Footnotes 1 and 2 had me chuckling, Footnote 3 put me on the floor. My entire office thinks I have lost my mind cause I still can't explain it without dissolving in laughter.
I agree Judge Boyko For President and Tanta for Mortgage Czar!!
And I like the idea of EVERYONE facing forclosure having a rubber stamp "delay things 2 months" order by forcing the forclosor to cough up valid paperwork.
bacon, from what I can tell, that's not really important. I think what the Judge is saying, is that DB has been profiting from knowingly being lax on the paperwork, because by not doing the paperwork, they drop a financial claim into a weak party's lap, while gaining all the benefit on both ends. It's amazing that this has been established business practice, but I guess for most of the past two decades or so, no one has given a hoot about the people who are being foreclosed on. Now, either because there are so many of them, or because some are more irked about this and able to do more about it, or (?) this established business practice is coming to light. I wonder what else goes on in the dark that we'll discover.
I am heartened to see that the seriousness of a foreclosure isn't being diminished by the judge. Inconvenience to the lender, who was negligent or inept in the first place, should be the least of his concerns.
Plaintiffs, Judge, you just dont understand how things work, argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.
Strike the word "quasi" and this is one of the best legal opinions I've read in a long time.
Um, correct me if Im wrong, but I dont see this as negligent or inept. I see it as intentional and malicious. Or am I missing something?
Depends on your point of view.
I do not believe that DB or anyone else intentionally and with malice aforethought lost its assignments in order to mess with some borrower who had not yet defaulted back when that loan sale took place.
I believe they were running with scissors because they believed that if the worst ever happened, some judge would roll over and let them go ahead and foreclose even though they didn't bother to make sure they had valid assignments in a collateral file in a custodian's vault.
I guess you could call that malicious: it's running a business with a high degree of risk in order to shave costs and impress Wall Street analysts.
But I don't think it's what is normally meant by "predatory foreclosures."
Traditional diversity requirements are spelled out in 28 U.S.C. 1332. Bascially, you have to have an action where all of the defendants live in different states from the plinitiffs and the amount in controversy (legalese for the value of the dispute) is greater than $75,000.
This requirement cannot be waived in federal court because it relates to subject matter jurisdiction. Since DB cannot prove the chain of assignments they cannot show a case or controversy between diverse parties for the requisite amount and the case must be dismissed.
"Diversity" in federal court is not about color, but where you are from. Generally, Federal court is for disputes between people from different states with at least $75,000 in dispute. Same state or smaller amount and you have to go to state court.
The party trying to go to Federal court (the bank) has the burden to show it meets the requirments to be in Federal court. Normally, the defendant will be the one to challange that claim and try to get it sent to another court. Here, the judge is saying the defendant homeowner has no reason to care, but that the Judge will take it upon himself to challenge the banks claim that it can be in federal court.
Sorry I didn't put them both in the original post, but I keep getting--ahem--complaints that the posts are too long.
1 Astoundingly, counsel at oral argument stated that his client, the purchaser from the original mortgagee,
acquired complete legal and equitable interest in land when money changed hands, even before the
purchase agreement, let alone a proper assignment, made its way into his clients possession.
2
Plaintiffs reliance on Ohios real party in interest rule (ORCP 17) and on any Ohio case citations is
misplaced. Although Ohio law guides federal courts on substantive issues, state procedural law cannot be
used to explain, modify or contradict a federal rule of procedure, which purpose is clearly spelled out in
the Commentary. In federal diversity actions, state law governs substantive issues and federal law
governs procedural issues. Erie R.R. Co. v. Tompkins, 304 U.S. 63 (1938); Legg v. Chopra, 286 F. 3d
286, 289 (6th Cir. 2002); Gafford v. General Electric Company, 997 F. 2d 150, 165-6 (6th Cir. 1993).
I don't know, but my mind start to wonder about all those gazzilions of contracts floating around out there with out signatures, initials and stamps. The cost of business revealed indeed.
Foot note: Judge Boyko most likely makes 1/100 the pay of that lawyer from DB. He is overworked and generally grumpy.
"The Assignments, in every instance, express a present intent to convey all rights, title and interest in the Mortgage and the accompanying Note to the Plaintiff named in the caption of the Foreclosure Complaint upon receipt of sufficient consideration on the date the Assignment was signed and notarized. (bold mine)
Am i reading this wrong, or is someone in the chain holding out for some payment before they sign off? Words like "intent to convey" and "consideration" sound like a deal being made, not a deal done.
The only thing missing was the threat to dismiss with prejudice should these wolves in sharkskin suits dare darken his chambers without every i dotted and t crossed in triplicate.
As much as footnote three had me toasting his honor I found the money quote to be: "Despite Plaintiffs counsels belief that there appears to be some level of disagreement and/or misunderstanding amongst professionals, borrowers, attorneys and members of the judiciary, the Court does not require instruction and is not operating under any misapprehension."
At great risk of incurring the wrath of my betters parsing this gem of legalese in down home talk: "Don't try to teach your Grandpa to suck eggs sonny or you'll feel the business end of my strap."
psychodave, in our Federal system the Federal Government is a government of enumerated powers and is actually quite limited in what it can do by the Constitution. If it ain't in there, it can't do it and whatever it is falls back to the states. A large part of what the Federal Government was set up to do was to govern the interaction between the states and force them to play nice with others. The Federal Courts therefore are what they call "courts of limited jurisdiction". If you can't show that you belong there under some enabled Federal Statute or that you come from differing states (and have a large enough amount cash at issue) the Federal Court doesn't have jurisdiction to hear the case, i.e., they can't even talk to you about it, and the case gets bounced.
In this case, however, the judge is saying "Because of your laziness and sloppy work you didn't prove you even have a Federal case, therefore I don't have to look at it until you do. Go away and come back when you've done your homework and have all the right boxes checked off on the Federal Statute." In other words the judge told them to go pound sand and come back when the assignments are fixed.
Just so you don't think the life of a judge is only full of these moments of glory, here's another recent case Judge Boyko had to rule on:
Riches v. James et al
Plaintiff seeks $83 billion collectively from defendants to be donated to Greensburg Kansas tornado victims, Kent State massacre victims, Richard Jewel, 2600.com (which is the Hacker Quarterly), coal miners and the Skid Row section of Los Angeles. Plaintiff alleges that LeBron James has a secret relationship with his sentencing judge, Michael Jordan wears Jonathan Riches t-shirts, Wayne Gretzky carries Jonathan Lee Riches bibles, Joe Montana is in business with gangster Tony Montana, Mickey Mantle (who passed away in 1995) tried to get JC Penney's store credit in his name and Michael Vick used his credit. Plaintiff also alleges that defendants are involved in global warming, endangering wildlife and setting wildfires, and that he caught them with gas cans along I-70. Defendants also allegedly fought in the Battle of Hastings 1066 with the Duke of Normandy and broke into Watergate in the 1970's.
Am i reading this wrong, or is someone in the chain holding out for some payment before they sign off? Words like "intent to convey" and "consideration" sound like a deal being made, not a deal done.
See, the problem is that the standard Assignment does say that for consideration about to be received I hereby assign my rights in this mortgage to somebody.
DB's lawyers tried to draft after-the-fact Assignments. In other words, the Assignments said "for consideration about to be received" but they were drafted about two years after the consideration was received. Dumb move.
They need to go find the original assisgnments. If those cannot, in fact, be located, then they need to go get an affidavit from the party who sold the loans to them declaring that it did in fact assign those loans over to DB. DB needs to prepare an affidavit of lost assignment. In other words, it needs to 'fess up, not try to scam the court by trying to make up new documents in the elf factory and see if a Federal Court Judge will fall for it.
The Federal Courts are generally considered to be more sophisticated than the state courts. So if you have diversity, why not? Particularly when it allows you to stay local and not travel out to whatever state the case is in. In addition, in many cases the law is more uniform (compared to 50 differing state statutes and case law), is more business friendly, and intimidates the heck out of defendants (who probably are even less inclined to travel).
On the snarkiness of Federal Judges - from what little I've seen that is more the case than otherwise. Judges are typically highly educated, intelligent and busy. They therefore tend not to take kindly to people that waste their time. No one reams like a Federal Judge. This is one of the things that gives me great hope for our legal system and society in general.
What a scream! My sides are hurting. The only thing that would be funnier is if the Supreme Court issued the same kind of ruling about habeus corpus and torture.
I think Monty Python used to do jokes about the Magna Carta . . . never leave home without it.
Oyyyyyyyyyyyyyyyyyyyyyyyyy.
The sad state we've fallen to in which such things pass as humor.
Joe "please, sir, please don't waterboard me" Shmoe
Correct me if I am wrong, but it sounds like "as of the date of the Foreclosure Complaint" is the key phrase. (The court even highlighted it in the initial paragraph.) By implication, DB actually has all the paperwork now to show they own the loans, they just can't prove they owned them then.
Is this correct? So now DB can just re-submit the complaint and complete the foreclosure?
So other than dinging DB's sloppiness with some legal fees -- and modestly slowing their foreclosure process -- does this decision actually change anything for homeowners facing foreclosure? Not that there's anything wrong with dinging the banks for sloppiness; I just do not see how this is big enough to help to save Western Civilization or whatever...
Boyko for AG in a Ron Paul administration.
From the good explanation it is clear that the reason the original article was so exaggerated, is that ambulance chasing lawyers are trying to squeeze fees from unsophisticated homeowners in foreclosure. They still will be foreclosed upon, the lawyer fees would have been a new start.
[Andrew]"you didn't prove you even have a Federal case, therefore I don't have to look at it until you do"
Thanks, I'd've never gotten there by myself.
Anybody want to develop the judge's bold and unambiguous "In the meantime, the financial institutions or successors/assignees rush to foreclose, obtain a default judgment and then sit on the deed, avoiding responsibility for maintaining the property while reaping the financial benefits of interest running on a judgment. The financial institutions know the law charges the one with title (still the homeowner) with maintaining the property" statement for someone with no real estate experience, and withering desire to acquire any (viz. moi)?
I'd somehow gotten the impression from this blogsite that foreclosures only resulted in financial loss for all parties.
Correct me if I am wrong, but it sounds like "as of the date of the Foreclosure Complaint" is the key phrase.
Yes, that is the key phrase.
But this is what IAFC's original post quoted it's "lawyer" as saying:
This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.
That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged "sale" to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.
This is an entirely different issue. MBS pools cannot, in fact, buy delinquent loans. Therefore, if the MBS acquired the loan after it had already defaulted, there would be hell to pay and investors in the MBS could sue.
