Archive | May, 2010

Why So Much Concern about Price Deflation?

31 May

By Richard E. Wagner, Ph.D.

We recently have been hearing a lot about the threat of deflation, doubtlessly inspired by recent falls in indexes of consumer and producer prices. The Great Depression of the 1930s comes to mind when people speak of deflation. No one wants another Great Depression. Nearly everyone would prefer the double-digit inflation of twenty years ago. This preference is reasonable, but it does not follow that deflation is bad. Whether deflation is bad or good depends on why prices fall.

The Great Depression of the 1930s is the prime example of the bad kind of deflation. The Federal Reserve allowed the supply of money to shrink by thirty-five percent between 1930 and 1933. This gigantic destruction in the supply of money sabotaged markets throughout the land. Consumers could not afford to buy products, businesses could not sell their output, and workers could not find jobs. All of this happened because the Federal Reserve failed in its fundamental task of keeping the stock of money intact. This kind of demand-side deflation is clearly an economic scourge of major proportions.

Deflation can also result for supply-side reasons. This type of deflation is a radically different type of animal, and is a good one to have around. It is the kind of deflation that occurred in our economy after the Civil War and existed pretty much continually until the creation of the Federal Reserve in 1913. As productivity increased, consumer prices fell. Workers did not receive the continual wage increases that they have received during our recent inflationary times. Their well-being increased nonetheless. Steady wages with falling prices is a fine recipe for progress. This is, moreover, a recipe that works to the advantage of retired people on fixed incomes. With moderate deflation, a fixed sum for retirement goes ever farther because deflation allows retirees to share in the gains from rising productivity.

There is all the reason in the world to avoid a demand-side deflation. There is no reason at all, however, to oppose a supply-side deflation. No reason, at least, for ordinary citizens to oppose a supply-side deflation. It may be different for politicians and government officials. They are in a different situation with respect to deflation than are ordinary citizens. Inflation allows for increases in government budgets that would never be possible under deflation. Sustained inflation entered the American economy only with the creation of the Federal Reserve in 1913. Until then, the federal government claimed less than ten percent of the output of the American economy. It was only after steady inflation became a way of life that government’s share in the economy grew and now approaches fifty percent.

There are many reasons why inflation promotes growth in government. One of them is that inflation increases the share of total income that is collected through ordinary taxes. A ten percent increase in income increases collections of income tax on the order of twelve percent. This ability of tax rates to rise with inflation is referred to as “bracket creep.” Inflation pushes people into higher rate brackets, where they pay larger shares of their income in taxes.

Besides bracket creep, inflation is also a type of tax in its own right. The inflation tax is a form of public counterfeiting that goes by the technical name “seigniorage.” Seigniorage is the difference between the value of the money the government creates and the cost of creating that money. It is the government’s profit from creating money, and it is of the same character as the profit that a private counterfeiter makes. It costs almost nothing for the government to print another $100 bill, but this new bill is as valuable as all other $100 bills.

To be sure, the collection of this seigniorage tax works differently in different nations. In some nations, the Treasury and the central bank are joined. In those places, the government can finance its activities directly by creating money. It is different in America because the Treasury and the central bank are distinct. The government can still finance its activities by creating money, only this happens indirectly in two stages. In the first stage the government runs a deficit; in the second stage the Federal Reserve buys government bonds. The end result is indistinguishable from the Treasury directly creating money to finance its activities.

Supply-side deflation would put an end to the government’s ability to finance its activities through monetary expansion as well as through bracket creep. It would also eliminate the need for all of the various forms of indexing that have arisen to deal with inflation. The only losers from deflation would be those who live off the tax revenues that inflation generates.


(Richard E. Wagner is Holbert Harris Professor of Economics at George Mason University and a member of the Board of Scholars of the Virginia Institute for Public Policy, an education and research organization headquartered in Potomac Falls, Virginia. Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.)

Bank of America no modification policy class action

31 May

On April 30 a new class action was filed as against Bank of America they are not giving Mods even thought they took 25 Billion in Taxpayer money
California Complaint

MERS and civil code 2932.5 and Bankruptcy code 547 here is how it comes together

26 May

CA Civil Code 2932.5 – Assignment”Where a power to sell real property is
given to a mortgagee, or other encumbrancer, in an instrument intended
to secure the payment of money, the power is part of the security and
vests in any person who by assignment becomes entitled to payment of the
money secured by the instrument. The power of sale may be exercised by
the assignee if the assignment is duly acknowledged and recorded.”

Landmark vs Kesler – While this is a matter of first impression in
Kansas, other jurisdictions have issued opinions on similar and related
issues, and, while we do not consider those opinions binding in the
current litigation, we find them to be useful guideposts in our analysis
of the issues before us.”

