THE GARFIELD CONTINUUM: THE STRATEGY FOR TOTAL VICTORY AGAINST THE LENDERS IN THE CURRENT FORECLOSURE MARKET

SECURITIZATION AND MORTGAGE DEFENSE/OFFENSE WORKSHOP

September 4, 2008 (9AM TO 5PM)

LOEWS HOTEL, SANTA MONICA, CALIFORNIA

IN 2009, 14 MILLION HOMEOWNERS WILL DEMAND THEIR HOMES FREE AND CLEAR

WILL YOU BE READY TO REPRESENT THEM?

REGISTER NOW - PayPal, Visa, MasterCard

The conspiracy to defraud homeowners will be thrown to its knees, and lenders will be called upon to produce the note or let the property go.

If you know anything about mortgage backed securities, the answer is clear. Precedent setting orders/opinions in New York, New Jersey, Michigan, Florida, Ohio and other states have already decided in favor of the homeowners – with more following every day.

Welcome to the emergence of mortgages interwoven the new world of derivatives, asset backed securities, credit market vehicles, ratings and appraisal practices, issuance of negotiable instruments, and administrative rules and regulations on the state and federal level.

Are your legal skills up to the challenge? Or are you malpracticing, unaware of this legal new world order called securitization?

If your practice has anything to do with bankruptcies, foreclosure, or real estate, be prepared to be sued yourself for not knowing the myriad state and federal laws that protect homeowners from predatory lenders. Further, there is now a proven legal strategy for not only protecting homeowners, but establishing legally that they already own their homes free and clear of all mortgage encumbrances.

Major changes in real property law and foreclosure defense arose as a result of the securitization of loans. This presents a huge opportunity for attorneys to enlarge their practice, win more cases, and earn substantial fees.

ATTORNEYS BEWARE: The typical predatory lender is in violation of an excess of a dozen statutory acts plus over twenty causes of action.

GARFIELD’S CONTINIUM workshop will teach you in one day how to upgrade your skills and embark on an exciting new legal journey, taught by Neil Garfield, who created the Continium, a combined and coordinated group of legal strategies that capitalize on the current securitization climate.

Held in sun-drenched Santa Monica, this exciting venue offers insight, invigoration and introspection, into the kind of practice you have, and the kind of practice you will create in response to a historical era in homeowner’s rights. Topics include the mortgage meltdown, securitization and its impact, foreclosure and bankruptcy old and new order, mortgage audits and strategies, defensive and offensive legal strategies, courtroom tools and winning arguments.

Perfect for litigators, mediators and judges, too.

WORKSHOP AGENDA

9:00-9:30 Past and Current Status of Mortgages, Notes and Foreclosures

9:30-10:00 Mortgage Meltdown

10:00-10:30 Securitization Process

10:30-11:00 Securitization Parties

11:00-11:30 Securitization Victims

11:30-12:00 Legal Consequences of Securitization

12:00-1:00p Special Lunch Forum: From the Lender’s Perspective: Guest Speaker Brad Kaiser

1:00-1:30 Overview of Defensive Strategies

1:30-2:00 Overview of Offensive Strategies

2:00-2:30 Ethical and Malpractice Considerations

2:30-3:00 Bankruptcy Errors and Omissions

3:00-3:30 Boots on the Ground: Getting the Word Out

3:30-4:00 Attorney Fees

4:00-5:00 Networking Q and A

5:00-7:00p COCKTAIL RECEPTION WITH NEIL GARFIELD AND ASSOCIATES

NOTE: LAYPERSONS AND THE MEDIA WILL NOT BE PERMITTED. NO AUDIO/VIDEO TAPING IS ALLOWED

CLE CREDITS: This course does not provide CLE credits

COST OF SEMINAR IS $595.00 PER PERSON, GROUP PRICE IS $495 FOR FIRM MEMBERS

TO REGISTER: click the link below or for more information email us at homeownerswar@aol.com

REGISTER NOW

Neil F. Garfield, M.B.A., J.D., 61, is the winner of dozens of academic awards, a popular speaker, and author of technical treatises on law and economics. He has come out of retirement with a bang and financial institutions should take note. He knows them from the inside out, who the deciders are, and how they arrived at a catastrophic scheme to defraud people, agencies, institutions and governments all over the world.

For more information on Neil Garfield visit his website at

http://livinglies.wordpress.com

I NEED LAWYERS IN ALL FIFTY STATES TO REFER CASES TO. WE ARE TALKING MONEY AND WINNING HERE NOT CHARITY AND LOST CAUSES. BUT YOU NEED TO KNOW THE PLAN, PLAN THE WORK AND WORK THE PLAN.

• EMERGENCY WORKSHOP ANNOUNCEMENT COMING UP FOR SEPTEMBER 4
• DVD ARGUMENTS IN PRODUCTION
• DOCUMENTARY IN PRODUCTION
• BOOK FOR LAYMAN ABOUT TO BE BE PUBLISHED

There are people to save, money to be made, and lives to be enriched. If you are filing bankruptcy actions the old way, you are only delaying the inevitable foreclosure. You could have stopped it. If you are asked for advice or filing defensive pleadings in the foreclosure the old way, you are only delaying the inevitable. You could not only stop it, you could take control of the mortgage and note for your client.

I am inundated by new cases from all over the country and I don’t have the time to deal with them all. We are taking care of some of that today with a new response system. But without local lawyers licensed in the jurisdictions where the property is located, I can’t really do anything effective — only you can do that.

We have twelve million homes to reach, and over one trillion dollar dollars in fees, mostly paid by lenders. This is far bigger than personal injury, will improve the quality and profitability of your law practice and raise your standing in litigation when you keep on winning.

Respond to ngarfield@msn.com with your contact info, bar number, states in which your license is active, and type of pratice you are currently running.

The Future of Securitization
By ETHAN PENNER
July 10, 2008; Page A15

The deconstruction of the financial services industry this past year has been something to behold. Unfortunately, the responses have been shortsighted, the equivalent of putting a band-aid on a gunshot wound. The blunt fact is that we’re in the midst of a major structural shift in the financial world: Yesterday’s business model has been invalidated.

