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

Posted on October 12, 2010 by Foreclosureblues

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

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

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

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

Step one: Hide the Truth!

Step two: Formulate intricate lies to placate the masses

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

Step three: Being forced to face the music

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

Step four: The eradication of US banks from global prominence

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

Click to enlarge…

Source: Cap Gemini Banking M&A

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

 

 

Source: Nomura on Balance Sheet Recessions

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

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

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

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

• Bank of America
• Chase Home Mortgage Corporation of the Southeast
• CitiMortgage, Inc.
• Fannie Mae
• Freddie Mac
• GMAC Residential Funding Corporation
• HSBC Finance Corporation
• Merrill Lynch Credit Corporation
• MGIC Investor Services Corporation
• Mortgage Bankers Association
• Nationwide Advantage Mortgage Company
• PMI Mortgage Insurance Company
• Stewart Title Guaranty Company
• SunTrust Morgage, Inc.
• United Guaranty Corporation
• Washington Mutual Bank
• Wells Fargo Bank, N.A.

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

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

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

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

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

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

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

Impact on RMBS and CDOs

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

GMAC Mortgage Class Action Lawsuit Complaint Filed Over Alleged … Oct 4, 2010 … GMAC Homeowners In Maine File Class Action Lawsuit Complaint Against GMAC Mortgage Over Alleged False Foreclosure Documents, Affidavits and. classactionlawsuitsinthenews.com/class–action–lawsuits/gmac-mortgage-class–action–lawsuit-complaint-filed-over-alleged-false-foreclosure-docu… – Cached Wrongful Foreclosure Class Action « Timothymccandless’s Weblog Jan 15, 2010 … 13 Responses to “Wrongful Foreclosure Class Action” … I would like to be included in your class action lawsuit. I am a victim of predatory … timothymccandless.wordpress.com/…/wrongful-foreclosure–class–action/

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

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

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

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

This is the part that everybody seems to be overlooking…

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

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

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

#1f1f1f;”>

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

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

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

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

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

#1f1f1f;”>

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

 

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

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

 

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

 

…

 

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

 

….

 

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

 

Striking a Balance

 

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

 

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

 

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

 

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

 

…

 

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

 

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

 

…

 

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

 

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

 

…

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

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

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

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

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

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

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

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

#ffffff;”>

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

#ffffff;”>

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

#ffffff;”>

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

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

#ffffff;”>

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

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

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

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

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

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

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

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

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

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

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

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

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

 

BofA Finds Foreclosure Document Errors

 

By DAN FITZPATRICK

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

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

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

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

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

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

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

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

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

More

• BofA Faces More Foreclosure Headwinds
• What the ‘Foreclosure Crisis’ Means for You

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

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

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

Its not Robo-Singning its lying !!!

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

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

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

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

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

Eviction statute california ccp 1161a

California Code of Civil Procedure Section 1161a

Legal Research Home > California Lawyer > Code of Civil Procedure > California Code of Civil Procedure Section 1161a

(a) As used in this section:
   (1) "Manufactured home" has the same meaning as provided in
Section 18007 of the Health and Safety Code.
   (2) "Mobilehome" has the same meaning as provided in Section 18008
of the Health and Safety Code.
   (3) "Floating home" has the same meaning as provided in
subdivision (d) of Section 18075.55 of the Health and Safety Code.
   (b) In any of the following cases, a person who holds over and
continues in possession of a manufactured home, mobilehome, floating
home, or real property after a three-day written notice to quit the
property has been served upon the person, or if there is a subtenant
in actual occupation of the premises, also upon such subtenant, as
prescribed in Section 1162, may be removed therefrom as prescribed in
this chapter:
   (1) Where the property has been sold pursuant to a writ of
execution against such person, or a person under whom such person
claims, and the title under the sale has been duly perfected.
   (2) Where the property has been sold pursuant to a writ of sale,
upon the foreclosure by proceedings taken as prescribed in this code
of a mortgage, or under an express power of sale contained therein,
executed by such person, or a person under whom such person claims,
and the title under the foreclosure has been duly perfected.
   (3) Where the property has been sold in accordance with Section
2924 of the Civil Code, under a power of sale contained in a deed of
trust executed by such person, or a person under whom such person
claims, and the title under the sale has been duly perfected.
   (4) Where the property has been sold by such person, or a person
under whom such person claims, and the title under the sale has been
duly perfected.
   (5) Where the property has been sold in accordance with Section
18037.5 of the Health and Safety Code under the default provisions of
a conditional sale contract or security agreement executed by such
person, or a person under whom such person claims, and the title
under the sale has been duly perfected.
   (c) Notwithstanding the provisions of subdivision (b), a tenant or
subtenant in possession of a rental housing unit which has been sold
by reason of any of the causes enumerated in subdivision (b), who
rents or leases the rental housing unit either on a periodic basis
from week to week, month to month, or other interval, or for a fixed
period of time, shall be given written notice to quit pursuant to
Section 1162, at least as long as the term of hiring itself but not
exceeding 30 days, before the tenant or subtenant may be removed
therefrom as prescribed in this chapter.
   (d) For the purpose of subdivision (c), "rental housing unit"
means any structure or any part thereof which is rented or offered
for rent for residential occupancy in this state.

insider mers memo foreclosure procedures all states

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

It could almost come from a science fiction movie where tens of thousands are forced out of their homes by a cold, mechanized Robo-Signer. But it’s not science fiction. It’s reality.

Over the past two weeks, both Bank of America and JPMorgan Chase have suspended their foreclosure proceedings for tens of thousands of mortgages as they look at their foreclosure process. The issue? Robo-Signers are authorizing thousands of foreclosures every week denying homeowners a proper, human review and proper consideration for their individual foreclosure case.

At least RoboCop had it right when he said, “Serve the public trust, protect the innocent, uphold the law.” Have banks’ foreclosure practices violated the public trust? Foreclosed on innocent homeowners? Broken the law?

In fact, banks in Florida, Texas, Maine and other states are withdrawing their foreclosure affidavits that were signed by Robo-Signers. GMAC and Chase in particular have admitted in sworn depositions that they have used Robo-Signers to authorize as many as 10,000 foreclosure documents a month without proper review and notorization.

Banks like GMAC claim that the errors are technical in nature and didn’t result in any inappropriate foreclosures. Attorneys General in states like Colorado, Texas, Iowa and others are looking into GMAC’s practices to see if they constitute criminal fraud.

Unfortunately, many homeowners, maybe 60% or more, facing foreclosure do little or nothing to safeguard their rights allowing Robo-Signers to run rough-shod over them. But some homeowners who have fought back have found irregularities in the foreclosure process used by banks. In some cases, the bank didn’t even own the loan it. It had been sold into a securitized trust held by other investors meaning that the bank had no basis for foreclosure.

According to the Wall Street Journal, IndyMac used a Robo-Signer named Erica A Johnson-Seck to sign more than 6,000 documents a week. Upon review by a court, it was determined that IndyMac couldn’t possibly have properly reviewed foreclosure cases as required by law.

More and more homeowners are beginning to fight their foreclosure process. Some complain that this will slow down the foreclosure process and, thus, the housing recovery.

Homeowner v Robo-signer

Bank Robo-Signers Oust Homeowners

It could almost come from a science fiction movie where tens of thousands are forced out of their homes by a cold, mechanized Robo-Signer. But it’s not science fiction. It’s reality.

Over the past two weeks, both Bank of America and JPMorgan Chase have suspended their foreclosure proceedings for tens of thousands of mortgages as they look at their foreclosure process. The issue? Robo-Signers are authorizing thousands of foreclosures every week denying homeowners a proper, human review and proper consideration for their individual foreclosure case.

At least RoboCop had it right when he said, “Serve the public trust, protect the innocent, uphold the law.” Have banks’ foreclosure practices violated the public trust? Foreclosed on innocent homeowners? Broken the law?

In fact, banks in Florida, Texas, Maine and other states are withdrawing their foreclosure affidavits that were signed by Robo-Signers. GMAC and Chase in particular have admitted in sworn depositions that they have used Robo-Signers to authorize as many as 10,000 foreclosure documents a month without proper review and notorization.

Banks like GMAC claim that the errors are technical in nature and didn’t result in any inappropriate foreclosures. Attorneys General in states like Colorado, Texas, Iowa and others are looking into GMAC’s practices to see if they constitute criminal fraud.

Unfortunately, many homeowners, maybe 60% or more, facing foreclosure do little or nothing to safeguard their rights allowing Robo-Signers to run rough-shod over them. But some homeowners who have fought back have found irregularities in the foreclosure process used by banks. In some cases, the bank didn’t even own the loan it. It had been sold into a securitized trust held by other investors meaning that the bank had no basis for foreclosure.

According to the Wall Street Journal, IndyMac used a Robo-Signer named Erica A Johnson-Seck to sign more than 6,000 documents a week. Upon review by a court, it was determined that IndyMac couldn’t possibly have properly reviewed foreclosure cases as required by law.

More and more homeowners are beginning to fight their foreclosure process. Some complain that this will slow down the foreclosure process and, thus, the housing recovery.

Bank Of America foreclosure fraud

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

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

Full report below, but first some background…

First from Business Insider…

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

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

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

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

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

Read more: http://www.businessinsider.com/bank-of-america-mortgage-report-2010-10#ixzz12dvMtRAf

Then we have the spin zone…

CNBC

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

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

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

Why not?

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

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

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

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

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

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

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

There will be no rule of law left in America.

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

We are in critical times here folks…

Oh, and one more thing.

How do you defraud the investor without defrauding the borrower?

They were both sold an empty box…

documents to look for to prepare for a bankruptcy filing

California Bankruptcy Statistics

As Southern Californians deal with the fallout from the mortgage crisis, many homeowners and families have found themselves saddled with debt they cannot afford. As a result of this unfortunate situation, individuals are increasingly turning to bankruptcy to get their financial lives back on track. A majority of individuals file a Chapter 7 bankruptcy to help wipe out most, if not all, of their unsecured debts, including credit card bills, medical bills and judgments. For those individuals who do not qualify for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy is beneficial where the debtor has significant property and/or wants to eliminate a second mortgage on the residence.

At the McCandless Law Firm, we are committed to providing personalized service and our team of professionals will help you obtain a fresh start for you and your family. Contact us today to arrange a free office consultation. Documents to Collect Before filing, the following documents will be necessary to complete your bankruptcy petition:

1. Copy of each debtor’s social security card and bring original with you to your hearing

2. Copy of each debtor’s drivers’ license and bring original with you to the hearing

3. Documentation of any wage garnishments, wage assignments or other legal actions, including lawsuits

4. Copy of recent real estate appraisal, if any

5. Copy of most recent real estate tax bill

6. Pay stubs for each debtor for prior 6 months

7. Documentation of other income i.e. child support, social security, pension, disability, unemployment for prior 6 months

8. Copies of federal and state tax returns complete with all schedules including W-2’s for the prior 4 years

9. Copies of checking account, savings account, and money market account bank statements complete with copies of canceled checks for the prior 6 months (you will be asked to supplement this at a later date)

10. Copy of any life insurance policies except ones through employment including a statement regarding the current cash value

11. Copy of most recent brokerage account statement

12. Copy of most recent individual retirement account statement

13. Copy of most recent pension/retirement account statement

14. Copy of most recent 401K, 401B or 401E account statement

15. Copy of any contract for deed in which you are a buyer or seller

16. Copy of divorce decrees and/or domestic support obligation orders (child support or alimony)

Creditor laws and the fair debt collection practices act fdcpa

Creditor Laws

While creditors must follow specific laws when it comes to collecting on debts, creditors often resort to unscrupulous collection practices which violate the Fair Debt Collection Act and risk being fined, or sued, depending upon the severity of the violation by attempting to take advantage of consumers who are ignorant when it comes to debt collection practices.

Fair Debt Collection Practices
Creditors must follow fair debt collection practices if attempting to collect on a debt. There are several laws in place governing creditor communication, including:

• Creditors cannot call and harass you throughout the day.  One phone call per day is allowed, provided that they actually speak with you.
• Creditors cannot misrepresent themselves to be a lawyer, police or other governmental entity.
• Creditors cannot threaten, harass, or annoy you.  They may not use profanity or threaten to sue you, garnish your wages or take other actions that they do not really plan to take.
• Creditors cannot call at inconvenient times, or contact you by telephone after you have requested that they stop calling.

Automatic Stay Violations

If you have filed for bankruptcy protection, creditors cannot attempt to collect on a debt for as long as the automatic stay is in place. Creditors that violate the automatic stay may be subject to legal action, and monetary damages. An automatic stay goes into place as soon as your paperwork is accepted by the bankruptcy court.  If you are contacted by creditors after they have been informed of your bankruptcy, you may be able to pursue the creditors in court.

Bankruptcy Discharge Violations

If a debt is listed as discharged on your bankruptcy filing and a creditor still attempts to collect on the debt, you may be entitled to damages. Speak with a reputable San Bernardino County Bankruptcy Attorney and get the representation that you need in this case.

Even though creditors have a right to collect the debts they are owed, they have to collect them within the boundaries of the law.  Fair debt collection practices were put into place to protect consumers like you, and you may have the right to seek damages if creditors employ abusive collection techniques. Contact us to speak to an experienced bankruptcy attorney if you have contacted in violation of the Fair Debt Collection Practices Act, and get the legal representation you need to recover damages and prevent further abuse.

Debtor Laws and complete disclosure in Bankruptcy petition

Once you have decided to file for bankruptcy, you must be truthful about your financial situation in order to take advantage of bankruptcy protections.  While this does not pose a problem for a majority of individuals, it is often unwise for a debtor undergoing a bankruptcy to seek to secrete or hide assets.

When you file bankruptcy, expect that the trustee will perform a thorough investigation of your assets and your financial transactions for a year or more prior to the bankruptcy.  If the trustee determines that you have sold or given away valuable items before filing for bankruptcy protection, this can cause your case to be dismissed.  If this happens, you will have to re-file and may not benefit from the protection afforded by the automatic stay which means that creditors will be free to pursue their collection attempts.  Additionally, debtors who attempt to hide assets may be guilty of fraud, accordingly, it is important to disclose any and all financial activities in your initial petition.

Despite innocent intentions, certain actions may require that you to have to wait in order to file for bankruptcy in order to avoid dismissal.  If you have recently sold or given away valuable property, you may have to wait for a year before you file, which is why it is important that you speak with a reputable bankruptcy attorney if you are considering filing for bankruptcy.  The McCandless Law Firm offers legal advice for anyone who may be considering filing for bankruptcy, contact us today to set up a free, no-obligation case evaluation.

What is Causing All of These Bankruptcy Filings?

There are several common causes which lead to filing for bankruptcy.  These included, but are not limited to the following:

1. Lawsuits/Garnishments

Nobody wants to be sued and brought to judgment.  Nobody wants to have 10%-25% of their hard earned wages deducted from their pay.  In many cases, the taking of 10%-25% of one’s wages leads to the inability of that person to pay his rent, utilities or auto payment.  Just the thought of the employer potentially having to garnish wages leads many to panic.  Debtors do not want their employers or co-workers knowing of their financial troubles.

2. Auto Repossessions

Imagine waking one morning, heading out the door to work, only to find that your car is not where you parked it.  Sure you were a little late on the auto payment, but you thought the finance company would wait for you to get current on your own.  Auto lenders will do whatever it takes to get you financed, regardless of whether you are actually capable of affording the car.  They realize that if you can’t pay the installment, they can take back their vehicle and re-sell it before it fully depreciates.  They do this through the use of auto auctions where the vehicle sells for substantially less than what is owed.  This leads to a deficiency amount which the lender seeks to recover from the debtor, you.  Talk about insult to injury, the debtor first loses possession of the vehicle and then gets sued for the outstanding deficiency balance.  Who wants to pay for something that they no longer have?

3. Unpaid Medicals

With more and more Americans going without medical insurance (45.8 million, per the U.S. Census Bureau press release dated 8/30/05), they risk losing whatever they have earned throughout their lifetime should a major medical problem occur.  Most claim that they can’t afford to carry medical insurance.  In reality, they can’t afford not to.  The rising cost of health care could significantly deplete one’s savings should a serious illness or injury occur.  Even those with co-payment coverages are having a difficult time meeting their burden of the bill.