But the problem here is not that the Judge is demanding that anyone prove that the MBS owned the loan before the borrower stopped making payments. The Judge is demanding that the servicer show that it had a beneficial interest in the mortgage on or before the day it filed a suit to foreclose on the loan.
Servicers can, in fact, buy delinquent loans if they want to. I don't think it's necessarily the case that DB recently acquired this loan. I suspect they did in fact aquire the servicing rights quite some time ago, when the loan was new. They just didn't record an assignment on that long-ago day, and now they can't find the unrecorded original assignment that was executed back then.
This story got picked up by at least one other blog, and a lot of our readers, because of that tie-in to MBS ownership of a defaulted loan. And there is as far as I can tell squat in this court order that addresses that issue. The attorney quoted by IAFC made shit up.
It probably won't change anything for the homeowner. They will probably get foreclosed on unless they and DB work something out on the courthouse steps. But this'll probably cattle prod DB into being a little more rigorous about dotting their i's and crossing their t's. I'm not saying that it will last long, but few institutions like senselessly wasting time and money. In the meantime the Judge has re-affirmed to the big boys that if you're going to go to the step of taking people's houses away, you will do it by the book and give them due process, regardless if they deserved it or not. This, I'd argue, benefits society at large even if in a small way.
while reaping the financial benefits of interest running on a judgment
No post of mine is ever long enough.
There's a difference between "foreclosure" and "default judgment."
This property is in Ohio, and OH is one of those states where a lender can pursue a deficiency judgment against a borrower when the loan is upside down. Now, these borrowers don't have any money to pay judgments out of. So they accrue interest, making them even worse for the borrower.
The Judge is saying that the lenders are in a big tearing hurry to foreclose, plus they want a judgment against the borrower, but they're not going to assure that they sell the REO quickly, to apply the proceeds of the sale to the borrower's debt as quickly as possible, to reduce the ultimate amount the borrower owes as much as possible.
I have no sympathy for any lender who is asking for a deficiency against a borrower who has no money, and who can't even back up that request with correctly completed documents.
I'd be willing to bet that at least one of the borrowers in one of those cases probably lied on his mortgage application. That's fraud. So the servicer gets pissy and asks for a judgment. OK, fine. Then the servicer tries to get made-up assignments past the judge. That's BAD KARMA.
Nemo and psycodave, (Tanta correct me if I guess wrong here) I think what the Judge is saying is that once they have the foreclosure judgement order they can start charging interest on it (just like your credit card company charges you for late fees) and leave the legal title un-transferred so that they are not legally responsible for property upkeep; the original owners are. I think this is mainly for things like lawn mowing and such if the local government does it.
Oh wow, now I understand what I was writing about.
You lost or should I say "offended me" when you said this, "that blog post is so badly written that I don't even know exactly what facts are being alleged to be in evidence."
This post and the blog you reference with your forked tongue in your previous post are written mainly for middle class homeowners (you know us uneducated folks), non-profits and consumer advocate attorneys.
Not for such elite and so highly friggenridiculously intelligent bloggers like you Tanta.
I am just reporting the facts in such an unfiggenridiculously unintelligent way so the guy that is losing his home can understand.
Yes, my writing skills are superbly fun.
The facts are what they are and you have your own crazy way to spin it into whatever Tanta web you so desire.
Shouldn't an apology be made on the basis that we reported the facts as we has interpreted them or is this just your normal song and rant and fire before you know what the hell is going on post that goes on forever, and ever and ever?
Potential delinquints should make November 15 national "I'm Not Paying Anything Anymore" day. Everyone call your mortgage lender, auto loan lender and credit card company to get on record IMMEDIATELY that you are never going to pay another dime! Why delay? Bring the system to a halt!!
Finding the right person to signt the Affidavit might be a LOT of fun if DB bought that loan from one of the 183 lenders that is now out of business...
Let me just say this clearly: there is a difference between not making more money by foreclosing than not foreclosing, on one hand, and increasing your recovery of costs in a foreclosure by dicking with a borrower on the other.
There is no question but that DB and its investor would have made more money if this loan had performed. The FC will not generate any profit.
What's pissing off the Judge is that the servicer is engaging in behavior that adds expenses. The sevicer can get away with that because it will be reimbursed for those expenses. There's still no profit here, but there's no or little loss for the servicer.
The parties who pay for this are 1) borrowers and 2) MBS investors, out of whose liquidation proceeds all these expenses get subtracted.
So my repeated assertion that nobody makes money off foreclosures (well, except attorneys) is precisely regarding the decision of to FC or not to FC. I am not saying that there aren't perverse incentives in some cases for servicers to let the expense meter run all day. But they do that just because they can get someone else to make them whole. Being made whole is not profiting, and no servicer who thinks that it is will stay in business long.
The party trying to go to Federal court (the bank) has the burden to show it meets the requirments to be in Federal court
I think the real reason DB tried to go directly to the Federal level was to avoid having to fight a legal battle in every State court. Think about it, if they hold a big pool of MBS with a certain delinquency rate, wouldn't it be quicker and cheaper to get a US District Court judge to rule in their favor than have to press separate cases in each state court that the defendant's properties resided in?
The real fallout of this could be that sloppy banks have much more in legal and administrative costs ahead of them if they intend to pursue reposessions. Or am I missing something?
What struck me about this is the fact that foreclosure actions are being filed in Federal Court. Diversity jurisdiction would give the lenders the choice to file in either state or Federal court. My guess (and it's just that, though based on 20 years of practicing law in the debtor/creditor field) is that the good judge was not amused that DB had chosen to bring the cases in Federal court, because foreclosure is fundamentally a state law matter. Most U.S. District Courts do not want to be flooded with this type of thing when the state courts are better suited to handle it. I'm guessing (again) that DB chose Federal court either because the state courts are clogged (and slow) or because the Federal Court covers multiple counties in each district (i.e., half the state) which would mean they could avoid having to file in every county courthouse where a property is located (and they can probably use electronic filing in Federal Court but not state). However, choosing Federal Court requires that the debtors appear in a court that may be far from where they live.
At the end of the day, I guess we all agree that DB will eventually get its way with these foreclosures and the whole "controversy" doesn't have any substantive effect on the enforceability of the underlying mortgages, though it makes for fun reading.
Now if you want to talk about a an issue that might affect the actual legal enforceability of a mortgage, the really ripe one is whether the second deed of trust in an 80/20 purchase in California is recourse or not. That's food for another thread on another day....but I'd bet more than a few donuts that it will come up very soon and could effectively eliminate whatever remaining value those second liens have.
The more you learn about the Wild West atmosphere of mortgage lending in the past few years, the less you'll be comfortable with the idea that the borrowers brought it all on themselves.
Let's take a few of the allegations facing Ameriquest, the now-defunct company that along with its sister company Argent was once the nation's largest subprime lender. According to investigations by the Los Angeles Times and National Public Radio's "Morning Edition," former employees claimed that:
* Tax forms and other documents were routinely altered, a practice known as "taking the loan to the art department."
* On occasion, documents for a fixed-rate loan would be placed atop a contract for a riskier adjustable-rate loan. After the borrower signed all the documents at closing, the fixed-rate pages would be discarded and the borrower would be shackled to the more hazardous loan.
* Mortgages were larded with hidden fees and borrowers were misled about loan terms, including whether rates were fixed and for how long and whether they would face prepayment penalties if they tried to refinance.
Before it was shut down, Ameriquest either denied the allegations or insisted that it had altered its practices to prevent abuse. It agreed to pay $325 million last year to settle predatory lending charges in 49 states and the District of Columbia.
Is this correct? So now DB can just re-submit the complaint and complete the foreclosure?
Doubtful. More likely they don't hold the paperwork and will need to do some lengthy legwork to establish the legal fact that they did indeed hold the note as of the date of complaint.
And as Tom Stone pointed out, with all the recent turmoil in the mortgage biz, this may keep a small platoon of paralegals gainfully employed.
Can fraud in the mortgage origination process let borrowers off the hook in the foreclosure process?
In my experience (as mortgage wonk, not as lawyer), these things result in recissions of the mortgage, instead of foreclosure.
In other words, these folks cannot afford to own these homes, but the lender's fraud means that they shouldn't have a foreclosure on their credit records to show for it. So the loan gets rescinded, or made as it it never happened. The borrower loses the house, but doesn't have his or her credit record ruined.
If it's possible that the borrower can make reasonable payments, of course the court finding malfeasance on the lender's part can order the loan restructured so that the borrower can keep the house.
Servicers can, in fact, buy delinquent loans if they want to. I don't think it's necessarily the case that DB recently acquired this loan. I suspect they did in fact aquire the servicing rights quite some time ago, when the loan was new.
Tanta, are you sure DB is the servicer of these loans and not just the trustee?
Tanta, are you sure DB is the servicer of these loans and not just the trustee?
Well, no, I'm not sure of that. If, however, this is a deal where the trustee forecloses instead of having its servicer (master or special or garden variety) do it, then it's still a case of whether assignment to the trustee was recorded before the lis pendens was filed.
if DB connot legally take an equable assignment of a mortgage
loan it has no standing to take action to foreclose does the loan go back to the seller to DB and is this seller fraud how much more of this is out there, possession is 9/10's of the law
The wrath of DB now ought properly to be directed at the very highly paid attornies who expect sloppiness still entitles them to that pay.
If you want the bucks, line up the ducks.
I think it is too soon to dismiss this problem as an annoying and easily remedied kink in paperwork. Breaks in assignment chains seem to be a very widespread problem.
Tanta, there is an interesting situation developing in California where a state law governing mortgage brokers requires that if the negotiations for a loan are in certain foreign languages (like Spanish) that the loan documents must be in the same language.
I am assisting a Hispanic couple who are in a foreclosure action with Saxon. The loan was originated by a broker, funding by a thrift and loan, and is currently serviced by Saxon. Upon examination of the documents I found that the broker had falsified the stated income making a gardener the foreman of a company and his MLM self-employed wife a regional vice president. The borrowers submitted genuine pay stubs show less than 15% of the income stated. (This was a cash out 95% refi for $598,000 that had over $42,000 in broker fees and prepayment penalties.) Interestingly, the only form that was printed in Spanish as well as English was what appeared to be a broker CYA form that stated some of the terms and closed with a statement to the effect that the borrower acknowledged that everything was explained to him. However, the broker form showed the terms of the loan as fixed for 30 years when it was actually a 2/28 adjustable. I am going to a meeting with the borrowers and a legal aid attorney tomorrow. If recission could be enforced a disgorgement of loan fees, prepayment penalties and a years interest could be of great benefit to the borrower.