Securitization as it has been practiced will not be the dominant means of financing it has been for the past decade and a half. And it has been truly dominant – moving from $1 trillion to $12 trillion in annual new issuance, capturing a significant share of all new loans including residential mortgages, commercial real estate and corporate loans, even auto and college tuition loans. Yet securitization will continue to play an important role – if adapted appropriately.

Securitization involves transferring a loan or pool of loans into a trust and then having that trust issue securities, or bonds, that are rated by the large rating agencies and purchased in the institutional bond market. Effectively, through what I will call “risk transference” securitization, whereby the originator retains no ongoing interest in the loan, the bond market becomes the at-risk lender. Implicit in that arrangement, especially at the high volume levels of past years, is the nearly complete delegation of credit underwriting by the ultimate lenders, the bond buyers, to others, mostly the credit rating agencies, and to a lesser extent the banks that originated, repackaged and sold the loans to these bond buyers.

It’s easy to see the model’s appeal over portfolio lending, where the banker held an originated loan to maturity. This limited the potential gross return on equity (ROE) that the loan could generate to something in the mid to high-teens. And from this seemingly unappetizing return, one must still deduct overhead expenses. Further, the bank remained on the hook for any losses during the life of the loan.

In the risk transference securitization model, the potential of significantly enhanced ROE was breathtaking. The originating bank became an intermediary, or a manufacturer of loans. A loan originated and resold within six months for a 2% profit could – when combining the yield spread in the six-month warehouse period with the gain on sale – double the bank’s ROE, while also permanently removing the credit risk associated with that loan from the bank’s balance sheet. Thus large banks shifted from purely portfolio lending to a mix of portfolio lending and risk transference securitization.

The most profound change occurred in the investment banks. Their balance sheets ballooned more than 100-fold as they morphed, from entities engaged primarily in the business of advising corporate America and facilitating access to the capital markets, into gigantic originators and intermediaries of all forms of credit assets. Without the huge fixed costs associated with deposit-gathering that the banks have – and the benefit of nearly double the leverage ratios of their more tightly regulated competitors – risk transference securitization generated staggering gross ROEs that, in the good times, ranged between 50%-100%.

That business model is now being dismantled, and the search is on for a new vision. Financial players need to explain to investors, whose capital they may desperately need to survive this painful transition period that, even in the best case, the ROE upside will be significantly less. Investment banks need to construct a vision justifying their huge balance sheets.

And yet the truth is that securitization, with a simple tweak, is actually something that can and will surely continue to play an important role in finance. This mechanism brings two main attributes to the table that are worth preserving.

First, it is the only method available to the asset originator to finance his position in a loan without incurring a mismatch risk between the terms of his assets and the terms of his liabilities. In the old portfolio-lending model, the bank would make a loan that may have a five- or 10-year fixed-rate term with all sorts of prepayment provisions that could shorten the term, and then finance that asset with deposits or other liabilities that didn’t match the term or the duration characteristics of the loans themselves.

This model created the sort of systemic risk that has caused most of the serious financial dislocations of the past, including the collapse of the Savings & Loans in the 1980s all the way to the collapse of the SIVs in 2007 and Bear Stearns in 2008.

The second significant benefit of securitization is the transparency that it brings to bear on the system. While this is painful in bad times, as the mistakes of the market are more immediately and broadly known, only the most cynical among us would argue that better information is not hugely beneficial to the market at large.

Were a portfolio lending model crafted in which the lender – instead of relying upon shorter term deposits or other liabilities whose terms are uncorrelated to the assets that they are intended to finance – financed his loan inventory through the securitization process, the duration mismatch risk would be solved. The lender would create distinct pools of loans, all of which it would retain on its balance sheet and hold appropriate equity capital against, and then have the trust issue only the lowest risk and most highly rated securities.

Further, in this construct the bond market will not be taking on the full ownership of the loan. Instead it will be providing lower risk leverage to the originator, who will retain ownership. Thus, the bond market will be relying less on the rating agencies and more on the lender’s acumen, and the alignment of interest that results from the originator’s ongoing ownership of the loan. These securities would have payment and maturity characteristics that exactly mirrored those of the underlying loans they were financing, and it would be this perfect match that would serve to remove the heretofore systemic duration mismatch risk that has resulted in numerous bailouts.

I believe the next step for finance in the Western world is to create a system that marries the discipline of portfolio lending with the asset-liability management and transparency benefits of securitization. As in the portfolio-lending model, the originator will be left to hold the loan. The bond-buying community will provide financing to the originating lender by purchasing the securitized debt that is backed by the loans originated.

Equity markets will provide the capital to own assets and will thus discriminate as to which origination franchises deserve the licenses to participate in the business of finance going forward. It will be those franchises that have demonstrated credit underwriting expertise in the areas in which they are extending credit, and clean and understandable balance sheets with commitments to transparent reporting, that will likely dominate in the next cycle.

The government’s role in this mess has been abdicated to people running agendas that are based on narrow self-interest. One could argue that if the Federal Reserve window was swung open for investment banks to borrow at Fed Funds rates using worthless securities based upon assets (residential real estate), that the same window should be open to the homeowners. But that is not necessary either.

Other than private loan situations and a few other rare exceptions, nearly 100% of all loans “secured” by residential real property were securitized, which means that these loans, false from in their inception, went on a journey to never never land where securities, also false from inception, were sold to investors to fund the transaction. Both sides were based upon fraud involving intentional representations of facts known to be false and upon which the victims at both ends relied most notably the false appraisal of the real estate value and the false appraisal of the ABS or CMO sold to an investor.

If authority is claimed but not real, then the nominal “lender” can execute a satisfaction of mortgage, an agreement to forgo deficiency, and allow the short payment — all to zero effect because the nominal “lender” lacked any right to execute any of those documents. Thus the lender, the “borrower” etc. could have their legal position virtually unchanged by the transaction, but the new buyer has a very substantial change of position, as does the new buyer’s lender both of whom might be taking title or recording a mortgage(s) subject to a mortgage that has not actually been been satisfied. This will produce trouble for title companies and closings.It might also produce claims of fraud against the nominal “lender” by new plaintiffs— the new buyer of the property and the new mortgage lender.