4. High Interest Loans

There have always been high interest personal loans from many sources.  In recent times, the advent of the payday loan has surfaced.  These loans have exorbitant interest, which is often carried over to extend the loan.  People who cannot survive until their next payday are giving up a huge portion of their paycheck to get the money in advance.  This dangerous cycle leads to further borrowing with less and less money actually going into the worker’s pocket.

6. Foreclosures

The pride and joy of being a homeowner can be easily tempered by the hard work and cost of maintaining the home.  Calling the landlord to make repairs is not an option; you are your own landlord.  When the water is not flowing to the main sewer, you have no option, but to make the repairs.  Additionally, the mortgage needs to be timely paid no matter what your special circumstance may be.  Real estate taxes and homeowner’s insurance are also required to be paid regularly or you face a foreclosure suit.  Changes in employment, health, income and marital status can lead to one’s failure to make timely payments.  Many take second mortgages or lines of credit which simply create an additional, financial burden on the homeowner.  When faced with the reality that they cannot afford the home, debtors can vacate the home and extinguish any mortgage liability through  bankruptcy.

7. Overzealous Lending

How many credit card applications have you received in the mail this year?  If you are like many Americans, the applications continue to appear regularly.  Have you received convenience checks or offers for additional lines of credit?  If so, you may have taken advantage of the use of the credit without any feasible way of repaying the debt.  Many people are receiving pre-approved credit applications when they are in fact, not credit worthy.  The credit card lenders point fault at the debtors for accepting the credit without the means to repay it.  It seems more logical to fault lenders who do not undertake to check the credit worthiness of particular debtors.

8. Consumer Overspending

Many people see what they want, acquire it, and decide later how they will pay for it.  People want to possess the latest clothing, jewelry, electronics, etc.  Most stores now offer the ability to take the product home through the use of store credit cards or outside financing.  You may even get a modest percentage discount off the purchase price if you open or use the store charge card.  Many people charge their groceries, restaurant and transportation expenses believing that if they just make the minimum payments everything will be alright.

Discharge Violations and damages for violation of the stay

Discharge Violations

Once your bankruptcy has been discharged, debts listed in your petition will be discharged.  While you will not have to repay these debts and creditors will not be able to contact you and demand payment, some creditors continue to pursue discharged debt. This is a violation of bankruptcy discharge laws, and you may be entitled to monetary damages. It is crucial that your bankruptcy petition was complete to make certain that all dischargeable debt was included in your filing.

If debts that have been properly discharged, demands for payment are rare but if this does happen to you, rest assured that our team of professionals will seek justice for you in court and recover any damages that you may be owed as a result of the creditor’s violations.  Proper legal representation is essential in order for you to take advantage of the full protection that the law provides.  If you have concerns about a bankruptcy discharge violation, contact us Southern California (909)890-9192 in Northern California(925)957-9797 as we can help answer your questions and give you the information you need to make an informed choice about your particular situation.

Fresh start and asset protection thru Bankruptcy

Asset Protection

While many clients are excited to get a fresh financial start through bankruptcy, the McCandless Law Firm understands the apprehension and fear of losing one’s assets. Whether it is your home, vehicle or prized personal possessions, implementing a solution for your debts does not mean that you have to lose the things your family values most. Our team of professionals will provide you with the information necessary to protect your assets and advise which exemptions may be available.

Asset Protection

While bankruptcy laws are federal statutes, the court will look to state exemptions to determine which assets you can protect from creditors.

Repair your Credit Score after Bankruptcy

One of the best things about getting a fresh start by declaring bankruptcy is that it allows you a chance to rebuild your credit score.  The first step in re-building your credit is to eliminate debt.  With less debt, meeting your remaining financial obligations should be easier, provided you manage your finances well.  Second, you should make sure to remove any negative information that remains on your credit reports with the three major credit reporting agencies.  After your bankruptcy is complete, any debt discharged therein should be listed on your credit report as included in the bankruptcy with a zero balance.  If the information regarding these debts is not updated, the accounts could still appear to be active, which could limit your ability to get credit.

In order to check the accuracy of your credit reports, you should order a copy of them to make sure all your discharged debts are listed as being included in your bankruptcy case and now show only zero balances. You can contact the three major credit reporting agencies online at:
•    Trans Union:  http://www.transunion.com
•    Equifax: http://www.equifax.com
•    Experian:  www.experian.com

Other valuable tips to help rebuild your credit after bankruptcy include:

1.    Establish accounts that will report positive information on you. Get a single credit card with a small credit limit, use it sparingly and pay the entire balance each month.
2.    Repay all bills in a timely manner.  Most credit cards and utilities report late payments.  After your bankruptcy, late payments will continue to paint you as a bad credit risk to creditors.

Why Hire An Attorney for Bankruptcy

Since the passage of new bankruptcy legislation in years past, the laws have become so complex that it is virtually impossible for lawyers who do not handle bankruptcy cases, much less a paralegal or document preparer, to be able to properly analyze a debtor’s situation, recognize the applicable exemptions and handle the debtor’s case from petition through discharge. In addition to completing the debtor’s petition, an experienced bankruptcy lawyer can advise which banks are quicker to freeze deposited funds when bankruptcy is filed or which lenders will immediately repossess your car despite timely payments by a debtor.

While an individual could save money by hiring a less qualified individual to assist with their bankruptcy case, the old adage of “you get what you pay for” is good advice. While it is possible to pay too much if a lawyer’s fees are exorbitant, you can also pay too little as the cheapest bankruptcy can often turn into the most expensive as mistakes in preparing the petition could be costly. While paralegals may charge low fees, he or she cannot give legal advice which could result in the loss of certain assets or a denial of discharge by the Court. By hiring an experienced lawyer you can get peace of mind knowing whether filing bankruptcy is really in your best interests and that foregoing some savings will save you money in the long run. If your eyesight was bad and you needed laser surgery (LASIX™) would you trust your vision to the cheapest doctor? Probably not. While past mistakes may have left you in the position where filing bankruptcy is necessary, do not make another mistake when it comes to your financial future and hire an experienced bankruptcy attorney.

The McCandless Law Firmoffers free initial consultations to individuals and families who are struggling financially and seek relief afforded by the Bankruptcy Code. Whether you are contemplating filing for bankruptcy or have received a foreclosure notice and are having difficulty with creditors,  in Southern California (909)890-9192 in Northern California(925)957-9797 if you want to get past difficult times and get the fresh start you need.

Deed in Lieu of Foreclosure

A deed in lieu agreement is another option for individuals who do not have the financial means to continue making payments on their mortgage but seek to avoid foreclosure.  A deed in lieu is an arrangement in which the deed to property is surrendered and any remaining balance on the mortgage is forgiven.  This is a good option for some individuals who have substantial equity in their home, but who cannot find a buyer for a short sale.

With a deed in lieu, a timeline will be established regarding turning over the deed and vacating the property.  The homeowner may also be expected to pay fees associated with transferring the property to the mortgage lender, and as with short sales, any forgiven principal balance may be subject to a forgiveness tax.  This can create an additional tax burden for some individuals, therefore the decision to go through with a deed in lieu arrangement is one that must be carefully evaluated.

If you are considering a deed in lieu arrangement with your mortgage lender, talk to one of our bankruptcy attorneys today.  The McCandless Law Firmoffers professional advice and a free, no-obligation case evaluation, so that you can complete information about your legal rights and any choices you may have when it comes to avoiding foreclosure.  Contact us in Southern California (909)890-9192 in Northern California(925)957-9797 today to learn about bankruptcy law, deed in lieu arrangements, and your rights and obligations under the law.

Chapter 7 Bankruptcy

Chapter 7 is designed to erase consumer debts and bankruptcy statistics show is the quickest and most straightforward type of bankruptcy and works best for individuals with large credit card debts or medical bills. Gaining a better understanding of Chapter 7 bankruptcy will help you determine whether it is suitable for your circumstances.

Should You File For Chapter 7 Bankruptcy?

In determining whether to file for Chapter 7 an individual should evaluate their financial situation with an experienced bankruptcy lawyer. In assessing the viability of a Chapter 7 case, the amount of debt is not as important as the client’s inability to repay it. Whereas some debtors file for bankruptcy with a relatively small amount of debt, others wait until massive amounts of debt accumulate before filing. With the assistance of an experienced bankruptcy attorney, the client’s debt, income, expenses and assets will be examined to help determine whether Chapter 7 is advisable.

The Bankruptcy Code requires debtors to disclose all of their monthly income and expenses. In addition to wages earned, debtors must disclose all other sources of income and are subjected to a means test. If an individual passes the means test, they are presumed to qualify for Chapter 7. Debtors who do not qualify for Chapter 7 pursuant to the means test may still be able to file for a Chapter 13 bankruptcy.

How a Chapter 7 Bankruptcy Works

The bankruptcy process begins with a petition filed in bankruptcy court that triggers an automatic stay which prohibits further collection efforts of creditors. While the court appoints a trustee to liquidate assets to pay existing creditors, most assets are subject to existing liens or are be exempt from liquidation. Generally, things like household goods, clothing and personal items are fully exempt. Property which is particularly valuable, such as oil paintings, coin collections, or rare items may have higher value than what can be protected under the exemption rules. In those circumstances, the debtor could be required to turn over the property to the trustee or offer to buy the trustee out of his interest in the non-exempt property. Once the trustee collects any nonexempt assets and pays creditors from their proceeds, any remaining debt is discharged, subject to certain limitations such as secured debt, taxes, Student loans, alimony and fraudulent acts.

If the debtor is concerned about losing certain assets in a Chapter 7 bankruptcy, he or she may be able to reaffirm certain assets, which permits them to keep the property outside of the bankruptcy by entering into a reaffirmation agreement if the debtor has sufficient disposable income and is relatively current on payments and the creditor agrees to reaffirm.

While filing for bankruptcy is often a difficult decision to make, debtors overwhelmingly feel relieved after they have filed for bankruptcy. At the McCandless Law Firm, we are committed to providing personalized service and our team of professionals want to help you get a fresh start. Southern California (909)890-9192 in Northern California(925)957-9797 today in Southern California (909)890-9192 in Northern California(925)957-9797today to arrange a free office consultation.

Things You Must Do Prior to Filing Bankruptcy

Stop using your credit cards and don’t incur any additional credit.
Once you have made the decision to file bankruptcy, you should not use your credit cards nor incur any additional credits from that point forward. Any recent purchases or advances can be held as still due and owing after you file bankruptcy. The rational is that you never intended to pay those debts back and is similar to fraud. If you’re seeking a fresh start, do your best to insure that you will in fact receive that fresh start. The credit card issuers are very aware of attempts to run-up the charges on credit cards. This also applies to cash advances. If you take a cash advance too close to filing bankruptcy, you are likely to see an objection from the credit card issuer. The objection comes in the form of an adversarial complaint. If the creditor is successful in their objection, the amount of the recent advance(s) will be held due and owing after your bankruptcy case.

Take the required credit counseling briefing
Before a Chapter 7 bankruptcy case can be filed, a person must take a credit counseling briefing from an approved credit counseling agency. This credit counseling briefing can be done on the internet or by telephone. The entire briefing typically takes less than one hour and at the time of this writing, costs approximately $50.00. The credit counseling briefing requires the debtor to provide information as to their monthly income and expenses as well as a listing of their creditors. This briefing must be completed within 180 days prior to filing bankruptcy.

File your taxes
You must file your most recent year’s taxes to qualify for Chapter 7 bankruptcy relief. Although this seems like a simple requirement, you would be amazed at the number of individuals who have not filed their most recent taxes. A copy of the return will be forwarded to your assigned bankruptcy trustee after your case is filed. You must also provide your most recent tax return to any creditor who requests it.

Provide your most recent paychecks
You must provide the most recent 60 days worth of paycheck stubs at the time your case is filed. These will be forwarded to your assigned bankruptcy trustee or may be filed with the clerk of the bankruptcy court. This measure is in place to make sure that the amount listed on the petition for monthly income is in fact accurate. If a person receives income from a source other than employment, evidence of that income must be provided just as if a paycheck stub. Once you are aware that you are likely going to file bankruptcy, keep copies all of your paycheck stubs in an organized manner.

Get Your Paperwork in Order
Collect all statements from bill collectors. Go online and get complete addresses of creditors who may have stopped billing you. Check the balances at financial institutions where you bank. Look at your recent tax returns to provide your gross income over the past three years. Basically, get to know your assets and liabilities and have them written out and organized for your lawyer to prepare your case. Gather a listing of all of all of your debts.

The more complete you can be in providing a list of your creditors, the less problems or headaches you will have from creditors after your bankruptcy case is over. Once you know that you are going to file, start to save all correspondence that arrives from creditors, collection agencies or others who are trying to collect on a debt. The disclosure requirements have become more stringent so you want to make sure that your have forwarded all of your creditor information to your attorney. If you are unsure of exactly who you may owe, you may want to consider acquiring a copy of your most recent credit reports. Each year you may request a free copy of your credit reports from the three major credit bureaus reporting companies. Those are TransUnion, Equifax and Experian and they can be obtained by going to www.annualcreditreport.com. Even if you are unaware of the creditors listed on your reports, provide those to your attorney anyway. When you seek credit, after your filing, for a mortgage, auto loan, or personal loan, you want to be able to show that all of the items on your credit report were listed and discharged in your bankruptcy case. The rule to remember is to list everybody and their grandmother on your bankruptcy petition and schedules. This way you can be assured that you are not leaving anyone out of the bankruptcy.

Check and review your petition for accuracy
Your attorney will prepare your bankruptcy petition and schedules primarily based upon the information and disclosures that you have provided. The petition and schedules will then need to be reviewed and signed by you. Do not take this step lightly. You are verifying that the information is true and correct to the best of your knowledge and that all of your assets and liabilities are listed. This is the time to double check the itemized list of creditors shown on the petition and schedules with your known list of creditors. You also want to make sure that your home, vehicle or other assets are properly listed and exempted to the full extent of the chosen law. Remember, your petition and schedules are a legal document signed under oath. Take the time to insure that they are true and accurate.

Pay your attorney or make payment arrangements
Most attorneys will want to be paid in full before they file your case. If they don’t, there is a chance that their fees may be discharged in the bankruptcy. All attorneys’ fees come under the scrutiny of the United State’s Trustee’s office and the bankruptcy court judges. They will monitor whether the fees charged in a Chapter 7 bankruptcy case are excessive. They will also determine whether or not the attorney had collected fees from his client when the debt was discharged. A debtor should be aware that there might be additional fees charged for filing amendments to the petition and schedules and for missed court dates. It is a good idea to get the attorney fee issue out of the way as early as possible. It is often the main reason why in certain circumstances, a case never gets filed.

The 8 Worst Bankruptcies in History

Throughout history, there have been a number of successful people who have built great fortunes.  Many of these people were able to enjoy their riches, while leaving enough for future generations to enjoy.  There have also been others who have earned vast amounts of money, only to be squandered away, ending in bankruptcy.  Similarly, companies have been built into opulent empires that have been later reduced to rubble with a simple turn of tides.  In this article are eight examples of some of the worst personal and corporate bankruptcies in history.