“Black’s Law Dictionary defines a nominee as “[a] person designated to
act in place of another, usu. in a very limited way” and as “[a] party
who holds bare legal title for the benefit of others or who receives and
distributes funds for the benefit of others.” Black’s Law Dictionary
1076 (8th ed. 2004). This definition suggests that a nominee possesses
few or no legally enforceable rights beyond those of a principal whom
the nominee serves……..The legal status of a nominee, then, depends
on the context of the relationship of the nominee to its principal.
Various courts have interpreted the relationship of MERS and the lender
as an agency relationship.”

“LaSalle Bank Nat. Ass’n v. Lamy, 2006 WL 2251721, at *2 (N.Y. Sup.
2006) (unpublished opinion) (“A nominee of the owner of a note and
mortgage may not effectively assign the note and mortgage to another for
want of an ownership interest in said note and mortgage by the

The law generally understands that a mortgagee is not distinct from a
lender: a mortgagee is “[o]ne to whom property is mortgaged: the
mortgage creditor, or lender.” Black’s Law Dictionary 1034 (8th ed.
2004). By statute, assignment of the mortgage carries with it the
assignment of the debt. K.S.A. 58-2323. Although MERS asserts that,
under some situations, the mortgage document purports to give it the
same rights as the lender, the document consistently refers only to
rights of the lender, including rights to receive notice of litigation,
to collect payments, and to enforce the debt obligation. The document
consistently limits MERS to acting “solely” as the nominee of the

Indeed, in the event that a mortgage loan somehow separates interests of
the note and the deed of trust, with the deed of trust lying with some
independent entity, the mortgage may become unenforceable.

“The practical effect of splitting the deed of trust from the promissory
note is to make it impossible for the holder of the note to foreclose,
unless the holder of the deed of trust is the agent of the holder of the
note. [Citation omitted.] Without the agency relationship, the person
holding only the note lacks the power to foreclose in the event of
default. The person holding only the deed of trust will never experience
default because only the holder of the note is entitled to payment of
the underlying obligation. [Citation omitted.] The mortgage loan becomes
ineffectual when the note holder did not also hold the deed of trust.”
Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App.

“MERS never held the promissory note,thus its assignment of the deed of
trust to Ocwen separate from the note had no force.” 284 S.W.3d at 624;
see also In re Wilhelm, 407 B.R. 392 (Bankr. D. Idaho 2009) (standard
mortgage note language does not expressly or implicitly authorize MERS
to transfer the note); In re Vargas, 396 B.R. 511, 517 (Bankr. C.D. Cal.
2008) (“[I]f FHM has transferred the note, MERS is no longer an
authorized agent of the holder unless it has a separate agency contract
with the new undisclosed principal. MERS presents no evidence as to who
owns the note, or of any authorization to act on behalf of the present
owner.”); Saxon Mortgage Services, Inc. v. Hillery, 2008 WL 5170180
(N.D. Cal. 2008) (unpublished opinion) (“[F]or there to be a valid
assignment, there must be more than just assignment of the deed alone;
the note must also be assigned. . . . MERS purportedly assigned both the
deed of trust and the promissory note. . . . However, there is no
evidence of record that establishes that MERS either held the promissory
note or was given the authority . . . to assign the note.”).

What stake in the outcome of an independent action for foreclosure could
MERS have? It did not lend the money to Kesler or to anyone else
involved in this case. Neither Kesler nor anyone else involved in the
case was required by statute or contract to pay money to MERS on the
mortgage. See Sheridan, ___ B.R. at ___ (“MERS is not an economic
‘beneficiary’ under the Deed of Trust. It is owed and will collect no
money from Debtors under the Note, nor will it realize the value of the
Property through foreclosure of the Deed of Trust in the event the Note
is not paid.”). If MERS is only the mortgagee, without ownership of the
mortgage instrument, it does not have an enforceable right. See Vargas,
396 B.R. 517 (“[w]hile the note is ‘essential,’ the mortgage is only ‘an
incident’ to the note” [quoting Carpenter v. Longan, 16 Wall. 271, 83
U.S. 271, 275, 21 L. Ed 313 (1872)]).

* MERS had no Beneficial Interest in the Note,
* MERS and the limited agency authority it has under the dot does
not continue with the assignment of the mortgage or dot absent a
ratification or a separate agency agreement between mers and the
* The Note and the Deed of Trust were separated at or shortly
after origination upon endorsement and negotiation of the note rendering
the dot a nullity
* MERS never has any power or legal authority to transfer the note
to any entity;
* mers never has a beneficial interest in the note and pays
nothing of value for the note.