The same logic would also require the conclusion that a “lender” or other buyer who takes title to a residence at a foreclosure sale has received nothing in the way of marketable title and even if the argument is made that the mortgage and note were not extinguished, the “lender” takes title subject to claims of multiple third parties

Either the title company will state an exception in the title policy which basically will mean that the buyer is not insured if a third party enters the picture later, or that the new lender for the new buyer, doesn’t have a mortgage at all because the new mortgage lender did not get the signature of the new buyer.

IN THE BEGINNING (when the first buyer/”borrower” bought the property): We have a buyer, a seller (or developer), and a nominal mortgage lender. The “selling forward” (presale of the loan to a third party before closing) by the nominal “lender” negated the validity of the loan closing but not the real estate closing. So the buyer received good title to the property (all other things being equal) and the seller got paid. Since there was no valid mortgage transaction, rescission becomes unnecessary. However fact patterns may vary, as do state laws, so that rescission is probably a good idea as an alternative position to take.

The funding by an undisclosed third party means that the party posing as the lender at the loan closing was by definition part of a deceptive scheme. The statutes help us with that because of the disclosure requirements coming from Federal and state laws. Failure to disclose the real lender is in itself a fatal defect in teh transaction. Hence the New York Judge who ordered that the mortgage be removed from the county records, leaving the homeowner with title, free and clear of the mortgage encumbrance. Going further, he also invalidated all transfers of any interest in the mortgage because the mortgage and note had never really existed.

But even if the mortgage had come into existence, and even if the theory that this was in reality part of an elaborate scheme to trick people into creating negotiable instruments and to trick other people into buying them as “asset backed securities” the loan was paid in full and the mortgage satisfied or extinguished contemporaneously with the original loan transaction. Whether the third party paid the nominal “lender” before or after closing, the note had been paid in full. In order to “purchase” a negotiable instrument and security instrument (mortgage) involving real estate, the transaction would need to be recorded. This is arguably true even in the “notice” states (what’s left of them).

Thus the payment of money by the third party to the nominal lender can only be interpreted as payment (satisfaction) of the note. This is why the allegation that the payments are in default from the “borrower” should be denied. No payments are required, under the terms of the note itself, if the note has been prepaid — whether the prepayment was from the borrower, his mother, or a mortgage aggregator. The affirmative defense of payment obviously is supported by the same logic.

And the filing of a claim to quiet title by the homeowners serving the nominal lander as a defendant/respondent, and John Does 1-100 as people or entities who might claim an interest in the note, will most likely be successful. The “lender” must disclaim any interest in the note. The servicer of the mortgage must admit (and it should be alleged) that they have been receiving payments from the “borrower”, instructions from “lender” and making payments to some third party, none of which should have been demanded, accepted or processed.

The failure to deliver the note or the failure to be able to account for the note in a situation where the intention of a series of parties in a chain of transactions was to transfer the rights or interests in the original “loan” transaction ALWAYS indicates the potential for a third party claim against any one of the parties in the chain at a later time despite adjudication of rights between any two or three of them.

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Here is an article from one of our contributors

Welcome to Wall Street’s Masquerade Ball (every American was invited)

Securities Disguised as Residential Mortgages - and Why Short-Sales Don’t Work among Other Things

Let’s back into this so you can really understand why the reality of what has happened to nearly every American and every homeowner is so bad, the cause of most of our economic problems right now, and yes, most-likely fraudulent.

You lose your job, your job is outsourced to China, you are in a car accident, substantially injured, life happens,etc. All of a sudden, you can’t pay your monthly mortgage payment, along with other debts. You call the financial institution that you send your mortgage payments to. Oh, by the way, this institution is different than who actually lent you the money at closing - and this “servicer” of the loan has maybe changed twice or more since you closed on the loan.

So, you can’t make your payment. The “servicer” now starts calling you almost daily “harrassing” you to “pay up or else.” You indulge them in your perfectly legitimate and understandable situation and, yes, it falls on deaf ears. They tell you something like, “Miss, if you are having a hardship, we will mail you out a hardship package, please fill it out completely and include all the items requested and send back to us. We will see what we can do for you.

So you do just that, you spend about 3 hours of your precious time, diligently filling everything out and collecting all those “necessary” documents. You send it in. Hear nothing back for like 6 weeks. So you call, wait on hold for 40 minutes and finally get someone who barely speaks English… But it sure as hell is frustrating trying to communicate with someone who obviously doesn’t speak your language, not to mention that, in the back of your head, you wonder “how safe it is to be revealing your social security number and all sorts of sensitive, personal information to someone you’re sure is somewhere halfway around the globe and 10 hours ahead/behind us in time. Anyway, sorry for the rant again… back to the real story.

So, you finally get someone on the line and ask them if they received your fax of all the documents you most diligently put together and faxed to them at their request. You faxed everything in 6 weeks ago and haven’t heard a thing! The person politely tells you that for some reason, they have no record of receiving anything from you and “are you sure that you sent it to the right number?” - Now you’re head turns about 3 shades of red as your carotid artery starts to bulge and you consider popping a Nitro pill to stave off a sure-fire myocardial infarction. But that’s beside the point.

Anyway, back to the real story. So, you send it again, wait another 3 weeks, call again and, “MIRACLE!” They got it, thank God, now we can at least get a solution to our current challenges…right.  The foreigner on the other end politely tells you that it will be a few weeks before the “committee” can review it and come up with a decision on your “situation.” (You feel like telling them to go stick it but refrain since “good, polite Americans” don’t do that sort of thing). Son of a gun… I just went off on a quick rant again. Sorry.

Anyway, back to the real story. So, 4 weeks go by and you hear nothing. You think, “What the heck?” Does this company have their heads so far up their rear ends that they can’t even return a call and respond to my really dire “situation?” Then you remember that you were talking to some person who didn’t really care and by now, they might have taken your Social Security Number, borrowed another $100,000 (on your credit) to go shopping at their country’s version of Best Buy and they’re probably watching the CNN “Mortgage Meltdown” coverage on some 100 inch Big Screen Plasma on a brand new leather couch with a Universal Remote Control that even God would be jealous of. Shoot. Sorry for the rant right there.

Anyway, back to the real story… So, you call again, wait another 25 min. on hold and finally get someone on the line. You explain the whole nightmare and they tell you that “yes, we did receive your package and yes, it did come back from the committee, and “could you please wait for a supervisor?” - and yes, the wait on hold charade starts again… but I know, you can’t relate.