Historical personal bankruptcies

1.   Jakob Fugger

Jakob Fugger is a 15th and 16th century merchant and banker who amassed such a fortune that he came to be known as Jacob The Rich.  Throughout the Renaissance, Fugger played an important role in supporting major political and religious figures.  He contributed over 540,000 (over 1,500 kilograms worth of gold) florins to help Charles V win the title of Holy Roman Emperor  by paying off the electors.(1) Fugger also funded the construction of what is known today as Vatican City.(2)  While Jakob was able to accrue enough riches to last for generations, many of his descendants would squander away the wealth and not much is left of it today.(3)

2.   Henry Ford

Henry Ford is well-known as the founder and owner of Ford Motor Company.  Many of Ford’s inventions reshaped and revolutionized the entire transportation industry and the history of America as a whole.(4)  Before getting things right with the Ford Motor Company, however, Henry Ford had troubles with debt.  Ford borrowed money from a few politicians and started the Detroit Automobile Company in 1899.  Two years later, the company went bankrupt, almost forcing Ford himself into bankruptcy.(5)  After leaving the Detroit Automobile Company, which would later develop into the Cadillac Automobile Company, Ford founded the Ford Motor Company and became one of the richest and most well-known people in the world.(4)

3.   Mike Tyson

In more recent years, another sizable case of bankruptcy occurred when Michael Gerard Tyson filed for bankruptcy in 2003.  Mike Tyson is one of the most popular, well-known and notorious figures in professional boxing.  He fought his way to to the top of the boxing world, becoming the youngest person to win and hold the title of heavyweight champion.(6)  Some of Tyson’s most lucrative boxing matches earned him over $30 million each.  It is estimated that he earned between $300 million and $400 million throughout his career, but he ended up filing for bankruptcy in 2003 as a result of poor money management.

4.   Charles M.  Schwab

Charles Michale Schwab was a powerful and extremely rich man who helped lead a large steel corporation to success.  Schwab’s career began as a stake driver in a steelworks company, which he later became the president of.  He negotiated the sale of the company and became the president of the newly formed corporation known as U.S. Steel.  Later on, Schwab ended up leaving the company to become the president and chairman of the board for Bethlehem Steel Corporation.(7)  The company became one of the largest steel producers in the world and Schwab became extremely rich.(8)  Schwab had a hankering for excessive spending on extravagant parties, gambling and extramarital affairs, which would cause his fortune to dwindle.  In 1929, the stock market crash forced Schwab into bankruptcy.  His fortunes were estimated at around $25 million to $40 million, which would have been equivalent to around $500 million to $800 million today.(7)

Historical corporate bankruptcies

1.   Lehman Brothers

One of the most recent corporate bankruptcies, which occurred in 2008, holds the title as the largest bankruptcy case in history.(9)  Lehman Brothers Holdings Inc. is a firm that offered financial and investment services worldwide.(10) Before filing for bankruptcy on September 15, 2008, the firm was worth over $600 billion in assets.  Causes for the bankruptcy date back over seven years, during the 9/11 attack, but the biggest cause was the financial crisis of 2008.(11)

2.   WorldCom

WorldCom Inc., known today as MCI, Inc., was forced to file for bankruptcy in 2002.  The WorldCom Inc. bankruptcy stands as the second-largest bankruptcy case in the history of the United States.  The company’s pre-filing assets amounted to over $100 billion.(12)  The main cause for the fallout was the numerous fraud cases that the company and its executives had to face.  Since declaring corporate bankruptcy bankruptcy, WorldCom Inc. has merged with MCI Communications to form MCI, Inc.(13)

3.   Enron

Enron Corp. currently holds the record for the third-largest bankruptcy filing in US history.(14)  The American energy company was founded in 1985, and quickly became a large tycoon worth revenues approximated at around $101 billion in 2000.(15)  Enron Corp. filed for bankruptcy in 2001, with their total assets amounting to about $66 billion before filing.(14)  Cases of accounting fraud and business fraud that became known as the “Enron scandal” were the main causes for the bankruptcy.(15)

4.   Conseco, Inc.

Before filing for bankruptcy in late 2001, Conseco, Inc.’s assets were estimated at over $60 billion.(16)  Conseco was an insurance organization that offered life insurance, supplemental health insurance, annuity and other financial products and services.  The company’s debt amounted to $8 billion, forcing them to file for bankruptcy.(17)  The company was not able to rebound until 2003.

These historical riches-to-rags stories can be seen as large, red, flashing warning signs of what to look out for in order to avoid bankruptcy.  Sure, some bankruptcies are caused by bad and perhaps even uncontrollable circumstances, but there are a number of ways that your can safeguard yourself or your company from bankruptcy:(18)(19)

1.   Understand how personal bankruptcy and corporate bankruptcy works.
2.   Make sure to have good legal and financial advisors with great track records, especially for corporate dealings.
3.   Keep accurate and honest accounting records that will help you make accurate and honest decisions with regard to finance, legal, and bankruptcy matters.

One of the biggest lessons to be learned by these historical bankruptcies is that there can only be two bankruptcy fates: 1) stay bankrupt, or 2) earn back your fortune.  Even if you fall and go bankrupt, it is not the end.  With determination, hard work and clear goals anyone can rebound from a bankruptcy.

Sources:

(1)  http://en.wikipedia.org/wiki/Fugger
(2)  http://remus.shidler.hawaii.edu/genes/Bavaria/augsburgfugger/home.htm
(3)  http://remus.shidler.hawaii.edu/genes/Bavaria/augsburgfugger/fugger.htm
(4)  http://en.wikipedia.org/wiki/Henry_Ford
(5)  http://www.cnn.com/2008/LIVING/personal/11/19/mf.successful.people.survived.bankruptcy/index.html
(6)  http://en.wikipedia.org/wiki/Mike_Tyson
(7)  http://en.wikipedia.org/wiki/Charles_M._Schwab
(8)  http://en.wikipedia.org/wiki/Bethlehem_Steel_Corporation
(9)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841342,00.html
(10)  http://en.wikipedia.org/wiki/Lehman_Brothers
(11)  http://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers
(12)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841349,00.html
(13)  http://en.wikipedia.org/wiki/Worldcom,_Inc.
(14)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841352,00.html
(15)  http://en.wikipedia.org/wiki/Enron
(16)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841355,00.html
(17)  http://en.wikipedia.org/wiki/Conseco
(18)  http://www.ehow.com/how_4783043_avoid-personal-bankruptcy.html
(19)  http://www.ehow.com/how_2140357_defend-against-bankruptcy-fraud-charges.html

Top 10 Celebrity Bankruptcies You Can Learn From

Celebrities from around the world are often admired for their fame and their fortune.  Let’s face it, practically anyone would love to live in the lap of luxury, with millions to spend on some of the world’s most extravagant and opulent treats.  Whether it’s John Travolta’s Boeing 707 private jet(1), Donald Trump’s high-end real estate ventures(2), or Ryan Seacrest’s magnificent home theater(3), celebrities certainly know how to spend a pretty penny.  Every now and then, however, stories of celebrities gone bankrupt come about.  Whether they make it back on top or not, celebrity bankruptcies are some interesting stories to follow.  Here are 10 celebrity bankruptcies that you might want to learn from on your way to making your own fortune.

Mike Tyson(4)

Michael Gerard Tyson, otherwise known as “Iron Mike” Tyson, is one of the most popular and controversial figures in boxing history.  As the youngest-ever winner of a heavyweight boxing title, Mike Tyson gained fame and a fortune amounting to an estimated $300-million.  In August of 2003, after being convicted of rape and getting back into the ring again, Tyson filed for bankruptcy due to uncontrolled spending and bad financial advice.

Kim Basinger(5)

Kimila Ann “Kim” Basinger was a model turned film actress who became famous for her roles in “Never Say Never Again,” “The Natural,” “L.A.  Confidential,” and “Batman.”  Winner of a Golden Globe Award, Academy Award, and Screen Actors Guild Award, Basinger had a promising career.  In 1989, Basinger and a few other investors put up $20 million dollars to buy a small town in Georgia called Braselton.  After spending such a hefty amount, she was sued for $8-million for backing-out of the film “Boxing Helena,” ultimately leading to her filing for bankruptcy.

Burt Reynolds(6)

Burton Leon “Burt” Reynolds, Jr.  is an actor who has become well-known for the hundreds of film appearances that he has made throughout his ongoing career.  Reynolds had to file for bankruptcy in 1996, because of his lavish expenses, a failed business venture and a divorce from Loni Anderson.  He rebounded from the bankruptcy within a couple of years.

Toni Braxton(7)

Toni Mechelle Braxton has gained much of her popularity as a singer and songwriter of R&B music, as well as a few acting roles.  In line with a $3.9-million debt, Braxton had to file for bankruptcy in 1998, forcing her to sell many of her posessions to pay-off creditors.  After filing for bankruptcy, she was offered a Broadway role in “Beauty and the Beast”, which helped her get back on track.  She soon released a chart-topping album that catapulted her back into fame and out of bankruptcy.

MC Hammer(8)

Stanley Kirk Burrell, best known by his stage name MC Hammer, became famous during the 1980s and 1990s as a rapper and dancer.  In 1996, Hammer had to file for bankruptcy after acruing a debt of $13 million.  His extravagant lifestyle and decreasing album sales led to the bankruptcy.  Since declaring bankruptcy, Hammer has released a number of albums and, in 2008, became host and CEO of a television show.

Wayne Newton(9)

Carson Wayne Newton, also known as Mr. Las Vegas, is an actor and entertainer who has had over 30,000 solo shows in Las Vegas.  Despite his success as an entertainer, Newton had to file for bankruptcy in 1992, with a debt of about $20 million.  The debt was largely due to a libel case that he filed against NBC.  It was not until 1999 that Newton would be able to build his fortunes once again.

Marvin Gaye(10)

Marvin Pentz Gaye, Jr.  is an iconic image in the soul and R&B music who became famous during the 1960s and 1970s.  In 1979, Gaye had to file for bankruptcy due to tax problems, overdue alimony payments, and drug addiction.  He moved to Hawaii and, later on, to Europe.  Touring Europe and later returning to the US, Gaye began to regain fame until he was shot and killed by is father.

Meat Loaf(11)

Michael Lee Aday is a musician, stage actor and screen actor who is best known by his stage name Meat Loaf.  Meat Loaf has been very successful as a rock musician, but he has had to endure two major bankruptcies during the 1980s.  The first bankruptcy was caused when Meat Loaf found out that his managers, Dellentash and Sonenberg, were stealing money from him.  Meat Loaf changed managers and was sued for breach of contract, leading him to file for bankruptcy.  The second bankruptcy happened during 1986, when Meat Loaf’s new album failed to become a hit.  Since filing for the 1986 bankruptcy, Meat Loaf has been able to rebound, touring and producing new albums.

Cyndi Lauper(12)

Cynthia Ann Stephanie “Cyndi” Lauper is an actress and singer-songwriter who has won an American Grammy and an Emmy award.  Before becoming successful, Lauper was in a band called Blue Angel, which released an album that didn’t do well.  The band broke up and fired their manager, who later sued them for breach of contract.  The $80,000 lawsuit caused Lauper to declare bankruptcy in 1980.  She later went on to success and fame in the mid-1980s.  Lauper has released a total of 11 albums and more than 40 singles, with her total record sales amounting to over $25 million.

Gary Coleman(13)

Gary Wayne Coleman became popular during the late 1970s up to the mid-1980s as an actor in an American sitcom named “Diff’rent Strokes.”  Coleman filed for bankruptcy in 1999, due to the mismanagement of his trust funds.  Since declaring bankruptcy, Coleman has made a number of appearances on television and in movies, but he has never regained the fame that he had in the 80s.

While some of these celebrity bankruptcies may be inspiring “rags-to-riches” stories, others have not ended so well.  It can be difficult to maintain one’s fortune after making it, which is why it’s important to learn from these stories of bankruptcies.  Most of the celebrities who have filed for bankruptcy have been forced to do so due to uncontrolled spending, lavish lifestyles, legal matters, or mishandled fortunes.  It is easy to get caught up trying to make money, but it’s essential to know how to manage money once you have it, to avoid bankruptcy.

Here are some simple things you can do to avoid bankruptcy:(14)

1.  Try to negotiate with your creditors for extensions on debt payments.
2.  Make sure you get sound advise from financial and legal experts who have a good track record.
3.  Manage your resources well and keep track of your expenses and income.

No matter what you do, always hold on to the things in life that are more meaningful than money, like family, friends, laughter, and love.

Bankruptcy preparation

Things You Must Do Prior to Filing

Stop using your credit cards and don’t incur any additional credit.
Once you have made the decision to file bankruptcy, you should not use your credit cards nor incur any additional credits from that point forward. Any recent purchases or advances can be held as still due and owing after you file bankruptcy. The rational is that you never intended to pay those debts back and is similar to fraud. If you’re seeking a fresh start, do your best to insure that you will in fact receive that fresh start. The credit card issuers are very aware of attempts to run-up the charges on credit cards. This also applies to cash advances. If you take a cash advance too close to filing bankruptcy, you are likely to see an objection from the credit card issuer. The objection comes in the form of an adversarial complaint. If the creditor is successful in their objection, the amount of the recent advance(s) will be held due and owing after your bankruptcy case.

Take the required credit counseling briefing
Before a Chapter 7 bankruptcy case can be filed, a person must take a credit counseling briefing from an approved credit counseling agency. This credit counseling briefing can be done on the internet or by telephone. The entire briefing typically takes less than one hour and at the time of this writing, costs approximately $50.00. The credit counseling briefing requires the debtor to provide information as to their monthly income and expenses as well as a listing of their creditors. This briefing must be completed within 180 days prior to filing bankruptcy.

File your taxes
You must file your most recent year’s taxes to qualify for Chapter 7 bankruptcy relief. Although this seems like a simple requirement, you would be amazed at the number of individuals who have not filed their most recent taxes. A copy of the return will be forwarded to your assigned bankruptcy trustee after your case is filed. You must also provide your most recent tax return to any creditor who requests it.

Provide your most recent paychecks
You must provide the most recent 60 days worth of paycheck stubs at the time your case is filed. These will be forwarded to your assigned bankruptcy trustee or may be filed with the clerk of the bankruptcy court. This measure is in place to make sure that the amount listed on the petition for monthly income is in fact accurate. If a person receives income from a source other than employment, evidence of that income must be provided just as if a paycheck stub. Once you are aware that you are likely going to file bankruptcy, keep copies all of your paycheck stubs in an organized manner.

Get Your Paperwork in Order
Collect all statements from bill collectors. Go online and get complete addresses of creditors who may have stopped billing you. Check the balances at financial institutions where you bank. Look at your recent tax returns to provide your gross income over the past three years. Basically, get to know your assets and liabilities and have them written out and organized for your lawyer to prepare your case. Gather a listing of all of all of your debts.

The more complete you can be in providing a list of your creditors, the less problems or headaches you will have from creditors after your bankruptcy case is over. Once you know that you are going to file, start to save all correspondence that arrives from creditors, collection agencies or others who are trying to collect on a debt. The disclosure requirements have become more stringent so you want to make sure that your have forwarded all of your creditor information to your attorney. If you are unsure of exactly who you may owe, you may want to consider acquiring a copy of your most recent credit reports. Each year you may request a free copy of your credit reports from the three major credit bureaus reporting companies. Those are TransUnion, Equifax and Experian and they can be obtained by going to www.annualcreditreport.com. Even if you are unaware of the creditors listed on your reports, provide those to your attorney anyway. When you seek credit, after your filing, for a mortgage, auto loan, or personal loan, you want to be able to show that all of the items on your credit report were listed and discharged in your bankruptcy case. The rule to remember is to list everybody and their grandmother on your bankruptcy petition and schedules. This way you can be assured that you are not leaving anyone out of the bankruptcy.

Check and review your petition for accuracy
Your attorney will prepare your bankruptcy petition and schedules primarily based upon the information and disclosures that you have provided. The petition and schedules will then need to be reviewed and signed by you. Do not take this step lightly. You are verifying that the information is true and correct to the best of your knowledge and that all of your assets and liabilities are listed. This is the time to double check the itemized list of creditors shown on the petition and schedules with your known list of creditors. You also want to make sure that your home, vehicle or other assets are properly listed and exempted to the full extent of the chosen law. Remember, your petition and schedules are a legal document signed under oath. Take the time to insure that they are true and accurate.

Student Loans Bankruptcy

Student Loans and Bankruptcy

Bankruptcy attorneys frequently get asked whether student loans are dischargeable in bankruptcy. As the Bankruptcy Code is very broad in defining what constitute a student loan, not only are government backed student loans such as Stafford, Direct, or Perkins loans normally non-dischargeable, but the Bankruptcy Code goes further and excepts “any indebtedness incurred…solely to pay higher education expenses” from being discharged.