Bankr. Code 547 provides, among other things, that an unsecured
creditor who had won a race to an interest in the debtor’s property
using the state remedies system within 90 days of the filing of the
bankruptcy petition may have to forfeit its winnings (without
compensation for any expenses it may have incurred in winning the race)
for the benefit of all unsecured creditors. The section therefore
prevents certain creditors from being preferred over others (hence,
section 547 of the Bankruptcy Code is titled “Preferences).” An
additional effect of the section (and one of its stated purposes) may be
to discourage some unsecured creditors from aggressively pursuing the
debtor under the state remedies system, thus affording the debtor more
breathing space outside bankruptcy, for fear that money spent using the
state remedies system will be wasted if the debtor files a bankruptcy

. Bankr. Code 547(c) provides several important exceptions to the
preference avoidance power.

Bankr. Code 547 permits avoidance of liens obtained within the 90 day
(or one year) period: the creation of a lien on property of the debtor,
whether voluntary, such as through a consensual lien, or involuntary,
such as through a judicial lien, would, absent avoidance, have the same
preferential impact as a transfer of money from a debtor to a creditor
in payment of a debt. If the security interest was created in the
creditor within the 90 day window, and if other requirements of section
547(b) are satisfied, the security interest can be avoided and the real
property sold by the trustee free of the security interest (subject to
homestead exemption). All unsecured creditors of the debtor, including
the creditor whose lien has been avoided, will share, pro rata, in the
distribution of assets of the debtor, including the proceeds of the sale
of the real estate

Wrongful Foreclosure 2923.5 and 2923.6 the recent holdings

21 May

To start with, Gaitan is an unreported case, and should not be cited, nor rely on by the court. But more to the point, Gaitan is the only case in California to so hold. It summarily states that there is no private cause of action without much discussion. No other court so held.

The cases dealing with the issue of private cause of action deal specifically with section 2923.6 dealing with the duty of the servicers to the investors in modifying loans, and very generally, in fact conclusionary, with section 2923.5. both statutes were enacted under the Perata Mortgage Relief Act. Almost all the cases, excluding Gaitan, which is unreported, dismissed section 2923.5 claim (the one in which the lender must give preforeclosure notice to the borrower) on the merits, while dismissing section 2923.6 for lack of private cause of action.