Anyway… supervisor comes on the phone like 10 minutes later and tells you that “unfortunately, there’s nothing we can do for you at this time. But if you’d like, you can go to our website and get the “I can’t make a friggin payment because I’m really out of a job” hardship form, fill it out and fax it in, we’ll see what we can do for you.”

Another rant and rave. Sorry. But really folks, this is the madness that everyday, hard-working AMERICANS are going through with their mortgage loans and the crazy lender/servicers can barely answer the phones much less speak intelligibly with a real solution or option!!!!

So, here’s the real story and WHY all those forms, short-sale efforts and all that work to modify your loan won’t do a bit of good. The company you’re calling is just the SERVICER! They don’t own your mortgage OR your note. They have no substantial right to do anything with the note/debt. The mortgage is still recorded in the name of the FIRST mortgage company that gave you the money at closing AND the note (the real evidence of the debt) was sold BEFORE you ever made a payment INTO a Securitization Trust which then SOLD that POOL of NOTES as a Security to 100’s or 1000’s of Investors ALL OVER THE COTTON-PICKIN’ WORLD.

So, the moral of the story is “THE SERVICER CAN’T MAKE A DECISION ON YOUR LOAN BECAUSE YOU REALLY GOT INTO A COMPLEX SECURITIZED INSTRUMENT SCHEME WHEN YOU SIGNED ALL THOSE CLOSING DOCUMENTS WHICH IS WHY THAT SAME DAMN SERVICER CAN’T APPROVE ANY REMEDY FOR ANY HARD-WORKING AMERICAN IN A REAL JAM!”

Want a little context to what I’m saying? Read below for some good ol’ fashioned 3rd party verification. Then, call me and we’ll try to help you a bit. I speak Indian, Chinese and Pig Latin by the way - just in case it’s needed to help you out on your loan.JK.

If you look at the proposed rules, you can see that the Fed has already established, as a matter of fact, a widespread pattern of predatory lending, bad underwriting, etc.You can use this as further proof of your arguments, that the government itself found these things to be true because they are taking the trouble to revamp the lending practices that happen coincinde with every one of your allegations.

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Fed plans new rules to protect future homebuyers

The following is a short article written by a good lawyer from California who understands the advantages and uses of TILA, audits etc. It doesn’t address the forensic analysis of the ledgers of the mortgage servicer or the securitization process, but it does state eloquently the case for knowing what you are doing:

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And the truth (in lending) shall set you free

By Cathy Moran, California Bankruptcy Attorney

In the midst of the mortgage meltdown, I’m searching for every tool that might provide a lever to modify a mortgage.  In every case involving a home, I’m inquiring about when the existing loans were made, since the borrower has three years from the transaction to rescind a loan for violations of the Truth in Lending Act.

The neat things about TILA violations is that they are strict liability causes of action:  the aggrieved borrower doesn’t have to prove they were defrauded or misled, or that they had actual damages.  The fact that the disclosures were defective gives the borrower the right to rescind the loan and deprives the lender of the right to interest on the loan.  Pretty powerful stuff.

Powerful stuff is what we need to keep people in their homes:  tools to bring the lender to the table to revisit the loan and find an alternative to foreclosure.  Because absent some sort of restructuring, a tremendous number of these impossible loans will otherwise be foreclosed.  In the long run, a foreclosure benefits neither party.

My small sample, unscientific sample says that I am finding TILA violations in at least half of the loans I’m reviewing these days.  TILA doesn’t apply  to  financing of investment property, but for me, it’s the family homes that I’m intent on saving.

So, if you have a loan taken out in the past three years, gather all of the documents you got at closing and see a lawyer immediately.  Get the transaction reviewed for Truth in Lending compliance.  Once those three years are past, there is little that TILA can do for you.

‘Ghostwriting’ Lawyers Can Remain Cloaked, but Not for Tactical Advantage

Charles Toutant
01-29-2008

A federal magistrate judge’s ruling last year that “ghostwriting” pleadings for a pro se litigant violates a lawyer’s ethical duty of candor to the court has caused an uproar loud enough to get a New Jersey Supreme Court ethics committee’s attention.

In a formal opinion meant to calm nerves, the Advisory Committee on Professional Ethics says it’s ethical, in limited circumstances, for a lawyer to draft pleadings and give other “unbundled” legal assistance to pro se parties without telling the court.

Disclosure is not required if the limited assistance is simply an effort to aid someone who is financially unable to secure an attorney or if it is part of a nonprofit program designed to provide legal assistance to people of limited means, the panel said in Opinion 713.

But full disclosure is required “where such assistance is a tactic by a lawyer or party to gain advantage in litigation by invoking traditional judicial leniency toward pro se litigants while still reaping the benefits of legal assistance.”

Disclosure is also required when it’s clear from the facts that the lawyer, not the pro se litigant, is “effectively in control of the final form and wording of the pleadings and conduct of the litigation,” the panel said.

The ghostwriting issue has been haunting since last spring when U.S. Magistrate Judge Tonianne Bongiovanni ruled, in Delso v. Trustees for the Retirement Plan for Hourly Employees of Merck & Co. Inc., that a lawyer’s anonymous help in preparing pleadings without affirmatively notifying the court was “not emblematic of the candid honesty contemplated by [Rule of Professional Conduct 3.3],” which requires candor to the tribunal.

The lawyer, Princeton, N.J., solo Richard Shapiro, instructed his client, Rosann Delso, to answer honestly if asked about his participation, and the client did so after defense counsel Randi Knepper of McElroy, Deutsch, Mulvaney & Carpenter in Morristown, N.J., told the judge the plaintiff’s papers did not look like those of a pro se litigant. And Knepper received correspondence from Delso in an envelope bearing the return address of Shapiro’s law office. Shapiro subsequently signed on as counsel of record for Delso in the ERISA case.

Bongiovanni said the undisclosed provision of legal assistance could take unfair advantage of the looser leash courts give to unrepresented litigants. “[C]ourts often act as referees charged with ensuring a fair fight,” she noted. “This becomes an obvious problem when the Court is giving extra latitude to a purported pro se litigant who is receiving secret professional help.”

