Predatory Lending – Page 2 – Works Rights Compliance Alliance

SAY NO TO LENDERS FRAUD!

Dear Homeowner,

It’s been widely reported around the country, via internet, blogs and newspapers, how the lenders used the foreclosure mills and other legal ways, to fabricate fraudulent documents to record in the county recorder offices and pretend they have legal standing to initiate the foreclosure procedure.

Neil Garfield in his blog http://www.livinglies.com, The Huffington Post, The New York Times, Steve Vondran in his website http://www.foreclosuredefenseresourcecenter.com, Tim McCandless in his blog https://timothymccandless.wordpress.com and many others have been advocating for the homeowners trying to raise awareness in the courts so that justice can be served.Contact Us: MortgageReductionLaw.com

A few years ago, when the Mortgage Debacle started, these lenders went after the Mortgage Brokers after they found themselves in trouble for the many defaulted loans. They filed civil and criminal lawsuits convicting these brokers for fabricating documents and forging signatures to fund the loans. The legal system, judges and General Attorneys were prompt to convict “these so called criminals”.Contact Us: MortgageReductionLaw.com

Today the tables have turned 180 degrees and we have discovered how these entities have been widely practicing what they accused others of. Today the lenders are fabricating documents, forging signatures and filing fraudulent documents with the government agencies to weasel their way into owning the homeowners’ properties.Contact Us: MortgageReductionLaw.com

The fact that judges preceding the Unlawful Detainer hearings are not educated enough about the matter and don’t want to take the time to hear the attorneys defending the homeowners, does not help to make this wrong right. Securitization is a very complicated subject that cannot be taught in an Unlawful Detainer hearing or even in a Wrongful Foreclosure hearing. The way judges have been manipulating the information provided by the homeowners in their lawsuits to rule in favor of the lenders is despicable!Contact Us: MortgageReductionLaw.com

That’s why it’s so important to have all your property recorded documents used to foreclose on your home, been researched and analyzed by an expert that can identify all the issues that can be used in a Court of Law to fight for your home.

When you go in front of a Judge with enough evidence to prove that fraud was committed by the lender when the lender fabricated documents used to foreclose, you have a good chance to get the Judge’s attention. Fraud is a subject they know, it’s a crime and they can rule in your favor. It would be very difficult for a Judge to justify this fraudulent behavior on the part of the lender.

Later on, once you have successfully received an injunction, you can bring the securitization argument in your complaint and make the lender prove their innocence.Contact Us: MortgageReductionLaw.com

The documents used to initiate the foreclosure of your home have been fraudulently fabricated by either the Trustee or the Lender.

Some attorneys who have explored this cause of action in their civil lawsuits, have been able to get relief for the homeowners by getting the in Temporary Restraining Order and the Injunction granted.

Below please find proof of a very common practice within these entities when they fabricate documents. They use the name of one person who becomes an officer of many entities and the signature is very different in different documents. This has happened in your case too.

This is a portion of our report after thoroughly performing research and discovery for one of our clients: (testimonial letters can be provided upon request after signing a confidentiality agreement).

SIGNED BY: LINDA GREEN AS VICE PRESIDENT FOR AMERICAN HOME MORTGAGE SERVICING, INC. AS SUCCESOR IN INTEREST TO OPTION ONE MORTGAGE CORPORATION

TOO MANY JOBS

For this report, over 500 mortgage assignments were examined.

Each Assignment was filed by Docx, a mortgage servicing company in Alpharetta, GA; each was notarized in Fulton County, GA.

Many of these Assignments have been used in foreclosure actions to prove that the lender has the legal right to file the foreclosure actions.

The name of Linda Green, frequently appears on Docx documents. The following list summarizes some of the many job titles used by Green.Contact Us: MortgageReductionLaw.com

JOB TITLES HELD BY LINDA GREEN

11-11-2004 & 06-22-2006

Vice President, Loan Documentation, Wells Fargo Bank, N.A., successor by merger to Wells Fargo

Home Mortgage, Inc.

08-11-2008 & 08-14-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

08-27-2008

Vice President, American Home Mortgage Servicing as successor-in-interest to Option One Mortgage Corporation

09-19-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit

09-30-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

09-30-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit

10-08-2009

Vice President & Asst. Secretary, American Home Mortgage Servicing, Inc., as servicer for Ameriquest Mortgage Corporation

10-16-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

10-17-2008, 11-20-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit

11-20-2008

Vice President, Option One Mortgage Corporation

12-08-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit

12-15-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for HLB Mortgage

12-24-2008

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

12-26-2008

Vice President, American Home Mortgage Servicing, Inc

01-13-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for Family Lending Services, Inc

01-15-2009

Vice President, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage Acceptance, Inc

02-03-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Broker Conduit

02-24-2009

Vice President, American Home Mortgage Servicing, Inc. as successor-in-interest to Option One Mortgage Corporation

02-25-2009

Vice President, Bank of America, N A

02-27-2009

Vice President, American Home Mortgage Servicing, Inc., as successor-in-interest to Option One Mortgage Corporation

03-02-2009

Vice President, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage

03-04-2009

Vice President, Argent Mortgage Company, LLC by Citi Residential Lending Inc., attorney-in-fact

03-06-2009 & 03-20-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

04-15-2009, 04-17-2009, 04-20-2009

Vice President, Bank of America, N.A.

05-11-2009, 07-06-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

07-14-2009

Vice President, Bank of America, N.A.

07-30-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

08-12-2009

Vice President, Sand Canyon Corporation f/k/a Option One Mortgage Corporation

08-28-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc.

09-03-2009

Asst. Vice President, Sand Canyon Corporation formerly known as Option One Mortgage Corporation

09-03-2009

Asst. Secretary, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage

09-04-2009

Asst. Secretary, Mortgage Electronic Registration Systems, Inc., acting solely as nominee for American Home Mortgage

09-08-2009

Vice President, Bank of America, N.A.

09-21-2009 & 09-22-2009

Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Home Mortgage Acceptance, Inc

ATTACHED TO THIS DOCUMENT OTHER DOCUMENTS SIGNED BY LINDA GREEN THAT SHOW THE VARIATIONS OF HER SIGNATURE

IT APPEARS AS IF THE SIGNATURE OF MS. GREEN COULD BE A FORGERY.Contact Us: MortgageReductionLaw.com

A forgery is a writing which falsely purports to be writing for another and is executed with the intent to defraud. Ordinarily a forged instrument cannot carry title.

THE SIGNATURE BELOW IS THE SIGNATURE IN THIS ASSIGNMENT OF DEED OF TRUST:Contact Us: MortgageReductionLaw.com

THE FOLLOWING SIGNATURES ARE FROM DIFFERENT DOCUMENTS RECORDEDIN DIFFERENT COUNTIES:

THIS WHOLE SYSTEM IS A FARCE. A BROKEN DOWN, FRAUDULENT, SHAKY, DISHONEST AND TERRIFYINGLY CORRUPT SYSTEM.

The press and the general public is starting to pick up on these major systemic issues that judges, attorneys and other insiders have known about for some time…when the whole system collapses we’ve all got a real mess on our hands.

As we all struggle to unravel this monstrous mess, breaking down capacity will be a key focus in the problem. We’re all going to be searching around to determine who to sue and where to sue them, but because the courts failed to enforce the most basic pleading requirement….i.e. specifically identify who the parties to the lawsuit are, this is going to be most difficult.

One of the persistent and most pervasive problems in the whole foreclosure crisis is the inability of any party to get reliable or credible information about what is owed on a mortgage, who that phantom amount is owed to and what negotiated amount a lender, servicer or other party involved in the transaction might accept to modify or short sale the underlying loan.

A very concerning issue is the publication on the MERS website of information that identifies who the servicer on a loan is and who the investor in that loan is. But, neither the servicer or investor matches up to the information in many cases.

When you combine all this information with the depositions of Robo signers that are posted on many website, you’ll understand that in a large number of cases, the only connection between the plaintiff foreclosing and the mortgage being foreclosed is a sloppy and hastily executed Assignment signed by an officer that has no corporate authority and has no personal knowledge of the information contained on those documents.

It’s simply not okay to use the “robosigning” practice in the non judicial foreclosure states because these foreclosure cases don’t have to go to court.

The following are some of the most clear legal reasons why the Robo-Signer Controversy should entitle hundreds of thousands of homeowners wrongfully foreclosed and evicted to sue in non judicial foreclosure states. Robo Signers are illegal because fraud cannot be the basis of clear title, trustee’s deeds following Robo Signed sales should be void as a matter of law, notarization is a recording requirement for many of the documents, which was often botched, and most importantly because robo signed falsifications are meant for use in court, including unlawful detainers and bankruptcy matters.Contact Us: MortgageReductionLaw.com

CALIFORNIA

1. Clear Title May Not Derive from a Fraud (including a bona fide purchaser for value).

In the case of a fraudulent transaction California law is settled. The Court in Trout v. Trout, (1934), 220 Cal. 652 at 656 stated:

“Numerous authorities have established the rule that an instrument wholly void, such as an undelivered deed, a forged instrument, or a deed in blank, cannot be made the foundation of a good title, even under the equitable doctrine of bona fide purchase. Consequently, the fact that defendant Archer acted in good faith in dealing with persons who apparently held legal title, is not in itself sufficient basis for relief.” (Emphasis added, internal citations omitted).

This sentiment was clearly echoed in 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279 at 1286 where the Court stated:

“It is the general rule that courts have power to vacate a foreclosure sale where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties.” (Emphasis added).

If forged signatures are used to obtain the foreclosure it makes a difference!

2. Any apparent sale based on Robosigned documents or forged signatures should be void and without any legal effect.

In Bank of America v. LaJolla Group II, the California Court of Appeals held that if a trustee is not contractually empowered under the Deed of Trust to hold a sale, it is totally void. Voidness, as opposed to voidability, means that it is without legal effect. Title does not transfer. No right to evict arises. The property is not sold.

In turn, California Civil Code 2934a requires that the beneficiary execute, notarize and record a substitution for a valid Substitution of Trustee to take effect. Thus, if the Assignment of Deed of Trust, the Substitution of Trustee or the Notice of Default are Robo-Signed, the sale should be void.Contact Us: MortgageReductionLaw.com

3. These documents are not recordable without good notarization.

In California, the reason these documents are notarized in the first place is because otherwise they will not be accepted by the County recorder. Moreover, a notary who helps commit real estate fraud is liable for $25,000 per offense.

Once the document is recorded, however, it is entitled to a “presumption of validity”, which is what spurned the falsification trend in the first place. California Civil Code Section 2924. Therefore, the notarization of a false signature not only constitutes fraud, but is every bit intended as part of a larger conspiracy to commit fraud on the court.

4. The documents are intended for court eviction proceedings.

A necessary purpose for these documents, after the non judicial foreclosure, is the eviction of the rightful owners afterward. Even in California, eviction is a judicial process, albeit summary and often sloppily conducted by judges who don’t really believe they can say no to the pirates taking your house. However, as demonstrated below, once these documents make it into court, the bank officers and lawyers become guilty of felonies:

California Penal Code section 118 provides (a) Every person who, having taken an oath that he or she will testify, declare, depose, or certify truly before any competent tribunal, officer, or person, in any of the cases in which the oath may by law of the State of California be administered, willfully and contrary to the oath, states as true any material matter which he or she knows to be false, and every person who testifies, declares, deposes, or certifies under penalty of perjury in any of the cases in which the testimony, declarations, depositions, or certification is permitted by law of the State of California under penalty of perjury and willfully states as true any material matter which he or she knows to be false, is guilty of perjury.Contact Us: MortgageReductionLaw.com

This subdivision is applicable whether the statement, or the testimony, declaration, deposition, or certification is made or subscribed within or without the State of California.

Penal Code section 132 provides: Every person who upon any trial, proceeding, inquiry, or investigation whatever, authorized or permitted by law, offers in evidence, as genuine or true, any book, paper, document, record, or other instrument in writing, knowing the same to have been forged or fraudulently altered or ante-dated, is guilty of felony.

The Doctrine of Unclean Hands provides: plaintiff’s misconduct in the matter before the court makes his hands “unclean” and he may not hold with them the pristine remedy of injunctive relief. California Satellite Sys. v Nichols (1985) 170 CA3d 56, 216 CR 180. California’s unclean hands rule requires that the Plaintiff don’t cheat, and behave fairly. The plaintiff must come into court with clean hands, and keep them clean, or he or she will be denied relief, regardless of the merits of the claim. Kendall-Jackson Winery Ltd. v Superior Court (1999) 76 CA4th 970, 978, 90 CR2d 743. Whether the doctrine applies is a question of fact. CrossTalk Prods., Inc. v Jacobson (1998) 65 CA4th 631, 639, 76 CR2d 615.

5. Robo Signed Documents Are Intended for Use in California Bankruptcy Court Matters. One majorly overlooked facet of California is our extremely active bankrtupcy court proceedings, where, just as in judicial foreclosure states, the banks must prove “standing” to proceed with a foreclosure. If they are not signed by persons with the requisite knowledge, affidavits submitted in bankruptcy court proceedings such as objections to a plan and Relief from Stays are perjured.

The documents in support are often falsified evidence.

CONCLUSION

Verified eviction complaints, perjured motions for summary judgment, and all other eviction paperwork after robo signed non judicial foreclosures in California and other states are illegal and void. The paperwork itself is void. The sale is void. But the only way to clean up the hundreds of thousands of effected titles is through litigation, because even now the banks will simply not do the right thing. And that’s why robo signers count in non-judicial foreclosure states. Victims of robosigners in California may seek declaratory relief, damages under the Rosenthal Act; an injunction and attorneys fees for Unfair Business practices, as well as claims for slander of title; abuse of process, civil theft, and conversion.Contact Us: MortgageReductionLaw.com

Ask for a 402 hearing and then dissmiss the eviction !!!

If the court follows the rules of evidence (and they do) if proper objections are filed. No eviction of a secuitized loan should ever prevail on an eviction; they cannot produce the foundation to authenticate the Trustees Deed it is based upon preliminary facts that they are unable and unwilling to bring to court. The Assignments Civil code 2932.5 , The Servicer, The Accounting, The Trustee, MERS, The Robo signer, The person that purportedly contacted the Borrower Trustor, The compliance documents with Civil Code 2924, all these are preliminary facts upon which the admission of the Trustees Deed depend Evidence code 400,401,402,403. Check out this motion !!

Timothy L. McCandless, Esq. (SBN 147715)

LAW OFFICES OF TIMOTHY L. MCCANDLESS

Attorney for Defendant,

SUPERIOR COURT OF CALIFORNIA

IN AND FOR THE COUNTY OF SOLANO

SOLANO COURT/ LIMITED JURISDICTION

FANNIE MAE et al,

Plaintiff,

Defendant.

)

)Case No.:

DEFENDANT’S IN LIMINE MOTION TO EXCLUDE ALL EVIDENCE (RE:FACIALLY INVALID DEED OF TRUST)

TRIAL DATE: Tues., June 15, 2010 )

To the Court, to Plaintiff FANNIE MAE, and its attorney of record:

PLEASE TAKE NOTICE that, on Tuesday, June 15, 2010, at 8:30 AM, or as soon thereafter as the matter may be heard, Defendant, MICHELLE CABESAS, will in limine judicii move the court, and hereby does move, for an order excluding from trial all evidence proffered by Plaintiff FANNIE MAE.

The motion will be heard in Department 26, at 1:30 p.m. in front of the Honorable Judge Davis of the Solano Court of the above-captioned court.

The motion will be brought pursuant to Evidence Code sections 353 and 400 et seq., Code of Civil Procedure section 430.10(b), and related decisional law.

The ground of the motion will be that the Unlawful Detainer Complaint, together with the publicly-filed “Deed of Trust” that is necessarily incorporated into it, is facially invalid because the Beneficiary did not have the power of sale. Such irregularities should constitute sufficient grounds to set aside the entire non-judicial foreclosure process. Therefore, the Trustee’s Deed After Sale should not be admitted as no lawful basis exists for its execution. Additionally, the Notice of Default, and Notice of Default Declaration should be excluded.

The failure of Plaintiff and/or Plaintiff’s agent to perform a condition precedent pursuant to Civil Code Section 2923.5 is fatal. The Notice of Default Declaration fails is several regards, (1) the language of the Notice does not comply with the statute because it does not set forth facts of how the statute was performed; (2) the Declaration is not sworn under penalty of perjury; (3) the only date of the Declaration is the date of execution which is one day prior to the Notice of Default which was recorded only five days later, thus, thirty days did not pass from the date of execution of the Declaration and the date of recordation. As such, under Section 2923.5, the Notice of Default Declaration is void and could not support the recordation of the Notice of Default. Because the non-judicial foreclosure process is subject to strict scrutiny, and given the material failure of a condition precedent by Plaintiff and/or Plaintiff’s agent, the entire non-judicial foreclosure process is invalid. Therefore, the Trustee’s Deed After Sale cannot be admitted into evidence, as no lawful foundation can be laid.

DATED: June 14, 2010. ________________________________________

LAW OFFICES OF TIMOTHY L. MCCANDLESS

By: Timothy P. McCandless, Esq.

Attorney for Defendant,

MEMORANDUM OF POINTS AND AUTHORITIES

FACTUAL BACKGROUND

The court’s records for this case will show that Plaintiff FANNIE MAE filed its Complaint on or about August 4, 2009. The apparent foreclosing beneficiary was plaintiff, FANNIE MAE. [See attachment to Unlawful Detainer Complaint entitled “Trustee’s Deed Upon Sale.”]

This motion ensued in its present form, because sufficient time did not remain before trial, in order to permit Defendant CABESAS to bring a regularly-noticed general demurrer or “motion for judgment on the pleadings”.

II.

THE COURT HAS POWER TO EXCLUDE ALL EVIDENCE FROM TRIAL, ON GROUNDS ANALOGOUS TO A GENERAL DEMURRER.

The court has power to consider and grant an objection to all evidence under Evidence Code sections 353 and 400 et seq. If no cause of action or defense is stated by the respective pleading, then no “factual issue” any longer exists, and therefore no evidence may be admitted on grounds of “relevance” under Evidence Code sections 400 et seq.

It is well established that a party may bring an in limine objection in order to exclude all evidence, as a sort of general demurrer or “motion for judgment on the pleadings”. “Although not in form a motion, this method of attacking the pleading is identical in purpose to a general demurrer and motion for judgment on the pleadings and is governed by the same rules. [Citations.]” 5 WITKIN, Cal.Proc.3^rd page 386, “Pleading” at §953. See also 6 WITKIN, Cal.Proc.3^rd pages 571-573, “Proceedings Without Trial” at §§272-273.

According to 5 WITKIN, Cal.Proc.3^rd page 340, “Pleading” at §899, a “general” demurrer concerns only the defense that the pleading does not state facts sufficient to constitute a cause of action or defense. That is precisely what defendant contends here: the Unlawful Detainer Complaint fails to state a claim for which relief may be granted.

III.

THE COURT MUST STRICTLY ENFORCE

THE TECHNICAL REQUIREMENTS FOR A FORECLOSURE.

The harshness of non-judicial foreclosure has been recognized. “The exercise of the power of sale is a harsh method of foreclosing the rights of the grantor.” Anderson v. Heart Federal Savings (1989) 208 Cal.App.3d 202, 6 215, citing to System Inv. Corporation v. Union Bank (1971) 21 Cal.App.3d 137, 153. The statutory requirements are intended to protect the trustor from a wrongful or unfair loss of his property Moeller v. Lien (1994) 25 Cal.App.4th 822, 830; accord, Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 503; Lo Nguyen v. Calhoun (6^th District 2003) 105 Cal.App.4th 428, 440, and a valid foreclosure by the private power of sale requires strict compliance with the requirements of the statute. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.179; Anderson v. Heart Federal Sav. & Loan Assn., 208 Cal. App. 3d 202, 211 (3d Dist. 1989), reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Bisno v. Sax (2d Dist. 1959) 175 Cal. App. 2d 714, 720.

It has been a cornerstone of foreclosure law that the statutory requirements, intending to protect the trustor from a wrongful or unfair loss of the property, must be complied with strictly. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182. “Close” compliance does not count. As a result, any trustee’s sale based on a statutorily deficient Notice of Default is invalid (emphasis added). Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182; Anderson v. Heart Federal Sav. & Loan Assn. (3dDist. 1989) 208 Cal. App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Saterstrom v. Glick Bros. Sash, Door & Mill Co.(3d Dist. 1931) 118 Cal. App. 379.

Additionally, any trustee’s sale based on a statutorily deficient Notice of Trustee Sale is invalid. Anderson v. Heart Federal Sav. & Loan Assn. (3d Dist. 1989) 11 208 Cal.App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989). The California Sixth District Court of Appeal observed, “Pursuing that policy [of judicial interpretation], the courts have fashioned rules to protect the debtor, one of them being that the notice of default will be strictly construed and must correctly set forth the amounts required to cure the default.” Sweatt v. The Foreclosure Co., Inc. (1985 – 6th District) 166 Cal.App.3d 273 at 278, citing to Miller v. Cote (1982) 127 Cal.App.3d 888, 894 and SystemInv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153.

The same reasoning applies even to a notice of a trustee’s sale. Courts will set aside a foreclosure sale when there has been fraud, when the sale has been improperly, unfairly, or unlawfully conducted, or when there has been such a mistake that it would be inequitable to let it stand. Bank of America Nat. Trust & Savings Ass’n v. Reidy (1940) 15 Cal. 2d 243, 248; Whitman v. Transtate Title Co.(4th Dist. 1985) 165 Cal. App. 3d 312, 322-323; In re Worcester (9th Cir. 1987) 811 F.2d 1224, 1228. See also Smith v. Williams (1961) 55 Cal. 2d 617, 621; Stirton v. Pastor (4^th Dist. 1960) 177 Cal. App. 2d 232, 234; Brown v. Busch (3d Dist. 1957) 152 Cal.App. 2d 200, 203-204.

If somehow these foreclosing predecessor-in-interest can establish this standing, or right, to extrajudicially foreclose, still it should be prevented from pursuing this eviction action, because such an action, if successful, would result in a wrongful foreclosure, due to the predecessor-in-interest’s exercise of a non-existent extrajudicial power.

IV.

PLAINTIFF, OR PLAINTIFF’S PREDECESSOR-IN-INTEREST,

DID NOT HAVE THE RIGHT TO EXTRAJUDICIALLY FORECLOSE

The foreclosing predecessor-in-interest simply did not have the right to foreclose under the subject trust deed, because the notice of default facially invalid.

The reason why the security instrument is not valid, is because it is facially void ! A copy of the subject trust deed – a public record!! — is attached hereto. Further, the trueness of the copy is readily verifiable, since it is a publicly-recorded document. Clear as daylight, contact with the trustor 30 days prior to the notice was imjpossible. The was no lender MERS is not a lender Plaintiff did not get the assignment till 7/8/2009 . The notice of default was recorded 7/31/2009 only 23 days after the assignment.

A trust deed adds a third party, of sorts, namely the beneficiary. It has been observed that a trust deed naming a purely fictitious person as beneficiary may be void. Woodward v. McAdam (1894), 101 Cal. 438. It has been held that a trust deed might be void for uncertainty, where the deed of trust does not name or describe any of the beneficiaries, but only classified them by reference to a common attribute. Watkins v. Bryant (1891), 91 Cal. 492. There seems to be no common-sense reason why the same principle should not apply to the designation of the grantee/ trustee, even were the law of deeds not generally applicable to trust deeds.

Beneficiary did not have the power of sale. Such irregularities should constitute sufficient grounds to set aside the entire non-judicial foreclosure process. Therefore, the Trustee’s Deed After Sale should not be admitted as no lawful basis exists for its execution. Additionally, the Notice of Default, and Notice of Default Declaration should be excluded.

CONCLUSION

The Plaintiff’s entire case rests upon the “facial” or “on the public record” legitimacy of the extrajudicial foreclosure by its predecessor-in-interest. The foreclosure was facially void. The case should be dismissed, upon the court’s determination that no factual “issue” remains.

Respectfully submitted,

DATED: June 14, 2010 _______________________________________

LAW OFFICES OF TIMOTHY L. MCCANDLESS

By: Timothy P. McCandless

ATTORNEY FOR DEFENDANT

Paragraph 22 in ALL Deeds of Trust lenders don’t follow the contract

BOMBSHELL- ANOTHER 2ND DCA SMACKDOWN- KONSULIAN! June 1st, 2011 Paragraph 22 of almost every mortgage contains a provision that requires the plaintiff to provide notice and an opportunity to cure the default prior to foreclosure. The principle behind this paragraph and the right to cure is not just a helpful little piece for the defendant, the default and cure provisions recited are an essential element of the entire legal process of foreclosure, deeply rooted in our American Jurisprudence. This is a subject that is discussed in some length in the recent Cardozo Law Review Article on Foreclosures. (attached) That’s all some deep stuff, but here’s where the rubber behind all that hits the road…in an opinion just released today….. Under Florida law, contracts are construed in accordance with their plain language, as bargained for by the parties. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000). Further, Busey did not refute Konsulian’s defenses nor did it establish that Konsulian’s defenses were legally insufficient. Because Busey did not prove that it met the conditions precedent to filing for foreclosure, it failed to meet its burden, and it is not entitled to judgment as a matter of law. In addition to being prematurely filed, Konsulian claims that the acceleration letter failed to state the default as required by the mortgage terms. We agree and reverse. Now there are default letters floating all around in Foreclosureland, but I doubt that many of them comply with the express terms of the contract the banks created…..

Wrongfull foreclosure lawsuit vallejo

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http://www.balitangamerica.tv/foreclosure-lawsuits/?sms_ss=facebook&at_xt=4dd2daa3410e4e26%2C0

Pooling and servicing agreements PSA how it works in Judicial foreclosure states like Florida

THE ROOT OF FORECLOSURE DEFENSE The Pooling and Servicing Agreement (PSA) is the document that actually creates a residential mortgage backed securitized trust and establishes the obligations and authority of the Master Servicer and the Primary Servicer. The PSA is the heart and root of all securitized based foreclosure action defenses. The PSA establishes that mandatory rules and procedures for the sales and transfers of the mortgages and mortgage notes from the originators to the Trust. It is this unbroken chain of assignments and negotiations that creates what is called “The Alphabet Problem.” In order to understand the “Alphabet Problem,” you must keep in mind that the primary purpose of securitization is to make sure the assets (e.g., mortgage notes) are both FDIC and Bankruptcy “remote” from the originator. As a result, the common structures seek to create at least two “true sales” between the originator and the Trust. One of the defenses used by the famous Foreclosure Defender, April Charney is the following: PLAINTIFF FAILED TO COMPLY WITH APPLICABLE POOLING AND SERVICING AGREEMENT LOAN SERVICING REQUIREMENTS: Plaintiff failed to provide separate Defendants with legitimate and non predatory access to the debt management and relief that must be made available to borrowers, including this Defendant pursuant to and in accordance with the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission that controls and applies to the subject mortgage loan. Plaintiff’s non-compliance with the conditions precedent to foreclosure imposed on the plaintiff pursuant to the applicable pooling and servicing agreement is an actionable event that makes the filing of this foreclosure premature based on a failure of a contractual and/or equitable condition precedent to foreclosure which denies Plaintiff’s ability to carry out this foreclosure. You therefore have in the most basic securitized structure the originator, the sponsor, the depositor and the Trust. I refer to these parties as the A (originator), B (sponsor), C (depositor) and D (Trust) alphabet players. The other primary but non-designated player in my alphabet game is the Master Document Custodian for the Trust. The MDC is entrusted with the physical custody of all of the “original” notes and mortgages and the assignment, sales and purchase agreements. The MDC must also execute representations and attestations that all of the transfers really and truly occurred “on time” and in the required “order” and that “true sales” occurred at each link in the chain. Section 2.01 of most PSAs includes the mandatory conveyancing rules for the Trust and the representations and warranties. The basic terms of this Section of the standard PSA is set-forth below: 2.01 Conveyance of Mortgage Loans. (a) The Depositor, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund, and the Trustee, on behalf of the Trust, hereby accepts the Trust Fund. (b) In connection with the transfer and assignment of each Mortgage Loan, the Depositor has delivered or caused to be delivered to the Trustee for the benefit of the Certificateholders the following documents or instruments with respect to each Mortgage Loan so assigned: (i) the original Mortgage Note (except for no more than up to 0.02% of the mortgage Notes for which there is a lost note affidavit and the copy of the Mortgage Note) bearing all intervening endorsements showing a complete chain of endorsement from the originator to the last endorsee, endorsed “Pay to the order of _____________, without recourse” and signed in the name of the last endorsee. To the extent that there is no room on the face of any Mortgage Note for an endorsement, the endorsement may be contained on an allonge, unless state law does not so allow and the Trustee is advised by the Responsible Party that state law does not so allow. If the Mortgage Loan was acquired by the Responsible Party in a merger, the endorsement must be by “[last endorsee], successor by merger to [name of predecessor]“. If the Mortgage Loan was acquired or originated by the last endorsee while doing business under another name, the endorsement must be by “[last endorsee], formerly known as [previous name]“; A review of all of the recent “standing” and “real party in interest” cases decided by the bankruptcy courts and the state courts in judicial foreclosure states all arise out of the inability of the mortgage servicer or the Trust to “prove up” an unbroken chain of “assignments and transfers” of the mortgage notes and the mortgages from the originators to the sponsors to the depositors to the trust and to the master document custodian for the trust. As stated in the referenced PSA, the parties have represented and warranted that there is “a complete chain of endorsements from the originator to the last endorsee” for the note. And, the Master Document Custodian must file verified reports that it in fact holds such documents with all “intervening” documents that confirm true sales at each link in the chain. The complete inability of the mortgage servicers and the Trusts to produce such unbroken chains of proof along with the original documents is the genesis for all of the recent court rulings. One would think that a simple request to the Master Document Custodian would solve these problems. However, a review of the cases reveals a massive volume of transfers and assignments executed long after the “closing date” for the Trust from the “originator” directly to the “trust.” I refer to these documents as “A to D” transfers and assignments. There are some serious problems with the A to D documents. First, at the time these documents are executed the A party has nothing to sell or transfer since the PSA provides such a sale and transfer occurred years ago. Second, the documents completely circumvent the primary objective of securitization by ignoring the “true sales” to the Sponsor (the B party) and the Depositor (the C party). In a true securitization, you would never have any direct transfers (A to D) from the originator to the trust. Third, these A to D transfers are totally inconsistent with the representations and warranties made in the PSA to the Securities and Exchange Commission and to the holders of the bonds (the “Certificateholders”) issued by the Trust. Fourth, in many cases the A to D documents are executed by parties who are not employed by the originator but who claim to have “signing authority” or some type of “agency authority” from the originator. Finally, in many of these A to D document cases the originator is legally defunct at the time the document is in fact signed or the document is signed with a current date but then states that it has an “effective date” that was one or two years earlier. Hence, we have what I call the Alphabet Problem.

AFFIRMATIVE DEFENSES AND COUNTRCLAIMS RELATED TO POOLING & SERVICING AGREEMENTS 1. Plaintiff failed to comply with the foreclosure prevention loan servicing requirement imposed on Plaintiff pursuant to the National Housing Act, 12 U.S.C. 1701x(c)(5) which requires all private lenders servicing non-federally insured home loans, including the Plaintiff, to advise borrowers, including this separate Defendant, of any home ownership counseling Plaintiff offers together with information about counseling offered by the U.S. Department of Housing and Urban Development. 2. Plaintiff cannot legally pursue foreclosure unless and until Plaintiff demonstrates compliance with 12 U.S.C. 1701x(c)(5). 3. Plaintiff failed to provide separate Defendants with legitimate and non predatory access to the debt management and relief that must be made available to borrowers, including this Defendant pursuant to and in accordance with the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission that controls and applies to the subject mortgage loan. 4. Plaintiff’s non-compliance with the conditions precedent to foreclosure imposed on the plaintiff pursuant to the applicable pooling and servicing agreement is an actionable event that makes the filing of this foreclosure premature based on a failure of a contractual and/or equitable condition precedent to foreclosure which denies Plaintiff’s ability to carry out this foreclosure. 5. The special default loan servicing requirements contained in the subject pooling and servicing agreement are incorporated into the terms of the mortgage contract between the parties as if written therein word for word and the defendants are entitled to rely upon the servicing terms set out in that agreement. 6. Defendants are third party beneficiaries of the Plaintiff’s pooling and servicing agreement and entitled to enforce the special default servicing obligations of the plaintiff specified therein. 7. Plaintiff cannot legally pursue foreclosure unless and until Plaintiff demonstrates compliance with the foreclosure prevention servicing imposed by the subject pooling and servicing agreement under which the plaintiff owns the subject mortgage loan. 8. The section of the Pooling and Servicing Agreement (PSA) is a public document on file and online at http://www.secinfo.com and the entire pooling and servicing agreement is incorporated herein. 9. The Plaintiff failed, refused or neglected to comply, prior to the commencement of this action, with the servicing obligations specifically imposed on the plaintiff by the PSA in many particulars, including, but not limited to: a. Plaintiff failed to service and administer the subject mortgage loan in compliance with all applicable federal state and local laws. b. Plaintiff failed to service and administer the subject loan in accordance with the customary an usual standards of practice of mortgage lenders and servicers. c. Plaintiff failed to extend to defendants the opportunity and failed to permit a modification, waiver, forbearance or amendment of the terms of the subject loan or to in any way exercise the requisite judgment as is reasonably required pursuant to the PSA. 10. The Plaintiff has no right to pursue this foreclosure because the Plaintiff has failed to provide servicing of this residential mortgage loan in accordance with the controlling servicing requirements prior to filing this foreclosure action. 11. Defendants have a right to receive foreclosure prevention loan servicing from the Plaintiff before the commencement or initiation of this foreclosure action. 12. Defendants are in doubt regarding their rights and status as borrowers under the National Housing Act and also under the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission. Defendants are now subject to this foreclosure action by reason of the above described illegal acts and omissions of the Plaintiff. 13. Defendants are being denied and deprived by Plaintiff of their right to access the required troubled mortgage loan servicing imposed on the plaintiff and applicable to the subject mortgage loan by the National Housing Act and also under the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission. 14. Defendants are being illegally subjected by the Plaintiff to this foreclosure action, being forced to defend the same and they are being charged illegal predatory court costs and related fees, and attorney fees. Defendants are having their credit slandered and negatively affected, all of which constitutes irreparable harm to Defendants for the purpose of injunctive relief. 15. As a proximate result of the Plaintiff’s unlawful actions set forth herein, Defendants continue to suffer the irreparable harm described above for which monetary compensation is inadequate. 18. Defendants have a right to access the foreclosure prevention servicing prescribed by the National Housing Act and under the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission which right is being denied to them by the Plaintiff. 16. These acts were wrongful and predatory acts by the plaintiff, through its predecessor in interest, and were intentional and deceptive. 17. There is a substantial likelihood that Defendants will prevail on the merits of the case.

CONSUMER ALERT FRAUD WARNING REGARDING LAWSUIT MARKETERS REQUESTING UPFRONT FEES FOR SO-CALLED “MASS JOINDER” OR CLASS LITIGATION PROMISING EXTRAORDINARY HOME MORTGAGE RELIEF

The California Department of Real Estate has issued the following
“CONSUMER ALERT” warning consumers about claims being made by marketers
of “Mass Joinder” Lawsuits. I have provided two links to the California
Department’s Website containing the text of the “Alert,” but have also
re-posted it in its entirety to help broaden the distribution of the
document. Mandelman

California Department of Real Estate ** CONSUMER ALERT **
FRAUD WARNING REGARDING LAWSUIT MARKETERS REQUESTING UPFRONT FEES FOR
SO-CALLED “MASS JOINDER” OR CLASS LITIGATION PROMISING EXTRAORDINARY
HOME MORTGAGE RELIEF
By Wayne S. Bell, Chief Counsel, California Department of Real Estate
I. HOME MORTGAGE RELIEF THROUGH LITIGATION (and “Too Good to Be True”
Claims Regarding Its Use to Avoid and/or Stop Foreclosure, Obtain Loan
Principal Reduction, and to Let You Have Your Home “Free and Clear” of
Any Mortgage).
This alert is written to warn consumers about marketing companies,
unlicensed entities, lawyers, and so-called attorney-backed,
attorney-affiliated, and lawyer referral entities that offer and sell
false hope and request the payment of upfront fees for so-called “mass
joinder” or class litigation that will supposedly result in
extraordinary home mortgage relief.
The California Department of Real Estate (“DRE” or “Department”)
previously issued a consumer alert and fraud warning on loan
modification and foreclosure rescue scams in California. That alert was
followed by warnings and alerts regarding forensic loan audit fraud,
scams in connection with short sale transactions, false and misleading
designations and claims of special expertise, certifications and
credentials in connection with home loan relief services, and other real
estate and home loan relief scams.

The Department continues to administratively prosecute those who engage
in such fraud and to work in collaboration with the California State
Bar, the Federal Trade Commission, and federal, State and local criminal
law enforcement authorities to bring such frauds to justice.
On October 11, 2009, Senate Bill 94 was signed into law in California,
and it became effective that day. It prohibited any person, including
real estate licensees and attorneys, from charging, claiming, demanding,
collecting or receiving an upfront fee from a homeowner borrower in
connection with a promise to modify the borrower’s residential loan or
some other form of mortgage loan forbearance.
Senate Bill 94’s prohibitions seem to have significantly impacted the
rampant fraud that was occurring and escalating with respect to the
payment of upfront fees for loan modification work.
Also, forensic loan auditors must now register with the California
Department of Justice and cannot accept payments in advance for their
services under California law once a Notice of Default has been
recorded. There are certain exceptions for lawyers and real estate
brokers.
On January 31, 2011, an important and broad advance fee ban issued by
the Federal Trade Commission became effective and outlaws providers of
mortgage assistance relief services from requesting or collecting
advance fees from a homeowner.
Discussions about Senate Bill 94, the Federal advance fee ban, and the
Consumer Alerts of the DRE, are available on the DRE’s website at
www.dre.ca.gov.
Lawyer Exemption from the Federal Advance Fee Ban –
The advance fee ban issued by the Federal Trade Commission includes a
narrow and conditional carve out for attorneys.
If lawyers meet the following four conditions, they are generally exempt
from the rule:
1. They are engaged in the practice of law, and mortgage assistance
relief is part of their practice.
2. They are licensed in the State where the consumer or the
dwelling is located.
3. They are complying with State laws and regulations governing the
“same type of conduct the [FTC] rule requires”.
4. They place any advance fees they collect in a client trust
account and comply with State laws and regulations covering such
accounts. This requires that client funds be kept separate from the
lawyers’ personal and/or business funds until such time as the funds
have been earned.
It is important to note that the exemption for lawyers discussed above
does not allow lawyers to collect money upfront for loan modifications
or loan forbearance services, which advance fees are banned by the more
restrictive California Senate Bill 94.
But those who continue to prey on and victimize vulnerable homeowners
have not given up. They just change their tactics and modify their
sales pitches to keep taking advantage of those who are desperate to
save their homes. And some of the frauds seeking to rip off desperate
homeowners are trying to use the lawyer exemption above to collect
advance fees for mortgage assistance relief litigation.
This alert and warning is issued to call to your attention the often
overblown and exaggerated “sales pitch(es)” regarding the supposed value
of questionable “Mass Joinder” or Class Action Litigation.
Whether they call themselves Foreclosure Defense Experts, Mortgage Loan
Litigators, Living Free and Clear experts, or some other official,
important or impressive sounding title(s), individuals and companies are
marketing their services in the State of California and on the Internet.
They are making a wide variety of claims and sales pitches, and offering
impressive sounding legal and litigation services, with quite
extraordinary remedies promised, with the goal of taking and getting
some of your money.
While there are lawyers and law firms which are legitimate and
qualified to handle complex class action or joinder litigation, you must
be cautious and BEWARE. And certainly check out the lawyers on the
State Bar website and via other means, as discussed below in Section
III. II.
QUESTIONABLE AND/OR FALSE CLAIMS OF THE SO-CALLED MORTGAGE LOAN DEFENSE
OR “MASS JOINDER” AND CLASS LITIGATORS.
A. What are the Claims/Sales Pitches? They are many and varied, and
include:
1. You can join in a mass joinder or class action lawsuit already
filed against your lender and stay in your home. You can stop paying
your lender.
2. The mortgage loans can be stripped entirely from your home.
3. Your payment obligation and foreclosure against your home can be
stopped when the lawsuit is filed.
4. The litigation will take the power away from your lender.
5. A jury will side with you and against your lender.
6. The lawsuit will give you the leverage you need to stay in your
home.
7. The lawsuit may give you the right to rescind your home loan,
or to reduce your principal.
8. The lawsuit will help you modify your home loan. It will give
you a step up in the loan modification process.
9. The litigation will be performed through “powerful” litigation
attorney representation.
10. Litigation attorneys are “turning the tables on lenders and
getting cash settlements for homeowners”. In one Internet advertisement,
the marketing materials say, “the damages sought in your behalf are
nothing less than a full lien strip or in otherwords [sic] a free and
clear house if the bank can’t produce the documents they own the note on
your home. Or at the very least, damages could be awarded that would
reduce the principal balance of the note on your home to 80% of market
value, and give you a 2% interest rate for the life of the loan”.
B. Discussion.
Please don’t be fooled by slick come-ons by scammers who just want your
money. Some of the claims above might be true in a particular case,
based on the facts and evidence presented before a Court or a jury, or
have a ring or hint of truth, but you must carefully examine and analyze
each and every one of them to determine if filing a lawsuit against your
lender or joining a class or mass joinder lawsuit will have any value
for you and your situation. Be particularly skeptical of all such
claims, since agreeing to participate in 4 such litigation may require
you to pay for legal or other services, often before any legal work is
performed (e.g., a significant upfront retainer fee is required).
The reality is that litigation is time-consuming (with formal discovery
such as depositions, interrogatories, requests for documents, requests
for admissions, motions, and the like), expensive, and usually
vigorously defended. There can be no guarantees or assurances with
respect to the outcome of a lawsuit.
Even if a lender or loan owner defendant were to lose at trial, it can
appeal, and the entire process can take years. Also, there is no
statistical or other competent data that supports the claims that a mass
joinder and class action lawsuit, even if performed by a licensed,
legitimate and trained lawyer(s), will provide the remedies that the
marketers promise.
There are two other important points to be made here:
First, even assuming that the lawyers can identify fraud or other legal
violations performed by your lender in the loan origination process,
your loan may be owned by an investor – that is, someone other than your
lender. The investor will most assuredly argue that your claims against
your originating lender do not apply against the investor (the purchaser
of your loan). And even if your lender still owns the loan, they are not
legally required, absent a court judgment or order, to modify your loan
or to halt the foreclosure process if you are behind in your payments.
If they happen to lose the lawsuit, they can appeal, as noted above.
Also, the violations discovered may be minor or inconsequential, which
will not provide for any helpful remedies.
Second, and very importantly, loan modifications and other types of
foreclosure relief are simply not possible for every homeowner, and the
“success rate” is currently very low in California. This is where the
lawsuit marketing scammers come in and try to convince you that they
offer you “a leg up”. They falsely claim or suggest that they can
guarantee to stop a foreclosure in its tracks, leave you with a home
“free and clear” of any mortgage loan(s), make lofty sounding but
hollow promises, exaggerate or make bold statements regarding their
litigation successes, charge you for a retainer, and leave you with less
money.
III. THE KEY HERE IS FOR YOU TO BE ON GUARD AND CHECK THE LAWYERS OUT
(Know Who You Are or May Be Dealing With) – Do Your Own Homework (Avoid
The Traps Set by the Litigation Marketing Frauds).
Before entering into an attorney-client relationship, or paying for
“legal” or litigation services, ascertain the name of the lawyer or
lawyers who will be providing the services. Then check them out on the
State Bar’s website, at www.calbar.ca.gov. Make certain that they are
licensed by the State Bar of California. If they are licensed, see if
they have been disciplined.
Check them out through the Better Business Bureau to see if the Bureau
has received any complaints about the lawyer, law firm or marketing firm
offering the services (and remember that only lawyers can provide legal
services). And please understand that this is just another resource for
you to check, as the litigation services provider might be so new that
the Better Business Bureau may have little or nothing on them (or
something positive because of insufficient public input).
Check them out through a Google or related search on the Internet. You
may be amazed at what you can and will find out doing such a search.
Often consumers who have been scammed will post their experiences,
insights, and warnings long
before any criminal, civil or administrative action has been brought
against the scammers.
Also, ask them lots of specific, detailed questions about their
litigation experience, clients and successful results. For example, you
should ask them how many mortgage-related joinder or class lawsuits they
have filed and handled through settlement or trial. Ask them for
pleadings they have filed and news stories about their so-called
successes. Ask them for a list of current and past “satisfied” clients.
If they provide you with a list, call those people and ask those former
clients if they would use the lawyer or law firm again.
Ask the lawyers if they are class action or joinder litigation
specialists and ask them what specialist qualifications they have. Then
ask what they will actually do for you (what specific services they will
be providing and for what fees and costs). Get that in writing, and take
the time to fully understand what the attorney-client contract says and
what the end result will be before proceeding with the services.
Remember to always ask for and demand copies of all documents that you
sign.
IV. CONCLUSION.
Mortgage rescue frauds are extremely good at selling false hope to
consumers in trouble with regard to home loans. The scammers continue
to adapt and to modify their schemes as soon as their last ones became
ineffective. Promises of successes through mass joinder or class
litigation are now being marketed. Please be careful, do your own
diligence to protect yourself, and be highly suspect if anyone asks you
for money up front before doing any service on your behalf. Most
importantly, DON’T LET FRAUDS TAKE YOUR HARD EARNED MONEY.
###########
Here’s another link to the California Department of Real Estate’s page
containing this fraud warning:
FRAUD WARNING REGARDING LAWSUIT MARKETERS REQUESTING UPFRONT FEES FOR
SO-CALLED “MASS JOINDER” OR CLASS LITIGATION PROMISING EXTRAORDINARY
HOME MORTGAGE RELIEF

Why Robo-Signatures Are Illegal in California and Other Non-Judicial Foreclosure States

With all of the press robo-signing has gotten, it is a bit surprising that everyone is having such a hard time concluding whether these practices effect California foreclosures. My assistant even said to me today, “but the banks say that it doesn’t matter because California is non judicial.”

Because the topic has not gotten the treatment it deserves, I will gladly do the job. The following are by no means a complete list, but are the most clear LEGAL reasons (setting aside pure moral questions and the U.S. Constitution) that the Robo-Signer Controversy will lead to massive litigation in California.

In short, Robo Signers are illegal in California because good title cannot be based on fraud, robo signed non judicial foreclosure sales are void as a matter of law, the documents are not able to be recorded in California if they are not notarized, which we know was often not done properly, and finally, because they robo signed forgeries ARE intended for judicial proceedings, including evictions and bankruptcy relief from stay motions.

1. Good Title Cannot Be Based on Fraud (Even as to a 3d Party).

In the case of a fraudulent transaction California law is settled. The Court in Trout v. Trout, (1934), 220 Cal. 652 at 656 made as much plain:

This sentiment was clearly echoed in 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279 at 1286 where the Court stated:

Hence, if forged Robo Signed signatures are used to obtain the foreclosure, it CERTAINLY makes a difference in California and other non-judicial foreclosure states.

2. Any apparent sale based on Robosigned documents is void – without any legal effect – like Monopoly Money.

In Bank of America v. LaJolla Group II, the California Court of Appeals held that if a trustee is not contractually empowered under the Deed of Trust to hold a sale, it is totally void. It has no legal effect whatsoever. Title does not transfer. No right to evict arises. The property is not sold.

In turn, California Civil COde 2934a requires that the beneficiary execute and notarize and record a substitution for a valid substitution of trustee to take effect. Thus, if the Assignment of Deed of Trust is robo-signed, the sale is void. If the substitution of trustee is robo-signed, the sale is void. If the Notice of Default is Robo-Signed, the sale is void.

3. These documents are not recordable without good notarization.

Once the document is recorded, however, it is entitled to a “presumption of validity”, which is what spurned the falsification trend in the first place. Civil Code section 2924.

Therefore, the notarization of a false signature not only constitutes fraud, but is every bit intended as part of a larger conspiracy to commit fraud on the court.

