Sloppy Bookkeeping In Securitizations Beginning To Bite Financial Institutions As Big Squeeze On Lenders, Servicers Looms In The Horizon

The New York Times reports:

• WE are all learning, to our deep distress, how the perpetual pursuit of profits drove so many of the bad decisions that financial institutions made during the mortgage mania. But while investors tally the losses that were generated by loose lending so far, the impact of another lax practice is only beginning to be seen. That is the big banks’ minimalist approach to meeting legal requirements — bookkeeping matters, really — when pooling thousands of loans into securitization trusts.

***

• THE woes brought on by sloppy bookkeeping in securitizations will be on the agenda at the American Bankruptcy Institute’s annual spring meeting on April 3. An article titled “Where’s the Note, Who’s the Holder,” co-written by Judge [Samuel L.] Bufford and R. Glen Ayers, a former federal bankruptcy judge in Texas, will be the basis of a discussion at the meeting.

• Mr. Ayers, who is a lawyer at Langley & Banack in San Antonio, said he expects that these documentation problems will halt a lot of foreclosures. That will mean pain for investors who hold the securities. The problem for those who expect to receive the benefit of the note, Mr. Ayers said, is that they “may not be able to show to the judge they have a right to foreclose.” “It’s a huge problem,” he added. “It’s going to be expensive, I don’t know how expensive, ultimately to the bondholders.”(1)

For the story, see Fair Game: Guess What Got Lost in the Loan Pool?

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the story.

(1) More and more judges, attorneys, and homeowners are taking note of the fact that foreclosing lenders have no business foreclosing on defaulted mortgages unless the lenders (a) produce the promissory note, and more importantly, (b) produce evidence (ie. the chain of title to the note, etc.) that they have the legal right to enforce the note. First in line in feeling the financial squeeze are the loan servicers, according to a recent story in American Banker:

• [P]ooling and servicing agreements typically require that servicers advance all the principal and interest payments, as well as tax, insurance, maintenance, and foreclosure costs, to investors regardless of whether the borrower is paying. Servicers get reimbursed for expenses incurred while a loan is delinquent but only after the property goes into foreclosure, so getting repaid can take nine months to a year. Large banks with servicing operations may be able to handle the financial strain of paying advances to investors, but independent servicers and special servicers that deal with defaulted borrowers are already cash-strapped, said Matt Stadler, a principal and the chief financial officer at National Asset Direct Inc., a New York buyer and servicer of distressed loans. "Advance lines are ballooning, and servicers are paying interest on those advances," he said. Mr. Stadler likened the state of the servicing industry to the "I Love Lucy" episode in which Lucy is furiously grabbing chocolates off a fast-moving conveyor belt. "The borrowers are just piling up, and servicers are inundated and overwhelmed with calls they can't answer, short sales they can't complete, and not enough staff," he said.

The estimate of nine months to a year that it takes for a servicer to get reimbursed for its advances is obviously based on the foreclosing entity producing the note, and producing satisfactory evidence of its right to enforce it. However, as more and more lenders are unable to produce the proper paperwork in foreclosure actions, these cases are going into indefinite limbo, and will be causing (if they haven't already) a serious financial crush on those loan servicers caught in the middle as they are obligated to continue paying the holders of the securitized interests while the defaulting homeowners continue to properly stiff them. Any payments being made by the homeowners on account of their home mortgage will go directly into a court registry, or their attorney's trust account, pending resolution of the matter. ThetaMissingDocsMtg

Buying Residential Mortgage Loans? Documentation Issues & Risks Increase As "Produce The Note" Strategy Gains In Popularity

An article on mondaq.com advises that:

• Investors considering the purchase of residential mortgage loans should include on their diligence checklists verifying the mortgage loan documentation to ensure they will be in a position to enforce the Note and realize on the mortgage if necessary. This entails making sure there is a proper negotiation of all Notes in accordance with UCC requirements, obtaining physical custody of the original Notes, and obtaining written assignments of mortgages in recordable form.

The article highlights the following issues that investors can expect to be raised if they fail in their due diligence:

• [O]ne issue that has become an increasing focus of litigation between residential mortgage lenders and borrowers is the adequacy of the "paper trail" of mortgage loan securitizations. [...] Consumer lawyers around the country have sought to capitalize on the inability of some mortgage servicers and foreclosure counsel to adequately "prove up" the mortgage loan documentation to prevent or delay foreclosure of defaulted loans.

***

• The principal points of contention have been, first, whether possession of the borrower's original promissory note is a prerequisite to exercise of foreclosure remedies; and, second, whether the foreclosing creditor must show a complete "chain of title" tracing assignment of the mortgage from the loan originator or other party named in the mortgage.

