Chapter/ Trick #4 – Double Speak

Doublespeak means to use language to deliberately obscure the truth in an amoral way, and in business, it is a way for corporations to exercise control while lying.[1] Double speak in business is when a corporation describes what they are doing as one thing when what they are actually doing is something completely different, like when they say they are accepting your resignation, but you are actually being fired. Doublespeak from your mortgage servicer may take the form of a telephone conversation with someone promising you something while the mail you are receiving says you aren’t getting it. In these cases, the person on the phone will tell you to simply ignore the mail and believe them instead.

Doublespeak from your mortgage servicer can make you feel like you are going insane or talking to a robot. The best way to deal with this is to remember that the first rule of war is deception.[2] The mortgage servicer is creating a paper trail that says something completely different from what is actually going on in case they need evidence of what happened, whether it happened or not. You may want to let them believe you are relying on their verbal promises while ignoring the written paper trail but don't actually do it. Create your own paper trail and send it by certified mail. It's sometimes okay to pretend to be a dupe; it may even be strategic. Just don't be one.

Double Speak # 1 – We're here to help you.

It is doublespeak when a servicer employee says they are there to help you. Straight talk would be if they told you to pay your mortgage and not rely on them. If they were there to help you, they would tell you that their business is foreclosure. If they were there to inform you, they would tell you they make no money from helping you and advise you to pay your mortgage.

Double Speak #2 - Your foreclosure sale is “on hold.”

A foreclosure sale may be postponed or canceled by the trustee, but there is no such thing as putting a foreclosure sale "on hold."  You may hear this term used conversationally, along with a letter from the servicer that will use the correct term - postponement. The servicer may provide you with a written postponement once or twice while you apply for a modification. Then there will suddenly be nothing in writing and only a verbal promise from someone on the phone telling you your foreclosure sale is "on hold."

A foreclosure sale is postponed in California by a process that is controlled by statute and not by the servicer employee.[3] At the time of the appointed foreclosure sale, the cryer of the sale, which is usually a company hired by the trustee, will announce the new postponed sale date, time, and place. If there is another postponement, it will be announced at that next date, time, and place. That will be the date on the letter you receive if you receive one.

When you hear form your mortgage servicer employee that they have put your sale "on hold," and it has been the case that it has been postponed before, you will come to rely on their verbal promises and believe this is the same as a postponement. It will be that last time when you get the verbal promise, but no letter of postponement, that the sale will go through. When you call the mortgage servicing company the next day, you will be told that the “hold” was "taken off" or "released." There will be no other explanation, and you will have been tricked into foreclosure.

Double Speak # 3 – Your loan modification is "under review."

Any of you who have watched your loan modification applications disappear into the mortgage servicer's abyss know these words – "your modification is under review" are meaningless. What is also meaningless to the servicer is your despair and your hardship. If there is a benefit to them to give you a modification, such as a tax break or government subsidy, they might give it to you. If there isn't, you won't get it. Borrower hardship is irrelevant to the mortgage servicer except as a means to collect your financials. 

Double Speak #4 – Your second deed of trust was "Charged off."

Around 2010, many borrowers used federal programs to modify their predatory first deeds of trust but did not address the second deeds of trust they had stopped paying on. These were the so-called "Zombie loans" that had been scooped up by investors who were lying in wait for the value to come back in your properties so they could bring these seconds back to life and foreclose. Many of you have found yourself surprised when a second deed of trust from the 2000s suddenly popped back up, and the investor wanted the principle plus interest.

When people came to Bank of America to modify their old Countrywide loan or to Wells Fargo to modify their old-World Savings Bank or Wachovia loan, starting around 2010, they believed these banks still held these second deeds of trust. Many times, when borrowers were asking about these seconds in an attempt to modify them or start paying on them again, the servicer's employee would tell them that their second was "written off" or "charged off." The borrower would think this meant the loan was forgiven, but it actually meant the loan had been "written off" or "charged off" of Wells Fargo’s or Bank of America's books because it had been sold to a different beneficiary. The servicer employee might also lie or lead the borrower to believe that the second had been modified along with the first. Neither thing was true.

This is another example of how the whole foreclosure economy around mortgage servicing runs on lies. The mortgage servicer employee who told you your second deed of trust was "written off" or "charged off" was probably reading from a script, and they might not have even understood what they were saying. They probably didn't. Even if they had understood, they could not have said otherwise and could not have gone off-script without risking getting fired.