Exactly, how does recission work out in practice? That is, how could they get back their old $500,000 loan and how does this work out in the assignee daisy chain when the lender probably cannot perform a repurchase?
Uncle Festus, I found out a couple of things at a recent CLE on foreclosure:
It is apparently the consensus of foreclosure lawyers in Phoenix that virtually any replacement financing counts as a purchase money loan, and is therefore non-recourse under Arizona law.
It is also apparently the consensus of foreclosure lawyers in Phoenix that seconds and home equity loans are purchase money loans unless it can be shown that the money was used for something other than adding value to the house, and these loans are therefore non-recourse.
I think these assumptions will be tested in the near future.
With regard to costs of upkeep, I recall hearing from several sources last year that it is common practice in Ohio for lenders to avoid recording foreclosure judgments so they can avoid nuisance assessments from local government. Take it for what it's worth.
Correction, we live the facts you just blog about them.
This will explain TILA and RESPA and what mortgage law attorneys use to chase ambulances and go after the big bad wolves.
Hopefully you'll put the time into reading it Tanta because I know how much you love to write.
By Nathan Fransen, Esq.
Loan Rescission when three days really means three years
In recent months Southern California has seen a staggering increase in the number of defaults of residential mortgages, specifically those involving sub-prime borrowers and what I would like to call "predatory lending" practices. Thee defaults will continue to lead to foreclosures, short sales, subsequent property devaluation, and other related adverse circumstances. Many borrowers will end up in bankruptcy or credit counseling, often reaching out to attorneys for direction. Regardless of the attorneys area of practice or background, a solid understanding of the remedies available to desperate homeowners is perhaps now more timely than ever. Arguably the most valuable remedy available exists in The Truth In Lending Act, promulgated by Regulation Z, specifically a borrowers right to rescind.
Most people are familiar with the three-day right to cancel period after signing a refinance loan secured by a principle dwelling. Lenders even provide documentation that clearly identifies the procedure for canceling the loan and the time in which it can be done. What the documentation fails to explain is that if any one of three key aspects of the loan package is not properly completed, the three day period is extended to three years.
Before explaining what these three defects are, it is helpful to first understand what canceling, or rescinding a loan really means. In a very general sense, to rescind is to undo. Basically put the injured party back to their original position. When a person rescinds a loan during the three day period the loan is simply not funded. There are no closing costs because there is no closing (exceptions such as appraisal fees may apply). The borrower simply keeps their existing loan; but what about when the loan has already closed? What about when the borrower has made payments on the loan for say, two and half years? In that case, what happens is that all closing costs and all interest paid to date on the loan are returned to the borrower. I highlight these two items because most people find the need to read them several times. The truth is there are other favorable events that take place, but this should at least peak your interest.
What makes a loan rescindable for more than three days.
First, a loan must qualify, that is it must be a refinance, or non-purchase loan, secured by a principle dwelling (Second mortgages and home equity lines of credit qualify since they meet the requirements above.) 15 U.S.C. § 1635(a); 12 C.F.R. §§ 226.15(a) 226.23(a)
That is, how could they get back their old $500,000 loan and how does this work out in the assignee daisy chain when the lender probably cannot perform a repurchase?
Well, that's the tough part. They can't get their old loan back.
But if the refinancing lender can't enforce the new loan, then a couple of people may just possibly have won the lottery.
You try to force the refinance lender to release its lien. The old lender was paid in full. That means that the borrowers now own free and clear.
Or, to put it another way, the restitution for having defrauded these borrowers was equal to the amount of the loan, and is applied to that loan by means of a lien satisfaction.
I don't know if you can make the lender do that; I suspect you have to get a judge to make the lender do that. I am not a lawyer, etc. But if you can prove that someone fraudulently put a lien on these folks' house, then that lien can theoretically be rescinded, even though that means title to the property remains with the borrower.
Oh and regards to the "Contract Law" referenced above. Another interesting "read" for you Tanta.
California Civil Code § 1632. Trade or business negotiating primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean
(b) Any person engaged in a trade or business who negotiates primarily in Spanish, Chinese, 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:
(1) A contract or agreement subject to the provisions of Title 2 (commencing with Section 1801) of, and Chapter 2b (commencing with Section 2981) and Chapter 2d (commencing with Section 2985.7) of Title 14 of, Part 4 of Division 3.
(2) A loan or extension of credit secured other than by real property, or unsecured, for use primarily for personal, family or household purposes.
(3) A lease, sublease, rental contract or agreement, or other term of tenancy contract or agreement, for a period of longer than one month, covering a dwelling, an apartment, or mobilehome, or other dwelling unit normally occupied as a residence.
(4) Notwithstanding paragraph (2), a 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 provisions of Article 7 (commencing with Section 10240) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code, or Division 7 (commencing with Section 18000), or Division 9 (commencing with Section 22000) of the Financial Code.
(5) Notwithstanding paragraph (2), a reverse mortgage as described in Chapter 8 (commencing with Section 1923) of Title 4 of Part 4 of Division 3.
Moe, you do not have to explain TILA and RESPA to me.
You do not have to explain TILA and RESPA to my blog's readers unless they ask about it. So far this morning, nobody has.
Otherwise you are changing the subject and cluttering up a comment thread. I point this out to you because if you're trying to rehabilitate your reputation as a blogger, you're in reverse and the hole is getting deeper.
Tanta, at the very least it would seem that this could put Saxon in a hard place. The borrower's right to rescind is not affected by the sale of the mortgage and Saxon's recourse, then, is only to the seller of the mortgage.
Hopefully, Moe will post the rest of his article. It was just getting interesting.
So basicly the Judge told them that the Federal bench is not their biatch. You can't both apply for en masse foreclosure action because it's too much trouble to deal with individual foreclosure actions on individaul borrowers in seperate states, and then whine that state procedure lets us get away with sloppy and incomplete paperwork. So is DB more likely to get their paperwork in order and resubmit to the federal bench, or will they start actions in the individual states where the FBs reside. Are state judges actually likely to be more forgiving, or did the lawyers just tell Judge Boyko "Mommy always lets me just assert that I have the deed." After all, local judges are often elected.
Moe is confusing the "right to rescind" (the three-day right to cancel) of a cash-out refinance under RESPA with other uses of the term rescission, such as the one I used to refer to a court's basically vacating a mortgage contract after fraud has been proven. I have no idea why he is doing that, although I suspect it's because he's still pissed that I pointed out the problems with his original post.
I am not going to spend all morning running down rabbit holes every time somebody introduces a new legal term into the discussion.
Moe, a mortgage can be rescinded for some other reason than a RESPA violation.
That seems to be the growing consensus here in California as well. I would expect a "test case" to hit pretty soon, particularly with respect to the "HELOCS" which were used to fund the 20 in the "80/20." Seems to me those were clearly purchase money (I mean, the entire proceeds were used to facilitate the purchase, with the knowledge, consent and cooperation of the lender).
I would expect a "test case" to hit pretty soon, particularly with respect to the "HELOCS" which were used to fund the 20 in the "80/20." Seems to me those were clearly purchase money (I mean, the entire proceeds were used to facilitate the purchase, with the knowledge, consent and cooperation of the lender).
I seem to recall having read about one of those recently.
The issue in that case was a loan where the borrower used a HELOC to purchase the property along with the proceeds of a first mortgage. Subsequent to that, the HELOC lender raised the borrower's limit, and the borrower then drew down the credit line for additional funds that were used for some other purpose.
The argument of the lender in foreclosure was that only the initial disbursement was purchase-money, and that the subsequent draw should be subject to deficiency (recourse).
Yeah, a little pissed. I am not trying to gain a reputation Tanta. Just blogging the facts from a different side of the fence than you and to get the message out to people that were ripped off on their mortgage.
You are not contributing anything of value - if you really wanted to help your so-called constituents, you would direct them towards facts, not your fantasy answers.
Sloppy counsels will be quartered and their skulls will be on display at their law firm building to teach some lessons to young impressionable associates...
To be fair, Tanta did not want to post on what you wrote as she correctly surmised that there were paperwork issues at fault and therefore no big bad fraud as you were guessing.
What she did right was to get her hot little hands on actual documentation to show what the true issue was instead of accepting some uninformed opinion as fact.
Now, go away, we are trying to celebrate the good judge's opinion
Tanta-did you lose your steel toed bunny slippers? You might want to get them.
Moe, it is people like you that make folks love filing malpractice suits against lawyers. You have the bedside manner of a rabid poodle. Go troll elsewhere please if you can't be civil.
Well, I checked with the attorney about the recission matter. California state law does require the documents to be translated into Spanish if the negotiations were predominately in Spanish and recission is a remedy. In this case the lender could be forced to reduce his payoff balance by about $15,000 in fees, $50,000 in earned interest and attorney fees. The lawyer is doing these on a contingent fee basis.
The problem is that even after the payoff reductions the property is upside down on value, plus the borrowers would still need a lender who would make the loan. Therefore, I would expect that recission alone will not be a practical option for those who refinanced for maximum amounts in the past couple years.
I'm not sure why this was in federal court. A favorable federal court decision does not set precedent on a state law issue.
You really need to look at the entire docket to see why a federal district court is looking at this, but my first guess would be that the defendant raised a Federal Truth-in-Lending claim as either a defense or a counter-claim. Just guessing though.
There have been several cases like this. They usually involve the Mortgage Electronic Registrations Syteme, Inc. (MERS), a company that is a clearing house for loan packages, yet appears as the mortgagee of record. The basic argument has been that mortgage foreclosures are being done in MERS' name, yet the real parties in interest are MERS member lenders, like DB, HSBC, New Century and so on. Legal Aid lawyers have gone after this saying that borrowers in default are being misled when they get a foreclosure notice from MERS the nominal mortgagee, or as the mortgage itself will actually read, "ABC Mortgage Corp., with MERS as nominee."
Ms. Charney may be rather more astute than has here been, by some, assumed. Google "April Charney" and you will turn up an article on her in Forbes,in the 6-18-07 issue, styled "Paper Chase." The article makes it clear that she sees these tactics as a way to gain leverage in negotiations. She is quoted as saying "I buy time, then I get lenders to cut interest rates and fees." I suspect she may have been misquoted in the other blog, or knows something we don't. She seems to have been around the block a time or two.