Here is the reasoning for no private cause of action in section 2923.6. It is easily distinguished from the other non judicial foreclosure statutes:
“[N]othing in Cal. Civ.Code § 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers. The Perata Mortgage Relief Act was enacted relatively recently, and thus California courts have had little chance to examine its provisions. Nevertheless, section 2923.6, passed along with section 2923.5, clearly does not create a private right of action. That section solely “creat[es] a duty between a loan servicer [*19] and a loan pool member. The statute in no way confers standing on a borrower to contest a breach of that duty.” Farner v. Countrywide Home Loans, No. 08cv2193 BTM (AJB), 2009 U.S. Dist. LEXIS 5303, 2009 WL 189025, at *2 (S.D. Cal. Jan. 26, 2009). Other courts to consider this question have agreed unanimously with the Farner court. See Tapia v. Aurora Loan Servs., LLC, No. 1:09-cv-01143 AWI (GSA), 2009 U.S. Dist. LEXIS 82063, 2009 WL 2705853, at *1 (E.D. Cal. Aug. 25, 2009); Anaya v. Advisors Lending Group, No. CV F 09-1191 LJO DLB, 2009 U.S. Dist. LEXIS 68373, 2009 WL 2424037, at *8 (E.D. Cal. Aug. 5, 2009); Pantoja v. Countrywide Home Loans, Inc., F. Supp. 2d , No. C 09-01615 JW, 2009 U.S. Dist. LEXIS 70856, 2009 WL 2423703, at *7 (N.D. Cal. July 9, 2009); Connors v. Home Loan Corp., No. 08cv1134-L(LSP), 2009 U.S. Dist. LEXIS 48638, 2009 WL 1615989, at *7 (S.D. Cal. June 9, 2009).
II compiled the cases in California dealing with the private cause of action as it relates to the statutory scheme for non judicial foreclosure and they clearly treat section 2923.6 differently from the other statutes and for a good reason.. I hope this will help.
Kuoha v. Equifirst Corp
., Slip Copy, 2009 WL 3248105, S.D.Cal.,2009
(Deciding section 2923.5 claim on the merits but citing Anaya v. Advisors Lending Group No. CV F 09-1191, 2009 WL 2424037, (E.D.Cal., Aug.5, 2009) for the proposition that there is no private right of action, although Anaya dealt only with Section 2923.6.)
Anaya v. Advisors Lending Group
No. CV F 09-1191, 2009 WL 2424037, (E.D.Cal., Aug.5, 2009) (No private cause of action to enforce section 2923.6)
Gaitan v. Mortgage Electronic Registration Systems
, not Reported in F.Supp.2d, 2009 WL 3244729
C.D.Cal.,2009. (Section 2923.5 contains no language that indicates intent to create a private right of action.)
Yulaeva v. Greenpoint Mortg. Funding, Inc
., Slip Copy, 2009 WL 2880393, E.D.Cal.,2009.
(In light of plaintiff’s concession that there was no private right of action to enforce 2923.5, the court declined to independently evaluate the legislature’s intent.)
Ortiz v. Accredited Home Lenders, Inc, 639 F.Supp.2d 1159, S.D.Cal.,2009
(the court rejected the bank’s argument that there was no private cause of action to enforce section 2923.5, and noted that while the Ninth Circuit has yet to address this issue, the court found no decision from this circuit where a § 2923.5 claim had been dismissed on the basis advanced by bank.)
Lee v. First Franklin Financial Corp
., Slip Copy, 2009 WL 1371740, E.D.Cal.,2009.
(Deciding a claim based on Section 2923.5 on the merits.)
Gentsch v. Ownit Mortgage Solutions Inc
., 2009 WL 1390843, (E.D.Cal., May 14, 2009)
(Ortiz’ court indicated that this case decided a claim based on section 2923.5 on the merits, but I could not open the case)
Permpoon v. Wells Fargo Bank Nat. Ass’n
, Slip Copy, 2009 WL 3214321, S.D.Cal.,2009.
(No private cause of action under section 2923.6, but deciding section 2923.5 on the merits)
Nool v. HomeQ Servicing
, 653 F.Supp.2d 1047, E.D.Cal.,2009.
(Granting leave to amend a claim under section 2923.6, but noting that there is no authority that supports a private right of action under this section. Mentioning that plaintiff sought leave to amend a claim under section 2923.5, without any further discussion.)
Paek v. Plaza Home Mortg., Inc