However, their deception had consequences for you, the borrower. At the time that your property value was so low that the second deed of trust was fully unsecured, there was a brief opportunity to remove the lien from your title through a Chapter 13 Bankruptcy. This would require a second proceeding within a Chapter 13 bankruptcy called a lien strip. If the servicer employee told you that this loan was still active and you needed to take care of it, you might have contacted a bankruptcy attorney and asked how you could do this, and you might have figured it out and stripped the lien.

Now, think about why it was important for them to lie to you. If you knew the truth and dealt with this second deed of trust, the investor who bought your second would now be holding worthless paper. If it got out that employees of the servicer were tipping off borrowers to resolve these debts, it would decrease the amount an investor was willing to pay for a non-performing second, which would decrease the profit to the seller bank. The investor would stop buying seconds from the lender that was selling them on the secondary market, and word being out, this market would tighten up and become less lucrative. The lender that sold the second to the secondary market might be the parent company of the servicer, and they would all stop making money.

Another benefit to the servicer for lying to you is that even if you received a modification on your first deed of trust, once the second came springing back to life, it might also cause you to default on the first. If you read your modification contract carefully, you'll see that a breach of the contract will cause the old debt to spring back to life, including any principle reduction you had received. That would invalidate your modification and cause your old unmodified debt, along with attorney fees, late fees, and any other fees they could think of, to spring back to life as well. Because of the large equity position you might have saved up over the years, there would be a lot of profit to go around for the players, a lot of it to the servicer of your first, none of it to you.

Double Speak # 5 - The trustee is a non-interested party

California law assumes that the trustee is a neutral, responsible equal to the trustor (you) and the lender, but from the beginning, the trustee is chosen by your lender/ originator, and you have no say in who that is. Things only get worse if you default on a mortgage when the servicer substitutes the original trustee with a foreclosure trustee that is even more directly under the servicer's control, which is done by a Substitution of Trustee recorded against your title with the County Recorder.[4] The foreclosure trustee hired by the mortgage servicer now acts with a duty of care towards the servicer and answers only to them.[5] In theory, the foreclosure trustee is still supposed to be a neutral party equally responsible to the trustor and the lender, but the trustee will tell you in no uncertain terms: "[w]e work for the servicer."

In nonjudicial foreclosure states, statutes and case law give a privilege to the trustee's communications, which presupposes that the trustee is a neutral, non-interested party with no financial benefit from foreclosure.[6] Foreclosure trustees rely on these statutes and laws to hide corruption. In a nonjudicial foreclosure state like California, a title theory state, this is one of the worst problems created by these outdated laws - the statutory presumption of neutrality given to the trustee.

More and more, since securitization, investors have come to control the foreclosure process in nonjudicial foreclosure states. Many times, it is the servicer manipulating the foreclosure process, but sometimes it is also the trustee. This is especially true with high-end properties where the debt-to-equity position is low, meaning the homeowner is sitting on a lot of equity. In these cases, the motivation to trick the borrower is high, and the trickery is intense by both the servicer and the trustee, who may postpone or delay crying a sale to make sure that their preferred investor gets the inside track to purchase the property at a foreclosure sale.

Double Speak #6 - MERS is a beneficiary

MERS is a fictional beneficiary added to your mortgage as a way for servicers to avoid the cost of complying with the Pooling and Servicing Agreement in a securitization. The big players in the Mortgage Banking Industry did this by creating a fiction that MERS was a beneficiary or a nominee of the beneficiary, which allowed the originators to avoid the costly physical transfers and recorded assignments required between the three entities involved in securitization. No law allowed this, but MERS suddenly started showing up on mortgages.

The costly transfers that the Mortgage Banking Industry sought to avoid were the three "true sales" between the three parties involved in a securitization: 1) the lender, 2) an intermediary called a Special Purpose Vehicle (SPV), and 3) the depositor that deposits the mortgage into the security and also has a legal responsibility to draft the Pooling and Servicing Agreement for the RMBS. Every pooling and servicing agreement of every RMBS requires these three "true sales." between these three to insure bankruptcy remoteness, meaning each of these parties would be immune to bankruptcy.

The bigwigs in the banking industry were seeking to save costs for themselves because the three "true sales" between these entities required the physical delivery of a promissory note between the parties, with a signed endorsement, as well as a recording of each of these assignments with the county recorder of the county where the property is located. Each of these three "true sales" costs hundreds of dollars or more because of the human cost of delivery, the signed endorsement, the record-keeping, and the recording fees to the county recorder.