Bongiovanni also found that undisclosed ghostwriting violates the spirit, if not the letter, of Federal Rule of Civil Procedure 11 and Local Civil Rule 11.1, which require attorneys to certify and sign their submissions to the court.

The committee said it hoped its Opinion 713 would strike a balance between “the interests of extending legal assistance to the unrepresented, preserving confidentiality and minimizing the cost of legal representation are on one side [and] candor toward the tribunal and fairness toward opposing parties on the other.”

The committee declined to address the possible applicability of Federal Rule of Civil Procedure 11 suggested by Bongiovanni, saying it has no jurisdiction over questions of federal civil procedure.

The balancing of interests drew a favorable review from John Beckerman, associate dean for academic affairs and professor of professional responsibility at Rutgers Law School-Camden. “My belief is that it is better to have limited representation, as long as it’s clearly understood what it will entail, than nothing at all,” he said.

Beckerman said lawyers limiting their representation should obtain the client’s signature on an extensive disclosure of what services will or will not be provided and the potentially negative outcomes for which the lawyer disclaims responsibility.

Bennett Wasserman, who teaches professional responsibility at Hofstra University School of Law, says Opinion 713 has some flaws that might make it clumsy to apply.

For one, it creates a different standard for compliance in state court than exists in federal court under Delso v. Merck. For another, by making disclosure unnecessary only where a litigant is unable to afford legal fees, the ruling seems to require a lawyer to conduct a financial evaluation of the prospective client’s ability to pay, says Wasserman, of Stryker, Tams & Dill in Newark.

Opinion 713 also holds limited-assistance lawyers to a different standard than transactional lawyers, who must disclose their role in preparing documents such as deeds and powers of attorney.

Finally, the presence of an off-stage lawyer prevents the adversary from conducting a conflicts check.

“Thus, while there may be benefit to one party to the litigation, the prejudicial effort on the adversary would tend to be greater,” Wasserman says.

Other states have taken diverse approaches to police such arrangements. The New York State Bar Association and the Iowa Supreme Court find them unethical per se as a fraud on the court. At the other end of the spectrum, the Los Angeles County Bar and the State Bar of Arizona find no duty to disclose, based on the need to preserve client confidentiality.

Still other states impose a limited duty of disclosure, some using imprecise terms such as “substantial” or “significant” to demarcate the duty, which the committee said were not helpful.

State Bar Associations are wrestling with the issues of “Ghost-Writing” and Unauthorized Practice of Law.

On the one hand it is obvious that substantial additional education is required for local lawyers to properly file their schedules in bankruptcy petitions or properly defend the foreclosures in state courts. On the other hand, despite the paucity of attorneys who actually understand the new context of foreclosure defense, it is in the State’s interest to regulate these activities because of the obvious potential for abuse by an out-of-state lawyer who does not know local laws or procedures.

We therefore feel, as you have seen in prior posts, that is critically important to retain local counsel who is actually involved in the case and not merely a signatory. We also feel that pro se (no lawyer) litigants are getting in over their  heads despite all the resources on this blog.

As for the lawyers reading this blog, consider the following article which while somewhat dated, provides at least some insight into possible consequences of being “behind the scenes.”

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Unbundled Legal Services:
Can the Unseen Hand be Sanctioned?
© 1998 Charles F. Luce, Jr.
All Rights Reserved Worldwide

One hot topic in legal ethics circles is the propriety of attorneys “ghost writing” pleadings for ostensibly pro se parties, i.e., in matters in which the attorney has not entered an appearance. The question has produced a handful of ethics opinions, some emotionally charged judicial commentary, and has attracted enough interest that it might some day be the subject of a specific Rule of Professional Conduct.

“Ghost writing” is, by its nature, a loaded term, suggesting the specter of unethical conduct. Certainly it was chastised as such in a fiery opinion by Judge John Kane, Johnson v. Board of County Commissioners, 868 F. Supp. 1226 (D. Colo. 1994), aff’d on other grounds, 85 F.3d 489 (10th Cir. 1996), the case which can be fairly credited for riveting the attention of Colorado litigators to the “ghost writing” issue. Kane’s denouncement of a related issue — partial representation of a client sued in multiple capacities — tersely summarizes the anti-ghost writing viewpoint: “Whatever phantom is calling this tune, . . . , may not have it played in this court.” 868 F. Supp. at 1230.

Depending upon your viewpoint, ghost writing is either an insidious and deceitful way for ostensibly pro se litigants to gain an unfair advantage and attorneys to shirk their duties as officers of the court, or a victory for consumers’ rights, merely one aspect of another hot topic among legal ethicists, the so-called “unbundling of legal services.”

The Case for Exorcising the Spectral Hand

Three principal arguments for prohibiting ghost-written pleadings are most frequently advanced:  (1) Fed. R. Civ. P. 11(b) (or the state equivalent) provides that an attorney’s signature constitutes a certification that the pleading is well-founded in fact and law and not interposed for any improper purpose; (2) Model Rule of Professional Conduct (”RPC”) 8.4, whose several provisions generally prohibit dishonest or misleading conduct by attorneys; and (3) federal law, and the law of some states, requires that preferential treatment, principally in the form of lower standards, be given to pro se litigants by virtue of their unrepresented status. The fault with these general arguments against ghost writing, as well as with the arguments supporting the practice, is that the specific circumstances and consequences of each phantom pleading must be considered. As in most other matters of legal ethics, application of an uncompromising rule, applied in an uncritical manner, will yield unjust results frequently, and ethical results purely by accident.

The Rule 11 “hard liners” contend that it is unlawful and unethical for an attorney not to sign a pleading the attorney has substantially prepared. Rule 11 itself does not support this position; the rule provides that an attorney’s signature is a certification, not that an attorney must sign every pleading he or she has had a hand in preparing. Moreover, there are situations in which an ethical attorney will be unwilling to sign any pleading because of consequences completely unrelated to Rule 11.