4. The documents are intended for court eviction proceedings.

A necessary purpose for these documents, AFTER the non judicial foreclosure, is the eviction of the rightful owners afterward. Even in California, eviction is a judicial process, albeit summary and often sloppily conducted by judges who don’t really believe they can say no to the pirates taking your house. However, as demonstrated below, once these documents make it into court, the bank officers and lawyers become guilty of FELONIES:

The Doctrine of Unclean Hands provides: plaintiff’s “unclean hands” bar injunctive relief when the plaintiff’s misconduct arose from the transaction pleaded in the complaint. California Satellite Sys. v Nichols (1985) 170 CA3d 56, 216 CR 180. The unclean hands doctrine demands that a plaintiff act fairly in the matter for which he or she seeks a remedy. The plaintiff must come into
court with clean hands, and keep them clean, or he or she will be denied relief, regardless of the merits of the claim. Kendall-Jackson Winery Ltd. v Superior Court (1999) 76 CA4th 970, 978, 90 CR2d 743. Whether the doctrine applies is a question of fact. CrossTalk Prods., Inc. v Jacobson (1998) 65 CA4th 631, 639, 76 CR2d 615.

5. Robo Signed Documents Are Intended for Use in California Bankruptcy Court Matters.

One majorly overlooked facet of California is our extremely active bankrtupcy court proceedings, where, just as in judicial foreclosure states, the banks must prove “standing” to proceed with a foreclosure. All declarations submitted in support of standing to file a proof of claim, objections to a plan and most importantly perhaps Relief from Stays are fraud upon bankruptcy court if signed by robo-signers.

Conclusion

(909)890-9192 begin_of_the_skype_highlighting (909)890-9192 end_of_the_skype_highlighting

(925)957-9797 begin_of_the_skype_highlighting (925)957-9797 end_of_the_skype_highlighting

FAX (909) 382-9956
tim@Prodefenders.com

http://www.timothymccandless.com

Modifying a Land Loan

Timothy McCandless Esq. and Associates
Offices Statewide

(909)890-9192
(925)957-9797
FAX (909) 382-9956
tim@Prodefenders.com

http://www.timothymccandless.com

(Adapted from the October 30, 2009 Policy Statement on Prudent Commercial Real Estate Loan Workouts)

Introduction

In response to the residential mortgage crisis, and in anticipation of the looming commercial mortgage crisis of much greater potential magnitude, the federal banking regulators got together and issued a policy statement to encourage lenders to modify commercial mortgages and other loans secured by commercial real estate. Attachment 1 to the Policy Statement featured six example scenarios to help lenders to understand that the question isn’t whether you modify a loan, but rather how you modify a loan, that may result in regulatory penalization.

From the statement: “[t]he regulators have found that prudent CRE loan workouts are often in the best interest of the financial institution and the borrower. Examiners are expected to take a balanced approach in assessing the adequacy of an institution’s risk management practices for loan workout activity. Financial institutions that implement prudent CRE loan workout arrangements after performing a comprehensive review of a borrower’s financial condition will not be subject to criticism for engaging in these efforts even if the restructured loans have weaknesses that result in adverse credit classification. In addition, renewed or restructured loans to borrowers who have the ability to repay their debts according to reasonable modified terms will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance. ”

What follows is the regulator’s example of modifying a Land Loan.

Note:

* The financial regulators consist of the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Federal Financial Institutions Examination Council (FFIEC) State Liaison Committee (collectively, the regulators).

BASE CASE: Three years ago, the lender originated a $3.25 million loan to a borrower for the purchase of raw land that the borrower was seeking to have zoned for residential use. The loan had a three-year term and required monthly interest-only payments at a market rate that the borrower has paid from existing financial resources. An appraisal obtained at origination reflected an “as is” market value of $5 million, which resulted in a 65 percent LTV. The borrower was successful in obtaining the zoning change and has been seeking construction financing for a townhouse development and to repay the land loan. At maturity, the borrower requested an extension to provide additional time to secure construction financing that would include repayment of the land loan.

SCENARIO 1: The borrower provided the lender with current financial information, demonstrating the ability to make principal and interest payments. Further, the borrower made a principal payment of $250,000 in exchange for an extension of the maturity date of the loan. The borrower also pledged additional unencumbered collateral, granting the lender a first lien on an office building with an “as stabilized” market value of $1 million. The financial information also demonstrates that cash flow from the borrower’s personal assets and the office building generate sufficient stable cash flow to amortize the land loan over a reasonable period of time. A recent appraisal of the raw land reflects an “as is” market value of $3 million, which results in a 75 percent LTV when combined with the additional collateral and the principal reduction. The lender restructured a $3 million loan with monthly principal and interest payments for another year at a market rate that provides for the incremental credit risk.

*
Classification: The lender internally graded the loan as pass due to the adequate cash flow to pay principal and interest from the borrower’s personal assets and the office building. Also the borrower provided a curtailment and additional collateral to maintain a reasonable LTV. The examiner agreed with the lender’s internal grade.
*
Nonaccrual Treatment: The lender maintained the loan on accrual status, as the borrower has sufficient funds to cover the debt service requirements for the next year. Full repayment of principal and interest is reasonably assured from the collateral and the borrower’s financial resources. The examiner concurred with the lender’s accrual treatment.
*
TDR Treatment: The lender concluded that while the borrower has been affected by declining economic conditions, the level of deterioration does not warrant TDR treatment. The borrower was not experiencing financial difficulties because the borrower has the ability to service the renewed loan, which was prudently underwritten and has a market rate of interest. The examiner concurred with the lender’s rationale and TDR treatment.

SCENARIO 2: The borrower provided the lender with current financial information that indicated the borrower is unable to continue to make interest-only payments. The borrower has been sporadically delinquent up to 60 days on payments. The borrower is still seeking a loan to finance construction of the townhouse development, but has not been able to obtain a takeout commitment. A recent appraisal of the property reflects an “as is” market value of $3 million, which results in a 108 percent LTV. The lender extended a $3.25 million loan at a market rate of interest for one year with principal and interest due at maturity.

*
Classification: The lender internally graded the loan as pass because the loan is currently not past due and at a market rate of interest. Also, the borrower is trying to obtain takeout construction financing. The examiner disagreed with the internal grade and adversely classified the loan. The examiner concluded that the loan was not restructured on reasonable repayment terms because the borrower does not have the capacity to service the debt and full repayment of principal and interest is not assured. The examiner classified $550,000 loss ($3.25 million loan balance less $2.7 million, based on the current appraisal of $3 million less estimated cost to sell of 10 percent or $300,000). The examiner classified the remaining $2.7 million balance substandard. This classification treatment recognizes the credit risk in the collateral dependent loan based on the property’s market value less costs to sell.
*
Nonaccrual Treatment: The lender maintained the loan on accrual status. The examiner did not concur with this treatment and advised the lender to place the loan on nonaccrual because the loan was not restructured on reasonable repayment terms, the borrower does not have the capacity to service the debt, and full repayment of principal and interest is not assured.
* TDR Treatment: The lender reported the restructured loan as a TDR. The borrower is experiencing financial difficulties as indicated by the inability to refinance this debt and the inability to repay the loan at maturity in a manner consistent with the original exit strategy. A concession was provided by renewing the loan with a deferral of principal and interest payments for an additional year when the borrower was unable to obtain takeout financing. The examiner concurred with the lender’s TDR treatment.

HIGH COURTS KNOCKING DOWN PRETENDER SHELL GAME

Posted on February 1, 2011 by Neil Garfield
ONE ON ONE WITH NEIL GARFIELD
COMBO ANALYSIS TITLE AND SECURITIZATION

SEE nj-game-over-standing-required-no-pretender-lenders-allowed-personal-knowledge-required-to-authenticate
SEE ibanez-huge-win-for-borrowers-in-massachusetts-non-judicial-state-high-court
Maybe the Game IS Over
Show me the law! That was the answer I was getting from skeptical lawyers and Judges three years, 2 years ago and even six months ago. Now there are high Courts and trial courts from Coast to Coast that are answering. It isn’t “new law” as the lawyers for the banks are suggesting, and it isn’t about a free house for borrowers.
In plain language this is about the application of law that has governed business conduct for centuries with the consequential effect of (a) preventing intervening parties from avoiding the requirements of due process and getting title issued to a house in which they never had any interest (a free house for pretender lenders) and (b) opening the door to the inner sanctum where the real parties in interest can interact in ways that will settle the mortgage mess (corruption of title and fraud) in a direct manner as best as possible under the circumstances.
Wall Street and those who protect Wall Street in government having nothing left but scare tactics — as if overturning millions of fraudulent transactions and foreclosures would somehow result in in the end of the world or weaken our nation. President Sarkozy answered that ridiculous assertion in sharp words to Jamie Dimon at the Davos conference when he pointed to the wild irresponsible schemes that others have less gently refereed to as criminal fraud. Sarkozy was speaking for the head of every government in the world and every central banker except perhaps a select few who were providing lubricant to Wall Street’s contrivances during the period of 2001-2009.

If our position in the world depends upon protecting those who commit fraud, if our credibility is seen as depending upon maintaining a status quo in which millions go starving and homeless, if the light we shine blinds the eyes of people who wish to see, then we have forsaken our heritage, and forever changed and corrupted the ideal that the United States of America is a nation of laws, in which here, better than anywhere else on Earth, here is where the people are free to pursue truth, justice and prosperity under the watchful eye of a protective government

mass joinder litigation complaint

And the first “meaty” part of the complaint….

5. The fraud perpetrated by the Countrywide Defendants from 2003 through 2007, including by BofA starting no later than 2007, was willful and pervasive. It begin with simple greed and then accelerated when Countrywide founder and CEO Angelo Mozilo (“Mozilo”) discovered that Countrywide could not sustain its business, unless it used its size and large market share in California to systematically create false and inflated property appraisals throughout California. Countrywide then used these false property valuations to induce Plaintiffs and other borrowers into ever-larger loans on increasingly risky terms. As Mozilo knew from no later than 2004, these loans were unsustainable for Countrywide and the borrowers and to a certainty would result in a crash that would destroy the equity invested by Plaintiffs and other Countrywide borrowers.

In other words, Countrywide is alleged to not only have made bad loans, but also to have intentionally inflated appraisals.

6. Hand-in-hand with its fraudulently-obtained mortgages, Mozilo and others at Countrywide hatched a plan to “pool” the foregoing mortgages and sell the pools for inflated value. Rapidly, these two intertwined schemes grew into a brazen plan to disregard underwriting standards and fraudulently inflate property values – county-by-county, city-by-city, person-by-person – in order to take business from legitimate mortgage-providers, and moved on to massive securities fraud hand-in-hand with concealment from, and deception of, Plaintiffs and other mortgagees on an unprecedented scale.

Oh, that’s rich. So not only (it is alleged) did Countrywide bamboozle borrowers, they also bamboozled investors.

9. It is now all too clear that this was the ultimate high-stakes fraudulent investment scheme of the last decade. Couched in banking and securities jargon, the deceptive gamble with consumers’ primary assets – their homes – was nothing more than a financial fraud perpetrated by Defendants and others on a scale never before seen. This scheme led directly to a mortgage meltdown in California that was substantially worse than any economic problems facing the rest of the United States. From 2008 to the present, Californians’ home values decreased by considerably more than most other areas in the United States as a direct and proximate result of the Defendants’ scheme set forth herein. The Countrywide Defendants’ business premise was to leave the borrowers, including Plaintiffs, holding the bag once Countrywide and its executives had cashed in reaping huge salaries and bonuses and selling Countrywide’s shares based on their inside information, while investors were still buying the increasingly overpriced mortgage pools and before the inevitable dénouement. This massive fraudulent scheme was a disaster both foreseen by Countrywide and waiting to happen. Defendants knew it, and yet Defendants still induced the Plaintiffs into their scheme without telling them.

There’s the base of it all….

24. Defendants have gone to great lengths to avoid producing documents in this litigation because they know that such documents will establish all details of the massive fraud they perpetrated on Plaintiffs and other Californians. PennyMac, the Granada Network and Defendants’ overseas operations are used by Defendants to systematically hide documents. By delaying production of documents, the Defendants are buying time as they (a) accept the benefits of the scheme described herein, (b) cover up their fraud, and (c) make it materially more expensive and difficult for Plaintiffs and their counsel to obtain a just result.

Of course there’s the famous “let’s hide Waldo” game once the gig is pretty much up. After all, if we have to produce the documents, well, our goose might be cooked – and that would be bad.

So what else is presented in here? Oh, all sorts of good stuff. Here’s a sampling:

275. Defendant CT REAL ESTATE SERVICES, INC. is a California corporation – corporation number C0570795 – and is a resident of Ventura County, California. Defendant CT REAL ESTATE SERVICES has acted alongside and in concertwith BofA in carrying out the concealment described herein and in continuing to conceal from Plaintiffs, from the California general public, and from regulators the details of the securitization and sale of deeds of trust and mortgages (including those of Plaintiffs herein) that would expose all Defendants herein to liability for sale of mortgages of California citizens – including all Plaintiffs herein – for more than the actual value of the mortgage loans. The sale and particularly the undisclosed sale of mortgage loans in excess of actual value violates California Civil Code, §§ 1709 and 1710, and California Business and Professions Code § 17200 et seq., 15 U.S.C. §§ 1641 et seq. and other applicable laws.

That sounds like a problem to me……

290. At the time of entering into the notes and deeds of trust referenced herein with respect to each Plaintiff, the Countrywide Defendants were bound and obligated to fully and accurately disclose:

a. Who the true lender and mortgagee were.

b. That to induce a Plaintiff to enter into the mortgage, the Countrywide Defendants caused the appraised value of Plaintiff’s home to be overstated.

c. That to disguise the inflated value of Plaintiff’s home, Countrywide was orchestrating the over-valuation of homes throughout Plaintiff’s community.

d. That to induce a Plaintiff to enter into a mortgage, the Countrywide Defendants disregarded their underwriting requirements, thereby causing Plaintiff to falsely believe that Plaintiff was financially capable of performing Plaintiff’s obligations under the mortgage, when the Countrywide Defendants knew that was untrue. One way they systematically disregarded the underwriting requirements was through the use of the Granada Network, another fact which Defendants systematically failed to disclose to any California borrower.

Ding ding ding ding ding ding!

One of the keys to this mess is that the lenders knew full well that the borrowers could not pay “as agreed”, yet made the loans anyway.

i. The sales would include sales to nominees who were not authorized under law at the time to own a mortgage, including, among others, Mortgage Electronic Registration Systems Inc., a/k/a MERSCORP, Inc. (“MERS”), which according to its website was created by mortgage banking industry participants to be only a front or nominee to “streamline” the mortgage re-sale and securitization process;

ii. Plaintiff’s true financial condition and the true value of Plaintiff’s home and mortgage would not be disclosed to investors to whom the mortgage would be sold;

iii. Countrywide intended to sell the mortgage together with other mortgages as to which it also intended not to disclose the true financial condition of the borrowers or the true value of their homes or mortgages;

iv. The consideration to be sought from investors would be greater than the actual value of the said notes and deeds of trust;

and

v.The consideration to be sought from investors would be greater than the income stream that could be generated from the instruments even assuming a 0% default rate thereon;

You mean basically everything important about the loans, their quality, who they were going to be sold to, why and how was all bogus? And in addition, the price to be sought from investors exceeded the income stream that could be achieved even if nobody defaulted at all?

Heh, that’s a good gig if you can get it – and if you can find a way to do it legally.

Are there some facts behind this? Oh it appears there are…

The credit losses experienced by Countrywide in 2007 not only were foreseeable by the proposed defendants, they were in fact foreseen at least as early as September 2004. [¶ 33 (Emphasis in original)]

. . .

The credit risk described in the September 2004 warning worsened from September 2004 to August 2007. [¶ 35 (Emphasis in original)]

. . .

By no later than 2006, Mozilo and Sambol were on notice that Countrywide’s exotic loan products might not continue to be saleable into the secondary market, yet this material risk was not disclosed in Countrywide’s periodic filings. [¶ 45]

. . .

Mozilo and Sambol made affirmative misleading public statements in addition to those in the periodic filings that were designed to falsely reassure investors about the nature and quality of Countrywide’s underwriting. [¶ 91]

Oh my. 2004 eh? I seem to remember tAngelo on CNBS making multiple appearances talking about how his company was going to take market share from all these subprime lenders that collapsed, and this was going to be great for his company. Indeed, I remember chortling at the time that I believed he was a lying SOB, and of course the so-called “Fantastic Mainstream Media” lapped it up – and helped support his stock price.

It appears that the intrepid attorneys who filed this action remember that too…. and the pages surrounding 100 in the complaint document a whole bunch of them, including statements in 10Ks and 10Qs that, it is alleged, were flatly false.

And, of course, there’s this one, which I have referred to many times over the last three and a half years:

363. In the January 30, 2007 earnings conference call, Mozilo attempted to distinguish Countrywide from other lenders by stating “we backed away from the subprime area because of our concern over credit quality.” On March 13, 2007, in an interview with Maria Bartiromo on CNBC, Mozilo said that it would be a “mistake” to compare monoline subprime lenders to Countrywide. He then went on to state that the subprime market disruption in the first quarter of 2007 would “be great for Countrywide at the end of the day because all of the irrational competitors will be gone.”

I distinctly remember the cheesy suits and ties, not to mention the sprayed-on-looking tan.

370. In fact, the appraisals were inflated. Countrywide did not utilize quality underwriting processes. Countrywide’s financial condition was not sound, but was a house of cards ready to collapse, as Countrywide well knew, but Plaintiffs did not. Further, Plaintiffs’ mortgages were not refinanced with fixed rate mortgages and neither Agate nor Countrywide ever intended that they would be.

As I have repeatedly pointed out, the entire intent of these loans was not to be a mortgage at all. It was, I allege, more akin to an asset-stripping scheme where the borrower would be effectively forced to come back to the lender after a couple of years when the teaser expired or the inevitable reset or recast occurred and effectively hand over his accumulated “appreciation” in price through yet more fees to be paid to the “lender.”

I believe that for all intents and purposes, from the lender’s point of view, this was nothing more than renting the house, as passing of a clear title to the buyer was never part of what was contemplated by the lender – but of course the borrower wasn’t told this in advance – or at all.

There’s much more in the complaint, but this will do for a start.

Incidentally, the banks tried to get this removed to Federal Court and kill it, and were rebuffed, so it appears that it’s headed to trial. Plaintiff’s Bar 1, Banksters 0 thus far – I will be providing updates on this case as I become aware of them. Southern California (909)890-9192 begin_of_the_skype_highlighting (909)890-9192 end_of_the_skype_highlighting in Northern California(925)957-9797

Class Actions or Mass joinder cases Widespread Wrongful Foreclosures, Failure to Reinstate Loans

It is no secret that the United States remains in the throes of one of the worst “mortgage meltdowns” in history. The problem is so widespread that the numbers are almost hard to believe. The consensus is that it will take years for the effects of this economic disaster to be unwound through any process, whether free market, government run or a combination of both. Just days ago, CNBC reported that the monthly foreclosures for January was an ALL TIME HIGH. This story ran simultaneously with the emergence of allegations of widespread “robo-signing” borrowerrs into foreclosure without regard to the actual status of their loan.

In the case of the wrongful foreclosure, the fact pattern generally goes as follows. First, borrower takes out a mortgage on his property and lender takes back a promissory note and deed of trust. Second, the borrower misses one or two payments, or falls behind one or two payments, and then catches up. Third, the lender notifies the borrower that the loan is in default, fails to reinstate the loan, and begins to generate fees and costs that must be paid by the borrower — before the lender will reinstate its loan — including but not limited to: (1) attorneys fees; (2) default interest; (3) late charges; (4) appraisal fees and (5) other costs. The lender goes on to threaten the buyer with foreclosure if the buyer fails to pay all the banks fees and costs, in addition to the principal and interest on the underlying loan this is called reinstatement.

What’s the big deal? These “default” fees and costs are quickly piled on, eroding any equity that the borrower may have slowly built up on the property (in effect paying it to the Bank), draining the borrower’s bank account and leaving the borrower unable to make up the payments or resist foreclosure. On the bank side, it’s a beautifully profitable transaction, they bleed the borrower dry, and then take the property back. Additionally they could not even initiate foreclosure in California till they comply with civil code 2923.5. One problem…..it’s illegal.

The recent case against Bank of America was based on abusive practices such as these, and resulted in a settlement of $108 million, affecting nearly 200,000 borrowers!

In California, borrowers also have the protection of a special statute, California Civil Code Section 2924c. California Civil Code § 2924c applies to any obligation secured by a deed of trust on real property, and permits the trustor, who is in default under the terms of the deed of trust, to cure the default unilaterally, by paying to the beneficiary or the successor in interest:

“(A) all amounts of principal, interest, taxes, assessments, insurance premiums, or advances actually known by the beneficiary to be, and that are, in default and shown by the beneficiary to be, and that are, in default and shown in the notice of default, under the terms of the deed of trust or mortgage and the obligation secured thereby, (B) all amounts in default on recurring obligations not shown in the notice of default, and (C) all reasonable costs and expenses, subject to subdivision (c), which are actually incurred in enforcing the terms of the obligation, deed of trust, or mortgage, and trustee’s or attorney’s fees, subject to subdivision (d), other than the portion of principal as would not then be due had no default occurred…”

If the trustor cures the default pursuant to this section, then “all proceedings theretofore had or instituted shall be dismissed or discontinued and the obligation and deed of trust or mortgage shall be reinstated and shall be and remain in force and effect, the same as if the acceleration had not occurred”. Bottom line, if a borrower tenders payment to the lender as required under 2924c, reinstatement is mandatory!

A recently filed a class action in LA Superior Court against Greystone Bank for alleged violations of California Civil Code 2924c. Read Complaint. If you are a borrower that has been: (1) subjected to, or threatened with wrongful foreclosure, or (2) forced to pay improper fees and costs in order to avoid foreclosure, by Greystone Bank or Greystone Servicing Corporation, we would like to talk with you about your situation.

Also, if you have had a wrongful foreclosure experience with any other large bank, other than Greystone Bank or Greystone Servicing Corporation, we would like to talk with you about your experience as well. Call Southern California 909-890-9192 in Northern California 925-957-9797

Top Treasury Official: Investigation Begins on Pretender Lenders

Posted 1 day ago by Neil Garfield on Livinglies’s Weblog

“We are faced with a choice here,” Silvers said during the hearing. “We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can’t do both.”

“Evidence has mounted that there are substantive problems with the liens that support significant numbers of securitized mortgages,” Damon Silvers, a member of the panel created to keep tabs on the bailout, who also works as director of policy and special counsel at the AFL-CIO, said Wednesday.

LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

two Republicans on the panel, J. Mark McWatters and Kenneth R. Troske, advocated an approach embraced by progressives and experts in bankruptcy and contract law: forcing banks to recognize their losses on depreciated assets (sour or underwater mortgages), and restructuring that debt to the current market value. Though they stopped just short of advocating for the judicial restructuring of mortgages, otherwise known as cramdown, they stressed that lenders need to recognize losses and allow borrowers the opportunity to stay in their homes. In other words, principal writedowns.

LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

“How do we know that people who don’t have good liens aren’t getting public money essentially under the false pretense that they have a good lien?” Silvers asked Caldwell.

“Again, we don’t,” was her reply. “Our focus at this point has been on…”

Silvers quickly stopped her. “Hold it,” he said. “That’s the issue.” He added that he hoped Treasury “would be diligent” in trying to answer “what’s potentially at play — are servicers and banks getting public money under false pretenses? We ought to try to figure out whether that’s true or not,” Silvers added.

Caldwell agreed.

First Posted: 10-29-10 04:35 PM | Updated: 10-29-10 07:40 PM

by Shahien Nasiripour

Mortgage companies enrolled in the Obama administration’s signature foreclosure-prevention initiative may be receiving taxpayer funds despite not having a legal right to the home or to the mortgage, a top Treasury Department official revealed Wednesday.

But despite faulty or missing paperwork, the Obama administration allows mortgage companies to boot homeowners from the program, sticking the borrowers with massive bills that often leave them worse off.

During an oversight hearing, Phyllis Caldwell, Treasury’s housing rescue chief, acknowledged during questioning that Treasury doesn’t know whether mortgage companies and the owners of mortgages are receiving public money under “false pretenses.” Treasury is investigating, she said.

The contradiction highlights what many critics of the past two administrations’ policies have claimed for some time: they exert overwhelming force when it comes to saving financial institutions, but merely modest assistance when it comes to distressed homeowners.

More than $535 billion in taxpayer money went to firms and toxic assets as part of the Troubled Asset Relief Program and the bailout of Fannie Mae and Freddie Mac, according to the latest quarterly figures from two federal auditors. About $992 million has gone to homeowners, the same data show.

President Barack Obama’s promise to “enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure,” which he detailed in a February 2009 speech, was “always modest compared to the incredible scale of the problem,” Senator Ted Kaufman, a Delaware Democrat and chairman of the Congressional Oversight Panel, a bailout watchdog, said Wednesday during the hearing with Caldwell. “Certainly, it was modest compared to the boldness shown in rescuing AIG, Fannie Mae, Freddie Mac, Bank of America, Citigroup and the auto companies.”

Caldwell’s revelation about the possible wrongful disbursement of taxpayer money comes on the heels of multiple nationwide criminal and civil investigations emanating from mortgage companies’ use of fraudulent paperwork to foreclose on homeowners.

The investigations and near-daily disclosures of improprieties has led to a growing crisis of confidence in the long-held assumption that lenders and other parties followed proper legal procedures when originating a loan and passing it through the chain of securitization. Over the past two weeks shares of Bank of America are down about 15 percent through Thursday; JPMorgan Chase is down seven percent.

The paperwork determines true ownership. If those documents weren’t properly passed along, then an investor who bought a piece of the mortgage or the company collecting those payments from homeowners, known as servicers, may not have the right to either the home or the mortgage.

The administration’s Home Affordable Modification Program, known as HAMP, doles out taxpayer funds to servicers, investors, lenders and homeowners for successfully restructuring a struggling homeowner’s mortgage and lowering their monthly payment so they can afford to stay in their home.

So taxpayer funds may be going to companies that have no right to it, admitted Caldwell, Treasury’s chief homeownership preservation officer.

“How do we know that people who don’t have good liens aren’t getting public money essentially under the false pretense that they have a good lien?” Silvers asked Caldwell.

“Again, we don’t,” was her reply. “Our focus at this point has been on…”

Caldwell agreed.

Those companies continue to get the money, though. Meanwhile, borrowers are tossed from the program for the same reason — faulty paperwork.

“I am concerned by what appears to be a discrepancy between the treatment of paperwork defects on the part of homeowners seeking help from HAMP, and the treatment of servicers who are obtaining HAMP funds on the basis that they have a valid lien on the homeowner’s property,” Silvers said in an interview. “However, I think that our hearing may have focused the HAMP team on what the issues are here, and I hope they do as they said they were going to do in terms of looking into the status of these liens,” Silvers said.

Three megabanks — Bank of America, JPMorgan Chase, and Wells Fargo — service $5.4 trillion in home loans, or 50 percent of all outstanding residential mortgages, according to the latest quarterly data from MortgageStats.com and the Federal Reserve. BofA and JPMorgan, the nation’s two largest banks, have halted foreclosure sales. On Wednesday Wells Fargo acknowledged errors in its paperwork, and said it’s filing supplemental documents in 55,000 foreclosure proceedings.

The three lenders also stand to be the biggest recipients of bailout cash as part of HAMP. Of the $30 billion obligated to modifying loans, about $17 billion, or nearly three-fifths, is slated for BofA, JPMorgan and Wells Fargo, Treasury data as of Oct. 19 show.

“By fulfilling the goal of avoiding a financial collapse, there is no question that the dramatic steps taken by Treasury and other federal agencies through TARP and related programs were a success for Wall Street,” the Special Inspector General for the Troubled Asset Relief Program wrote in his Oct. 26 report to Congress. “Those actions have helped garner a swift and striking turnaround, accompanied by a return to profitability and seemingly ever-increasing executive bonuses. For large Wall Street banks, credit is cheap and plentiful and the stock market has made a tremendous rebound.”

For homeowners it’s a different story.

The watchdog said that HAMP can sometimes cause the foreclosures it’s supposed to prevent as applicants “end up unnecessarily depleting their dwindling savings in an ultimately futile effort to obtain the sustainable relief promised by the program guidelines.”

“Main Street has largely suffered alone, however, in those areas in which TARP has fallen short of its other goals,” SIGTARP wrote. “[T]he most specific of TARP’s Main Street goals, ‘preserving homeownership,’ has so far fallen woefully short.”

The criticism speaks to the larger attitude within the administration, something President Barack Obama explained Wednesday during a White House discussion with left-leaning bloggers.

“The biggest challenge,” Obama explained, is to help those homeowners “who really deserve help… without wasting that money on folks who don’t deserve help.” The undeserving include “speculators,” said Obama, a former community organizer.

His attitude towards homeowners is not shared among the two Republicans and three Democrats who make up the Congressional Oversight Panel.

While they all share the feeling that some foreclosures will undoubtedly happen, and that it’s not incumbent upon taxpayers to prevent every foreclosure, the panelists uniformly expressed deep disappointment with the results of the administration’s foreclosure-prevention initiative. Nearly 21 months after Obama promised that up to four million homeowners would be able to restructure their mortgages, just 640,300 homeowners remain in the program. Nearly 729,000 overburdened homeowners have been kicked out.

During Wednesday’s hearing, the panelists relentlessly hammered away at the administration’s approach in their questioning of Caldwell and Faith Schwartz, senior adviser to the Hope Now Alliance, a government-encouraged coalition of private industry lenders, servicers and investors that was formed out of the Housing Policy Council. The Council is part of the Financial Services Roundtable, the Washington trade group representing the nation’s biggest financial institutions.

In fact, the two Republicans on the panel, J. Mark McWatters and Kenneth R. Troske, advocated an approach embraced by progressives and experts in bankruptcy and contract law: forcing banks to recognize their losses on depreciated assets (sour or underwater mortgages), and restructuring that debt to the current market value. Though they stopped just short of advocating for the judicial restructuring of mortgages, otherwise known as cramdown, they stressed that lenders need to recognize losses and allow borrowers the opportunity to stay in their homes. In other words, principal writedowns.

The only problem is that’s the very approach most vigorously opposed by the banking industry. The Obama administration opposes it, too.

Basically, if the nation’s biggest lenders had to write down the value of their mortgage assets to their current value, experts believe they’d be wiped out and another bailout would be necessary. The administration says it opposes widespread principal cuts in part because it would reward reckless borrowers. Some have pointed to other considerations.

“We are faced with a choice here,” Silvers said during the hearing. “We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can’t do both.”

McWatters, who once worked on Capitol Hill for Rep. Jeb Hensarling, a conservative Texas Republican, and Troske, who was picked for the panel by Senate Minority Leader Mitch McConnell, a Kentucky Republican, want banks to write down those mortgages.

“You know, I come at this problem as a corporate lawyer, M&A lawyer, tax lawyer,” McWatters said. “And when I look at it, I’m sort of mystified, because if someone came in my office — and [let’s] take off our foreclosure-mitigation hat and just think about a work-out deal — if someone comes in and says, ‘Yes, I paid $250,000 for something. It’s worth $150,000 today. There’s a second lien on it of $50,000, and a first lien of $200,000. What do I do?’

“And the first thing I’d ask them is, ‘It non-recourse debt?’ And if it’s non-recourse debt, I have an answer. Then if they say — then I would ask them, if it’s a recourse debt, and they say, ‘Yes, it’s recourse, but I’m broke.’ Okay. Now we have the facts.
“In a commercial setting, what you would do is you would write the loan down to $150,000. You wouldn’t fool around. You would just write it down to $150,000. Because guess what? That’s what the property’s worth. If you foreclose, nobody’s going to pay a dime over $150,000, so you go to [the] economic reality of $150,000.

“Now, first- and second-lien holders are not chumps. They’re going to say, ‘Well, what if the market turns?’

“Okay, I’ll give you an equity kicker. Okay? You give them an equity kicker.”

An equity kicker is a mechanism that allows for the holder of the debt — like the lender who owns the homeowner’s mortgage — to share in the appreciation of its value by giving the holder a stake in the collateral. For example, if the homeowner ends up selling the house at a premium, the lender would get a cut.

“In the second lien mortgage, what you should do is write them down to zero,” McWatters continued. “You can’t write them down to zero — they’re going to extort something out of you, right? They have a seat at the table. [So] you give them 10 cents on the dollar, you give them 20 cents on the dollar, but you make them happy. You give them an equity kicker. You write [the mortgage] down.
“Second thing you do is you refinance the loan to a market rate of interest — not 7 percent, not one of these ridiculous adjustable-rate things which people can’t pay. You take it down to a 3.75 or 4 percent risk-adjusted, 30-year fixed rate.

“Okay, what am I missing? Why doesn’t that work in this environment?”

Schwartz, representing the financial services industry, was the first to respond.

“Well, you have investor contracts that won’t let you write down mortgages. You have Fannie Mae, Freddie Mac and FHA [Federal Housing Administration], who won’t allow for a write-down like that,” she said.

“Well, those rules need to be changed, or someone needs to talk to them,” McWatters retorted.

Left unsaid by Schwartz was that the nation’s four biggest banks — Bank of America, JPMorgan Chase, Citigroup and Wells Fargo — together hold on their balance sheets nearly $434 billion in second lien mortgages, or nearly half of all outstanding seconds in the country, their most recent regulatory filings with the Fed show. Second liens are home equity loans, second mortgages and other debt that’s junior to the primary mortgage. If a borrower were to declare bankruptcy, those second liens would be wiped out before the debt from the primary mortgage would be affected. Nationwide, there were $996 billion in outstanding second liens as of June 30, the latest Federal Reserve data show. About $742 billion of that is held by commercial banks.

After some back and forth, during which Schwartz didn’t budge from her opposition to the widespread writing down of mortgage principal, McWatters had enough.

“Okay, so you’re saying there are rules that would inhibit a common sense, market-oriented response. Oh, that’s encouraging,” he said.

But the bankruptcy expert among the witnesses, Katherine M. Porter, a law professor at Harvard Law School on leave from the University of Iowa, expressed support for McWatters’s idea. She cautioned that financial firms may not be so supportive.

“I would tell them that’s a personal problem,” McWatters said. “They cut that deal back in 2004. I’m sorry they cut a bad deal. But guess what? If that deal had turned out to be a really good deal, do you think they would be calling [Treasury] Secretary [Timothy] Geithner and saying, ‘Hey, we made a whole bunch of dough. We want to give you some more?’ No, they would keep every dime of it. So they should live with the downside, too.”

During a separate exchange, Kaufman and Caldwell discussed the second lien issue. Kaufman noted the “reluctance of some financial institutions to extinguish second liens because they’re carrying them on the books at 90 percent of value.”

“It seems to me the only reason that they’re carrying the second liens is because they don’t want to write them down because they’re carrying them at 90 percent of value, and they’re worth nowhere near 90 percent of value,” he added.

“You know, that particular thing we hear a lot,” Caldwell said. But, she noted, those second liens “continue to be current.”

Experts outside the firms holding and selling second liens uniformly say there’s no reason for a homeowner to keep paying their seconds if they’re delinquent on or struggling with their primary mortgage.

The administration would never concede that point, though. Neither would the nation’s biggest banks. A deal is a deal, after all.

“For those who are concerned that somehow there’s something morally suspect about restructuring loans, I should note that every day on Wall Street the people of power and privilege in this society restructure their debt,” Silvers said. “It is commonplace for everyone but the poor.”

“As people have noted,” Troske explained, “we are at a point where… house prices are worth less than they were. Banks need to write that off, and of course, people need to write that off as well.”

*************************Shahien Nasiripour is the business reporter for The Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455 begin_of_the_skype_highlighting 646-274-2455 end_of_the_skype_highlighting.

Rather Than Investigating Foreclosure Fraud, House Republicans Vow To Investigate Loans To Poor People

Posted 7 hours ago by Neil Garfield on Livinglies’s Weblog

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

Editor’s Note: THAT’S IT. BLAME THE POOR PEOPLE — THE ONES WHO KNOW THE LEAST ABOUT FINANCE AND MORTGAGES.

It is not as ominous as it sounds. No matter where they look they are going to find that the mortgages, notes and obligation are hopelessly obscured. Finding loans to “poor people” or people who are NOW poor because of the mortgage fraud and foreclosure fraud by the banks is going to lead back to shady practices, predatory lending and invalid liens. It will also lead back to the fact that there was NO LOAN by the originator who appears on the mortgage documents. Politicians will TRY to do the bidding of the banks by diverting attention away from their own fraud, errors, perjury, forgery and fabrication, but the horse is already out of the barn.

by Pat Garafolo, Over the weekend, the Washington Post provided some more details about the ongoing foreclosure fraud scandal, noting that “virtually everyone involved – loan servicers, law firms, document processing companies and others – made more money as they evicted more borrowers from their homes, creating a system that was vulnerable to error and difficult for homeowners to challenge.” A bevy of Democratic lawmakers have called for examinations of the banks’ potentially fraudulent activities, while the Attorneys General of all fifty states have pledged a coordinated investigation.

Republicans, however, have been largely silent on the issue. And according to Rep. Darrell Issa (R-CA), who is slated to take over the House Committee on Government and Oversight should the Republicans gain a majority, the GOP is not really interested in the banks’ malpractice. Instead, Issa wants to “launch aggressive inquiries” into whether the government helped poor people buy houses they couldn’t afford:

The conservative Republican from California, who would become chairman of the powerful House oversight and government reform committee, said hearings would focus on whether the federal government should be involved at all in sponsoring home loans for the poor.

Such hearings would evidently “centre on the roles of Fannie Mae and Freddie Mac,” which Republicans have blamed for the financial collapse of 2008, despite the overwhelming evidence to the contrary. As the Wonk Room explains, Issa’s pronouncement is part of an ongoing conservative effort to scapegoat homeowners and government for Wall Street’s malfeasance.

While the GOP likes to blame homeowners for the country’s economic woes, in the last decade, as the Center for American Progress has documented, banks were still systematically charging minorities higher costs for loans and pushing them into expensive subprime mortgages, making government policies to ensure fair access to credit a necessary step. It says a lot about the Republican mindset that banks evicting homeowners who aren’t in foreclosure doesn’t merit an investigation, but a low-income family receiving a mortgage in a traditionally under-served community does.

The Robo-Signing Mess Is Just the Tip of the Iceberg, Mortgage Putbacks Will Be the Harbinger of the Collapse of Big Banks that Will Dwarf 2008!

Posted on October 12, 2010 by Foreclosureblues

The Robo-Signing Mess Is Just the Tip of the Iceberg, Mortgage Putbacks Will Be the Harbinger of the Collapse of Big Banks that Will Dwarf 2008!

Today, October 12, 2010, 1 hour ago | Reggie Middleton

Now that the Robo-Signing scandals have achieved full notoriety through the media, it is time to address the real issues facing investors in bank stocks. I also believe that the media is staring at the wrong target. Each major media outlet is copying what is popular or what the next outlet broke as a story versus where the true economic risks actually lie – which is essentially the real story and where the meat actually is. Here’s what’s truly at stake – the United States is now at risk of losing its hegemony as the financial capital of the world! Why? Because when we had the chance to put the injured banks to sleep and redirect resources to into new productivity, we instead allowed politics to shovel 100′s of billions in tax payer capital into zombie institutions as they turned around and paid much of it right back out as bonuses. As a result, significant capital has been destroyed, the original problem has metastized, and the banks are still in zombie status, but with share prices that are multiples of the actual values of the entities that they allegedly represent – a perfect storm for a market crash that will make 2008 look like a bull rally! For those who feel I am being sensationalist, I refer you first my track record in making such claims.

The Japanese tried to hide massive NPAs in its banking system after a credit fueled bubble burst by sweeping them under a rug for political reasons. Here’s a newsflash – it didn’t work, it hasn’t worked for 20 years, and despite that Japan is embarking on QE v3.3 because it simply doesn’t believe that it is not working. Here are the steps the US is consciously taking it its bid to enter a 20 year deflationary spiral like Japan, and may I add that these steps were clearly delineated on BoomBustBlog ONE YEAR ago (Bad CRE, Rotten Home Loans, and the End of US Banking Prominence? Thursday, November 12th, 2009), so no one can say this is a surprise.

Step one: Hide the Truth!

Step two: Formulate intricate lies to placate the masses

In this case, the US bank stress tests: You’ve Been Bamboozled, Hoodwinked and Lied To! Here’s the Proof. What Are You Going to Do About It?. We have government complicity in the purposeful opacity of the values of the mortgage assets (see the FDIC “Prudent Commercial Real Estate Loan Workouts” guidance issued Oct 30th, as reported by the WSJ: Banks Hasten to Adopt New Loan Rules and the new FDIC guidance that states performing loans “made to creditworthy borrowers” will not require write downs “solely because the value of the underlying collateral declined”).

Step three: Being forced to face the music

This is where we are now, and I will go through this in more detail below

Step four: The eradication of US banks from global prominence

Not the floundering of the banks that I predicted in 2007 and 2008, but the outright collapse of many (and probably most) of the big ones, or at the very least significant shrinkage. Does this sound outrageous to you? For those of you who believe that the government’s “pretend and extend” policy has any chance in hell of working, or better yet, that we are not following in the footsteps of Japan, let’s take a pictorial trip through recent history. There are practically no Japanese banks in the top 20 bank category on global basis by 2003 – NONE (save potentially Nomura, which arguably survived in name, alone). As you can see, they literally dominated 90% of the space in 1990!

Click to enlarge…

Source: Cap Gemini Banking M&A

The European banks are not faring much better than the US banks,either – reference the Pan-European Sovergein Debt Crisis, as I see it. This is so much more serious than robo-signing scandals, and I have been shouting about this non-sense of 3 years straight. Well, are we following the Japanese “Lost Path”? Notwithstanding the damning evidence of hide the truth and hide amongst lies linked to above, ponder the following rather dated, but still quite poignant data…

Source: Nomura on Balance Sheet Recessions

Keep in mind that the US housing futures data above is based on the unrealistically optimistic Case Shiller index – reference Those Who Blindly Follow Housing Prices Without Taking Other Metrics Into Consideration Are Missing the Housing Depression of the New Millennium.

Robo-Signing: What is the real issue at hand?

The Robo-Signing issues have arisen because some mortgage servicers have been signing off foreclosure documents without actually reading them, or doing so without the presence of a notary. Thus, the Office of the Comptroller of the Currency (OCC) has directed seven of the US’ biggest lenders — BAC, JPM, WFC, Citi, HSBC, PNC and UBS — to review their foreclosure processes. Consequently, Bank of America, JP Morgan Chase and GMAC Mortgage have suspended foreclosure cases in 23 states after noting their employees may have mishandled foreclosure documents. Goldman Sachs is following suit via their Litton Loans arm. It should also be noted that the document forgery issues penetrate much farther than just distressed properties and foreclosures. Evidence has surfaced that all types of forgeries and misrepresentations are abound in all types of mortgage paperwork. 4closureFraud (a sight where I sourced a lot of the recent robo-signing scandal info from) has a post that actually shows President Obama’s mortgage paperwork as a “Victim to Chase Robo-Signer” This mess, in and of itself, will be difficult to untangle.

For those who didn’t notices, this is a regulatory “hold it” to the MERS system and an alert to its constituency, many of whom are subjects of extensive BoomBustBlog forensic analysis. Major MERS shareholders include:

These companies will start infighting as their myriad interest start to conflict with each other. Title insurers will balk at insuring what could be defective title, banks will fight insurers who will try to renege on insurance and/or put back loans through the warranties and representations clause as losses to investors mount though either increased expenses to work out the paperwork mess or outright losses due to fraud.

Make no mistake, the amount of litigation that is being thrown at these banks and service companies is significant, and they are shining lights on aspects of the banking world that were most conveniently kept secret, as in this class action suit that outlines the contradictory wording in the MERS paperwork (reference pages 10, 11 and 15). Pages 15 on makes issue of fraudulent assignments, of Robo-Signing fame – see for yourself;

Here is a deposition of one of the “said” secretaries from another suit in New Jersey…

#000000;”>Does MERS have any salaried employees?
A No.
Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.
Q Does MERS have any employees currently?
A No.
Q In the last five years has MERS had any
employees?
A No.
Q To whom do the officers of MERS report?
A The Board of Directors.
Q To your knowledge has Mr. Hallinan ever
reported to the Board?
A He would have reported through me if there was
something to report.
Q So if I understand your answer, at least the
MERS officers reflected on Hultman Exhibit 4, if they
had something to report would report to you even though
you’re not an employee of MERS, is that correct?
MR. BROCHIN: Object to the form of the
question.
A That’s correct.
Q And in what capacity would they report to you?
A As a corporate officer. I’m the secretary.
Q As a corporate officer of what?
Of MERS.
Q So you are the secretary of MERS, but are not
an employee of MERS?
A That’s correct.

#000000;”>etc…
How many assistant secretaries have you
appointed pursuant to the April 9, 1998 resolution; how
many assistant secretaries of MERS have you appointed?
A I don’t know that number.
Q Approximately?
A I wouldn’t even begin to be able to tell you
right now.
Q Is it in the thousands?
A Yes.
Q Have you been doing this all around the
country in every state in the country?
A Yes.
Q And all these officers I understand are unpaid
officers of MERS?
A Yes.
Q And there’s no live person who is an employee
of MERS that they report to, is that correct, who is an
employee?
MR. BROCHIN: Object to the form of the
question.
A There are no employees of MERS.

And even more damning, this particular suit gets right to the heart of the matter from an economic AND legal perspective (something that the previous suits have not) and that is that the banks were complicit in overvaluing both the lender and the collateral at the point of underwriting, and doing so on a broad basis. This is the notion behind my premise that a wave of losses and litigation will be coming any minute now as investors and the insurers facing claims from those investors attempt to put back loans on a wide scale and near universal basis as the rampant fraud of the real estate bubble of the new millenium is exposed and litigated throughout the court system.Those entities that swallowed loan mills such as Wachovia, Countrywide, Nationwide, Lehman, Bear Sterns, Merrill Lynch and WaMu will be feeling their indigestion.

I read through portions of a couple of filings and there appears to be some technical errors and maybe even a slight misunderstanding of the banking business, but if these guys (the plaintiff’s attorneys) get their act together in terms of coordinating with each other and getting some real expertise on the subject matter to bolster their filings, I really don’t see how this will not – at the very least – materially drive the expense ratios of both the banks and the investment pools, and at worst hasten the inevitable demise of those entities that underwrote or bought the bad paper then paid the gift of US taxpayer capital (TARP,ZIRP, PPIP, etc. ) out as bonuses versus alleviating the matter at hand.

Impact on RMBS and CDOs

Most analysts believe that a break in foreclosures will not be an optimistic sign for Residential Mortgage Backed Securities (RMBS). This is because RMBS portfolios that contain the foreclosure loans will likely experience higher loss severities due to longer liquidation timelines. Additionally, the RMBS market is expected to witness a large number of repurchases as well as higher monetary losses and ratings downgrades if it is proved that loans were not serviced in accordance with regulatory guidelines. Of course, I believe that servicing is the minor issue. It is the faulty underwriting that is the canary in the goldmine here, and the servicing issues is simply the impetus that will shine the light on the premise that at least half of the high LTV loans written were done so on a fraudulent basis.

GMAC Mortgage Class Action Lawsuit Complaint Filed Over Alleged … Oct 4, 2010 … GMAC Homeowners In Maine File Class Action Lawsuit Complaint Against GMAC Mortgage Over Alleged False Foreclosure Documents, Affidavits and.
classactionlawsuitsinthenews.com/class–action–lawsuits/gmac-mortgage-class–action–lawsuit-complaint-filed-over-alleged-false-foreclosure-docu… – Cached

Wrongful Foreclosure Class Action « Timothymccandless’s Weblog

Jan 15, 2010 … 13 Responses to “Wrongful Foreclosure Class Action” … I would like to be included in your class action lawsuit. I am a victim of predatory …
timothymccandless.wordpress.com/…/wrongful-foreclosure–class–action/

o According to Canadian rating agency DBRS “The recent findings could have far reaching implications throughout the industry with hundreds of thousands of homeowners contesting foreclosures that are in process or have been completed; ultimately causing servicers to face losses due to expensive litigation and class action lawsuits. The biggest uncertainty remains on how the courts will view the “legality” of foreclosures that have already taken place and what actions, if any, will be taken to remedy the situation.