Notwithstanding the general prohibition against discharging student loans, only two instances exist in which a debtor can eliminate student loans in bankruptcy. The first situation is where it can be shown that requiring the debtor to repay his or her student loans would impose an undue hardship. To qualify for a hardship discharge, a debtor must prove that they will never be able to pay back their student loans, whether it is an inability to repay due permanent disability, or some other reason which would establish undue hardship. To be eligible to receive this type of discharge, usually the debtor must be found to be totally disabled and would be require to supply sufficient documentation that he or she is unable to work due to life threatening illness or injury. If, however, the debtor was afflicted with the illness or condition at the time he or she obtained the student loans, the hardship discharge would be inapplicable. The second instance is where a debtor lists his or her student loans in a Chapter 13 plan and the lender fails to object. This issue has been the subject of great controversy however, and the law in this regard may change in the near future as bankruptcy practitioners anxiously await the United States Supreme Court decision in United Student Aid Funds, Inc. v. Espinosa, argued in December 2009.

The offers free initial consultations to individuals and families who are struggling financially and seek relief afforded by the Bankruptcy Code. Whether you are contemplating filing for bankruptcy or have received a foreclosure notice and are having difficulty with creditors, Southern California (909)890-9192 in Northern California(925)957-9797 if you want to get past difficult times and get the fresh start you need.

discharge Student loans

Student Loans and Bankruptcy

Bankruptcy attorneys frequently get asked whether student loans are dischargeable in bankruptcy. As the Bankruptcy Code is very broad in defining what constitute a student loan, not only are government backed student loans such as Stafford, Direct, or Perkins loans normally non-dischargeable, but the Bankruptcy Code goes further and excepts “any indebtedness incurred…solely to pay higher education expenses” from being discharged.

Notwithstanding the general prohibition against discharging student loans, only two instances exist in which a debtor can eliminate student loans in bankruptcy. The first situation is where it can be shown that requiring the debtor to repay his or her student loans would impose an undue hardship. To qualify for a hardship discharge, a debtor must prove that they will never be able to pay back their student loans, whether it is an inability to repay due permanent disability, or some other reason which would establish undue hardship. To be eligible to receive this type of discharge, usually the debtor must be found to be totally disabled and would be require to supply sufficient documentation that he or she is unable to work due to life threatening illness or injury. If, however, the debtor was afflicted with the illness or condition at the time he or she obtained the student loans, the hardship discharge would be inapplicable. The second instance is where a debtor lists his or her student loans in a Chapter 13 plan and the lender fails to object. This issue has been the subject of great controversy however, and the law in this regard may change in the near future as bankruptcy practitioners anxiously await the United States Supreme Court decision in United Student Aid Funds, Inc. v. Espinosa, argued in December 2009.

The offers free initial consultations to individuals and families who are struggling financially and seek relief afforded by the Bankruptcy Code. Whether you are contemplating filing for bankruptcy or have received a foreclosure notice and are having difficulty with creditors, Southern California (909)890-9192 in Northern California(925)957-9797 if you want to get past difficult times and get the fresh start you need.

bankruptcy repossession

Repossessions

Help With Repossessions
If you are aware that you are behind on car payments and a repo man is looming or have been threatened with a repossession a bankruptcy stay will delay the repossession and a Chapter 13 plan will provide for a repayment plan to make up the back payments and avoid the repossession altogether.

bankruptcy foreclosure

Foreclosures

Help With Foreclosure
If you have been given a notice of default and a foreclose sale is scheduled a bankruptcy stay will delay the foreclosure and a Chapter 13 plan will provide for a repayment plan to make up the back payments.

Discharge Judgements

Judgments

Help With Judgments
If you have been sued by a creditor and have had a judgment issued, the creditor may file an Abstract of Judgment asserting a lien on all real property you own, not unlike another mortgage.  As long as the judgment goes unpaid, it usually increases as the creditor has a right to interest on the unpaid balance.

Subject to certain exemptions, a judgment creditor can also try to collect on other things you may own, such as a car, household goods, money in the bank, tools, equipment, etc.   The judgment against you will appear on your credit report which may result in a more difficult time obtaining credit and may also has some negative effects with respect to employment.

While dealing with the effects of a judgment can be devastating, contact one of our bankruptcy attorneys today to see if filing Chapter 7 or a Chapter 13 bankruptcy will eliminate the debts before they can become judgments.  In some instances, your creditors can be completely eliminated, and in others, you may be able to negotiate a repayment plan up to five years in duration for what amounts to pennies on the dollar.

Understanding that each debtor’s circumstances are unique, results will vary depending on your individual situation.  The McCandless Law Firm has helped many individuals in similar situations out of the financial holes they have found themselves in.  Contact us today to see how we can assist you in getting the fresh start you deserve.

bankruptcy taxes

Past Due Taxes

Are you worried back taxes owed to the IRS?  If you owe State, Federal, or local taxes and you are also behind in other payments to creditors, Federal Laws can give you assistance.

Filing Bankruptcy Can Stop Tax Garnishment

If you file for a Chapter 7 or Chapter 13 bankruptcy, all collection activities, including tax garnishments must cease.  While you may still owe the tax, the automatic stay will put you in a better position to deal with repaying the tax, if it is not one that can be discharged completely. Certain taxes, specifically income taxes (depending on their age) may not have to be repaid should you declare bankruptcy.  If you file for bankruptcy under Chapter 13, you may get up to 60 months to pay back taxes which are non-dischargeable under bankruptcy.

Understanding that each debtor’s circumstances are unique, results will vary depending on your individual situation.  The McCandless Law Firmhas helped many individuals in similar situations out of the financial holes they have found themselves in.  Contact us today to see how we can assist you in getting the fresh start you deserve.

Discharge taxes

Past Due Taxes

Are you worried back taxes owed to the IRS?  If you owe State, Federal, or local taxes and you are also behind in other payments to creditors, Federal Laws can give you assistance.

Filing Bankruptcy Can Stop Tax Garnishment

If you file for a Chapter 7 or Chapter 13 bankruptcy, all collection activities, including tax garnishments must cease.  While you may still owe the tax, the automatic stay will put you in a better position to deal with repaying the tax, if it is not one that can be discharged completely. Certain taxes, specifically income taxes (depending on their age) may not have to be repaid should you declare bankruptcy.  If you file for bankruptcy under Chapter 13, you may get up to 60 months to pay back taxes which are non-dischargeable under bankruptcy.

Understanding that each debtor’s circumstances are unique, results will vary depending on your individual situation.  The McCandless Law Firmhas helped many individuals in similar situations out of the financial holes they have found themselves in.  Contact us today to see how we can assist you in getting the fresh start you deserve.

What Bankruptcy can do for You

Experienced Protection

We provide strong thorough protection. We give you solid solutions and fast answers. Our fiduciary responsibility is you. Your house. Your car. Your hard work. We legally guard your financial assets.

With a phone call, we can begin a process that within only a day or two can stop your creditors in their tracks and give you peace of mind. Contact us today in Southern California (909)890-9192 in Northern California(925)957-9797today to arrange a free office consultation. Here is the process in a nutshell.

What We Do:

• We meet to determine what is best for you
• We stop bill collectors from contacting you
• We protect your assets
• We stop the foreclosure process
• We counsel you on your rights
• We guide you, making as simple as possible
• We file your petition
• We stand by you at the court hearing

We believe in accountability. Our philosophy is simple…vertical accountability to our Creator ensures horizontal accountability to our clients. Here are some of the credit question most commonly asked by our clients. What about :

Past Due Taxes

Are you worried back taxes owed to the IRS?  If you owe State, Federal, or local taxes and you are also behind in other payments to creditors, Federal Laws can give you assistance.

Filing Bankruptcy Can Stop Tax Garnishment

If you file for a Chapter 7 or Chapter 13 bankruptcy, all collection activities, including tax garnishments must cease.  While you may still owe the tax, the automatic stay will put you in a better position to deal with repaying the tax, if it is not one that can be discharged completely. Certain taxes, specifically income taxes (depending on their age) may not have to be repaid should you declare bankruptcy.  If you file for bankruptcy under Chapter 13, you may get up to 60 months to pay back taxes which are non-dischargeable under bankruptcy.

Understanding that each debtor’s circumstances are unique, results will vary depending on your individual situation.  The McCandless Law Firmhas helped many individuals in similar situations out of the financial holes they have found themselves in.  Contact us today to see how we can assist you in getting the fresh start you deserve.

Judgments

Help With Judgments
If you have been sued by a creditor and have had a judgment issued, the creditor may file an Abstract of Judgment asserting a lien on all real property you own, not unlike another mortgage.  As long as the judgment goes unpaid, it usually increases as the creditor has a right to interest on the unpaid balance.

Subject to certain exemptions, a judgment creditor can also try to collect on other things you may own, such as a car, household goods, money in the bank, tools, equipment, etc.   The judgment against you will appear on your credit report which may result in a more difficult time obtaining credit and may also has some negative effects with respect to employment.

While dealing with the effects of a judgment can be devastating, contact one of our bankruptcy attorneys today to see if filing Chapter 7 or a Chapter 13 bankruptcy will eliminate the debts before they can become judgments.  In some instances, your creditors can be completely eliminated, and in others, you may be able to negotiate a repayment plan up to five years in duration for what amounts to pennies on the dollar.

Understanding that each debtor’s circumstances are unique, results will vary depending on your individual situation.  The McCandless Law Firm has helped many individuals in similar situations out of the financial holes they have found themselves in.  Contact us today to see how we can assist you in getting the fresh start you deserve.

Foreclosures

Help With Foreclosure
If you have been given a notice of default and a foreclose sale is scheduled a bankruptcy stay will delay the foreclosure and a Chapter 13 plan will provide for a repayment plan to make up the back payments.

Repossessions

Help With Repossessions
If you are aware that you are behind on car payments and a repo man is looming or have been threatened with a repossession a bankruptcy stay will delay the repossession and a Chapter 13 plan will provide for a repayment plan to make up the back payments and avoid the repossession altogether.

Student Loans and Bankruptcy

Bankruptcy attorneys frequently get asked whether student loans are dischargeable in bankruptcy. As the Bankruptcy Code is very broad in defining what constitute a student loan, not only are government backed student loans such as Stafford, Direct, or Perkins loans normally non-dischargeable, but the Bankruptcy Code goes further and excepts “any indebtedness incurred…solely to pay higher education expenses” from being discharged.

Notwithstanding the general prohibition against discharging student loans, only two instances exist in which a debtor can eliminate student loans in bankruptcy. The first situation is where it can be shown that requiring the debtor to repay his or her student loans would impose an undue hardship. To qualify for a hardship discharge, a debtor must prove that they will never be able to pay back their student loans, whether it is an inability to repay due permanent disability, or some other reason which would establish undue hardship. To be eligible to receive this type of discharge, usually the debtor must be found to be totally disabled and would be require to supply sufficient documentation that he or she is unable to work due to life threatening illness or injury. If, however, the debtor was afflicted with the illness or condition at the time he or she obtained the student loans, the hardship discharge would be inapplicable. The second instance is where a debtor lists his or her student loans in a Chapter 13 plan and the lender fails to object. This issue has been the subject of great controversy however, and the law in this regard may change in the near future as bankruptcy practitioners anxiously await the United States Supreme Court decision in United Student Aid Funds, Inc. v. Espinosa, argued in December 2009.

The offers free initial consultations to individuals and families who are struggling financially and seek relief afforded by the Bankruptcy Code. Whether you are contemplating filing for bankruptcy or have received a foreclosure notice and are having difficulty with creditors, Southern California (909)890-9192 in Northern California(925)957-9797 if you want to get past difficult times and get the fresh start you need.

Things You Must Do Prior to Filing

Stop using your credit cards and don’t incur any additional credit.
Once you have made the decision to file bankruptcy, you should not use your credit cards nor incur any additional credits from that point forward. Any recent purchases or advances can be held as still due and owing after you file bankruptcy. The rational is that you never intended to pay those debts back and is similar to fraud. If you’re seeking a fresh start, do your best to insure that you will in fact receive that fresh start. The credit card issuers are very aware of attempts to run-up the charges on credit cards. This also applies to cash advances. If you take a cash advance too close to filing bankruptcy, you are likely to see an objection from the credit card issuer. The objection comes in the form of an adversarial complaint. If the creditor is successful in their objection, the amount of the recent advance(s) will be held due and owing after your bankruptcy case.

Take the required credit counseling briefing
Before a Chapter 7 bankruptcy case can be filed, a person must take a credit counseling briefing from an approved credit counseling agency. This credit counseling briefing can be done on the internet or by telephone. The entire briefing typically takes less than one hour and at the time of this writing, costs approximately $50.00. The credit counseling briefing requires the debtor to provide information as to their monthly income and expenses as well as a listing of their creditors. This briefing must be completed within 180 days prior to filing bankruptcy.

File your taxes
You must file your most recent year’s taxes to qualify for Chapter 7 bankruptcy relief. Although this seems like a simple requirement, you would be amazed at the number of individuals who have not filed their most recent taxes. A copy of the return will be forwarded to your assigned bankruptcy trustee after your case is filed. You must also provide your most recent tax return to any creditor who requests it.

Provide your most recent paychecks
You must provide the most recent 60 days worth of paycheck stubs at the time your case is filed. These will be forwarded to your assigned bankruptcy trustee or may be filed with the clerk of the bankruptcy court. This measure is in place to make sure that the amount listed on the petition for monthly income is in fact accurate. If a person receives income from a source other than employment, evidence of that income must be provided just as if a paycheck stub. Once you are aware that you are likely going to file bankruptcy, keep copies all of your paycheck stubs in an organized manner.

Get Your Paperwork in Order
Collect all statements from bill collectors. Go online and get complete addresses of creditors who may have stopped billing you. Check the balances at financial institutions where you bank. Look at your recent tax returns to provide your gross income over the past three years. Basically, get to know your assets and liabilities and have them written out and organized for your lawyer to prepare your case. Gather a listing of all of all of your debts.

The more complete you can be in providing a list of your creditors, the less problems or headaches you will have from creditors after your bankruptcy case is over. Once you know that you are going to file, start to save all correspondence that arrives from creditors, collection agencies or others who are trying to collect on a debt. The disclosure requirements have become more stringent so you want to make sure that your have forwarded all of your creditor information to your attorney. If you are unsure of exactly who you may owe, you may want to consider acquiring a copy of your most recent credit reports. Each year you may request a free copy of your credit reports from the three major credit bureaus reporting companies. Those are TransUnion, Equifax and Experian and they can be obtained by going to www.annualcreditreport.com. Even if you are unaware of the creditors listed on your reports, provide those to your attorney anyway. When you seek credit, after your filing, for a mortgage, auto loan, or personal loan, you want to be able to show that all of the items on your credit report were listed and discharged in your bankruptcy case. The rule to remember is to list everybody and their grandmother on your bankruptcy petition and schedules. This way you can be assured that you are not leaving anyone out of the bankruptcy.

Check and review your petition for accuracy
Your attorney will prepare your bankruptcy petition and schedules primarily based upon the information and disclosures that you have provided. The petition and schedules will then need to be reviewed and signed by you. Do not take this step lightly. You are verifying that the information is true and correct to the best of your knowledge and that all of your assets and liabilities are listed. This is the time to double check the itemized list of creditors shown on the petition and schedules with your known list of creditors. You also want to make sure that your home, vehicle or other assets are properly listed and exempted to the full extent of the chosen law. Remember, your petition and schedules are a legal document signed under oath. Take the time to insure that they are true and accurate.

Pay your attorney or make payment arrangements
Most attorneys will want to be paid in full before they file your case. If they don’t, there is a chance that their fees may be discharged in the bankruptcy. All attorneys’ fees come under the scrutiny of the United State’s Trustee’s office and the bankruptcy court judges. They will monitor whether the fees charged in a Chapter 7 bankruptcy case are excessive. They will also determine whether or not the attorney had collected fees from his client when the debt was discharged. A debtor should be aware that there might be additional fees charged for filing amendments to the petition and schedules and for missed court dates. It is a good idea to get the attorney fee issue out of the way as early as possible. It is often the main reason why in certain circumstances, a case never gets filed.