For example, in many, if not most, jurisdictions, entry of appearance is accomplished with the stroke of a pen; the signing of any pleading accomplishes the entry of appearance. See, e.g., D.C.COLO. LR 83.5(B); Colo. R. Civ. P. 121, § 1-1(1). Litigators are all too keenly aware that the courthouse door swings more easily inward than outward. Many jurisdictions, including Colorado, take the position that, once having entered an appearance, an attorney is duty-bound to see a matter through to conclusion. People v. Demarest, 801 P.2d 6, 7(Colo. App. 1990) (”We further recognize the general rule that counsel who undertakes to conduct an action impliedly stipulates that he will prosecute it to a conclusion.”) (citing Riley v. District Court, 181 Colo. 90, 507 P.2d 464 (Colo.1973)). Accord People v. Ray, 801 P.2d 8, 9 (Colo. App. 1990); Anderson, Calder & Lembke v. District Court of Larimer County, 629 P.2d 603, 604-05 (Colo. 1981). Accordingly, it is not uncommon for an attorney’s plea to withdraw from a case on the grounds that the client has ceased paying to fall upon deaf or unsympathetic judicial ears. While attorneys should not be allowed to “sign out” as easily as they can “sign into” a case, so long as the key to the courtroom exit is held by a potentially unsympathetic judge, those lawyers who have before found themselves caught in the Venus flytrap of the ease of entry of appearance will be naturally reluctant to sign any pleading if the client’s ability to afford full representation is questionable.

Another common situation in which an attorney may be reluctant to sign on Rule 11’s dotted line is when a potential plaintiff comes calling on the eve of the running of the statute of limitations. If the client has left no time for the attorney to verify facts, how can an ethical lawyer certify that he has conducted a reasonable investigation? Until such an investigation has been made, how can the attorney assess his or her willingness to enlist for the duration of the case? In such a situation, it is obvious that an attorney cognizant of Rule 11 must not sign the complaint. But it is a false Hobson’s choice, and decidedly not in the interest of justice — in any meaningful sense of the word — to conclude that the attorney must either falsely certify the complaint under Rule 11 (a clear ethical violation), or permit the statute of limitations to run, depriving the client of a claim and exposing the attorney to a malpractice action on the theory that representation was undertaken negligently, or, more absurdly, that the lawyer should have undertaken representation.(1)

Another, thornier situation where legal services might be unbundled, are those instances in which insurance defense counsel has been retained by the insurer to provide defense only, even though there are meritorious counterclaims which might and ought to be stated if the insured were in a position to be able to afford full legal representation. If the client is unable to afford insurance counsel, who is already knowledgeable about the case, to provide full representation, the option of the insured to retain separate counsel to prosecute its counterclaims is illusory. Yet, at least in Judge Kane’s courtroom, partial representation of the client may not be allowed. See Johnson, 868 F. Supp. at 1230-31.

In situations such as those described above, the alternatives are either no assistance of counsel or, provided the attorney is willing to unbundle legal services, limited assistance of counsel, which may not extend to the execution of pleadings or appearance in the case. In the author’s opinion, the latter is plainly preferable to the former.

The Rule 11 hard liners who would not admit the existence of this possibility ignore not only the language of Rule 11 itself, but of the first rule of civil procedure, that all the rules “shall be construed and administered to secure the just, speedy and inexpensive determination of every action.” Fed. R. Civ. P. 1 (emphasis added). While Rule 11 provides that an attorney’s signature is a certification that the pleading is well-grounded in fact and law, the converse, that the absence of an attorney’s signature is the hallmark of a spurious and frivolous pleading, is hogwash. Having debunked the hard line Rule 11 position, the RPC 8.4 argument must also fall; it is no more misleading or deceitful for an attorney to ghost write a meritorious pleading than it is proper for an attorney to sign a frivolous and groundless pleading. The real issue is not the presence or absence of a lawyer’s signature, but the intended or reasonably foreseeable effect of the unseen assistance of counsel.

The third argument made in support of an anti-ghost writing rule — that in federal courts and some jurisdictions pro se pleadings are treated more leniently — is considerably stronger than the Rule 11 argument. This rule, rooted in the edict of the Supreme Court’s decision in Haines v. Kerner, 404 U.S. 519, 520 (1972), was the foundation of Judge Kane’s concern in Johnson, supra. Moreover, as litigators know, even in those jurisdictions whose black-letter law provides that pro se litigants are to be given no preferential treatment, the reality is that they frequently are. Even the most ardent disciple of stare decisis will, if not bend over backwards, at least incline some degree in that direction when dealing with a pro se litigant, if only in the interest of “bulletproofing” appellate review. Accordingly, if the spectral solicitor knows that a pleading regarding which he has provided substantial assistance will be used in a jurisdiction which either, as a matter of law or practice, favors pro se litigants, the attorney’s hand, even if not identified, must be acknowledged to avoid a foreseeable unfair effect. This duty need not take the form of the attorney signing the pleading, but can be as effectively discharged by the attorney conspicuously indicating in the pleading, perhaps in the signature block, “prepared with the assistance of counsel,” or words to similar effect. Numerous ethics bodies considering this issue have reached the same conclusion. See infra.

The Case for A Beetle Juice Barrister

In assailing the Rule 11 hard line position, the author does not suggest that the best representation is for an attorney to operate the levers of justice from behind a curtain like the Wizard of Oz, nor to appear only in cameo. Even simple litigation requires a myriad of daily decisions by someone trained and experienced in law. An attorney who is only partially engaged, figuratively and/or literally, is a danger to himself and to the client, and should so advise the client. Further, there is a substantial risk that the client and attorney may bargain for unbundled, limited assistance, only to have a court hold the attorney to a more encompassing duty should the lawyer-coached client’s case go south. Although the Model Rules permit an attorney to limit the scope of representation, RPC 1.2(c), there is foreseeable and understandable judicial reluctance to “downsize” the standard of care. See generally, Cohen, Afraid of Ghosts, 83 A.B.A. J. 80 (Dec. 1997) (warning against the malpractice potential inherent in “sort of” representing a client). Agreeing to author, but not sign, pleadings undoubtedly creates an attorney-client relationship, and requires that the attorney fulfill all the duties normally owed to a client, even though the scope of representation is limited. The attorney must exercise caution that unseen assistance will not result in a fraud on the court or other litigants — such as creating an illusion of pro se representation if the forum’s rules require leniency be granted only to truly pro se parties — for this would violate Rule 8.4’s prohibition against directly or indirectly engaging in dishonest conduct. The attorney must also be mindful that the principal of unbundled legal services does not support the unauthorized practice of law; if it would be unlawful for an attorney to appear in a particular matter directly, it is no less unlawful for the attorney to “disappear.” See Iowa Opinion 94-35 (May 23, 1995) (attorney-serviceman stationed, but not licensed, in Georgia, may not prepare pleadings for nonlawyers in Georgia).