., Not Reported in F.Supp.2d, 2009 WL 1668576, C.D.Cal.,2009.
(Dismissing claim under 2923.5 on the merits, because plaintiff’s allegations were inadequate to “raise a right to relief above the speculative level.” And dismissing claim under 2923.6 on the merits, but quoting Farner v. Countrywide Home Loans, 2009 WL 189025 at *2 (S.D.Cal. Jan. 26, 2009) that “nothing in section 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers.”).
Farner v. Countrywide Home Loans
, Not Reported in F.Supp.2d, 2009 WL 189025, S.D.Cal.,2009 (nothing in section 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers.)
Collins v. Power Default Services, Inc
., Slip Copy, 2010 WL 234902, N.D.Cal.,2010.
(Citing In Connors v. Home Loan Corp., District Court for the Southern District of California determined that there was no private right of action under section 2923.6. but granting leave to amend claim for “Violation of Statutory Duties” alleging that Defendants “failed to give proper notice under California law,” and issued ” notice of trustee’s sale that was not compliant with California law” to identify the statutory duties were violated, noting specifically possible sections 2924(a)(1), and 2924f.)
Connors v. Home Loan Corp
., Slip Copy, 2009 WL 1615989, S.D.Cal.,2009
(no private right of action with respect to section 2923.6.)
Glover v. Fremont Inv. and Loan
, Slip Copy, 2009 WL 5114001, N.D.Cal.,2009.
(No private right of action with respect to section 2923.6, but granting leave to amend re claim under 2923.5, to include factual allegations to support the bare legal conclusions.)
Reynoso v. Chase Home Finance
, Slip Copy, 2009 WL 5069140, N.D.Cal.,2009
(Section 2923.6 does not create a private right of action for purported violations of its provisions)
Tapia v. Aurora Loan Services, LLC
, Slip Copy, 2009 WL 2705853, E.D.Cal.,2009.
(“California Civil Code section 2923.6 does not create a cause of action for Plaintiff. Subdivision (a) of the section applies only to servicers and parties in a loan pool.” )
Reynoso v.Paul Financial, LLC
, Slip Copy, 2009 WL 3833298, N.D.Cal.,2009.
(Plaintiff’s claim for specific performance to modify the loan terms pursuant to section 2923.6(a), dismissed with prejudice. “Nothing in Cal. Civ.Code § 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers.”)
Enders v. Countrywide, Home Loans, Inc
., Slip Copy, 2009 WL 4018512, N.D.Cal.,2009.
(No private cause of action for section 2923.6)
Biggins v. Wells Fargo & Co.
2009 WL 2246199 (N.D.Cal.,2009)
(dismissing a section 2923.6 claim for being a “stand-alone claim for relief” and informing parties that it could be brought under a § 17200 claim).
Dizon v. California Empire Bancorp, Inc
., Not Reported in F.Supp.2d, 2009 WL 3770695, C.D.Cal.,2009.
(No private right of action under section 2923.6)
Santos v. Countrywide Home Loans
, Slip Copy, 2009 WL 3756337, E.D.Cal.,2009.
(No private cause of action under 2923.6)
Maguca v. Aurora Loan Services
, Not Reported in F.Supp.2d, 2009 WL 3467750, C.D.Cal.,2009.
(No private right of action for 2923.6, and deciding section 2923.5 on the merits: cause of action for violation of section 2923.5 dismissed because the allegations in the complaint were conclusory, and were contradicted by the notice of default provided by Aurora.)
Butera v. Countrywide, Home Loans, Inc
., Slip Copy, 2009 WL 3489873, E.D.Cal.,2009.
(No private right of action under section 2923.6. But citing section 2924(a)(1), and quoting Munger v. Moore, 11 Cal.App.3d 1, 7, 89 Cal.Rptr. 323 (1970): ‘trustee or mortgagee may be liable to the trustor or mortgagor for damages sustained where there has been an illegal, fraudulent or wilfully oppressive sale of property under a power of sale contained in a mortgage or deed of trust.”’, and finding that complaint lacks facts of foreclosure irregularities or facts to support wrongful foreclosure to warrant dismissal of the fourth claim.