In my experience through more than a few credit cycles, the "details" of a deal are like springing options. They are only exercised by the borrower at time of maximum credit distress. Before that they do not seem to matter. So in short, sweating details do get in the way of making deals, but are vital if one wants to get reliably repaid.
Everytime its the same. The deal guys finally beat the control guys senseless, and then the big losses come in. The saddest part of this, most of such details can be automated and made pretty painless.
I am sure that DB is not the only bank with bad docs. With the Tsunami of mortgages done by folks with no idea what they were doing (note underwriting), is it such a tremendous stretch they did not bother to safeguard the note? lol...
I have to say this was excellent. I have had the opportunity to work w/ legal beagles both on both forward and defensive positions.
These things take months and years to work through and it is often the most inconsequential thing that breaks free.
Case on point I was affiliated with a firm that in the fifth year of litigation on a contractual issue. And nine days prior to trial and seven months after discovery and new and bright legal beagle noticed that on a very obscure submission that the page numbers on a 26 page fax copy did not jive. On point was what was missing...it was a signature authorizing a power of attorney for a rights settlement.
Now nobody was contesting the ownership and rights, but the fact that the plaintiff failed to disclose. The rest is history
I just finished representing a client in a foreclosure fraud criminal case and I can attest the degree of sloppiness throughout the entire loan and assignment process. There was truly no way to ascertain that the loan went from New Century to DB without a map and a microscope.
DB moved for reconsideration, saying the factual record was "replete" with evidence that Plaintiffs were the owners and holders of the Notes when the Complaints were filed, but citing none specifically.
DB said that Plaintiffs have "submitted unopposed affidavits stating that they are the owners and holders of the Notes and Mortgages. Finally, Plaintiffs have filed assignments of mortgages, evidencing the transfer of the security interest to the Plaintiffs that occurred before the Complaints were filed. ... Plaintiffs have submitted ... an affidavit from employee-agents of Plaintiffs and a payment history ... No evidence has been introduced to suggest that Plaintiffs are not the owners and holders of the notes and mortgages. Additionally, Plaintiffs' counsel has filed hundreds of complaints in foreclosure in the Northern District of Ohio without any indication that Plaintiffs lacked standing or that these filings have violated Rule 11."
DB argues that "In any event, to establish standing ... Plaintiffs are not required to be owners and holders of the Notes and Mortgages at the time they file Complaints. ... Courts are denied the power to dismiss actions until parties are given a "reasonable time" to cure standing issues of this type."
DB goes farther out on a limb: "Plaintiffs have no basis or incentive to sue on notes and mortgages held by others. ... They would not have the payment histories ... if they were not the holders. ... inevitably the real owners and holders of the notes and mortgages would seek to intervene ... Additionally, the false "owners and holders" would incur the unnecessary expense of filing fees without any apparent object or advantage ... if a Plaintiff foreclosed on a note and mortgage held by another, and the note and mortgage were not in default, doing so would provoke both the borrower and the true owner and holder ... Plaintiff's counsel has filed hundreds of foreclosures in the Northern District of Ohio. In each and every case, complaints signed and filed by Plaintiffs' counsel contained accurate and truthful statements of holder and owner status that have never been successfully opposed through the adversarial process. This has remained true despite the obvious incentive for a borrower to challenge Plaintiffs ... As a class of Plaintiffs, therefore, the record would appear to confirm the honesty and concern for accuracy characteristic of foreclosure Plaintiffs in general."
DB argues that Rule 17(a) "places no requirement that the Plaintiffs be owners and holders of the Notes and Mortgages at the time they file Complaints, or else risk dismissal. In fact, the opposite is true, as cases cannot be dismissed unless and until a party is given a reasonable length of time to cure standing issues of this type."
DB claims to be Real Party in Interest under Rule 17(a).
DB says: "While the assignments in these cases are dated after the Complaints were filed, they are not fraudulent and m
DB says: "While the assignments in these cases are dated after the Complaints were filed, they are not fraudulent and merely memorialize assignments that occurred long before the Complaints were filed, when large pools of loans were transferred in bulk on the secondary mortgage market. (This is not the only way modern mortgages are transferred, but the large majority are now assigned in this manner.) Only the memorialization of the individual transfer, prepared and filed because of the foreclosure action, took place after the complaint filing date."
The Court did not think much of the Rule 17(a) argument, stating that the opportunity to cure was only for cases where determination of the proper party to sue is difficult or when an understandable mistake has been made.
Tanta, I beg your forebearance. I wrote this on another blog for an audience less sophisticated than the one here. Do I have it wrong?
Some people are saying this is simply a paperwork issue. That MAY be true, but I'm not so sure.
There may be a more metaphysical issue at base.
The relationship between the mortgages and the security tranches is a statistical relationship: it is stochastic, not deterministic.
That's why we have been hearing things like "a six sigma event". "Sigma" is the symbol for standard deviation.
Now that probably makes some sort of sense for cash payments. A Dollar is a Dollar, wherever it comes from. It is a commodity that can be quantified, divided and shared amongst the security holders on a statistical basis.
But does it make sense for the physical properties that are the underlying "collateral" for the collateralised debt obligation? Each is unique, and must be treated deterministically.
But CDOs disperse the right to foreclose amongst the security holders such that, perhaps, none has standing to foreclose. You cannot subdivide that right!
Now if that sounds incredible, hold on, because it fits the data.
The ratings agency models have all been based on one assumption: that house prices CANNOT FALL. For example Fitch admitted that their model "starts to break down" if prices stagnate. If prices actually fall for a period of some years the model "breaks down completely".
So THERE you have their definition of a AAA investment grade security: one that is safe SO LONG AS THINGS GO WELL!
It's fucking ridiculous. But I digress.
The point I am making is that these things have been set up without a thought for what happens if prices fall and foreclosures become necessary. The ONLY thought has been about divvying up the cash that flows in from performing mortgages.
So this may be ANOTHER fatal flaw inherent in this whole concept of securitised mortgages.
If that is the case this will trigger an unwinding of the securities. The senior trancheholders will want to get their money back before the whole thing collapses in a heap.
I used to work in sold loans and I've done some work on clearing title. And assignments don't get filed all the time. In my experience, it's more common for them to not be filed than for the paperwork to actually be correct.
There are original mortgages that aren't filed, sometimes for over a year. And in some cases I worked on the liens can't be filed cause they lost the original paperwork, and the bank's just hoping the customer doesn't default. These things have been shrugged off for years, and it's about time someone forced the lenders to file paperwork like they're required to do.
The problem DB has with providing the required evidence is that it must prove each previous owner of record. If it wants to be truthful, then it must list every owner either recorded or not back to the original. They will have to prove chain of title for numerous non-recorded transactions, which leaves the door wide open for debtor's attorneys to want every single assignment documented and proved. (These things are bought and sold like candy.)
They did refile (one case I just looked at), with two exhibits: a payment history and an Assignment, which was the identical same post-filing assignment that wasn't good enough for the previous case, except that now it predates the filing of the new case. So instead of proving that it had been assigned earlier, they just created a new assignment from Argent to DB.
A related question to whether forclosure can proceed... If a bank has taken title, is there any way to prove the original mortgage has been satisfied? In other words, should you buy a forclosed property from a bank?
I'm thankful for your proper analysis of the situation. You wouldn't believe how many bloggers interpreted this as loop hole for homeowners to get out of foreclosures. All it did as you point out correctly is force lenders to have the paperwork in order before showing up in court.
Footnotes 1 and 2 had me chuckling, Footnote 3 put me on the floor. My entire office thinks I have lost my mind cause I still can't explain it without dissolving in laughter.
I agree Judge Boyko For President and Tanta for Mortgage Czar!!
great dig through on this topic as usual.
What is/are "traditional federal diversity requirements"?
it looks to me like DB has already refiled these things (Nov 8-12)? i'm just looking at the bloomberg court dockets for deutsche.
Tanta, your first post nailed the issue, your second post made my day! Bravo. I really like judges that do their job AND have a sense of humor.
Best Wishes.
HAHAHAHA. The Snark is STRONG with this one...
And I like the idea of EVERYONE facing forclosure having a rubber stamp "delay things 2 months" order by forcing the forclosor to cough up valid paperwork.
bacon, from what I can tell, that's not really important. I think what the Judge is saying, is that DB has been profiting from knowingly being lax on the paperwork, because by not doing the paperwork, they drop a financial claim into a weak party's lap, while gaining all the benefit on both ends. It's amazing that this has been established business practice, but I guess for most of the past two decades or so, no one has given a hoot about the people who are being foreclosed on. Now, either because there are so many of them, or because some are more irked about this and able to do more about it, or (?) this established business practice is coming to light. I wonder what else goes on in the dark that we'll discover.
What is/are "traditional federal diversity requirements"?
A jurisdictional issue. I will allow one of our Real Lawyers to 'splain it.
Dear Real Lawyers: could you help here?
Once again a post with two many words and not enough colorful graphs.
I am heartened to see that the seriousness of a foreclosure isn't being diminished by the judge. Inconvenience to the lender, who was negligent or inept in the first place, should be the least of his concerns.
Um, correct me if Im wrong, but I dont see this as negligent or inept. I see it as intentional and malicious. Or am I missing something?
sorry that it took a while to get this updated post written
I thought you wrote incredibly fast (and well).
Hey, you just busted the quality/cost/speed triangle!
bacon, from what I can tell, that's not really important.
i know, i get the point of the post.
Plaintiffs, Judge, you just dont understand how things work, argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.
Strike the word "quasi" and this is one of the best legal opinions I've read in a long time.
High praise indeed from Tanta - would you knight him as a member of the order of the Steel Toed Bunny Slippers?
Once again a post with two many words
I agree. Plz omit "the" and "bat".
More seriously, good for the Judge. Is there a latin term for the "Judge, you just don't understand how things work" argument?
Um, correct me if Im wrong, but I dont see this as negligent or inept. I see it as intentional and malicious. Or am I missing something?
Depends on your point of view.
I do not believe that DB or anyone else intentionally and with malice aforethought lost its assignments in order to mess with some borrower who had not yet defaulted back when that loan sale took place.
I believe they were running with scissors because they believed that if the worst ever happened, some judge would roll over and let them go ahead and foreclose even though they didn't bother to make sure they had valid assignments in a collateral file in a custodian's vault.
I guess you could call that malicious: it's running a business with a high degree of risk in order to shave costs and impress Wall Street analysts.