However, some legal assistance is preferable to none at all, and if the client is unable to afford the complete panoply of the attorney’s skills, it should not consequently be deprived of all of them. The authors of the Model Rules of Professional Conduct recognized this in adopting RPC 1.2(c): “A lawyer may limit the objectives of the representation if the client consents after consultation.” This is not simply an issue of indigent representation; many attorneys could not themselves afford uninsured legal representation. If justice is to be practically available for all, if the litigation is not to become literally “the sport of kings,” unbundling legal services must apply litigation services, too. See generally Colo. Bar Ass’n Opinion 101, Unbundled Legal Services (Jan. 17, 199 (recognizing, but declining to address the issue of ghost writing).

The Law

Although the ethical rules implicated in the ghost writing debate are clear, no consensus has emerged regarding the ethical or legal propriety or procedure by which counselors may proffer a phantom pen.

The few published opinions express severe reservations regarding unbundled litigation services. Johnson, supra, concluded that the undisclosed assistance of counsel in drafting pleadings, “necessarily causes the court to apply the wrong tests in its decisional process and can very well produce unjust results,” 868 F. Supp. at 1231, violates Rule 11, id., and is “ipso facto lacking in candor,” id. at 1232 (citing RPC 1.2(d)). Laremont-Lopez, supra, held that ghost writing:

(1) unfairly exploits the Fourth Circuit’s mandate that the pleadings of pro se parties be held to a less stringent standard than pleadings drafted by lawyers . . . , (2) effectively nullifies the certification requirement of Rule 11 . . . and (3) circumvents the withdrawal of appearance requirements of Rule 83.1(G) of the Local Rules for the United States District Court for the Eastern District of Virginia [permitting withdrawal only by order of the court and after reasonable client notice].

986 F. Supp. at 1078 (citations omitted). Another court properly granted a motion to compel disclosure of whether “behind the scenes” legal assistance was being provided an ostensibly pro se party:

Plaintiff argues that she has a legal fight [sic] to proceed pro se, whether or not she is an attorney. She also argues against any “unlawful intrusion into privileged information.” . . . The court has no quarrel or disagreement with these propositions. But they miss the point. The court does not propose to deny plaintiff the right to proceed pro se. Nor does it propose the invasion of privileged information. In this instance, however, plaintiff has sought to invoke the leniency of the court when she may not have a right to assert her pro se status for that purpose. Both the court and the parties, moreover, have a legitimate concern that an attorney who substantially participates in a case at least be identified and recognize the possibility that he or she may be required to enter appearance as counsel of record and thereby accept accountability for his or her participation, pursuant to Rule 11 and the rules of professional conduct applicable to attorneys. The grounds urged by plaintiff to deny the requested information do not trump the valid reasons for providing it on the record.

Wesley v. Don Stein Buick, Inc., 987 F. Supp. 884, 887 (D. Kan. 1997) (citations omitted).

Ethics opinions have generally been more supportive of ghost writing as an unbundled legal service, though they have differed as to what kind of notice of legal assistance should be provided. See, e.g., Kentucky Bar Ass’n Opinion E-353 (Jan. 1991) (lawyer’s name, but not signature, must appear on pleadings); N.Y. City Bar Ass’n Opinion 1987-2 (document must state “Prepared by Counsel,” but attorney need not be identified); Iowa State Bar Ass’n Opinion 96-31 (1997) (proper for lawyer to prepare pro se pleadings provided court is informed of lawyer’s identity); New York State Ethics Opinion 613 (1990) (reaching a similar conclusion). Other ethics bodies see no reason for any identification of legal assistance to appear. See, e.g., Maine Ethics Commission No. 89 (Aug. 31, 1988); Los Angeles County Bar Ass’n No. 483 (March 20, 1995); Alaska Bar Ass’n Ethics Committee No. 93-1 (March 19, 1993) (noting “that judges are usually able to discern when a pro se litigant has received the assistance of counsel in preparing or drafting pleadings”). See also Virginia Bar Ass’n Opinion 1127 (198 (Virginia attorneys may assist pro se litigants in preparing pleadings, briefs and discovery requests without entering an appearance).

Conclusion

The value of unbundling litigation services for clients is self-apparent. The risk to attorneys who may find themselves held accountable for a larger duty than they thought was bargained for is only slightly less obvious. A bright-line rule regarding ghost writing is neither possible, nor desirable; careful consideration must be given to the circumstances of each case and the rules of each forum. Instead, the author suggests the following standard be used in assessing the ethics of adopting the nom de plume of one’s client:  if the intent or reasonably foreseeable effect of ghost writing is that the court or another party will be misled or that a pro se litigant will obtain an unfair advantage, the act of ghost writing, if not the identity of the spectral scrivener, must be made known. The court may always compel the pro se litigant to identify the assisting counsel, if it believes there is a need. If, on the other hand, no deceit or unfair advantage is either intended or reasonably likely to occur, the assisting lawyer’s hand may remain unseen and unknown.

Whether such a standard will be adopted in Colorado remains to be seen. For now, those practicing in federal court would be wise to carefully consider Johnson, supra, and should at least insist that the pro se pleading indicate the assistance of counsel. However, the test proposed stands on solid footing, both as a matter of current ethics and social policy and, at least amongst bar ethicists, appears to be the “better rule.”

1. The suggestion of one court, that the “better practice” in this scenario “would be for counsel to acknowledge draftsmanship of the complaint . . . by signing and filing it and simultaneously filing a motion to withdraw as counsel accompanied by an appropriate explanation and brief,” Laremont-Lopez v. Southeastern Tidewater Opportunity Center, 968 F. Supp. 1075, 1077 n.2 (E.D.Va 1977), assumes a benevolent and understanding judiciary, and trust that the motion to withdraw will be granted. Bad experiences have taught many litigators to not be so trusting. Moreover, the suggested motion to withdraw would be tantamount to an admission that the attorney had violated Rule 11.

