Consumer complaint received 2025-03-27 00:00:00
Product: Mortgage — FHA mortgage
Issue: Trouble during payment process — Payment process
Company: PENNYMAC LOAN SERVICES, LLC.
State: CO

Complaint narrative:
Constitutional Right to Due Process in Foreclosures The statutory scheme enabling nonjudicial foreclosures violates the Seventh Amendment, which guarantees the right to a trial by jury in controversies exceeding {$20.00}. Congress has no constitutional authority to abridge this fundamental right under the guise of efficiency for creditors, as the Constitution provides no exceptions for monetary disputes above this threshold. The statutory framework allowing nonjudicial foreclosures inherently denies borrowers their right to due process by circumventing judicial oversight, even in cases where borrowers are part of the Borrower-in-Custody ( BIC ) Program or other Federal Reserve-backed programs. The right to petition the government for grievances, as preserved under the First Amendment, further prohibits the foreclosure process from proceeding without adequate judicial review. 

Dear CFPB Representative, I am submitting this formal complaint against PennyMac for failure to provide proper accounting, misrepresentation of financial obligations, and non-compliance with federal regulations concerning fractional reserve banking and the Borrower-in-Custody ( BIC ) Program. Additionally, I assert that PennyMac has no legal standing to claim any debt or enforce a financial obligation due to multiple factors, including their lack of standing as a holder in due course, failure to provide a chain of title, and refusal to apply the common-law right of offset. 

1. Lack of Standing Original Note Was Tendered to XXXX XXXX XXXX  My wet-ink signed promissory note was originally executed and tendered to XXXX XXXX XXXX, the original servicer. Under UCC Article 3, only the original holder in due course of the note has the right to enforce it. PennyMac has failed to provide any documented proof of purchase, transfer, or lawful assignment of my promissory note from XXXX XXXX XXXX 

Additionally, I have recorded an acceptance of my deed at the county deeds office, confirming my property rights and nullifying any claim of foreclosure or unlawful transfer. PennyMac has ignored this legal filing and continues to misrepresent its interest in my property.

2. Violation of 12 U.S.C. 412 and 59 Stat. 237 2 Failure to Recognize Collateralization and Fractional Reserve Banking Transactions PennyMac, as a depository institution, has already received compensation for my promissory note through the fractional reserve banking system. Under 12 U.S.C. 412, my note was pledged as collateral, allowing the financial institution to obtain funding at a multiple of the notes face value.

Through the BIC Program, the Federal Reserve approved a transaction in excess of my notes face value, and the resulting funds were deposited into an account in my name, which PennyMac maintains control over. Despite this, PennyMac has refused to : Provide a full accounting of the fractional reserve transactions related to my note.

Recognize that my note has already been monetized through the Federal Reserve banking system. 

Apply the right of offset to credit my account with the funds that were deposited under my name. 

3. Failure to Provide Full Accounting and Fiduciary Transparency I have formally sent PennyMac and their indentured trustee a Power of Attorney ( POA ), demanding that they act in accordance with federal law and recognize the BIC Program guidelines. However, they have failed to respond, violating my legal right to full disclosure under 9 U.S.C. 210.

PennyMac must be compelled to disclose : The funds deposited into my account as a result of the pledged collateral. 

The original face value of my promissory note.

The amounts fractionally reserved by PennyMac.

Any transactions related to my pledged collateral under the BIC Program.

4. Ongoing Litigation in Colorado State Court & Securitization Audit Findings I am currently engaged in an ongoing case in Colorado State Court regarding the improper claims and securitization of my promissory note. As part of my legal strategy, I commissioned a securitization audit, which has revealed significant irregularities, including : No proper chain of title demonstrating a lawful transfer to PennyMac.

The use of my promissory note as a negotiable instrument without disclosure.

The sale and trading of my note without proper authorization. 

Despite these findings, PennyMac continues to act as though it has lawful standing while refusing to validate the alleged debt with proper documentation.

5. Denial of the Common-Law Right of Offset Under Federal Reserve Operating Circular No. 10, Section 7, I, as the borrower, have the legal right to demand compliance with the BIC Programs contractual and regulatory framework. PennyMac is obligated under the common-law right of offset to apply the funds deposited into the account established in my name toward any claimed obligation. 

PennyMacs refusal to apply this offset contradicts established banking principles, effectively double-dipping by receiving Federal Reserve funds under my name while still pursuing an alleged outstanding balance.

6. Non-Recognition of Pledged Collateral Value Under Federal Reserve laws and regulations, possession of pledged collateral within the BIC Program is proof of its real and measurable value. Since PennyMac continues to hold this collateral, it is not suffering a loss and can not lawfully claim an outstanding debt without first accounting for and recognizing the value of the pledged instrument. 

Requested Action from the CFPB I request that the CFPB take immediate action to enforce compliance and require PennyMac to : Provide a full accounting of all financial transactions related to my pledged collateral, as required by 9 U.S.C. 210. 

Disclose the chain of title and prove lawful transfer from XXXX XXXX XXXX, including proof of consideration and assignment. 

Recognize the right of offset, crediting my account with the funds sufficient to satisfy any alleged outstanding balance. 

Apply federal banking laws that prohibit depository institutions from misrepresenting pledged collaterals value and double-claiming financial obligations. 

PennyMacs failure to comply with 12 U.S.C. 412, 59 Stat. 237 2, and related banking laws demonstrates willful misrepresentation and financial fraud. As a borrower under the BIC Program, I have the legal right to demand proper accounting, disclosure, and the application of the right of offset. I request the CFPBs assistance in ensuring that PennyMac complies with federal law and ceases its deceptive practices.

Thank you for your time and attention to this matter. Please contact me at your earliest convenience to discuss this complaint further.

Company response to consumer: Closed with explanation