DBRS believes that servicers will be able to quickly correct and refile any deficient affidavits in addition to implementing the appropriate controls to ensure there is not another breakdown in process. However, RMBS that contain these loans will likely experience higher loss severities due to longer liquidation timelines, negative rating actions and the potential for loans to be repurchased out of the transaction due to breaches of representation and warranties if it is proven that they were not serviced in accordance with applicable guidelines. DBRS will continue to monitor the impact of this situation on its rated transactions and take any rating actions as necessary” (Source: http://ftalphaville.ft.com/blog/2010/10/05/360811/from-robo-signing-to-rmbs/)

o Researchers at DBRS also highlighted that the robo-signing debacle will likely lead to a large number of residential mortgage-backed securities repurchases as well as higher monetary losses and continual ratings downgrades if it is proven that loans were not serviced in accordance with federal guidelines. (Source: http://foreclosureblues.wordpress.com/2010/10/04/rmbs-buybacks-expected-to-increase-due-to-robo-signing-dbrs/)

Every material development is impetus for the potential for putbacks due to breaches of representation and warranties Uncertainty in the RMBS market in terms of actual valuation is a result of rampant and provable inflation of appraisal prices during the underwriting of said mortgages and not so much falsification of documents since in many cases those documents can be cured, but misrepresentation cannot! You do not hear this in the media circuits, but it is a fact. Thus, the underwriting banks face the chance of systemic losses. I have warned of this about a year ago – Banks Swallow Another $30 billion or So in More Losses as Their Share Prices Surge (Again). You see, banks often allowed for the inflation of appraisal values and/or income/assets, but the broker channel did it as par for the course.

This is the part that everybody seems to be overlooking…

All you really need to do is find the banks that accepted a lot of broker business, factor in the expense of the class action suit litigation that is popping up in nearly every state (try Googling it, you will be amazed as big firms and store front lawyers alike are throwing their hats in the ring), and you will see the easiest way out of a potentially tough bind for investors is the put back. Where does this land? Squarely on the balance sheet of the banks – who, BTW have the money to attract even more predatory lawyers. A forensic review of high LTV loans between 2003 and 2007 should find that at the very least 30% were aggressively valued, with a more realistic number coming in at about 60%. Ask anyone who was in in the business at that time, I doubt they will disagree.

When I warned of this LAST YEAR, it was not taken very seriously. I suggest all should think again – Reggie Middleton on JP Morgan’s “Blowout” Q4-09 Results. Let’s reminisce…

I pointed out an anomaly in JP Morgan’s “blowout” quarterly earnings release – #1f1f1f;”>Reggie Middleton on JP Morgan’s “Blowout” Q4-09 Results#000000;”>. Let’s reminisce…

#1f1f1f;”>

#333333;”>Warranties of representation, and forced repurchase of loans

#333333;”>JP Morgan has increased its reserves with regards to repurchase of sold securities but the information surround these actions are very limited as the company does not separately report the repurchase reserves created to meet contingencies. However, the Company’s income from mortgage servicing was severely impacted by increase in repurchase reserves. Mortgage production revenue was negative $192 million against negative $70 million in 3Q09 and positive $62 million in 4Q08.

Counterparties who are accruing losses from bad loans, (ex. monoline insurers such as Ambac and MBIA, see A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton circa November 2007,) are stepping up their aggression in pushing loans that appear to breach certain warranties or smack of fraud. I expect this activity to pick up significantly, and those banks that made significant use of brokers and third parties to place mortgages will be at material risk – much more so than the primarily direct writers. I’ll give you two guesses at which two banks are suspect. If you need a hint, take a look at who is increasing reserves for repurchases! JP Morgan and their not so profitable acquisition, WaMu!

As I said, losses should be ramping up on the mortgage sector. Notice the trend of housing prices after the onset of government bubble blowing: If Anybody Bothered to Take a Close Look at the Latest Housing Numbers…

PNC Bank and Wells Fargo are in very similar situations regarding acquiring stinky loan portfolios. I suggest subscribers review the latest forensic reports on each company to refresh as the companies report Q4 2009 earnings. Unlike JPM, these banks do not have the investment banking and trading fees of significance (albeit decreasing significance) to fall back on as a cushion to consumer and mortgage credit losses.

#1f1f1f;”>

Well, it looks as if I was onto something. From Bloomberg:

March 5 (Bloomberg) – Fannie Mae andFreddie Mac may force lenders includingBank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.

That’s the estimate of Oppenheimer & Co. analyst Chris Kotowski, who says U.S. banks could suffer losses of $7 billion this year when those loans are returned and get marked down to their true value. Fannie Mae and Freddie Mac, both controlled by the U.S. government, stuck the four biggest U.S. banks with losses of about $5 billion on buybacks in 2009, according to company filings made in the past two weeks.

The surge shows lenders are still paying the price for lax standards three years after mortgage markets collapsed under record defaults. Fannie Mae and Freddie Mac are looking for more faulty loans to return after suffering $202 billion of losses since 2007, and banks may have to go along, since the two U.S.- owned firms now buy at least 70 percent of new mortgages.

…

Freddie Mac forced lenders to buy back $4.1 billion of mortgages last year, almost triple the amount in 2008, according to a Feb. 26 filing. As of Dec. 31, Freddie Mac had another $4 billion outstanding loan-purchase demands that lenders hadn’t met, according to the filing. Fannie Mae didn’t disclose the amount of its loan-repurchase demands. Both firms were seized by the government in 2008 to stave off their collapse.

….

The government’s efforts might be counterproductive, since the Treasury and Federal Reserve are trying to help banks heal, FBR’s Miller said. The banks have to buy back the loans at par, and then take an impairment, because borrowers usually have stopped paying and the price of the underlying homehas plunged. JPMorgan said in a presentation last month that it loses about 50 cents on the dollar for every loan it has to buy back.

Striking a Balance

“It’s a fine line you’re walking, because the government’s trying to recapitalize the banks, not put them in bankruptcy, and then here’s Fannie and Freddie putting more pressure on the banks through these buybacks,” FBR’s Miller said. “If it becomes too big of an issue, the banks are going to complain to Congress, and they’re going to stop it.” [Of, course! Let the taxpayer eat the losses borne from our purposefully sloppy underwriting]

Bank of America recorded a $1.9 billion “warranties expense” for past and future buybacks of loans that weren’t properly written, seven times the 2008 amount, the bank said in a Feb. 26 filing. A spokesman for Charlotte, North Carolina- based Bank of America, Scott Silvestri, declined to comment.

JPMorgan, based in New York, recorded $1.6 billion of costs in 2009 from repurchases, including $500 million of losses on repurchased loans and $1 billion to increase reserves for future losses, according to a Feb. 24 filing.

“It’s become a very meaningful issue, and it will continue to be a meaningful issue for the next couple of years,” Charlie Scharf, JPMorgan’s head of retail banking, said at a Feb. 26 investor conference. He declined to say when the repurchase demands might peak.

…

“I can’t forecast the rates at which they’re going to continue,” she said. Her division lost $3.84 billion last year, as the bank overall posted a $6.28 billion profit. “The volume is increasing.”

Wells Fargo, ranked No. 1 among U.S. home lenders last year, bought back $1.3 billion of loans in 2009, triple the year-earlier amount, according to a Feb. 26 filing. The San Francisco-based bank recorded $927 million of costs last year associated with repurchases and estimated future losses.

…

Citigroup increased its repurchase reserve sixfold to $482 million, because of increased “trends in requests by investors for loan-documentation packages to be reviewed,” according to a Feb. 26 filing.

“The request for loan documentation packages is an early indicator of a potential claim,” New York-based Citigroup said.

…

According to a WSJ analysis, the RMBS market may have a balanced impact with the junior bondholders typically at the bottom of the credit structure could actually end up better off than expected. Senior bondholders, typically at the top, could end up worse off. This is because when houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure processes—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream. In addition, how the allocation of cost of re-processing the foreclosed loans, which could be significant also, remains a key concern. (Source: http://ftalphaville.ft.com/blog/2010/10/07/363876/updating-the-us-foreclosure-scandal/)

However, some analysts and bond traders have a contrarian view that the “Robo-signing” issues will not have a significant effect on the RMBS valuations, as most RMBS investments have been made after stringent performance modeling (Yeeeahhh, right! Just like the HPA (perpetual housing price appreciation assumptions utilized by Fitch during the boom to dole out AAA ratings on subprime trash! This is total and absolute BULLSHIT, but I am including it so as to be as balanced as possible). More so, they believe that the actual impact on RMBS valuations will depend on how long it takes for banks to tackle the problem.

According to a RMBS manager at one capital market group, “the majority of investors currently involved in trading RMBS performed stringent performance modeling. Anyone who bought RMBS from 2006 and 2007, vintages from when presumably these robo-signed foreclosures were inked, would have run the collateral through extended resolution scenarios”. He also expects that bond rally will continue, and that problem would not emerge unless the robo-signing issue is not resolved in less than six months. As per the RMBS manager, “RMBS right now is trading like stocks. Besides, in the year-end, the book always goes up, it’s window dressing the portfolio.“
Another bond trader, who is also has a bullish view for the market, believes that every single major servicer will face problems similar to Ally and JPMorgan, but still expects RMBS to remain well-valued considering overall loss severities are level and constant repayment rates remain healthy (source: http://www.housingwire.com/2010/10/01/robo-signers-dont-scare-the-mortgage-bond-market).
According to Brett Schaffer, the president of Phoenix Capital Inc. and Phoenix Analytics Services Inc, “it’s premature to determine how big of a hit the “robo-signing” scandal will have on servicing valuations. Much depends on how long it takes for servicers to address the problem. If this gets resolved in fairly short order within a month or six weeks and … there isn’t any critical flaw in the mortgage servicers’ practices in general, then I don’t think it has really any impact,” On the other hand, if it is determined that there is a material flaw and there is going to be long-term foreclosure halts, then it probably would have a material impact on those particular firms. It’s not just a blanket statement for the market.”
According to Robert Lee, senior vice president at Mortgage Industry Advisory Corp. in New York, “Servicing costs are going to rise regardless of how long it takes for the issue to be resolved, as companies hire employees to work through the documents and the foreclosure process is delayed. But the impact of those higher costs on mortgage servicing asset values may be minimal because many servicers have been conservative in their estimates. Servicing rights themselves right now are weaker than where the cash flow values are.” He also estimated the hit to most portfolios’ value from the fallout of the documentation scandal will be less than 10 basis points. (Servicing values are expressed as a percentage of the unpaid principal balance of the loans in a portfolio).

Overall, we at the BoomBust believe that the uncertainty on the impact of robo-signing on RMBS valuation will remain until the banks give clarity on how long the foreclosures are expected to remain suspended. We also believe that the media is staring at the wrong target. Each major media outlet is copying what is popular or what the next outlet broke as a story versus where the true economic risks actually lie – which is essentially the real story and where the meat actually is. Watch the W&R number over the next two quarters for those banks that purchased cesspool portfolios such as Countrywide, National City, Wachovia and WaMu, and let me know if they start to skyrocket.

In the meantime, I will be updating my forensic valuations of the big banks that I have covered right about the time they report in the upcoming weeks. These updates will include Morgan Stanley, Goldman Sachs, PNC, Wells Fargo, and JP Morgan. I will put them through the realistic stress test scenarios that our government failed to and have the results available to paying subscribers. Of course, I will factor in the very real probability of a surge in W&R activity, just as I warned last year. This is something that is just not found in banking analysis that I see on the Street. Below is an example of what was done last year for PNC…….

#ffffff;”>For those of you want to know what the stress tests results of the big banks were if they used the NY Fed/FDIC official loss data, I have run the numbers for you. It doesn’t look very pretty in some cases. This content is paid subscriber-only, except for the two links that have public-lite and public excerpt included! Let’s walk through the PNC free data, in light of how misleading their latest quarterly report was (see For those that didn’t notice – Reggie Middleton on PNCl Q3-09 Results and then be sure to read At What Point Does Accounting Gimmickery Become an Outright Lie? Let’s Ask PNC).

#ffffff;”>Click any of these graphics to enlarge…

#ffffff;”>Notice the amount of leverage that PNC is using if one were to use the NY Fed and FDIC data in lieu of what PNC has proffered through their take home test.

#ffffff;”>

#ffffff;”>As you can see from above, there is a significant difference between what the government’s SCAP tests reveal PNC will lose and what the government’s NY Fed and FDIC call sheet data says PNC will lose – a very significant difference. Solely as a result of looking at this chart, one should be willing to demand a second round of considerably more stringent stress testing.

#ffffff;”>

#ffffff;”>If one were to granularly break down the foreseen losses to PNC’s portfolio using the government data…

#ffffff;”>

#ffffff;”>As you can see, going through each major loan category in PNC’s books reveals a much LESS optimistic scenario than ANY portrayed in their SCAP take home test results…

#ffffff;”>In an act of near unprecedented generosity, I have included the PNC valuation along with the Blackrock contribution in the free PNC lite public download below (in alphabetical order).

#ffffff;”>

Subscriber content that reveals what the banks REALLY needed in terms of capital and cushions to whether the true rate of losses and unemployment to come. You may subscribe here to access this content.#ffffff;”> Goldman Sachs Stress Test Professional 2009-04-20 10:06:45 4.04 Mb

Goldman Sachs Stress Test Retail 2009-04-20 10:08:06 720.25 Kb

MS Simulated Government Stress Test 2009-05-05 11:36:25 2.49 Mb

MS Stess Test Model Assumptions and Stress Test Valuation 2009-04-22 07:55:17 339.99 Kb

PNC SCAP Results recast using FDIC and NY Fed data – Pro 2009-05-15 07:31:21 455.37 Kb

PNC SCAP Results recast using FDIC and NY Fed data – Retail 2009-05-15 07:30:25 395.18 Kb

PNC Stress Test Pro 2009-04-13 02:10:17 3.11 Mb

PNC Stress Test update – Professional 2009-04-21 15:55:56 3.00 Mb

PNC Stress Test Retail 2009-04-13 02:11:08 323.51 Kb

PNC Stress Test update – Retail 2009-04-21 15:53:52 777.50 Kb

PNC stress test write up – public lite 2009-07-27 02:37:11 995.30 Kb

Sun Trust Banks Simulated Government Stress Test 2009-05-05 11:37:13 1016.17 Kb

JPM Public Excerpt of Forensic Analysis Subscription 2009-09-22 14:33:53 1.51 Mb

BofA Finds Foreclosure Document Errors

By DAN FITZPATRICK

Bank of America Corp. for the first time acknowledged finding some mistakes in foreclosure files as it begins to resubmit documents in 102,000 cases.

The Charlotte, N.C., lender discovered errors in 10 to 25 out of the first several hundred foreclosure cases it examined starting last Monday. The problems included improper paperwork, lack of signatures and missing files, said people familiar with the results. In certain cases, information about the property and payment history didn’t match.

Some of the defects seem relatively minor, according to the bank, and bank officials said they haven’t uncovered any evidence of wrongful foreclosures. There was an address missing one of five digits, misspellings of borrowers’ names, a transposition of a first and last name and a missing signature on one document “underlying” an affidavit, a bank spokesman said.

Experience WSJ professional

Editors’ Deep Dive: Rebuilding the Mortgage Market

NATIONAL MORTGAGE NEWS

Foreclosure Mess Spurs Congressional Hearing, Maybe Two
Daedalus

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But the bank uncovered these mistakes while preparing less than 1% of the first foreclosure files that it intends to resubmit to the courts in 23 states. As the nation’s largest mortgage lender, the bank is under pressure to show that its mortgage process isn’t flawed amid revelations that many banks used “robo-signers” to approve large numbers of foreclosure documents without reading them closely.

State and federal agencies launched investigations into the allegations, and some officials, including Iowa’s attorney general, said they wouldn’t necessarily trust the banks’ self-assessments.

Several statements from bank officers about foreclosure practices have come under scrutiny. Wells Fargo & Co. Chief Executive John Stumpf on Oct. 20 said: “I don’t know how other companies do it, but in our company the affidavit signer and the reviewer are the same team member.” Days later a deposition emerged from a bankruptcy case indicating that Wells Fargo had in fact used a robo-signer who didn’t verify documents she approved.

A Wells Fargo spokeswoman said “we don’t believe any of those cases or depositions should be taken out of context. If we find some errors and need for improvements we will take that action.”

Bank of America in several recent public comments about the foreclosure issue hadn’t previously acknowledged even minor errors. Yet last week it uncovered a group of mistakes as it prepared to resubmit the first batch of documents and shared the information internally, according to people familiar with the matter. Executives are briefed twice daily about what was found.

When the bank announced Oct. 18 that it would lift a freeze on foreclosure sales in 23 states, it emphasized the accuracy of its internal review. “Our initial assessment findings show the basis for our foreclosure decisions is accurate,” the company said in a statement.

That conclusion, it turns out, was based on an earlier sample of fewer than 1,000 files. The bank found no mistakes in the sample, a spokesman said, but it decided to make changes to its affidavit approval procedures before going through all 102,000 cases. Now, for example, a notary will sit next to the signer of the affidavit as the documents are being reviewed.

The day after the bank began its comprehensive review of all documents, CEO Brian Moynihan told analysts on an Oct. 19 conference call that “the teams reviewing the data have not found information which was inaccurate, which would affect the plain facts of the foreclosure” such as whether the customer was actually delinquent on the loan. The errors uncovered so far support Mr. Moynihan’s statement, bank officials said, and all mistakes are being corrected before the bank resubmits documents to the courts.

Barbara Desoer, president of home loans for Bank of America, said Sunday that Mr. Moynihan’s Oct. 19 comments were “consistent” with the review findings. “The basis for the foreclosure decisions have been accurate and correct,” she said.

Its not Robo-Singning its lying !!!

Like everyone else, I’d been reading with amazement the stories about one of those legal problems: the robo-signing scandal that has ensnared all the banks with mortgage servicing subsidiaries, Bank of America included. That’s the scandal in which a tiny handful of employees had signed — or allowed others to forge their signatures — on thousands of affidavits confirming that the banks had the legal right to foreclose on properties they serviced. In truth, they had often never seen the documents proving the bank had that legal right. In some cases, the documents didn’t even exist. As a result of the mounting publicity, many big banks had halted all foreclosures while they reviewed the legality of their affidavits. Its more than just the process of robo-signing its lying. In California in 2008 the California Foreclosure prevention act was passed requiring lenders to contact Borrowers and assess their financial condition before a valid foreclosure could be initiated. Rather some Mers employee signs a declaration that the borrower was contacted. They do not follow the law civil code 2923.5 and 2923.6 and 2924.

Southern California (909)890-9192 in Northern California(925)957-9797

A wrongful foreclosure action typically occurs when the lender starts a non judicial foreclosure action when it simply has no legal cause. This is even more evident now since California passed the Foreclosure prevention act of 2008 SB 1194 codified in Civil code 2923.5 and 2923.6. In 2009 it is this attorneys opinion that 90% of all foreclosures are wrongful in that the lender does not comply (just look at the declaration page on the notice of default). The lenders most notably Indymac, Countrywide, and Wells Fargo have taken a calculated risk. To comply would cost hundreds of millions in staff, paperwork, and workouts that they don’t deem to be in their best interest. The workout is not in there best interest because our tax dollars are guaranteeing the Banks that are To Big to Fail’s debt. If they don’t foreclose and if they work it out the loss is on them. There is no incentive to modify loan for the benefit of the consumer.

Sooooo they proceed to foreclosure without the mandated contacts with the borrower. Oh and yes contact is made by a computer or some outsourcing contact agent based in India. But compliance with 2923.5 is not done. The Borrower is never told that he or she have the right to a meeting within 14 days of the contact. They do not get offers to avoid foreclosure there are typically two offers short sale or a probationary mod that will be declined upon the 90th day.

Wrongful foreclosure actions are also brought when the service providers accept partial payments after initiation of the wrongful foreclosure process, and then continue on with the foreclosure process. These predatory lending strategies, as well as other forms of misleading homeowners, are illegal.