Chapter 7 Bankruptcy

Chapter 7 is designed to erase consumer debts and bankruptcy statistics show is the quickest and most straightforward type of bankruptcy and works best for individuals with large credit card debts or medical bills. Gaining a better understanding of Chapter 7 bankruptcy will help you determine whether it is suitable for your circumstances.

Should You File For Chapter 7 Bankruptcy?

In determining whether to file for Chapter 7 an individual should evaluate their financial situation with an experienced bankruptcy lawyer. In assessing the viability of a Chapter 7 case, the amount of debt is not as important as the client’s inability to repay it. Whereas some debtors file for bankruptcy with a relatively small amount of debt, others wait until massive amounts of debt accumulate before filing. With the assistance of an experienced bankruptcy attorney, the client’s debt, income, expenses and assets will be examined to help determine whether Chapter 7 is advisable.

The Bankruptcy Code requires debtors to disclose all of their monthly income and expenses. In addition to wages earned, debtors must disclose all other sources of income and are subjected to a means test. If an individual passes the means test, they are presumed to qualify for Chapter 7. Debtors who do not qualify for Chapter 7 pursuant to the means test may still be able to file for a Chapter 13 bankruptcy.

How a Chapter 7 Bankruptcy Works

The bankruptcy process begins with a petition filed in bankruptcy court that triggers an automatic stay which prohibits further collection efforts of creditors. While the court appoints a trustee to liquidate assets to pay existing creditors, most assets are subject to existing liens or are be exempt from liquidation. Generally, things like household goods, clothing and personal items are fully exempt. Property which is particularly valuable, such as oil paintings, coin collections, or rare items may have higher value than what can be protected under the exemption rules. In those circumstances, the debtor could be required to turn over the property to the trustee or offer to buy the trustee out of his interest in the non-exempt property. Once the trustee collects any nonexempt assets and pays creditors from their proceeds, any remaining debt is discharged, subject to certain limitations such as secured debt, taxes, Student loans, alimony and fraudulent acts.

If the debtor is concerned about losing certain assets in a Chapter 7 bankruptcy, he or she may be able to reaffirm certain assets, which permits them to keep the property outside of the bankruptcy by entering into a reaffirmation agreement if the debtor has sufficient disposable income and is relatively current on payments and the creditor agrees to reaffirm.

While filing for bankruptcy is often a difficult decision to make, debtors overwhelmingly feel relieved after they have filed for bankruptcy. At the McCandless Law Firm, we are committed to providing personalized service and our team of professionals want to help you get a fresh start. Southern California (909)890-9192 in Northern California(925)957-9797 today in Southern California (909)890-9192 in Northern California(925)957-9797today to arrange a free office consultation.

Deed in Lieu

A deed in lieu agreement is another option for individuals who do not have the financial means to continue making payments on their mortgage but seek to avoid foreclosure.  A deed in lieu is an arrangement in which the deed to property is surrendered and any remaining balance on the mortgage is forgiven.  This is a good option for some individuals who have substantial equity in their home, but who cannot find a buyer for a short sale.

With a deed in lieu, a timeline will be established regarding turning over the deed and vacating the property.  The homeowner may also be expected to pay fees associated with transferring the property to the mortgage lender, and as with short sales, any forgiven principal balance may be subject to a forgiveness tax.  This can create an additional tax burden for some individuals, therefore the decision to go through with a deed in lieu arrangement is one that must be carefully evaluated.

If you are considering a deed in lieu arrangement with your mortgage lender, talk to one of our bankruptcy attorneys today.  The McCandless Law Firmoffers professional advice and a free, no-obligation case evaluation, so that you can complete information about your legal rights and any choices you may have when it comes to avoiding foreclosure.  Contact us in Southern California (909)890-9192 in Northern California(925)957-9797 today to learn about bankruptcy law, deed in lieu arrangements, and your rights and obligations under the law.

Why Hire An Attorney for Bankruptcy

Since the passage of new bankruptcy legislation in years past, the laws have become so complex that it is virtually impossible for lawyers who do not handle bankruptcy cases, much less a paralegal or document preparer, to be able to properly analyze a debtor’s situation, recognize the applicable exemptions and handle the debtor’s case from petition through discharge. In addition to completing the debtor’s petition, an experienced bankruptcy lawyer can advise which banks are quicker to freeze deposited funds when bankruptcy is filed or which lenders will immediately repossess your car despite timely payments by a debtor.

While an individual could save money by hiring a less qualified individual to assist with their bankruptcy case, the old adage of “you get what you pay for” is good advice. While it is possible to pay too much if a lawyer’s fees are exorbitant, you can also pay too little as the cheapest bankruptcy can often turn into the most expensive as mistakes in preparing the petition could be costly. While paralegals may charge low fees, he or she cannot give legal advice which could result in the loss of certain assets or a denial of discharge by the Court. By hiring an experienced lawyer you can get peace of mind knowing whether filing bankruptcy is really in your best interests and that foregoing some savings will save you money in the long run. If your eyesight was bad and you needed laser surgery (LASIX™) would you trust your vision to the cheapest doctor? Probably not. While past mistakes may have left you in the position where filing bankruptcy is necessary, do not make another mistake when it comes to your financial future and hire an experienced bankruptcy attorney.

The McCandless Law Firmoffers free initial consultations to individuals and families who are struggling financially and seek relief afforded by the Bankruptcy Code. Whether you are contemplating filing for bankruptcy or have received a foreclosure notice and are having difficulty with creditors,  in Southern California (909)890-9192 in Northern California(925)957-9797 if you want to get past difficult times and get the fresh start you need.

Repair your Credit Score

One of the best things about getting a fresh start by declaring bankruptcy is that it allows you a chance to rebuild your credit score.  The first step in re-building your credit is to eliminate debt.  With less debt, meeting your remaining financial obligations should be easier, provided you manage your finances well.  Second, you should make sure to remove any negative information that remains on your credit reports with the three major credit reporting agencies.  After your bankruptcy is complete, any debt discharged therein should be listed on your credit report as included in the bankruptcy with a zero balance.  If the information regarding these debts is not updated, the accounts could still appear to be active, which could limit your ability to get credit.

In order to check the accuracy of your credit reports, you should order a copy of them to make sure all your discharged debts are listed as being included in your bankruptcy case and now show only zero balances. You can contact the three major credit reporting agencies online at:
•    Trans Union:  http://www.transunion.com
•    Equifax: http://www.equifax.com
•    Experian:  www.experian.com

Other valuable tips to help rebuild your credit after bankruptcy include:

1.    Establish accounts that will report positive information on you. Get a single credit card with a small credit limit, use it sparingly and pay the entire balance each month.
2.    Repay all bills in a timely manner.  Most credit cards and utilities report late payments.  After your bankruptcy, late payments will continue to paint you as a bad credit risk to creditors.

Asset Protection

While many clients are excited to get a fresh financial start through bankruptcy, the McCandless Law Firm understands the apprehension and fear of losing one’s assets. Whether it is your home, vehicle or prized personal possessions, implementing a solution for your debts does not mean that you have to lose the things your family values most. Our team of professionals will provide you with the information necessary to protect your assets and advise which exemptions may be available.

Asset Protection

While bankruptcy laws are federal statutes, the court will look to state exemptions to determine which assets you can protect from creditors.

Discharge Violations

Once your bankruptcy has been discharged, debts listed in your petition will be discharged.  While you will not have to repay these debts and creditors will not be able to contact you and demand payment, some creditors continue to pursue discharged debt. This is a violation of bankruptcy discharge laws, and you may be entitled to monetary damages. It is crucial that your bankruptcy petition was complete to make certain that all dischargeable debt was included in your filing.

If debts that have been properly discharged, demands for payment are rare but if this does happen to you, rest assured that our team of professionals will seek justice for you in court and recover any damages that you may be owed as a result of the creditor’s violations.  Proper legal representation is essential in order for you to take advantage of the full protection that the law provides.  If you have concerns about a bankruptcy discharge violation, contact us Southern California (909)890-9192 in Northern California(925)957-9797 as we can help answer your questions and give you the information you need to make an informed choice about your particular situation.

What is Causing All of These Bankruptcy Filings?

There are several common causes which lead to filing for bankruptcy.  These included, but are not limited to the following:

1. Lawsuits/Garnishments

Nobody wants to be sued and brought to judgment.  Nobody wants to have 10%-25% of their hard earned wages deducted from their pay.  In many cases, the taking of 10%-25% of one’s wages leads to the inability of that person to pay his rent, utilities or auto payment.  Just the thought of the employer potentially having to garnish wages leads many to panic.  Debtors do not want their employers or co-workers knowing of their financial troubles.

2. Auto Repossessions

Imagine waking one morning, heading out the door to work, only to find that your car is not where you parked it.  Sure you were a little late on the auto payment, but you thought the finance company would wait for you to get current on your own.  Auto lenders will do whatever it takes to get you financed, regardless of whether you are actually capable of affording the car.  They realize that if you can’t pay the installment, they can take back their vehicle and re-sell it before it fully depreciates.  They do this through the use of auto auctions where the vehicle sells for substantially less than what is owed.  This leads to a deficiency amount which the lender seeks to recover from the debtor, you.  Talk about insult to injury, the debtor first loses possession of the vehicle and then gets sued for the outstanding deficiency balance.  Who wants to pay for something that they no longer have?

3. Unpaid Medicals

With more and more Americans going without medical insurance (45.8 million, per the U.S. Census Bureau press release dated 8/30/05), they risk losing whatever they have earned throughout their lifetime should a major medical problem occur.  Most claim that they can’t afford to carry medical insurance.  In reality, they can’t afford not to.  The rising cost of health care could significantly deplete one’s savings should a serious illness or injury occur.  Even those with co-payment coverages are having a difficult time meeting their burden of the bill.

4. High Interest Loans

There have always been high interest personal loans from many sources.  In recent times, the advent of the payday loan has surfaced.  These loans have exorbitant interest, which is often carried over to extend the loan.  People who cannot survive until their next payday are giving up a huge portion of their paycheck to get the money in advance.  This dangerous cycle leads to further borrowing with less and less money actually going into the worker’s pocket.

6. Foreclosures

The pride and joy of being a homeowner can be easily tempered by the hard work and cost of maintaining the home.  Calling the landlord to make repairs is not an option; you are your own landlord.  When the water is not flowing to the main sewer, you have no option, but to make the repairs.  Additionally, the mortgage needs to be timely paid no matter what your special circumstance may be.  Real estate taxes and homeowner’s insurance are also required to be paid regularly or you face a foreclosure suit.  Changes in employment, health, income and marital status can lead to one’s failure to make timely payments.  Many take second mortgages or lines of credit which simply create an additional, financial burden on the homeowner.  When faced with the reality that they cannot afford the home, debtors can vacate the home and extinguish any mortgage liability through  bankruptcy.

7. Overzealous Lending

How many credit card applications have you received in the mail this year?  If you are like many Americans, the applications continue to appear regularly.  Have you received convenience checks or offers for additional lines of credit?  If so, you may have taken advantage of the use of the credit without any feasible way of repaying the debt.  Many people are receiving pre-approved credit applications when they are in fact, not credit worthy.  The credit card lenders point fault at the debtors for accepting the credit without the means to repay it.  It seems more logical to fault lenders who do not undertake to check the credit worthiness of particular debtors.

8. Consumer Overspending

Many people see what they want, acquire it, and decide later how they will pay for it.  People want to possess the latest clothing, jewelry, electronics, etc.  Most stores now offer the ability to take the product home through the use of store credit cards or outside financing.  You may even get a modest percentage discount off the purchase price if you open or use the store charge card.  Many people charge their groceries, restaurant and transportation expenses believing that if they just make the minimum payments everything will be alright.

Debtor Laws

Once you have decided to file for bankruptcy, you must be truthful about your financial situation in order to take advantage of bankruptcy protections.  While this does not pose a problem for a majority of individuals, it is often unwise for a debtor undergoing a bankruptcy to seek to secrete or hide assets.

When you file bankruptcy, expect that the trustee will perform a thorough investigation of your assets and your financial transactions for a year or more prior to the bankruptcy.  If the trustee determines that you have sold or given away valuable items before filing for bankruptcy protection, this can cause your case to be dismissed.  If this happens, you will have to re-file and may not benefit from the protection afforded by the automatic stay which means that creditors will be free to pursue their collection attempts.  Additionally, debtors who attempt to hide assets may be guilty of fraud, accordingly, it is important to disclose any and all financial activities in your initial petition.

Despite innocent intentions, certain actions may require that you to have to wait in order to file for bankruptcy in order to avoid dismissal.  If you have recently sold or given away valuable property, you may have to wait for a year before you file, which is why it is important that you speak with a reputable bankruptcy attorney if you are considering filing for bankruptcy.  The McCandless Law Firmoffers legal advice for anyone who may be considering filing for bankruptcy, contact us today to set up a free, no-obligation case evaluation.

Creditor Laws

While creditors must follow specific laws when it comes to collecting on debts, creditors often resort to unscrupulous collection practices which violate the Fair Debt Collection Act and risk being fined, or sued, depending upon the severity of the violation by attempting to take advantage of consumers who are ignorant when it comes to debt collection practices.

Fair Debt Collection Practices
Creditors must follow fair debt collection practices if attempting to collect on a debt. There are several laws in place governing creditor communication, including:

• Creditors cannot call and harass you throughout the day.  One phone call per day is allowed, provided that they actually speak with you.
• Creditors cannot misrepresent themselves to be a lawyer, police or other governmental entity.
• Creditors cannot threaten, harass, or annoy you.  They may not use profanity or threaten to sue you, garnish your wages or take other actions that they do not really plan to take.
• Creditors cannot call at inconvenient times, or contact you by telephone after you have requested that they stop calling.

Automatic Stay Violations

If you have filed for bankruptcy protection, creditors cannot attempt to collect on a debt for as long as the automatic stay is in place. Creditors that violate the automatic stay may be subject to legal action, and monetary damages. An automatic stay goes into place as soon as your paperwork is accepted by the bankruptcy court.  If you are contacted by creditors after they have been informed of your bankruptcy, you may be able to pursue the creditors in court.

Bankruptcy Discharge Violations

If a debt is listed as discharged on your bankruptcy filing and a creditor still attempts to collect on the debt, you may be entitled to damages. Speak with a reputable San Bernardino County Bankruptcy Attorney and get the representation that you need in this case.

Even though creditors have a right to collect the debts they are owed, they have to collect them within the boundaries of the law.  Fair debt collection practices were put into place to protect consumers like you, and you may have the right to seek damages if creditors employ abusive collection techniques. Contact us to speak to an experienced bankruptcy attorney if you have contacted in violation of the Fair Debt Collection Practices Act, and get the legal representation you need to recover damages and prevent further abuse.

California Bankruptcy Statistics

As Southern Californians deal with the fallout from the mortgage crisis, many homeowners and families have found themselves saddled with debt they cannot afford. As a result of this unfortunate situation, individuals are increasingly turning to bankruptcy to get their financial lives back on track. A majority of individuals file a Chapter 7 bankruptcy to help wipe out most, if not all, of their unsecured debts, including credit card bills, medical bills and judgments. For those individuals who do not qualify for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy is beneficial where the debtor has significant property and/or wants to eliminate a second mortgage on the residence.

At the McCandless Law Firm, we are committed to providing personalized service and our team of professionals will help you obtain a fresh start for you and your family. Contact us today to arrange a free office consultation. Documents to Collect Before filing, the following documents will be necessary to complete your bankruptcy petition:

1. Copy of each debtor’s social security card and bring original with you to your hearing

2. Copy of each debtor’s drivers’ license and bring original with you to the hearing

3. Documentation of any wage garnishments, wage assignments or other legal actions, including lawsuits

4. Copy of recent real estate appraisal, if any

5. Copy of most recent real estate tax bill

6. Pay stubs for each debtor for prior 6 months

7. Documentation of other income i.e. child support, social security, pension, disability, unemployment for prior 6 months

8. Copies of federal and state tax returns complete with all schedules including W-2’s for the prior 4 years

9. Copies of checking account, savings account, and money market account bank statements complete with copies of canceled checks for the prior 6 months (you will be asked to supplement this at a later date)

10. Copy of any life insurance policies except ones through employment including a statement regarding the current cash value

11. Copy of most recent brokerage account statement

12. Copy of most recent individual retirement account statement

13. Copy of most recent pension/retirement account statement

14. Copy of most recent 401K, 401B or 401E account statement

15. Copy of any contract for deed in which you are a buyer or seller

16. Copy of divorce decrees and/or domestic support obligation orders (child support or alimony)

stop foreclosure

National Association of Realtors to fight foreclosure

National Association of Realtors to fight foreclosure

In September and October 2010, several lenders suspended foreclosures due to questions about whether the transactions were being processed consistent with applicable state law requirements.