20 May

Posted on May 19, 2010 by Neil Garfield
There’s more than one way to attack the prima facie case though—here’s a good example of a nice result from attacking the assignment…

This NY decision lays out the legal reasoning for dismissing cases for problematic assignments:

Decided on April 19, 2010
Supreme Court, Kings County
The Bank of New York, as trustee for the benefit of the
Certificateholders, CWABS, Inc., Asset Backed Certificates, Series 2007-2, Plaintiff,
Sameeh Alderazi, Bank of America, NA, New York City Environmental Control
Board, .
Plaintiff submits anet al

Upon reading the Affirmation of Linda P. Manfredi, Esq., counsel for the
Plaintiff, dated November 20, 2008, together with Plaintiff’s Memorandum of
Law, dated November 19th, 2008, together with the proposed Ex Parte Order
Appointing a Referee to Compute, and all exhibits annexed thereto, the
application is denied without prejudice, with leave to renew upon providing the
Court with proof of the grant of authority from the original mortgagee to
MERS specifically to act in its interest as related to the secured loan
which is the subject of this action.
Plaintiff seeks summary judgment to foreclose upon the property located at
639 East 91st Street, (Block 4751, Lot 31), in Kings County.
In order to establish prima facie entitlement to summary judgment in a
foreclosure action, a plaintiff must submit the mortgage and unpaid note,
along with evidence of default. Capstone Business Credit, LLC v. Imperial
Family Realty, LLC, 70 AD3d 882
, 895 NYS2d 199 (2nd Dept 2010). The Second
Department has also required a showing that the mortgage was valid. Washington Mut.
Bank, FA v. Peak Health Club, Inc., 48 AD3d 793
, 853 NYS2d 112 (2nd
In this case, Defendant Sameeh Alderazi borrowed $408,000.00 from
“America’s Wholesale Lender” on January 25, 2007. The mortgage was recorded in the
Office of the City Register, New York City Department of Finance on
February 14, 2007. MERS was referred to in the mortgage as nominee of the
mortgagee, America’s Wholesale Lender, for the purpose of recording the mortgage.
MERS purported to assign the mortgage to Plaintiff BANK OF NEW YORK on
July 23, 2008. The assignment was recorded on September 19, 2008. The
assignment was executed by “Keri Selman, Assistant Vice President of MERS, as
“authorized agent pursuant to Board of Resolutions and/or appointment”. However,
no resolution nor other proof of authority was recorded with the
assignment or submitted to the Court.
A party cannot foreclose on a mortgage without having title, giving it
standing to bring the action. (See Kluge v. Fugazy, 145 AD2d 537, 538 (2nd
Dept 1988 ), holding that a “foreclosure of a mortgage may not be brought by
one who has no title to it and absent transfer of the debt, the assignment of
the mortgage is a nullity”. Katz v. East-Ville Realty Co., 249 AD2d 243
(1st Dept 1998), holding that “[p]laintiff’s attempt to foreclose upon a
mortgage in which he had no legal or equitable interest was without foundation
in law or fact”.
“To have a proper assignment of a mortgage by an authorized agent, a power
of attorney is necessary to demonstrate how the agent is vested with the
authority to assign the mortgage.” [*2]HSBC BANK USA, NA v. Yeasmin, 19 Misc
3d 1127(A), 866 NYS2d 92 (Table) N.Y.Sup.,2008. “No special form or
language is necessary to effect an assignment as long as the language shows the
intention of the owner of a right to transfer it”. Emphasis added, Id.,
citing Tawil v. Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 55 (1st
Dept 1996); Suraleb, Inc. v. International Trade Club, Inc., 13 AD3d 612
Dept 2004).
The claim in this case is that the mortgage was assigned by MERS, as the
nominee, to the Plaintiff. However Plaintiff submits no evidence that
America’s Wholesale Lender authorized MERS to make the assignment. MERS submits
only its own statement that it is the nominee for America’s Wholesale
Lender, and that it has authority to effect an assignment on America’s Wholesale L
ender’s behalf.
The mortgage states that MERS is solely a nominee. The Plaintiff, in its
Memorandum of Law, admits that MERS is solely a nominee, acting in an
administrative capacity.
In its Memoranda, Plaintiff quotes the Court in Schuh Trading Co., v.
Commisioner of Internal Revenue, 95 F.2d 404, 411 (7th Cir. 1938), which
defined a nominee as follows:
The word nominee ordinarily indicates one designated to act for another as
his representative in a rather limited sense. It is used sometimes to
signify an agent or trustee. It has no connotation, however, other than that of
acting for another, or as the grantee of another.. Id. Emphasis added.
Black’s Law Dictionary defines a nominee as “[a] person designated to act
in place of another, usually in a very limited way”. Agency is a fiduciary
relationship which results from the manifestation of consent by one person
to another that the other shall act on his behalf and subject to his
control, and consent by the other so to act. Hatton v. Quad Realty Corp., 100
AD2d 609, 473 NYS2d 827, (2nd Dept 1984). “[A]n agent constituted for a
particular purpose, and under a limited and circumscribed power, cannot bind his
principal by an act beyond his authority.” Andrews v. Kneeland, 6 Cow. 354
N.Y.Sup. 1826.
MERS, as nominee, is an agent of the principal, for limited purposes, and
has only those powers which are conferred to it and authorized by its
In the mortgage in this case, MERS claims, as nominee, that it was granted
the right “(A) to exercise any or all of those rights, including, but not
limited to the right to foreclose and sell the Property, and (B) to take
any action required of the Lender including, but not limited to, releasing
and canceling this Security Instrument.” However, this language quoted by
MERS is found in the mortgage under the section “BORROWER’S TRANSFER TO LENDER
OF RIGHTS IN THE PROPERTY” and therefore is facially an acknowledgment by
the borrower. The fact that the borrower acknowledged and consented to MERS
acting as nominee of the lender has no bearing on what specific powers and
authority the lender granted MERS. The problem is not whether the borrower
can object to the assignees’ standing, but whether the original lender,
who is not before the Court, actually transferred its rights to the
Plaintiff. To allow a purported assignee to foreclosure in the absence of some proof
that the original lender authorized the assignment would throw into doubt
the validity of title of subsequent purchasers, should the original lender
challenge the assignment at some future date.
Furthermore, even accepting MERS’ position that the lender acknowledges
MERS’ authority exercise any or all of the lenders’ rights under the
mortgage, the mortgage does not convey the specific right to assign the mortgage.
The only specific rights enumerated in the [*3]mortgage is the right to
foreclose and sell the Property. The general language “to take any action
required of the Lender including, but not limited to, releasing and canceling
this Security Instrument” is not sufficient to give the nominee authority to
alienate or assign a mortgage without getting the mortgagee’s explicit
authority for the particular assignment. Alienating a mortgage absent specific
authorization is not an administrative act.
Plaintiff submitted no other documents which purport to authorize MERS to
assign or otherwise convey the right of the mortgagor to assign the
mortgage to another party.
A party who claims to be the agent of another bears the burden of proving
the agency relationship by a preponderance of the evidence, Lippincot v.
East River Mill & Lumber Co., 79 Misc. 559, 141 NYS 220 (1913), and “[t]he
declarations of an alleged agent may not be shown for the purpose of proving
the fact of agency”. Lexow & Jenkins, P.C. v. Hertz Commercial Leasing
Corp., 122 AD2d 25, 504 NYS2d 192 (2nd Dept 1986). See also Siegel v. Kentucky
Fried Chicken of Long Island, Inc., 108 AD2d 218, 488 NYS2d 744 (2nd Dept
1985), Moore v. Leaseway Transp. Corp., 65 AD2d 697, 409 NYS2d 746 (1st Dept
1978). “The acts of a person assuming to be the representative of another
are not competent to prove the agency in the absence of evidence tending to
show the principal’s knowledge of such acts or assent to them”. (2 NY Jur
2d, Agency and Independent Contractors, 26).
Plaintiff has submitted no evidence to demonstrate that the original
lender, the mortgagee America’s Wholesale Lender, authorized MERS to assign the
secured debt to Plaintiff.
Thus, Plaintiff has not made out a prima facie case that it is entitled to
foreclose on the mortgage in question.WHEREFORE, it is ORDERED that the
Plaintiff’s application for an Order appointing referee to compute amounts
due to the Plaintiff is denied with leave to renew upon proof of authority.
This shall constitute the decision and order of this Court.