***

• Increasingly, at the urging of debtors and debtor's counsel, state courts and in particular bankruptcy courts presented with motions for relief from the automatic stay to foreclose defaulted residential mortgage loans are requiring creditors to produce original Notes.

***

• A related issue concerns who is entitled to enforce the Note. It has been held that "[i]f a loan has been securitized, the real party in interest is the trustee of the securitization trust, not the servicing agent." In re Hwang, 396 B.R. 757, 767 (Bankr. C.D. Cal. 2008). Enforcement and foreclosure proceedings are often brought by the loan servicer, sometimes in its own name and sometimes in the name of its principal pursuant to a power of attorney. Any claimant who is not the "holder" of the Note within the meaning of the Uniform Commercial Code and in actual physical possession of the Note may find its standing challenged by borrowers and courts.

***

• The other principal line of attack by borrowers and their counsel concerns the validity of written assignments of mortgages.

***

• Another complication concerns the role of MERS-- the Mortgage Electronic Registration System, Inc. MERS was established to maintain an electronic off-record mortgage registry, thus eliminating the need for filings in the public land records whenever a mortgage changes hands.

For the article, see Documentation Issues And Risks In Purchasing Residential Mortgage Loans (article starts half way down the webpage).

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here. ThetaMissingDocsMtg

CNN On The Lee County, Florida Foreclosure "Rocket Docket"

On the heels of the recent stories in The Wall Street Journal and CBS News (here and here) on the Fort Myers, Florida Foreclosure "Rocket Docket," CNN comes out with its own coverage of the Southwest Florida court blasting away at the backlog of foreclosure cases.

For the story, see As foreclosures mount, Florida court turns to 'rocket docket.' (read story) (watch video). ThetaMissingDocsMtg

Pennsylvania Homeowner Uses "Produce The Note" Self-Help Strategy In Attempt To Fend Off Foreclosure

In Ellwood City, Pennsylvania, KDKA-TV Channel 2 reports:

• A Lawrence County man is trying a new strategy to save his home. Mark Strohecker, of Ellwood City, is a former firefighter who is on disability. When his adjustable rate mortgage jumped, he was unable to make payments. Facing foreclosure, he used a strategy promoted by a Florida-based website called the Consumer Warning Network. He filed a motion asking the lender to "produce the note." "Provide to me the promissory note to show to me that they are indeed the rightful owner of my property here," Strohecker said.(1)

***

• Strohecker tells KDKA his lender has told him they can't find the note. It's unclear what will happen next. He plans on filing more paperwork in court next week.

For the story, see Ellwood City Man Uses 'Note' Strategy To Save Home.

For the KDKA-TV Channel 2 video, see 'Note' Strategy Could Stop Home Foreclosure.

See also The Consumer Warning Network: Homeowner Stops Foreclosure after filing “Produce the Note”

• [T]he fight for Strohecker’s home is not over yet. The Judge’s order delays the foreclosure sale until May 13th. The order gives the plaintiff, LaSalle Bank National Association, time to come up with the original note, or, if it was lost or destroyed, to prove that LaSalle is the rightful owner of the note. The Judge’s order cites a potential loan modification as a reason for stopping the Sheriff’s Sale. “Said sale is stayed until the next sale scheduled for May 13, 2009, as there is the strong possibility of federal relief for mortgage foreclosures,” Judge Cox wrote in his order.

Go here for more on Produce The Note “How-To”.

Go here for Sample Foreclosure Legal Documents.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) For those in Mr. Strohecker's position, it might be a good idea to request that the mortgage company prove, not only that it has the note, but that it also has the legal right to enforce the note through foreclosure by demanding that it produce, among other things:

• a complete "chain of title" tracing assignment of the mortgage from the loan originator or other party named in the mortgage;
• all necessary affidavits, powers of attorney, etc. that impact on the validity of the written assignments of mortgage;
• the pooling and servicing agreement if a loan servicer is involved (see Max Gardner’s Top Resasons for Wanting a Pooling Servicing Agreement). ThetaMissingDocsMtg

Burden On Homeowner To Initiate Lawsuit To Employ "Produce The Note" Strategy In Non-Judicial Foreclosure States

In Atlanta, Georgia, WXIA-TV Channel 11 reports:

• With foreclosures all over the country reaching record levels, more and more people are beginning to fight back with three words that hit lenders like a fist: "Produce the note." "If a lender cannot produce the note," said bankruptcy attorney Howard Rothbloom, "it's no different than a person going to the bank trying to cash a lost check. If you don't have the note you can't prove that you don't have the mortgage."(1)

***

• But to be used here in Georgia, the three words have to be uttered by an attorney, not by you. That's because Georgia is a non-judicial foreclosure state, and for the court to intervene an attorney has to ask for a temporary restraining order. "So in order to demand that a lender to produce a note outside of bankruptcy court a borrower is going to have to sue the lender in state court and demand that the lender produce the note," noted Rothbloom.