insider mers memo foreclosure procedures all states

State-by-State
MERS Recommended
Foreclosure Procedures
Updated 2002
Corporate Offices
1818 Library Street, Suite 300
Reston, VA 20190
tel (800) 646-6377
fax (703) 748-0183
http://www.mersinc.org
TABLE OF CONTENTS
INTRODUCTION__________________________________________________________3
RECOMMENDED FORECLOSURE PROCEDURES:
Alabama___________________________________________________________________________8
Alaska____________________________________________________________________________10
Arizona___________________________________________________________________________12
Arkansas__________________________________________________________________________14
California__________________________________________________________________________16
Colorado__________________________________________________________________________18
Connecticut________________________________________________________________________20
Delaware__________________________________________________________________________22
District of Columbia_________________________________________________________________24
Florida____________________________________________________________________________26
Georgia___________________________________________________________________________28
Hawaii____________________________________________________________________________30
Idaho_____________________________________________________________________________32
Illinois____________________________________________________________________________34
Indiana____________________________________________________________________________36
Iowa______________________________________________________________________________38
Kansas____________________________________________________________________________40
Kentucky__________________________________________________________________________42
Louisiana__________________________________________________________________________44
Maine_____________________________________________________________________________46
Maryland__________________________________________________________________________48
Massachusetts______________________________________________________________________50
Michigan__________________________________________________________________________52
Minnesota_________________________________________________________________________54
Mississippi_________________________________________________________________________56
Missouri___________________________________________________________________________58
Montana___________________________________________________________________________60
Nebraska__________________________________________________________________________62
Nevada___________________________________________________________________________64
New Hampshire_____________________________________________________________________66
New Jersey________________________________________________________________________68
New Mexico_______________________________________________________________________70
New York_________________________________________________________________________72
North Carolina______________________________________________________________________74
North Dakota_______________________________________________________________________76
Ohio______________________________________________________________________________78
Oklahoma_________________________________________________________________________80
Oregon____________________________________________________________________________83
Pennsylvania_______________________________________________________________________85
Rhode Island_______________________________________________________________________87
South Carolina______________________________________________________________________89
South Dakota_______________________________________________________________________91
Tennessee_________________________________________________________________________93
Texas_____________________________________________________________________________95
Utah______________________________________________________________________________97
Vermont___________________________________________________________________________99
Virginia__________________________________________________________________________102
Washington_______________________________________________________________________104
West Virginia_____________________________________________________________________106
Wisconsin________________________________________________________________________108
Wyoming_________________________________________________________________________110
Introduction
MERS has put together this Foreclosure Manual to provide a state by state guideline for our Members to follow when foreclosing a mortgage loan in the name of MERS. Each state’s procedure was developed jointly with local counsel in that respective state. There may be future versions of this Manual if needed. If you have any questions about this Foreclosure Manual, please contact MERS.
Sharon McGann Horstkamp
Corporate Counsel
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What is MERS?
MERS serves two purposes. First, it is a national electronic registry for tracking servicing rights and beneficial ownership interests in mortgage loans. Second, MERS acts as nominee (a form of agent) for the servicer and beneficial owner of a mortgage loan in the public land records. MERS is designed to operate within the existing legal framework in all U.S. jurisdictions and did not require any changes to existing laws.
How is this made possible? Its members appoint MERS as the mortgagee of record on all loans that they register on the MERS System. This appointment eliminates the need for any future assignments when servicing rights are sold from one MERS Member to another. Instead of preparing a paper assignment to track the change in the county land records, all subsequent transfers are tracked electronically on the MERS System.
MERS does not create or transfer beneficial interests in mortgage loans or create electronic assignments of the mortgage. What MERS does do is eliminate the need for subsequent recorded assignments altogether. The transfer process of the beneficial ownership of mortgage loans does not change with the arrival of MERS. Promissory notes still require an endorsement and delivery from the current owner to the next owner in order to change the beneficial ownership of a mortgage loan.
MERS is a Delaware corporation with a broad base of ownership from the mortgage industry. American Land Title Association is among our owners and has a seat on the MERS Board of Directors. Other owners with substantial investments in MERS include the Mortgage Bankers Association of America (MBA), Fannie Mae, and Freddie Mac. These parties, along with Ginnie Mae, decided several years ago that MERS would be a major benefit to the mortgage industry and worked together to create the MERS of today.
How does MERS become the Mortgagee of Record?
MERS is put in this position in one of two ways: the first is by an assignment from a lender or servicer to MERS. This method is usually associated with bulk transfers of servicing. The second way is with the lender naming MERS as the mortgagee of record as nominee for itself (and its successors and assigns) in the original security instrument at the time the loan is closed. We call this second option “MOM”, which stands for MERS as Original Mortgagee.
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“MOM” was a significant milestone for MERS and the mortgage industry. Fannie Mae, Freddie Mac, and Ginnie Mae have each approved the use of MERS as original mortgagee as nominee for a lender on the security instrument for loans sold to them and registered on the MERS System.
In order to make MOM work, changes were made by Fannie Mae and Freddie Mac to their uniform security instruments allowing MERS to be named as the mortgagee in a nominee capacity for the lender. First, to reflect the interrelationship of the promissory note and mortgage and to ensure these two instruments are tied together properly, the recital paragraph names MERS, solely as nominee for Lender, as beneficiary. Second, it is made clear that the originating lender rather than MERS is defined as the “Lender”. This change was made so that everyone understands that MERS is not involved in the loan administration process. Third, as mortgagee of record, MERS needs to have the authority to release the lien of security instrument, or if necessary, foreclose on the collateral on behalf of the lender. Such authority is provided by adding a paragraph to the security instrument informing the borrower that MERS holds only legal title to the interests granted by the borrower. It also informs the borrower that, if necessary to comply with law or custom, MERS may exercise the right to foreclose and sell the property and may take any action required of the Lender to release or cancel the security instrument.
Once MERS is named in the original security instrument or by way of an assignment, the document is then recorded in the appropriate public land records. From this point on, no subsequent assignments of the mortgage to a MERS member needs to be recorded. MERS remains in the land records, as mortgagee, throughout the life of the loan so long as servicing is not sold to a non-MERS member. All subsequent transfers of ownership in mortgage loans and servicing rights for that loan are tracked electronically between MERS members through the MERS System. This process eliminates the opportunity for a break in the chain of title.
Moreover, unless a MERS member transfers servicing rights to a loan registered on the MERS System to a non-MERS member, the loan stays on the system until it is paid off. The process to transfer servicing rights between MERS members requires an electronic confirmation from the buyer. It begins with the seller entering loan transfer information into the system, including the Mortgage Identification Number (explained below), the new servicer organizational identification number, the sale date, and the transfer effective date. The buyer then must submit a confirmation acknowledgment to the system. The old servicer and the new servicer are still required to notify the homeowner in writing when loan servicing is traded as required under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. A loan is de-registered from the system only if its servicing rights to a loan are transferred to a non-MERS member.
With every new loan that is registered on the MERS System, it becomes more likely that you will come in contact with a mortgage loan having MERS as the mortgage holder in the chain of title. MERS is put in this position in one of two ways: the first is by an assignment from a lender or servicer to MERS. This method is usually associated with bulk transfers of servicing. The second way is with the lender naming MERS as the mortgagee of record as
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nominee for itself (and its successors and assigns) in the original security instrument at the time the loan is closed. We call this second option “MOM”, which stands for MERS as Original Mortgagee.
“MOM” was a significant milestone for MERS and the mortgage industry. Fannie Mae, Freddie Mac, and Ginnie Mae have each approved the use of MERS as original mortgagee as nominee for a lender on the security instrument for loans sold to them and registered on the MERS System.
In order to make MOM work, changes were made by Fannie Mae and Freddie Mac to their uniform security instruments allowing MERS to be named as the mortgagee in a nominee capacity for the lender. First, to reflect the interrelationship of the promissory note and mortgage and to ensure these two instruments are tied together properly, the recital paragraph names MERS, solely as nominee for Lender, as beneficiary. Second, it is made clear that the originating lender rather than MERS is defined as the “Lender”. This change was made so that everyone understands that MERS is not involved in the loan administration process. Third, as mortgagee of record, MERS needs to have the authority to release the lien of security instrument, or if necessary, foreclose on the collateral on behalf of the lender. Such authority is provided by adding a paragraph to the security instrument informing the borrower that MERS holds only legal title to the interests granted by the borrower. It also informs the borrower that, if necessary to comply with law or custom, MERS may exercise the right to foreclose and sell the property and may take any action required of the Lender to release or cancel the security instrument.
Once MERS is named in the original security instrument or by way of an assignment, the document is then recorded in the appropriate public land records. From this point on, no subsequent assignments of the mortgage to a MERS member needs to be recorded. MERS remains in the land records, as mortgagee, throughout the life of the loan so long as servicing is not sold to a non-MERS member. All subsequent transfers of ownership in mortgage loans and servicing rights for that loan are tracked electronically between MERS members through the MERS System. This process eliminates the opportunity for a break in the chain of title.
Moreover, unless a MERS member transfers servicing rights to a loan registered on the MERS System to a non-MERS member, the loan stays on the system until it is paid off. The process to transfer servicing rights between MERS members requires an electronic confirmation from the buyer. It begins with the seller entering loan transfer information into the system, including the Mortgage Identification Number (explained below), the new servicer organizational identification number, the sale date, and the transfer effective date. The buyer then must submit a confirmation acknowledgment to the system. The old servicer and the new servicer are still required to notify the homeowner in writing when loan servicing is traded as required under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. A loan is de-registered from the system only if its servicing rights to a loan are transferred to a non-MERS member.
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Why Foreclose in the Name of MERS
The mortgage establishes the remedy to foreclose and sell the property if the borrower does not pay back the amount loaned to the borrower according to schedule. Typically, the loan servicer, as the mortgagee of record, is the party that initiates the foreclosure proceedings on behalf of the investor. When MERS is the mortgagee of record, the foreclosure can be commenced in the name of MERS in place of the loan servicer. For another entity to foreclose, an assignment is required from MERS to the other entity.
Establishing MERS as mortgagee of record will not cause any significant changes to current foreclosure practices in any state when the beneficial owner wants to proceed with foreclosures in the name of MERS. Just take a look at the recommended procedures.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ALABAMA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are foreclosed non-judicially under power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. Notice of the foreclosure sale is published with Mortgage Electronic Registration Systems, Inc. (MERS) named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the promissory note to the servicer prior to foreclosure. We recommend that the agencies’ policies be followed.
At the foreclosure sale, the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then the auctioneer will be instructed to deed the property directly to the investor. We have been advised that this is the same procedure followed when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the auctioneer deed can be issued to the servicer. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ALASKA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are typically used and are foreclosed non-judicially by the power of sale contained therein. MERS local counsel advises that a foreclosure can be done in the name of MERS. Local counsel confirmed with First American Title Insurance Company that with a few minor caveats, foreclosing in the name of MERS should not present any problems.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies’ policy is that the promissory note is endorsed in blank when the seller/servicer sells the loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes the Note is endorsed to the servicer prior to the foreclosure, but unless it is legally required, the Note should remain endorsed in blank. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The trustee, who is typically a title company, commences the foreclosure by executing and recording the Notice of Default. The Notice of Default is filed and published the same way with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing
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entity. At the foreclosure sale, an “offset bid” is entered on behalf of MERS who is acting in the capacity as “agent” for the servicer. Local counsel advises that the Beneficiary’s Declaration of Default can be modified to describe the relationship of MERS and the Servicer. This should enable the servicer, instead of MERS, to be the named grantee of the Trustee’s Deed. The servicer can then issue a deed to the investor. This procedure is consistent with the current two-deed foreclosure practice.
While initially there may be some hesitation to accept an “offset bid” by the servicer, MERS local counsel states that usually a title company is willing to recognize the substance of who actually owns the loan rather than the form of the record ownership.1 In that instance, if the servicer is successful at the foreclosure sale, the trustee’s deed will be issued directly to the servicer.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer, by being the grantee of the trustee’s deed, is able to commence the eviction. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
1 If the “offset bid” is not accepted, then the trustee’s deed may need to be granted to MERS. If MERS takes title to the property, a subsequent deed should be executed to the investor as soon as possible.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ARIZONA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the deed of trust that gives the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Trustee’s Sale is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity. It is important to note that the same procedures and state requirements that are required when foreclosing in the servicer’s name still must be followed when foreclosing in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS. The substituted trustee is typically the foreclosing attorney.
The agencies (Fannie Mae, Freddie Mae and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells the loan to them. The note is to remain endorsed in the blank when a servicer commences foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS for the investor. This is the same process that is used today when foreclosing in the servicer’s name. We have been advised that the
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current foreclosure procedure is a one-deed process with the investor directly taking title from the Trustee’s Deed. Therefore, the MERS recommended procedure is the same as when foreclosing in the name of the servicer. The bid is made on behalf of the investor so that the Trustee’s deed will be issued directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, then the trustee’s deed is not recorded to the investor until after the eviction is completed. The eviction is conducted the same way it would be conducted if the servicer foreclosures.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ARKANSAS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like a servicer , will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Default is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS. The substituted trustee is typically the foreclosing attorney.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. The Trustee’s deed will be issued directly to the assignee of the bid. We have been advised that the current foreclosure procedure is a two-deed process with the servicer taking title and then executing a subsequent deed to the investor. Therefore, the MERS recommended procedure is the same as the current practice of assigning the bid to the servicer. Because the MERS recommended procedure follows the same procedure that is used when the servicer
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forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer, by being the grantee of the trustee’s deed, can commence the eviction. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR CALIFORNIA
A deed of trust in which the Mortgage Electronic Registration Systems, Inc. (MERS) is named as beneficiary requires special non-judicial foreclosure procedures. MERS was created to avoid the cost and delays caused by assignments of mortgages and deeds of trust. To avoid the need to prepare and record an assignment with the County Recorder’s office, MERS holds title as nominee for the true mortgagee/beneficiary of the mortgage/deed of trust and as transfers occur, they are recorded on the MERS computer in a book entry systems similar to the transfer of stocks.
The MERS procedure for tracking the ownership of mortgages has a direct effect on the foreclosure process. On MERS loans, MERS is shown as the record beneficiary and therefore a MERS foreclosure is brought in the name of MERS. However, at the time of sale the true beneficiary is determined by MERS and the Trustee’s Deed Upon Sale is recorded in the name of that true beneficiary. There are no assignments, additional taxes or costs when foreclosing under the MERS’ foreclosure procedures.
To achieve this result, the following non-judicial foreclosure guidelines are recommended:
On MERS loans, MERS will show as the beneficiary of record. Foreclosures should be commenced in the name of MERS. To effectuate this process, MERS has allowed each servicer to choose a select number of its own employees to act as officers for MERS. Through this process, appropriate documents may be executed at the servicer’s site on behalf of MERS by the same servicing employee that signs foreclosure documents for non-MERS loans.
Until the time of sale, the foreclosure is handled in same manner as non-MERS foreclosures. At the time of sale, if the property reverts, the Trustee’s Deed Upon Sale will follow a different procedure. Since MERS acts as nominee for the true beneficiary, it is important that the Trustee’s Deed Upon Sale be made in the name of the true beneficiary and not MERS. Your title company or MERS officer can easily determine the true beneficiary. Title companies have indicated that they will insure subsequent title when these procedures are followed.
Normally, where the name of the grantee under the Trustee’s Deed Upon Sale is different than the name of the foreclosing entity, the Trustee’s Deed Upon Sale states that the “Grantee was not the foreclosing beneficiary.” This designation triggers the imposition of transfer taxes on the sale. It is important to note that in a MERS foreclosure sale, even where the property reverts, the name of the grantee will be different than the name of the entity foreclosing. Nonetheless, the Trustee’s
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Deed Upon Sale should state that “The Grantee was the foreclosing beneficiary.” This is because MERS merely holds title as nominee for the true beneficiary; it is the true beneficiary that has actually foreclosed and acquired title.
Finally, should a bankruptcy be filed, servicers should use the same procedures they use for other investor loans. Motions for Relief from Stay should be brought by the real party in interest, namely “Mortgage Electronic Registration Systems, Inc. as record holder and nominee for the true beneficiary _________.” On Proofs of Claim, both the servicer and Mortgage Electronic Registration Systems, Inc. should be jointly named. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR COLORADO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc.
(MERS) has been around since 1998. The reason why it works is because when the role
of MERS is examined, it becomes clear that MERS stands in the same position to
foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It
is the Deed of Trust that gives MERS the authority to foreclose. However, because
Colorado differs from other states in that the Promissory Note controls, and MERS is not
the beneficial note holder, we recommend foreclosing in the servicer’s name by
endorsing the Note to the servicer.
We are amending our prior recommended Procedure to foreclose in MERS name due to
recent changes in the Colorado Foreclosure Statute. This revision was developed in
conjunction with experienced foreclosure counsel. The goal of the recommended
procedures is to avoid adding any extra steps or incurring any additional taxes or costs.
MERS will continually review the guidelines and, if necessary, will issue revisions.
The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially pursuant to a power
of sale. In Colorado, the deed of trust names a Colorado public trustee rather than a
private trustee. Local counsel advises that a foreclosure can be brought in the name of
MERS. However, because the endorsement on the Note controls, and MERS holds the
mortgage lien on behalf of the Note Holder, it is a better practice to foreclose in the Note
Holder’s name. That may be the servicer of the loan.. This does not impact MERS
position as the mortgagee and no assignment from MERS to the servicer is necessary to initiate the foreclosure and the mortgage loan should remain registered on the MERS® System.
Keep in mind that the agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a
blank endorsement of the promissory note when the seller/servicer sells a mortgage
loan to them. However, in Colorado, the requirement is that the promissory note
needs to be endorsed to the foreclosing entity, which is usually the servicer. Therefore, the note should be endorsed to servicer.
This switch in our recommendation is also predicated on the change in the Colorado Foreclosure Statute that now allows for a copy of the Note rather than the original
Note to be produced together with a Certificate that can be filed by certain entities of which MERS does not fit into in its current corporate structure. The certificate states
that the foreclosing entity is the owner of the Note/debt and is a qualified entity
under the Statute to use a copy of the Note. Please consult with your own counselon
how this change impacts your current foreclose procedure.
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If the debtor declares bankruptcy, the proof of claim should be filed jointly in the
name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of
MERS and the servicer. The address to be used is the servicer’s address so that all
trustee payments go directly to the servicer, not to MERS. The Motion for Relief
from Stay may be filed either solely in the name of MERS or jointly with the
servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
MERS Local Counsel:
Caren Castle, Esq.
Castle & Castle, P.C.
Denver Place Plaza Tower
1099 18th Street, Suite 2300
Denver, CO 80202
Tel: (303) 299-1800
Fax: (303) 299-1808
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR CONNECTICUT
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. When the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that the authority is given to MERS to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially either by strict foreclosure or by a power of sale. MERS local counsel advises that a loan can be foreclosed in the name of MERS. It up to the judge to decide which method will be used. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity, and not just the preferred method.3 If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the
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3 Local Counsel advises us that certain judges take the position that the note and mortgage must be held by the same entity. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
same individual that signs the documents today for the servicer will continue to sign the documents, but now as an officer of MERS.
In a strict foreclosure, once the Judgement of Strict Foreclosure is entered, and the applicable redemption period has expired, a certificate of Foreclosure is filed on the land records that will reflect MERS as the property owner. MERS should remain in the land records for as short a time as possible. A subsequent deed should be prepared from MERS to the investor.4 Alternatively, at the time of the entering of the judgment, if an assignment of judgment is executed by MERS, judgment could automatically be entered into the investor’s name.
In a foreclosure by sale, a motion should be submitted to the judge requesting the judge that the servicer be allowed to bid at the auction. If it is the highest bid, then after approval of the sale by the Court, a closing will be scheduled whereby title should vest in the servicer.5
Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name for the investor, no additional taxes or recording fees are incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the title holder. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the name of the title holder. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
4 Some Connecticut Revenue Officers have taken the position that a state conveyance tax is due on the subsequent deed from the servicer to the investor. MERS local counsel is currently appealing this issue.
5 If a judge will not allow the servicer to “credit” bid, then a bid may be entered on behalf of MERS. Title will then vest with MERS momentarily until the deed to the investor is executed and recorded.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR DELAWARE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The same procedures and requirements that are followed when foreclosing in the name of the servicer are still followed when foreclosing in the name of Mortgage Electronic Registration Systems, Inc. The major difference is that the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.6
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method.7
6 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
7 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If it is the successful bid, the sheriff will be instructed to execute a deed directly to the investor. This is the same method that is used when the servicer forecloses in its name. The sheriff then issues a sheriff’s deed directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR DISTRICT OF COLUMBIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Sale is sent, filed and published the same way it is when foreclosing in the name of the servicer with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. This is the same requirement when foreclosing a loan in the name of the servicer. We have found that it is not legally required to have the note endorsed to MERS prior to the foreclosure.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then an unrecorded assignment of the deed of trust to the investor is given to the trustee prior to the sale. This assignment allows the Trustee’s Deed to be issued directly to the investor. We have been advised that this is the procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the same Version 1.1
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procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the eviction can be brought in the name of MERS. At this point, MERS holds only equitable title. Once the eviction is completed, then the investor can be substituted in as the party to receive the Trustee’s Deed. Again, the same procedures should be followed as you do when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR FLORIDA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the mortgagee of record. It is the mortgage that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will be the ultimate owner of the note.8
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS. However, we have not found it a requirement in Florida that the Note needs to be endorsed to the foreclosing entity.9
8 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
9 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of Version 1.1
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment to MERS is entered, a public sale is held. The Plaintiff (MERS) has the option of assigning the foreclosure bid either prior to the foreclosure sale or in the ten (10) day period between the sale and the issuance of the Certificate of Title. The assignment is done with a motion filed with the court, and a court order is entered. If the bid is assigned, the certificate of title is issued directly to the assignee. This is the same method that is used when the servicer forecloses in its own name. Because the MERS recommended procedure follows the same procedure that is used when the servicer foreclosures in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, then proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR GEORGIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Security Deeds are used and are generally foreclosed non-judicially pursuant to a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. It is important to note that the same procedures and state requirements that are required to be followed when foreclosing in the servicer’s name still must be followed when foreclosing in the name of MERS. The foreclosure proceeding is commenced by advertising the foreclosure in the official county newspaper once a week for four consecutive weeks prior to the date of the foreclosure sale. A notice is mailed to the debtor’s residence at least 15 days prior to the sale date. You will continue to do everything that you normally do when foreclosing a mortgage in the servicer’s name. The only difference is that the foreclosing entity is Mortgage Electronic Registration Systems, Inc.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents today for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the sale, the certifying officer will instruct the foreclosing attorney to enter a bid on behalf of the servicer. This is the same process that is used today when
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foreclosing in the servicer’s name. If it is the successful bid, then the attorney will be instructed to execute the deed under power directly to the servicer. We have been advised that the current foreclosure procedure is a two-deed process with the servicer taking title and then executing a special warranty deed to the investor. Therefore, the MERS recommended procedure would conform to the current practice. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. The servicer is issued the deed under power and therefore commences the eviction in the servicer’s name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of Mortgage Electronic Registration Systems, Inc. or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR HAWAII
Foreclosing a loan in the name of MERS is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially10. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The same procedures and state requirements that are followed when foreclosing in the name of the servicer are still followed when foreclosing in the name of Mortgage Electronic Registration Systems, Inc. The major difference is that the caption of the complaint will state Mortgage Electronic Registration Systems, Inc. in place of the servicer’s name.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. A secondary market investor will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
10 Freddie Mac has initiated a non-judicial program in Hawaii effective January 1, 1998.
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After a foreclosure judgment to MERS is entered, a public auction is held. A bid is entered on behalf of MERS, and if the successful bid, then the Commissioner will be instructed that MERS has selected a nominee to be the ultimate purchaser of the property. (The nominee can be the servicer or the investor).
After the hearing to confirm the sale and the confirmation order, a deed is executed directly to the nominee. This is the same method that is used today when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording fees or taxes are incurred by foreclosing in the name of MERS. A conveyance tax and recording fee is paid on the transfer of the property from the commissioner to the nominee of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure had been filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR IDAHO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Trust Deeds are used and are generally foreclosed non-judicially pursuant to a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. It is important to note that the same procedures and requirements that are followed when foreclosing in the servicer’s name must still be followed when foreclosing in the name of MERS. The Trustee must still file and record the Notice of Default and provide the grantor with a Notice of Sale. The Notice of Sale is published the same way is it when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. The note should remain endorsed in blank when the servicer commences foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have not found that it is legally required that the note be endorsed to the foreclosing entity.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If it is the highest bid, then the trustee will be instructed by an instruction letter to execute the Trustee’s Deed directly to the
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investor. We have been advised that the current foreclosure procedure is a one-deed process with the trustee executing the Trustee’s Deed directly to the investor. The MERS recommended procedure is the same procedure followed when foreclosing in the name of the servicer. Therefore, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, then the Trustee’s Deed may be issued to the servicer in order for the servicer to commence the eviction. Another option may be that the trustee’s deed is not recorded to the investor until after the eviction is completed. The eviction should be conducted the same way it would be conducted if the servicer commenced the foreclosure.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR ILLINOIS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer.
MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.11
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying
11 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered and the applicable redemption period expires, a foreclosure sale is held. A bid is entered on behalf of MERS, and if the successful bid, then the Certificate of Sale would be assigned to the investor. This assignment is not normally recorded. A confirmation hearing will be held confirming the sale. This is the same method that is used when the servicer forecloses in its name for the investor. After the entry of the Order of Confirmation, the holder of the Certificate of Sale is entitled to a deed. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the deed is not recorded until after the eviction is completed. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR INDIANA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note.12 An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
12 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment to MERS is entered, MERS will assign the judgment and the right to bid to the servicer. This assignment of the judgment is filed with the Clerk of the Court in which the judgment is pending. A sheriff’s sale is scheduled as a result of the filing of a praecipe for sale. The servicer will enter a bid as the bid assignee and if the highest bidder, the Return of Sale will reflect this. The assignment of the judgment allows the servicer to bid so that title can be taken directly by the servicer. The servicer can then convey a subsequent deed to the investor. Because the MERS recommended procedure closely follows the same procedure that is used when the servicer forecloses in its name, no additional transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. Because the foreclosure judgment is assigned to the servicer, the eviction can be brought in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR IOWA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Generally, mortgages are used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the petition of foreclosure should name Mortgage Electronic Registration Systems, Inc. (MERS) as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement when a seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After the foreclosure judgment to MERS is entered, there is a sheriff’s foreclosure sale. At the sale, a bid would be entered on behalf of MERS, and if the bid is successful, MERS will receive a certificate of purchase which it will assign to the
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servicer or the investor.13 The sheriff’s deed is then issued directly to the servicer or investor. Because the MERS recommended procedure follows the procedures used when foreclosing in the name of the servicer, no additional transfer taxes are incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
13 On a foreclosure without the right of redemption, there is no Certificate of Purchase issued. Instead, the foreclosure judgment should be assigned to the servicer or investor. To whom the judgment is issued will depend upon the instructions given from the servicer or investor. If the judgment is not assigned from MERS, this may cause title to be issued directly to MERS if a bid is entered on the behalf of MERS at the sheriff’s sale. If title is then subsequently passed to a private investor, revenue stamps may be incurred.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR KANSAS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require that the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend that the agencies’ requirements be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
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If the successful bid, the sheriff will issue a certificate of purchase to MERS. This certificate will then be assigned from MERS to the investor. This is the same method that is used when the servicer forecloses in its name. After the applicable redemption period, a deed will be issued directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR KENTUCKY
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a foreclosure sale is held. The certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If it is the successful bid, it will be assigned to the investor by simple documentation that is signed by the foreclosing attorney. The bid assignment does
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not need to be recorded. This is the same method that is used today when the servicer forecloses in its name.
The Motion to Confirm the sale is filed, and after the sale is confirmed, a deed will be prepared by the Master Commissioner to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording fees or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR LOUISIANA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are employed in Louisiana in real estate transactions and must be foreclosed judicially, usually by a proceeding known as “Executory Process.” MERS local counsel advises that Louisiana law does not prohibit a loan from being foreclosed in the name of MERS.14 When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS becomes the mortgage holder.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.15
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them.16 Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, it seems to be the standard practice that the blank endorsement is cancelled and the note is endorsed to the servicer to
14 Please Note: Fannie Mae’s foreclosure regulations require an assignment from MERS to Fannie Mae in the Parish of Orleans. This means that Fannie Mae will be the foreclosing entity. This is the same requirement that exists when the servicer is the record mortgage holder.
15 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
foreclose. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After the Petition is filed and the judge signs an order of executory process, the writ of seizure and sale is issued by the clerk and is served by the sheriff upon the mortgagor. After the foreclosure is published for the required amount of time, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the successful bid, then the sheriff will issue a deed to MERS. MERS will then issue a subsequent deed to the investor.17 This is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
17 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of
17 MERS should remain as the titleholder for as short of time as possible.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MAINE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS.18 The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.19
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend adhering to the agencies’ policies.
18 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
19 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered and the redemption period has expired, a public auction is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If the successful bid, then MERS will assign its bid and any deficiency judgment to the investor. This is the same method that is used when the servicer forecloses in its name. The foreclosure deed will issue directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MARYLAND
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the mortgagee of record. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is filed and placed on the docket of the applicable circuit court with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be the named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that there is sometimes an endorsement to the servicer in order to foreclose. We have not found this to be a legal requirement, and therefore, the agencies’ policies should be followed.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then before ratification, a motion to substitute interests will be filed so that the deed is issued directly to the investor. We have been advised that this is the procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the
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same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be substituted as the interested party. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MASSACHUSETTS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are foreclosed using the mortgage power of sale together with a Land Court Judgment. MERS local counsel advises that a loan can be foreclosed in the name of Mortgage Electronic Registration Systems, Inc. Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes the Note is endorsed to the servicer prior to the foreclosure. However, we recommend that the agencies’ policies be followed.
MERS stands in the same position as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.20
At the foreclosure auction, MERS can waive the requirement of a deposit as to the investor. This way, the servicer can enter a bid on behalf of the investor without the
20 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights of the promissory note.
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investor needing to produce any funds. If it is the highest bid, the foreclosure deed can be issued directly to the investor. We have been advised that this procedure is the same procedure used when Freddie Mac or Ginnie Mae are the investors. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MICHIGAN
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are foreclosed non-judicially usually by a power of sale contained in the mortgage. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is advertised by publishing the notice for four (4) consecutive weeks. The attorney should follow the same procedure followed when foreclosing in the name of the servicer except that the foreclosing entity is Mortgage Electronic Registration Systems, Inc. (MERS).
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. The endorsement is to remain in blank even if the servicer commences foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the promissory notes to the servicer to foreclose. However, we recommend that the agencies’ policies be followed. We have not found an endorsement to the foreclosure entity to be a legal requirement, and therefore, the note should not be endorsed to MERS prior to the foreclosure.
At the auction, the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then a deed may be issued to MERS. However, when the role of MERS, the servicer and the
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investor is explained and understood, the servicer may be allowed to bid on its own behalf without having to produce any funds at the sale. This would be the preferred method to use if at all possible. This way, the deed is executed directly to the servicer. If this is not possible, and MERS must take title, then title should be held by MERS for as short of time as possible. A subsequent deed from MERS to the investor should be executed immediately so that MERS remains in the chain of title only for an instant. We have been advised that the current practice used when foreclosing in the name of the servicer, is for the servicer to take title and then execute a subsequent deed to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MINNESOTA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are typically foreclosed non-judicially. MERS local counsel advises that a loan can be foreclosed in the name of Mortgage Electronic Registration Systems, Inc. Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the power of attorney to foreclose the mortgage, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that currently sign the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
At the foreclosure sale, the certifying officer will instruct the foreclosing attorney to enter a bid on behalf of MERS. A sheriff’s certificate is issued to the highest bidder. If MERS is the highest bidder, then the Sheriff’s certificate will be issued to MERS. The sheriff’s certificate operates as the conveyance of title. The certificate is executed and recorded during the redemption period. At the end of the redemption period, a deed will be issued from MERS to the investor.21 However, not every
21 During the redemption period, MERS will be considered to be titleholder. However, at the end of the redemption period, a deed to the investor should be executed as soon as possible so that MERS remains in the chain of title for as short a time as possible.
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foreclosure counsel follows this procedure currently when foreclosing mortgage loans in the name of the servicer. If your current practice is to assign the sheriff’s certificate to the investor, then this is also an acceptable option.22
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the eviction can be brought in the name of MERS if MERS is the sheriff’s certificate holder. However, if you use the option of assigning the sheriff’s certificate, then the certificate is assigned to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
22 The difference between the two options is that some counsels prefer a one-deed process implementing an assignment of the sheriff’s certificate to the investor. Other counsels use a two-deed process with the servicer first taking title, and then executing a subsequent deed to the investor. Counsel should continue to follow the instructions given to them by the servicer of the mortgage loan.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MISSISSIPPI
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is advertised with the same required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Deed of Appointment substituting Trustees, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is a blank note endorsement to the servicer prior to foreclosure. We have not found this to be a legal requirement, and therefore, the note should not be endorsed to MERS prior to the foreclosure.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then MERS can assign the bid to the investor. This assignment is simply a paragraph incorporated in the substitution of trustee document authorizing the substituted trustee to convey the property directly to the investor in the Substituted Trustee’s Deed. We have been
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advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be assigned the bid. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MISSOURI
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially under a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. A notice of sale is published and the borrower is notified along with all parties entitled to notice under state laws. A sale is then held. The same requirements continue to be followed except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require that the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend that the agencies’ requirements be followed.
At the trustee sale, the certifying officer will instruct the trustee by a written bid letter that the bid is being assigned to the investor and that title should vest with the investor. We have been advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Therefore, no additional fees are incurred by foreclosing in the name of MERS.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be the assignee of the bid. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR MONTANA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Sale includes the same required information as when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer. The Notice of Sale is recorded in the county where the property is located and is published in a newspaper of general circulation.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells the loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then a trustee’s deed will be issued to MERS. Title should only remain with MERS for as short of time as possible. A certifying officer of MERS will subsequently execute a Grant Deed to the investor. We have been advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Because the MERS recommended
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procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEBRASKA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
If a mortgage is used, it is foreclosed judicially. If a deed of trust is used, it can be foreclosed non-judicially under power of sale. Regardless of the type of security instrument used, MERS local counsel advises that a loan can be foreclosed in the name of MERS.
In a judicial foreclosure, when MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer].23 The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. However, it is advised that a paragraph be inserted that explains that the servicer is the entity that is servicing the loan. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
In a non-judicial foreclosure, a notice of default is filed and recorded with the register of deeds in the county in which the property is located. The same procedures that are followed when foreclosing in the name of the servicer should continue to be followed except that Mortgage Electronic Registration Systems, Inc. will be named as the foreclosing entity.
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23 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the owner and holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan. Therefore, MERS is both the mortgage holder and the note holder as nominee for the current servicer.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method.24
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents today on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered in a judicial foreclosure, a foreclosure sale is held. The certifying officer enters a bid on behalf of MERS. If it is the successful bid, then the bid will be assigned to the investor. The sheriff’s deed will be issued directly to the investor. This is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure is the same as when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commenced the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship between MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
24 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEVADA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially pursuant to a power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. It is important to note that the same procedures and state requirements that are required to be followed when foreclosing in the servicer’s name must still be followed when foreclosing in the name of MERS. The Trustee must still record the Notice of Default and Election to Sell the Property. After the expiration of the three-month period, the Notice of Trustee’s Sale is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS. The substituted trustee is typically the foreclosing attorney.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. The note should remain endorsed in blank when the servicer commences the foreclosure. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS for the investor. This is the same process that is used
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when foreclosing in the servicer’s name. If it is the successful bid, then the trustee will be instructed to execute the Trustee’s Deed directly to the investor. Therefore, the MERS recommended procedure is the same as the current practice of bidding on behalf of the investor so that the Trustee’s Deed is issued directly to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS. Furthermore, there will not be a transfer tax when the trustee’s deed is issued directly to Fannie Mae, Freddie Mac, VA or HUD.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, then the deed is not recorded to the investor until after the eviction is completed. The eviction is conducted the same way it is conducted when the foreclosure is brought in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW HAMPSHIRE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. (MERS) is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS.25 The Notice of Sales must be published with all required information except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies’ (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the foreclosure auction, the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, MERS will assign the bid to the investor so that the foreclosure deed is issued directly to the investor. We have been advised that the current foreclosure procedure is a one-deed process with the investor taking title. Therefore, the MERS
25 Please Note: Fannie Mae’s foreclosure regulations require an assignment from MERS to Fannie Mae in New Hampshire. This means that Fannie Mae will be the foreclosing entity. This is the same requirement that exists when the servicer is the record mortgage holder.
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recommended procedure is same the as the current practice with an assignment of the bid to the investor. Therefore, no additional taxes are incurred by foreclosing in the name of MERS in place of the servicer.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer may be assigned the bid so that the servicer is the grantee of the foreclosure deed. This way, the servicer is able to commence the eviction. The servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name. After the eviction is completed, the servicer will then issue a deed to HUD.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW JERSEY
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS become the mortgage holder.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.26
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend following the agencies’ policies.
26 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the highest bid, then the sheriff would be instructed that MERS has assigned its bid to the investor. This is the same method that is used when the servicer forecloses in its name. The sheriff would issue a sheriff’s deed directly to the investor. Local counsel advises that only VA and HUD are exempt from transfer taxes on the sheriff’s deed. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW MEXICO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same position as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.27
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.28 We have not found it to be a requirement in New Mexico that the Note be endorsed to the foreclosing entity.
27 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights of the promissory note.
28 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution from MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment to MERS is entered, a Notice of Sale is published. The certifying officer will instruct the attorney regarding the bid to be entered on behalf of MERS. After the sale, a Report of Special Master is filed and an Order approving Sale and Special Master’s Report is filed. If MERS bid is the highest bid, then the Special Master’s Deed is recorded conveying the title to MERS. The title should only be held by MERS momentarily. A second deed should be prepared as soon as possible conveying the property from MERS to the investor. This is the same method that is used when the servicer forecloses in its own name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NEW YORK
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. In that case, the caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how did MERS become the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be authorized to sign any necessary documents as a certifying officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. This typically will be the same individual that signs the documents for the servicer, but now will be signing as an officer of MERS.
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A foreclosure judgment to MERS would be entered. At the foreclosure sale the certifying officer will instruct the foreclosing attorney regarding the bid to be entered on behalf of MERS. If it is the successful bid, MERS will assign the bid to the investor. The assignment of the bid is a simple one-sentence reference that is submitted to the referee that states MERS assigns the bid to investor. The referee’s deed would be directly issued to the investor. This is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is for the servicer so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NORTH CAROLINA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially under power of sale. Local counsel advises that a foreclosure can be brought in the name of MERS. Notices are sent to all interested parties, and a hearing is scheduled with the Clerk of Superior Court. The same process followed when foreclosing in the name of the servicer continues to be followed except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the note to the servicer prior to the commencement of the foreclosure. We have not found this to be a legal requirement, and therefore, the agencies’ requirements should be followed.
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procedure followed when foreclosing in the name of the servicer. Because it is the same procedure, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid can be assigned to the servicer. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship between MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR NORTH DAKOTA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through this instrument that the authority is given to MERS to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS.29 When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. However, it is advised that a paragraph be inserted that explains that the servicer is the entity that is servicing the loan. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.30
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to
29 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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30 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS. However, we have not found it a requirement in North Dakota that the Note be endorsed to the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents today on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. A bid is entered on behalf of MERS, and if the successful bid, then the certificate of sale can be issued to MERS. At the sale, only the party who conducted the foreclosure is entitled to “credit.” At this point, one of two options can be followed. One is to assign the certificate of sale to the servicer or the investor. This way, the sheriff’s deed will be issued directly to the assignee. The other is the sheriff’s deed can be issued to MERS, and a Grant Deed will be subsequently issued to the investor. The latter option is the same method that is used when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is for the servicer so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR OHIO
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. The caption should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the successful bid, then MERS will assign its bid to the investor. The deed will then be issued directly to the investor. This is the same method that is used
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when the servicer forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer foreclosures in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR OKLAHOMA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS, so long as MERS is the record mortgage holder and the holder of the promissory note (even if not the beneficial owner of the promissory note). The caption should reflect Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note.31 An investor, typically a secondary market investor, will still be the beneficial owner of the promissory note.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them.32 Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. However, we have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
31 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
32 If the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a Special Execution and Order of Sale is issued. The party instituting a foreclosure action must send a notice of the sheriff’s sale date to the borrower and all other persons that have a recorded interest or other known interest in the property that will be extinguished by the sale. This would include any junior lienholders, current owners or tenants and the holders of any other encumbrances on the property. The notice must be executed by the county sheriff and must contain a legal description of the property, as well as the date, time and place of sale. This notice must be sent at least 10 days prior to the date of sale. The attorney for the foreclosing party must execute and file an affidavit of compliance with these notice rules.
In addition, the party instituting a foreclosure action must publish notice of public sale for two successive weeks in the newspaper of the county in which the property is situated. The notice must also be executed by the sheriff and must state the names of persons having an interest in the property that will be extinguished by the sale. If the county does not have a newspaper, then a notice must be published on the court house, in 5 other public places in the county, as well as in any general circulation paper distributed in the county. If the county has a population of 110,000 as of the latest federal census, then the notice of sale must be published in a newspaper in the city or township in which the property is situated, or if no such paper exists, then the notice must be published in some newspaper published in the county. Okla. Stat. Tit. 12, section 764 (1995).
The sale is conducted by the county sheriff and must be held not less than 30 days after the date of the first publication or posting of the sale notice. Okla. Stat. Tit. 12, section 764 (1995). The sale is conducted through a public auction and the property is awarded to the highest bidder.
The certifying officer will instruct the foreclosing attorney to enter a bid on behalf of MERS. If it is the highest bid, then in the motion to confirm sale, MERS will request that the sheriff’s deed be issued to the investor. Upon the entering of the order confirming sale, the sheriff’s deed will be executed in favor of the investor. The MERS recommended procedures do not cause any additional taxes to be incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to
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disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR OREGON
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are foreclosed non-judicially by conferring a power of sale on the trustee in the event of default by the borrower. MERS local counsel advises that a loan can be foreclosed in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The only change to the foreclosure procedure is to name Mortgage Electronic Registration Systems, Inc. in the foreclosure notices as the beneficiary instead of to name the servicer. At the trustee’s sale, a bid will be entered on behalf of MERS. The bid is entered the same way it is entered for the servicer when foreclosing in the servicer’s name. If the bid is the highest bid, then the trustee’s deed can be issued directly to the investor. The Trustee’s deed will identify the investor as the grantee under the trustee’s deed and will recite that MERS, as nominee, successfully bid for the property at the trustee’s sale. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR PENNSYLVANIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer or the investor to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. The caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer or investor. A paragraph should be added that MERS, is or will be, the owner of legal title to the mortgage that is the subject of this action, and nominee for the [insert name of investor, or name of current servicer, if investor is Fannie Mae or Freddie Mac], which is the owner of the entire beneficial interest in the mortgage.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
After the foreclosure judgment is entered in favor of MERS, the sheriff’s sale is scheduled. The servicer provides bidding instructions to the foreclosure attorney. After the sale, assuming that the foreclosure attorney was the successful bidder, the
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attorney instructs the sheriff, in writing, to assign the bid to the investor and to name the investor as grantee on the sheriff’s deed.33
The name of MERS must not appear on any post-sale documents, including sheriff’s deeds and complaints in ejectment. For FHA-insured loans that require evictions, the attorney must instruct the sheriff, in writing, to assign the bid to the investor, instead of to HUD, and to name the investor as grantee on the sheriff’s deed. The servicer, on behalf of the investor, proceeds with the eviction and deeds the property to HUD once the eviction is completed.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
33 MERS local counsel has contacted and received a letter from the Department of Revenue of the Commonwealth of Pennsylvania that indicates the investor can use the foreclosing mortgagee transfer tax exemption by showing that MERS participated in the sheriff’s sale merely as an agent of the investor.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR RHODE ISLAND
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are used and are foreclosed non-judicially. MERS local counsel advises a loan can be foreclosed in the name of Mortgage Electronic Registration Systems, Inc.34 The foreclosure is advertised with Mortgage Electronic Registration Systems, Inc. as the named foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents on behalf of the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS. We have been advised that sometimes there is an endorsement of the Note to the servicer prior to foreclosure. However, we recommend that the agencies’ policies be followed.
34 Please Note: Fannie Mae’s foreclosure regulations require an assignment from MERS to Fannie Mae in Rhode Island. This means that Fannie Mae will be the foreclosing entity. This is the same requirement that exists when the servicer is the record mortgage holder.
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MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.35
At the foreclosure auction, MERS can waive the requirement of a deposit as to the investor. This way, the servicer can enter a bid on behalf of the investor without the investor needing to produce any funds. If it is the highest bid, the foreclosure deed can be issued directly to the investor. We have been advised that this procedure is the same procedure used when Freddie Mac or Ginnie Mae are the investors. Because the MERS recommended procedure follows the same procedure that is used when the servicer foreclosures in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
35 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial right to the promissory note.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR SOUTH CAROLINA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS.36 When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. However, it is advised that a paragraph be inserted that explains that the servicer is the entity that is servicing the loan. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note. 37
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require that the promissory note be endorsed in blank when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure
36 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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37 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
is commenced in the name of MERS unless it is legally required to be endorsed to the foreclosing entity and not just the preferred method. We have been advised that sometimes there is an endorsement of the note to the servicer prior to the foreclosure. However, we recommend that the agencies’ requirements be followed.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a foreclosure sale is held. A bid is entered on behalf of MERS, and if the successful bid, then the bid will be assigned to the investor by using a one-page form instructing the sheriff of the assignment of bid. This is the same method that is used when the servicer forecloses in its name. The master in equity or the special referee would issue a deed directly to the investor. Local counsel advises that Fannie Mae, Freddie Mac, VA and HUD are exempt from transfer taxes on the sheriff’s deed. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR SOUTH DAKOTA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS become the mortgage holder.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer in relation to not being the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.38
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the
38 Even though the servicer has physical custody of the note, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial right to the promissory note.
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same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a judgment to MERS is entered, a sheriff’s sale is held. The certifying officer will instruct the foreclosing attorney as to the bid to be entered on behalf of MERS. If it is the successful bid, then one of two options can be followed39. The first is that the Certificate of Sale may be assigned from MERS to the investor. This way, upon expiration of the redemption period, the sheriff’s deed will issue directly to the investor. There is a recording cost for the Certificate of Sale. The second option is that upon the expiration of the redemption period, MERS is issued the sheriff’s deed by virtue of being the holder of the Certificate of Sale. If this option is followed, MERS should only remain in the chain of title for as short of time as possible. A subsequent deed will then be executed from MERS to the investor. We have been advised that this latter option is the method that is used when the servicer forecloses in its name. Typically the servicer is issued the sheriff’s deed, and then issues a subsequent deed to the investor. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
39 MERS prefers to not take title to the property, so the Certificate of Sale should be assigned if possible. However, either option is acceptable.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR TENNESSEE
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, in place of the servicer, will be the record mortgage holder. It is the mortgage or deed of trust that gives MERS the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are generally foreclosed non-judicially under a power of sale in the security instrument. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Default is filed and published the same way it is when foreclosing in the name of the servicer except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Appointment of Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. In the Trustee’s Deed, the bid will be assigned to the investor, unless the certifying officer instructs the trustee to assign the bid to the servicer. We have been advised that the current foreclosure procedure is a one-deed process with the investor directly taking title upon the conclusion of the trustee’s sale. Therefore, the MERS recommended procedure is the same as the current practice of assigning the bid to the investor. Because the MERS recommended
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procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan, the eviction may need to be brought in the name of MERS. Therefore, MERS may need to be the grantee of the trustee’s deed. After the eviction is completed, MERS will then issue a deed to HUD.40
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
40 MERS should only be in the chain of title for as short of a time as possible. As soon as the eviction is completed, the deed to HUD should be recorded.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR TEXAS
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the mortgagee or beneficiary of record in the chain of title. It is through the power of sale in the deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The foreclosure is commenced the same way as if it were being brought in the servicer’s name except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named the foreclosing entity as the mortgagee or beneficiary of record as the nominee for the current servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Appointment of Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS as the mortgagee of record. If the bid is the highest bid, then the trustee’s deed is issued to MERS as the mortgagee of record and as the nominee for the current servicer. The servicer, as a duly appointed officer of MERS, can then convey the property by deed to the investor which is the same as the current practice that is used when foreclosing in the name of the servicer as mortgagee or
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beneficiary of record. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of MERS and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR UTAH
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The Notice of Default and Election to Sell is filed with the county recorder. Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
After the reinstatement period expires, the Notice of Sale is published for the required length of time. Once this is completed, the foreclosure sale is held. The certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, the certifying officer will instruct the trustee to deed the property directly to the investor. We have been advised that this procedure is the same procedure used when foreclosing in the name of the servicer. Therefore, no additional taxes are incurred by foreclosing in the name of MERS in place of the servicer.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be substituted as the interested party.41 This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
41 MERS local counsel advises that an eviction is brought in the name of the party that takes title to the property following the foreclosure sale.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR VERMONT
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. When the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. MERS local counsel advises that a loan can be foreclosed in the name of MERS. Over 90% of the foreclosures are by strict foreclosures. When MERS has been assigned the mortgage, the caption of the complaint should state Mortgage Electronic Registration Systems, Inc. as the plaintiff. However, this changes slightly if MERS is the original mortgagee of record, meaning that MERS is named on the mortgage in a nominee capacity for the originating lender, its successors and assigns. The caption should then state Mortgage Electronic Registration Systems, Inc. as nominee for [insert name of the current servicer]. The key is how MERS is named as the mortgagee of record.
The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. An investor, typically a secondary market investor, will still be the ultimate owner of the promissory note.42
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS unless it is legally required to be endorsed to the
42 The servicer usually has physical custody of the note at the time of the foreclosure with a blank endorsement. This makes the servicer the noteholder for the purposes of foreclosing. However, custom in the mortgage industry is that the investor (Fannie Mae, Freddie Mac, Ginnie Mae or a private investor) owns the beneficial rights to the promissory note.
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foreclosing entity. If it is required to endorse the promissory note to the foreclosing entity, then the note may need to be endorsed to MERS. Local counsel has advised that it is essential that the Promissory Note be held in the name of the mortgage holder.43
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
Because the majority of the foreclosures are by strict foreclosure, title will vest in MERS momentarily.44 The certifying officer will submit an affidavit of amounts due to the Clerk of Court, after which a default or summary judgment will be issued by the Court. The Clerk will prepare an accounting. Once the accounting is received, a judgment is prepared and served. The judgment is then signed by the Court. After the redemption period expires, a Certificate of Non-Redemption and Writ of Possession will be issued by the Court to MERS. The property will then be deeded from MERS to the investor. This is the same process that occurs when the servicer of the mortgage loan forecloses in its name. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional taxes are incurred by foreclosing in the name of MERS.
An alternative option is to file a Motion for Substitution of Parties after the judgment to MERS is entered. At this time, an unrecorded assignment of the mortgage needs to be shown to the judge. It should be noted that certain courts are not staffed with full time judges and there may be a slight increase in time before this Motion can be decided. It is recommended that this Motion be filed as soon as possible after the judgment is entered so that it is completed prior to the expiration of the redemption period. At the end of the redemption period, a Certificate of Non-Redemption is recorded which transfers the title. Prior to the Certificate being issued, the assignment of the mortgage is recorded.
Local counsel advises that Fannie Mae, Freddie Mac, VA and HUD are exempt from transfer taxes on the sheriff’s deed.
43 We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having the servicer’s employees be certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan.
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Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR VIRGINIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially by a power of sale given to the Trustee upon default. Local counsel advises that a foreclosure can be brought in the name of MERS.45 The same procedure that is followed when foreclosing in the name of the servicer is followed when foreclosing in the name of MERS except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Because the original note is required to be shown to the Commissioner at the time of the final accounting, the note is usually endorsed to the servicer when foreclosing in the name of the servicer. Therefore, local counsel advises that the note may need to be endorsed to MERS as the foreclosing entity. The endorsement of the note to the servicer is the same procedure that is followed when foreclosing in the name of the servicer.
45 Local Counsel advises that the promissory note is endorsed to the servicer prior to commencing a foreclosure so that the servicer becomes the noteholder. In order for a foreclosure to be brought in the name of MERS, the note should be endorsed to MERS so that MERS is the noteholder.
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At the trustee sale, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then the trustee will be instructed to deed the property directly to the investor. We have been advised that this procedure is the same used when foreclosing in the name of the servicer. Therefore, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be deeded the property so that the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WASHINGTON
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are used and are foreclosed non-judicially by conferring a power of sale on the trustee in the event of default by the borrower. MERS local counsel advises that a loan can be foreclosed in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the substitution of trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
The only change to the foreclosure procedure is to name Mortgage Electronic Registration Systems, Inc. as the foreclosing entity. The Notice of Default and Notice of Trustee’s Sale is still required to be sent and published and all requirements related to these Notices must be followed. At the trustee’s sale, a bid will be entered on behalf of MERS. The bid is entered the same way it is entered for the servicer when foreclosing in the servicer’s name. If the bid is the highest bid, then the trustee’s deed can be issued directly to the investor. This is the same procedure that is followed when commencing a foreclosure in the name of the servicer. The Trustee’s deed will identify the investor as the grantee under the trustee’s deed and will recite that MERS, as nominee, successfully bid for the
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property at the trustee’s sale. Because the MERS recommended procedure follows the same procedure that is used when the servicer forecloses in its name, no additional recording or transfer taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to HUD. This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WEST VIRGINIA
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Deeds of Trust are foreclosed non-judicially. Local counsel advises that a foreclosure can be brought in the name of MERS. The notice of sale is served on the grantor of the Deed of Trust by certified mail. The foreclosure sale is published according to the same requirements followed when foreclosing in the name of the servicer. Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents, such as the Substitution of Trustee, as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the trustee auction, the certifying officer will instruct the trustee regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then the certifying officer will instruct the trustee on how to deed the property. A three-party deed can be used with the trustee transferring the property to the investor. MERS simply signs the deed and states that it has assigned its right in its bid to the investor. We have been advised that this procedure is the same procedure used when foreclosing
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in the name of the servicer. Therefore, no additional taxes are incurred by foreclosing in the name of MERS.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the property can be deeded to the servicer. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WISCONSIN
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like a servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed in conjunction with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are typically used and are foreclosed judicially. The caption of the complaint should name Mortgage Electronic Registration Systems, Inc. (MERS) as the plaintiff. The body of the complaint should be the same as when foreclosing in the name of the servicer. MERS stands in the same shoes as the servicer to the extent that it is not the beneficial owner of the promissory note. A secondary market investor will still be the owner of the promissory note. A paragraph can be added to the complaint to explain the role of MERS as being the mortgagee of record with the authority to foreclose.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when a seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
After a foreclosure judgment in favor of MERS is entered and after expiration of the redemption period, a foreclosure sale is held. The certifying officer will provide local counsel with bid instructions. A bid will be entered on behalf of MERS, and if it is the highest bid, MERS will assign its bid to the investor and the investor can appear as the grantee on the Sheriff’s Deed. The Sheriff’s deed is then issued
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directly to the investor. The assignment of the bid is the method that is being used when the servicer forecloses in its name. The sheriff’s deed is exempt from transfer tax as are sheriff’s deeds following an assignment of bid. Certain other transfers, as between “principal and agent for no consideration may also be exempt from transfer tax. Because the MERS recommended procedure follows the procedure used when foreclosing in the servicer’s name, no additional taxes are incurred.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the bid assignment is given to the servicer instead of to the investor (HUD). This way, the servicer will proceed with the eviction the same way it would if the foreclosure were filed in its own name.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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MERS RECOMMENDED FORECLOSURE PROCEDURE
FOR WYOMING
Foreclosing a loan in the name of Mortgage Electronic Registration Systems, Inc. is something new in the foreclosure arena. However, when the role of MERS is examined, it becomes clear that MERS stands in the same position to foreclose as the servicer. MERS, like the servicer, will be the record mortgage holder. It is through the mortgage or deed of trust that MERS is given the authority to foreclose.
To help make a smooth transition from foreclosing loans in the name of the servicer to foreclosing loans in the name of MERS, we have developed state by state recommended guidelines to follow. These guidelines were developed with experienced foreclosure counsel in your state. We have been able to keep the MERS recommended procedures consistent with the existing foreclosure procedures. The goal of the recommended procedures is to avoid adding any extra steps or incurring any additional taxes or costs by foreclosing in the name of MERS instead of the servicer.
MERS will continually review the guidelines and, if necessary, will issue revisions. The recommended guidelines to follow in your state are as follows:
Mortgages are foreclosed non-judicially by a power of sale contained in the mortgage. Local counsel advises that a foreclosure can be brought in the name of MERS. Notice of the sale is recorded in the real estate records and mailed by certified mail to all interested parties. The same procedures followed when foreclosing a mortgage loan in the name of the servicer is followed when foreclosing in the name of MERS except that Mortgage Electronic Registration Systems, Inc. (MERS) will be named as the foreclosing entity instead of the servicer. Publication of the sale occurs ten (10) days after the recording and mailing of the Notice.
Employees of the servicer will be certifying officers of MERS. This means they are authorized to sign any necessary documents as an officer of MERS. The certifying officer is granted this power by a corporate resolution of MERS. In other words, the same individual that signs the documents for the servicer will continue to sign the documents, but now as an officer of MERS.
The agencies (Fannie Mae, Freddie Mac and Ginnie Mae) require a blank endorsement of the promissory note when the seller/servicer sells a mortgage loan to them. Therefore, the note should remain endorsed in blank when the foreclosure is commenced in the name of MERS.
At the sheriff’s sale, the certifying officer will instruct the sheriff regarding the bid to be entered on behalf of MERS. If the bid is the highest bid, then MERS will be issued a Certificate of Purchase. The Certificate of Purchase will be assigned to the investor. We have been advised that this is the same procedure used when foreclosing in the name of the servicer. Because the MERS recommended procedure
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follows the same procedure that is used when the servicer forecloses in its name, no additional recording costs are incurred by foreclosing in the name of MERS. Wyoming does not have transfer taxes.
Evictions are handled the same way they are handled when the servicer commences the foreclosure as the foreclosing entity. If it is an FHA-insured loan and an eviction is necessary, then the servicer can be assigned the Certificate. This way, the eviction can be brought in the name of the servicer. Once the eviction is completed, then the servicer can issue a deed to HUD. Again, you should follow the same procedures you follow when foreclosing in the name of the servicer.
If the debtor declares bankruptcy, the proof of claim should be filed jointly in the name of Mortgage Electronic Registration Systems, Inc. and the servicer. It is advised to file in both names in order to disclose to the court the relationship of MERS and the servicer. The address to be used is the servicer’s address so that all trustee payments go directly to the servicer, not to MERS. The Motion for Relief from Stay may be filed either solely in the name of MERS or jointly with the servicer. If MERS is the foreclosing entity, then it is MERS that needs the relief from the bankruptcy.
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Bank Of America foreclosure fraud

The Devastating Report On Bank Of America That Everyone Is Talking About

Posted by Foreclosure Fraud on October 17, 2010 · 3 Comments

Full report below, but first some background…

First from Business Insider…

Here’s That Devastating Report On Bank Of America That Everyone Is Talking About Today

Editors note: This was originally published yesterday, but continues to get plenty of attention today, and was just referenced by David Fasber on CNBC. Without further ado...

Earlier, we wrote about Felix Salmon’s contention that there’s a new mortgage fraud scandal that has the potential to dwarf Goldman’s ABACUS dealings. In this fraud scenario, banks took advantage of their information advantage and sold CDOs with mortgages they knew to be bad without clear representation to investors.

In August, Manal Mehta and Branch Hill Capital put together a presentation targeting Bank of America’s potential exposure to this mortgage fraud, as well as other problems in the mortgage market.

The presentation comes to a pretty damning conclusion: Bank of America’s exposure could nearly halve its share price.

Then we have the spin zone…

CNBC

Sorry Folks, The Put-Back Apocalypse Ain’t Gonna Happen

You should probably be a buyer of Bank of America right now.

But Bank of America’s recent decline—down almost 10% this week—is driven by fears that the bank could be hit with huge liabilities for faulty mortgage pools. And I’m pretty sure that is not going to happen.

Why not?

Because the politicians will not let the financial stability of the largest bank in the nation be threatened by contractual rights. Not when there’s an easy fix available that won’t cost taxpayers a dime.

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act.

There’s a big difference between the financial crisis of 2008 and the new crisis. In 2008, banks were destabilized by the growing realization that they were over-exposed to the real estate market. Huge portions of their balance sheets were committed to mortgage-linked investments that were no longer generating the expected revenues or producing losses. That was a problem of economics that could only be solved by recapitalizing banks or letting some of the biggest banks in the U.S. fail.

The put-back crisis is not driven by economics. It is driven by legal rights. And there’s simply zero probability that the politicians in Washington are going to let Bank of America or Citigroup or JP Morgan Chase fail because of a legal issue.

So here’s what I expect will happen. The lame duck session of Congress will pass a bill that essentially papers over the misdeeds of the banks that originated mortgage securities. Every member of Congress and every Senator who has been voted out of office will cast a vote for the bill. And the President will sign it.

You can check out the rest of this along with comments here…

If the latter is what comes to be, am I terrified on what the repercussions will bring…

There will be no rule of law left in America.

If wall street does not have follow the law, why should main street?

We are in critical times here folks…

Oh, and one more thing.

How do you defraud the investor without defrauding the borrower?

They were both sold an empty box…

Is wall street stealing your home

“Just when you thought Wall Street couldn’t defraud the economy any further, it went ahead and did it. After pushing millions of borrowers into foreclosure with fraudulent loans, big banks are now being implicated in a massive new fraud scandal involving the foreclosure process itself. All over the country, banks and their lawyers are resorting to outright fraud in order to kick people out of their homes and slap them with huge, illegal fees. It may be the biggest scandal of the entire financial crisis, one that could result in epic losses for the nation’s largest banks.

We’ve been hearing for years about the horrific mortgages bankers pushed borrowers into, the outrageous scams they deployed in dumping these mortgages on investors, and the lies they told to their own shareholders about those mortgages in order to boost bonuses. Fraud was a major part of this machine at every stage of production, but the foreclosure fraud being uncovered by lawyers today appears to be the broadest scandal to emerge from the mortgage mess thus far.

Yves Smith has done an outstanding job covering this scandal, so be sure to check out her posts for all the details, but here’s the basic story: Banks intentionally skimped on their mortgage paperwork during the housing bubble—it cut their costs and made the sale of mortgage-backed securities more profitable. A basic, standardized part of the mortgage process at many banks included forging or destroying key documents, or never bothering to write them up in the first place. Those reckless procedures have been applied to millions of mortgages issued over the past decade, and allowed inflated bonus checks to be written for years. But things are about to get very ugly for the banks.

Mortgage documentation has been so shoddy that banks can’t actually prove that they own the mortgages they want to foreclose on. This isn’t a small scandal, it isn’t a minor clerical issue, and it isn’t a problem that banks deserve help from taxpayers to solve. Wall Street has simply not performed the basic tasks necessary to track ownership of its assets. Imagine a car manufacturer being unable to document the sale of automobiles. The basic business has broken.

If banks can’t prove that they have the right to foreclose, they’re not allowed to foreclose. The borrower gets to keep the house—even if he or she has stopped making payments on the mortgage. So banks—and the scummy law firms they hire—are resorting to all kinds of new tricks in order to foreclose (see Andy Kroll’s excellent article detailing the sharks who operate these law firms). They’re creating new documents, forging signatures and lying to judges. This is all fraud.

And this fraud doesn’t only help banks cut costs—it also enables lawyers to slap troubled borrowers with huge, illegal fees, squeezing them for money even after they’ve been tapped out on mortgage payments. If you can’t pay the foreclosure fees in court, debt collectors will chase you down and garnish your wages for years to come. These are massive fees—tens of thousands of dollars assessed on individual families for the luxury of being booted out of their home, all made possible by fraudulent documents, forged paperwork, and straightforward lies.

The ownership chain for mortgages is so complex—one bank issues a loan, which is sliced and diced into multiple mortgage-backed securities and sold to multiple investors—that the right to foreclose is not clear without precise and meticulous paperwork. If banks don’t keep these records, there is no way for them to prove the losses or profits they make from a given loan.

Banks can’t even keep track of what houses they actually have the right to foreclose on. In addition to slipping illegal fees into the mix, the financial establishment is slamming incorrect foreclosures through the legal pipeline. Banks are actually kicking people out of homes who have been paying their mortgages on time. In some cases, they’re even evicting borrowers who have already paid off their loan.

When banks can’t get the documents they want, they resort to still more drastic measures. Banks are violating the law by physically breaking into peoples’ homes, stealing their belongings and changing the locks. Add breaking and entering and larceny to the list of crimes committed by banks in the foreclosure process.

This scandal ought to put people behind bars. When somebody breaks into your home and steals your stuff, he goes to jail. But it also creates very serious problems for the entire financial system—if banks can’t prove they own mortgages, how can we trust their quarterly earnings statements? How can the bonuses based on those earnings be justified?

In other words, the inhumane and illegal way banks have treated their borrowers is only part of the fraud scandal Wall Street now faces. There is also the makings of a massive corporate accounting scandal—one that easily rivals Enron and WorldComm in its scope.

GMAC, Bank of America and JPMorgan Chase—three of the largest mortgage servicers in the nation—have already frozen foreclosures in 23 states. These are the states in which banks must obtain a court order to proceed with a foreclosure, but there is every reason to suspect that the same illegal practices are occurring in other states. Shoddy documentation has been a standardized element of the mortgage process for years—it has just been easier to prove this malfeasance in states that require courts to sign-off on foreclosures.

When housing prices are in decline, banks lose money on foreclosures. Today, the average loss on a foreclosed subprime or Alt-A mortgage is about 63 percent, according to data analyzed by Valparaiso University Law Professor Alan White. But if banks can’t actually take over the home, a foreclosure is far worse for the bank—it can’t cut its losses on an unpaid loan by seizing the house and selling it. If borrowers assert their rights, and courts uphold the law, some of the nation’s largest banks are about to take massive, unexpected losses.

That fact—combined with the prospect of shareholder lawsuits over improper accounting—should radically change the landscape for foreclosure relief and broader financial reform. Most banks cannot afford to go to zero on every mortgage they own from the housing bubble. If troubled borrowers stand up to their banks, the resulting losses could easily jeopardize the solvency of some major firms. This gives reformers and policymakers a critical tool to demand stronger medicine for Wall Street: Give us real reform, or we’ll let you go under.

Trial Mods or forbearance agreements may be a waiver of Foreclosure

Waiver or Estoppel to Claim Payment or Default

May a client call me to say they where making there trial loan mod payments but the lender foreclosed anyway. The trustor may deny that any amount is owed at that particular time, or may deny that the prescribed amount demanded is owed, if the beneficiary has waived the time requirements contained in the obligation by accepting late payments or if the beneficiary has accepted payments smaller than that permitted in the contract.

A waiver is unlikely to be construed as permanent in the absence of a writing or new consideration. A permanent waiver is, in effect, a change in the agreement equivalent to a novation requiring new consideration. [E.g., Hunt v. Smyth, supra, 25 Cal.App.3d 807, 819; Bledsoe v. Pacific Ready Cut Homes, Inc. (1928) 92 Cal.App. 641, 644-45; 268 P. 697.] The beneficiary and trustor may modify their payment schedule in writing without new consideration. [See Civ. Code §§1698(a), 2924c (b)(1).] The beneficiary’s conduct, however, may constitute a temporary waiver.

The beneficiary cannot declare the trustor in default of the terms of the obligation where the beneficiary has temporarily waived such terms — until the beneficiary has given definite notice demanding payment in accord with the obligation and has provided the trustor a reasonable length of time to comply. In addition, the beneficiary must give the trustor definite notice that future payments must comply with the terms of the obligation. [E.g., Hunt v. Smyth. supra, 25 Cal.App.3d 807, 822-23; Lopez v. Bell (1962) 207 Cal.App.2d 394, 398-99; 24 Cal.Rptr. 626; Bledsoe v. Pacific Ready Cut Homes, Inc., supra, 92 Cal.App. 641, 645.] Even if the beneficiary’s conduct does not constitute a knowing relinquishment of rights, it may create an equitable estoppel. [See e.g., Altman v. McCollum (1951) 107 Cal.App.2d Supp. 847; 236 P.2d 914.]

Brown Asks for Halt to All GMAC/Ally Financial Evictions in California


By: David Dayen Saturday September 25, 2010 7:37 am	Tweet8 Share4

When Ally Financial, formerly GMAC Mortgage, appeared to suspend foreclosure evictions in 23 states, they left out the ones where a judge is not required to sign off on foreclosures, including California, one of the four “sand states” with a massive amount of delinquencies and defaults. However, Attorney General Jerry Brown, who is running for Governor, has found a reason to demand a delay to any Ally/GMAC foreclosures:

California officials today demanded that Ally Financial Inc. stop foreclosing on homes in the state, citing reports indicating the big mortgage lender is violating the law.

The cease-and-desist letter, issued by Attorney General Jerry Brown, came as officials in several other states began investigating Ally’s operations […]

According to Brown, California law forbids a lender from issuing a notice of default – the first step toward foreclosure – unless it can show it has tried to contact the borrower. The law covers mortgages originated between 2003 and 2007.

If Jeffrey Stephan, the robo-signer who processed thousands of Ally/GMAC foreclosure affadavits with the courts, spent around a minute on each set of documentation, he cannot possibly say with any certainty that the lender contacted the borrowers. As Yves Smith says, Stephan could also have been engaged in a cover-up, knowingly signing off on documents where the lender never made the contact.

The New York Times has finally jumped in on this, assigning the article to David Streitfeld, who has revealed his bias against homeowners in previous stories. Streitfeld generally gets this one right, although you can see his slip showing at various points.

Florida lawyers representing borrowers in default said they would start filing motions as early as next week to have hundreds of foreclosure actions dismissed.

While GMAC is the first big lender to publicly acknowledge that its practices might have been improper, defense lawyers and consumer advocates have long argued that numerous lenders have used inaccurate or incomplete documents to remove delinquent owners from their houses.

The issue has broad consequences for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property. And it may offer unforeseen opportunities for those who were evicted.

“You know those billboards that lawyers put up seeking divorcing or bankrupt clients?” asked Greg Clark, a Florida real estate lawyer. “It’s only a matter of time until they start putting up signs that say, ‘You might be entitled to cash payment for wrongful foreclosure.’”

I hope he’s not intimating that the borrowers are taking advantage of the poor lenders and servicers, and using fly-by-night ambulance chasers to boot. GMAC/Ally, and many other lenders, broke the rules, lied to the judges, forged signatures, and took people’s homes under false pretenses. I know this isn’t normal practice in this country anymore, but they’re supposed to face the consequences.

Streitfeld also gets the Treasury Department on the record. The federal government is the majority owner in GMAC during the bank bailout.

“We have discussed the current situation with GMAC and expect them to take prompt action to correct any errors,” said Mark Paustenbach, a spokesman for the Treasury Department.

Sounds pretty hands-off to me. But they’re going to have to face up to this problem soon, because it’s about to spread nationwide.

Foreclosure proof homes ? !!!

forclosure proof homes

Taxpayers Bailout the Banks Nobody Bailsout the taxpayer!

Pain on Main Street

As lawmakers continue paying out the 17 trillion it will ultimately cost taxpayers to bailout the banks and lenders on Wall Street, the foreclosure machine grinds on and the mortgage crisis at the heart of the problem continues to worsen.

Every day, people show up looking for help at the modest offices of United Communities Against Poverty, a housing counseling agency in Prince George’s County, Md., in suburban Washington. Homes are going into foreclosure at one of the fastest rates in the nation here, and to chief counselor Caprice Coppedge, it’s hardly surprising that the bailout bill doesn’t have much in it to help them.

“I’m not shocked,” she said. “Each one of these so-called rescues hasn’t done much to help homeowners. There has to be a little bit more of a solid plan. I don’t understand why they [Congress and the Treasury Dept.] are not getting a clear understanding of what’s going on on the ground level — with homeowners.”

When it comes to the bailout, homeowners understand one thing for sure: They aren’t too big to fail. A long-sought measure that might help some of them — changing federal law to allow bankruptcy judges to modify mortgages — faces tough odds, with the lending industry strongly opposed to it.

Even if gets approved, some borrowers can’t afford bankruptcy attorneys or don’t want to file. Still, housing groups estimate the change would keep some 600,000 families in their homes, which is why they have been pushing the idea.

To help even more, Senate Democrats want the government to modify as many of the loans it buys as possible. But just because the government owns all those bad mortgages doesn’t mean it can do a massive restructuring to make them more affordable.

In taking on toxic loans, the government faces a huge Humpty-Dumpty problem — mortgage-backed securities were sliced into pieces and sold that way to investors around the globe. Spending all that taxpayer money to buy those securities still won’t ensure the government can own or control them all, so it can’t redo loans on a large scale. Even $700 billion won’t be enough to put all the pieces back together again, said Adam Levitin, a Georgetown University law professor and expert on the credit industry.

The small percentage of loan modifications that might get done will be “random and arbitrary,” and not based on the merit’s of a homeowner’s case, he said. Not to mention that second mortgage holders regularly refuse to do loan modifications, and many subprime homeowners took out two mortgages.

Given all this, the bailout ends up rewarding the most egregious of the subprime lenders — the ones who made the most abusive and predatory loans and who disproportionately targeted minority borrowers — since they’ll be the ones with the most toxic securities to buy. Banks that didn’t do as much subprime lending won’t need to sell off as many loans, and they won’t get as much government money, Levitin said.

And don’t count on banks being subject to tighter regulation in return for their bailout, he added. It’s possible that banks and lenders in a few years might use the same taxpayer dollars that rescued them to stave off regulatory reform of the financial markets, the ultimate irony of the bailout effort.

The banks seem to be escaping the consequences of their past lending behavior.

“It’s pretty insidious,” Levitin said. “We’re bailing out banks that got us into this mess because of years of abusive and predatory loans. And there’s no price to pay. I find that deeply troubling.”

No where is it more troubling than places like Prince George’s County, the nation’s wealthiest black suburb, which has been hard hit by subprime loans and foreclosures. Credit scores here rank at or above the national average, but the community has more than its share of subprime loans, with almost twice as many homeowners holding high-cost mortgages as the national average.

That pattern holds true elsewhere. In majority black and Latino communities nationwide, nearly half of all mortgages made in 2006 were subprime loans. All during the housing boom, racial differences became more pronounced as income increased — so middle-to-high income black and Latino borrowers were more likely than non-minority borrowers with modest incomes to have subprime mortgages.

Iris Pulliam, 51, a social worker in the District of Columbia public schools, refinanced her Prince George’s County home with a 9.5 percent Countywide loan three years ago. She tried to do some research before refinancing and refused the adjustable rate mortgage the lender first offered.

Looking back, Pulliam said she wasn’t aware she could have had a real estate attorney with her at the closing, and didn’t comprehend all the additional fees included in the loan before she signed. Still, she kept up the payments until her husband died almost two years ago, leaving her with just one income to pay the mortgage and take care of her 15-year-old son.

Pulliam began falling behind on her mortgage, and tried working out a loan modification with Countrywide. But the lender agreed only to a repayment plan that would increase her monthly payments.

She stood in a long line in the July heat to try to get a loan restructuring through the Neighborhood Assistance Corp. of America, a housing advocacy group. But Countrywide still hasn’t approved it. A Countrywide representative called her recently to discuss her case, but she called back again and again and couldn’t get through to anyone.

At this point, Pulliam has taken on a part-time job in addition to her full-time position and has dipped into most of her retirement savings to keep up with the mortgage. Her day starts at 5 a.m., and she gets home around 8 p.m. She’s thinking of trying to refinance again, if possible. One thing she’s well aware of: The bailout plan isn’t going to do a thing for her.

“It’s not taking the average homeowner into consideration, to me,” she said. “I feel that they’re putting all this money out for all these big money industries, investment companies and firms, and they should do something more for the average homeowner, to try to make sure we keep our homes.

“I think the scales are tipped toward the mortgager who has billions of dollars. For the little person, we might as well be off the scales.”

Modifying bankruptcy laws won’t help her, Pulliam said. She wouldn’t be able to afford a bankruptcy attorney. Congress could make a difference by forcing subprime lenders in future to be “upfront and above board,” she said. She’s not convinced that will happen.

To Coppedge, the housing counselor, part of the problem is that people need the sort of help neither Congress nor the Treasury Dept. is talking about. Coppedge, a former mortgage banker, is well aware that keeping credit flowing will help people in the long run to buy homes or take out loans — in that sense, she sees the need for a bailout.

But the people who come to her could use help too, like emergency assistance to cover even a month or two of mortgage payments to stay in their homes. For along with subprime loans, Coppedge noted, higher gas and food prices are cutting into the ability of the elderly and other homeowners on fixed incomes to pay their mortgages.

“I see a lot of clients who are not your typical five or six months behind on their mortgage,” Coppedge said. “I see some individuals, especially the elderly and the handicapped, who were preyed upon and asked to refinance their mortgages to make repairs or whatever the case may be. And these people just need one or two months of mortgage assistance to catch up, and catch their breath, and be able to get back on track.”

As part of the bailout, Democrats in the House and Senate want government agencies like the Federal Housing Admin. to expand their lending programs and help more homeowners, building on an effort included in the mortgage rescue bill. Under that program, the FHA will provide $300 billion in guarantees for lower-rate mortgages refinanced by lenders willing to accept a loss on the loans.

The program, which begins Oct. 1, is voluntary, and no one seems sure how well it will work. Coppedge noted that most of her clients either don’t have enough income or owe so much more on their mortgages than their homes are worth that they usually don’t qualify for FHA or other government programs.