NAR Says Families Will Suffer if Foreclosure Freeze Continues (Oct. 12)
NAR Letter Regarding Deficiencies in the Foreclosure Process by Some Mortgage Servicers (Oct. 12) (PDF: 138K)
Serious Questions Raised about the Validity of Foreclosures (Oct. 7)
Foreclosure Moratorium: Latest in the Debate (Oct. 11)

Tips, Tools and Resources

Resources For Realtors®
Field Guide to Foreclosures
Realtor® Magazine Ethics Column: When the Seller Is Bankrupt
Quiz: Test Your Foreclosure IQ
Video: Learn from a Foreclosure Specialist
NAR Research’s Trends in Foreclosures Webinar
Foreclosure Prevention and Response Tool Kit: For REALTORS®

Educational Opportunities
Realtor University: Short Sales and Foreclosures–What Real Estate Professionals Need to Know
Short Sales and Foreclosure Certification Program

Resources For Homeowners, Buyers and Sellers
HouseLogic.com:  Foreclosure Counsellors: What They Can and Can’t Do
HouseLogic.com: Foreclosure Process: How State Laws Vary
6 Questions Foreclosure Buyers Should Ask
Homeowners: Concerned About Your Existing Mortgage?

Resources and Programs For Realtor® Associations
Foreclosure Prevention and Response Program
Foreclosure Prevention and Response: Best Practices
Foreclosure Prevention and Response Tool Kit: For Associations
Neighborhood Stabilization Project

Is wall street stealing your home

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

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

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

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

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

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

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

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

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

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

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

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

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

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

the debate

Debunking the Gospel of Garfield

April 7, 2010 by admin · 15 Comments

Since starting MFI-Miami almost 2 years ago, I have received some pretty strange calls from people. I’ve had real estate agents call me who have bought 15 income properties and then try to claim they are victim of Predatory Lending. I’ve had people who have bought investment properties who thought because they watched two episodes of The Apprentice they’re as smart as Donald Trump. I have gotten calls from the conspiracy theorists who think the Obama Administration wants their property so they can build an internment camp on it when the armed UN hovercraft come skimming over the Everglades. These are some of the more interesting calls.

However, the most interesting calls I get are from Pro Se litigants. What are Pro Se litigants? Pro Se litigants are homeowners who represent themselves in court and usually have no training as a lawyer. They are usually people who think they know more than everyone else or have the attitude of “Why should I hire a lawyer when I can do it myself.”

As the saying goes, “An attorney who represents themselves has a fool for a client.” Here’s a case in point. I had a foreclosure client when I started MFI-Miami, who filed an answer to his foreclosure that he copied and pasted off Neil Garfield’s website, Living Lies. My client then tells me he was going file a federal civil RICO case against his lender because his wife’s “forged” signature violated interstate commerce laws which is a RICO predicate. When I asked him who told him he could do that, he claimed he read he could do it on Garfield’s site. I have since received dozens of calls from people asking me for free advice based on what they read by Neil Garfield.

I have received at least 6 calls in the past week from Pro Se litigants claiming that they don’t know what to do because their Florida judge laughs at them for demanding the wet inked copy of their note. This is one of those misconceptions out on the blogosphere that had its origin from the Living Lies site. The misconception is that if the servicer or the Trustee cannot produce the original wet inked note, then they lack legal standing to execute a foreclosure and therefore the debt obligation is now nullified. This is absolutely false. In Florida, the transfer affidavit or note must officially be on record with the county 60 days prior to a servicer or Trustee filing the initial foreclosure complaint. When the attorney files the foreclosure complaint, all they are required to do is attach a copy of the original note.

For those you who don’t know who Neil Garfield is, he is a self-proclaimed Foreclosure Expert who holds seminars across the country for lawyers and Pro-Se litigants helping them fight foreclosures. According to his biography, was an Economist, Accountant and he is a “Chairman Emeritus” of a consortium of financial service companies and claims to be the “ultimate insider” on Wall Street. (Page 4, Garfield Continuum Handbook) Yet, he never mentions which companies he has worked with or the positions he held. The state of Florida also has no license on file for him being an accountant.

If he was a Wall Street “Insider,” he was like Lon Chaney aka The Man of Thousand Faces because friends of mine in the media who cover Wall Street had never heard of him until he started doing seminars. He was a trial attorney in Florida from 1977 until 1993 and by his own admission to me when I attended his seminar in Orlando last May, has not done any litigation work since then.

He preaches that, “homeowners can walk into a foreclosure hearing and walk out owning their house free and clear.” (Page 5, Garfield Continuum Handbook)

He even preaches this on his website and it is over-simplified comments like this that draw people to his website looking for easy answers. Like a late night televangelist, Garfield delivers a lot of what on the surface appears to be easy solutions but in reality are very complex legal arguments. Unfortunately, for the homeowner, foreclosure defense is not easy. It is a lot of painstaking detective work and TILA rescissions happen in only one of out of 50-75 loans.

Neil Garfield’s theories make for great legal debate and table talk for foreclosure defense junkies and conspiracy theorists. However, in reality his theories are impractical for the average homeowner due to the astronomical fees of legal research and litigation that they would require. What Neil Garfield fails to understand or express to his seminar participants is that judges do not like going out on the proverbial limb and therefore will not make precedent making decisions.

In other words, Neil Garfield is great at talking the talk but is a little short on walking the walk. He lacks the practical litigation experience to transform his theories into reality. Even now if you read his blogs, attorneys as well as Pro Se litigants who are frequent contributors phrase their comments as if expressing opinion instead of fact.

Garfield has created a problem in judicial foreclosure states such as Florida. He has unleashed an army of Pro Se litigants who have clogged the courts trying to argue their foreclosure cases using theories they barely understand. They lack not only legal expertise but lending expertise. They are totally unprepared to argue their own cases and fail to learn or obey court procedure. Many of them go in to court trying to argue constitutional law or TILA and find themselves summarily dismissed by a judge. They then write comments on the blogosphere claiming the judicial system is corrupt and that corruption is a result of some mass government conspiracy.

What the Garfield seminars fail to express to these litigants is that foreclosure laws vary from state to state and if you are fortunate enough to live in a judicial state like Florida or New York, judges want to hear state statute not federal statute unless it is relevant to your case.

This also creates another problem for the court system. The problem consists of the homeowners who have been successful in getting their foreclosures postponed. Fed by what they read on Living Lies, these pro se litigants begin having delusions of grandeur and begin believing they are the next Alan Dershowitz or Gerry Spence. They begin dispensing legal advice on the internet. The reality is, it was not the Gospel of Neil Garfield or the Pro Se litigant’s superior linguistic or legal abilities that got the foreclosure postponed but forces beyond the homeowner’s control.

In his 683 page handbook which is riddled with errors, he claims, “Neil has come out of retirement with one purpose in mind – to do all he can to counter the effects of the mortgage meltdown and save the people and the country from the disaster of created by free money using derivative securities that not even experts understood and targeting the least sophisticated members of society.”
This may sound charitable, but don’t believe the hype. At the end of the day, it’s all about the Bejamins. Garfield and his partner Brad Keiser use these seminars to market future consulting work and forensic audits from law firms and Pro Se litigants that attend their conferences.

Don’t get me wrong, I have no problem with people making money and I don’t have a problem with the fees Garfield and Kaiser charge their clients, I do have an issue with what they preach and how they manage the expectations of what they preach to the average homeowner. This industry is filled with enough wannabe Elmer Gantrys or messianic types with no practical mortgage industry experience and the last thing it needs is to encourage more unqualified “healers” to come into this business which is what Garfield and Keiser are doing.

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Filed under Mortgage Fraud News, Steve’s Blog · Tagged with avoiding foreclosure, banking, consumer protection, economic meltdown, financial crisis, florida foreclosures, foreclosure crisis, foreclosure defense, foreclosure help, foreclosure rescue, foreclosure rescue scams, Housing Crisis, illegal foreclosures, Living Lies, mortgage backed securities, mortgage fraud, mortgage help, mortgages, Neil Garfield

15 Responses to “Debunking the Gospel of Garfield”

1. KevinG says:

   April 9, 2010 at 11:46 pm

   Steve, I’m just an average guy with properties that are upside down like alot of my friends whom I network with here in Las Vegas. Like Florida, Vegas has been hard hit with foreclosures. The State Fight Fraud Task Force trys to keep up with the foreclosure ‘consultants’ and even passed legistlation requiring registration and licensing. But, many innocent, ignorant and desperate homeowners are still being SCAMMED on a regular basis. Self procalimed ‘Experts’ like Garfield tend to flourish in ecomonic times like this.

   I have attended at least four local meetings her in Vegas that all pitch slight variations on Garfields approach to ‘fighting back’ with the tools he provides from ‘Living Lies’. I’ve met with an attorney listed as a reference for one of these companies who represents homeowers in predatory lending situations…he was not the least positive about the outcome. On the other hand, I’ve met with 60+ people in a $2,000,000 home with the owner who shared his personal experience in using this ‘Administrative Process’ to reconvey his property back into his name (I’m still trying to get eyes on proof of this claim). Every week I hear from somebody who’s considering trying this Living Lies strategy…mainly out of desperation.

   I’ve seen the paperwork and process and the claims, claims and more claims…but no proof as you say. I’ve even started to document this investigation to help inform and warn others like the gray haired lady and her elderly husband who asked at one of these meetings…”If I am already in the Foreclosure Process will your methods effect my credit rating?” That really sadden me to think that people really don’t know what they’re getting themselves into.

   I have looked for others in Nevada who can validate, proof positive, that Neils methods will work in Nevada. So far, I haven’t found anyone…except those who CLAIM sucess.

   His methods are also being combined with what’s called ‘Accepted for Value” …A4V for short. As I understand it, this involves paying your debts from your “Treasury Account” that is based upon your Birth Certificate. I’ve heard so many claims about this for paying credit cards, mortgages, etc. it’s amazing how much buzz there is about this. But, as I say again…how can the average guy or gal validate an of this with the IRS and Treasury Dept?

   Tonight is the first time I came upon your blog…based upon a search I googled for Neil Garfield. I have yet another meeting with yet another person making claims that they helped people by using the LIVING LIES principles.

   The report I am writing entitiled “Mortgage Elimination Education – Fact or Fiction” could use the input by someone with better creditials than mine. If you know of anyone … hint…hint… in Nevada whom I may confer with I would appreciate hearing from anyone both pro or con.

2. skeptical-optimist-1 says:

   April 10, 2010 at 12:38 am

   I also heard of a few others ‘educating’ people.

   Any comments would be appreciated.

3. admin says:

   April 10, 2010 at 5:00 am

   I have picked up on your hint. Feel free to contact me at the phone number on the website or send me over anything you would like my opinion on.

   From what I’ve seen with the “Accepted For Value” programs (it also goes by different names) is that it is essentially the same thing as those Money Merge Accounts scams that were floating around about three years ago. It’s the BS but in a different package.

4. Capt. Jack says:

   April 10, 2010 at 1:09 pm

   I’m not here to defend Neil Garfield or Brad Kaiser or the Livinglies website. I am here to question how you differentiate yourself from them.

   Where is your resume? Is everyone doomed without your service? Surely you are not suggesting you are the only one with the skills to defend against fraud.

5. Capt. Jack says:

   April 10, 2010 at 2:03 pm

   What is the policy here on posting links? I see that mine were “trimmed” but others are allowed!

   Very revealing!

6. admin says:

   April 10, 2010 at 2:10 pm

   There are several big difference between what I do and what Neil Garfield and Brad Keiser do. First, I don’t encourage people to play Perry Mason without a law degree. I will not take a client on unless they have either retained a attorney or have spoken to an attorney before they hire me to tear apart their mortgage. Matter of fact, I won’t do business with pro se litigants because of the problems they create. They exacerbate the problem of their foreclosure because they read on the internet that foreclosure defense is easy and they can simply walk into foreclosure hearing and walk out with a free house. Here’s a perfect example from the client I mentioned in the article. In his answer that he copied and pasted off Living Lies, he accused the Lender of violating “Florida mini-FTC laws”. This was actually in the sample Neil and Brad had on the website. There is a huge problem with this because Florida never called the Florida Deceptive and Unfair Trade Practices Act (Florida Statute 501) a “Florida Mini-FTC”. Neil Garfield being a member of the Florida Bar and licensed attorney should know this.

   Second, I don’t give my clients false expectations of what the outcome will be. Myself and the attorneys I work with (4 have gone to a Garfield seminar) all give the client realistic expectations of what to expect if they fight their foreclosure. The attorney also explains to them any alternatives, they feel may be better for the client.

   I not saying and I never said foreclosure victims are doomed if they don’t use my services. I said the problem I have with what Neil Garfield and Brad Keiser do is that they do not manage the expectations of their clients or their readers. There are other companies out there doing excellent work. I will even bring on competitors to help me on files. If we are successful on file like Cindi Dixon (who operates Mela Capital Group) and I were on the Cirigliano file, I have no problem sharing the accolades or the credit.

7. admin says:

   April 10, 2010 at 2:12 pm

   Your post was “trimmed” because you were plugging your sites. The links were the only things removed.

8. Alina says:

   April 10, 2010 at 3:30 pm

   admin,

   There is an old Texas saying – load your brain before you shoot off your mouth.

   Above you state that Florida does not have a mini-FTC statute. First let me begin by enlightening you. Every state’s UDAP statute is patterned after the FTC, therefore they are commonly referred to as the mini-FTC. If you want to proof of this, I have plenty of case law I can send to you. It appears from your statement and also from your disclaimer on the right of this site that you are not an attorney. But yet, you believe you have the right to negatively comment on an attorney’s work.

   The homeowner in your story was unprepared. He copied and pasted something for which he was not versed in. However, this is in no way Neil’s or Brad’s fault. The Living Lies site should be used as a starting point. From there every homeowner should be taxed with the duty to research their own state’s laws, rules, statutes. The site have a vast amount of invaluable information.

   Alina

9. endGOVTwaste says:

   April 10, 2010 at 3:41 pm

   This contradicts the MFI-Miami blogpost that appears above this one. There’s no way the courts are being clogged up by homeowners – the ones that know their rights and choose to defend themselves are few and far between. Comrad, you should embrace the fact that Mr. Garfield has enlightened many… for you to edit “snippets” of his site and brand him as an alarmist converting the masses into pro se litigants is completely BUNK. I think it is merely an attempt to use his name to further your stat counter!

   When I search your name I find the article “Steve Dibert at MFI-Mod Squad Leaves Consumers Confused” & “Another Smart & Feisty Chick Doesn’t Take Any Crap From Martin Andelman, Steve Dibert or Aaron Krowne.” But this doesn’t mean I would go out and spread bad words about you and your company.

   So what to do… post my comment and reply to me or delete my comment. I guess we’ll see what happens. Take care and please, lets try & stick together. We need all the help we can get (HB 1523).

10. admin says:

    April 10, 2010 at 3:56 pm

    Alina,
    I didn’t say Florida didn’t have it’s own version of an FTC law, I said it’s not called “Mini-FTC” and no one in the legal profession here in Florida calls it that. I know because 90% of my business comes from law firms. They refer to as FS 501 or FDUTP. Again, the problem is that the majority of people who read that site substitute it for bona fide legal advice. As I told the other person who wrote a comment, I get 6-10 phone calls a week saying, “I read on Living Lies, I can do. . .” and usually followed by some theory the courts have already shot down. It’s usually some person with no legal training that thinks he’s Gerry Spence or Alan Dershowitz.