For more, see Fight Foreclosure With Three Simple Words?

(1) And just like the lost check, even if the foreclosing lender or its agent can produce the note, it has the burden of proving that it has the legal right (ie. the legal standing) to enforce it (ie. endorsements, assignments, affidavits, powers of attorney, and any other required legal paperwork must all be in proper order). Copyright 2009 The Home Equity Theft Reporter (http:/HomeEquityTheft.blogspot.com) ThetaMissingDocsMtg

More On Missing Promissory Notes In Foreclosure Actions

An article co-authored by U.S. Bankruptcy Judge Samuel Bufford (Central District of California) and Texas attorney (and former Chief U.S. Bankruptcy Judge, Western District of Texas) R. Glen Ayers with the firm Langley & Banack in San Antonio, Texas directs the reader's attention to, among other things, title issues under Article 3 of the Uniform Commercial Code ("UCC") in the context of mortgage foreclosures.

The authors assert that these issues have received less than adequate focus in foreclosure proceedings. The article, which is part of a UCC presentation to be given by Mr. Ayers at the Advanced Bankruptcy Institute on April 3, 2009, is available online courtesy of his firm.

With respect to the lender's producing the promissory note in order to proceed with a foreclosure action, the authors point out that of even more importance than producing the note, the lender seeking to enforce a missing instrument:

• must be entitled to enforce the instrument,
• must prove the instrument’s terms, and
• must prove its right to enforce the instrument

pursuant to §3-309 (a)(1) & (b) of the UCC.

For the article (in MS Word format), see Where's The Note, Who's The Holder: Enforcement Of Promissory Note Secured By Real Estate.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here. ThetaMissingDocsMtg

Ponzi Schemes, Ski Masks, Uzis & The "Standing-Lacking" Foreclosure Interlopers

In Jacksonville, Florida, The Florida Times Union recently ran a story that contained this observation about foreclosing lenders from attorney April Charney, head of foreclosure defense with Jacksonville Area Legal Aid:

• [B]anks, investors, securitized trusts filled with home loans, rating organizations and others - all, according to Charney, were involved in and continue to facilitate a Ponzi scheme in which originating lenders did not transfer loans legally. In many cases, she says, the foreclosing entity has neither loaned money to a homeowner nor collected any payments.

• "These court interlopers might as well be wearing a ski mask and carrying an Uzi for as much right as they have to force homeowners out of their homes," Charney said Wednesday.

***

• Charney travels across the country, training other lawyers in how to stop foreclosures. She said she has trained at least 1,500. "Even judges are getting it now," she says. "In a case in California, the judge told the plaintiff, 'You can't even show me why you're here.' "(1)

For more, see 'Interlopers' in mortgages find foe in Legal Aid (April Charney fights shady lenders to help residents save homes).

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) Apparently, the "Rocket Docket - judicial rubber-stampers" blasting their way through foreclosure actions at the Lee County, Florida (Fort Myers) courthouse have yet to get the memo. See:

• The Wall Street Journal: A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge), and
• CBS Evening News: Pay Up Or Move Out. ThetaMissingDocsMtg

Foreclosure Halted As Questions Surround Court Filings; Brooklyn Judge Calls Multiple Corporate Hat-Wearing Bank Exec "A Milliner's Delight"

In a February, 2009 ruling, Brooklyn Supreme Court Justice Arthur M. Schack refused to allow a foreclosure action to continue, raising questions as to the propriety of a certain bank executive, one Keri Selman, signing mortgage assignments and affidavits in a number of his cases in which she identified herself as an Assistant Vice President for Mortgage Electronic Registration Systems (MERS), Bank of New York, and Countrywide Home Loans.