With the new legal fiction of MERS, the banks could now claim MERS as a nominal beneficiary and assignee and assert that they had thereby satisfied bankruptcy remoteness for the lender, the SPV, and the depositor and removed the need for "true sales" between these parties. To get around the fact that they were not a true beneficiary, MERS would claim "bare legal title," although that title was already held by the big bank trustee that controlled the RMBS, the dividing of equitable and legal ownership being what had given the trustee of the RMBS the power to control the trust's assets.[7] The assignment of legal title to the trustee of the RMBS meant that no legal title could pass to MERS, but that would not stop the banks from claiming it.[8]

When it comes time to foreclose, the servicers are sure to satisfy the last "true sale" from the lender into the RMBS in order to protect their own right to foreclose. In California, that means you will usually see an Assignment of the Deed of Trust recorded shortly before a Notice of Default, which will be the first time you will know the name of the RMBS that is your actual beneficiary (not MERS). This deception also perpetrates a falsity in the recording system since from the time you get the loan until the time you are foreclosed, the only beneficiary appearing in the county records will be the long-gone originator of your mortgage, who will not have had anything to do with the loan from the time of origination or the years after.

MERS is not a beneficiary in any way that a real person could identify since there are no employees, physical location, telephone number you can call, or a person you can speak to. MERS also holds no promissory notes. Suppose you see assignments recorded in your county records by officers of MERS. In that case, these "officers" will be the servicers' employees who have downloaded forms from the MERS website to become corporate officers to allow them to identify themselves as MERS officers to the county recorder. This means that even when you think you correspond with a beneficiary, you are still talking to a servicer.

This MERS doublespeak also allows these servicer employees to execute that last assignment of your mortgage into the RMBS and shortly thereafter hire a trustee and authorize the trustee to conduct your foreclosure. This puts even more power into the hands of the mortgage servicers. Putting all this power, minus any accountability, into the hands of servicer employees whose profit is based on foreclosure is also what has opened the door to robo-signing, forgeries, and mortgage fraud.

Double Speak #7 – the MERS database replaces the County Recorder

MERS is also a database that the mortgage banking industry (including the big four banks) created as a computer registry for servicers to join as members, which allows them to track their servicing rights. At origination, each MERS mortgage gets a MIN number, which the servicers can use to locate your mortgage and who is servicing it so they can easily transact these servicing rights between themselves.[9] The MERS database is voluntary, meaning it will be up to the servicers if they want to use it or not, and it is also up to them whether to identify the beneficiary. The MERS database also does not record transactions between beneficiaries or save any record of them.

Beneficiaries may use the MERS computer to transact a loan interest, but they do this through an electronic message to MERS where both simultaneously update a field in a database, which is called an "electronic handshake.[10]" This "electronic handshake" system is voluntary and includes no accompanying digital or hard copy of a memorialized agreement.[11] This adds to the unreliability of the MERS system as opposed to the county recording system.[12]

Now, instead of being able to identify your beneficiary at any given time by searching the county records, you are forced to use the MERS website, which identifies your loan by a MIN number. The information you get will be the name of your servicer and whether your servicer is servicing for themselves or someone else, but not who. Now, instead of knowing when your debt was sold from one beneficiary to another, your recorded chain of title will only show your original deed of trust or mortgage and no additional assignments to different beneficiaries, which will remain hidden until you satisfy the debt. You may also discover it when you find yourself in foreclosure when a final assignment prior to the foreclosure will identify the beneficiary in order to comply with the RMBS.

This MERS database saves money for the servicers and the lenders, but it is at your expense in multiple ways. First, the MERS computer registry is voluntary, so it's up to the servicers and lenders what information they want to put on there, and, as we know, they're not interested in informing you, so they don't put much. Second, this clandestine database, for the benefit of the servicers only, cannot replace the transparent county recorder system that has been in place in this country, serving the public (you) since the 1600s. Your title will remain clouded and will not be cleared and restored to the grantor-grantee indexing system until you pay off that MERS mortgage and the title is returned to you.[13]

But the coup de grace is the damage that the fictional MERS mortgage has caused and will continue to cause to local economies: the loss of billions of dollars in county recorder fees. These proceeds previously flowed through to other public institutions and public services and should have been the cost of doing business for the banks as part of their profit from securitization. Instead, they became savings for the bank, a cost that had already been factored into the cost of your mortgage but that the bank is now saving.