House for free don’t get caught in the trap

20 May

Posted on May 19, 2010 by Neil Garfield
I’m probably partly to blame for this notion so I want to correct it. The goal is NOT to get your house for free, although that COULD be the result, as we have seen in a few hundred cases. The simple answer is “No Judge I am not trying to get my house for free, I’m trying to stop THEM from getting my house for free. They don’t have one dime invested in this deal and payments have been received by the real creditors for which they refuse to give an accounting.”

The obligation WAS created. The question is not who holds the note but to whom the note is payable, and what is the balance due on the note after a full accounting from the creditor.

So don’t leave your mouth hanging open when the Judge says something like that. Tell him or her that they have the wrong impression because they are getting misinformation from the other side which is trying to get a lawyer’s argument admitted as evidence. Tell him you want the deal you signed up for — including the appraised value that the lender represented to you at closing.

Don’t say you won’t pay anything. Offer to make a monthly payment into the court registry — not in the amount demanded, but for perhaps 25% of the amount demanded. Tell him you refuse to pay someone who never lent you the money, who is not on the closing documents and is relying on securitization documents which contain multiple conditions, many of which they have violated.

Tell the Judge you deny the default because you know they received third party payments and they refuse to allocate the payments to your loan, and they refuse to inform you or the Court as to whether these third party insurers and guarantors have equitable or legal rights of subrogation. Subrogation is taking the place of another person because you are the real party in interest.

“Why should I lose my house just because I didn’t pay them. The note isn’t payable to them. Even if they have an assignment, it violates the terms under which they are permitted to accept it, and even if they were permitted to accept it, it wold be on behalf of the true creditors who were the investors who advanced the funds and now could be anyone because of the transactions in which the investors were paid or settled.

“The question is not whether I made a payment, it is whether a payment is due after allocation of third party insurance, credit default swap and guarantee payments. Who are they to declare a default when they refuse to give a full accounting?”

Attorneys take on the Foreclosure crisis

20 May

By Kristina Horton Flaherty
Staff Writer

One recent fall morning, nearly 80 attorneys, paralegals and housing counselors streamed into San Francisco’s Practising Law Institute — another 166 arrived via the Internet — to learn how to better help desperate homeowners facing foreclosure.

More than 79,000 Californians lost their homes in the third quarter of 2008. Another 94,240 new default notices went out during the same period. And with credit tight, housing counselors overwhelmed and loan modification scams on the rise, experts say, thousands of homeowners are sinking fast.

The free, day-long “Defending Subprime Mortgage Foreclosures” training, still available online, was just one of several initiatives jointly sponsored by the State Bar to provide information and rally more volunteer assistance for those caught in the foreclosure crisis.

Other efforts include a free training on how to defend unlawful detainers (co-sponsored by Housing and Economic Rights Advocates of Oakland and others), and a new Web site — Foreclosure — launched by the Public Interest Clearinghouse and the bar for homeowners and tenants, as well as attorneys interested in volunteering their help.

“There aren’t enough people out there to help the borrowers,” said Tara Twomey, the National Consumer Law Center attorney who conducted the foreclosure defense training. “It’s a numbers problem, a sheer numbers problem, especially in areas like California.”

And attorney volunteers from all areas of practice can make a difference, she says. “Does that mean every borrower can be helped? Probably not. But I do think that with some persistence, a lot of borrowers can.”

That help might involve seeking a loan modification or simply developing an exit strategy — delaying an eviction or negotiating a payment from the lender to vacate the home. Freezing an interest rate for two years while the borrower’s child finishes high school, for example, might be one homeowner’s goal. “Not everybody needs a long-term solution,” Twomey said.

The training includes an overview of the subprime mortgage market, the foreclosure process, the current crisis and responses to it, available options and how to spot potential predatory lending, federal law violations and state claims in the origination and servicing of subprime mortgages.

A recent explosion in loan modification scams illustrates that borrowers are not finding the help they need, Twomey points out. Desperate borrowers pay fees in advance to someone who promises to renegotiate their loan but winds up doing little or nothing.

“People are willing to pay money because the system’s so broken that they can’t get anywhere,” Twomey said. “Really, this should be able to be done for free.”

But housing counselors and non-profit programs are stretched too thin, many say. And borrowers often cannot get through to anyone at their financial institutions who can help them. In turn, a spin-off loan modification industry — along with numerous scams — has sprung up in just months.

“It’s just exploded,” said Tom Pool of the Department of Real Estate.

But companies that promise to help consumers in foreclosure cannot legally collect advance fees (attorneys are exempt from this prohibition). If no default notice has been recorded, real estate brokers can collect advance fees for such work if they have special approval from the DRE. In early November, just 12 brokers had such approval; six weeks later, that number had jumped to 40, with another 400 applications pending.