Troubled by the apparent incestuous relationships among the mortgage companies (commenting that "Ms. Selman is a milliner's delight by virtue of the number of hats she wears") and expressing concern "that Ms. Selman might be engaged in a subterfuge, wearing various corporate hats," Justice Schack refused to allow the foreclosure action to continue until:

1. an affidavit from Keri Selman is filed, explaining her employment history for the past three years and why Ms. Selman didn't have a conflict of interest as the assignor of the instant mortgage and note from MERS, as nominee for the original mortgagee, Homebridge Mortgage Bankers Corp., to plaintiff The Bank of New York, as Trustee;
2. an affidavit from an officer of the original mortgagee, Homebridge Mortgage Bankers Corp., explaining whether Homebridge Mortgage Bankers Corp. was aware of Ms. Selman's conflict of interest, and if Ms. Selman, in her dual roles, as Assistant Vice President of MERS, the nominee for Homebridge, and as Assistant Vice President of The Bank of New York, fully disclosed to Homebridge Mortgage Bankers Corp. the implications of her simultaneous representation and the advantages and risks involved; and
3. an affidavit or affirmation identifying whether the instant mortgage loan, pursuant to L2008, ch 472, § 3-a is a subprime home loan as defined in Real Property and Actions Proceedings Law § 1304 or is a high-cost home loan as defined in Banking Law § 6-l.

For Justice Schack's ruling, see Bank of NY v Myers, 2009 NY Slip Op 50159(U) [22 Misc 3d 1117(A)], February 3, 2009.

For other cases in which Justice Schack wrestled with the employment status of multiple corporate hat-wearing bank executives in foreclosure actions before him, see:

• HSBC Bank USA, N.A. v Charlevagne, 2008 NY Slip Op 51652(U) [20 Misc 3d 1128(A)]; Decided on August 4, 2008 (comments that with all the corporate hats one bank exec has worn, she might become the contemporary millinery rival to the late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug, both of whom notorious for wearing many colorful hats);

• HSBC Bank USA v Antrobus, 2008 NY Slip Op 51639(U) [20 Misc 3d 1127(A)]; Decided on July 31, 2008.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here. ThetaMissingDocsMtg

Miami Foreclosure Sale Set Aside As Lender Is Unable To Produce The Proper Paperwork Proving The Right To Enforce The Note

In Miami, Florida, The New York Times reports:

• [O]n Feb. 11, a circuit court judge in Miami-Dade County in Florida set aside a judgment against Ana L. Fernandez, a borrower whose home had been foreclosed and repurchased on Jan. 21 by Chevy Chase Bank, the institution claiming to hold the note. But the bank had been unable to produce evidence that the original lender had assigned the note, which was in the amount of $225,000, to Chevy Chase.

• With the sale set aside, Ms. Fernandez remains in the home. “We believe this loan was never assigned,” said Ray Garcia, the lawyer in Miami who represented the borrower. Now, he said, it is up to whoever can produce the underlying note to litigate the case. The statute of limitations on such a matter runs for five years, he said.(1)

***

• Mr. Garcia has another case in which a borrower tried to sell his home but could not because the note underlying a $60,000 second mortgage cannot be found. The statute of limitations on the matter will expire in October, he said, and if the note holder has not come forward by then, the borrower will be free of his obligation on the second mortgage.

For the story, see Fair Game: Guess What Got Lost in the Loan Pool?

Go here for the court order setting aside the foreclosure judgment.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) Sec. 95.11(2)(c), 95.281(1)(a), Florida Statutes. ThetaMissingDocsMtg

B'klyn Judge Slams Brakes On Another Foreclosure As "Standing-Lacking" Lender Fails To Prove Ownership Of Note, Right To Sue

In Brooklyn, New York, the New York Post reports:

• Aquila Rose got a $475,000 mortgage from Fremont Investment & Loan for her Flatbush home in January 2007 and made exactly one payment before defaulting. When Fremont started a foreclosure action on Oct. 15 that year, it seemed like a slam dunk - like Rose would soon be forced from her East 35th Street home.

• But Rose has not been foreclosed upon, according to court papers. Her case in Brooklyn state court is assigned to Justice Arthur M. Schack, one of a growing number of judges in the country creating a new front in the foreclosure epidemic by forcing banks and mortgage-service agents to prove they own the mortgage.

• In Rose's case, as in most mortgages, the lender, Fremont, sold the loan and, when pressed by Schack, couldn't prove it owned the mortgage - therefore didn't have the right to sue.(1) So Schack stopped the proceedings in its tracks.(2)

For the story, see HOW B'KLYN WOMAN KEPT HER HOME.

For Justice Shack's decision, see Fremont Inv. & Loan v Rose, 2008 NY Slip Op 52409 [21 Misc 3d 1137 (December 2, 2008).

Justice Schack received an "honorable mention" in this recent New York Post article.

Go here for other posts referencing Justice Arthur M. Schack.