11. admin says:

    April 10, 2010 at 4:26 pm

    I haven’t seen that article. It was probably written by Erin Baldwin who was a self-proclaimed “fraud fighter” because she couldn’t qualify for a modification and lost her house. I later exposed her for being a scam and being mentally unbalanced. If not, it was Krista Railey who is a friend of everyone’s favorite ex-convict and illegal mod company operator Moe Bedard, who was mad because the three of us said nice things about a mod company she was hell bent on taking down.

    I do agree about HB 1523. We need to put pressure on the Florida legislature to vote no on HB 1523. I will be posting an article about it Monday or Tuesday. Feel free to cut paste the information from the article. I’m also going to make up flyers people can print out and pass out in their neighborhoods. I have a call into some trial lawyers who are going to help. I will also spread the word with my friends in the Florida media next week as well.

12. ppulatie says:

    April 10, 2010 at 6:37 pm

    I work with attorneys in CA, doing examinations. I have many of the same concerns as Steve. To give all an idea:

    1. Garfield talks about the “2nd Yield Spread Premium” paid to lenders. The YSP is based upon the purchase price of the bonds, and also when the interest rate changes on a adjustable rate loan. There is no potential way that these differences could ever be considered YSP and need to be disclosed.

    YSP is a payment to a broker for placing a borrower into a higher interest rate than what they were qualified for. It is a required disclosure.

    When a lender sells a loan, if they receive a “YSP”, it is not a requirement for disclosure. This “YSP” has occurred after the sell, so how could it be disclosed anyway?

    When bonds are sold, that is a completely different transaction, and cannot be considered a YSP. Those would fall under Security Laws, anyway, and not TILA or RESPA.

    2. In his seminars, Garfield quotes 226.34, the section that covers the requirement of the lender to determine the ability of the borrower to repay the loan. This sounds great, unless one knows that statute. 226.34 ONLY applies to HOEPA loans, of which there are very few done. It does not apply to 99% of the loans that were done. I see attorneys file complaints with 226.34 alleged, and I can immediately sees the flaws in the arguments. This should get tossed, if the lenders have competent attorneys.

    BTW, most attorneys and even auditors do not realize that the “CAP” on the interest rate is not to be used in determining HOEPA violations. It is the Fully Amortized Rate.

    3. Garfield and others have made representations that the securitization of the Note changes the character of the Note and that it might make the loan no longer forecloseable. Under CA Uniform Commercial Code, and I suspect most others, the Code covers this and allows for such foreclosures.

    4. Most of the cases that are posted on the website are preliminary rulings or they are the initial complaints. As such, they have not generally would their way through appeal, and until they do so, the cases are not much use.

    5. Garfield does not really expound upon the fact that case law is jurisdictional, and what might work in one jurisdiction, would not work in another.

    6. Foreclosure law is state specific. And Non-Judicial v Judicial foreclosures are completely different animals.

    7. The Countrywide/B of A Class Action in Washington that Garfield posted, has major issues with the complaint. It alleges violations of HAMP. I tried to point out these issues, with regard to the fact that HAMP does not guarantee a loan modification, nor is there likely a Private Right of Action, among other issues. Furthermore, many of the claimants in the action would not qualify for HAMP, but unless the attorneys fully understand this, and only a few do, then it will pose issues for determining Class members. Garfield deleted my post for this. This occurs each and every time that I right something contradictory to what he writes.

    Garfied also deleted my post ragarding a case that Max Gardner, the BK attorney posted. Gardner made mention when “MERS transfers the Note”. I called him out on this and suggested that either Gardner “mis-wrote” or he was in error. The reason is that MERS does not transfer a Note. The Note is endorsed, usually in blank, and transferred by the original lender to the Trust. MERS only transfers the Deed. (I also explained other issues that could be exploited.)

    Well, that post was deleted as well. And Gardner’s comments have not been corrected. If Garfield is not willing to correct false or incorrect information, then what good is he?

    8. Most attorneys that I know who went to his seminar in CA, also say that much of his info is useless, if not garbage.

    9. He promotes seminars, whereby he will train people in forensic analysis and expert witness testimony in just a couple of days. This is pure bunk. There is too much to know and understand in just a couple of days. The concepts and the statutes and case law are just too complicated. Especially so when you consider California, whereby one court will rule one way, and another court will rule the opposite, both in the same day, and the merits are the same.

    Expert Witness? That is a joke. There are only a few people I know that are competent to be an expert witness. And those people have no desire to be one. That is because the “true auditor” can look at a file and see not just lender fraud, but also broker fraud and borrower fraud. The lenders that know what I do would love to get me on the stand because they know that I would be able to also indict most borrowers, if questioned correctly. That is why each of my Predatory Lending Exams, I provide the attorney a separate Comment Sheet, apart from the Exam, which details the other issues and how the lender will discredit the borrower.

    I do not do Pro Se litigants either. They end up wanting me to act as an attorney for them, and I am not one and do not pretend to be. It is just that over 30 months of doing this, I understand how CA courts work, and what works in the court and does not.

    When a homeowner calls, I will talk with them a bit, to find out what is going on. I then refer them to an attorney. I will not work with a homeowner without an attorney who litigates. I will not work with attorneys who simply do loan modifications. I do not contact lenders, servicers or other entities, because under CA law, I then become a foreclosure consultant. I have been checked out twice by the CA DRE and both times, they have concluded that I am doing things “right” and in accordance with CA law.

    I make no representations about what I do and what it can accomplish. In fact, I tell people that there are no guarantees about what will occur. The best that can be hoped for is to bring the lender to the table for a loan modification. There will be no principal reductions, or getting homes for free. Better to be realistic, that give them false hopes.

    That said, I am working with three different Class Action law firms, to attack lenders on specific items I have discovered. These are very narrow issues, and are designed to prevent Federal Preemption arguments, but they do have a Private Right to Action. These will be interesting to see what happens. They won’t help everyone, but they will help many.

    I know that the Garfield followers will likely not care for what I write. But, it is time to address the issues and let the chips fall where they do. I am tired of the blatant misrepresentations or errors by so many people who claim to be “auditors” and other foreclosure assistance personnel. Unfortunately, there are too many “scam artists” out there, epecially in CA, and no, I am not calling Garfield a scam artist, and are just preying on homeowners in trouble.

13. Elvis says:

    April 11, 2010 at 5:39 pm

    Steve
    Really…the axe you are grinding with Garfield and Keiser just discredits you. First, like you I have attended the Lawyers seminar. They both are very clear that their target audience is Lawyers and that homeowners need to have “competent” local counsel and the objective of their seminars is to surface competent lawyers willing to take foreclosure defense cases that homeowners can be referred to, since you are not a lawyer you may not have picked up on this… So your whole diatribe that they have “unleashed an army of Pro Se litigants” is patently false.

    I have followed the blog for sometime and I know you used to post frequently and include the link to your site to solicit “loan audit” business.

    Essentially, you were “trolling” the Livinglies site for customers for loan audits. Since you say you have four lawyers that you work for that have attended the Garfield seminar, I can only assume you like many other “loan auditors” (including Mr. Pulatie who posts here)have also used the list of lawyers posted to benefit homeowners the site as a prospect list to solicit business. Just curious have you ever sent a dollar of donation to the Livinglies blog site? I bet not. I have.

    If homeowners cannot find competent lawyers to represent them and have to go Pro Se and use the internet, well you have to admit the Livinglies site is a good resource for them. The fact is there are not enough lawyers to serve the homeowners that need help, but like “loan auditors” there are even more lawyers that will take homeowners money an DO NOTHING…because they don’t know what to do.

    So really this whole article is misguided, Garfield and Keiser have as another poster here commented “enlighted” thousands, maybe hundred of thousands to the reality of the fraud taking place with these foreclosures, helped many lawyers and homeowners who they will probably never meet and you want to take issue with “snippets” of their materials. Really we all need to work together. I do have to hand it to you if this was a strategy to increase the stats/hits on your website its not a bad angle. If you have the “nads” to actually allow this comment to be posted, then good for you. If not you will be confirming that you are just another fringe player out there trying to leverage Livinglies and the work that Garfield and Keiser have done to enlighten the marketplace and homeowners to the facts for your own benefit.(I think you used the term “its all about the Benjamins”)

    Oh and by the way a recent post on Livinglies re: “Produce the Note is Not Enough” kind of contradicts your point that Garfield originated that angle…it was April Charney long before Garfield came along, I like to give credit where credit is due…but since you only started your business a little less than two years ago you may have not known that…did you by chance attend their Forensic Mortgage Analysis Workshop a couple weeks ago? I talked to a couple folks who did and they were very impressed and felt it was worth the money. I am just hoping they will do one in the East sometime soon.

    Hopefully you actually allow this comment to be posted…if not I understand your agenda.

    Truth

14. admin says:

    April 11, 2010 at 6:35 pm

    Elvis,

    First, I don’t have an “axe to grind” against Neil and Brad. If you actually read the article you would have known that. You and other Neil Garfield Groupies make a lot of assumptions about how I run my business, how I market my company and my motivations. I find it interesting all of you want to question my testicular fortitude but none of you have the spine to post your real names on these posts.

    Besides, I really don’t need to start a blog war with Neil Garfield to increase my SEO. I get plenty of traffic from the exposure I get from international media. I find it interesting that the people helping drive traffic to this site are the upset Garfield Groupies who keep pasting the link and spreading it around.

    Those quotes where from his handbook were not “snippets.” They were the actual quotes from his hand book. Look at both page 4 and 5 of his handbook.

    Tell you what, if you can show me 5 cases of a pro se litigants who were awarded a free and clear title to their home using the what they learned at a Garfield seminar without the help of a lawyer, I will retract the article.

    Also, why would I “donate” to a website that is clearly a marketing tool for a for-profit venture. Does that mean I should ask you for an $11 donation for my Go Daddy bill next month?

15. ppulatie says:

    April 11, 2010 at 7:27 pm

    For the record, I do not recommend any attorneys from the Neil Garfield website. Heck, most of those who attended the CA seminars quickly understood that CA law is different from Florida, and what works in Florida does not work in Ca. I only accept work from attorneys who I interview, and know that they will do good work. I work for very few attorneys as a result, because most attorneys really haven’t got past the first three months of a learning curve that is needed in CA.

    CA Civil Code 2924 is considered “exhaustive” and as such, Produce the Note does not work. 2924 has no requirement. Nor do other arguments that Garfield talks about.

    I will say that I was more than happy to see that Garfield did write recently about using reasonable arguments and not theories that courts were not ready for. But prior to that post, he had never mentioned such before, and so large numbers of homeowners were led astray. I know, because I have read the complaints filed by these Pro Se litigants, and I have talked with large numbers on the phone. That is a major reason why I do not do retail audits, and only work through attorneys.

    BTW, the post previous to this one was the very first one I had ever done on this website. I only respond to your post to explain that I do not work with attorneys on Garfield’s list.

    Also, I should note that I do not do audits outside of CA and a couple of other states. That is because the laws are so different and the case law per state takes months to really understand. To be proficient in other states, a person must understand what is going on and tailor the exam to what the courts in that state will accept. Otherwise, the exam is a waste of money. That is why I have consistently turned down offers to take my operation nationwide.

    Also, I have found that to train an examiner, it takes at least a year of very hard work and effort. It is not about plugging information into a software program, as most so called auditors do. It is about understanding the statutes, the lending process, underwriting process, and knowing and keeping up to date on case law. As well, it is an intuitive feel for what happens in the loan process.

    That is why I differentiate my operations from others. I don’t do forensic audits. I do Predatory Lending Exams. That is far beyond what all but a few companies will ever do, because they don’t understand the full process. Most were former loan officers who decided to jump into this business long after people like Steve and I developed it. They never took the time to learn the law, go into court and watch what happened, and they never tried to read the case law and understand how it related to loans.

    And that is why, when I start working with knowledgeable attorneys, they come back time and again.

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President, Woodstock Institute

HMDA is a crucial tool in the fight against discriminatory lending, but the data currently collected is not sensitive enough to detect some of the problematic practices that triggered the foreclosure crisis.

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Judith Sandalow: Politicians Are Failing An Entire Generation Of Children

Diane Tucker, 09.26.2010

Writer/producer/director living in Washington DC

In the shadow of the White House, nearly 45,000 American children live in poverty, a number that has been soaring since 2007. The District of Columbia…

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Fixing America’s Broken Housing Market

Joseph E. Stiglitz, 09.15.2010

Professor at Columbia University and a Nobel Laureate in Economics

The Obama administration’s reluctant and belated recognition that its efforts to get the housing and mortgage markets working again have largely failed.

A Visit To A Loan Modification Marathon

• Quick Read |
• Comments |
• 10.04.2010

BofA Exec Signed But Didn’t Read Up To 8,000 Foreclosure Papers Per Month

• Quick Read |
• Comments (368) |
• 10.01.2010

Cautious Homeowners Not Seduced By Record-Low Interest Rates

• Quick Read |
• Comments (79) |
• 10.01.2010

Mortgage Rates Low: Level Matches Lowest In Decades

• Quick Read |
• Comments |
• 09.30.2010

‘Club Fed’: The Cozy Ties Between Fed And Big Investors

• Quick Read |
• Comments (61) |
• 09.30.2010

Click on the links below for individual wrongful foreclosure stories.

Click on the links below for individual wrongful foreclosure stories.

Bank of America’s unfunny foreclosure tricks

Repossession hell: 6 extremely ‘wrongful’ foreclosures

Bank of America Sued for Foreclosing on Wrong Homes

House “trashed out” that Michigan couple paid cash for

Kentucky man sues after bank takes wrong house

Bank of America Pocketed Insurance Proceeds for Gas Explosion, Then Attempts Foreclosure on Home Anyway

Foreclosures go wrong as lenders, clean-up crews cut legal corners

Pittsburgh area woman with paid-up mortgage says bank “repossessed” property, damaged furniture, confiscated pet parrot

Bank of America forecloses on house that Massachusetts couple paid cash for

Texas doctor says bank seized house he owns free and clear, turned off utilities and left him with 75 pounds of spoiled fish

Bank Tries To Foreclose on Owned Home in California

Fort Lauderdale man’s home sold out from under him in foreclosure mistake

Click on the links below for overviews of the foreclosure crisis.

Caught in a pile of paper – the foreclosure crisis rages on

The looting of America continues

Bank of America Exec Signed, but Didn’t Read Up to 8,000 Foreclosure Papers Per Month

A Crack in Wall Street’s Foreclosure Pipeline

While We Are on the Subject of Bad Foreclosures, What About HAMP’s Compliance?

Fannie And Freddie’s Foreclosure Barons

Bank of America to Freeze Foreclosure Cases

pretender lenders don’t have to follow the law if they can get title insurance

Title and Escrow complaint to the California Department of Insurance

Title and Escrow complaint to the California Department of Insurance. Lennar the lender, the builder, the title and escrow. the insurance and many more controlled the whole process.
They made many mistakes and covered themself. Reason they are primarily controlled by the lenders and banks that they are foreclosing for. They say we don’t have to comply with the law as long as we can get title insurance. Then the sign an indemnification agreement with the title company illegally foreclose and wait to see if the former owner will sue or just accept it and move out.

http://www.scribd.com/doc/38476963/North-American-Title-Complaint-to-California-Fraudulent-Documents

http://www.scribd.com/doc/38476275/lennar-subisdiaries-universal-american-mortgage-company-north-american-title-company

Guess who happened to call me to help him in a class action against the banksters–BRIANT HUMPHREY.

http://www.scribd.com/doc/38476462/Briant-Humphry-north-American-Title-Company-called-Me-09-27-10-310-200-2174

http://www.scribd.com/doc/38477748/Arthur-Silver-Berg-Brian-Humphrey-Archived-Messages-09-30-10

JP Morgan Must Show Foreclosures Are Legal, Brown Says

October 01, 2010, 3:47 PM EDT

By Joel Rosenblatt

(Updates with Brown’s statement in fourth paragraph.)

Oct. 1 (Bloomberg) — JPMorgan Chase & Co., the third- biggest U.S. mortgage servicer, must prove its home foreclosures are legal, and if it can’t, must stop the practice, California Attorney General Jerry Brown said.