On Capitol Hill, some lawmakers and economists are questioning whether the bailout plan will do enough to ease the credit crunch and to hold off a recession. But to groups like the Center for Responsible Lending, they are asking the wrong questions. Unless any bailout also deals with the problems of people facing foreclosures, it can’t fix the economy.

“The bailout will not solve our economic problems because it will do virtually nothing to stop the foreclosure epidemic,” the center said in a statement. “Continuing foreclosures will drag down the economy even further.”

John Taylor, president of the National Community Reinvestment Coalition, which represents housing advocacy groups, called it “unconscionable” for Congress to approve a plan that never addresses the underlying problem behind the crisis. His group met with Federal Reserve Chairman Ben Bernanke on Monday to complain that the government should first help homeowners facing foreclosure, before shoring up Wall Street.Its the classic case privatizing the profits of Bear Sterns and The Gang of Five and Socializing Losses.And you think it’s an accident, some “natural order of things? That’s what the super wealthy want us to think. And profit-driven establishment, celebrity media to plays along, because it’s a good deal for them. Ain’t it grand? I’m gonna be like that some day, so we better not tax them…. that would be spreading the wealth…. in the wrong direction.

Pulliam says the bailout for Wall Street mostly means that she’s on her own to save her home. Does anyone in power understand what she’s going through?

“The CEO of Countrywide wouldn’t know,” Pulliam said. “Or the vice president of Countrywide; or the Bank of America. They’re all out buying up other banks while the consumers have trouble keeping their houses.”
Pulliam grew up in a house with a white picket fence, and she wants that same sense of the benefits of homeownership for her son. She’s thinking about taking in a roommate to help pay the mortgage. Her sister is also facing foreclosure, and they’re considering sharing a household to solve both of their difficulties.
“I’ll do everything possible that’s legal and above board to keep my home,” Pulliam said. “That’s what I want for my son — a stable neighborhood environment.”

Like other troubled borrowers dealing with a crisis that seems far removed from the political posturing on Capitol Hill, Pulliam seems willing to pay whatever price it takes to keep it.

A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

62 MILLION HOMES ARE LEGALLY FORECLOSURE -PROOF

Posted 7 hours ago by Neil Garfield on Livinglies’s Weblog

EDITOR’S NOTE: YES IT MEANS WHAT IT SAYS — WHICH IS WHAT I HAVE BEEN SAYING FOR THREE YEARS. BUT JUST BECAUSE SOME JUDGES REALIZE THAT THIS IS THE ONLY CORRECT LEGAL INTERPRETATION DOESN’T MEAN ALL OF THEM WILL ABIDE BY THAT. QUITE THE REVERSE. MOST JUDGES REFUSE TO ACCEPT AND CAN’T WRAP THEIR BRAINS AROUND THE FACT THAT THE FINANCIAL INDUSTRY THAT SET THE LEGAL STANDARDS FOR PERFECTING A SECURITY INTEREST IN RESIDENTIAL HOME MORTGAGES COULD HAVE SCREWED UP LIKE THIS.

THE ANSWER OF COURSE IS THAT THEY DIDN’T — WALL STREET DID IT. I KNOW FOR A FACT AND HAVE SEEN THE INTERNAL MEMORANDUM WRITTEN IN 2003-2006 THAT LAWYERS WHO WERE PREPARING THE SECURITIZATION DOCUMENTS KNEW AND INFORMED THEIR CLIENTS THAT THIS COULD NOT WORK.

THIS DOES NOT MEAN YOU GET A FREE HOUSE. BUT IT DOES MEAN THAT AT THE MOMENT ANY HOUSE IN WHICH MERS WAS INVOLVED DOES NOT HAVE A PERFECTED SECURITY INTEREST AS AN ENCUMBRANCE. AND THAT MEANS THAT ANY FORECLOSURE BASED UPON DOCUMENTS OR PRESUMPTIONS REGARDING MERS ARE VOID. AND THAT MEANS THAT IF YOU FALL INTO THIS CLASS OF PEOPLE — AND MOST PEOPLE DO — IT IS POSSIBLE AND EVEN PROBABLE THAT YOU COULD BE AWARDED QUIET TITLE ON A HOME THAT WAS FORECLOSED AND SOLD EVEN YEARS AGO.

BUT BEWARE: JUST BECAUSE THEY SCREWED UP THE PAPERWORK AND THEY DON’T HAVE THE REMEDY OF FORECLOSURE IMMEDIATELY AVAILABLE DOESN’T MEAN THAT NOBODY LENT YOU MONEY NOR DOES IT MEAN THAT YOU DON’T OWE ANY MONEY NOR DOES IT MEAN THAT THEY COULD NOT CREATE AN EQUITABLE LIEN ON YOUR PROPERTY THAT COULD AMOUNT TO A MORTGAGE THAT COULD BE FORECLOSED. BUT THAT IS STRICTLY A JUDICIAL PROCESS EVEN IN SO-CALLED NON-JUDICIAL STATES.

WE ARE NOW CLOSING IN ON THE REALITY. THE INEVITABLE OUTCOME IS PRINCIPAL REDUCTION WHETHER THE BANKS LIKE IT OR NOT. EVEN IF THEIR LIEN WAS PERFECTED AND ENFORCEABLE THEY STILL CANNOT GET ANY MORE MONEY THAN THE HOUSE IS WORTH. WITHOUT THE ENCUMBRANCE, THEY ARE FORCED TO NEGOTIATE A WHOLE NEW PATH WITH ONLY THE PARTIES THAT ARE NOW LEFT HOLDING THE BAG ON THE LOSS ASSOCIATED WITH THE ORIGINAL LOAN ON YOUR PROPERTY, AFTER ADJUSTMENTS FOR PAYMENTS RECEIVED BUT NOT RECORDED OR ALLOCATED.

IN ORDER TO HOLD THEIR FEET TO THE FIRE, YOU HAVE TO KNOW THE ORIGINAL SECURITIZATION SCHEME AND INSIST ON PROOF OF WHAT HAPPENED AFTER THE INITIAL SECURITIZATION PLAN WAS PUT IN PLACE. REMEMBER THAT THIS IS NOT A FIXED EVENT. THIS IS SINGLE TRANSACTION BETWEEN THE BORROWER AND AN ONGOING PROCESSION OF SUCCESSORS EACH OF WHOM HAS QUESTIONABLE RIGHTS TO THE NOTE, MORTGAGE OR EVEN THE OBLIGATION SINCE THEY WERE ONLY ASSIGNED A RECEIVABLE FROM A PARTY WHO WAS NEITHER THE BORROWER NOR THE ORIGINATING LENDER.

A Homeowners’ Rebellion: Could 62 Million Homes be Foreclosure-Proof?

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Ellen Brown
Web of Debt
August 20, 2010

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.

Victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or “whistle blower” to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for “wrongfully bypass[ing] the counties’ recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located.” The complaint notes that “MERS claims to have ‘saved’ at least $2.4 billion dollars in recording costs,” meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.

By Their Own Sword: MERS’ Role in the Financial Crisis

MERS is, according to its website, “an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.” Or as Karl Denninger puts it, “MERS’ own website claims that it exists for the purpose of circumventing assignments and documenting ownership!”

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MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept….

After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible …. The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary’ under millions of deeds of trust in Nevada and other states.

Axing the Bankers’ Money Tree

If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chronicle article by attorney Sean Olender following the October 2007 Boyko [pdf] decision:

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

Nationalization of these giant banks might be the next logical step—a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.

The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a “people’s bank,” making low interest loans to consumers and businesses through branches all over the country.

With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.

Consumer Law E-mail Groups

NCLC
NATIONAL CONSUMER
LAW CENTER’
Advancing Fairness in the Marketplace for All

Why Join an E-Mail Group?
• They are free; all you need is an e-mail address
• Get instant answers to your questions from experts around the country
• Hear the latest developments, practice ideas, and litigation issues
• Obtain copies of pleadings and other useful documents
• Get into the nitty-gritty of the actual practice of consumer law
• Join a community of like-minded attorneys focused on the same subject area
NCLC and NACA sponsor a number of email groups for those representing consumer interests. These groups are not open to those who represent the industry that is the topic of the group or other adverse parties.
NATIONAL CONSUMER LAW CENTER E-MAIL GROUPS
1. Autofraud (Contact: Jon Sheldon) To join: owner-autofraud@lists.nclc.org
This is one of the oldest and most active consumer law e-mail groups with over 350 members, and much email traffic each day. The group focuses on many different issues related to motor vehicles, from financing to sales practices to lemons to repossessions. Like all NCLC e-mail groups, you can perform key-word searches in the archives for past e-mails.
2. Manufactured Homes (Contact: Odette Williamson)
To join: manufacturedhomes-request@lists.nclc.org and CC: owilliamson@nclc.org
If manufactured home cases ever come to your office, this is the e-mail group for you, covering issues of financing, defects, sales, and parks.
3. Student Loans (Contact: Deanne Loonin)
To join: studentloan-request@lists.nclc.org
(dloonin@nclc.org if experiencing technical problems)
This is NCLC’s first group, dating back over 10 years. The discussion covers student loan collections, offsets, vocational schools, and related topics.
4. FCRA – Fair Credit Reporting Act (Contact: Chi Chi Wu)
To join: cwu@nclc.org
A large group of experts exchanging ideas about credit reporting issues.
5. E-payments (Contact: Lauren Saunders) To join: http://lists.nclc.org/subscribe
This is the e-mail group for anyone concerned with the electronic payment of food stamps and other state benefits.
6. UtilityNetwork – Massachusetts (Contact: Charlie Harak)
To join: http://lists.nclc.org/subscribe
Covers issues of utility terminations, energy affordability, payment sources for utility bills, and low-income utility programs FOR MASSACHUSETTS ONLY.
7. EnergyNetwork – National (Contact: Charlie Harak, Olivia Wein, or John Howat)
To join: http://lists.nclc.org/subscribe
Covers issues of utility terminations, energy affordability, telephones, and low-income utility programs. Keep current on policy and programmatic issues.
8. Bankruptcy (Contact: John Rao) To join: http://lists.nclc.org/subscribe
This group is for legal services attorneys and pro bono coordinators and covers many issues relating to representation of low-income consumers in bankruptcy.
9. DC Updates (Contact: Lauren Saunders). To join: http://lists.nclc.org/subscribe
Provides updates on legislative and administrative developments in Washington, including agency comment opportunities and critical moments for legislative input. Open to NACA members and nonprofit consumer advocates (including non-attorneys).
10. California (Contact: Lauren Saunders). To join: http://lists.nclc.org/subscribe
Provides a forum for sharing of information on consumer law activities in California. Open to nonprofit attorneys and to NACA members willing to partner with or mentor nonprofit attorneys.
11. Carchange- Auto Ownership, Finance, and Policy (Contact John Van Alst)
To join: http://lists.nclc.org/subscribe
A new group for advocates seeking to improve the ability of low-income families to get, keep, and use a reliable, affordable car. Includes topics of car finance, sales, and ownership as well as anyone working on broader issues that affect access to transportation for low-income workers and their families (e.g., insurance, driver’s licenses, maintenance, etc.).
NATIONAL ASSOCIATION OF CONSUMER ADVOCATES E-MAIL GROUPS Tlie lists operated by NACA require NACA membership for admission to those lists.
12. Mortgage (Contact: Jeff Dillman) To apply for admission: jdillman@thehousingcenter.org
This NACA group has over 600 members and covers all aspects of protecting a homeowner against foreclosure, from predatory lending to servicer abuses.
13. Class Action (Contact: Steve Gardner) To apply for admission: sgardner@cspinetorg
The place to be if your office handles class actions, if you are interested in co-counseling with other NACA offices experienced in class cases, or if you just want to learn more about the class action remedy.
14. Stop Binding Mandatory Arbitration Campaign (Contact: Cora Ganzglass)
To join: cora@naca.net
This NACA list is to help build awareness and support for state and federal legislation that fights back against binding mandatory arbitration clauses.
15. Statewide Listserves (Contact: Chris Wojcik) To join: chris@naca.net
NACA Statewide listserves exist for NACA members in Alabama, Arkansas, Arizona, DC, Florida, Iowa, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Montana, North Carolina, New York, New Jersey, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Virginia, Washington state, and Wisconsin. The listserves provide support, share documents and information, call attention to recent developments, and facilitate group action to protect and promote consumer rights.
16. Military Statewide Listserves (Contact: Chris Wojcik) To join: chris@naca.net A special Military NACA list for military attorneys in any state.
17. Doing Well by Doing Good list (Contact: Chris Wojcik) To join: chris@naca.net A listserve open to all NACA members.

CLASS ACTION VIDEO

http://www.youtube.com/watch?v=YRGr9sGlIpg&feature=player_embedded

Southern California (909)890-9192 in Northern California(925)957-9797

Gator Bradshaw and the BASICS

CASE INTERPRETATION BY ATTORNEY NEIL GARFIELD of livinglies:
“The real party in interest in relief from stay is whoever is entitled to enforce the obligation
sought to be enforced. Even if a servicer or agent has authority to bring the motion on
behalf of the holder, it is the holder, rather than the servicer, who must be the moving
party, and so identified in the papers and in the electronic docketing done by the moving
party’s counsel.”
For 2 years I have been saying “stick with the basics.” Black Letter Law will set you free. But
time and again attorneys, pro se litigants and judges go astray and find themselves in never-never
land. Most attorneys and Judges take preliminary motions with a grain of salt. Virtually all
foreclosures would be eliminated if lawyers and judges paid attention to the very beginning of
the case. Gator Bradshaw in Florida delivers a nice piece at our seminar on motion practice.
Your job is to immediately focus the Judge’s attention on the fatal defects presented by the
actions of the intermediaries in the securitization process and more specifically, whoever is
attempting to foreclose. By failing to challenge this at the outset you have effectively waived the
issue and now face an uphill battle. This case reported below shows that a mere objection from
the Trustee in BK Court caused the entire claim of the forecloser to completely collapse.
Seven (7) months ago, before any of the landmark decisions reported on these pages, Federal
Bankruptcy Judge Myers in Idaho was presented with an objection from the Trustee to Motion
for Relief From Stay.
The fact that the Trustee took up the cause is reason enough to note this case. What the Court did
with it, in an articulate, well-reasoned memorandum of decision, is nothing short of startling in
its clarity.
One by one, this Judge takes down the arguments and tactics of the intermediaries in the
securitization chain and basically says that none of them has a right to make a claim.
In short, just as in these pages, the Judge doesn’t say who CAN assert and enforce the claim; he
just says that none of these nominees, intermediaries, conduits, bookkeepers, servicers, MERS,
or pretender lenders has any pecuniary interest in the outcome and therefore they lack standing to
be in court. On jurisdictional grounds, therefore, the case is closed and these interlopers are
thrown out of court. Will the REAL Lender please stand up? Maybe, maybe not.
The Judge points out that “The Motion further alleges that Debtors were indebted at filing “to
Movant” and that the debt arose out of a promissory note and a deed of trust dated September 20,
2006 “naming Movant as beneficiary.”
Judge Myers calmly and correctly points out that this was a total lie. When pressed, the
attorney acknowledged that the movant was not owed any money and that MERS was
merely an agent for an undisclosed principal for an undisclosed purpose acting
purportedly for the real party in interest. But the Judge says quite clearly and correctly
that the rules require the real party in interest to be the movant.
This Judge also addresses the issue of burden of proof, a sticking point for many readers of this
blog. He states that the burden is on the movant to prove standing, not on the homeowner or
petitioner to prove lack of standing. In fact, pointing to the rules again, he says that the pleading
must “[p]rovide the details of the underlying obligation or liability upon which the motion
is based;”
In a stroke of his pen, this Judge ends the issue over who has the burden of proof and even
provides grounds BEFORE DISCOVERY for dumping fraudsters out of court. They must plead
the allegations, and they must attach documentation that shows their pleadings are true and
correct.
This Judge is telling fraudsters to stop coming to court with attorney affidavits that are not
evidence (see his memorandum) and to stop submitting affidavits, notes, revisions to notes, late
indorsements, assignments that don’t match up with the pleadings or the requirements of
pleading.
Edited by MSFraud.org
1 All chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
unless otherwise indicated.
2 In 2008, this Court saw over 2,300 stay relief motions in the 5,224 cases filed.
3 See Local Bankruptcy Rule 4001.2 (addressing substantive and procedural
requirements for stay relief motions, and providing for entry of orders upon absence of objection
after notice).
MEMORANDUM OF DECISION – 1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF IDAHO
IN RE )
) Case No. 08-20381-TLM
DARRELL ROYCE SHERIDAN, )
SHERRY ANN SHERIDAN, )
) Chapter 7
Debtors. )
________________________________ )
MEMORANDUM OF DECISION
________________________________________
INTRODUCTION
In this Chapter 7 case, the trustee, Ford Elsaesser (“Trustee”), objects to a
motion under § 362(d) for relief from the § 362(a) automatic stay.1 Motions under
§ 362(d) are common in bankruptcy cases.2 Most stay relief requests proceed
promptly to entry of an order, after proper notice, without any objection.3
However, changes in mortgage practices over the past several years have
created a number of new issues. The one highlighted in this case is the standing of
4 There was no objection, and the exemption was therefore allowed. Taylor v. Freeland
& Kronz, 503 U.S. 638, 643-44 (1992); Rainsdon v. Farson (In re Farson), 387 B.R. 784, 797
(Bankr. D. Idaho 2008). Debtors indicated in their § 521 statement of intention that they would
(continued…)
MEMORANDUM OF DECISION – 2
the moving creditor. Serial assignments of the mortgagee’s interest(s) and the
securitization of mortgages have complicated what was previously a generally
straight-forward standing analysis. Though many creditors provide in their
motions adequate explanation and documentation of their standing to seek relief
on real estate secured debts, Trustee challenges the adequacy of the subject motion
in this case.
Following hearing and consideration of the arguments of the parties, the
Court determines that Trustee’s objection is well taken and the same will be
sustained. The motion for stay relief will be denied.
BACKGROUND AND FACTS
On June 24, 2008, Darrell and Sherry Ann Sheridan (“Debtors”) filed their
joint chapter 7 bankruptcy petition, schedules and statements. They scheduled a
fee ownership interest in a residence located in Post Falls, Idaho. See Doc. No. 1
at sched. A (the “Property”). Debtors asserted the Property’s value was
$225,000.00. Id. They indicated secured claims existed in favor of “Litton Loan
Servicing” ($197,000.00) and “Citimortgage” ($34,000.00). Id. at sched. D.
While this left no apparent equity in the Property, Debtors nevertheless claimed
the benefit of an Idaho homestead exemption. Id. at sched. C.4
4 (…continued)
reaffirm the secured debts on the Property.
5 Closing of the case as a no asset chapter 7 would constitute an abandonment of the
Property as a scheduled but not administered asset, see § 554(c), and the automatic stay would
terminate, see § 362(c)(1).
6 Mortgage Electronic Registration Systems, Inc. refers to itself, and is generally referred
to by others and in the case law, as “MERS.”
MEMORANDUM OF DECISION – 3
The § 341(a) meeting of creditors occurred on July 31, 2008. Debtors
received a discharge on October 3, 2008. While the case was noticed to creditors
as a “no asset” chapter 7, and though Trustee concedes there will be no anticipated
distribution to creditors, Trustee has not yet filed his final report of no distribution
which would allow the case to close.5
On October 16, 2008, the subject motion for relief from stay was filed. See
Doc. No. 21 (the “Motion”). It was filed by “Mortgage Electronic Registration
Systems, Inc. as nominee HSBC Bank USA, National Association, as Indenture
Trustee of the Fieldstone Mortgage Investment Trust Series 2006-3.” Id. at 1 (the
“Movant”).6 The Movant characterized itself as a “secured creditor and
Claimant.” Id. The Motion further alleges that Debtors were indebted at filing “to
Movant” and that the debt arose out of a promissory note and a deed of trust dated
September 20, 2006 “naming Movant as beneficiary.” Id.
Attached to the Motion is a promissory note (the “Note”) executed by
Debtors. It is payable to “Fieldstone Mortgage Company” as the “Lender.” See
7 The documents attached to the Motion were admitted into evidence at the final hearing,
by stipulation of the parties, as “Exhibit 1.”
8 A “final hearing” is contemplated under § 362(d) and (e). That it would be an
evidentiary hearing is a result of the presence of material, disputed facts, which under Fed. R.
Bankr. P. 9014(d) requires testimony in the same manner as in an adversary proceeding.
MEMORANDUM OF DECISION – 4
Ex. 1.7 A portion of the Note states: “I understand Lender may transfer this Note.
Lender or anyone who takes this Note by transfer and who is entitled to receive
payments . . . is called the Note Holder.”
The Note is secured by a deed of trust dated September 20, 2006 and
recorded in the real property records of Kootenai County, Idaho, on September 22,
2006 (the “Deed of Trust”). The Deed of Trust at paragraph (C) identifies and
defines the “Lender” as “Fieldstone Mortgage Company, a Maryland corporation.”
Paragraph (E) of the Deed of Trust recites:
MERS is a separate corporation that is acting solely as nominee for
Lender and Lender’s successors and assigns. MERS is the beneficiary
under this Security Instrument.
Ex. 1.
Trustee objected to the Motion, contending that the Movant failed to
establish its interest in the Property or its standing to seek stay relief. Doc. No. 23.
At a preliminary hearing on November 4, 2008, the parties requested a final
hearing because the question of standing remained unresolved.8 A final hearing
was held on December 16, 2008, at which Trustee and counsel for Movant made
argument, but no evidence was presented other than the documents that, as noted
9 The Code establishes time frames for preliminary hearing, final hearing and ruling.
See § 362(e)(1), (2). In this case, the Motion was originally filed October 16, 2008. Under
§ 362(e)(2), the stay generally “shall terminate on the date that is 60 days after a request is made
by a party in interest” if the case is one under chapters 7, 11 or 13 and the debtor is an individual.
However, that period may be extended by either agreement of the parties or by the Court for good
cause. See § 362(e)(2)(B). Here, the scheduling of the hearings resulted in a final hearing on
December 16, 2008, about the 60th day after the request. This delay was by or with concurrence
of the parties. The Court concludes that additional delay to the date of this Decision was required
to address the contentions of the parties.
10 Another ground for stay relief with respect to acts against property is an absence of
equity in such property coupled with a lack of necessity of such property for an effective
reorganization. See § 362(d)(2). The Motion indicated a lack of equity in the Property and, in
light of the fact that this is a chapter 7 liquidation, the Property is not required for reorganization.
MEMORANDUM OF DECISION – 5
above, were admitted by agreement.9
DISCUSSION AND DISPOSITION
A. Stay relief requires a motion by a party in interest with standing
The Bankruptcy Code, Bankruptcy Rules and this District’s local rules
govern stay relief requests.
Under the Code, relief from the § 362(a) stay is authorized “[o]n request of
a party in interest and after notice and a hearing, . . . .” See § 362(d) (emphasis
added). See also § 362(e)(1) and (2), § 362(f), § 362(j) (all referring to requests
made by a “party in interest.”) One ground for stay relief is “cause, including the
lack of adequate protection of an interest in propertyof such party in interest[.]”
§ 362(d)(1) (emphasis added). The Motion here alleged “cause” based on
delinquent payments, see Doc. No. 21 at 2, thus implicating § 362(d)(1) even
though no specific citations to § 362(d)(1) are made.10
MEMORANDUM OF DECISION – 6
The Rules require that a stay relief request be made by a motion. See Fed.
R. Bankr. P. 9013 (“A request for an order, except when an application is
authorized by these rules, shall be by written motion, unless made during a
hearing.”) (emphasis added); Fed. R. Bankr. P. 4001(a)(1) (“A motion for relief
from an automatic stay provided by the Code . . . shall be made in accordance with
Rule 9014[.]”) (emphasis added).
In addition to the Bankruptcy Rules, this District’s local rules require, inter
alia, that:
– the request shall be made by a “party in interest” and by “motion;”
– the motion shall “[p]rovide the details of the underlying obligation or
liability upon which the motion is based;” and
– the motion shall have attached “accurate and legible copies of all
documents evidencing the obligation and the basis of perfection of
any lien or security interest[.]”
LBR 4001.2(a), (b)(2), and (b)(5).
1. Party in interest, and standing
While the term “party in interest” is not defined by the Code, this Court has
held that such a party must have a “pecuniary interest” in the outcome of the
dispute before the Court. See In re Simplot, 2007 WL 2479664 at *9 n.45 (Bankr.
D. Idaho Aug. 28, 2007) (citing In re Elias, 05.2 I.B.C.R. 41, 42, 2005 WL
4705220 (Bankr. D. Idaho 2005), and In re Stone, 03.2 I.B.C.R. 134, 135 (Bankr.
MEMORANDUM OF DECISION – 7
D. Idaho 2003)). See also Brown v. Sobczak (In re Sobczak), 369 B.R. 512, 517-
18 (9th Cir. BAP 2007) (noting that a “party in interest” may be one who has an
actual pecuniary interest in the case, one who has a practical stake in the outcome
of the case, or one who will be impacted in any significant way in the case).
Simplot not only defined party in interest, it addressed “standing” issues.
The question there was whether the J. R. Simplot Company, which was not a
creditor with a claim against the debtor or estate, “had sufficient party in interest
standing to be heard[.]” 2007 WL 2479664 at *9. This Court stated:
Hasso v. Mozsgai (In re La Sierra Fin. Servs.), 290 B.R. 718 (9th Cir.
BAP 2002), explained that the doctrine of standing encompasses both
constitutional limitations on federal court jurisdiction (i.e., the case or
controversy requirements of Article III), and prudential limitations on
the court’s exercise of that jurisdiction. Constitutional standing
requires an injury in fact, viz. an invasion of a judicially cognizable
interest. 290 B.R. at 726-27. Prudential standing requires that the
party’s assertions fall within the zone of interests protected by the
statute and, further, requires that the litigant assert only its own rights
and not those of another party. Id. at 727 (citing Bennett v. Spear, 520
U.S. 154, 162, 167-68 (1997). The party asserting standing exists has
the burden of proving it. Id. at 726. Though sometimes articulated in
the cases as principles applicable to standing on appeal, the same
propositions apply to a party at the bankruptcy court level.
Id. (footnote citations omitted). In Simplot, the Court concluded that “parties may
not assert . . . objections that relate solely to others, or that go to issues that do not
directly and adversely affect them pecuniarily.” Id. at *10 (footnote citations
omitted). These same standing requirements were recently highlighted in a stay
relief context by the court in In re Jacobson, ___ B.R. ___, 2009 WL 567188 at
MEMORANDUM OF DECISION – 8
*5-6 (Bankr. W.D. Wash. Mar. 6, 2009).
2. Real party in interest
Under Rule 9014, which by virtue of Rule 4001(a)(1) governs stay relief
requests, certain “Part VII” rules are applicable. See Rule 9014(c). Among those
incorporated rules is Rule 7017, which in turn incorporates Fed. R. Civ. P. 17, and
Rule 17(a)(1) provides that “An action must be prosecuted in the name of the real
party in interest.”
Jacobson notes that its moving party, who claimed to be a servicer for the
holder of the note, “neither asserts beneficial interest in the note, nor that it could
enforce the note in its own right.” 2009 WL 567188 at *4. It concluded that Fed.
R. Civ. P. 17 applied, requiring the stay relief motion to be brought in the name of
the real party in interest. Id. (citing In re Hwang, 396 B.R. 757, 767 (Bankr. C.D.
Cal. 2008)); see also In re Vargas, 396 B.R. 511, 521 (Bankr. C.D. Cal. 2008). As
Jacobson summarized:
The real party in interest in relief from stay is whoever is entitled to
enforce the obligation sought to be enforced. Even if a servicer or
agent has authority to bring the motion on behalf of the holder, it is the
holder, rather than the servicer, which must be the moving party, and
so identified in the papers and in the electronic docketing done by the
moving party’s counsel.
Id.
The upshot of these several provisions of the Code, Rules, local rules and
case law is this: to obtain stay relief, a motion must be brought by a party in
interest, with standing. This means the motion must be brought by one who has a
11 The Ninth Circuit’s recent decision in Reusser v. Wachovia Bank, 525 F.3d 855 (9th
Cir. 2008) does not require a different conclusion. Reusser held that a lender, Wachovia Bank,
did not violate the automatic stay by seeking to foreclose on the debtors’ property after the
bankruptcy court granted the loan servicer’s (Washington Mutual) § 362(d) motion. Id. at 861-
62. Although Wachovia did not join in the motion or separately seek stay relief, the court held
that the order entered “as to Washington Mutual” was effective as to Wachovia. Id. at 857, 861.
Notably, however, the Reussers never challenged Washington Mutual’s standing in bankruptcy
court; instead, they launched that attack in a subsequently filed district court action. Id. at 861-
62. The Ninth Circuit held that “a final order lifting an automatic stay is binding as to the
property or interest in question—the res—and its scope is not limited to the particular parties
before the court.” Id. at 861. The difference here is that Trustee has timely objected to Movant’s
standing and, of course, no final order has been entered.
MEMORANDUM OF DECISION – 9
pecuniary interest in the case and, in connection with secured debts, by the entity
that is entitled to payment from the debtor and to enforce security for such
payment. That entity is the real party in interest. It must bring the motion or, if
the motion is filed by a servicer or nominee or other agent with claimed authority
to bring the motion, the motion must identify and be prosecuted in the name of the
real party in interest.11
B. The present Motion
Under the documents attached to the Motion and later admitted at hearing
as Ex. 1, Fieldstone Mortgage Company, a Maryland corporation, would certainly
appear to be a party in interest and have standing. It has an economic interest
according to the Note attached to the Motion and an interest in Debtors’ Property
according to the Deed of Trust that is also attached.
However, the Motion was not brought by Fieldstone Mortgage Company.
12 Idaho Code § 45-1502(1) defines beneficiary for purposes of the trust deed statute as
“the person named or otherwise designated in a trust deed as the person for whose benefit a trust
deed is given, or his successor in interest, and who shall not be the trustee.” Idaho Code § 45-
1502(3) defines trust deed as “a deed executed in conformity with this act and conveying real
property to a trustee in trust to secure the performance of an obligation of the grantor or other
person named in the deed to a beneficiary.” Id. (emphasis added).
MEMORANDUM OF DECISION – 10
1. MERS as “nominee” or “beneficiary”
Counsel for Movant argues that MERS, given its titular designation of
“beneficiary” under the Deed of Trust, is or should be able to prosecute the
Motion under the Code, Rules and Local Rules. Counsel conceded, however, that
MERS is not an economic “beneficiary” under the Deed of Trust. It is owed and
will collect no money from Debtors under the Note, nor will it realize the value of
the Property through foreclosure of the Deed of Trust in the event the Note is not
paid.12
Further, the Deed of Trust’s designation of MERS as “beneficiary” is
coupled with an explanation that “MERS is . . . acting solely as nominee for
Lender and Lender’s successors and assigns.” Ex. 1 (emphasis added). Movant’s
briefing suggests that a “nominee” is synonymous with an “agent.” See Doc. No.
26 at 2.
The Motion was filed by MERS “as nominee [for] HSBC Bank USA,
National Association, as Indenture Trustee of the Fieldstone Mortgage Investment
Trust Series 2006-3.” Even assuming that MERS as a “nominee” had sufficient
rights and ability as an agent to advance its principal’s stay relief request, there
13 The Motion uses several terms (Movant, Claimant, Petitioner) without definition or
evident consistency. The Motion commenced as follows:
“COMES NOW Mortgage Electronic Registration Systems, Inc. as nominee
HSBC Bank USA, National Association, as Indenture Trustee of the Fieldstone
Mortgage Investment Trust Series 2006-3, a secured creditor and Claimant
herein, and moves the Court for its Order granting relief from the automatic
stay[.]”
Thus, the “Claimant” and evidently the “Movant” (i.e., the party who “COMES NOW . . . and
moves”) are one and the same, and this entity also purports to be a “secured creditor.” Since
MERS is acting as nominee, the Claimant/Movant and secured creditor appears by these
allegations to be HSBC Bank USA (in its role as indenture trustee for others). The Motion
continues by asserting that “Debtor was on the date of filing the petition herein, indebted to
Claimant arising out of [the Note] and a Deed of Trust dated September 20, 2006, naming
Movant as beneficiary.” Contrary to these assertions, the Deed of Trust does not name HSBC
Bank USA or the Fieldstone Mortgage Investment Trust as its beneficiary. Nor is there
explanation of how Debtors came to owe HSBC Bank USA.
14 This language appears in the Deed of Trust only. There is no mention of MERS in the
Note.
MEMORANDUM OF DECISION – 11
remains an insuperable problem. The Motion provides no explanation, much less
documentation or other evidence, to show that the Fieldstone Mortgage
Investment Trust Series 2006-3 (as an entity) or HSBC Bank USA (as that entity’s
“indenture trustee”) has any interest in the subject Note or the subject Deed of
Trust.13
In light of Trustee’s objection on this score, Movant argues that MERS’
role as “nominee for Lender [i.e., Fieldstone Mortgage Company] and Lender’s
successors and assigns” gives it ample authority to assert the stay relief request
under the Deed of Trust for whatever successor in interest or assignee might have
the beneficial interest.14 Even if the proposition is accepted that the Deed of Trust
15 Some courts have indicated that the stay relief request should explain the serial
assignments resulting in the movant becoming the holder of the note. See, e.g., In re Hayes, 393
B.R. 259, 269 (Bankr. D. Mass. 2008) (“The Court and the Debtor are entitled to insist that the
moving party establish its standing in a motion for relief from stay through the submission of an
accurate history of the chain of ownership of the mortgage.”); In re Maisel, 378 B.R. 19, 22
(Bankr. D. Mass. 2007) (“‘If the claimant acquired the note and mortgage from the original lender
or from another party who acquired it from the original lender, the claimant can meet its burden
through evidence that traces the loan from the original lender to the claimant.’”) (quoting In re
(continued…)
MEMORANDUM OF DECISION – 12
provisions give MERS the ability to act as an agent (“nominee”) for another, it
acts not on its own account. Its capacity is representative.
2. Documentation
This District’s Local Bankruptcy Rule 4001.2 requires copies of “all
documents evidencing the obligation and the basis of perfection of any lien or
security interest.” The sole documentation provided with the Motion here
evidences the interests in the Note and Deed of Trust held by Fieldstone Mortgage
Company, a Maryland corporation. This submission does not answer the key
question — Who was the holder of the Note at the time of the Motion?
Several movants for stay relief have argued that the holder of a note secured
by a deed of trust obtains the benefit of the deed of trust even in the absence of an
assignment of the deed of trust, on the theory that the security for the debt follows
the debt. Under this theory, it would appear that when bankruptcy intervenes, and
somewhat like a game of Musical Chairs, the then-current holder of the note is the
only creditor with a pecuniary interest and standing sufficient to pursue payment
and relief from stay.15
15 (…continued)
Parrish, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005)). The court in Jacobson decided that it
“need not here go so far” as to require such tracing, because of the paucity of proof presented in
that case. 2009 WL 567188 at *6. The same is true here. Movant’s proof does not even show
who presently holds the Note. That alone provides sufficient basis to deny the Motion.
MEMORANDUM OF DECISION – 13
The Motion here certainly suggests that the Fieldstone Mortgage
Investment Trust Series 2006-3 (or perhaps HSBC Bank USA in its capacity as
indenture trustee for that trust) was the holder of the note on the June 24, 2008,
petition date. But at the time of the final § 362(e) evidentiary hearing herein, the
parties discussed and Movant ultimately conceded that (I) the Note contained
nothing indicating its transfer by Fieldstone Mortgage Company, (ii) the Motion
was devoid of allegations regarding the details of any such transfer, and (iii) the
record lacked any other documents related to the issue.
3. The supplemental affidavit
Subsequent to the closing of the hearing and after the Court took the
dispute under advisement, Movant filed a “supplemental affidavit” of its counsel.
See Doc. No. 28 (filed January 2, 2009). This affidavit alleges that Movant’s
counsel obtained on such date the “original” Note and that the same contains an
indorsement. Counsel states that his “affidavit is presented to supplement the
record herein and for the Court’s consideration in the pending motion[.]” Id. at 2.
The filing and consideration of this supplemental affidavit are improper for
several reasons.
16 Accord Jacobson, 2009 WL 567188 at *6-8 (discussing inadequacies of evidentiary
submissions).
MEMORANDUM OF DECISION – 14
First, the record was closed, and the Court did not authorize the reopening
of that record, nor did it indicate any post-hearing submissions would be accepted.
Second, Trustee did not have the opportunity to address this “newly
obtained” document at hearing, and nothing shows his consent to the post hoc
supplementation of the evidentiary record.
Third, disputed factual issues in contested matters may not be resolved
through testimony in “affidavits” but rather require testimony in open court. See
Fed. R. Bankr. P. 9014(d). Under the circumstances, the identity of the holder of
the Note certainly appears to be a fact in dispute falling within the ambit of this
rule.
Fourth, the affidavit is insufficient to establish that counsel, as affiant, has
the ability to testify regarding or lay the foundation required to admit the
document. See Esposito v. Noyes (In re Lake Country Invs., LLC), 255 B.R. 588,
594-95 (Bankr. D. Idaho 2000).16 The assertion that the newly possessed note is
the “original” appears to be based not on the affiant’s (counsel’s) personal
knowledge but on the assertions of someone else.
Fifth, the proffer of this “new” note as the “original” note directly
contradicts Movant’s prior representations that the Note attached to the Motion
17 See generally Idaho Code § 28-3-205(2) (“When indorsed in blank, an instrument is
payable to the bearer and may be negotiated by transfer of possession alone until specially
indorsed.”); § 28-3-301 (providing that the holder of the instrument may enforce it). These
provisions make identification of the current holder significant.
MEMORANDUM OF DECISION – 15
was “true and correct” and the operative document in this matter. See Doc. No. 21
at 1.
Sixth, even were it considered, the “new” Note’s asserted indorsement
states: “Pay To The Order Of [blank] Without Recourse” and then purports to be
signed by Fieldstone Mortgage Company through a named assistant vice
president. There is no date nor indication of who was or is the transferee.
Fieldstone Mortgage Company may have indorsed the Note in blank, but this
document does not alone establish that either HSBC Bank USA or Fieldstone
Mortgage Investment Trust is the Note’s holder.17
Thus, even if a “nominee” such as MERS could properly bring a motion for
stay relief in the name of and on behalf of the real party in interest – the entity that
has rights in and pecuniary interest under the Note secured by the Deed of Trust –
nothing of record adequately establishes who that entity actually is. Under the
evidence submitted at the § 362(e) final hearing, which consists solely of Exhibit
1, the only entity that MERS could conceivably represent as an agent/nominee
would be Fieldstone Mortgage Company. But MERS does not represent that party
according to the Motion and, in fact, its contentions are to the effect that
18 For this reason, Movant’s reliance on In re Huggins, 357 B.R. 180 (Bankr. D. Mass.
2006) is misplaced. Huggins held that MERS, which was named in a mortgage as the lender’s
nominee, had standing to seek stay relief. Id. at 184-85. But in Huggins, the original lender
continued to hold the note, and the mortgage had not been transferred. Id. at 182, 184.
19 See Fed. R. Bankr. P. 9011(b) (providing inter alia that a motion’s filing or other
presentation constitutes a certification that there has been an “inquiry reasonable under the
circumstances” and that factual allegations made “have evidentiary support or, if specifically so
identified, are likely to have evidentiary support after a reasonable opportunity for further
investigation or discovery”). Trustee here was clear, though, that he asserted no Rule 9011
claims against Movant or its counsel.
MEMORANDUM OF DECISION – 16
Fieldstone Mortgage Company is no longer a party in interest.18
At the time of that final hearing, counsel for Movant conceded that he had
no documentation provided to him by his “client” which indicated the interests
under the Note or Deed of Trust were held by either HSBC Bank USA or the
Fieldstone Mortgage Investment Trust. Counsel filed the Motion and
characterized the Movant’s identity therein based solely on undocumented
representations made to him. This would appear to be a problematic approach
generally.19 And, in this particular case, Trustee’s objection to the Motion put the
matter at issue and Movant to its proof.
CONCLUSION
When Trustee challenged the Motion’s bare assertions, Movant failed to
provide an adequate record showing it was a party in interest with standing
entitled to seek such relief. On the record presented, the Court finds and
concludes Trustee’s objection is well taken. That objection will be sustained. The
Motion will be denied. The Trustee will provide a form of order for the Court’s
MEMORANDUM OF DECISION – 17
review and entry.
DATED: March 12, 2009
TERRY L. MYERS
CHIEF U. S. BANKRUPTCY JUDGE

CLASS ACTION FILED AGAINST STERN, MERS

Posted on July 28, 2010 by Neil Garfield

Entered on the Court docket of the Southern District of Florida, a class action for damages has been filed against MERS, the Stern Law Firm and David Stern individually.The lawsuit alleges racketeering under the RICO (Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. Sec. 1962 and 1964) statute, alleging that MERS was created “in order to undermine and eventually eviscerate long-standing principles of real property law…”. It also cites the “lost note” syndrome we are all so familiar with by now.

The lawsuit filed by Kenneth Eric Trent, Esq. in Fort Lauderdale, Florida reads like a mystery novel. He probably has an incorrect chronology of a few details of the actual way securitization played out, but on the whole, the complaint is worth a read and he should get all the help you can give him. He includes actual testimony in the complaint taken from other cases in addition to a very well-written narrative. Here is one quote I liked —

“Unbeknownst to the borrowers and the public, the billions of dollars spent to fund these loans were expended to “prime the pump.” The big institutions and the conspirators were making an investment, but the expected return was NOT the interest they pretended to anticipate receiving as borrowers paid the mortgages. The lenders knew that the new loans were “bad paper;” this was of little concern to them because they intended to realize profits so great as to render such interest, even if it had been received, negligible by comparison. Part of the reason this fraudulent scheme has gone largely unnoticed for such an extended period of time is that its sophistication is beyond the imagination of average persons. Similarly beyond the imagination of most persons is and was the scope of the DISHONESTY of the lenders and those acting in furtherance of the scheme, including the present Defendants.”

Gretchen “Gets It” but misses the mark

Posted on July 25, 2010 by Neil Garfield

It’s no secret that I admire Gretchen Morgenson of the New York Times. Her articles have penetrated deeper and deeper into the realities and logistics of the Great Financial Meltdown. But she continues to drag myth alongside of reality. True, it is difficult to get your mind around the idea that Wall Street managers WANTED bad mortgages, but that simple piece of truth is unavoidable. In the article below she draws ever nearer to this truth, saying that the real question is “what did they know and when did they know it?”
She even spots the extremely important fact that the worse the loan the more money was made by Wall Street. My objection is why not ask the next obvious question, to wit: “If Wall Street’s profits went up as the quality of mortgages went down, isn’t the obvious incentive to create increasingly bad paper?” And in what world has Wall Street ever done anything to diminish profits on moral grounds?
But her spotting is defective. She sees a 5 point spread (Yield Spread Premium) between what was paid for the loans and the price charged to investors. She correctly points out that the most Wall Street usually gets on trades like this is around 2 points. But think about it. Could such a small spread actually account for the ensuing mayhem that resulted?
What she fails to point out is the actual logistics. Investors, and for that matter, even the rating agencies, were never given the actual loans to look at and kick the tires. They were given descriptions of the loans which were incorporated into a narrative that portrayed the loans in a much better light than anything a loan underwriter would agree with. The final description of the loans was so loaded with misrepresentations that even a small amount of due diligence would have revealed major discrepancies that would have stopped this money machine from operating, for good.
Gretchen’s error is reflected in most articles by journalists and government officials. They all miss a major part of the transaction. Do the math. How could a five point spread account for the actual 8-10 point spread that was used to massage the description of the pool? There is a whole other SIV transaction that everyone is ignoring. The size of it will astonish you.

If for the purpose of one extreme example we isolate a single loan transaction, you can see how it works.
John Smith, an unemployed, homeless migrant worker with a gross income of $500 per month is pulled off the street by a “loan adviser.” The salesman gets John to sign a bunch of papers and tells him to go move into a $500,000 house. The interest rate on the loan is 18%, which is $90,000 per year. John doesn’t have to pay anything for the first 3 months and then only $100 per month for the first year, when he must pay a higher amount, still not as much as the monthly interest of $7,500 per month, let alone amortization, taxes, and insurance.
Now go to the investor who has been promised, for this example 9% annual return. The investor gives the investment banker $1,000,000 dollars believing that the investment banker is taking a 2% fee ($20,000). In other words, the investor is expecting $980,000 of his money to be invested. But that is NOT what happened — not ever, in ANY example. The investor, expecting a 9% annual return on his $1 million is therefore expecting $90,000 per year in income.
So in our over-simplified example the investment banker goes to the mortgage aggregator, and says give me the crappiest mortgage you have that says the interest is $90,000 per year. The aggregator (Countrywide, for example) sells the John Smith Mortgage to a structured investment vehicle off-shore for $500,000. The SIV sells the John Smith Mortgage to another entity (Seller) created by the investment bank for $980,000. The Seller sells the John Smith Mortgage to an “investment pool” for $1 million.
Watch Carefully! What just happened is that the John Smith mortgage was created that would never be paid. The interest rate on that mortgage was 18% and the principal was $500,000. So the annual interest to be paid by borrower was $90,000. The investor gave $1 million to the investment banker and thus “bought” the $90,000 in “income” from John Smith.
The surface transaction that Gretchen and others are looking at is that last transaction where the investment banker appears to pick up a few points as a fee. The underlying transaction, the substance of the real deal, is that the investment banker took $1 million from the investor and funded a $500,000 mortgage, thus creating a yield spread premium total of $500,000. In other words, the investment banker, in our oversimplified example, made a profit EQUAL TO THE MORTGAGE PRINCIPAL.
Not all the borrowers were John Smith. They ranged from him to people with the ability to pay anything. But the Mary Jones Mortgage where she had a credit score of 815 and assets of over $10 million was a key ingredient to this fraud. May Jones Mortgage was put in the top level of the “pool.” She was the gold plating covering dog poop underneath.
The identity of Mary Jones and her credit score HAD to be there, HAD to be used without her permission in order to sell the John Smith Mortgage. I think that is called identity theft. I think it was interstate commerce and I think it was a pattern of conduct. I think that is racketeering, breach of the the Truth in Lending Act and Securities Fraud, based upon appraisal (ratings) fraud at both ends (borrower and investor) of the transaction.
And let’s not forget that all these sales and transfers were undocumented. The only thing that moved was the money. And of course there are all those third party insurance and bailout payments that were never credited to the investor or the borrower. The investment banker kept those too.
——————————————————————————————–
July 24, 2010
Seeing vs. Doing
By GRETCHEN MORGENSON

“WHAT did they know, and when did they know it?” Those are questions investigators invariably ask when trying to determine who’s responsible for an offense or a misdeed.

But for the Wall Street banks whose financing of the subprime mortgage machine placed them at the center of the credit crisis, it’s becoming clear that a third, equally important question must be asked: “What did they do once they knew what they knew?”

As investigators delve deeper into the mortgage mess, they are finding in too many cases that Wall Street firms did nothing when they learned about problem loans or improprieties in lending. Rather than stopping practices of profligate originators like New Century, Fremont and Ameriquest, Wall Street financiers, which held the purse strings for these companies, apparently decided to simply look the other way.

Recent cases have provided glimpses of this conduct. Last week, the Financial Industry Regulatory Authority accused Deutsche Bank Securities, a unit of the huge German bank, of misleading investors about how many delinquent loans went into six mortgage securities worth $2.2 billion that the firm underwrote. Deutsche Bank underreported the delinquency rates among loans when it created the securities in 2006, Finra contends, and then sold them to investors.

Deutsche Bank also understated historical delinquency rates in 16 subprime securities it packaged in 2007, Finra said. Even after it discovered the errors, the authority added, Deutsche Bank continued to report the misstated figures on its Web site, where investors checked the performance of past mortgage pools.

Deutsche Bank settled without admitting or denying the allegations; it paid $7.5 million. The firm said Friday that it had cooperated and was pleased to have the matter behind it.

James S. Shorris, acting chief of enforcement at Finra, said that this was just the first of such cases and that he oversees a team of more than a dozen people investigating firms involved in mortgage securities.

While the Finra case showed Deutsche Bank failing to report problem loans in its securities, investigators in other matters are learning that some firms used information about lending misconduct to increase their profits from the securitization game — without telling investors, of course.

Here is what investigators have learned, according to two people briefed on the inquiries who spoke anonymously because they were not authorized to discuss them publicly. The large banks that provided money to mortgage originators during the mania hired outside analytics firms to conduct due diligence on the loans that Wall Street bought, bundled into securities and sold to investors.