(1) According to the story, Fremont claimed, according to court papers, that it sold the loan to GRP Loan. But Schack wanted to know why Fremont and GRP share the same White Plains office. The judge was also curious why the GRP lawyer also represents Fremont in the transfer of ownership - and threatened to sanction the lawyer for an apparent conflict of interest. Schack gave GRP until Feb. 2 to come back to court and prove that it owned the mortgage. They never showed. Meanwhile, Rose continues to live in her house.

Apparently, Fremont and GRP have a similar office-sharing arrangement that Justice Schack uncovered and referred to in another foreclosure action involving a different lender. In his written decision in HSBC Bank USA, N.A. v Charlevagne, 2008 NY Slip Op 51652 [20 Misc 3d 1128]; (August 4, 2008), he found it curious that, according to court documents filed in a number of cases he has presided over, the financial behemoths HSBC Bank USA, N.A., Ocwen Loan Servicing, LLC, Mortgage Electronic Registration Systems, Inc., Deutsche Bank and Goldman Sachs all share the same office space at "the ever popular Suite 100" at 1661 Worthington Road, West Palm Beach, Florida 33409.

(2) For a list of links to over thirty of Justice Schack's decisions denying foreclosure to foreclosing lenders who lacked standing to initiate the legal action, see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced. ThetaMissingDocsMtg

"Multiple Hat-Wearing" Mortgage Servicing Exec Back In The News; May Be "Contemporary Millinery Rival" To Hopper, Abzug, Says Respected B'klyn Jurist

A recent New York Times' story on mortgage companies offering financially strapped homeowners an opportunity to modify their mortgage loans contained the following blurb:

• “Our biggest hurdle is reaching out and talking to people,” said Margery A. Rotundo, Ocwen’s senior vice president for residential loss mitigation. “If a borrower has a desire and the ability to stay in the home, we can help them.” Ms. Rotundo said the company’s decades-long experience with borrowers with blemished credit histories informed its approach.

The last time Ms. Rotundo made the news (at least on this blog) was last summer, when Brooklyn, New York Supreme Court Justice Arthur Schack, in a foreclosure action over which he presided, commented in his written opinion that he found court documents filed in various foreclosure actions in which Ms. Rotundo swore that she was Senior Vice President for:

1. Residential Loss Mitigation of Ocwen Loan Servicing, LLC,
2. Residential Loss Mitigation of HSBC Bank USA, N.A.,
3. Loss Mitigation for Nomura Credit & Capital, Inc., and
4. an unnamed servicing agent for HSBC.

The perplexed Justice Schack then went on to make this observation on Ms. Rotundo's apparent knack to freely move from mortgage company employer to mortgage company employer, as the need appeared to demand ("Ms. Rotundo's merry-go-round of employment" as he referred to it):

• [T]he late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug were famous for wearing many colorful hats. With all the corporate hats Ms. Rotundo has recently worn, she might become the contemporary millinery rival to both Ms. Hopper and Ms. Abzug. The Court needs to know the employment history of the peripatetic Ms. Rotundo. Did she truly switch employers or did plaintiff have her sign the "affidavit of merit and amount due" as its Senior Vice President solely to satisfy the Court?(1)

I don't know how this issue was ultimately resolved, but as of press time of the above-referenced New York Times' article, Ms. Rotundo was apparently wearing her "Ocwen corporate hat."

For Justice Schack's written opinion containing his observations on Ms. Rotundo's alleged "multiple hat-wearing activities," see HSBC Bank USA, N.A. v Charlevagne, 2008 NY Slip Op 51652 [20 Misc 3d 1128]; Decided on August 4, 2008.

(1) Justice Schack also commented on his discovery that multiple financial giants, including the plaintiff, were all listing "the ever popular Suite 100" at the same South Florida street address as their place of business. Inaddition to demanding an affidavit describing Ms. Rotundo's employment history for the last three years, Justice Schack also went on to demand an affidavit from the plaintiff explaining "why the plaintiff HSBC BANK USA, N.A., [...], shares office space at Suite 100, 1661 Worthington Road, West Palm Beach, Florida 33409, with Ocwen Loan Servicing, LLC, Mortgage Electronic Registration Systems, Inc., Deutsche Bank and Goldman Sachs." ThetaMissingDocsMtg

Calif. Widower Takes On MERS As Bankruptcy Judge Thwarts Foreclosure Attempt, Sanctions Attorney For Sloppy Motion; Homeowner Files Suit Seeking $1M+

In Cerritos, California, msnbc.com reports:

• Questions linger here, as ripe and nagging as the odor that once wafted over this former dairy capital: Who is trying to seize the home of Ray Vargas, child of the Great Depression, D-Day veteran and loving husband who just wanted to do right by his dying wife? And are they entitled to it?