But I don't think it's what is normally meant by "predatory foreclosures."
ou poor mr judge, he is against DB which has as advisor AliG. ou wait a sec, poor DB it has as advisor AliG
Traditional diversity requirements are spelled out in 28 U.S.C. 1332. Bascially, you have to have an action where all of the defendants live in different states from the plinitiffs and the amount in controversy (legalese for the value of the dispute) is greater than $75,000.
This requirement cannot be waived in federal court because it relates to subject matter jurisdiction. Since DB cannot prove the chain of assignments they cannot show a case or controversy between diverse parties for the requisite amount and the case must be dismissed.
"Diversity" in federal court is not about color, but where you are from. Generally, Federal court is for disputes between people from different states with at least $75,000 in dispute. Same state or smaller amount and you have to go to state court.
The party trying to go to Federal court (the bank) has the burden to show it meets the requirments to be in Federal court. Normally, the defendant will be the one to challange that claim and try to get it sent to another court. Here, the judge is saying the defendant homeowner has no reason to care, but that the Judge will take it upon himself to challenge the banks claim that it can be in federal court.
Would someone kindly post footnote 1 and 2?
Would someone kindly post footnote 1 and 2?
Sorry I didn't put them both in the original post, but I keep getting--ahem--complaints that the posts are too long.
1 Astoundingly, counsel at oral argument stated that his client, the purchaser from the original mortgagee,
acquired complete legal and equitable interest in land when money changed hands, even before the
purchase agreement, let alone a proper assignment, made its way into his clients possession.
2
Plaintiffs reliance on Ohios real party in interest rule (ORCP 17) and on any Ohio case citations is
misplaced. Although Ohio law guides federal courts on substantive issues, state procedural law cannot be
used to explain, modify or contradict a federal rule of procedure, which purpose is clearly spelled out in
the Commentary. In federal diversity actions, state law governs substantive issues and federal law
governs procedural issues. Erie R.R. Co. v. Tompkins, 304 U.S. 63 (1938); Legg v. Chopra, 286 F. 3d
286, 289 (6th Cir. 2002); Gafford v. General Electric Company, 997 F. 2d 150, 165-6 (6th Cir. 1993).
I don't know, but my mind start to wonder about all those gazzilions of contracts floating around out there with out signatures, initials and stamps. The cost of business revealed indeed.
Foot note: Judge Boyko most likely makes 1/100 the pay of that lawyer from DB. He is overworked and generally grumpy.
OT - but perhaps this is why we have no Sebastian sightings lately.
http://news14.com/content/headlines/589589/housing-slump-finally-hits-charlotte/Default.aspx
Thanks, Tanta!
"The Assignments, in every instance, express a present intent to convey all rights, title and interest in the Mortgage and the accompanying Note to the Plaintiff named in the caption of the Foreclosure Complaint upon receipt of sufficient consideration on the date the Assignment was signed and notarized. (bold mine)
Am i reading this wrong, or is someone in the chain holding out for some payment before they sign off? Words like "intent to convey" and "consideration" sound like a deal being made, not a deal done.
Judge Christopher Boyko, Northern District of Ohio, appointed by President George W. Bush.
The only thing missing was the threat to dismiss with prejudice should these wolves in sharkskin suits dare darken his chambers without every i dotted and t crossed in triplicate.
As much as footnote three had me toasting his honor I found the money quote to be: "Despite Plaintiffs counsels belief that there appears to be some level of disagreement and/or misunderstanding amongst professionals, borrowers, attorneys and members of the judiciary, the Court does not require instruction and is not operating under any misapprehension."
At great risk of incurring the wrath of my betters parsing this gem of legalese in down home talk: "Don't try to teach your Grandpa to suck eggs sonny or you'll feel the business end of my strap."
psychodave, in our Federal system the Federal Government is a government of enumerated powers and is actually quite limited in what it can do by the Constitution. If it ain't in there, it can't do it and whatever it is falls back to the states. A large part of what the Federal Government was set up to do was to govern the interaction between the states and force them to play nice with others. The Federal Courts therefore are what they call "courts of limited jurisdiction". If you can't show that you belong there under some enabled Federal Statute or that you come from differing states (and have a large enough amount cash at issue) the Federal Court doesn't have jurisdiction to hear the case, i.e., they can't even talk to you about it, and the case gets bounced.
In this case, however, the judge is saying "Because of your laziness and sloppy work you didn't prove you even have a Federal case, therefore I don't have to look at it until you do. Go away and come back when you've done your homework and have all the right boxes checked off on the Federal Statute." In other words the judge told them to go pound sand and come back when the assignments are fixed.
Just out of curiosity, why is a forclosure case in federal court to begin with? Isn't that a state matter? Or was this an appeal of a state case?
...but I keep getting--ahem--complaints that the posts are too long.
Ignore them.
Never mind - I figured it out... Stupid Haloscan...
Just so you don't think the life of a judge is only full of these moments of glory, here's another recent case Judge Boyko had to rule on:
Riches v. James et al
Plaintiff seeks $83 billion collectively from defendants to be donated to Greensburg Kansas tornado victims, Kent State massacre victims, Richard Jewel, 2600.com (which is the Hacker Quarterly), coal miners and the Skid Row section of Los Angeles. Plaintiff alleges that LeBron James has a secret relationship with his sentencing judge, Michael Jordan wears Jonathan Riches t-shirts, Wayne Gretzky carries Jonathan Lee Riches bibles, Joe Montana is in business with gangster Tony Montana, Mickey Mantle (who passed away in 1995) tried to get JC Penney's store credit in his name and Michael Vick used his credit. Plaintiff also alleges that defendants are involved in global warming, endangering wildlife and setting wildfires, and that he caught them with gas cans along I-70. Defendants also allegedly fought in the Battle of Hastings 1066 with the Duke of Normandy and broke into Watergate in the 1970's.
Riches v. James et al :: Justia News
Am i reading this wrong, or is someone in the chain holding out for some payment before they sign off? Words like "intent to convey" and "consideration" sound like a deal being made, not a deal done.
See, the problem is that the standard Assignment does say that for consideration about to be received I hereby assign my rights in this mortgage to somebody.
DB's lawyers tried to draft after-the-fact Assignments. In other words, the Assignments said "for consideration about to be received" but they were drafted about two years after the consideration was received. Dumb move.
They need to go find the original assisgnments. If those cannot, in fact, be located, then they need to go get an affidavit from the party who sold the loans to them declaring that it did in fact assign those loans over to DB. DB needs to prepare an affidavit of lost assignment. In other words, it needs to 'fess up, not try to scam the court by trying to make up new documents in the elf factory and see if a Federal Court Judge will fall for it.
What does DB care? It's not real money, it didn't cost them anything to make the loan.
The Federal Courts are generally considered to be more sophisticated than the state courts. So if you have diversity, why not? Particularly when it allows you to stay local and not travel out to whatever state the case is in. In addition, in many cases the law is more uniform (compared to 50 differing state statutes and case law), is more business friendly, and intimidates the heck out of defendants (who probably are even less inclined to travel).
On the snarkiness of Federal Judges - from what little I've seen that is more the case than otherwise. Judges are typically highly educated, intelligent and busy. They therefore tend not to take kindly to people that waste their time. No one reams like a Federal Judge. This is one of the things that gives me great hope for our legal system and society in general.
What a scream! My sides are hurting. The only thing that would be funnier is if the Supreme Court issued the same kind of ruling about habeus corpus and torture.
I think Monty Python used to do jokes about the Magna Carta . . . never leave home without it.
Oyyyyyyyyyyyyyyyyyyyyyyyyy.
The sad state we've fallen to in which such things pass as humor.
Joe "please, sir, please don't waterboard me" Shmoe
Once again a post with two many words and not enough colorful graphs.
Mason Suna | 11.14.07 - 12:23 pm | #
You forgot to mention too funny!
Cote, you are correct. Never, never insult the judge's intelligence.
Hopinsd, also correct; it's the only way to get into Federal Court UNLESS you are suing under Federal law, or dealing with certain Indian affairs.
Correct me if I am wrong, but it sounds like "as of the date of the Foreclosure Complaint" is the key phrase. (The court even highlighted it in the initial paragraph.) By implication, DB actually has all the paperwork now to show they own the loans, they just can't prove they owned them then.
Is this correct? So now DB can just re-submit the complaint and complete the foreclosure?
So other than dinging DB's sloppiness with some legal fees -- and modestly slowing their foreclosure process -- does this decision actually change anything for homeowners facing foreclosure? Not that there's anything wrong with dinging the banks for sloppiness; I just do not see how this is big enough to help to save Western Civilization or whatever...
Boyko for AG in a Ron Paul administration.
From the good explanation it is clear that the reason the original article was so exaggerated, is that ambulance chasing lawyers are trying to squeeze fees from unsophisticated homeowners in foreclosure. They still will be foreclosed upon, the lawyer fees would have been a new start.
[Andrew]"you didn't prove you even have a Federal case, therefore I don't have to look at it until you do"
Thanks, I'd've never gotten there by myself.
Anybody want to develop the judge's bold and unambiguous
"In the meantime, the financial institutions or successors/assignees rush to foreclose, obtain a default judgment and then sit on the deed, avoiding responsibility for maintaining the property while reaping the financial benefits of interest running on a judgment. The financial institutions know the law charges the one with title (still the homeowner) with maintaining the property" statement for someone with no real estate experience, and withering desire to acquire any (viz. moi)?
I'd somehow gotten the impression from this blogsite that foreclosures only resulted in financial loss for all parties.
Forgive me for being naive, but:
while reaping the financial benefits of interest running on a judgment
What financial benefits are those, exactly?
Correct me if I am wrong, but it sounds like "as of the date of the Foreclosure Complaint" is the key phrase.
Yes, that is the key phrase.
But this is what IAFC's original post quoted it's "lawyer" as saying:
This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.
That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged "sale" to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.
This is an entirely different issue. MBS pools cannot, in fact, buy delinquent loans. Therefore, if the MBS acquired the loan after it had already defaulted, there would be hell to pay and investors in the MBS could sue.
But the problem here is not that the Judge is demanding that anyone prove that the MBS owned the loan before the borrower stopped making payments. The Judge is demanding that the servicer show that it had a beneficial interest in the mortgage on or before the day it filed a suit to foreclose on the loan.
Servicers can, in fact, buy delinquent loans if they want to. I don't think it's necessarily the case that DB recently acquired this loan. I suspect they did in fact aquire the servicing rights quite some time ago, when the loan was new. They just didn't record an assignment on that long-ago day, and now they can't find the unrecorded original assignment that was executed back then.