These analysts looked for loans that failed to meet underwriting standards. Among the flagged loans were those in which appraisals seemed fishy or the mortgages went to borrowers with credit scores far below acceptable levels. Loans on vacation properties erroneously identified as primary residences were also highlighted.

The analysts would take their findings back to the Wall Street firms packaging the securities; the reports were not made available to investors.

In 2006-07, amid the mortgage craze, more loans didn’t meet the criteria. But instead of requiring lenders to replace these funky mortgages with proper loans, Wall Street firms kept funneling the junk into securities and selling them to investors, investigators have found.

Cases brought against Wall Street firms by Martha Coakley, attorney general of Massachusetts, have brought some of these practices to light. “Our focus has been on the borrower,” she said in an interview last week, “but as we’ve peeled back the onion we’ve gotten the picture of the role Wall Street played through the financing of these loans.”

But some on Wall Street went further than simply peddling loans they knew were bad, according to the people briefed on some investigators’ findings. They say the firms used these so-called scratch-and-dent loans to increase their profits in the securitization process.

When due-diligence reports turned up large numbers of defective loans — known as exceptions — the banks used this information to negotiate a lower price on the mortgages they bought from the original lenders.

So, instead of paying 99 cents on the dollar for the problem loans, the firm would force the lender to accept 97 cents or perhaps less. But the firm would still sell the mortgage pool to investors at 102 cents or higher, as was typical on high-quality loan pools.

Wall Street enjoyed the profits these practices generated. And because lenders were financed by the Wall Street firms bundling the mortgages into securities, they were hesitant to reject too many dubious loans because doing so would slow the securitization machine.

FOR their part, Wall Street loan packagers were loath to imperil their relationship with lenders like New Century; as long as Wall Street’s lucrative mortgage factories were humming, it needed loans to stoke them. Forcing New Century to eat its bad loans might prompt it to take its business elsewhere.

The bottom line: the more problematic the loans, the better the bargaining power and the higher the profits for Wall Street.

To be sure, the securities’ offering statements noted, in legalese, that the deals might contain “underwriting exceptions” and those exceptions could be “material.” But as investigators get closer to understanding how Wall Street used these exceptions to jack up its earnings, that disclosure defense may ring hollow.

Filed under:

Securitized Mortgage: A Basic Roadmap

The Parties and Their Roles

The first issue in reviewing a structured residential mortgage transaction is to differentiate between a private-label deal and an “Agency” (or “GSE”) deal. An Agency (or GSE) deal is one involving Fannie Mae, Freddie Mac, or Ginnie Mae, the three Government Sponsored Enterprises (also known as the GSEs). This paper will review the parties, documents, and laws involved in a typical private-label securitization. We also address frequently-occurring practical considerations for counsel dealing with securitized mortgage loans that are applicable across-the-board to mortgages into both private-label and Agency securitizations.

The parties, in the order of their appearance are:

Originator. The “originator” is the lender that provided the funds to the borrower at the loan closing or close of escrow. Usually the originator is the lender named as “Lender” in the mortgage Note. Many originators securitize loans; many do not. The decision not to securitize loans may be due to lack of access to Wall Street capital markets, or this may simply reflect a business decision not to run the risks associated with future performance that necessarily go with sponsoring a securitization, or the originator obtains better return through another loan disposition strategy such as whole loan sales for cash.

Warehouse Lender. The Originator probably borrowed the funds on a line of credit from a short-term revolving warehouse credit facility (commonly referred to as a “warehouse lender”); nevertheless the money used to close the loan were technically and legally the Originator’s funds. Warehouse lenders are either “wet” funders or “dry” funders. A wet funder will advance the funds to close the loan upon the receipt of an electronic request from the originator. A dry funder, on the other hand, will not advance funds until it actually receives the original loan documents duly executed by the borrower.

Responsible Party. Sometimes you may see another intermediate entity called a “Responsible Party,” often a sister company to the lender. Loans appear to be transferred to this entity, typically named XXX Asset Corporation.

Sponsor. The Sponsor is the lender that securitizes the pool of mortgage loans. This means that it was the final aggregator of the loan pool and then sold the loans directly to the Depositor, which it turn sold them to the securitization Trust. In order to obtain the desired ratings from the ratings agencies such as Moody’s, Fitch and S&P, the Sponsor normally is required to retain some exposure to the future value and performance of the loans in the form of purchase of the most deeply subordinated classes of the securities issued by the Trust, i.e. the classes last in line for distributions and first in line to absorb losses (commonly referred to as the “first loss pieces” of the deal).

Depositor. The Depositor exists for the sole purpose of enabling the transaction to have the key elements that make it a securitization in the first place: a “true sale” of the mortgage loans to a “bankruptcy-remote” and “FDIC-remote” purchaser. The Depositor purchases the loans from the Sponsor, sells the loans to the Trustee of the securitization Trust, and uses the proceeds received from the Trust to pay the Sponsor for the Depositor’s own purchase of the loans. It all happens simultaneously, or as nearly so as theoretically possible. The length of time that the Depositor owns the loans has been described as “one nanosecond.”

The Depositor has no other functions, so it needs no more than a handful of employees and officers. Nevertheless, it is essential for the “true sale” and “bankruptcy-remote”/“FDIC-remote” analysis that the Depositor maintains its own corporate existence separate from the Sponsor and the Trust and observes the formalities of this corporate separateness at all times. The “Elephant in the Room” in all structured financial transactions is the mandatory requirement to create at least two “true sales” of the notes and mortgages between the Originator and the Trustee for the Trust so as to make the assets of the Trust both “bankruptcy” and “FDIC” remote from the originator. And, these “true sales” will be documented by representations and attestations signed by the parties; by attorney opinion letters; by asset purchase and sale agreements; by proof of adequate and reasonably equivalent consideration for each purchase; by “true sale” reports from the three major “ratings agencies” (Standard & Poors, Moody’s, and Fitch) and by transfer and delivery receipts for mortgage notes endorsed in blank.

Trustee. The Trustee is the owner of the loans on behalf of the certificate holders at the end of the securitization transaction. Like any trust, the Trustee’s powers, rights, and duties are defined by the terms of the transactional documents that create the trust, and are subject to the terms of the trust laws of some particular state, as specified by the “Governing Law” provisions of the transaction document that created the trust. The vast majority of the residential mortgage backed securitized trusts are subject to the applicable trust laws of Delaware or New York. The “Pooling and Servicing Agreement” (or, in “Owner Trust” transactions as described below, the “Trust Indenture”) is the legal document that creates these common law trusts and the rights and legal authority granted to the Trustee is no greater than the rights and duties specified in this Agreement. The Trustee is paid based on the terms of each structure. For example, the Trustee may be paid out of interest collections at a specified rate based on the outstanding balance of mortgage loans in the securitized pool; the Master Servicer may pay the Trustee out of funds designated for the Master Servicer; the Trustee may receive some on the interest earned on collections invested each month before the investor remittance date; or the Securities Administrator may pay the Trustee out of their fee with no charges assessed against the Trust earnings. Fee amounts ranger for as low as .0025% to as high as .009%.

Indenture Trustee and Owner Trustee. Most private-label securitizations are structured to meet the Internal Revenue Code requirements for tax treatment as a “Real Estate Mortgage Investment Conduit (“REMIC”). However some securitizations (both private-label and GSE) have a different, non-REMIC structure usually called an “Owner Trust.” In an Owner Trust structure the Trustee roles are divided between an Owner Trustee and an Indenture Trustee. As the names suggest, the Owner Trustee owns the loans; the Indenture Trustee has the responsibility of making sure that all of the funds received by the Trust are properly disbursed to the investors (bond holders) and all other parties who have a financial interest in the securitized structure. These are usually Delaware statutory trusts, in which case the Owner Trustee must be domiciled in Delaware.

Primary Servicer. The Primary Servicer services the loans on behalf of the Trust. Its rights and obligations are defined by a loan servicing contract, usually located in the Pooling and Servicing Agreement in a private-label (non-GSE) deal. The trust may have more than one servicer servicing portions of the total pool, or there may be “Secondary Servicers,” “Default Servicers,” and/or “Sub-Servicers” that service loans in particular categories (e.g., loans in default). Any or all of the Primary, Secondary, or Sub-Servicers may be a division or affiliate of the Sponsor; however under the servicing contract the Servicer is solely responsible to the Trust and the Master Servicer (see next paragraph). The Servicers are the legal entities that do all the day-to-day “heavy lifting” for the Trustee such as sending monthly bills to borrowers, collecting payments, keeping records of payments, liquidating assets for the Trustee, and remitting net payments to the Trustee.

The Servicers are normally paid based on the type of loans in the Trust. For example, a typical annual servicing fee structure may be: .25% annually for a prime mortgage; .375% for an Alt-A or Option ARM; and .5% for a subprime loan. In this example, a subprime loan with an average balance over a given year of $120,000 would generate a servicing fee of $600.00 for that year. The Servicers are normally permitted to retain all “ancillary fees” such as late charges, check by phone fees, and the interest earned from investing all funds on hand in overnight US Treasury certificates (sometimes called “interest earned on the float”).

Master Servicer. The Master Servicer is the Trustee’s representative for assuring that the Servicer(s) abide by the terms of the servicing contracts. For trusts with more than one servicer, the Master Servicer has an important administrative role in consolidating the monthly reports and remittances of funds from the individual servicers into a single data package for the Trustee. If a Servicer fails to perform or goes out of business or suffers a major downgrade in its servicer rating, then the Master Servicer must step in, find a replacement and assure that no interruption of essential servicing functions occurs. Like all servicers, the Master Servicer may be a division or affiliate of the Sponsor but is solely responsible to the Trustee. The Master Servicer receives a fee, small compared to the Primary Servicer’s fee, based on the average balance of all loans in the Trust.

Custodian. The Master Document Custodian takes and maintains physical possession of the original hard-copy Mortgage Notes, Mortgages, Deeds of Trust and certain other “key loan documents” that the parties deem essential for the enforcement of the mortgage loan in the event of default.

• This is done for safekeeping and also to accomplish the transfer and due negotiation of possession of the Notes that is essential under the Uniform Commercial Code for a valid transfer to the Trustee to occur.
• Like the Master Servicer, the Master Document Custodian is responsible by contract solely to the Trustee (e.g., the Master Document Custodial Agreement). However unlike the Master Servicer, the Master Document Custodian is an institution wholly independent from the Servicer and the Sponsor.
• There are exceptions to this rule in the world of Fannie Mae/Freddie Mac (“GSE”) securitizations. The GSE’s may allow selected large originators with great secure storage capabilities (in other words, large banks) to act as their own Master Document Custodians. But even in those cases, contracts make clear that the GSE Trustee, not the originator, is the owner of the Note and the mortgage loan.
• The Master Document Custodian must review all original documents submitted into its custody for strict compliance with the specifications set forth in the Custodial Agreement, and deliver exception reports to the Trustee and/or Master Servicer as to any required documents that are missing or fail to comply with those specifications.
• In so doing the Custodian must in effect confirm that for each loan in the Trust there is a “complete and unbroken chain of transfers and assignments of the Notes and Mortgages.”
• This does not necessarily require the Custodian to find assignments or endorsements naming the Depositor or the Trustee. The wording in the Master Document Custodial Agreement must be read closely. Defined terms such as “Last Endorsee” may technically allow the Custodian to approve files in which the last endorsement is from the Sponsor in blank, and no assignment to either the Depositor or the Trustee has been recorded in the local land records.
• In many private-label securitizations a single institution fulfills all of the functions related to document custody for the entire pool of loans. In these cases, the institution might be referred to simply as the “Custodian” and the governing document as the “Custodial Agreement.”

Typical transaction steps and documents (in private-label, non-GSE securitizations)

1. The Originator sells loans (one-by-one or in bundles) to the Securitizer (a/k/a the Sponsor) pursuant to a Mortgage Loan Purchase and Sale Agreement (MLPSA) or similarly-named document. The purpose of the MLPSA is to sell all right, title, claims, legal, equitable and any and all other interest in the loans to the Securitizer-Sponsor. For Notes endorsed in “blank” which are bearer instruments under the UCC, the MLPSA normally requires acceptance and delivery receipts for all such Notes in order to fully document the “true sale.” Frequently a form is prescribed for the acceptance and delivery receipt and attached as an exhibit to the MLPSA.

The MLPSA will contain representations, attestations and warranties as to the enforceability and marketability of each loan, and specify the purchaser’s remedies for a breach of any “rep” or “warrant.” The primary remedy is the purchaser’s right to require the seller to repurchase any loan materially and adversely affected by a breach. Among the defects and events covered by “reps” and “warrants” are “Early Payment Defaults,” commonly referred to as “EPD’s.” An EDP occurs if a loan becomes seriously (usually, 60 or more days) delinquent within a specified period of time after it has been sold to the Trust. The EDP covenants are always limited in time and normally only cover EDPs that occur within 12 to 18 months of the original sale. If an EDP occurs, then the Trust can force the originator to repurchase the EPD note and replace it with a note of similar static qualities (amount, term, type, etc.)

2. The Securitizer-Sponsor sells the loans to the Depositor. This takes place in another MLPSA very similar to the first one and the same documents are created and exchange with the same or similar terms. These are typically included as exhibits to the PSA.

3. Depositor, Trustee, Master Servicer and Servicer enter into a Pooling and Servicing Agreement (“PSA”) in which:

— the Depositor sells all right, title, legal, equitable and any other interest in the mortgage loans to the Trustee, with requirements for acceptance and delivery receipts, often including the prescribed form as an exhibit, in similar fashion to the MLPSA’s;

— the PSA creates the trust, appoints the Trustee, and defines the classes of securities (often called “Certificates”) that the trust will issue to investors and establishes the order of priority between classes of Certificates as to distributions of cash collected and losses realized with respect to the underlying loans (the highest rated Certificates are paid first and the lowest rated Certificates suffer the first losses-thus the basis for the term “structured finance”); and

— the Servicer, Master Servicer and Trustee establish the Servicer’s rights and duties, including limits and extent of a Servicer’s right to deal with default, foreclosure, and Note modifications. Some PSA’s include detailed loss mitigation or modification rules, and others limit any substantive modifications (such as changing the interest rate, reducing the principal debt, waiving default debt, extending the repayment term, etc.)

4. All parties including the Custodian enter into the Custodial Agreement in which:

• the Depositor agrees to cause the Notes and other specified key loan documents (usually including an unrecorded, recordable Assignment “in blank”)(NB that several recent courts have raised serious legal questions about the assignment of a real estate instrument in blank under such theories as the statute of frauds and whether or not an assignment in blank is in fact a “recordable” legal real estate document) to be delivered to the Custodian (with the Securitizer to do the actual physical shipment);
• the Custodian agrees to inspect the Notes and other documents and to certify in designated written documents to the Trustee that the documents meet the required specifications and are in the Custodian’s possession; and
• establishes a (supposedly exclusive) procedure and specified forms whereby the Servicer can obtain possession of any Note, Mortgage, Deed of Trust or other custodial document for foreclosure or payoff purposes.

Finding Documents on the S.E.C.’s website (the EDGAR filing system):

• If you know the name of the Depositor and the name of the Trust (e.g. “Time Bomb Mortgage Trust 2006-2”) that contains the loan in question, then the PSA and Custodial Agreement probably can be found on the SEC’s website (www.sec.gov):
• On the SEC home page look for a link to “Search for Company Filings” and then choose to search by “Company Name,” using the name of the Depositor. (Alternatively, click on the “Contains” button on the search page and then search by the series, i.e. 2006-2 in the above example.)
• Hopefully, this will enable you to find the Trust in question. If so, the PSA and the Custodial Agreement should be available as attachments to one or more of the earliest-filed forms (normally the 8-K) shown on the list of available documents. Sometimes the PSA is listed as a named document but other times you just look for the largest document in terms of megabytes filed with the 8-K form.
• The available documents also should include the Prospectus and/or Prospectus Supplement (Form 424B5) and the Free Writing Prospectus (“FWP”). The latter documents (at least the sections written in English, as opposed to the many tables of financial data) can be very helpful in providing a concise and straightforward description of the parties, documents, and transaction steps and detailed transactional graphs and charts in the particular deal. And because these are SEC documents, the information serves as highly credible evidence on these points, and the Court can take judicial notice of any document filed with the SEC.
• For securitizations created after January 1, 2006, SEC “Regulation AB” requires the parties to file a considerable amount of detailed information about the individual loans included in the Trust. This information may be filed as an Exhibit to the PSA or to a Form 8-K. This loan-level data typically includes loan numbers, interest rates, principal amount of loan, origination date and (sometimes) property addresses and thus can be very useful in proving that a particular loan is in a particular Trust.

Dealing with Notes and Assignments:

There are two basic documents involved in a residential mortgage loan: the promissory note and the mortgage (or deed of trust). For brevity’s sake these are referred to simply as the Note and the Mortgage.

A Note is: a contract to repay borrowed money. It is a negotiable instrument governed by Article 3 of the Uniform Commercial Code (UCC). The Note, by itself, is an unsecured debt. Notes are personal property. Notes are negotiated by endorsement or by transfer and delivery as provided for by the UCC. Notes are separate legal documents from the real estate instruments that secure the loans evidenced by the Notes by liens on real property.

A Mortgage is: a lien on, and an interest in, real estate. It is a security agreement. It creates a lien on the real estate as collateral for a debt, but it does not create the debt itself. The rights created by a Mortgage are classified as real property and these instruments are governed by local real estate law in each jurisdiction. The UCC has nothing to do with the creation, drafting, recording or assignment of these real estate instruments.

A Note can only be transferred by: an “Endorsement” if the Note is payable to a particular party; or by transfer of possession of the Note, if the Note is endorsed “in blank.” Endorsements must be written or stamped on the face of the Note or on a piece of paper physically attached to the Note (the Allonge). See UCC §3-210 through §3-205. The UCC does not recognize an Assignment as a valid means of transferring a Note such that the transferee becomes a “holder”, which is what the owners of securitized mortgage notes universally claim to be.

In most states, an Allonge cannot be used to endorse a note if there is sufficient room at the “foot of the note” for such endorsements. The “foot of the note” refers to the space immediately below the signatures of the borrowers. Also, if an Allonge is properly used, then it must describe the terms of the note and most importantly must be “permanently affixed” to the Note. Most jurisdictions hold that “staples” and “tape” do not constitute a “permanent” attachment. And, the Master Document Custodial Agreement may specify when an Allonge can be used and how it must be attached to the original Note.

Mortgage rights can only be transferred by: an Assignment recorded in the local land records. Mortgage rights are “estates in land” and therefore governed by the state’s real property laws. These vary from state to state but in general Mortgage rights can only be transferred by a recorded instrument (the Assignment) in order to be effective against third parties without notice.

In discussions of exactly what documents are required to transfer a “mortgage loan” confusion often arises between Notes versus Mortgages and the respective documents necessary to accomplish transfers of each. The issue often arises from the standpoint of proof: Has Party A proven that a transfer has occurred to it from Party B? Does Party A need to have an Assignment? The answer often depends on exactly what Party A is trying to prove.

Scenario 1: Party A is trying to prove that the Trustee “owns the loan.” Here the likely questions are, did the transaction steps actually occur as required by the PSA and as represented in the Prospectus Supplement, and are the Trustee’s ownership rights subject to challenge in a bankruptcy case?

The answers lie in the UCC and in documents such as:

• the MLPSA’s;
• conveyancing rules of the PSA (normally Section 2.01);
• transfer and delivery receipts (look for these to be described in the “Conditions to Closing” or similarly named section of MLPSA’s and the PSA);
• funds transfer records (canceled checks, wire transfers, etc);
• compliance and exception reports provided by the Custodian pursuant to the Master Document Custodial Agreement; and
• the “true sale” legal opinions.

Some of these documents may or may not be available on the SEC’s EDGAR system; some may be obtainable only through discovery in litigation. The primary inquiry is whether or not the documents, money and records that were required to have been produced and change hands actually do so as required, and at the times required, by the terms of the transaction documents.

Another question sometimes asked when examining the “validity” of a securitization (or in other words, the rights of a securitization Trustee versus a bankruptcy trustee) is, must the Note be endorsed to the Trustee at the time of the securitization? Here are some points to consider:

• Frequently the only endorsement on the Note is from the Securitizer-Sponsor “in blank” and the only Assignment that exists, pre-foreclosure, is from the Securitizer-Sponsor “in blank” (in other words, the name of the transferee is not inserted in the instrument and this space is blank).
• The concept widely accepted in the securitization world (the issuers and ratings agencies, and the law firms advising them) is that this form of documentation was sufficient for a valid and unbroken chain of transfers of the Notes and assignments of the Mortgages as long as everything was done consistently with the terms of the securitization documents. This article is not intended to validate or defend either this concept or this practice, nor is it intended to represent in any way that the terms of the securitization documents were actually followed to the letter in every real-world case. In fact, and unfortunately for the certificate holders and the securitized mortgage markets, there are many instances in many reported cases where these mandatory rules of the securitization documents have not been followed but in fact, completely ignored.
• Often shortly before foreclosure (or in some cases afterwards) a mortgage assignment is produced from the Originator to the Trustee years after the Trust has closed out for the receipt of all mortgage loans. Such assignments are inconsistent with the mandatory conveyancing rules of the Trust Documents and are also inconsistent with the special tax rules that apply to these special trust structures. Most state law requires the chain of title not to include any mortgage assignments in blank, but assignments from A to B to C to D. Under most state statutes, an assignment in blank would be deemed an “incomplete real estate instrument.” Even more frequent than A to D assignments are MERS to D assignments, which suffer from the same transfer problems noted herein plus what is commonly referred to as the “MERS problem.”

Scenario 2: Party B seeks to prove standing to foreclose or to appear in court with the rights of a secured creditor under the Bankruptcy Code. OK, granted the UCC (§3-301) does provide that a negotiable instrument can be enforced either by “(i) the holder of the instrument, or (ii) a non-holder in possession of the instrument who has the rights of a holder.”

• Servicers and foreclosure counsel have been known to contend that this is the end of the story and that the servicer can therefore do anything that the holder of the Note could do, anywhere, anytime.

• The Fannie Mae and Freddie Mac Guides contain many sections that appear to lend superficial support to this contention and frequently will be cited by Servicers and foreclosure counsel as though the Guides have the force of law, which of course they do not.

• There are many serious problems with this legal position, as recognized by an increasing number of reported court decisions.

Authors’ General Conclusions and Observations:

• Servicers and foreclosure firms are either wrong, or at least not being cautious, if they attempt to foreclose, or appear in court, without having a valid pre-complaint or pre-motion Assignment of the Mortgage. Yet at the same time, Servicers and note holders place themselves at risk of preference and avoidable transfer issues in bankruptcy cases if, for example, endorsements and Assignments that they rely upon to support claims to secured status occur or are recorded after or soon before bankruptcy filing.

• In addition any Servicer, Lender, or Securitization Trustee is either wrong, or at least not being cautious, if it ever: (1) claims in any communications to a consumer or to the Court in a judicial proceeding that it is the Note holder unless they are, at the relevant point in time, actually the holder and owner of the Note as determined under UCC law; or (2) undertakes to enforce rights under a Mortgage without having and recording a valid Assignment.
• The UCC deals only with enforcing the Note. Enforcing the Mortgage on the other hand is governed by the state’s real property and foreclosure laws, which generally contain crucial provisions regarding actions required to be taken by the “note holder” or “beneficiary.” State law may or may not authorize particular actions to be taken by servicers or agents of the holder of the Note.

• For the Servicer to have “the rights of the holder” under the UCC it must be acting in accordance with its contract. For example, if the Servicer claims to have possession of the Note, did it follow the procedures contained in the “Release of Documents” section of the Custodial Agreement in obtaining possession? Does the Servicer really have “constitutional” standing under either Federal or State law to enforce the Note even if it is a “holder” if it does not have any “pecuniary” or economic interest in the Note? In short, the concept of constitutional standing involves some injury in fact and it is hard to see how a mere “place-holder” or “Nominee” could ever over-come such a hurdle unless it actually owned the Note or some real interest in the same.

• The Servicer should have the burden of explaining the legal reasons supporting its standing and authority to act. Sometimes Servicers have difficulty maintaining a consistent story in this regard. Is the Servicer claiming to be the actual holder, or the holder and the owner, or merely an authorized agent of the true holder? If it is claiming some agency, what proof does it have to support such a claim? What proof is required? Sometimes this is just academic legal hair-splitting but many times it involves serious issues of fact. For example, what if the attorney for the Servicer asserts to the court that his or her client actually owns the Note, but the Fannie Mae website reports that Fannie is the owner? What if the MERS website reports that the Plaintiff is just the “Servicer?” What if the pre-complaint correspondence to the borrower names some entirely different party as the holder and indicated that the current plaintiff is only the Servicer?

• Finally, the Servicer always has an obligation to be factually accurate in borrower communications and legal proceedings, and to supervise employees and vendors and attorneys to assure that Note endorsements, Assignments of Mortgage, and affidavits are executed by persons with valid corporate authority, and not falsified nor offered for any improper purpose.

The focus of the default servicing industry must move from “how fast we can get things done” to “how honestly and accurately can we be in presenting the proper documentation to the courts and to the borrowers”. Judicial proceedings are not like NASCAR races where the fastest lawyer always wins. Judicial proceedings are all about finding the truth no matter how long it takes and regardless of the time and difficulties involved.

Where and when does the fraud begin

This document is meant to take the reader down a road they have
likely never traveled. This is a layman’s explanation of what has
been happening in this country that most have no idea or inkling
of. It is intended to give the reader an overview of a systemic
Fraud in this country that has reached epic proportions and
provoke action to eradicate this scourge that has descended upon
the people of America. This is intended as an overview of the process. Is
is one thing to have a grasp on what actually happened in our capitalistic
society it is quit another to convince a judge on these facts. The Judge
has his or her hands tied by the very system that allowed the
fraud in the first place.
Depending on what your situation is, you
may react with disbelief, fear, anger or outright disgust at what you
are about to learn. The following information is supported with
facts, exhibits, law and is not mere opinion.

Let’s start our journey of discovery with the purchase of a home
and subsequent steps in the financial process through the life of
the “mortgage loan”. It all starts at the “closing” where we gather
with other people that are “involved” in the process to sign the
documents to purchase our new home. Do we really know what
goes on at the closing? Are we ever told who all the participants
are in that entire process? Are we truly given “full disclosure” of all
the various aspects of that entire transaction regarding what, for
most people, is the single largest purchase they will make in their
entire life?

Let’s start with the very first part of the transaction. We have a
virtual stack of papers placed in front of us and we are instructed
where we are supposed to start signing or initialing on those
“closing documents”. There seems to be so many different
documents with enough legal language that we could read for
hours just to get through them the first time, much less begin to
fully understand them. Are we given a copy of all these documents
at least 7 days prior to the closing so we can read and study these
documents so we fully understand what it is that we are signing
and agreeing to? That has never happened for the average
consumer and purchaser of a property in the last 30 years or more
if it ever has at all. WHY? We have a stack of documents placed
before us at the “closing” that we haven’t ever seen before and are
instructed where to sign or initial to complete the transaction and
“get our new home”. We depend on the real estate agent, in most
cases, to bring the parties together at the closing after we have
supplied enough financial data and other requested information so
that the “lender” can determine whether we can qualify for our
“loan”. Obviously we have the “three day right of rescission” but do
we really stop to read all the documents after we have just
purchased our home and want to move in? Is the thought that
there might be something wrong with what we have just signed a
primary thought in our mind at that time? Did we trust the people
involved in the transaction? Are we naturally focusing on getting
moved into our new home and getting settled with our family?

Who are the players involved in the transaction from the
perspective of the consumer purchasing a property and signing a
“Mortgage Note” and “Deed” or similar “Security Instrument” at the
closing? There is, of course, the seller, the real estate agent(s), title
insurance company, property appraiser who is supposed to
properly determine the value of the property, and the most
obvious one being who we believe to be “the lender” in the
transaction. We are led, by all involved, to believe that we are, in
fact, borrowing money from the “lender” which is then paid to the
current owner of the property as compensation for them
relinquishing any “claim of ownership” to the property and
transferring that “claim of ownership” to us as the purchaser. It all
seems so simple and clear on its face and then the transaction is
completed. After the “closing” everyone is all smiles and you
believe you have a new home and have to repay the “lender”, over a
period of years, the money which you believe you have “borrowed”.

IS THERE SOMETHING WE DON’T KNOW?

Everything appears to be relatively simple and straightforward
but is that really the case? Could it be that there are other players
involved in this whole transaction that we know nothing about that
have a very substantial financial interest in what has just
occurred? Could it be that those players that we are totally
unaware of have somehow used us without our knowledge or

consent to secure a spectacular financial gain for themselves with
absolutely no investment or risk to themselves whatsoever? Could
it be that there is a hidden aspect of this whole transaction that is
“standard operating procedure” in an industry where this hidden
“aspect of a transaction” occurs every single banking day across
this country and beyond? Could it be that this hidden “aspect of a
transaction” is a deliberate process to unjustly enrich certain
individuals and entities at the expense of the public as a whole?
Could it be that there was not full disclosure of the “true nature” of
the transaction as it actually occurred which is required for a
contract to be valid and enforceable?

THE DOCUMENTS INVOLVED

The two most important and valuable documents that are signed
at a closing are the “Note” and the “Deed” in various forms. When
looking at the definition of a “Mortgage Note” it is obvious that it is
a “Security Instrument”. It is a promise to pay made by the maker
of that “Note”. When looking at a copy of a “Deed of Trust” such as
the attached Exhibit “A”, which is a template of a Tennessee “Deed
of Trust” form that is directly from the freddiemac.com website, it
is very obvious that this document is also a “Security Instrument”.
This is a template that is used for MOST government purchased
loans. You will note that the words “Security Instrument” are
mentioned no less than 90 times in that document. Is there ANY
doubt it is a “Security”? When at the closing, the “borrower” is led

to believe that the “Mortgage Note” that he signs is a document that
binds him to make repayment of “money” that the “lender” is
loaning him to purchase the property he is acquiring. Is there
disclosure to the “borrower” to the effect that the “lender” is not
really loaning any of their money to the “borrower” and therefore
is taking no risk whatsoever in the transaction? Is it disclosed to
the “borrower” that according to FEDERAL LAW, banks are not
allowed to loan credit and are also not allowed to loan their own or
their depositor’s money? If that is the case, then how could this
transaction possibly take place? Where does the money come
from? Is there really any money to be loaned? The answer to this
last question is a resounding NO! Most people are not aware that
there has been no lawful money since the bankruptcy of the United
States in 1933.

Since House Joint Resolution 192 (HJR 192) (Public law 7310)
was passed in 1933 we have only had debt, because all property
and gold was seized by the government as collateral in the
bankruptcy of the United States. Most people today would think
they have money in their hand when they pull something out of
their pocket and look at the paper that is circulated by the banks
that they have been told is “money”. In reality they are looking at a
“Federal Reserve Note” which is stated right on the face of the piece
of paper we have come to know as “money”. It is NOT really
“money”, it is debt, a promise to pay made by the United States! If
you take a “Federal Reserve Note” showing a value of ten dollars

and buy something, you are then making a purchase with a “Note”
(a promise to pay). There is absolutely no gold or silver backing
the Federal Reserve Notes that we refer to as “money” today.

When you sit down at the closing table to complete the
transaction to purchase your home aren’t you tendering a “Note”
with your signature which would be considered money? That is
exactly what you are doing. A “Note” is money in our monetary
system today! You can deposit the “Federal Reserve Note” (a
promise to pay) with a denomination of $10 at the bank and they
will credit your account in that same amount. Why is it that when
you tender your “Note” at the closing that they don’t tell you that
your home is paid for right on the spot? The fact is that it IS PAID
FOR ON THE SPOT. Your signature on a “Note” makes that “Note”
money in the amount that is stated on the “Note”! Was this
disclosed to you at the “closing” in either verbal or written form?
Could this be the place where the other players come into the
transaction at or near the time of closing? What happens to the
“Note” (promise to pay) that you sign at the closing table? Do they
put it in their vault for safe keeping as evidence of a debt that you
owe them as you are led to believe? Do they return that note to you
if you pay off your mortgage in 5, 10 or 20 years? Do they disclose
to you that they do anything other than put it away for safe keeping
once it is in their possession?

WHAT ACTUALLY HAPPENS TO THE “NOTE”?

Unknown to almost everyone, there is something VERY different
that happens with your “Mortgage Note” immediately after closing.

Your “Mortgage Note” is endorsed and deposited in the bank as a
check and becomes “MONEY”! See attached (Exhibit “B” para 13)
The document that you just gave the bank with your signature on
it, that you believe is a promise to pay them for money loaned to
you, has just been converted to money in THEIR ACCOUNT. You
just gave the “lender” the exact dollar value of what they said they
just loaned you! Who is the REAL creditor in this “Closing
Transaction”? Who really loaned who anything of value or any
money? You actually just paid for your own home with your
promissory “Mortgage Note” that you gave the bank and the bank
gave you what in return? NOTHING!!! For any contract to be valid
there must be consideration given by both parties. But don’t they
tell you that you must now pay back the “Loan” that they have
made to you?

How can it be that you could just write a “Note” and pay for your
home? This leads us back to the bankruptcy of the United States in
1933. When FDR and Congress took all the property and gold from
the people in 1933 they had to give something in return for that
confiscation of property. See attached (Exhibit “B” para 6) What
the people got in return was the promise that all of their needs
would be met by the government because the assets and the labor
of the people were collateral for the debt of the United States in the

bankruptcy. All of their debts would be “discharged”. This was
done without the consent of the people of America and was an act
of Treason by President Franklin Delano Roosevelt. The problem
comes in where they never told us how we could accomplish that
discharge and have what we were entitled to after the bankruptcy.
Why has this never been taught in the schools in this country?
Could it be that it would expose the biggest fraud in the history of
this entire country and in the world? If the public is purposely not
educated about certain things then certain individuals and entities
can take full financial advantage of virtually the entire population.
Isn’t this “selective education” more like “indoctrination”? Could
this be what has happened? In Fina Supply, Inc. v. Abilene Nat.
Bank, 726 S.W.2d 537, 1987 it says “Party having superior
knowledge who takes advantage of another’s ignorance of the law
to deceive him by studied concealment or misrepresentation can
be held responsible for that conduct.” Does this mean that if there
are people with superior knowledge as a party in this “Loan
Transaction” that take advantage of the “ignorance of the law”,
(through indoctrination) of the public to unjustly enrich
themselves, that they can be held responsible? Can they be held
responsible in only a civil manner or is there a more serious
accountability that falls into the category of criminal conduct?

It is well established law that Fraud vitiates (makes void) any
contract that arises from it. Does this mean that this intentional
“lack of disclosure” of the true nature of the contract we have

entered into is Fraud and would make the mortgage contract void
on its face? Could it be that the Fraud could actually be “studied
concealment or misrepresentation” that makes those involved in
the act responsible and accountable? What happens to the “Note”
once it is deposited in the bank and is converted to “money”? Are
there different kinds of money? There is money of exchange and
money of account. They are two very different things. See attached
(Exhibit “B” para 11), Affidavit of Expert Witness Walker Todd.
Walker Todd explains in his expert witness affidavit that the banks
actually do convert signatures into money. The definition of
“money” according to the Uniform Commercial Code: “Money” means a
medium of exchange authorized or adopted by a domestic or foreign
government and includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or more nations. Money can actually be in different forms other than what we are
accustomed to thinking. When you sign your name on a
promissory note it becomes money whether you are talking a
mortgage note or a credit card application! Did the bankers ever
“disclose” this to us? Were we ever taught anything about this in
the school system in this country? Could it be that this whole idea
of being able to convert our signature to money is a “studied
concealment” or “misrepresentation” where those involved
become responsible if we are harmed by their actions? What
happens if you have signed a “Mortgage Note” and already paid for
your home and they come at a later date and foreclose and take it
from you? Would you consider yourself to be harmed in any way?
We will bring this up again very shortly but we need to look at the

other document that is signed at the “closing” that is of great
significance.

THE DEED OF TRUST

Why do we need a Deed of Trust? What exactly IS a Deed of
Trust or other similar “Security Instrument”? It spells out all the
details of the contract that you are signing at the “closing”,
including such things as insurance requirements, preservation and
maintenance and all of the financial details of how, when, where
and why you are going to make payments to the “lender” for years
and years. Wait a minute!!!!! Make payments to the “lender”????
Why do you have to make payments to the “lender”??? Didn’t we
just establish the fact that your house was paid for by YOU, with
your “Mortgage Note” that is converted to money by THE BANK
DEPOSITING IT? Is there something wrong with this picture? We
have just paid for our “home” but now we are told we have to sign a
Deed of Trust or similar “Security Instrument” that binds us to pay
the “lender” back? Pay the “lender” back for what? Did they loan
us any money? Remember the part about banks not being able to
loan “their or their depositors money” under FEDERAL LAW? What
about: “In the federal courts, it is well established that a national bank
has no power to lend its credit to another by becoming surety, indorser,
or guarantor for him.” Farmers and Miners Bank v. Bluefield Nat ‘l
Bank, 11 F 2d 83, 271 U.S. 669; “A national bank has no power to lend
its credit to any person or corporation.” Bowen v. Needles Nat. Bank, 94

F 925, 36 CCA 553, certiorari denied in 20 S.Ct 1024, 176 US 682, 44
LED 637?

What is happening here with this “Deed of Trust” or similar
“Security Instrument” that says we have to pay all this money back
and if we don’t, they can foreclose and take our home? Why do we
have to have this kind of agreement when we have already paid for
our home through our “Mortgage Note” which was converted to
money BY THE BANK? Could this possibly be another example of
“studied concealment or misrepresentation” where those involved
could be held accountable for their conduct? What happens to this
Deed of Trust or similar “Security Instrument” after we sign it?
Where does it go? Does it go into the vault for safekeeping like we
might think? See attached Exhibit “C” for substantially more
information.

WHO ARE THE OTHER PLAYERS?

We have already found out that the “Note” doesn’t go into the vault
for safe keeping but instead is deposited into an account at the
bank and becomes money. Where does the Note go then? This is
where things get VERY interesting because your “Mortgage Note” is
then used to access your Treasury Account (that you know nothing
about) and get credit in the amount of your “Mortgage Note” from
your “Prepaid Treasury Account”. If they process the “Note” and
get paid for it then they have received the funds from YOUR

account at Treasury to pay for YOUR home correct? They then turn
around and bundle the “Note” and sell it to investors on Wall Street
and get paid again! Now let’s see what happens to the “Deed of
Trust” or similar “Security Instrument” after you have signed it.
You may be quite surprised to know that not only does it not go
into “safekeeping” it is immediately SOLD as an INVESTMENT
SECURITY to one of any number of investors tied to Wall Street.
There is a ready, and waiting, market for all of the “mortgage
paper” that is produced by the banks. What happens is the “Deed
of Trust” or other similar “Security Instrument” is bundled and
SOLD to a buyer and the BANK GETS PAID FOR THE VALUE OF THE
MORTGAGE AGAIN!! Haven’t the bankers just transferred any risk
on that mortgage to someone else and they have their money?
That is a pretty slick way of doing things! They ALWAYS get their
money right away and everyone else connected to the transaction
has the liabilities! Is there something wrong with THIS picture?
How can it possibly be that the bank has now been paid three times
in the amount of your “purported” mortgage? How is it that you
still have to pay years and years on this “purported” loan? Was any
of this disclosed to you before you signed the “Deed of Trust” or
other similar “Security Instrument”? Would you have signed ANY
of those documents including the “Mortgage Note” if you knew that
this is what was actually happening? Do you think there were any
“copies” of the “Mortgage Note” and “Deed of Trust” or other
similar “Security Instrument” made during this process? Are those

“copies” just for the records to be put in a file somewhere or is
there another purpose for them?

CAN REPRODUCING A NOTE OR DEED OF TRUST BE
ILLEGAL?

We have already established that the “Mortgage Note” and the
“Deed of Trust” or other similar “Security Instrument” are
“Securities” by definition under the law. Securities are regulated
by the Securities and Exchange Commission which is an agency of
the Federal Government. There are very strict regulations about
what can and cannot be done with “Securities”. There are very
strict regulations that apply to the reproduction or “copying” of
“Securities”:

The Counterfeit Detection Act of 1992, Public Law 102-550, in Section 411 of Title 31 of the Code of Federal Regulations, permits color illustr

ations of U.S. currency provided: . The illustration is of a size less than three-fourths or more than one and one-ch part of the item illustrated

half, in linear dimension, of ea

. The illustration is one-sided All negatives, plates, positives, digitized storage medium, graphic files, magnetic medium, optical storage devices, and any other thing used in the making of the illustration that contain an image of the illustration or any part thereof are destroyed and/or deleted or erased after their final use

Other

Obligations and Securities
. Photographic or other likenesses of other United States obligations and securities and foreign currencies are permissible for any non-fraudulent purpose, provided the items are reproduced in black and white and are less

than three-quarters or greater than one-and-one-half times the size, in linear dimension, of any part of the original item being reproduced. Negatives and plates used in making the likenesses must be destroyed after their use for the purpose for which they were made.

Title 18 USC § 472 Uttering counterfeit obligations or securities
Whoever, with intent to defraud, passes, utters, publishes, or sells, or attempts to pass, utter, publish, or sell, or with like intent brings into the United States or keeps in possession or conceals any falsely made, forged, counterfeited, or altered obligation or other security of the United States, shall be fined under this title or imprisoned not more than 20 years, or both.

Title 18 USC § 473 Dealing in counterfeit obligations or securities Whoever buys, sells, exchanges, transfers, receives, or delivers any false, forged, counterfeited, or altered obligation or other security of the United States, with the intent that the same be passed, published, or used as true and genuine, shall be fined under this title or imprisoned not more than 20 years, or both.

Title 18 USC § 474 Plates, stones, or analog, digital, or electronic

images for counterfeiting obligations or securities Whoever, with intent to defraud, makes, executes, acquires, scans, captures, records, receives, transmits, reproduces, sells, or has in such person’s control, custody, or ossession, an analog, digital, or electronic image of any obligation or other security f the United States is guilty of a class B felony.

Are these regulations always adhered to by the “lender” when
they have possession of these “original” SECURITIES and make
reproductions of them before they are “sold to investors? How
much has been in the media in the past 2 years about people
demanding to see the “wet ink signature Note” when there is a
foreclosure action initiated against them? You hear it all the time.
Why is that such a big issue? Shouldn’t the “lender” be able to just
bring the “Note” and the “Deed of Trust” or similar “Security
Instrument” to the Court and show that they have the original

documents and are the “holder in due course” and therefore have a
legal right to foreclose? To foreclose they must have BOTH the
“Mortgage Note” and “Deed of Trust” or other similar “Security
Instrument” ORIGINAL DOCUMENTS in their possession at the time
the foreclosure action is initiated. Furthermore, IS there a real
honest to goodness obligation to be collected on?

Why is it that there is such a problem with “lost Mortgage Notes”
as is claimed by numerous lenders that are trying to foreclose
today? How could it be that there could be so many “lost”
documents all of a sudden? Could it be that the documents weren’t
really lost at all, but were actually turned into a source of revenue
that was never disclosed as being a part of the transaction? To
believe that so many “original” documents could be legitimately
“lost” in such a short period of time stretches the credibility of such
claims beyond belief. Could this be the reason that MERS (Mortage
Electronic Registration Systems) was formed in the 1990’s as a way
to supposedly “transfer ownership of a mortgage” without having
to have the “original documents” that would be required to be
presented to the various county recorders? Could it be they KNEW
THEY WOULDN’T HAVE THE ORIGINAL DOCUMENTS FOR
RECORDING and had to devise a system to get around that
requirement? When the foreclosure action is filed in the court the
attorney for the purported “party of interest”, usually the “lender”
who is foreclosing, files a “COPY” of the “Deed of Trust” or similar
“Investment Security” with the Complaint to begin foreclosure

proceedings. Is that “COPY” of the “Security Instrument” within the
“regulations” of Federal Law under 18 U.S.C. § 474? Is it usually the
same size or very nearly the same size as the original document?
Yes it is and without question it is a COUNTERFEIT SECURITY! Who
was it that produced that COUNTERFEIT SECURITY? Who was
involved in taking that COUNTERFEIT SECURITY to the Court to file
the foreclosure action? Who is it that is now legally in possession
of that COUNTERFEIT SECURITY? Has everyone from the original
“lender” down to the Clerk of the Court where the foreclosure is
now being litigated been in possession or is currently in possession
of that COUNTERFEIT SECURITY? What about the Trustees who are
involved in the process of selling foreclosed properties in nonjudicial
states? What about the fact that there is no judicial
proceeding in those states where the documentation purported to
be legal and proper to bring a foreclosure action can be verified
without expensive litigation by the alleged “borrower”? All the
trustee has to do is send a letter to the alleged “borrower” stating
they are in default and can sell their property at public auction. It
is just ASSUMED that they have the “ORIGINAL” documents in their
possession as required by law. In reality, in almost every situation,
they do NOT!!! They are using a COUNTERFEIT SECURITY as the
basis to foreclose on a property that was paid for by the person
who signed the “Mortgage Note” at the closing table that was
converted to money by the bank. When it is demanded they
produce the actual “original signed documents” they almost always
refuse to do so and ask the Court to “take their word for it” that

they have
. They have,
instead, submitted a COUNTERFEIT SECURITY to the Court as their
“proof of claim” to attempt to unjustly enrich themselves through a
blatantly fraudulent foreclosure action. One often cited example of
this was the decision handed down by U. S. Federal District Court
Judge Christopher A. Boyko of Ohio, who on October 31, 2007
dismissed 14 foreclosure actions at one time with scathing
footnote comments about the actions of the Plaintiffs and their
attorneys. See (Exhibit “E”). Not long after that came the dismissal
of 26 foreclosure cases in Ohio by U.S. District Court Judge Thomas
M. Rose who referenced the Boyko ruling in his decision. See
(Exhibit “F”). How many other judges have not been so brave as to
stand on the principles of law as Judges Boyko and Rose did, but
need to start doing so TODAY?
BOTH of the original documents which are absolutely
required to be in their possession to begin foreclosure actions.
Almost every time the people that are being foreclosed on are able
to convince the Court (in judicial foreclosures) to demand that
those “original documents” be produced in Court by the Plaintiff,
the foreclosure action stops and it is obvious why that happens!
THEY DON’T HAVE THE “ORIGINAL” DOCUMENTS

Has any of this foreclosure activity crossed state lines in
communications or other activities? Have there been at least two
predicate acts of Fraud by the parties involved? Have the people
involved used any type of electronic communication in this Fraud
such as telephone, faxing or email? It is obvious that those

questions have to be answered with a resounding YES! If that is the
case, then the Fraud that has been discussed here falls under the
RICO statutes of Federal Law. Didn’t they eventually take down the
mob for Racketeering under RICO statutes years ago? Is it time to
take down the “NEW MOB” with RICO once again?

HOW RAMPANT IS THIS FRAUD?

How could this kind of situation ever occur in this country?
Could it be that this whole entire process could be “studied
concealment or misrepresentation” where the parties involved are
responsible under the law for their conduct? Could it be that it is
no “accident” that so many “wet ink signature” Notes cannot be
produced to back up the foreclosure actions that are devastating
this country? Could it be that the overwhelming use of
COUNTERFEIT SECURITIES, as purported evidence of a debt in
foreclosure cases, is BY DESIGN and “studied concealment or
misrepresentation” so as to strip the people of this country of their
property and assets? Could it be that a VERY substantial number of
Banks, Mortgage Companies, Law Firms and Attorneys are guilty of
outright massive Fraud, not only against the people of this country,
but of massive Fraud on the Court as well because of this
COUNTERFEITING? How could one possibly come to any other
conclusion after learning the facts and understanding the law?
How many other people are implicated in this MASSIVE FRAUD
such as Trustees and Sheriffs that have sold literally millions of

homes after foreclosure proceedings based on these COUNTERFEIT
SECURITIES submitted as evidence of a purported obligation? How
many judges know about this Fraud happening right in their own
courtrooms and never did anything? How many of them have
actually been PAID for making judgments on foreclosures?
Wouldn’t that be a felony or at the very least, misprision of felony,
to know what is going on and not act to stop it or make it known to
authorities in a position to investigate and stop it?