• In bankruptcy court documents, the party attempting to foreclose is identified as Mortgage Electronic Registration Systems Inc., or MERS,(1) a small Vienna, Va.-based company employed by lenders to streamline the resale of mortgage loans and servicing rights. In that role, MERS claims an interest in tens of millions of U.S. home loans and the legal right to foreclose on those in default.

• But MERS never gave Vargas a loan. It never collected money from him or recorded his payments. It had no ability to modify his loan. What it did have was a copy of a document that named it a “beneficiary” of the mortgage on his home and a “nominee” for the lender and “lender’s successors and assigns.” But it has never identified the current holder of the loan.

• While such documentation has allowed many foreclosures to proceed around the nation, the judge in Vargas’ case threw MERS for a loop, ruling that the company had no right to attempt to seize his home on behalf of unnamed plaintiffs. “No such unidentified parties are permitted in a motion before the court,” wrote Judge Samuel L. Bufford. Bufford’s October ruling kept the foreclosure on hold and opened the door for Vargas to sue MERS in an action aimed at clearing his home of the $826,549 in debt he says is the result of fraud, forgery and abuse of process.

***

• [J]udge Bufford’s ruling in Vargas’ case was greeted with enthusiasm by [consumer bankruptcy advocates]. In a withering opinion, the judge said MERS “presented no admissible evidence” in its case. And he found that sanctions should be imposed against [Mark T.] Domeyer, the attorney representing MERS, for bringing such a sloppy motion to court. The bottom line, Bufford said, was that the true owners of the loan — “highly unlikely” to be original lender Freedom — did not come forward in court and MERS failed to prove any right to act on their behalf.

For the entire story, see D-Day vet's tale parallels mortgage meltdown (Ex-corpsman, 84, blames 'greed, greed, greed' as he faces losing his home).

For Judge Bufford's ruling in this case, see In re Vargas, 396 B.R. 511 (Bankr. C.D. Cal. 2008).

Go here for the homeowner's lawsuit against MERS and Freedom Home Mortgage Corporation.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) A 2007 lawsuit against MERS (Trevino v. Merscorp Inc., et al.) identified its controlling shareholders as: Citigroup, Inc., Countrywide Financial Corporation, Fannie Mae, Freddie Mac, GMAC-RFC Holding Company, LLC, (doing business as GMAC Residential Funding Corporation), HSBC Finance Corporation, JP Morgan Chase & Co., Washington Mutual Bank, and Wells Fargo & Company.

Among other things, the 2007 lawsuit alleged that "MERS is grossly undercapitalized to cover the potential liability stemming directly from its role as primary mortgagee on tens of millions of Mortgage Notes." Because of this, the suit sought to "pierce the corporate veil of MERS" and hold the the controlling shareholders jointly and severally liable for damages as well as MERS (see Trevino v. Merscorp Inc., et al. - page 8, paragraphs 9(l) and 9(m)). See also, Homeowners In Foreclosure Being Clipped For Illegally Inflated Legal & Appraisal Fees, Says Lawsuit. Copyright 2009 The Home Equity Theft Reporter (http:/HomeEquityTheft.blogspot.com) ThetaMissingDocsMtg

ABC News On The "Produce The Note" Approach To Holding Foreclosing Lenders' Feet To The Fire

ABC News' Good Morning America broadcast a story this morning on the "Produce The Note" strategy of hammering sloppy lenders and their attorneys attempting to foreclose on homes without first establishing in court that they have the legal standing to do so.

For the story (approx. 5 minutes), see Fighting Against Foreclosure (Some homeowners have found a new tactic to keep the banks at bay).(1)

Go here for helpful legal documents that can be used in fighting foreclosure.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) For the related Associated Press story published last week, see Homeowners' Rallying Cry: Produce the Note (AP Enterprise: Homeowners stave off foreclosure by demanding the bank produce the note). ThetaMissingDocsMtg

Jointly Owned Marital Real Estate Facing Foreclosure - Did Both Spouses Sign The Paperwork?

In a recent column appearing in The Herald News (Fall River, Massachusetts), foreclosure defense and bankruptcy attorney Glenn Russell Jr. writes about one problem facing lenders in some foreclosure actions that has gone pretty much unnoticed in general media reports - What happens if a sloppy loan originator and/or title closer obtained only one spouse's signature on a promissory note and mortgage in connection with property owned by husband and wife jointly as tenants by the entirety?

• If your lender is seeking to foreclose on your home, and you live in a state like Massachusetts that recognizes a type of property ownership known as “Tenancy by the Entirety,” you have some protection.(1) Both spouses’ signatures are required to be on all of the loan and property documentation when you purchased your home.