Among the institutions that have suffered the most over the last twenty years from this drying up of recorders' fees are the county courts, to which the county recorder profits are used to pay the salaries of judges, clerks, and court reporters. Courts are now filled with lawsuits against mortgage servicers, while budget cuts have left us with fewer judges, fewer courtrooms, and completely eliminated court reporters. The salary of the court reporter, which used to be paid by county funds from the county recorder, which might be thousands of dollars over the course of a trial, are now counted as savings to the bank and a cost passed on to you.

Double Speak #7 – Fair Debt Collection Act

What makes it hard for you to sue the servicers under the Fair Debt Collection Practices Act (FDCPA) is a Supreme Court case from 1999 which held that "but for (FDCPA U.S.C) §1692f (6)," those who engage only in nonjudicial foreclosure proceedings are not debt collectors within the meaning of the (Fair Debt Collection Practices ) Act.[14] However, §1692f (6) that the Supreme Court was talking about still requires these debts to be justified.[15] For instance, the servicer can't claim default fees when you are not in default, and there is no present right to exercise the power of sale.[16]

The FDCPA defines a "debt collector" as someone who is using interstate commerce to collect "the debts of another.[17]" This is one of the reasons servicers will try to argue that they are not servicing the loan for an RMBS but are themselves a beneficiary. This is because they can be sued for collecting default amounts they are not entitled to. When they have done this, they will come up with all kinds of documentation after the fact to show their abuses were justified. In one of my cases, the servicer came up with letters mailed to the wrong address telling the borrower that they were instituting escrow fees. These servicers gamble that very few borrowers will have the stomach to sue them in federal court for these over-charges, very few judges will be willing to thread this needle, and very few attorneys working in this field will be skilled enough to navigate the law, and they are correct on all these counts.

[1] “Double-speak” is a term invented by George Orwell in his dystopian 1949 novel 1984. “What is really important in the world of doublespeak is the ability to lie, whether knowingly or unconsciously, and to get away with it; and the ability to use lies and choose and shape facts selectively, blocking out those that don’t fit an agenda or program.”— Edward S. Herman

[2] “All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.” Sun Tzu, The Art of War.

[3] Cal. Civ. Code §2022g(a)(2)-(3)

[4] Cal. Civ. Code §2924(a)(6) addresses the Substitution of Trustee. Foreclosure trustees are rarely the original trustee on your deed of trust Deeds of Trust, unless you have a short-term balloon mortgage that the hard money lender expects to go to foreclosure immediately. The substitution of trustee may be recorded after the original trustee records the notice of default, but the foreclosure trustee must be substituted prior to the recording of the notice of trustee’s sale.

[5] The foreclosure trustee will usually always be different from the trustee on your deed of trust. This substitution must be by a Substitution of Trustee recorded by the county recorder or else it is without rights.

[6] The statutes that control the trustee’s actions and rights in California begin with Cal. Civ. Code §2924(a)(1); See also: Kachlon v. Markowitz, 168 Cal. App. 4th 316 (2008); Cal. Civ. Code §2924(d)

[7] Christoper Peterson FORECLOSURE, SUBPRIME MORTGAGE LENDING, AND THE MORTGAGE ELECTRONIC REGISTRATION SYSTEM, 78 U. Cin. L. Rev. 1384 (2011).

[8] Id at 1384.

[9] The MIN number will be at the top of your recorded Deed of Trust or Mortgage.

[10] Christopher Peterson, Demystifying the Mortgage Electronic Registration System's Land Title Theory, 53 WM & MARY L. REV.126-127 (2011).

[11] Id at 126-127

[12] Id at 126-127

[13] In lien theory states (mortgage) title will be returned to you by the beneficiary. In title theory states (deed of trust) it will be returned to you by the trustee.

[14] Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 1038, 203 L. Ed. 2d 390 (2019)

[15] 15 U.S.C. §1692(f)(6)(A) prohibits debt collection when “…there is no present right to possession of the property claimed as collateral through an enforceable security interest.”

[16]15 U.S.C. §1692(a)(6)(F)(iii) also excludes “a debt which was not in default at the time it was obtained by such person.”

[17] 15 U.S.C. §1692(a)(6) “The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f (6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.”