This story got picked up by at least one other blog, and a lot of our readers, because of that tie-in to MBS ownership of a defaulted loan. And there is as far as I can tell squat in this court order that addresses that issue. The attorney quoted by IAFC made shit up.
It probably won't change anything for the homeowner. They will probably get foreclosed on unless they and DB work something out on the courthouse steps. But this'll probably cattle prod DB into being a little more rigorous about dotting their i's and crossing their t's. I'm not saying that it will last long, but few institutions like senselessly wasting time and money. In the meantime the Judge has re-affirmed to the big boys that if you're going to go to the step of taking people's houses away, you will do it by the book and give them due process, regardless if they deserved it or not. This, I'd argue, benefits society at large even if in a small way.
"Getting their ducks in a row" may be easier said than done.
@jalrin & hopeinsd
I swear, its Haloscan's fault I missed your diversity responses.
egligent, inept, intentional malicious
My vote would be for lazy and arrogant.
while reaping the financial benefits of interest running on a judgment
No post of mine is ever long enough.
There's a difference between "foreclosure" and "default judgment."
This property is in Ohio, and OH is one of those states where a lender can pursue a deficiency judgment against a borrower when the loan is upside down. Now, these borrowers don't have any money to pay judgments out of. So they accrue interest, making them even worse for the borrower.
The Judge is saying that the lenders are in a big tearing hurry to foreclose, plus they want a judgment against the borrower, but they're not going to assure that they sell the REO quickly, to apply the proceeds of the sale to the borrower's debt as quickly as possible, to reduce the ultimate amount the borrower owes as much as possible.
I have no sympathy for any lender who is asking for a deficiency against a borrower who has no money, and who can't even back up that request with correctly completed documents.
I'd be willing to bet that at least one of the borrowers in one of those cases probably lied on his mortgage application. That's fraud. So the servicer gets pissy and asks for a judgment. OK, fine. Then the servicer tries to get made-up assignments past the judge. That's BAD KARMA.
Nemo and psycodave, (Tanta correct me if I guess wrong here) I think what the Judge is saying is that once they have the foreclosure judgement order they can start charging interest on it (just like your credit card company charges you for late fees) and leave the legal title un-transferred so that they are not legally responsible for property upkeep; the original owners are. I think this is mainly for things like lawn mowing and such if the local government does it.
Whoops. Thanks Tanta. I was off base on that one.
Thanks, Tanta. Excellent work, as usual.
I have learned more from this blog than any other site on the Internet. Maybe more than all of them combined...
Oh wow, now I understand what I was writing about.
You lost or should I say "offended me" when you said this, "that blog post is so badly written that I don't even know exactly what facts are being alleged to be in evidence."
This post and the blog you reference with your forked tongue in your previous post are written mainly for middle class homeowners (you know us uneducated folks), non-profits and consumer advocate attorneys.
Not for such elite and so highly friggenridiculously intelligent bloggers like you Tanta.
I am just reporting the facts in such an unfiggenridiculously unintelligent way so the guy that is losing his home can understand.
Yes, my writing skills are superbly fun.
The facts are what they are and you have your own crazy way to spin it into whatever Tanta web you so desire.
Shouldn't an apology be made on the basis that we reported the facts as we has interpreted them or is this just your normal song and rant and fire before you know what the hell is going on post that goes on forever, and ever and ever?
If so, then that's just friggen fantastic.
Thanks.
Potential delinquints should make November 15 national "I'm Not Paying Anything Anymore" day. Everyone call your mortgage lender, auto loan lender and credit card company to get on record IMMEDIATELY that you are never going to pay another dime! Why delay? Bring the system to a halt!!
Finding the right person to signt the Affidavit might be a LOT of fun if DB bought that loan from one of the 183 lenders that is now out of business...
Let me just say this clearly: there is a difference between not making more money by foreclosing than not foreclosing, on one hand, and increasing your recovery of costs in a foreclosure by dicking with a borrower on the other.
There is no question but that DB and its investor would have made more money if this loan had performed. The FC will not generate any profit.
What's pissing off the Judge is that the servicer is engaging in behavior that adds expenses. The sevicer can get away with that because it will be reimbursed for those expenses. There's still no profit here, but there's no or little loss for the servicer.
The parties who pay for this are 1) borrowers and 2) MBS investors, out of whose liquidation proceeds all these expenses get subtracted.
So my repeated assertion that nobody makes money off foreclosures (well, except attorneys) is precisely regarding the decision of to FC or not to FC. I am not saying that there aren't perverse incentives in some cases for servicers to let the expense meter run all day. But they do that just because they can get someone else to make them whole. Being made whole is not profiting, and no servicer who thinks that it is will stay in business long.
OT:
http://www.urbandigs.com/2007/11/commercials_correction_r_word.html
confirmation that the fear of a slump in CRE in ebullient nyc has reached the point where they are being discussed out-loud by participants.
I don't care who becomes President next year...
Boyko for AG !
Good grief Moe,I thought all three of the Stooges were dead,my bad.
Shouldn't an apology be made on the basis that we reported the facts as we has interpreted them
Yes. You should apologize to all of us for having "interpreted" the facts instead of "reporting them."
Don't worry; I'll wait.
Wtf are they in federal court for a foreclosure to begin with?
Moe. You are panting. Chase one ambulance too many?
The party trying to go to Federal court (the bank) has the burden to show it meets the requirments to be in Federal court
I think the real reason DB tried to go directly to the Federal level was to avoid having to fight a legal battle in every State court. Think about it, if they hold a big pool of MBS with a certain delinquency rate, wouldn't it be quicker and cheaper to get a US District Court judge to rule in their favor than have to press separate cases in each state court that the defendant's properties resided in?
The real fallout of this could be that sloppy banks have much more in legal and administrative costs ahead of them if they intend to pursue reposessions. Or am I missing something?
What struck me about this is the fact that foreclosure actions are being filed in Federal Court. Diversity jurisdiction would give the lenders the choice to file in either state or Federal court. My guess (and it's just that, though based on 20 years of practicing law in the debtor/creditor field) is that the good judge was not amused that DB had chosen to bring the cases in Federal court, because foreclosure is fundamentally a state law matter. Most U.S. District Courts do not want to be flooded with this type of thing when the state courts are better suited to handle it. I'm guessing (again) that DB chose Federal court either because the state courts are clogged (and slow) or because the Federal Court covers multiple counties in each district (i.e., half the state) which would mean they could avoid having to file in every county courthouse where a property is located (and they can probably use electronic filing in Federal Court but not state). However, choosing Federal Court requires that the debtors appear in a court that may be far from where they live.
At the end of the day, I guess we all agree that DB will eventually get its way with these foreclosures and the whole "controversy" doesn't have any substantive effect on the enforceability of the underlying mortgages, though it makes for fun reading.
Now if you want to talk about a an issue that might affect the actual legal enforceability of a mortgage, the really ripe one is whether the second deed of trust in an 80/20 purchase in California is recourse or not. That's food for another thread on another day....but I'd bet more than a few donuts that it will come up very soon and could effectively eliminate whatever remaining value those second liens have.
A question for Tanta and the Real Lawyers --
Can fraud in the mortgage origination process let borrowers off the hook in the foreclosure process? (example below)
Let's fix this subprime mess - MSN Money
A visit to the 'Art Department'
The more you learn about the Wild West atmosphere of mortgage lending in the past few years, the less you'll be comfortable with the idea that the borrowers brought it all on themselves.
Let's take a few of the allegations facing Ameriquest, the now-defunct company that along with its sister company Argent was once the nation's largest subprime lender. According to investigations by the Los Angeles Times and National Public Radio's "Morning Edition," former employees claimed that:
* Tax forms and other documents were routinely altered, a practice known as "taking the loan to the art department."
* On occasion, documents for a fixed-rate loan would be placed atop a contract for a riskier adjustable-rate loan. After the borrower signed all the documents at closing, the fixed-rate pages would be discarded and the borrower would be shackled to the more hazardous loan.
* Mortgages were larded with hidden fees and borrowers were misled about loan terms, including whether rates were fixed and for how long and whether they would face prepayment penalties if they tried to refinance.
Before it was shut down, Ameriquest either denied the allegations or insisted that it had altered its practices to prevent abuse. It agreed to pay $325 million last year to settle predatory lending charges in 49 states and the District of Columbia.
"OH is one of those states where a lender can pursue a deficiency judgment against a borrower when the loan is upside down."
Does anyone have a sense for consumer liability beyond the down payment in terms of the percentage of mortgages outstanding?
Is this correct? So now DB can just re-submit the complaint and complete the foreclosure?
Doubtful. More likely they don't hold the paperwork and will need to do some lengthy legwork to establish the legal fact that they did indeed hold the note as of the date of complaint.
And as Tom Stone pointed out, with all the recent turmoil in the mortgage biz, this may keep a small platoon of paralegals gainfully employed.
Can fraud in the mortgage origination process let borrowers off the hook in the foreclosure process?
In my experience (as mortgage wonk, not as lawyer), these things result in recissions of the mortgage, instead of foreclosure.
In other words, these folks cannot afford to own these homes, but the lender's fraud means that they shouldn't have a foreclosure on their credit records to show for it. So the loan gets rescinded, or made as it it never happened. The borrower loses the house, but doesn't have his or her credit record ruined.
If it's possible that the borrower can make reasonable payments, of course the court finding malfeasance on the lender's part can order the loan restructured so that the borrower can keep the house.
Servicers can, in fact, buy delinquent loans if they want to. I don't think it's necessarily the case that DB recently acquired this loan. I suspect they did in fact aquire the servicing rights quite some time ago, when the loan was new.
Tanta, are you sure DB is the servicer of these loans and not just the trustee?
Tanta, are you sure DB is the servicer of these loans and not just the trustee?
Well, no, I'm not sure of that. If, however, this is a deal where the trustee forecloses instead of having its servicer (master or special or garden variety) do it, then it's still a case of whether assignment to the trustee was recorded before the lis pendens was filed.
if DB connot legally take an equable assignment of a mortgage
loan it has no standing to take action to foreclose does the loan go back to the seller to DB and is this seller fraud how much more of this is out there, possession is 9/10's of the law
The wrath of DB now ought properly to be directed at the very highly paid attornies who expect sloppiness still entitles them to that pay.
If you want the bucks, line up the ducks.
yes, that's still the point. i was just looking at some of the deals involved and i don't think DB services any of them. (ie FFMLT 2006-FF6).