“Failure to Add Indispensable” Parties: Why Not Raising This Defense in Your Client’s Mortgage Foreclosure Case May be a Ticket to a Legal Malpractice Claim

This article is intended for attorneys who choose to defend a mortgage foreclosure action. As has been repeatedly published in this blog, in the great majority of instances we have seen, the Plaintiff in the foreclosure action is something along the lines of “ABC Bank as Indenture Trustee for the Registered Holders of XYZ Asset-Backed Bonds Series 2005-V”, or something of that ilk. Per a previous article published on this blog by this author, when the name of the Plaintiff is something akin to this example, you need to dig, as that type of moniker tells you, right up front, that there were several assignments of the note and mortgage to various entities before these instruments wound up in some tranche in some special investment vehicle which may be in the Cayman Islands or with a batch of thousands of other notes and mortgages in some vault in Reykjavik, Iceland.

In other instances and in addition to the “red flag” name of the Plaintiff, we have seen  other cases where the Plaintiff admits that they do not own or hold the note or mortgage, do not know where they are, and in one case the Plaintiff actually put a settlement offer into the allegations of the Count for “Enforcement of Lost Documents” that the Plaintiff would “agree to a Final Judgment of Foreclosure which would require the Plaintiff to indemnify and hold [the named borrower Defendant] harmless” from someone who may come along later and claim ownership of the original note and mortgage. Talk about chutzpah!

Which begets the defense of failure to add indispensable parties. As soon as you see a case where the Plaintiff is some trustee or some assignee of some group of unnamed investors or holders of some series of mortgage-backed securities or bonds, etc., the Motion to Dismiss for Failure to Add Indispensable Parties should be filed forthwith. The allegation is that the Plaintiff knows or should know, by its very title, that the mortgage and note were assigned or sold or transferred at least one or more times between the time of loan origination and the time of the filing of the action, and that there are thus real parties in interest who may claim an interest in the note or mortgage who have not been named. Remember, the classic definition of an indispensable party is “one without whose joinder the complete rights and obligations of the parties cannot be determined”. The case cited above where the Plaintiff admitted that there may be some other party or parties out there who may, at some point, claim an interest in the note or mortgage is proof positive of the Plaintiff’s actual knowledge of this material issue.

Not filing this Motion can be a ticket to a claim for legal malpractice. Even if you prevail in defending the foreclosure on one or more of the substantive defenses, if you do not ascertain all other potentially interested parties in your intensive discovery, there is the distinct possibility that someone is going to come out of the woodwork down the road with the original note and mortgage and go “AHA, this property belongs to me!”, whereupon you, as the underlying foreclosure defense attorney, then get the letter from your client (or his malpractice attorney) requesting copies of your E&O or professional liability policy, dec sheet, etc.

Bottom line: file the Motion, do the discovery, and find out who all of the players were who may have an interest, and force the Plaintiff to add them as Defendants. In any settlement, make it an absolute “deal breaker” that the settling party sign an iron-clad  indemnification and hold harmless agreement, even if it means putting up a bond if the settling party’s future existence is dubious (a la Bear Stearns) or may be teetering on the verge of bankruptcy or closing its doors.

Stay tuned to this blog for examples of the type of discovery you will need to advance this most important issue in your client’s defense.

Jeff Barnes, Esq.

PRELIMINARY INQUIRIES PRECEDING FORECLOSURE: A SMALL INVESTMENT IN THE PROPER LETTER MAY OPEN MANY DOORS AND AVOID NIGHTMARES LATER

We have been receiving an increasing number of inquiries from foreclosure victims requesting our assistance in dealing with recalcitrant servicing companies who either ignore or send a “bluff response” to inquiry or demand letters sent by borrowers who are not attorneys. We have also received a literal deluge of telephone calls, e-mails, and faxes from borrowers who are attempting to advance defenses to foreclosure under Federal and state laws in court without the assistance of an attorney. In many of these instances, the borrower victims tell us, consistently, that when they try to make their arguments that the Judge “laughed at me”.

This harkens back to an article which I previously wrote for this blog advising on the dangers of going to court without an attorney, which is suggested reading. However, this article deals with the pre-foreclosure lawsuit process, where borrowers are being equally frustrated as well.

When a borrower sends a pre-foreclosure inquiry or demand letter to a “lender” or mortgage servicing company which touts citations to TILA violations, Federal law, and the like, the servicing company is going to do one of two things, either (a) realize that the borrower is probably “surfing the net” and trying to “play attorney”, knowing that a response of “there are no violations” is going to put the borrower on the defensive and confound them, or (b) send the letter to their attorney, who will likewise advise the borrower that they have no claim. In this instance, few if any borrowers know what to do next. An attorney versed in the concepts in this blog not only knows how to respond to this, but also undertakes efforts to avoid the type of “blow them off” response which is typically sent to a borrower. Recent responses from lenders and servicing companies to formal inquiry and demand letters crafted by attorneys associated with this blog show that when the letter is written by an attorney that the response is very different, and in certain instances which are becoming more frequent, the response is that the “lender” would like to engage in settlement discussions without going to court.

The entire tone for the negotiation and/or litigation process is often set by the initial inquiry or demand letter. A borrower who tries to do this on their own is invariably going to miss several, if not numerous, legal issues which, if properly presented by an attorney, should get the attention of the lender, servicing company, or their attorney(s), as it is this “first impression” which lasts. An attorney coming in after a borrower has muddied the waters is going to have more work ahead of him or her than an attorney who comes in at “ground zero”.

As such, the investment of a sum of money, at the initial stages of the process, with an attorney versed in foreclosure defense may be not only well worth it, but may ultimately save the borrower in the long run from having to hire an attorney to undo whatever damage the borrower did before hiring the attorney (sort of like an accountant trying to do a brake job on his own to save the cost of having a mechanic do it, only to have to pay the mechanic double when the brakes fail).

Those old adages like “a stitch in time saves nine”, and “penny wise and pound foolish” are pertinent here, as is the old commercial where the repairman says “well, you can pay me now or pay me later, but later is going to be a lot more”.

Once again, law is an extremely specialized field of endeavor which should not ever be “dabbled” in by non-lawyers. Doing so may not only result in you losing your home, but may also result in your having to pay the attorneys’ fees of the lawyer for the foreclosing party because the court or judge finds that what you attempted to argue was “frivolous”.

Jeff Barnes, Esq.