***

• During the mortgage frenzy over the past 7 years, mortgage brokers could not keep up with the paperwork and became very sloppy, or worse. Many times, these people were in too much of a rush, and lacked the necessary knowledge about this issue, to even ask for both signatures.

For the entire column, see Tell bank where to stick its foreclosure note.

(1) According to Russell, tenancy by the entirety is recognized in 28 states, including Massachusetts. In most cases the foreclosing lender will not be able to foreclose and sell your property, but will be able to place a lien on the property equal to the spouse’s share who did sign the loan documents, as long as the couple remains married and alive. He goes on to point out, however, that this share is only a “contingent” interest, meaning that the lender would only take actual ownership of the property if the non-signing spouse pre-deceased the signing spouse. If the married couple divorce, the lender can proceed with the foreclosure process.

I would add to this point by observing that in the State of Florida, a mortgage on a primary residence (ie. homestead property) signed only by one spouse (irrespective of how title is held) is treated as null and void pursuant to the provisions of Article X Section 4 of the Florida Constitution (relating to the state homestead exemption from forced sale) and the state court interpretations thereof. In that case, the foreclosing lender will find itself having no recourse at all against the property and, accordingly, will be left holding the bag.

While I have yet to see specific recent cases recounted in general media reports on incidents where only one spouse signed the note and mortgage on property owned as tenants by the entirety that is facing foreclosure, anectdotes thereon are definitely out there. ThetaMissingDocsMtg

CNBC's "Power Lunch" Interviews Florida Legal Aid Attorney On Lenders' Failure To Prove Ownership Of Mortgage Loans In Foreclosure Actions

CNBC's program Power Lunch yesterday featured an interview with Florida attorney April Charney with Jacksonville Area Legal Aid on the inability of many lenders to produce proof that they actually own the promissory note they are trying to enforce through foreclosure.

For the interview (about 5 minutes), see Foreclosure Loophole. ThetaMissingDocsMtg

Wikipedia Entry Invalid As Proof In Establishing Creditor's Standing To Sue In Credit Card Collection Litigation, Says New Jersey Appeals Court

The New Jersey Law Journal reports:

• A New Jersey judge who allowed a lawyer to plug an evidentiary gap with a Wikipedia page has been reversed on the ground that the online encyclopedia that "anyone can edit" is not a reliable source of information. "[I]t is entirely possible for a party in litigation to alter a Wikipedia article, print the article and thereafter offer it in support of any given position," an appeals court held. "Such a malleable source of information is inherently unreliable and clearly not one 'whose accuracy cannot reasonably be questioned,'" such as would support judicial notice under New Jersey Evidence Rule 201(b)(3).

• The ruling tossed out a judgment in a collection case, Palisades Collection v. Graubard, A-1338-07, in which the plaintiff relied on a Wikipedia entry to help trace ownership of a credit-card debt to establish standing to sue.(1)

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• [Defendant-debtor's attorney Ronald] Groseibl says he is disappointed the appeals court did not take the opportunity to set standards for proving chain of title in credit-card cases like those adopted by some courts in mortgage matters. Last year, the New Jersey judiciary's Office of Foreclosure announced it would no longer process cases where the complaint did not allege the plaintiff owned the mortgage at the time of filing.

• There are thousands of credit-card cases raising a similar issue regarding standing, [...] but a dearth of court opinions, because "people who don't pay credit cards don't have money to pay lawyers either," says Groseibl.

For more, see Wikipedia Too Malleable to Be Reliable Evidence.

For the court ruling, see Palisades Collection LLC v. Graubard, Docket No. A-1338-07 (NJ Super. App. Div., April 17, 2009).

In a related story on courts relying on information floating around on the Internet, see The Legal Intelligencer: Questioning Courts' Trust of Web Sources.

(1) According to the story, during a bench trial in Bergen County, New Jersey, the Defendant-debtor contended that the Plaintiff-creditor lacked standing to sue. The challenge for the creditor was to show how the obligation wound up in the company's hands, providing proof for each step of the way. ThetaMissingDocsMtg

"Rubber Stamp" Method vs. Mandatory Mediation: CBS News Goes Into The Courtroom For A Look At Foreclosure Adjudication

The CBS Evening News has a story on its website contrasting the approaches being taken in adjudicating foreclosures in two different courtrooms:

• The "Rocket Docket" in Fort Myers, Florida (described in The Wall Street Journal article, A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge)), and

• The swap meet-like affair that meets every Thursday in Courtroom 676 in Philadelphia, Pennsylvania (described in the Philadelphia Daily News article, The miracle of Courtroom 676: Saving lives, one address at a time).