I think it is too soon to dismiss this problem as an annoying and easily remedied kink in paperwork. Breaks in assignment chains seem to be a very widespread problem.
Tanta, there is an interesting situation developing in California where a state law governing mortgage brokers requires that if the negotiations for a loan are in certain foreign languages (like Spanish) that the loan documents must be in the same language.
I am assisting a Hispanic couple who are in a foreclosure action with Saxon. The loan was originated by a broker, funding by a thrift and loan, and is currently serviced by Saxon. Upon examination of the documents I found that the broker had falsified the stated income making a gardener the foreman of a company and his MLM self-employed wife a regional vice president. The borrowers submitted genuine pay stubs show less than 15% of the income stated. (This was a cash out 95% refi for $598,000 that had over $42,000 in broker fees and prepayment penalties.) Interestingly, the only form that was printed in Spanish as well as English was what appeared to be a broker CYA form that stated some of the terms and closed with a statement to the effect that the borrower acknowledged that everything was explained to him. However, the broker form showed the terms of the loan as fixed for 30 years when it was actually a 2/28 adjustable. I am going to a meeting with the borrowers and a legal aid attorney tomorrow. If recission could be enforced a disgorgement of loan fees, prepayment penalties and a years interest could be of great benefit to the borrower.
Exactly, how does recission work out in practice? That is, how could they get back their old $500,000 loan and how does this work out in the assignee daisy chain when the lender probably cannot perform a repurchase?
Sounds like DB could use some Real Lawyers.
Uncle Festus, I found out a couple of things at a recent CLE on foreclosure:
It is apparently the consensus of foreclosure lawyers in Phoenix that virtually any replacement financing counts as a purchase money loan, and is therefore non-recourse under Arizona law.
It is also apparently the consensus of foreclosure lawyers in Phoenix that seconds and home equity loans are purchase money loans unless it can be shown that the money was used for something other than adding value to the house, and these loans are therefore non-recourse.
I think these assumptions will be tested in the near future.
With regard to costs of upkeep, I recall hearing from several sources last year that it is common practice in Ohio for lenders to avoid recording foreclosure judgments so they can avoid nuisance assessments from local government. Take it for what it's worth.
Correction, we live the facts you just blog about them.
This will explain TILA and RESPA and what mortgage law attorneys use to chase ambulances and go after the big bad wolves.
Hopefully you'll put the time into reading it Tanta because I know how much you love to write.
By Nathan Fransen, Esq.
Loan Rescission when three days really means three years
In recent months Southern California has seen a staggering increase in the number of defaults of residential mortgages, specifically those involving sub-prime borrowers and what I would like to call "predatory lending" practices. Thee defaults will continue to lead to foreclosures, short sales, subsequent property devaluation, and other related adverse circumstances. Many borrowers will end up in bankruptcy or credit counseling, often reaching out to attorneys for direction. Regardless of the attorneys area of practice or background, a solid understanding of the remedies available to desperate homeowners is perhaps now more timely than ever. Arguably the most valuable remedy available exists in The Truth In Lending Act, promulgated by Regulation Z, specifically a borrowers right to rescind.
Most people are familiar with the three-day right to cancel period after signing a refinance loan secured by a principle dwelling. Lenders even provide documentation that clearly identifies the procedure for canceling the loan and the time in which it can be done. What the documentation fails to explain is that if any one of three key aspects of the loan package is not properly completed, the three day period is extended to three years.
Before explaining what these three defects are, it is helpful to first understand what canceling, or rescinding a loan really means. In a very general sense, to rescind is to undo. Basically put the injured party back to their original position. When a person rescinds a loan during the three day period the loan is simply not funded. There are no closing costs because there is no closing (exceptions such as appraisal fees may apply). The borrower simply keeps their existing loan; but what about when the loan has already closed? What about when the borrower has made payments on the loan for say, two and half years? In that case, what happens is that all closing costs and all interest paid to date on the loan are returned to the borrower. I highlight these two items because most people find the need to read them several times. The truth is there are other favorable events that take place, but this should at least peak your interest.
What makes a loan rescindable for more than three days.
First, a loan must qualify, that is it must be a refinance, or non-purchase loan, secured by a principle dwelling (Second mortgages and home equity lines of credit qualify since they meet the requirements above.) 15 U.S.C. § 1635(a); 12 C.F.R. §§ 226.15(a) 226.23(a)
Second, there must be a failure by
That is, how could they get back their old $500,000 loan and how does this work out in the assignee daisy chain when the lender probably cannot perform a repurchase?
Well, that's the tough part. They can't get their old loan back.
But if the refinancing lender can't enforce the new loan, then a couple of people may just possibly have won the lottery.
You try to force the refinance lender to release its lien. The old lender was paid in full. That means that the borrowers now own free and clear.
Or, to put it another way, the restitution for having defrauded these borrowers was equal to the amount of the loan, and is applied to that loan by means of a lien satisfaction.
I don't know if you can make the lender do that; I suspect you have to get a judge to make the lender do that. I am not a lawyer, etc. But if you can prove that someone fraudulently put a lien on these folks' house, then that lien can theoretically be rescinded, even though that means title to the property remains with the borrower.
Oh and regards to the "Contract Law" referenced above. Another interesting "read" for you Tanta.
California Civil Code § 1632. Trade or business negotiating primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean
(b) Any person engaged in a trade or business who negotiates primarily in Spanish, Chinese, 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:
(1) A contract or agreement subject to the provisions of Title 2 (commencing with Section 1801) of, and Chapter 2b (commencing with Section 2981) and Chapter 2d (commencing with Section 2985.7) of Title 14 of, Part 4 of Division 3.
(2) A loan or extension of credit secured other than by real property, or unsecured, for use primarily for personal, family or household purposes.
(3) A lease, sublease, rental contract or agreement, or other term of tenancy contract or agreement, for a period of longer than one month, covering a dwelling, an apartment, or mobilehome, or other dwelling unit normally occupied as a residence.
(4) Notwithstanding paragraph (2), a 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 provisions of Article 7 (commencing with Section 10240) of Chapter 3 of Part 1 of Division 4 of the Business and Professions Code, or Division 7 (commencing with Section 18000), or Division 9 (commencing with Section 22000) of the Financial Code.
(5) Notwithstanding paragraph (2), a reverse mortgage as described in Chapter 8 (commencing with Section 1923) of Title 4 of Part 4 of Division 3.
Moe, you do not have to explain TILA and RESPA to me.
You do not have to explain TILA and RESPA to my blog's readers unless they ask about it. So far this morning, nobody has.
Otherwise you are changing the subject and cluttering up a comment thread. I point this out to you because if you're trying to rehabilitate your reputation as a blogger, you're in reverse and the hole is getting deeper.
Tanta, at the very least it would seem that this could put Saxon in a hard place. The borrower's right to rescind is not affected by the sale of the mortgage and Saxon's recourse, then, is only to the seller of the mortgage.
Hopefully, Moe will post the rest of his article. It was just getting interesting.
So basicly the Judge told them that the Federal bench is not their biatch. You can't both apply for en masse foreclosure action because it's too much trouble to deal with individual foreclosure actions on individaul borrowers in seperate states, and then whine that state procedure lets us get away with sloppy and incomplete paperwork. So is DB more likely to get their paperwork in order and resubmit to the federal bench, or will they start actions in the individual states where the FBs reside. Are state judges actually likely to be more forgiving, or did the lawyers just tell Judge Boyko "Mommy always lets me just assert that I have the deed." After all, local judges are often elected.
Moe is confusing the "right to rescind" (the three-day right to cancel) of a cash-out refinance under RESPA with other uses of the term rescission, such as the one I used to refer to a court's basically vacating a mortgage contract after fraud has been proven. I have no idea why he is doing that, although I suspect it's because he's still pissed that I pointed out the problems with his original post.
I am not going to spend all morning running down rabbit holes every time somebody introduces a new legal term into the discussion.
Moe, a mortgage can be rescinded for some other reason than a RESPA violation.
Albrt:
That seems to be the growing consensus here in California as well. I would expect a "test case" to hit pretty soon, particularly with respect to the "HELOCS" which were used to fund the 20 in the "80/20." Seems to me those were clearly purchase money (I mean, the entire proceeds were used to facilitate the purchase, with the knowledge, consent and cooperation of the lender).
I would expect a "test case" to hit pretty soon, particularly with respect to the "HELOCS" which were used to fund the 20 in the "80/20." Seems to me those were clearly purchase money (I mean, the entire proceeds were used to facilitate the purchase, with the knowledge, consent and cooperation of the lender).
I seem to recall having read about one of those recently.
The issue in that case was a loan where the borrower used a HELOC to purchase the property along with the proceeds of a first mortgage. Subsequent to that, the HELOC lender raised the borrower's limit, and the borrower then drew down the credit line for additional funds that were used for some other purpose.
The argument of the lender in foreclosure was that only the initial disbursement was purchase-money, and that the subsequent draw should be subject to deficiency (recourse).
Now I can't remember where I read that.
Yeah, a little pissed. I am not trying to gain a reputation Tanta. Just blogging the facts from a different side of the fence than you and to get the message out to people that were ripped off on their mortgage.
Moe, shut up and take your medicine.
You are not contributing anything of value - if you really wanted to help your so-called constituents, you would direct them towards facts, not your fantasy answers.
Priceless.
Sloppy counsels will be quartered and their skulls will be on display at their law firm building to teach some lessons to young impressionable associates...
I'm not contibuting anything of value but your sitting here commenting on what I originally posted on and Tanta put her spin on.
Oh. but she is 100% right because she does this for a living.
Continue on sheeple, I mean unsympathetic. I think it is you who needs the medicine.
Moe-
To be fair, Tanta did not want to post on what you wrote as she correctly surmised that there were paperwork issues at fault and therefore no big bad fraud as you were guessing.
What she did right was to get her hot little hands on actual documentation to show what the true issue was instead of accepting some uninformed opinion as fact.
Now, go away, we are trying to celebrate the good judge's opinion
Tanta-did you lose your steel toed bunny slippers? You might want to get them.
Moe, it is people like you that make folks love filing malpractice suits against lawyers. You have the bedside manner of a rabid poodle. Go troll elsewhere please if you can't be civil.
Well, I checked with the attorney about the recission matter. California state law does require the documents to be translated into Spanish if the negotiations were predominately in Spanish and recission is a remedy. In this case the lender could be forced to reduce his payoff balance by about $15,000 in fees, $50,000 in earned interest and attorney fees. The lawyer is doing these on a contingent fee basis.