How is it that so many banks could recover financially, so
rapidly, from the financial debacle of 200809,
with foreclosures
still running at record levels, and yet pay back taxpayer money that
was showered on them and do it so quickly? Could it be that when
they take back a property in foreclosure where they never risked
any money and actually were unjustly enriched in the previous
transaction, that it is easy to make huge sums by reselling that
property and then beginning the whole “Unconscionable” process
all over again with a new “borrower”? How is it that just three
years ago a loan was available to virtually almost anyone who
could “fog a mirror” with no documentation of income or ability to
repay a loan? Common sense makes you ask how “lenders” could
possibly take those kinds of risks. Could it be that the ability to
“repay a loan” was not an issue at all for the lenders because they
were going to get their profits immediately and risk absolutely
nothing at all? Could it be that, if anything, they stood to make
even more money if a person defaulted on the “alleged loan” in a

short period of time? They could literally obtain the property for
nothing other than some legal fees and court filing costs through
foreclosure. They could then resell the property and reap
additional unjust profits once again! One does not need to have
been a finance major in college to figure out what has been
happening once you are enlightened to the FACTS.

WHAT ACTIONS HAVE PEOPLE TAKEN TO AVOID LOSING
THEIR HOMES IN FORECLOSURE?

There have been a number of different actions taken by people
to keep from losing their homes in foreclosure. The first and most
widely used tactic is to demand that the party bringing the
foreclosure action does, in fact, have the standing to bring the
action. The most important issue of standing is whether that party
has actual possession of the “original wet ink signature”
documents from the closing showing they are the “holder in due
course”. As previously mentioned, in almost ALL cases the Plaintiff
bringing the action refuses to make these documents available for
inspection by the Defendant in the foreclosure action so they can,
in fact, determine the authenticity of those documents that are
claimed to be “original” and purportedly giving the legal right to
foreclose. The fact that the Courts allow this to happen repeatedly
without demanding the Plaintiff bring the ”wet ink signature
documents” into the court for inspection by the Defendant, begs
the question of whether some of the judiciary are involved in this

Fraud. Where is due process under the law for the Defendant when
the Plaintiff is NOT REQUIRED by the Court to meet that burden of
proof of standing, when demanded, to bring their action of
foreclosure?

One other option that has been used more and more frequently
in recent months to deal with foreclosure actions is the issuing of a
“Bonded Promissory Note” or “Bill of Exchange” as payment to the
alleged “lender” as satisfaction of any amounts allegedly owed by
the Defendant. As was earlier described, a “Note” is money and as
the banks demonstrated after the closing, it can be deposited in the
bank and converted to money. SOME of the “Bonded Promissory
Notes” and “Bills of Exchange” are, in fact, negotiated and credit is
given to the accounts specified and all turns out well. See (Exhibit
“B” para 12) The problem that has occurred is that MANY of the
“lenders” say that the “Bonded Promissory Notes” and “Bills of
Exchange” are bogus documents and are worthless and fraudulent
and they refuse to give credit for the amount of the “Note” they
receive as payment of an alleged debt even though they are given
specific instructions on how to negotiate the “Note”. Isn’t it
interesting that THEY can take a “Note” that THEY print and put
before you to sign at the closing table and deposit it in the bank
and it is converted to money immediately, but the “Note” that YOU
issue is worthless and fraudulent? The only difference is WHO
PRINTS THE NOTE!!!! They are both signed by the same
“borrower” and it is that person’s credit that backs that “Note”.

The “lenders” don’t want the people to know they can use your
“Prepaid Treasury Account”, just as the banks do without your
knowledge and consent. See (Exhibit “D”) for more information on
“Bills of Exchange”. The fact that SOME of the “Bonded Promissory
Notes” are negotiated and accounts are settled, proves beyond a
shadow of a doubt that they are legal SECURITIES just like the one
that the bank got from the “borrower” at the closing. Why then
aren’t ALL of the “Notes” processed and credit given to the accounts
and the foreclosure dismissed? Because by doing so you would be
lowering the National Debt and the bankers would make less
money!!!!

One very interesting thing that happens with these “Bonded
Promissory Notes” or “Bills of Exchange” that are submitted as
payment, is that they are VERY RARELY RETURNED TO THE ISSUER
yet credit is not given to the intended account. They are not
returned, and the issuer is told they are “bogus, fraudulent and
worthless” but they are NOT RETURNED! Why would someone
keep something that is allegedly “bogus, fraudulent and
worthless”? Could it be that they are NOT REALLY “BOGUS,
FRAUDULENT AND WORTHLESS” and the “lender” has, in fact,
actually negotiated them for YET EVEN MORE UNJUST
ENRICHMENT? That is exactly what happens in many instances.
There could be no other explanation for the failure to return the
allegedly “worthless” documents WHICH ARE ACTUALLY
SECURITIES!!! Does the fact that they keep the “Note” that was

submitted and refuse to credit the account that it was written to
satisfy, rise to the level of THEFT OF SECURITIES? This is just one
more example of the Fraud that is so obvious. This is but one more
example of the ruthless nature of those who would defraud the
people of this country.

CONCLUSIONS

One of the incredible aspects of this whole debacle is the fact
that the very people who are participants in this Fraud are victims
as well. How many bank employees, judges, court clerks, lawyers,
process servers, Sheriffs and others have mortgages? How many of
the people who work in law offices, Courthouses, Sheriffs
Departments and other entities that are directly involved in this
Fraud have been fraudulently foreclosed on themselves? How
many people in our military, law enforcement, firefighting and
medical fields have lost their homes to this Fraud? How many of
your friends or neighbors have lost their homes to these
fraudulent foreclosures? Everyone who has a mortgage is a VICTIM
of this fraud but some of the most honest, trusting, hardest
working and most dedicated people in this country have been the
biggest victims. Who are those who have been the major
beneficiaries of this massive Fraud? Those with the “superior
knowledge” that enables them to take advantage of another’s
ignorance of the law to deceive them by “studied concealment or
misrepresentation”. This group of beneficiaries includes many on
Wall Street, large investors, and most notoriously, the bankers at
the top and the lawyers who work so hard to enhance their profits

and protect the Fraud by them from being exposed. The time has
now come to make those having superior knowledge who HAVE
taken advantage of another’s ignorance of the law to deceive them
by studied concealment or misrepresentation to be held
responsible for that conduct. This isn’t just an idea. It is THE LAW
and it is time to enforce it starting with the criminal aspect of the
fraud! Under the doctrine of “Respondeat Superior” the people at
the top of these organizations are responsible for the actions of
those in their employ. That is where the investigations and arrests
need to start.

What is it going to take to put a stop to the destruction of this
country and the lives of the people who live here? It is going to
take an uprising of the people of this country, as a whole, to finally
say that they have had enough. The information presented here is
but one part of the beginning of that uprising and the beginning of
the end of the Fraud upon the people of America. It is obvious, as
has been pointed out here, with supporting evidence, that Fraud is
rampant. You now know the story and can no longer say you are
totally uninformed about this subject. This is only an outline of
what needs to, and will, become common knowledge to the people
and law enforcement agencies in this country. If you are in law
enforcement it is YOUR DUTY to take what you have been given
here and move forward with your own intense investigation and
root out the Fraud and stop the theft of people’s homes. Your

failure to do so would make you an accessory to the fraud through
your inaction now that you have been noticed of what is occurring.

If you are an attorney and receive this information it would do
you well to take it to heart, and understand there is no place for
your participation in this Fraud and if you participate you will
likely become liable for substantial damages, if not more severe
consequences such as prison. If you are in the judiciary you would
do well to start following the letter of the law if you haven’t been,
and start making ALL of those in your Court do likewise, lest you
find yourself looking for employment as so many others are, if you
are not incarcerated as a result of your participation in the fraud.
If you are part of the law enforcement community that enforces
legal matters regarding foreclosure you would do well to make
sure that ALL things have been done legally and properly rather
than just taking the position “I am just doing my job” and turn a
blind eye to what you now know. If you are a banker, you must
know that you are now going to start being held accountable for
the destruction you have wreaked on this country. You have every
right to be, and should be, afraid…….very afraid. If you are one of
the ruthless foreclosure lawyers that has prayed on the numerous
people who have lost their homes, you need to be afraid also. Very
VERY afraid. When people learn the truth about what you have
done to them you can expect to see retaliation for what you have
done. People are going to want to see those who defrauded them
brought to justice. These are not threats by any stretch of the

imagination. These are very simple observations and the study of
human behavior shows us that when people find out they have
been defrauded in such a grand manner as this, they tend to
become rather angry and search for those who perpetrated the
fraud upon them. The foreclosure lawyers and the bankers will be
standing clearly in their sights.

The question of WHERE DOES THE FRAUD BEGIN has been
answered. It began right at the closing table and was perpetuated
all the way to the loss of property through foreclosure or the
incredible payment of 20 or 30 years of payments and interest by
the alleged “borrower” to those who would conspire to commit
Fraud, collusion and counterfeiting and practice “studied
concealment or misrepresentation” for their own unjust
enrichment.

The simplest of analogies: What would happen if you were to
make a copy of a $100 Federal Reserve Note and go to Walmart and
attempt to use it to fraudulently acquire items that you wanted?
You more than likely would be arrested and charged with
counterfeiting under Title 18 USC § 474 and go to prison. What is
the difference, other than the magnitude of the fraud, between that
scenario and someone who makes a copy of a mortgage security,
and using it through foreclosure, attempts to fraudulently acquire
a property? Shouldn’t they be treated exactly the same under the
law? The answer is obvious and now it is starting to happen.

Title 18 USC § 474

Whoever, with intent to defraud, makes, executes,
acquires, scans, captures, records, receives, transmits,
reproduces, sells, or has in such person’s control, custody,
or possession, an analog, digital, or electronic image of any
obligation or other security of the United States is guilty of
a class B felony.

“Fraud vitiates the most solemn Contracts, documents and
even judgments” [U.S. vs. Throckmorton, 98 US 61, at pg.
65].

“It is not necessary for rescission of a contract that the
party making the misrepresentation should have known
that it was false, but recovery is allowed even though
misrepresentation is innocently made, because it would be
unjust to allow one who made false representations, even
innocently, to retain the fruits of a bargain induced by
such representations.” [Whipp v. Iverson, 43 Wis 2d 166].

“Any false representation of material facts made with
knowledge of falsity and with intent that it shall be acted
on by another in entering into contract, and which is so
acted upon, constitutes ‘fraud,’ and entitles party deceived
to avoid contract or recover damages.” Barnsdall Refining
Corn. v. Birnam Wood Oil Co. 92 F 26 817.

Exhibit B Walker Todd_Note Expert Witness

Exhibit D Mem of Law Bills of Exch

Exhibit A Deed Trust Tenn

Exhibit C Mem of Law Bank Fraud_Foreclosures

Exhibit E Boyko_Foreclosure Case

non-judicial sale is NOT an available election for a securitized loan

Posted 6 days ago by Neil Garfield on Livinglies’s Weblog
NON-JUDICIAL STATES: THE DIFFERENCE BETWEEN FORECLOSURE AND SALE:

FORECLOSURE is a judicial process herein the “lender” files a lawsuit seeking to (a) enforce the note and get a judgment in the amount owed to them (b) asking the court to order the sale of the property to satisfy the Judgment. If the sale price is lower than the Judgment, then they will ask for a deficiency Judgment and the Judge will enter that Judgment. If the proceeds of sale is over the amount of the judgment, the borrower is entitled to the overage. Of course they usually tack on a number of fees and costs that may or may not be allowable. It is very rare that there is an overage. THE POINT IS that when they sue to foreclose they must make allegations which state a cause of action for enforcement of the note and for an order setting a date for sale. Those allegations include a description of the transaction with copies attached, and a claim of non-payment, together with allegations that the payments are owed to the Plaintiff BECAUSE they would suffer financial damage as a result of the non-payment. IN THE PROOF of the case the Plaintiff would be required to prove each and EVERY element of their claim which means proof that each allegation they made and each exhibit they rely upon is proven with live witnesses who are competent — i.e., they take an oath, they have PERSONAL KNOWLEDGE (not what someone else told them),personal recall and the ability to communicate what they know. This applies to documents they wish to use as well. That is called authentication and foundation.

SALE: Means what it says. In non-judicial sale they just want to sell your property without showing any court that they can credibly make the necessary allegations for a judicial foreclosure and without showing the court proof of the allegations they would be required to make if they filed a judicial foreclosure. In a non-judicial state what they want is to SELL and what they don’t want is to foreclose. Keep in mind that every state that allows non-judicial sale treats the sale as private and NOT a judicial event by definition. In Arizona and many other states there is no election for non-judicial sale of commercial property because of the usual complexity of commercial transactions. THE POINT is that a securitized loan presents as much or more complexity than commercial real property loan transactions. Thus your argument might be that the non-judicial sale is NOT an available election for a securitized loan.

When you bring a lawsuit challenging the non-judicial sale, it would probably be a good idea to allege that the other party has ELECTED NON-JUDICIAL sale when the required elements of such an election do not exist. Your prima facie case is simply to establish that the borrower objects the sale, denies that they pretender lender has any right to sell the property, denies the default and that the securitization documents show a complexity far beyond the complexity of even highly complex commercial real estate transactions which the legislature has mandated be resolved ONLY by judicial foreclosure.

THEREFORE in my opinion I think in your argument you do NOT want to concede that they wish to foreclose. What they want to do is execute on the power of sale in the deed of trust WITHOUT going through the judicial foreclosure process as provided in State statutes. You must understand and argue that the opposition is seeking to go around normal legal process which requires a foreclosure lawsuit.

THAT would require them to make allegations about the obligation, note and mortgage that they cannot make (we are the lender, the defendant owes us money, we are the holder of the note, the note is payable to us, he hasn’t paid, the unpaid balance of the note is xxx etc.) and they would have to prove those allegations before you had to say anything. In addition they would be subject to discovery in which you could test their assertions before an evidentiary hearing. That is how lawsuits work.

The power of sale given to the trustee is a hail Mary pass over the requirements of due process. But it allows for you to object. The question which nobody has asked and nobody has answered, is on the burden of proof, once you object to the sale, why shouldn’t the would-be forecloser be required to plead and prove its case? If the court takes the position that in non-judicial states the private power of sale is to be treated as a judicial event, then that is a denial of due process required by Federal and state constitutions. The only reason it is allowed, is because it is private and “non-judicial.” The quirk comes in because in practice the homeowner must file suit. Usually the party filing suit must allege facts and prove a prima facie case before the burden shifts to the other side. So the Judge is looking at you to do that when you file to prevent the sale.

Legally, though, your case should be limited to proving that they are trying to sell your property, that you object, that you deny what would be the allegations in a judicial foreclosure and that you have meritorious defenses. That SHOULD trigger the requirement of re-orienting the parties and making the would-be forecloser file a complaint (lawsuit) for foreclosure. Then the burden of proof would be properly aligned with the party seeking affirmative relief (i.e., the party who wants to enforce the deed of trust (mortgage), note and obligation) required to file the complaint with all the necessary elements of an action for foreclosure and attach the necessary exhibits. They don’t want to do that because they don’t have the exhibits and the note is not payable to them and they cannot actually prove standing (which is a jurisdictional question). The problem is that a statute passed for judicial economy is now being used to force the burden of proof onto the borrower in the foreclosure of their own home. This is not being addressed yet but it will be addressed soon.

Fannie Mae Policy Now Admits Loan Not Secured

Posted 14 hours ago by Neil Garfield on Livinglies’s Weblog

29248253-Mers-May-Not-Foreclosure-for-Fannie-Mae

Editor’s Note: Their intention was to get MERS and servicers out of the foreclosure business. They now say that prior to foreclosure MERS must assign to the real party in interest.

Here’s their problem: As numerous Judges have pointed out, MERS specifically disclaims any interest in the obligation, note or mortgage. Even the language of the mortgage or Deed of Trust says MERS is mentioned in name only and that the Lender is somebody else.

These Judges who have considered the issue have come up with one conclusion, an assignment from a party with no right, title or interest has nothing to assign. The assignment may look good on its face but there still is the problem that nothing was assigned.

Here’s the other problem. If MERS was there in name only to permit transfers and other transactions off-record (contrary to state law) and if the original party named as “Lender” is no longer around, then what you have is a gap in the chain of custody and chain of title with respect to the creditor’s side of the loan. It is all off record which means, ipso facto that it is a question of fact as to whose loan it is. That means, ipso facto, that the presence of MERS makes it a judicial question which means that the non-judicial election is not available. They can’t do it.

So when you put this all together, you end up with the following inescapable conclusions:

* The naming of MERS as mortgagee in a mortgage deed or as beneficiary in a deed of trust is a nullity.
* MERS has no right, title or interest in any loan and even if it did, it disclaims any such interest on its own website.
* The lender might be the REAL beneficiary, but that is a question of fact so the non-judicial foreclosure option is not available.
* If the lender was not the creditor, it isn’t the lender because it had no right title or interest either, legally or equitably.
* Without a creditor named in the security instrument intended to secure the obligation, the security was never perfected.
* Without a creditor named in the security instrument intended to secure the obligation, the obligation is unsecured as to legal title.
* Since the only real creditor is the one who advanced the funds (the investor(s)), they can enforce the obligation by proxy or directly. Whether the note is actually evidence of the obligation and to what extent the terms of the note are enforceable is a question for the court to determine.
* The creditor only has a claim if they would suffer loss as a result of the indirect transaction with the borrower. If they or their agents have received payments from any source, those payments must be allocated to the loan account. The extent and measure of said allocation is a question of fact to be determined by the Court.
* Once established, the allocation will most likely be applied in the manner set forth in the note, to wit: (a) against payments due (b) against fees and (c) against principal, in that order.
* Once applied against payments, due the default vanishes unless the allocation is less than the amount due in payments.
* Once established, the allocation results in a fatal defect in the notice of default, the statements sent to the borrower, and the representations made in court. Thus at the very least they must vacate all foreclosure proceedings and start over again.
* If the allocation is less than the amount of payments due, then the investor(s) collectively have a claim for acceleration and to enforce the note — but they have no claim on the mortgage deed or deed of trust. By intentionally NOT naming parties who were known at the time of the transaction the security was split from the obligation. The obligation became unsecured.
* The investors MIGHT have a claim for equitable lien based upon the circumstances that BOTH the borrower and the investor were the victims of fraud.

Ortiz v. Accredited Home Lenders


	UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
	Docket Number available at www.versuslaw.com
	Citation Number available at www.versuslaw.com
	July 13, 2009 ERNESTO ORTIZ; ARACELI ORTIZ, PLAINTIFFS, v. ACCREDITED HOME LENDERS, INC.; LINCE HOME LOANS; CHASE HOME FINANCE, LLC; U.S. BANK NATIONAL ASSOCIATION, TRUSTEE FOR JP MORGAN ACQUISITION TRUST-2006 ACC; AND DOES 1 THROUGH 100, INCLUSIVE, DEFENDANTS. The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge ORDER GRANTING MOTION TO DISMISS Doc. No. 7 On February 6, 2009, Plaintiffs Ernesto and Araceli Ortiz (“Plaintiffs”) filed a complaint in the Superior Court of the State of California, County of San Diego, raising claims arising out of a mortgage loan transaction. (Doc. No. 1, Exh. 1.) On March 9, 2009, Defendants Chase Home Finance, LLC (“Chase”) and U.S. Bank National Association (“U.S. Bank”) removed the action to federal court on the basis of federal question jurisdiction, 28 U.S.C. § 1331. (Doc. No. 1.) Plaintiffs filed a First Amended Complaint on April 21, 2009, naming only U.S. Bank as a defendant and dropping Chase, Accredited Home Lenders, Inc., and Lince Home Loans from the pleadings. (Doc. No. 4, “FAC.”) Pending before the court is a motion by Chase and U.S Bank to dismiss the FAC for failure to state a claim pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6). (Doc. No. 7, “Mot.”) Because Chase is no longer a party in this matter, the court construes the motion as having been brought only by U.S. Bank. Plaintiffs oppose the motion. (Doc. No. 12, “Opp’n.”) U.S. Bank submitted a responsive reply. (Doc. No. 14, “Reply.”) Pursuant to Civ.L.R. 7.1(d), the matter was taken under submission by the court on June 22, 2009. (Doc. No. 12.) For the reasons set forth below, the court GRANTS the motion to dismiss. I. BACKGROUND Plaintiffs purchased their home at 4442 Via La Jolla, Oceanside, California (the “Property”) in January 2006. (FAC ¶ 3; Doc. No. 7-2, Exh. 1 (“DOT”) at 1.) The loan was secured by a Deed of Trust on the Property, which was recorded around January 10, 2006. (DOT at 1.) Plaintiffs obtained the loan through a broker “who received kickbacks from the originating lender.” (FAC ¶ 4.) U.S. Bank avers that it is the assignee of the original creditor, Accredited Home Lenders, Inc. (FAC ¶ 5; Mot. at 2, 4.) Chase is the loan servicer. (Mot. at 4.) A Notice of Default was recorded on the Property on June 30, 2008, showing the loan in arrears by $14,293,08. (Doc. No. 7-2, Exh. 2.) On October 3, 2008, a Notice of Trustee’s Sale was recorded on the Property. (Doc. No. 7-2, Exh. 4.) From the parties’ submissions, it appears no foreclosure sale has yet taken place. Plaintiffs assert causes of action under Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”), the Perata Mortgage Relief Act, Cal. Civil Code § 2923.5, the Foreign Language Contract Act, Cal. Civ. Code § 1632, the California Unfair Business Practices Act, Cal. Bus. Prof. Code § 17200 et seq., and to quiet title in the Property. Plaintiffs seek rescission, restitution, statutory and actual damages, injunctive relief, attorneys’ fees and costs, and judgments to void the security interest in the Property and to quiet title. II. DISCUSSION A. Legal Standards A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe the pleadings in the light most favorable to the plaintiff, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). While Rule 12(b)(6) dismissal is proper only in “extraordinary” cases, the complaint’s “factual allegations must be enough to raise a right to relief above the speculative level….” U.S. v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981); Bell Atlantic Corp. v. Twombly, 550 US 544, 555 (2007). The court should grant 12(b)(6) relief only if the complaint lacks either a “cognizable legal theory” or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). In testing the complaint’s legal adequacy, the court may consider material properly submitted as part of the complaint or subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). Furthermore, under the “incorporation by reference” doctrine, the court may consider documents “whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff’s] pleading.” Janas v. McCracken (In re Silicon Graphics Inc. Sec. Litig.), 183 F.3d 970, 986 (9th Cir. 1999) (internal quotation marks omitted). A court may consider matters of public record on a motion to dismiss, and doing so “does not convert a Rule 12(b)(6) motion to one for summary judgment.” Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. 1986), abrogated on other grounds by Astoria Fed. Sav. and Loan Ass’n v. Solimino, 501 U.S. 104, 111 (1991). To this end, the court may consider the Deed of Trust, Notice of Default, Substitution of Trustee, and Notice of Trustee’s Sale, as sought by U.S. Bank in their Request for Judicial Notice. (Doc. No. 7-2, Exhs. 1-4.) B. Analysis A. Truth in Lending Act Plaintiffs allege U.S. Bank failed to properly disclose material loan terms, including applicable finance charges, interest rate, and total payments as required by 15 U.S.C. § 1632. (FAC ¶¶ 7, 14.) In particular, Plaintiffs offer that the loan documents contained an “inaccurate calculation of the amount financed,” “misleading disclosures regarding the…variable rate nature of the loan” and “the application of a prepayment penalty,” and also failed “to disclose the index rate from which the payment was calculated and selection of historical index values.” (FAC ¶ 13.) In addition, Plaintiffs contend these violations are “obvious on the face of the loans [sic] documents.” (FAC ¶ 13.) Plaintiffs argue that since “Defendant has initiated foreclosure proceedings in an attempt to collect the debt,” they may seek remedies for the TILA violations through “recoupment or setoff.” (FAC ¶ 14.) Notably, Plaintiffs’ FAC does not specify whether they are requesting damages, rescission, or both under TILA, although their general request for statutory damages does cite TILA’s § 1640(a). (FAC at 7.) U.S. Bank first asks the court to dismiss Plaintiffs’ TILA claim by arguing it is “so summarily pled that it does not ‘raise a right to relief above the speculative level …'” (Mot. at 3.) The court disagrees. Plaintiffs have set out several ways in which the disclosure documents were deficient. In addition, by stating the violations were apparent on the face of the loan documents, they have alleged assignee liability for U.S. Bank. See 15 U.S.C. § 1641(a)(assignee liability lies “only if the violation…is apparent on the face of the disclosure statement….”). The court concludes Plaintiffs have adequately pled the substance of their TILA claim. However, as U.S. Bank argues, Plaintiffs’ TILA claim is procedurally barred. To the extent Plaintiffs recite a claim for rescission, such is precluded by the applicable three-year statute of limitations. 15 U.S.C. § 1635(f) (“Any claim for rescission must be brought within three years of consummation of the transaction or upon the sale of the property, whichever occurs first…”). According to the loan documents, the loan closed in December 2005 or January 2006. (DOT at 1.) The instant suit was not filed until February 6, 2009, outside the allowable three-year period. (Doc. No. 1, Exh. 1.) In addition, “residential mortgage transactions” are excluded from the right of rescission. 15 U.S.C. § 1635(e). A “residential mortgage transaction” is defined by 15 U.S.C. § 1602(w) to include “a mortgage, deed of trust, … or equivalent consensual security interest…created…against the consumer’s dwelling to finance the acquisition…of such dwelling.” Thus, Plaintiffs fail to state a claim for rescission under TILA. As for Plaintiffs’ request for damages, they acknowledge such claims are normally subject to a one-year statute of limitations, typically running from the date of loan execution. See 15 U.S.C. §1640(e) (any claim under this provision must be made “within one year from the date of the occurrence of the violation.”). However, as mentioned above, Plaintiffs attempt to circumvent the limitations period by characterizing their claim as one for “recoupment or setoff.” Plaintiffs rely on 15 U.S.C. § 1640(e), which provides: This subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law. Generally, “a defendant’s right to plead ‘recoupment,’ a ‘defense arising out of some feature of the transaction upon which the plaintiff’s action is grounded,’ … survives the expiration” of the limitations period. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415 (1998) (quoting Rothensies v. Elec. Storage Battery Co., 329 U.S. 296, 299 (1946) (internal citation omitted)). Plaintiffs also correctly observe the Supreme Court has confirmed recoupment claims survive TILA’s statute of limitations. Id. at 418. To avoid dismissal at this stage, Plaintiffs must show that “(1) the TILA violation and the debt are products of the same transaction, (2) the debtor asserts the claim as a defense, and (3) the main action is timely.” Moor v. Travelers Ins. Co., 784 F.2d 632, 634 (5th Cir. 1986) (citing In re Smith, 737 F.2d 1549, 1553 (11th Cir. 1984)) (emphasis added). U.S. Bank suggests Plaintiffs’ TILA claim is not sufficiently related to the underlying mortgage debt so as to qualify as a recoupment. (Mot. at 6-7.) The court disagrees with this argument, and other courts have reached the same conclusion. See Moor, 784 F.2d at 634 (plaintiff’s use of recoupment claims under TILA failed on the second and third prongs only); Williams v. Countrywide Home Loans, Inc., 504 F.Supp.2d 176, 188 (S.D. Tex. 2007) (where plaintiff “received a loan secured by a deed of trust on his property and later defaulted on the mortgage payments to the lender,” he “satisfie[d] the first element of the In re Smith test….”). Plaintiffs’ default and U.S. Bank’s attempts to foreclose on the Property representing the security interest for the underlying loan each flow from the same contractual transaction. The authority relied on by U.S. Bank, Aetna Fin. Co. v. Pasquali, 128 Ariz. 471 (Ariz. App. 1981), is unpersuasive. Not only does Aetna Finance recognize the split among courts on this issue, the decision is not binding on this court, and was reached before the Supreme Court’s ruling in Beach, supra. Aetna Fin., 128 Ariz. at 473, Nevertheless, the deficiencies in Plaintiffs’ claim become apparent upon examination under the second and third prongs of the In re Smith test. Section 1640(e) of TILA makes recoupment available only as a “defense” in an “action to collect a debt.” Plaintiffs essentially argue that U.S. Bank’s initiation of non-judicial foreclosure proceedings paves the path for their recoupment claim. (FAC ¶ 14; Opp’n at 3.) Plaintiffs cite to In re Botelho, 195 B.R. 558, 563 (Bkrtcy. D. Mass. 1996), suggesting the court there allowed TILA recoupment claims to counter a non-judicial foreclosure. In Botelho, lender Citicorp apparently initiated non-judicial foreclosure proceedings, Id. at 561 fn. 1, and thereafter entered the plaintiff’s Chapter 13 proceedings by filing a Proof of Claim. Id. at 561. The plaintiff then filed an adversary complaint before the same bankruptcy court in which she advanced her TILA-recoupment theory. Id. at 561-62. The Botelho court evaluated the validity of the recoupment claim, taking both of Citicorp’s actions into account — the foreclosure as well as the filing of a proof of claim. Id. at 563. The court did not determine whether the non-judicial foreclosure, on its own, would have allowed the plaintiff to satisfy the three prongs of the In re Smith test. On the other hand, the court finds U.S. Bank’s argument on this point persuasive: non-judicial foreclosures are not “actions” as contemplated by TILA. First, § 1640(e) itself defines an “action” as a court proceeding. 15 U.S.C. § 1640(e) (“Any action…may be brought in any United States district court, or in any other court of competent jurisdiction…”). Turning to California law, Cal. Code Civ. Proc. § 726 indicates an “action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property” results in a judgment from the court directing the sale of the property and distributing the resulting funds. Further, Code § 22 defines an “action” as “an ordinary proceeding in a court of justice by which one party prosecutes another for the declaration, enforcement, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense.” Neither of these state law provisions addresses the extra-judicial exercise of a right of sale under a deed of trust, which is governed by Cal. Civ. Code § 2924, et seq. Unlike the situation in Botelho, U.S. Bank has done nothing to bring a review its efforts to foreclose before this court. As Plaintiffs concede, “U.S. Bank has not filed a civil lawsuit and nothing has been placed before the court” which would require the court to “examine the nature and extent of the lender’s claims….” (Opp’n at 4.) “When the debtor hales [sic] the creditor into court…, the claim by the debtor is affirmative rather than defensive.” Moor, 784 F.2d at 634; see also, Amaro v. Option One Mortgage Corp., 2009 WL 103302, at 3 (C.D. Cal., Jan. 14, 2009) (rejecting plaintiff’s argument that recoupment is a defense to a non-judicial foreclosure and holding “Plaintiff’s affirmative use of the claim is improper and exceeds the scope of the TILA exception….”). The court recognizes that U.S. Bank’s choice of remedy under California law effectively denies Plaintiffs the opportunity to assert a recoupment defense. This result does not run afoul of TILA. As other courts have noted, TILA contemplates such restrictions by allowing recoupment only to the extent allowed under state law. 15 U.S.C. § 1640(e); Joseph v. Newport Shores Mortgage, Inc., 2006 WL 418293, at 2 fn. 1 (N.D. Ga., Feb. 21, 2006). The court concludes TILA’s one-year statute of limitations under § 1635(f) bars Plaintiffs’ TILA claim. In sum, U.S. Bank’s motion to dismiss the TILA claim is granted, and Plaintiffs’ TILA claims are dismissed with prejudice. B. Perata Mortgage Relief Act, Cal. Civ. Code § 2923.5 Plaintiffs’ second cause of action arises under the Perata Mortgage Relief Act, Cal. Civ. Code § 2923.5. Plaintiffs argue U.S. Bank is liable for monetary damages under this provision because it “failed and refused to explore” “alternatives to the drastic remedy of foreclosure, such as loan modifications” before initiating foreclosure proceedings. (FAC ¶¶ 17-18.) Furthermore, Plaintiffs allege U.S. Bank violated Cal. Civ. Code § 2923.5(c) by failing to include with the notice of sale a declaration that it contacted the borrower to explore such options. (Opp’n at 6.) Section 2923.5(a)(2) requires a “mortgagee, beneficiary or authorized agent” to “contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.” For a lender which had recorded a notice of default prior to the effective date of the statute, as is the case here, § 2923.5(c) imposes a duty to attempt to negotiate with a borrower before recording a notice of sale. These provisions cover loans initiated between January 1, 2003 and December 31, 2007. Cal. Civ. Code § 2923.5(h)(3)(i). U.S. Bank’s primary argument is that Plaintiffs’ claim should be dismissed because neither § 2923.5 nor its legislative history clearly indicate an intent to create a private right of action. (Mot. at 8.) Plaintiffs counter that such a conclusion is unsupported by the legislative history; the California legislature would not have enacted this “urgency” legislation, intended to curb high foreclosure rates in the state, without any accompanying enforcement mechanism. (Opp’n at 5.) The court agrees with Plaintiffs. While the Ninth Circuit has yet to address this issue, the court found no decision from this circuit where a § 2923.5 claim had been dismissed on the basis advanced by U.S. Bank. See, e.g. Gentsch v. Ownit Mortgage Solutions Inc., 2009 WL 1390843, at 6 (E.D. Cal., May 14, 2009)(addressing merits of claim); Lee v. First Franklin Fin. Corp., 2009 WL 1371740, at 1 (E.D. Cal., May 15, 2009) (addressing evidentiary support for claim). On the other hand, the statute does not require a lender to actually modify a defaulting borrower’s loan but rather requires only contacts or attempted contacts in a good faith effort to prevent foreclosure. Cal. Civ. Code § 2923.5(a)(2). Plaintiffs allege only that U.S. Bank “failed and refused to explore such alternatives” but do not allege whether they were contacted or not. (FAC ¶ 18.) Plaintiffs’ use of the phrase “refused to explore,” combined with the “Declaration of Compliance” accompanying the Notice of Trustee’s Sale, imply Plaintiffs were contacted as required by the statute. (Doc. No. 7-2, Exh. 4 at 3.) Because Plaintiffs have failed to state a claim under Cal. Civ. Code § 2923.5, U.S. Bank’s motion to dismiss is granted. Plaintiffs’ claim is dismissed without prejudice. C. Foreign Language Contract Act, Cal. Civ. Code § 1632 et seq. Plaintiffs assert “the contract and loan obligation was [sic] negotiated in Spanish,” and thus, they were entitled, under Cal. Civ. Code § 1632, to receive loan documents in Spanish rather than in English. (FAC ¶ 21-24.) Cal. Civ. Code § 1632 provides, in relevant part: Any person engaged in a trade or business who negotiates primarily in Spanish, Chines, Tagalog, Vietnamese, or Korean, orally or in writing, in the course of entering into any of the following, shall deliver to the other party to the contract or agreement and prior to the execution thereof, a translation of the contract or agreement in the language in which the contract or agreement was negotiated, which includes a translation of every term and condition in that contract or agreement. Cal. Civ. Code § 1632(b). U.S. Bank argues this claim must be dismissed because Cal. Civ. Code § 1632(b)(2) specifically excludes loans secured by real property. (Mot. at 8.) Plaintiffs allege their loan falls within the exception outlined in § 1632(b)(4), which effectively recaptures any “loan or extension of credit for use primarily for personal, family or household purposes where the loan or extension of credit is subject to the provision of Article 7 (commencing with Section 10240) of Chapter 3 of Part I of Division 4 of the Business and Professions Code ….” (FAC ¶ 21; Opp’n at 7.) The Article 7 loans referenced here are those secured by real property which were negotiated by a real estate broker.fn1 See Cal. Bus. & Prof. Code § 10240. For the purposes of § 1632(b)(4), a “real estate broker” is one who “solicits borrowers, or causes borrowers to be solicited, through express or implied representations that the broker will act as an agent in arranging a loan, but in fact makes the loan to the borrower from funds belonging to the broker.” Cal. Bus. & Prof. Code § 10240(b). To take advantage of this exception with respect to U.S. Bank, Plaintiffs must allege U.S. Bank either acted as the real estate broker or had a principal-agent relationship with the broker who negotiated their loan. See Alvara v. Aurora Loan Serv., Inc., 2009 WL 1689640, at 3 (N.D. Cal. Jun. 16, 2009), and references cited therein (noting “several courts have rejected the proposition that defendants are immune from this statute simply because they are not themselves brokers, so long as the defendant has an agency relationship with a broker or was acting as a broker.”). Although Plaintiffs mention in passing a “broker” was involved in the transaction (FAC ¶ 4), they fail to allege U.S. Bank acted in either capacity described above. Nevertheless, Plaintiffs argue they are not limited to remedies against the original broker, but may seek rescission of the contract through the assignee of the loan. Cal. Civ. Code § 1632(k). Section 1632(k) allows for rescission for violations of the statute and also provides, “When the contract for a consumer credit sale or consumer lease which has been sold and assigned to a financial institution is rescinded pursuant to this subdivision, the consumer shall make restitution to and have restitution made by the person with whom he or she made the contract, and shall give notice of rescission to the assignee.” Cal. Civ. Code § 1632(k) (emphasis added). There are two problems with Plaintiffs’ theory. First, it is not clear to this court that Plaintiffs’ loan qualifies as a “consumer credit sale or consumer lease.” Second, the court interprets this provision not as a mechanism to impose liability for a violation of § 1632 on U.S. Bank as an assignee, but simply as a mechanism to provide notice to that assignee after recovering restitution from the broker. The mechanics of contract rescission are governed by Cal. Civ. Code § 1691, which requires a plaintiff to give notice of rescission to the other party and to return, or offer to return, all proceeds he received from the transaction. Plaintiffs’ complaint does satisfy these two requirements. Cal. Civ. Code § 1691 (“When notice of rescission has not otherwise been given or an offer to restore the benefits received under the contract has not otherwise been made, the service of a pleading…that seeks relief based on rescission shall be deemed to be such notice or offer or both.”). However, the court notes that if Plaintiffs were successful in their bid to rescind the contract, they would have to return the proceeds of the loan which they used to purchase their Property. For these reasons discussed above, Plaintiffs have failed to state a claim under Cal. Civ. Code § 1632. U.S. Bank’s motion to dismiss is granted and Plaintiffs’ claim for violation of Cal. Civ. Code § 1632 is dismissed without prejudice. D. Unfair Business Practices, Cal. Bus. & Prof. Code § 17200 California’s unfair competition statute “prohibits any unfair competition, which means ‘any unlawful, unfair or fraudulent business act or practice.'” In re Pomona Valley Med. Group, 476 F.3d 665, 674 (9th Cir. 2007) (citing Cal. Bus. & Prof. Code § 17200, et seq.). “This tripartite test is disjunctive and the plaintiff need only allege one of the three theories to properly plead a claim under § 17200.” Med. Instrument Dev. Labs. v. Alcon Labs., 2005 WL 1926673, at 5 (N.D. Cal. Aug. 10, 2005). “Virtually any law–state, federal or local–can serve as a predicate for a § 17200 claim.” State Farm Fire & Casualty Co. v. Superior Court, 45 Cal.App.4th 1093, 1102-3 (1996). Plaintiffs assert their § 17200 “claim is entirely predicated upon their previous causes of action” under TILA and Cal. Civ. Code §§ 2923.5 and § 1632. (FAC ¶¶ 25-29; Opp’n at 9.) U.S. Bank first contend Plaintiffs lack standing to pursue a § 17200 claim because they “do not allege what money or property they allegedly lost as a result of any purported violation.” (Mot. at 9.) The court finds Plaintiffs have satisfied the pleading standards on this issue by alleging they “relied, to their detriment,” on incomplete and inaccurate disclosures which led them to pay higher interest rates than they would have otherwise. (FAC ¶ 9.) Such “losses” have been found sufficient to confer standing. See Aron v. U-Haul Co. of California, 143 Cal.App.4th 796, 802-3 (2006). U.S. Bank next offers that Plaintiffs’ mere recitation of the statutory bases for this cause of action, without specific allegations of fact, fails to state a claim. (Mot. at 10.) Plaintiffs point out all the factual allegations in their complaint are incorporated by reference into their § 17200 claim. (FAC ¶ 25; Opp’n at 9.) The court agrees there was no need for Plaintiffs to copy all the preceding paragraphs into this section when their claim expressly incorporates the allegations presented elsewhere in the complaint. Any argument by U.S. Bank that the pleadings failed to put them on notice of the premise behind Plaintiffs’ § 17200 claim would be somewhat disingenuous. Nevertheless, all three of Plaintiffs’ predicate statutory claims have been dismissed for failure to state a claim. Without any surviving basis for the § 17200 claim, it too must be dismissed. U.S. Bank’s motion is therefore granted and Plaintiffs’ § 17200 claim is dismissed without prejudice. E. Quiet Title In their final cause of action, Plaintiffs seek to quiet title in the Property. (FAC ¶¶ 30-36.) In order to adequately allege a cause of action to quiet title, a plaintiff’s pleadings must include a description of “[t]he title of the plaintiff as to which a determination…is sought and the basis of the title…” and “[t]he adverse claims to the title of the plaintiff against which a determination is sought.” Cal. Code Civ. Proc. § 761.020. A plaintiff is required to name the “specific adverse claims” that form the basis of the property dispute. See Cal. Code Civ. Proc. § 761.020, cmt. at ¶ 3. Here, Plaintiffs allege the “Defendant claims an adverse interest in the Property owned by Plaintiffs,” but do not specify what that interest might be. (Mot. at 6-7.) Plaintiffs are still the owners of the Property. The recorded foreclosure Notices do not affect Plaintiffs’ title, ownership, or possession in the Property. U.S. Bank’s motion to dismiss is therefore granted, and Plaintiffs’ cause of action to quiet title is dismissed without prejudice. III. CONCLUSION For the reasons set forth above, U.S. Bank’s motion to dismiss (Doc. No. 7) is GRANTED. Accordingly, Plaintiffs’ claim under TILA is DISMISSED with prejudice and Plaintiffs’ claims under Cal. Civ. Code § 2923.5, Cal. Civ. Code § 1632, and Cal. Bus. & Prof. Code § 17200, and their claim to quiet title are DISMISSED without prejudice. The court grants Plaintiffs 30 days’ leave from the date of entry of this order to file a Second Amended Complaint which cures all the deficiencies noted above. Plaintiffs’ Second Amended Complaint must be complete in itself without reference to the superseded pleading. Civil Local Rule 15.1. IT IS SO ORDERED. Opinion Footnotes fn1 Although U.S. Bank correctly notes the authorities cited by Plaintiffs are all unreported cases, the court agrees with the conclusions set forth in those cases. See Munoz v. International Home Capital Corp., 2004 WL 3086907, at 9 (N.D. Cal. 2004); Ruiz v. Decision One Mortgage Co., LLC, 2006 WL 2067072, at 5 (N.D. Cal. 2006).

2009-2010 livinglies recap

1. No governmental relief is in sight for homeowners except in isolated instances of community action together with publicity from the media.
2. State and federal governments continue to sink deeper into debt, cutting social and necessary services while avoiding the elephant in the living room: the trillions of dollars owed and collectible in taxes, recording fees, filing fees, late fees, penalties, financial damages, punitive damages and interest due from the intermediary players on Wall Street who created trading “instruments” based upon conveyance of interests in real property located within state borders. The death grip of the lobby for the financial service industry is likely to continue thus making it impossible to resolve the housing crisis, the state budget crisis or the federal budget deficit.
3. Using taxpayer funds borrowed from foreign governments or created through quantitative easing, trillions of dollars have been paid, or provided in “credit lines” to intermediaries on the false premise that they own or control the mortgage backed securities that have defaulted. Foreclosures continue to hit new highs. Total money injected into the system exceeds 8 trillion dollars. Record profits announced by the financial services industry in which power is now more concentrated than before, making them the strongest influence in Federal and State capitals around the world.
4. Toxic Titles reveal unmarketable properties in and out of foreclosures with no relief in sight because nearly everyone is ignoring this basic problem that is a deal-breaker on every transfer of an interest in real property.
5. Evictions continue to hit new highs as Judges continue to be bombarded with ill-conceived motions that do not address the jurisdiction or authority of the court. The illegal evictions are based upon fraudulent conveyances procured through abuse of the foreclosure process and direct misrepresentations and fraud upon the court and recording system in each county as to the documents fabricated for purposes of foreclosure — creating the illusion of a proper paper trail.
6. 1.7 million new foreclosed properties are due to hit the market according to published statistics. Livinglies estimate the number to be at least 4 million.
7. Downward pressure on both price and marketability continues with no end in sight.
8. Unemployment continues to rise, albeit far more slowly than at the beginning of 2009. Unemployment, underemployment, employment drop-outs, absence of entry-level jobs, low statistics on new business starts, and former members of workforce (particularly men) are harbingers for continued decline in median income combined with higher expenses for key components, particularly health care. The ability to pay anything other than rent is continuing its decline.
9. Concurrent with the increase in foreclosures and the decrease in housing prices, official figures put the number of homes underwater at 25%. Livinglies estimates that when you look at three components not included in official statistics, the figure rises to more than 45%. The components are selling discounts, selling expenses, and continued delusional asking prices that will soon crash when sellers realize that past high prices were an illusion, not a market fluctuation.
10. The number of people walking from their homes is increasing daily, including people who are not behind in their mortgages. This is increasing the inventory of homes that are not officially included in the pipeline because they are not sufficiently advanced in the delinquency or foreclosure process. This is a hidden second wave of pressure on housing prices and marketability.
11. With the entire economy on government life-support that is not completely effective in preventing rises in homelessness and people requiring public assistance, the likelihood of severe social unrest and political upheaval increases month by month. Increasing risks of unrest prompted at least one Wall Street Bank to order enough firearms and ammunition to start an armory.
12. Modification of mortgages has been largely a sham.
13. Short-sales have been largely a sham.
14. Quiet titles in favor of homeowners are increasing at a slow pace as the sophistication of defenses improves on the side of financial services companies seeking free homes through foreclosures.
15. Legislative Intervention has been ineffective and indeed, misleading
16. Executive intervention has been virtually non-existent. The people who perpetrated this fraud not only have evaded prosecution, they maintain close relationships with the Obama administration.
17. Judicial intervention has been spotty and could be much better once people accept the complexity of securitization and the simplicity of STRATEGIES THAT WORK.
18. Legal profession , slow to start went from zero to 15 mph during 2009. Let’s hope they get to 60 mph during 2010.
19. Accounting profession, which has thus far stayed out of the process is expected to jump in on several fronts, including closer scrutiny of the published financial statements of public companies and financial institutions and the cottage industry of examining loan documents for compliance issues and violations of Federal and State lending laws.
20. Prospects for actual economic recovery affecting the average citizen are dim. While there has been considerable improvement from the point of risk we had reached at the end of 2008, the new President and Congress have yet to address essential reforms on joblessness, regulation of financial services (including insurance businesses permitted to write commitments without sufficient assets in reserve to assure the payment of the risk. The economic indicators have been undermined by the intentional fraud perpetrated upon the world economic and financial system. Thus the official figures are further than ever from revealing the truth about about our current status. Without key acceptance of these anomalies it is inconceivable that the economy will, in reality, improve during 2010.
21. Real inflation affecting everyday Americans has already started to rise as credit markets become increasingly remote from the prospective borrowers. Hyperinflation remains a risk although most of us were off on the timing because we underestimated the tenacious grip the dollar had on world commerce. While this assisted us in moving toward a softer landing, the probability that the dollar will continue to fall is still very high, thus making certain non-dollar denominated commodities more valuable. This phenomenon could affect housing prices in an upward direction if the trend continues. However the higher dollar prices will be offset by the fact that the cheaper dollars are required in greater quantities to buy anything. Thus the home prices might rise from $125,000 to $150,000 but the price of a loaf of bread will also be higher by 20%.
22. GDP has been skewed away from including econometrics for actual work performed in the home unless money changes hands. Societal values have thus depreciated the value of child-rearing and stable homes. The results have been catastrophic in education, crime, technological innovation and policy making. While GDP figures are officially announced as moving higher, the country continues to move further into a depression. No actual increase in GDP has occurred for many years, unless the declining areas of the society are excluded from what is counted.
23. The stock market is vastly overvalued again based upon vaporous forward earnings estimates and completely arbitrary price earnings ratios used by analysts. The vapor created by a 1000% increase in money supply caused by deregulation of the private financial institutions together with the illusion of profits created by these institutions trading between themselves has resulted in an increase from 16% to 45% of GDP activity. This figure is impossible to be real. As long as it is accepted as real or even possible, public figures, appointed and elected will base policy decisions on the desires of what is currently seen as the main driver of the U.S. economy. The balance of wealth will continue to move toward the levels of revolutionary France or the American colonies.
24. Perceptible increases in savings and consumer resistance to retail impulse buying bodes well for the long-term prospects of the country. As the savings class becomes more savvy and more wealthy, they will, like their counterparts in the upper echelons of government commence exercising their power in the marketplace and in the voting booth.

no recoded asignment no power of sale (foreclosure)2932.5

Mortgages with a power of sale as a form of security, although such powers of sale are strictly construed (Savings & Loan Soc. v. Burnett, 106 Cal. 514 [39 P. 922]), are not looked upon with disfavor in California. (Godfrey v. Monroe, 101 Cal. 224 [35 P. 761].) Indeed, such powers of sale are expressly permitted by section 2932 of the Civil Code, and since July 27, 1917, the exercise of such powers has been carefully regulated. (Civ. Code, sec. 2924.) In this connection we should also bear in mind section 858 of the Civil Code, which reads as follows: “Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is to be deemed a part of the security, and vests in any person who, by assignment, becomes entitled to the money so secured to be paid, and may be executed by him whenever the assignment is duly acknowledged and recorded.” This indicates to some extent that California intended that such a power of sale survives until the debt is paid or barred by the statute of limitations. [13 Cal.App.2d 239]

unperfected mortgage goes away in Bankruptcy and here is how it was done

Yes in San Jose an unperfected Mortgage was don away with the perfect storm.
1. COMPLAINT 2. MEMOR. IN SUPPORT OF APPLICATION FOR RESTRAINING ORDER 3. APPLICATION FOR A TEMPORARY RESTRAINING ORDER 4. REQUEST FOR JUDICIAL NOTICE 5. OPPOSITION TO MOTION FOR RELIEF FROM THE AUTOMATIC STAY 6. DECLARATION OF ISABEL 7. NOTICE OF HEARING

How to Stop Foreclosure

This is general information and assumes that you have access to the rest of the material on the blog. Foreclosures come in various flavors.