Loan modification scams typically start with a flyer, phone call or knock at the door and an offer to renegotiate the homeowner’s loan — for an upfront fee. Participating homeowners often are told to avoid contacting their lenders. Then, while the company does little or nothing to renegotiate the loan, the unwitting homeowner loses precious time and falls deeper into foreclosure.

“Loan modification scams are becoming more and more prevalent across the country, particularly in California,” Attorney General Jerry Brown said in November, after announcing arrests in an alleged Southern California scam involving First Gov (also operating as Foreclosure Prevention Services).

Homeowners allegedly paid First Gov an advance fee of $1,500 to $5,000 and then, when delinquency or foreclosure notices continued to pile up, were told that they needed to make an additional “good faith” payment to secure new accounts for their renegotiated loans. According to the Attorney General’s Office, records suggest homeowners lost more than $700,000 in the scheme.

Prosecutors and nonprofit counselors alike stress that assistance is available for homeowners at little or no cost. But many swamped non-profits need help — particularly from attorneys in such areas as bankruptcy, probate, elder abuse and consumer law.

At the Sacramento-based Senior Legal Hotline, those manning the phone lines can only handle about half of the 80 to 100 calls that back up every day, says supervising attorney David Mandel. And the bulk of those calls now involve foreclosure-related cases that tend to be more time-consuming.

“The amount of time we’re spending on each case has shot way up,” Mandel said. In some instances, he turns to reverse mortgages to help seniors stay in their homes. And he could really use help, he says, from attorneys willing to handle predatory lending cases that might lead to litigation.

The Housing and Economic Rights Advocates in Oakland currently handles 100 to 200 foreclosure-related calls a week, sometimes as many as 65 calls a day. Executive Director Maeve Elise Brown says she’s hoping to build a list of vetted pro bono attorneys who could be tapped, with some guidance, to take on some of their cases.

Kellie Morgantini, one of two staff attorneys at Legal Services for Seniors in Monterey County, says she’s recently seen a huge jump in senior tenants on the verge of eviction. They live in homes purchased as investment properties during the boom. They pay their rent on time. And then one day, the sheriff shows up with an eviction notice.

All Morgantini can do in most cases is negotiate a delay in the move, she says. She works to keep the tenant’s name off of the unlawful detainer as well. And she’s met with the sheriff to try to find a way to ease the situation. In one recent case, Morgantini’s client moved out after a delay, but bank investigators later insisted the woman was still in the home. As it turned out, someone else in dire straits had settled into the vacant home and placed a post-it on the window: “Please don’t throw us out. We’re a family.”

Morgantini attended the recent foreclosure defense training via the Webcast, she said, to learn how to better assist the surge of seniors falling victim to foreclosure, predatory lending scams and potential homelessness.

“This has been something that has been getting bigger and bigger,” she said. “We needed to be able to see how to focus on what’s important.”

Dan Mulligan of Jenkins, Mulligan & Gabriel LLP, a presenter at the training, says very little can be done for borrowers in the current climate. But, he said, attorneys who want to help should take the training, get into an organized pro bono program and try to do something. “Dig in,” the La Quinta attorney said, “and see where you can go on the loan modification process. It’s still possible.”

To view the trainings at no charge and earn MCLE credit, go to The Web site also provides a link to a list of programs that are seeking pro bono help from attorneys statewide.(866)717-0415 in Northern California(916)361-6583
Many a client call me when its toooooo late however sometimes something can be done it would envolve an appeal and this application for a stay. Most likely you will have to pay the reasonable rental value till the case is decided. And … Yes we have had this motion granted. ex-parte-application-for-stay-of-judgment-or-unlawful-detainer3
When title to the property is still in dispute ie. the foreclosure was bad. They (the lender)did not comply with California civil code 2923.5 or 2923.6 or 2924. Or the didn’t possess the documents to foreclose ie. the original note. Or they did not possess a proper assignment 2932.5. at trial you will be ignored by the learned judge but if you file a Motion for Summary Judgmentevans sum ud
template notice of Motion for SJ
TEMPLATE Points and A for SJ Motion
templateDeclaration for SJ
TEMPLATEProposed Order on Motion for SJ
TEMPLATEStatement of Undisputed Facts
you can force the issue and if there is a case filed in the Unlimited jurisdiction Court the judge may be forced to consider title and or consolidate the case with the Unlimited Jurisdiction Case

2nd amended complaint (e) manuel
BAKER original complaint (b)
Countrywide Complaint Form
California stop foreclosure and get your own shortsale COMPLAINT
And in some cases an injunction is in order
Foreclosure injunction TRO
and a Lis Pendence

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