The problem is that even after the payoff reductions the property is upside down on value, plus the borrowers would still need a lender who would make the loan. Therefore, I would expect that recission alone will not be a practical option for those who refinanced for maximum amounts in the past couple years.
I'm not sure why this was in federal court. A favorable federal court decision does not set precedent on a state law issue.
You really need to look at the entire docket to see why a federal district court is looking at this, but my first guess would be that the defendant raised a Federal Truth-in-Lending claim as either a defense or a counter-claim. Just guessing though.
There have been several cases like this. They usually involve the Mortgage Electronic Registrations Syteme, Inc. (MERS), a company that is a clearing house for loan packages, yet appears as the mortgagee of record. The basic argument has been that mortgage foreclosures are being done in MERS' name, yet the real parties in interest are MERS member lenders, like DB, HSBC, New Century and so on. Legal Aid lawyers have gone after this saying that borrowers in default are being misled when they get a foreclosure notice from MERS the nominal mortgagee, or as the mortgage itself will actually read, "ABC Mortgage Corp., with MERS as nominee."
Most of the posters here can check on their own mortgages go to https://www.mers-servicerid.org/sis/
Not all mortgages are in this system, but a very large portion of mortgages made in last ten years are.
Tanta:
(1) do you have a cite for the case?
(2) did DB file in in the USDC or did the defendants have it removed? I've never heard of a mortgage foreclosure action being commenced in a DC.
(3) if the judge really thought DB's attorneys were trying to pull something, he could have sanctioned them.
Thanks for an excellent summary.
Ms. Charney may be rather more astute than has here been, by some, assumed. Google "April Charney" and you will turn up an article on her in Forbes,in the 6-18-07 issue, styled "Paper Chase." The article makes it clear that she sees these tactics as a way to gain leverage in negotiations. She is quoted as saying "I buy time, then I get lenders to cut interest rates and fees." I suspect she may have been misquoted in the other blog, or knows something we don't. She seems to have been around the block a time or two.
In my experience through more than a few credit cycles, the "details" of a deal are like springing options. They are only exercised by the borrower at time of maximum credit distress. Before that they do not seem to matter. So in short, sweating details do get in the way of making deals, but are vital if one wants to get reliably repaid.
Everytime its the same. The deal guys finally beat the control guys senseless, and then the big losses come in. The saddest part of this, most of such details can be automated and made pretty painless.
I am sure that DB is not the only bank with bad docs. With the Tsunami of mortgages done by folks with no idea what they were doing (note underwriting), is it such a tremendous stretch they did not bother to safeguard the note? lol...
This decision is now being noted on the Drudge Reports (says it's "developing").
The story below it on Drudge is "Small Florida Town Overcome by Mysterious Ape Sightings"
"OH is one of those states where a lender can pursue a deficiency judgment against a borrower when the loan is upside down."
Is that true in the absence of deliquency? 'Cause lots of people with a recent high LTV mortgage (including me) are or will soon be in that situation.
I have to say this was excellent. I have had the opportunity to work w/ legal beagles both on both forward and defensive positions.
These things take months and years to work through and it is often the most inconsequential thing that breaks free.
Case on point I was affiliated with a firm that in the fifth year of litigation on a contractual issue. And nine days prior to trial and seven months after discovery and new and bright legal beagle noticed that on a very obscure submission that the page numbers on a 26 page fax copy did not jive. On point was what was missing...it was a signature authorizing a power of attorney for a rights settlement.
Now nobody was contesting the ownership and rights, but the fact that the plaintiff failed to disclose. The rest is history
Tanta do you have the case number for this? I want to take a look at it on Pacer. Or better yet, a downloaded .pdf of the order?
I just finished representing a client in a foreclosure fraud criminal case and I can attest the degree of sloppiness throughout the entire loan and assignment process. There was truly no way to ascertain that the loan went from New Century to DB without a map and a microscope.
There were several cases. Case numbers are:
1:07CV2282
07CV2532
07CV2560
07CV2602
07CV2631
07CV2638
07CV2681
07CV2695
07CV2920
07CV2930
07CV2949
07CV2950
07CV3000
07CV3029
All in the Ohio Northern District, Eastern Division.
DB moved for reconsideration, saying the factual record was "replete" with evidence that Plaintiffs were the owners and holders of the Notes when the Complaints were filed, but citing none specifically.
DB said that Plaintiffs have "submitted unopposed affidavits stating that they are the owners and holders of the Notes and Mortgages. Finally, Plaintiffs have filed assignments of mortgages, evidencing the transfer of the security interest to the Plaintiffs that occurred before the Complaints were filed. ... Plaintiffs have submitted ... an affidavit from employee-agents of Plaintiffs and a payment history ... No evidence has been introduced to suggest that Plaintiffs are not the owners and holders of the notes and mortgages. Additionally, Plaintiffs' counsel has filed hundreds of complaints in foreclosure in the Northern District of Ohio without any indication that Plaintiffs lacked standing or that these filings have violated Rule 11."
DB argues that "In any event, to establish standing ... Plaintiffs are not required to be owners and holders of the Notes and Mortgages at the time they file Complaints. ... Courts are denied the power to dismiss actions until parties are given a "reasonable time" to cure standing issues of this type."
DB goes farther out on a limb: "Plaintiffs have no basis or incentive to sue on notes and mortgages held by others. ... They would not have the payment histories ... if they were not the holders. ... inevitably the real owners and holders of the notes and mortgages would seek to intervene ... Additionally, the false "owners and holders" would incur the unnecessary expense of filing fees without any apparent object or advantage ... if a Plaintiff foreclosed on a note and mortgage held by another, and the note and mortgage were not in default, doing so would provoke both the borrower and the true owner and holder ... Plaintiff's counsel has filed hundreds of foreclosures in the Northern District of Ohio. In each and every case, complaints signed and filed by Plaintiffs' counsel contained accurate and truthful statements of holder and owner status that have never been successfully opposed through the adversarial process. This has remained true despite the obvious incentive for a borrower to challenge Plaintiffs ... As a class of Plaintiffs, therefore, the record would appear to confirm the honesty and concern for accuracy characteristic of foreclosure Plaintiffs in general."
DB argues that Rule 17(a) "places no requirement that the Plaintiffs be owners and holders of the Notes and Mortgages at the time they file Complaints, or else risk dismissal. In fact, the opposite is true, as cases cannot be dismissed unless and until a party is given a reasonable length of time to cure standing issues of this type."
DB claims to be Real Party in Interest under Rule 17(a).
DB says: "While the assignments in these cases are dated after the Complaints were filed, they are not fraudulent and m
DB says: "While the assignments in these cases are dated after the Complaints were filed, they are not fraudulent and merely memorialize assignments that occurred long before the Complaints were filed, when large pools of loans were transferred in bulk on the secondary mortgage market. (This is not the only way modern mortgages are transferred, but the large majority are now assigned in this manner.) Only the memorialization of the individual transfer, prepared and filed because of the foreclosure action, took place after the complaint filing date."
The Court did not think much of the Rule 17(a) argument, stating that the opportunity to cure was only for cases where determination of the proper party to sue is difficult or when an understandable mistake has been made.
The New York Times is now covering the Deutsche Bank court story:
Foreclosures Hit a Snag For Lenders - NY Times
My apologies if this has already been posted.
Tanta, I beg your forebearance. I wrote this on another blog for an audience less sophisticated than the one here. Do I have it wrong?
Some people are saying this is simply a paperwork issue. That MAY be true, but I'm not so sure.
There may be a more metaphysical issue at base.
The relationship between the mortgages and the security tranches is a statistical relationship: it is stochastic, not deterministic.
That's why we have been hearing things like "a six sigma event". "Sigma" is the symbol for standard deviation.
Now that probably makes some sort of sense for cash payments. A Dollar is a Dollar, wherever it comes from. It is a commodity that can be quantified, divided and shared amongst the security holders on a statistical basis.
But does it make sense for the physical properties that are the underlying "collateral" for the collateralised debt obligation? Each is unique, and must be treated deterministically.
But CDOs disperse the right to foreclose amongst the security holders such that, perhaps, none has standing to foreclose. You cannot subdivide that right!
Now if that sounds incredible, hold on, because it fits the data.
The ratings agency models have all been based on one assumption: that house prices CANNOT FALL. For example Fitch admitted that their model "starts to break down" if prices stagnate. If prices actually fall for a period of some years the model "breaks down completely".
So THERE you have their definition of a AAA investment grade security: one that is safe SO LONG AS THINGS GO WELL!
It's fucking ridiculous. But I digress.
The point I am making is that these things have been set up without a thought for what happens if prices fall and foreclosures become necessary. The ONLY thought has been about divvying up the cash that flows in from performing mortgages.
So this may be ANOTHER fatal flaw inherent in this whole concept of securitised mortgages.
If that is the case this will trigger an unwinding of the securities. The senior trancheholders will want to get their money back before the whole thing collapses in a heap.
I used to work in sold loans and I've done some work on clearing title. And assignments don't get filed all the time. In my experience, it's more common for them to not be filed than for the paperwork to actually be correct.
There are original mortgages that aren't filed, sometimes for over a year. And in some cases I worked on the liens can't be filed cause they lost the original paperwork, and the bank's just hoping the customer doesn't default. These things have been shrugged off for years, and it's about time someone forced the lenders to file paperwork like they're required to do.
The problem DB has with providing the required evidence is that it must prove each previous owner of record. If it wants to be truthful, then it must list every owner either recorded or not back to the original. They will have to prove chain of title for numerous non-recorded transactions, which leaves the door wide open for debtor's attorneys to want every single assignment documented and proved. (These things are bought and sold like candy.)
This is a much bigger deal than it appears.
Tanta, could you upate this after you read the order? Until you do so, aren't you just speculating on the impact of this?
In MERS cases, does MERS also have to prove all non-recorded transactions?
They did refile (one case I just looked at), with two exhibits: a payment history and an Assignment, which was the identical same post-filing assignment that wasn't good enough for the previous case, except that now it predates the filing of the new case. So instead of proving that it had been assigned earlier, they just created a new assignment from Argent to DB.
A related question to whether forclosure can proceed... If a bank has taken title, is there any way to prove the original mortgage has been satisfied? In other words, should you buy a forclosed property from a bank?
I'm thankful for your proper analysis of the situation. You wouldn't believe how many bloggers interpreted this as loop hole for homeowners to get out of foreclosures. All it did as you point out correctly is force lenders to have the paperwork in order before showing up in court.