First of all you have non-judicial and judicial foreclosure states. Non-judicial basically means that instead of signing a conventional mortgage and note, you signed a document that says you give up your right to a judicial proceeding. So the pretender lender or lender simply instructs the Trustee to sell the property, giving you some notice. Of course the question of who is the lender, what is a beneficiary under a deed of trust, what is a creditor and who owns the loan NOW (if anyone) are all issues that come into play in litigation.

In a non-judicial state you generally are required to bring the matter to court by filing a lawsuit. In states like California, the foreclosers usually do an end run around you by filing an unlawful detainer as soon as they can in a court of lower jurisdiction which by law cannot hear your claims regarding the illegality of the mortgage or foreclosure.

In a judicial state the forecloser must be the one who files suit and you have considerably more power to resist the attempt to foreclose.

Then you have stages:

STAGE 1: No notice of default has been sent.

In this case you want to get a forensic analysis that is as complete as humanly possible — TILA, RESPA, securitization, title, chain of custody, predatory loan practices, fraud, fabricated documents, forged documents etc. I call this the FOUR WALL ANALYSIS, meaning they have no way to get out of the mess they created. Then you want a QWR (Qualified Written Request) and DVL (Debt Validation Letter along with complaints to various Federal and State agencies. If they fail to respond or fail to answer your questions you file a suit against the party who received the QWR, the party who originated the loan (even if they are out of business), and John Does 1-1000 being the owners of mortgage backed bonds that are evidence of the investors ownership in the pool of mortgages, of which yours is one. The suit is simple — it seeks to stop the servicer from receiving any payments, install a receiver over the servicer’s accounts, order them to answer the simple question “Who is my creditor and how do I get a full accounting FROM THE CREDITOR? Alternative counts would be quiet title and damages under TILA, RESPA, SEC, etc.

Tactically you want to present the forensic declaration and simply say that you have retained an expert witness who states in his declaration that the creditor does not include any of the parties disclosed to you thus far. This [prevents you from satisfying the Federal mandate to attempt modification or settlement of the loan. You’ve asked (QWR and DVL) and they won’t tell. DON’T GET INTO INTRICATE ARGUMENTS CONCERNING SECURITIZATION UNTIL IT IS NECESSARY TO DO SO WHICH SHOULD BE AFTER A FEW HEARINGS ON MOTIONS TO COMPEL THEM TO ANSWER.

IN OTHER WORDS YOU ARE SIMPLY TELLING THE JUDGE THAT YOUR EXPERT HAS PRESENTED FACTS AND OPINION THAT CONTRADICT AND VARY FROM THE REPRESENTATIONS OF COUNSEL AND THE PARTIES WHO HAVE BEEN DISCLOSED TO YOU THUS FAR.

YOU WANT TO KNOW WHO THE OTHER PARTIES ARE, IF ANY, AND WHAT MONEY EXCHANGED HANDS WITH RESPECT TO YOUR LOAN. YOU WANT EVIDENCE, NOT REPRESENTATIONS OF COUNSEL. YOU WANT DISCOVERY OR AN ORDER TO ANSWER THE QWR OR DVL. YOU WANT AN EVIDENTIARY HEARING IF IT IS NECESSARY.

Avoid legal argument and go straight for discovery saying that you want to be able to approach the creditor, whoever it is, and in order to do that you have a Federal Statutory right (RESPA) to the name of a person, a telephone number and an address of the creditor — i.e., the one who is now minus money as a result of the funding of the loan. You’ve asked, they won’t answer.

Contemporaneously you want to get a temporary restraining order preventing them from taking any further action with respect to transferring, executing documents, transferring money, or collecting money until they have satisfied your demand for information and you have certified compliance with the court. Depending upon your circumstances you can offer to tender the monthly payment into the court registry or simply leave that out.

You can also file a bankruptcy petition especially if you are delinquent in payments or are about to become delinquent.

STAGE 2: Notice of Default Received

Believe it or not this is where the errors begin by the pretender lenders. You want to challenge authority, authenticity, the amount claimed due, the signatory, the notary, the loan number and anything else that is appropriate. Then go back to stage 1 and follow that track. In order to effectively do this you need to have that forensic analysis and I don’t mean the TILA Audit that is offered by so many companies using off the shelf software. You could probably buy the software yourself for less money than you pay those companies. I emphasize again that you need a FOUR WALL ANALYSIS.

Stage 3 Non-Judicial State, Notice of Sale received:

State statutes usually give you a tiny window of opportunity to contest the sale and the statute usually contains exact provisions on how you can do that or else your objection doesn’t count. At this point you need to secure the services of competent, knowledgeable, experienced legal counsel — professionals who have been fighting with these pretender lenders for a while. Anything less and you are likely to be sorely disappointed unless you landed, by luck of the draw, one of the increasing number of judges you are demonstrating their understanding and anger at this fraud.

Stage 4: Judicial State: Served with Process:

You must answer usually within 20 days. Failure to do so, along with your affirmative defenses and counterclaims, could result in a default followed by a default judgment followed by a Final Judgment of Foreclosure. See above steps.

Stage 5: Sale already occurred

You obviously need to reverse that situation. Usually the allegation is that the sale should be vacated because of fraud on the court (judicial) or fraudulent abuse of non-judicial process. This is a motion or Petitioner but it must be accompanied by a lawsuit, properly served and noticed to the other side. You probably need to name the purchaser at sale, and ask for a TRO (Temporary Restraining Order) that stops them from moving the property or the money around any further until your questions are answered (see above). At the risk of sounding like a broken record, you need a good forensic analyst and a good lawyer.

Stage 6: Eviction (Unlawful Detainer Filed or Judgment entered:

Same as Stage 5.

The lawyer is not competend to testify

If the lawyer is not a competent witness with personal knowledge, then he should shut up and sit down.

So you sent a QWR and you know the loan is securitized. The orignating lender says talk to the servicer and the servicer declines to answer all the questions because they didn’t originate the loan. Or you are in court and the lawyer is trying to finesse his way past basic rules of evidence and due process by making representations to the Judge as an officer of the court.

He’s lying of course and if you let it go unchallenged, you will lose the case. Basically opposing counsel is saying “trust me Judge I wouldn’t say it if it wasn’t so.” And your answer is that the lawyer is not a witness, that you don’t trust the lawyer or what he has to say, that if he is a witness he should be sworn in and subject to cross examaintion and if he is not a witness you are entitled to be confronted with a real witness with real testimony based upon real knowledge.

First Questions: When did you first learn of this case? What personal knowledge do you have concerning the payments received from the homeowner or third parties? What personal knowledge do you have as to who providing the actual cash from which the subject loan was funded?

Only when pressed relentlessly by the homeowner, the servicer comes up with a more and more restrictive answer as to what role they play. But they always start with don’t worry about a thing we control everything. Not true. Then later after you thought you worked out a modification they tell the deal is off because the investor declined. The investor is and always was the lender. That is the bottom line and any representation to the contrary is a lie and a fraud upon the court.

So whoever you sent the QWR to, always disclaims your right to ask, or tells you the name of the investor (i.e., your lender) is confidential, or that they have authority (but they won’t show it to you). That doesn’t seem to be a lender, does it? In fact they disclaim even knowing enough to answer your questions.

So AFTER THEY SERVE YOU with something file a motion to compel an immediate full answer to your QWR since under TILA service on the servicer is the same as service on the lender. You argue that everyone seems to be claiming rights to be paid under the original obligation, everyone seems to be claiming the right to enforce the note and mortgage, but nobody is willing to state unequivocally that they are the lender.

You are stuck in the position of being unable to seek modification under federal and State rules, unable to sell the property because you don’t know who can sign a satisfaction of mortgage or a release and reconveyance, unable to do a short-sale, and unable to refinance — all because they won’t give a simple answer to a simple question: who is the lender and what is the balance claimed by the real lender on the obligation? At this point you don’t even know that any of the real lenders wish to make a claim.

This is probably because they received TARP funds and insurance proceeds on defaults of pools that they had purchased multiple insurance policies (credit default swaps). But whether they are paid by someone who acquired rights of subrogation or they were not paid, you have a right to a FULL accounting and to know who they are and whether they received any third party money. If they were paid in part or otherwise sold their interest, then you have multiple additional unknown parties.

The reason is simple. They are not the lender and they know it. The lender is a group of investors who funded the transaction with Petitioner/Homeowner and others who purchased similar financial products from the same group of participants in the securitization chain relating to the subject loan.

The people currently in court do not include all the real parties in interest for you to make claims against the lender. Cite to the Massachusetts case where Wells Fargo and its lawyer were subject to an $850,000 sanction for misrepresenting its status to the court.

It is not enough for them to bluff their way by saying that they have already answered the interrogatories. When they lost and it came time to allocate damages and attorneys fees, Wells suddenly said they were NOT the lender, beneficiary or current holder and that therefore the damages and attorneys fees should be assessed against the real lender — who was not a party to the pending litigation and whom they refused to disclose along with their misrepresentation that they were the true lender.

It is not enough that the lawyer makes a representation to the court as an officer of the court. That is not how evidence works. If the lawyer wants to represent facts, then he/she should be sworn in and be subject to (1) voir dire to establish that he/she is opposing counsel that it came from some company.

The witness must be a competent witness who takes an oath, has personal knowledge regarding the content of the document, states that personal knowledge and whose testimony conforms to what is on the document.

There is no such thing as foundation without a witness. There is no such thing as foundation without a competent witness. So if the lawyer tries to finesse the subject by making blanket representations to the court(e.g. the property is “underwater” by $xxx,xxx and we need a lift of stay…yet, there is no certified appraisal entered into evidence with a certified appraiser that can be cross examined…just a statement from opposing counsel) point to Wells, or even point to other inconsistencies between what counsel has represented and what now appears to be the truth, and demand an evidentiary hearing. If the lawyer is not a competent witness with personal knowledge, then he should shut up and sit down.

File a motion to extend time to file adversary proceeding(in BK situation), answer, affirmative defenses and counterclaim UNTIL YOU GET A FULL AND COMPLETE ANSWER TO YOUR QWR so you can determine the real parties in interest and serve them with process. Otherwise, we will have a partial result wherein the real owner of the loan can and will claim damages and injunctive relief probably against all the current parties to this action including the Homeowner.

In short, the opposing counsel cannot just make statements of “fact” and have them accepted by the court as “fact” if they don’t pass the sniff test of real evidence corroborated by a competent witness. …and with every pleading ask for an evidentiary hearing and attorneys fees. Follow rule 11 procedure in Federal Court or the state law counterpart so you can get them later.

The case is lost when you stip to the commissioner

remember this if you forget everything else you don’t have to agree to take a commissioner in your eviction case he has thirty or so cases per day and therefore does not have time to listen to your defenses to the foreclosure or that the sale was not dully perfected . He will politely say I do not have jurisdiction to hear these defenses. if they present the Trustees deed,

Trustees Fleming and Huff (Photo credit: dave.cournoyer)

its over.
See Cal. Const. Article 6, §§21; 22
CCP § 259(e)

Foreclosure Victory For Nor Cal Area Homeowner!

A Sacramento area court ruling against the plaintiff came in an unlawful detainer hearing last Friday. Lenders and servicers are taking notice of the “sale” by trustee that was set aside in favor of a loan modification. Submitted by Steve Shafer

February 5, 2009 / Sacramento California – The Bay Area Superior Court decision and judgment against the plaintiff allows the “sale” by the trustee to be set aside in favor of a loan modification.
Lenders nationwide who originate and service loans know California offers them a “safe haven” from homeowner’s who dispute a recent foreclosure. That means overwhelming odds for anyone in foreclosure who loses their home to a lender in a foreclosure. The borrower becomes a holdover and must respond to an unlawful detainer after their home is lost.

That was not the case for an El Dorado area resident at a recent hearing for an unlawful detainer matter heard in a Placerville County superior court room. The recent victory in court was in an unlawful detainer matter for the defendant Ms. Stella Onyeu and mortgage lender and securities sponsor – AURORA LOAN SERVICES v. STELLA D. ONYEU (case number PCU2008032).

AURORA LOAN SERVICES like so many other lender servicing agents has come under greater scrutiny as of late for questionable business practices. According to its web site Aurora Loan Services is operating as usual. The company is a subsidiary of Lehman Brothers Bank, and not part of the Lehman Brothers Holding Inc. bankruptcy filing.

The case was originally filed in October of last year and shortly thereafter was dismissed when the Plaintiff failed to show at a scheduled hearing. Subsequent motions were filed to vacate the dismissal in favor of a motion to dismiss by the plaintiffs. The matter was heard recently heard again by the same court and earlier mentioned presiding judge. Mark Terbeek is the attorney for the Defendant and Maher Soliman a Juris Pro witness provided case development and court expert testimony.

This judgment for the defendant is monumental given the courts limited jurisdiction related to the lenders sole focus to have the borrower removed from the home. The issues at hand are the legal procedural limitations and high attrition rate for defendants and their attorney’s. The problem is the defendant’s lack of standing for pleading a wrongful foreclosure due to jurisdiction of the court.

So what does this all mean? Many homeowners can find some hope, for the moment, in knowing the otherwise unfriendly California UD courts will now hold some promise for hearing arguments as to the foreclosure and the plaintiffs standing. According to foreclosure and REO sales analyst Brenda Michelson of Nationwide Loan Services “It’s hit or miss at this level of the law and the courts willingness to step outside of its jurisdiction.” The smaller outlying courts seem to me to be more willing to entertain defense arguments that the plaintiff may not be the holder in due course and lacks capacity throughout the foreclosure” Terbeek’s response is that if the plaintiff cannot demonstrate a logical and properly conveyed transfer of the beneficial interest – it is not entitled to possession.

After the foreclosure and conveyance back to the trustee, the homeowner is considered unlawfully occupying the dwelling as a holdover. However, the court ruled that AURORA had in fact violated its duty to show good faith and comply accordingly under the recent California statutes and amendments Power of Sale provision. The presiding judge who heard the matter ordered a judgment against the company allowed for Terbeek to enter a request for all legal fees due.

According to legal expert Soliman, “there are more attorneys willing to now jump into the wrongful foreclosure business and fight the court on the jurisdiction issue. However, it is nearly impossible to rely on the judge and courts at this level”. Soliman is an examiner with Nationwide Loan Services and has engagements in multiple cases throughout California through attorneys such as Terbeek who represented the defendant.

Jurisdiction: An Overview

The term jurisdiction is really synonymous with the word “power” and the sovereignty on behalf of which it functions. Any court possesses jurisdiction over matters only to the extent granted to it by the Constitution, or legislation of a paramount fundamental question for lawyers is whether a given court has jurisdiction to preside over a given case. A jurisdictional question may be broken down into various components including whether there is jurisdiction over the person (in personam), the subject matter, or res (in rem), and to render the particular judgment sought.

An unlawful detainer lawsuit is a “summary” court procedure. This means that the court action moves forward very quickly, and that the time given the tenant to respond during the lawsuit is very short. For example, in most cases, the tenant has only five days to file a written response to the lawsuit after being served with a copy of the landlord’s complaint. Normally, a judge will hear and decide the case within 20 days after the borrower now tenant files an answer.

The question of whether a given court has the power to determine a jurisdictional question is itself a jurisdictional question. Such a legal question is referred to as “jurisdiction to determine jurisdiction.” In order to evict the tenant, the landlord must file an unlawful detainer lawsuit in superior court. In an eviction lawsuit, the lender is the “plaintiff” and the prior borrower and homeowners become an occupant holdover and the “defendant.” Immediately after the trustee sale of the home the conveyance by the trustee is entered in favor of the lender. Until recently in most cases the lender is with in its right foreclose if a borrower has missed a number of payments, failed to make the insurance premiums or not paid the property taxes. “But sometimes a lender is wrong and you can fight foreclosure by challenging the foreclosure process and related documents” said Soliman.

As the new owner of record AURORA HOME LOAN SERVICES must follow procedures no different than that of a landlord in a tenant occupancy dispute. The next step is to remove the homeowner from the subject dwelling. If the tenant doesn’t voluntarily move out after the landlord has properly given the required notice to the tenant, the landlord can evict the tenant. If the lender makes a mistake in its filing of the foreclosure documents a court my throw out the whole foreclosure case. In the case of a wrongful foreclosure the borrower’s claims are limited to affirmative defenses.

Affirmative Defenses

Unlike a judicial proceeding, California lenders need to merely wait out the mandatory term for issuing default notices and ensure it has properly served those notices to the borrower. In other words the hearing and trial taken place in the above referenced matter is not subject to arguments brought by the homeowner for wrongful foreclosure versus the question as to lawful possession of the property by the lender.

California lenders are typically limited to only the defenses a landlord will face when opposed and made subject to claims of wrongfully trying to evict a tenant. Claims such as the Plaintiff has breached the warranty to provide habitable premises, plaintiff did not give proper credit before the notice to pay or quit expired or plaintiff waived, changed, or canceled the notice to quit, or filed the complaint to retaliate against defendant are often completely unrelated to the matter at hand. The courts decision to enforce the provisions of an earlier modification in lieu of a foreclosure sends a major wake up call to the lenders who are under siege to avoid foreclose and be done with mortgage mess affecting United States homeowners. Soliman says the decision is unfortunately not likely to be read into as case precedent for future lawyers and wrongful defendants seeking to introduce our case as an example of a lenders wrongful action.

Soliman goes on to say “it’s both interesting and entertaining to see experienced attorneys who jump in and immediately question the issue of the courts authority. Its reality time when they get to their first hearing and see first hand the problematic issues with jurisdiction.”

Servicing agents are never the less on notice they must be ready to defend themselves when the opportunity to argue the plaintiffs standing are allowed in an unlawful detainer motivate by a foreclosure. Therefore, the debate about what the courts hear will remain open and subject to further scrutiny by the lawyers for both sides and judges who preside over the courts at this level.

Nationwide Loan Servicing is an approved Expert Witness who provides court testimoney in matters concerning wrongful foreclosures, Federal Savings Banks regultory violations and SEC filings for private registrations.

SB 94 and its interferance with the practice

CA SB 94 on Lawyers & Loan Modifications Passes Assembly… 62-10

The California Assembly has passed Senate Bill 94, a bill that seeks to protect homeowners from loan modification scammers, but could end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.

SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture. Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these services are not compensated until the contracted services have been performed.

SB 94 prevents companies, individuals… and even attorneys… from receiving fees or any other form of compensation until after the contracted services have been rendered. The bill will now go to the Democratic controlled Senate where it is expected to pass.

Supporters of the bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return. They say that by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no question that there have been some unscrupulous people that have taken advantage of homeowners in distress, the number of these scammers is unclear. Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.

In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up front fees for modifications, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are. Bank of America, for example, got the worst grade of any bank on the President’s report card listing, modifying only 4% of the eligible mortgages since the plan began. We’ve given B of A something like $200 billion and they still claim that they’re having a hard time answering the phones over there, so who’s scamming who?

To make matters worse, and in the spirit of Y2K, the media has fanned the flames of irrationality with stories of people losing their homes as a result of someone failing to get their loan modified. The stories go something like this:

We gave them 1,000. They told us to stop making our mortgage payment. They promised us a principal reduction. We didn’t hear from them for months. And then we lost our house.

I am so sure. Can that even happen? I own a house or two. Walk me through how that happened again, because I absolutely guarantee you… no way could those things happen to me and I end up losing my house over it. Not a chance in the world. I’m not saying I couldn’t lose a house, but it sure as heck would take a damn sight more than that to make it happen.

Depending on how you read the language in the bill, it may prevent licensed California attorneys from requiring a retainer in advance of services being rendered, and this could essentially eliminate a homeowner’s ability to hire a lawyer to help save their home.

Supporters, on the other hand, respond that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

But, assuming they’re talking about at the end of the transaction, there are key differences. Real estate agents and mortgage brokers are paid OUT OF ESCROW at the end of a transaction. They don’t send clients a bill for their services after the property is sold.

Homeowners at risk of foreclosure are having trouble paying their bills and for the most part, their credit ratings have suffered as a result. If an attorney were to represent a homeowner seeking a loan modification, and then bill for his or her services after the loan was modified, the attorney would be nothing more than an unsecured creditor of a homeowner who’s only marginally credit worthy at best. If the homeowner didn’t pay the bill, the attorney would have no recourse other than to sue the homeowner in Small Claims Court where they would likely receive small payments over time if lucky.

Extending unsecured credit to homeowners that are already struggling to pay their bills, and then having to sue them in order to collect simply isn’t a business model that attorneys, or anyone else for that matter, are likely to embrace. In fact, the more than 50 California attorneys involved in loan modifications that I contacted to ask about this issue all confirmed that they would not represent homeowners on that basis.

One attorney, who asked not to be identified, said: “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved.”

“I don’t think there’s any question that SB 94 will make it almost impossible for a homeowner to obtain legal representation related to loan modifications,” explained another attorney who also asked not to be identified. ”The banks have fought lawyers helping clients through the loan modification process every step of the way, so I’m not surprised they’ve pushed for this legislation to pass.”

Proponents of the legislation recite the all too familiar mantra about there being so many scammers out there that the state has no choice but to move to shut down any one offering to help homeowners secure loan modifications that charges a fee for the services. They point out that consumers can just call their banks directly, or that there are nonprofit organizations throughout the state that can help homeowners with loan modifications.

While the latter is certainly true, it’s only further evidence that there exists a group of people in positions of influence that are unfamiliar , or at the very least not adequately familiar with obtaining a loan modification through a nonprofit organization, and they’ve certainly never tried calling a bank directly.

The fact that there are nonprofit housing counselors available, and the degree to which they may or may not be able to assist a given homeowner, is irrelevant. Homeowners are well aware of the nonprofit options available. They are also aware that they can call their banks directly. From the President of the United States and and U.S. Attorney General to the community newspapers found in every small town in America, homeowners have heard the fairy tales about about these options, and they’ve tried them… over and over again, often times for many months. When they didn’t get the desired results, they hired a firm to help them.

Yet, even the State Bar of California is supporting SB 94, and even AB 764, a California Assembly variation on the theme, and one even more draconian because of its requirement that attorneys only be allowed to bill a client after a successful loan modification has been obtained. That means that an attorney would have to guarantee a homeowner that he or she would obtain a modification agreement from a lender or servicer or not get paid for trying. Absurd on so many levels. Frankly, if AB 764 passes, would the last one out of California please turn off the lights and bring the flag.

As of late July, the California State Bar said it was investigating 391 complaints against 141 attorneys, as opposed to nine investigations related to loan modifications in 2008. The Bar hasn’t read anywhere all of the complaints its received, but you don’t have to be a statistician to figure out that there’s more to the complaints that meets the eye. So far the State Bar has taken action against three attorneys and the Attorney General another four… so, let’s see… carry the 3… that’s 7 lawyers. Two or three more and they could have a softball team.

At the federal level they’re still reporting the same numbers they were last spring. Closed 11… sent 71 letters… blah, blah, blah… we’ve got a country of 300 million and at least 5 million are in trouble on their mortgage. The simple fact is, they’re going to have to come up with some serious numbers before I’m going to be scared of bumping into a scammer on every corner.

Looking Ahead…

California’s ALT-A and Option ARM mortgages are just beginning to re-set, causing payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result. Prime jumbo foreclosure rates are already up a mind blowing 634% as compared with January 2008 levels, according to LPS Applied Analytics.

Clearly, if SB 94 ends up reducing the number of legitimate firms available for homeowners to turn to, everyone involved in its passage is going to be retiring. While many sub-prime borrowers have suffered silently through this horror show of a housing crisis, the ALT-A and Option ARM borrowers are highly unlikely to slip quietly into the night.

There are a couple of things about the latest version of SB 94 that I found interesting:

1. It says that a lawyer can’t collect a fee or any other compensation before serivces have been delivered, but it doesn’t make clear whether attorneys can ask the client to deposit funds in the law firm’s trust account and then bill against thsoe funds as amounts are earned. Funds deposited in a law firm trust account remain the client’s funds, so they’re not a lawyer’s “fees or other compensation”. Those funds are there so that when the fees have been earned, the lawyer doesn’t have to hope his or her bill gets paid. Of course, it also says that an attorney can’t hold any security interest, but money in a trust account a client’s money, the attorney has no lien against it. All of this is a matter of interpretation, of course, so who knows.

2. While there used to be language in both the real estate and lawyer sections that prohibited breaking up services related to a loan modification, in the latest version all of the language related to breaking up services as applied to attorneys has been eliminated. It still applies to real estate licensed firms, but not to attorneys. This may be a good thing, as at least a lawyer could complete sections of the work involved as opposed to having to wait until the very end, which the way the banks have been handling things, could be nine months away.

3. The bill says nothing about the amounts that may be charged for services in connection with a loan modification. So, in the case of an attorney, that would seem to mean that… well, you can put one, two and three together from there.

4. Lawyers are not included in definition of foreclosure consultant. And there is a requirement that new language be inserted in contracts, along the lines of “You don’t have to pay anyone to get a loan modification… blah, blah, blah.” Like that will be news to any homeowner in America. I’ve spoken with hundreds and never ran across one who didn’t try it themselves before calling a lawyer. I realize the Attorney General doesn’t seem to know that, but look… he’s been busy.

Conclusion…

Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners, while foreclosures increase and our economy continues its deflationary free fall? Will the California State Bar ever finishing reading the complaints being received, and if they ever do, will they understand what they’ve read. Or is our destiny that the masses won’t understand what’s happening around them until it sucks them under as well.

I surely hope not. But for now, I’m just hoping people can still a hire an attorney next week to help save their homes, because if they can’t… the Bar is going to get a lot more letters from unhappy homeowners.

Countrywide San Diego district attorney v. Countrywide

san deigovscountrywide

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

News Release
July 15, 2009
For Immediate Release
Contact: (916) 324-5500
Print Version
Attachments

Los Angeles – As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief.

Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

Brown filed five lawsuits as part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants, which he conducted with the Federal Trade Commission, the U.S. Attorney’s office and 22 other federal and state agencies. In total, 189 suits and orders to stop doing business were filed across the country.

Following the housing collapse, hundreds of loan modification and foreclosure-prevention companies have cropped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. Yet, loan modifications are rarely, if ever, obtained. Less than 1 percent of homeowners nationwide have received principal reductions of any kind.

Brown has been leading the fight against fraudulent loan modification companies. He has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

Brown’s office filed the following lawsuits in Orange County and U.S. District Court for the Central District (Los Angeles):

– U.S. Homeowners Assistance, based in Irvine;
– U.S. Foreclosure Relief Corp and its legal affiliate Adrian Pomery, based in the City of Orange;
– Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
– RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, City of Orange, Huntington Beach, Corona, and Fresno;
– and
– United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.

U.S. Homeowners Assistance
Brown on Monday sued U.S. Homeowners Assistance, and its executives — Hakimullah “Sean” Sarpas and Zulmai Nazarzai — for bilking dozens of homeowners out of thousands of dollars each.

U.S. Homeowners Assistance claimed to be a government agency with a 98 percent success rate in aiding homeowners. In reality, the company was not a government agency and was never certified as an approved housing counselor by the U.S. Department of Housing and Urban Development. None of U.S. Homeowners Assistance’s known victims received loan modifications despite paying upfront fees ranging from $1,200 to $3,500.

For example, in January 2008, one victim received a letter from her lender indicating that her monthly mortgage payment would increase from $2,300 to $3,500. Days later, she received an unsolicited phone call from U.S. Homeowners Assistance promising a 40 percent reduction in principal and a $2,000 reduction in her monthly payment. She paid $3500 upfront for U.S. Homeowners Assistance’s services.

At the end of April 2008, her lender informed her that her loan modification request had been denied and sent her the documents that U.S. Homeowners Assistance had filed on her behalf. After reviewing those documents, she discovered that U.S. Homeowners Assistance had forged her signature and falsified her financial information – including fabricating a lease agreement with a fictitious tenant.

When she confronted U.S. Homeowners Assistance, she was immediately disconnected and has not been able to reach the company.

Brown’s suit contends that U.S. Homeowners Assistance violated:
– California Business and Professions Code section 17500 by falsely stating they were a government agency and misleading homeowners by claiming a 98 percent success rate in obtaining loan modifications;

– California Business and Professions Code section 17200 by failing to perform services made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Civil Code section 2945.45 for failing to register with the California Attorney General’s Office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

US Homeowners Assistance also did business as Statewide Financial Group, Inc., We Beat All Rates, and US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown last week sued US Foreclosure Relief Corporation, H.E. Service Company, their executives — George Escalante and Cesar Lopez — as well as their legal affiliate Adrian Pomery for running a scam promising homeowners reductions in their principal and interest rates as low as 4 percent. Brown was joined in this suit by the Federal Trade Commission and the State of Missouri.

Using aggressive telemarketing tactics, the defendants solicited desperate homeowners and charged an upfront fee ranging from $1,800 to $2,800 for loan modification services. During one nine-month period alone, consumers paid defendants in excess of $4.4 million. Yet, in most instances, defendants failed to provide the mortgage-relief services. Once consumers paid the fee, the defendants avoided responding to consumers’ inquiries.

In response to a large number of consumer complaints, several government agencies directed the defendants to stop their illegal practices. Instead, they changed their business name and continued their operations – using six different business aliases in the past eight months alone.

Brown’s lawsuit alleges the companies and individuals violated:
– The National Do Not Call Registry, 16 C.F.R. section 310.4 and California Business and Professions Code section 17200 by telemarketing their services to persons on the registry;

– The National Do Not Call Registry, 16 C.F.R. section 310.8 and California Business and Professions Code section 17200 by telemarketing their services without paying the mandatory annual fee for access to telephone numbers within the area codes included in the registry;

– California Civil Code section 2945 et seq. and California Business and Professions Code section 17200 by demanding and collecting up-front fees prior to performing any services, failing to include statutory notices in their contracts, and failing to comply with other requirements imposed on mortgage foreclosure consultants;

– California Business and Professions Code sections 17200 and 17500 by representing that they would obtain home loan modifications for consumers but failing to do so in most instances; by representing that consumers must make further payments even though they had not performed any of the promised services; by representing that they have a high success rate and that they can obtain loan modification within no more than 60 days when in fact these representations were false; and by directing consumers to avoid contact with their lenders and to stop making loan payments causing some lenders to initiate foreclosure proceedings and causing damage to consumers’ credit records.

Victims of this scam include a father of four battling cancer, a small business owner, an elderly disabled couple, a sheriff whose income dropped due to city budget cuts and an Iraq-war veteran. None of these victims received the loan modification promised.

Brown is seeking unspecified civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

The defendants also did business under other names including Lighthouse Services and California Foreclosure Specialists.

Home Relief Services, LLC
Brown Monday sued Home Relief Services, LLC., its executives Terence Green Sr. and Stefano Marrero, the Diener Law Firm and its principal attorney Christopher L. Diener for bilking thousands of homeowners out of thousands of dollars each.

Home Relief Services charged homeowners over $4,000 in upfront fees, promised to lower interest rates to 4 percent, convert adjustable-rate mortgages to low fixed-rate loans and reduce principal up to 50 percent within 30 to 60 days. None of the known victims received a modification with the assistance of the defendants.

In some cases, these companies also sought to be the lenders’ agent in the short-sale of their clients’ homes. In doing so, the defendants attempted to use their customers’ personal financial information for their own benefit.

Home Relief Services and the Diener Law Firm directed homeowners to stop contacting their lender because the defendants would act as their sole agent and negotiator.

Brown’s lawsuit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 95 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $10 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Two other companies with the same management were also involved in the effort to deceive homeowners: Payment Relief Services, Inc. and Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown Monday sued RMR Group Loss Mitigation and its executives Michael Scott Armendariz of Huntington Beach, Ruben Curiel of Lancaster, and Ricardo Haag of Corona; Living Water Lending, Inc.; and attorney Arthur Steven Aldridge of Westlake Village as well as the law firm of Shippey & Associates and its principal attorney Karla C. Shippey of Yorba Linda – for bilking over 500 victims out of nearly $1 million.

The company solicited homeowners through telephone calls and in-person home visits. Employees claimed a 98 percent success rate and a money-back guarantee. None of the known victims received any refunds or modifications with the assistance of defendants.

For example, in July 2008, a 71-year old victim learned his monthly mortgage payments would increase from $2,470 to $3,295. He paid $2,995, yet received no loan modification and no refund.

Additionally, RMR insisted that homeowners refrain from contacting their lenders because the defendants would act as their agents.

Brown’s suit contends that the defendants violated:

– California Business and Professions Code section 17500 by claiming a 98 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

United First, Inc.
On July 6, 2009, Brown sued a foreclosure consultant and an attorney — Paul Noe Jr. and Mitchell Roth – who conned 2,000 desperate homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings.

These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home’s value.

Noe convinced more than 2,000 homeowners to sign “joint venture” agreements with his company, United First, and hire Roth to file suits claiming that the borrower’s loan was invalid because the mortgages had been sold so many times on Wall Street that the lender could not demonstrate who owned it. Similar suits in other states have never resulted in the elimination of the borrower’s mortgage debt.

After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth’s firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner’s debt, the homeowner would be required to pay the company 80 percent of the value of the home.

Brown’s lawsuit contends that Noe, Roth and United First:

– Violated California’s credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945

– Inserted unconscionable terms in contracts;

– Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating California Business and Professions Code 6150; and

– Violated 17500 of the California Business and Professions Code.

Brown’s office is seeking $2 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Tips for Homeowners
Brown’s office issued these tips for homeowners to avoid becoming a victim:

DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON’T transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.

DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or http://www.hud.gov.

If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.
# # #

Pretender Lenders

— read and weep. Game Over. Over the next 6-12 months the entire foreclosure mess is going to be turned on its head as it becomes apparent to even the most skeptical that the mortgage mess is just that — a mess. From the time the deed was recorded to the time the assignments, powers of attorneys, notarization and other documents were fabricated and executed there is an 18 minute Nixonian gap in the record that cannot be cured. Just because you produce documents, however real they appear, does not mean you can shift the burden of proof onto the borrower. In California our legislator have attempted to slow this train wreck but the pretender lenders just go on with the foreclosure by declaring to the foreclosure trustee the borrower is in default and they have all the documents the trustee then records a false document. A notice of default filed pursuant to Section 2924 shall include a declaration from the mortgagee, beneficiary, or authorized agent that it has contacted the borrower, tried with due diligence to contact the borrower as required by this section, or the borrower has surrendered the property to the mortgagee, trustee, beneficiary, or authorized agent.
Invalid Declaration on Notice of Default and/or Notice of Trustee’s Sale.

The purpose of permitting a declaration under penalty of perjury, in lieu of a sworn statement, is to help ensure that declarations contain a truthful factual representation and are made in good faith. (In re Marriage of Reese & Guy, 73 Cal. App. 4th 1214, 87 Cal. Rptr. 2d 339 (4th Dist. 1999).
In addition to California Civil Code §2923.5, California Code of Civil Procedure §2015.5 states:
Whenever, under any law of this state or under any rule, regulation, order or requirement made pursuant to the law of this state, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn statement, declaration, verification, certificate, oath, or affidavit, in writing of the person making the same, such matter may with like force and effect be supported, evidenced, established or proved by the unsworn statement, declaration, verification, or certificate, in writing of such person which recites that is certified or declared by him or her to be true under penalty of perjury, is subscribed by him or her, and (1), if executed within this state, states the date and place of execution; (2) if executed at any place, within or without this state, states the date of execution and that is so certified or declared under the laws of the State of California. The certification or declaration must be in substantially the following form:
(a) If executed within this state:
“I certify (or declare) under penalty of perjury that the foregoing is true and correct”:
_____________________ _______________________
(Date and Place) (Signature)

For our purposes we need not look any farther than the Notice of Default to find the declaration is not signed under penalty of perjury; as mandated by new Civil Code §2923.5(c). (Blum v. Superior Court (Copley Press Inc.) (2006) 141 Cal App 4th 418, 45 Cal. Reptr. 3d 902 ). The Declaration is merely a form declaration with a check box.

No Personal Knowledge of Declarant
According to Giles v. Friendly Finance Co. of Biloxi, Inc., 199 So. 2nd 265 (Miss. 1967), “an affidavit on behalf of a corporation must show that it was made by an authorized officer or agent, and the officer him or herself must swear to the facts.” Furthermore, in Giles v. County Dep’t of Public Welfare of Marion County (Ind.App. 1 Dist.1991) 579 N.E.2d 653, 654-655 states in pertinent part, “a person who verified a pleading to have personal knowledge or reasonable cause to believe the existence of the facts stated therein.” Here, the Declaration for the Notice of Default by the agent does not state if the agent has personal knowledge and how he obtained this knowledge.
The proper function of an affidavit is to state facts, not conclusions, ¹ and affidavits that merely state conclusions rather than facts are insufficient. ² An affidavit must set forth facts and show affirmatively how the affiant obtained personal knowledge of those facts. ³
Here, The Notice of Default does not have the required agent’s personal knowledge of facts and if the Plaintiff borrower was affirmatively contacted in person or by telephone
to assess the Plaintiff’s financial situation and explore options for the Plaintiff to avoid foreclosure. A simple check box next to the “facts” does not suffice.
Furthermore, “it has been said that personal knowledge of facts asserted in an affidavit is not presumed from the mere positive averment of facts, but rather, a court should be shown how the affiant knew or could have known such facts, and, if there is no evidence from which the inference of personal knowledge can be drawn, then it is
¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬____________________________________________________________________________
¹ Lindley v. Midwest Pulmonary Consultants, P.C., 55 S.W.3d 906 (Mo. Ct. App. W.D. 2001).
² Jaime v. St. Joseph Hosp. Foundation, 853 S.W.2d 604 (Tex. App. Houston 1st Dist. 1993).
³ M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d 403 (Tex. App. Corpus Chrisit 1999).

presumed that from which the inference of personal knowledge can be drawn, then it is presumed that such does not exist.” ¹ The declaration signed by agent does not state anywhere how he knew or could have known if Plaintiff was contacted in person or by telephone to explore different financial options. It is vague and ambiguous if he himself called plaintiff.
This defendant did not adhere to the mandates laid out by congress before a foreclosure can be considered duly perfected. The Notice of Default states,

“That by reason thereof, the present beneficiary under such deed of trust, has executed and delivered to said agent, a written Declaration of Default and Demand for same, and has deposited with said agent such Deed of Trust and all documents evidencing obligations secured thereby, and has declared and does hereby declare all sums secured thereby immediately due and payable and has elected and does hereby elect to cause the trust property to be sold to satisfy the obligations secured thereby.”

However, Defendants do not have and assignment of the deed of trust nor have they complied with 2923.5 or 2923.6 or 2924 the Deed of Trust, nor do they provide any documents evidencing obligations secured thereby. For the aforementioned reasons, the Notice of Default will be void as a matter of law. The pretender lenders a banking on the “tender defense” to save them ie. yes we did not follow the law so sue us and when you do we will claim “tender” Check Mate but that’s not the law.

Recording a False Document
Furthermore, according to California Penal Code § 115 in pertinent part:
(a) Every person who knowingly procures or offers any false or forged instrument to be filed, registered, or recorded in any public office within this state, which instrument, if genuine, might be filed, registered, or recorded under any law of this state or of the United States, is guilty of a felony.

If you say you have a claim, you must prove it. If you say you are the lender, you must prove it. Legislators take notice: Just because bankers give you money doesn’t mean they can change 1000 years of common law, statutory law and constitutional law. It just won’t fly. And if you are a legislator looking to get elected or re-elected, your failure to act on what is now an obvious need to clear title and restore the wealth of your citizens who were cheated and defrauded, will be punished by the votes of your constituents.

The doan deal 3

California Civil Code 2923.6: California Courts’ Negative Rulings to Homeowners.

By Michael Doan on Apr 26, 2009 in Foreclosure Defense, Foreclosure News, Mortgage Servicer Abuses

In September, 2008, I wrote about the new effects of California Civil Code 2923.6 and how it would appear that home loans in California would require modifications to fair market value in certain situations.

Since then, many decisions have come down from local judges attempting to decipher exactly what it means. Unfortunately, most judges are of the opinion that newly enacted California Civil Code 2923.6 has no teeth, and is a meaningless statute.

Time and time again, California Courts are ruling that the new statute does not create any new duty for servicers of mortgages or that such duties do not apply to borrowers. These Courts then immediately dismiss the case, and usually do not even require the Defendant to file an Answer in Court, eliminating the Plaintiff’s right to any trial.

Notwithstanding some of these decisions, the statute was in fact specifically created to address the foreclosure crisis and help borrowers, as Noted in Section 1 of the Legislative Intent behind the Statute:

SECTION 1. The Legislature finds and declares all of the following:

(a) California is facing an unprecedented threat to its state economy and local economies because of skyrocketing residential property foreclosure rates in California. Residential property foreclosures increased sevenfold from 2006 to 2007. In 2007, more than 84,375 properties were lost to foreclosure in California, and 254,824 loans went into default, the first step in the foreclosure process.

(b) High foreclosure rates have adversely affected property values in California, and will have even greater adverse consequences as foreclosure rates continue to rise. According to statistics released by the HOPE NOW Alliance, the number of completed California foreclosure sales in 2007 increased almost threefold from 1,902 in the first quarter to 5,574 in the fourth quarter of that year. Those same statistics report that 10,556 foreclosure sales, almost double the number for the prior quarter, were completed just in the month of January 2008. More foreclosures means less money for schools, public safety, and other key services.

(c) Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.

(d) It is essential to the economic health of California for the state to ameliorate the deleterious effects on the state economy and local economies and the California housing market that will result from the continued foreclosures of residential properties in unprecedented numbers by modifying the foreclosure process to require mortgagees, beneficiaries, or authorized agents to contact borrowers and explore options that could avoid foreclosure. These changes in accessing the state’s foreclosure process are essential to ensure that the process does not exacerbate the current crisis by adding more foreclosures to the glut of foreclosed properties already on the market when a foreclosure could have been avoided. Those additional foreclosures will further destabilize the housing market with significant, corresponding deleterious effects on the local and state economy.

(e) According to a survey released by the Federal Home Loan Mortgage Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-paying borrowers do not know their lenders may offer alternatives to help them avoid foreclosure.

(f) As reflected in recent government and industry-led efforts to help troubled borrowers, the mortgage foreclosure crisis impacts borrowers not only in nontraditional loans, but also many borrowers in conventional loans.

(g) This act is necessary to avoid unnecessary foreclosures of residential properties and thereby provide stability to California’s statewide and regional economies and housing market by requiring early contact and communications between mortgagees, beneficiaries, or authorized agents and specified borrowers to explore options that could avoid foreclosure and by facilitating the modification or restructuring of loans in appropriate circumstances.

SEC. 7. Nothing in this act is intended to affect any local just-cause eviction ordinance. This act does not, and shall not be construed to, affect the authority of a public entity that otherwise exists to regulate or monitor the basis for eviction.

SEC. 8. The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

The forgoing clearly illustrates that the California Legislature was specifically looking to curb foreclosures and provide modifications to homeowners in their statement of intent. Moreover, Section (a) of 2923.6 specifically references a new DUTY OWED TO ALL PARTIES in the loan pool:

(a) The Legislature finds and declares that any duty servicers may have to maximize net present value under their pooling and servicing agreements is owed to all parties in a loan pool, not to any particular parties,…..

California Civil Code 2923.6(a) specifically creates to a NEW DUTY not previously addressed in pooling and servicing agreements. It then states that such a DUTY not only applies to the particular parties of the loan pool, but ALL PARTIES. So here we have the clear black and white text of the law stating that if a duty exists in the pooling and servicing agreement to maximize net present value between particular parties of that pool(and by the way, every pooling and servicing agreement I have ever read have such duties), then those same duties extend to all parties in the pool.

So how do these Courts still decide that NO DUTY EXISTS??? How do these Courts dismiss cases by finding that the thousands of borrowers of the loan pool that FUND the entire loan pool are not parties to that pool?

Hmm, if they are really not parties to the loan pool, then why are they even required to make payments on the loans to the loan pools? As you can see, the logic from these courts that there is no duty or that such a duty does not extend to the borrower is nothing short of absurd.

To date, there are no appellate decision on point, but many are in the works. Perhaps these courts skip the DUTY provisions in clause (a) and focus on the fact that no remedy section exists in the statute (notwithstanding the violation of any statute is “Tort in Se”). Perhaps their dockets are too full to fully read the legislative history of the statute (yes, when printed out is about 6 inches thick!) Whatever the reason, it seems a great injustice is occurring to defaulting homeowners, and the housing crisis is only worsening by these decisions.

Yet the reality is that much of the current housing crisis has a solution in 2923.6, and is precisely why the legislature created this EMERGENCY LEGISLATION. Its very simple: Modify mortgages, keep people in their homes, foreclosures and housing supplies goes down, and prices stabilize. More importantly, to the Servicers and Lenders, is the fact that they are now better off since THEY GENERALLY SAVE $50,000 OR MORE in foreclosure costs when modifying a loan(yes, go ahead and google the general costs of foreclosure and you will see that a minimum of $50,000.00 in losses is the average). Thus it is strange why most Courts are ruling that the California Legislature spent a lot of time and money writing a MEANINGLESS STATUTE with no application or remedy to those in need of loan modification.

Well, at least one Judge recently got it right. On April 6, 2009, in Ventura, California, in Superior Court case number 56-2008-00333790-CU-OR-VTA, Judge Fred Bysshe denied Metrocities Mortgage’ motion to dismiss a lawsuit brought under 2923.6. Judge Bysshe ruled that 2923.6 is not a matter of law that can be decided in the beginning of a lawsuit to dismiss it, but is instead a matter of fact that needs to be decided later:

THE COURT: Well, at this juncture in this case the Court holds that section 2923.6 was the legislature’s attempt to deal with a collapsing mortgage industry, and also to stabilize the market. And the Court’s ruling is to overrule the demurrer. Require the defendant to file an answer on or before April 27, 2009. And at this juncture with regard to the defendant’s request to set aside the Lis Pendens, that request is denied without prejudice.

Hopefully, more judges will now follow suit and appeals courts will have the same rulings. To read the actual transcript of the forgoing case, please click to my other blog here.

Written by Michael Doan

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“We are faced with a choice here,” Silvers said during the hearing. “We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can’t do both.”

Mortgage companies enrolled in the Obama administration’s signature foreclosure-prevention initiative may be receiving taxpayer funds despite not having a legal right to the home or to the mortgage, a top Treasury Department official revealed Wednesday.

“We are faced with a choice here,” Silvers said during the hearing. “We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can’t do both.”

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Editor’s Note: THAT’S IT. BLAME THE POOR PEOPLE — THE ONES WHO KNOW THE LEAST ABOUT FINANCE AND MORTGAGES.

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Step one: Hide the Truth!

Step two: Formulate intricate lies to placate the masses

Step three: Being forced to face the music

Step four: The eradication of US banks from global prominence

Impact on RMBS and CDOs

This is the part that everybody seems to be overlooking…

#333333;”>Warranties of representation, and forced repurchase of loans

As I said, losses should be ramping up on the mortgage sector. Notice the trend of housing prices after the onset of government bubble blowing: If Anybody Bothered to Take a Close Look at the Latest Housing Numbers…

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BofA Finds Foreclosure Document Errors

By DAN FITZPATRICK

Daedalus

Housing Policy in the Wake of the Crash

National Mortgage News

Lenders Want Delay on Appraisal Fee Language

More

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The Devastating Report On Bank Of America That Everyone Is Talking About

Here’s That Devastating Report On Bank Of America That Everyone Is Talking About Today

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