For the CBS Evening News' story, see Glut Of Foreclosures Clogs Courts (CBS Evening News: A Look At "Fast-Court" In Florida And An Innovative Program In Philly For Those Facing Losing Their Homes).

For the CBS' Evening News video on the "Rocket Docket" foreclosure proceedings in Fort Myers, Florida (1:40), see Pay Up Or Move Out.

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Editor's Note: CBS News could have spiced up their story a little had they included something on the courtrooms of:

• Brooklyn, New York jurist Arthur Schack, a judge who has unequivocally rejected the "rubber stamp" approach to handling foreclosures, and has demonstrated no reluctance at giving unprepared lenders and their attorneys the boot from his courtroom (at times threatening sanctions on lenders' attorneys when their paperwork is garbage) when they fail to file the proper paperwork (see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced), and

• Miami, Florida Judge David C. Miller, who, in a recent denial of a foreclosing lender's motion to proceed with foreclosure because it hadn't complied with a pro se homeowner's document request, reportedly punctuated his decision by tearing the lender's motion in half and throwing it over his shoulder in open court (see The home you save could be your own (In foreclosure crisis, more Americans representing themselves in court)). ThetaMissingDocsMtg

Judge Halts Foreclosure Action As Lender Lacks Promissory Note, Ditches Court Hearing

In Levy County, Florida, the Chiefland Citizen reports:

• It’s a story right off the national news: Homeowners fighting to prevent foreclosure on their property ask a lender to produce the original promissory note in legal proceedings. But in Levy County, it is the estate of Kathryn F. Causey, an accountant who died in January 2008, that is trying to stave off foreclosure by having the lender produce the promissory note.

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• The attorneys for Wells Fargo were a no-show for a hearing on their suit to enforce a missing promissory note so the judge dismissed it. For the estate of Kathryn F. Causey, a Cedar Key accountant who died in January 2008, it’s a victory in staving off a foreclosure attempt by the lender who cannot produce the original promissory note.

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• In June 2008, Wells Fargo filed suit asking 8th Judicial Circuit Judge David O. Glant to grant it “an action to enforce a lost, destroyed or stolen promissory note and mortgage.” [...] Glant scheduled a 10-minute telephone hearing in his chambers [last] Monday, but because Wells Fargo’s lawyers did not call in he granted a motion by Hamill’s attorney to dismiss the case.

For more, see:

• No note? Go ask a judge for one (Foreclosure, inheritance for Cedar Key School hinge on promissory note) (if link expires, try here),
• Wells Fargo suit dismissed (Attorney did not call for hearing) (if link expires, try here).

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here. ThetaMissingDocsMtg

“Produce the Note” Approach Also Effective In Non-Judicial Foreclosure States

The Consumer Warning Network reports:

• In some states, a lender can foreclose on your home without going to court. These are called non-judicial foreclosure states. You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.

For more, see How to use “Produce the Note” in Non-judicial Foreclosure States. ThetaMissingDocsMtg

Traveling Foreclosure Defense Seminar Featuring Florida Legal Aid Attorney To Make "Broadway Debut" Next Month

The New York Post recently ran a story on Florida foreclosure defense attorney April Charney from Jacksonville Area Legal Aid, who is traveling the country spreading the word on a well publicized strategy(1) for hammering mortgage lenders and loan servicers in foreclosure actions.

• [C]harney has held seminars in Ohio, Oregon, South Carolina and throughout Florida to educate lawyers on how to implement the courtroom defense. [...] She is scheduled to [...] hold her first New York seminar next month.

For the story, see THE LOAN RANGER (Lawyer Outwits Banks In Foreclosure Battles).

Go here for a diagram of the complicated, convoluted mortgage securitization process that is now making it difficult for foreclosing entities to prove they actually own the promissory notes.

(1) According to the story, she asserts that the loan servicers bringing most of the foreclosure actions in the country don't own the mortgages and have no standing to take away a person's home. The strategy has spread virally around the country and now thousands of foreclosure lawsuits are sitting idly - in legal limbo. "I have one case from 2004 where the bank has not returned to court and where my client now has deposited more money into a trust account than the house is worth," Charney noted. The legal issue is that banks turn the mortgages into bonds, which are put into trusts, like collateralized debt obligations, or CDOs. The bank "sells" the CDOs the right to collect the revenue stream but, according to Charney, not the right of ownership of the loan/promissory note itself. ThetaMissingDocsMtg