JPMorgan is asking courts to delay judgments in pending foreclosure cases while the bank reviews and possibly resubmits statements. JPMorgan said this week it is re-examining foreclosure filings after learning employees may have signed affidavits without personally reviewing underlying records, relying instead on other personnel.

Brown made a similar demand on Sept. 24 of Ally Financial Inc.’s GMAC Mortgage unit, which is being investigated by attorneys general in Texas, Iowa and Illinois after the lender said it would halt some evictions following a discovery of faulty documentation.

“JP Morgan Chase, like GMAC’s Ally Financial, has admitted that its review of key foreclosure documents was a ruse,” Brown said today in an e-mailed statement.

JPMorgan can’t record defaults on mortgages made from Jan. 1, 2003, to Dec. 31, 2007, unless, with “limited exceptions,” the lender had tried to determine whether the borrower is eligible for a loan modification, according to Brown.

Thomas Kelly, a spokesman for New York-based JPMorgan, declined to comment.

Yesterday, Illinois Attorney General Lisa Madigan, questioning whether JPMorgan is violating state consumer protection laws, demanded a meeting with the lender to discuss its foreclosures. Earlier today, Connecticut Attorney General Richard Blumenthal asked the state Judicial Department to freeze home foreclosures for 60 days, citing reports on GMAC and JPMorgan.

–With assistance from Dakin Campbell in San Francisco, Rick Green in New York and Andrew M. Harris in Chicago. Editors: Michael Hytha, Charles Carter.

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.

fraud factories in foreclosure

FDCPA — Fair Debt Collection Practices Act

Posted on June 29, 2009 by Neil Garfield

Don’t get misled by titles. The wording of the statute clearly uses “verification” not validation. Verification generally means some sworn document or affidavit. This means when you contest the debt under FDCPA (in addition to sending a QWR) the party who is supposedly collecting or enforcing the debt has a duty to “obtain verification”. And that means they can’t verify it themselves unless they are the actual lender. And the statutes says pretty clearly that they must give the lenders name and contact information — past and present. STRATEGY: IF THEY SUPPLY SUCH A DOCUMENT, PICK UP THE PHONE AND SPEAK WITH THE PERSON WHO SIGNED IT.I CAN PRACTICALLY GUARANTEE THEY WILL DISCLAIM EVERYTHING THAT WAS IN IT AND POSSIBLY EVEN THAT THEY SIGNED IT.

15 U.S.C. 1692 ———–

FDCPA

Salient provisions affecting foreclosures:

§ 1692. Congressional findings and declaration of purpose

Abusive practices

There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
(b) Inadequacy of laws
Existing laws and procedures for redressing these injuries are inadequate to protect consumers.

(4) The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.

§ 1692g. Validation of debts

(a) Notice of debt; contents
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this subchapter may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.
(c) Admission of liability
The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
(d) Legal pleadings
A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).
§ 1692j. Furnishing certain deceptive forms

(a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.
Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 1692k of this title for failure to comply with a provision of this subchapter.

§ 1692k. Civil liability

(a) Amount of damages
Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—
(1) any actual damage sustained by such person as a result of such failure;
(2)
(A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or
(B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.
(b) Factors considered by court
In determining the amount of liability in any action under subsection (a) of this section, the court shall consider, among other relevant factors—
(1) in any individual action under subsection (a)(2)(A) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional.
(c) Intent
A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
(d) Jurisdiction
An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.
(e) Advisory opinions of Commission
No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

§ 1692n. Relation to State laws

This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.

§ 1692o. Exemption for State regulation

The Commission shall by regulation exempt from the requirements of this subchapter any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this subchapter, and that there is adequate provision for enforcement.

The Fair Debt Collection Practices Act (FDCPA) has long been ignored by the mortgage servicing and foreclosure industry, which have thought of the law as designed to arrest the abusive behavior of bill collectors, such as the late night phone calls and the harassing letters to the debtor’s place of business. In fact, it is a law whose impact is beginning to be felt throughout the mortgage industry. The FDCPA is a federal law, first enacted in 1977. For years, the FDCPA was enforced through litigation by consumers that was outside the context of the mortgage foreclosure. However, the FDCPA’s expansive language, as well as recent court decisions have led more industries, such as lawyers and mortgage services, to examine whether they are subject to the provisions of the FDCPA. The answer is that they often are. This article will discuss who is subject to the provisions of the FDCPA, and if subject thereto, what the compliance requirements are, and finally, what the penalty provisions for violation of the FDCPA are.

There are some gray areas in the applicability of the FDCPA, but it is indisputably the law that a mortgage debt and those trying to collect  upon it, in the correct circumstances, can be subject to the FDCPA. The Act applies only to debts that were incurred primarily for “personal, family or household purposes, whether or not [a debt] has been reduced to judgment.” This means that the character of the debt, i.e., consumer or non consumer, is determined by the use to which the money loaned is put. For instance, monies loaned (and secured by a deed of trust) that are invested in a business or used to purchase a commercial strip center or apartment dwelling would represent a non-consumer debt and not be subject to the FDCPA. However, if the borrower used the loaned monies to purchase his personal residence or for other personal expenses, the debt would be a consumer debt subject to the Act.

Note that the character of the debt, consumer or nonconsumer, is not determined by the type of property that is secured by the deed of trust. For example, the borrower could borrow against a commercial strip center and use the proceeds to buy groceries. Although, the commercial center is, of course, a commercial enterprise, the loaned monies were used for personal purposes and the debt is, therefore, subject to the FDCPA.

As a practical matter, of course, mortgage services and trustees will find it insufferably burdensome to have to determine the original use of the loan proceeds in every foreclosure situation. Good practice, therefore, would be to assume that all mortgage loan debt is consumer debt, unless there is certain knowledge to the contrary.

The next question for purposes of determining the applicability of the FDCPA is to ascertain whether the person communicating with the debtor is a “debt collector.” The FDCPA defines debt collector as a person engaged in a business with the principal purpose of collecting debts or who “regularly collects or attempts to collect, directly or indirectly, debts owed to another.” Whether you fall within the definition is crucial. If you are considered a debt collector, you are subject to all of the requirements and restrictions of the FDCPA.

The application by the courts of who is a debt collector under this definition has been growing over time. For instance, in a case decided on April 18,1995, the United States Supreme Court held that lawyers who regularly collect consumer debts, even when their collection efforts are through litigation only, are debt collectors under FDCPA.  Heintz v. Jerkins 95 Daily Journal D.A.R. 7134 (1995). Note that those organizations that collect on their own debts are not debt collectors (other than those persons whose business’ principal purpose is debt collection). Therefore, courts have held that lenders who foreclose on their mortgage loans are not debt collectors. Olroyd v. Associates Consumer Discount Co., 863 F.2d 23 7 (D.C., E D. Penn 1994).

Creditors who take an assignment of the debt while it is in default are generally considered to be subject to FDCPA as debt collectors. Therefore, mortgage services who receive a loan prior to default are not covered as debt collectors (Penny v. Stewart Elk Co., 756 F.2d 1197 (5th Cir., 1985); rehearing granted on other grounds, 7611 F.2d 237), but mortgage services who obtained the loan while it was in default are subject to the FDCPA as debt collectors [Games v. Cavazas, 737 F.Supp. 1368 (D.C., D. Del. 1990)]. Thus, the same servicer can be a debt collector for purposes of some loans and not others.

The author has not reviewed any court decisions holding that a trustee merely performing its statutorily required acts for a nonjudicial foreclosure sale is a debt collector. However, given the increasingly expensive view of the FDCPA taken by the courts, this may be an area of future litigation, and so trustees may be well advised to examine whether their practices are in accordance with the requirements of the FDCPA.

Often, if not in the majority of cases, the trustee handling a non-judicial foreclosure is substituted onto the deed of trust after the loan falls into default. In a sense, the trustee is analogous to the mortgage servicer who obtains a loan in default. The trustee might be considered by a court at least for some of its activities, as a debt collector for purposes of the FDCPA.

The FDCPA falls under the purview of the Federal Trade Commission (FTC). The FTC has promulgated Statements of General Policy and Staff Commentary on the FDCPA. In part of this commentary and particularly in other FTC staff interpretations, the FTC has stated that legally required communications to debtors in connection with judicial or non-judicial foreclosures are not “communications” within the meaning of the FDCPA. In particular, the interpretations by the FTC state that the preparation or non-judicial foreclosure notices are not debt collection activities under the Act.

Although the FTC’s comments may appear comforting to trustees, relying on the FTC’s comments may be a mistake. For instance, the FTC had taken a clear position that lawyers whose practice is limited to legal activities, are not subject to the FDCPA. The United States Supreme Court noted the FTC’s position recently in the Heintz case and specifically rejected it noting that the commentary is not binding on the FTC or the public, and the FTC’s interpretations did not properly express congressional intent as stated in the statute. Even if a court ultimately did determine that legally required communications, such as the notices of default, are not subject to the FDCPA, practically any other communications between the trustee and borrower might be covered.

Once subject to the FDCPA, a debt collector has several responsibilities and restrictions. In particular, the debt collector must give a so called “Miranda Warning” in every communication with the debtor. The warning must disclose clearly to the debtor that, “the debt collector is attempting to collect the debt,” and, “any information obtained will be used for that purpose.”

In addition to the Miranda Warning, there are general rules about communications.For instance, unless otherwise informed, the debt collector should assume that it is inconvenient to contact the debtor between the hours of 9:00 p.m. and 8:00 a.m. local time. Also, if the debt collector knows the name of the debtor’s attorney or can readily obtain his name and address, the creditor must communicate only with the attorney, and address all communications only to the attorney, unless the attorney fails to respond within a reasonable period of time or consents to direct communication with the debtor. In addition, the debtor may not be contacted at his place of employment if the debt collector knows or has reason to know that the debtor’s employer prohibits the debtor from receiving such communication. There are also a number of types of communications that are considered misleading.

The FDCPA also requires that a statement be included in the initial communication with the debtor (or within 5 days of the initial communication), providing the debtor with written notice containing the following:

• the amount of the debt;
• the name of the creditor to whom the debt is owed;
• the statement that, unless the consumer, within thirty (30) days after the receipt of the notice disputes the validity of the debt or any portion there of, the debt will be assumed to be valid by the debt collector;
• the statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt or any portion there of is disputed, the debt collector will obtain a verification of the debt or a copy of the judgment will be mailed to the consumer by the debt collector;
• a statement that upon the consumer’s written request within the thirty day period, a debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor

Violations of the FDCPA can be severely punished. The consumer has the right to bring its own lawsuit. If the debt collector is in violation of the FDCPA, he/she may be held liable for: (1) any actual damages sustained by the consumer (including damages for mental distress, loss of employment, etc.), and, (2) such additional damages as the court may allow, but not exceeding $ 1,000.

In the case of the class action, the court may award up to $500,000 or one percent of the debt collector’s net worth, whichever is less. The statute of limitations for bringing an action under the FDCPA is one year. Because a class action award could be a significant cost to a violating debt collector, the statute does have some punitive aspects. In short, because of the continually expansive view of the coverage of the FDCPA, trustees are well advised to consult with their own courts and determine whether they should implement comprehensive practices and procedures to comply with the Fair Debt Collection Practices Act.

The Devil’s in the Details – Foreclosure

By Numerian Posted by Michael Collins

It seems, therefore, that millions of foreclosures that have occurred in the past two years may be invalid. Investors who were part of the $8,000 tax credit program may not have valid mortgages and may not legally have the right to live in their home. Title insurance companies have stopped accepting mortgage titles from GMAC and other financial firms implicated in this situation. Numerian

What appeared at first to be an isolated problem with home mortgage foreclosures at GMAC has morphed into a serious conundrum for just about everyone involved in the residential home market: homeowners, banks, mortgage servicers, investors, and even the US government. The problem goes beyond finding which lender has legal title to a home, and therefore the right to foreclose on a defaulted mortgage. The problem has become how to prepare for a possible behavioral change among homeowners, if more than a small percentage of them decide to stop paying on their mortgage. (Image)

Strategic Defaults are Already On the Rise

What would motivate a homeowner to stop paying their mortgage principal and interest? So far, severe financial problems, combined with a drastic fall in house prices, have been the main causes of most mortgage defaults by homeowners. When the value of the house falls below the mortgage balance due, homeowners are even more liable to default on their loan, and the greater this difference (referred to as the homeowner being “underwater”), the more likely it is that a strategic default will take place. This is an industry term for defaults that occur even though the borrower has the financial means to continue paying down the mortgage.

Strategic defaults are a rational decision by the homeowner, who believes the value of the home is so far below the mortgage balance that it would take years for market values to catch up. Why pay off a loan on a depreciating asset, especially if the homeowner can rent the same size home for much less than their mortgage payment? Depending on the location, strategic defaults represent from 10% – 20% of all defaults. There is also more of a tendency for owners of expensive homes to strategically default than owners of average size homes, so strategic defaults are of serious concern to the banking industry.

The initial reaction of banks to the rising level of mortgage defaults was to foreclose and dispose of the property as soon as possible. When home values were in a free-fall up to the summer of 2009, the banking industry frenetically processed tens of thousands of foreclosures each month, evicting homeowners in every metropolitan area across the US. This process slowed down last year for two reasons. First, the federal government imposed a moratorium on foreclosures, and second, the banks were achieving less and less on foreclosed homes. In previous recessions, banks could recover around 40% of the value of the outstanding mortgage from a foreclosure and bank sale of the property. Today the recovery rate has fallen to an unprecedented low of 5% of the loan value, which is hardly worth the expense, time, and trouble of foreclosing on the property.

You would think, therefore, that banks would be eager to work out a deal with the homeowner, lowering their mortgage balance to some level that meets the financial capabilities of the borrower. This isn’t happening either. To do this, the bank would still have to declare a loss on its books, and even the biggest banks don’t have enough capital to do this on a wholesale scale. Another factor is that the banks may only own a small portion of the mortgage, the rest being sold off to investors in a mortgage-backed security deal. These investors would have to consent to taking a loss as well, and this is almost impossible to arrange.

Where is the Title to the Home?

Now comes a third problem. The GMAC revelations showed that this mortgage company has been foreclosing on thousands of properties each month, filing incomplete or possibly fraudulent documents with the court approving the foreclosures. The process of foreclosing on a home mortgage is complex and governed by both federal and state laws, but in any event the process requires that someone working for the foreclosing bank assert in writing that they are personally familiar with all the documents submitted, and that these documents are accurate. GMAC has not been meeting this standard. A middle level executive has been signing over 10,000 foreclosure documents for GMAC each month and could not possibly have “personal knowledge” of the details of each foreclosure.

It gets worse. GMAC has been asserting that it is in possession of the lien representing the mortgage, and much more importantly – it is also in possession of the title to the home. It is the title which is of far more importance here, because without clear title a bank has no foreclosure rights. GMAC has been going in front of courts all over the US claiming it holds title to the property in question, when in fact the person making this claim has no personal knowledge of the documents, and GMAC cannot in many cases produce the title.

Who has the title? GMAC may have lost it within its own files, or may have passed the title on to a mortgage servicer when the mortgage was sold off to investors. The mortgage servicer may have sold the title to another servicer, or to a clearing house that supposedly was protecting the legal rights of the lenders and investors in mortgage securities. As the mortgage market became frenzied at the height of the bubble, the financial industry became very sloppy about documentation and is now having serious trouble producing the necessary documents to proceed with a foreclosure.

Quite a few real estate lawyers believe that what GMAC did, whether through sloppiness or deliberately, constitutes a fraud upon the court, which is subject to criminal penalties. GMAC has halted all foreclosures until it straightens out the document mess, but there is increasing suspicion in the mortgage market that these problems are not going to be solved in just a month or two, if at all. JP Morgan Chase has admitted that it too has a middle level executive who was submitting personal attestations to the foreclosure courts, when she could not possibly have known the facts behind each mortgage. Chase is probably in very good company with Citigroup, Bank of America, and Wells Fargo, all of which are likely to have similar processing problems.

It seems, therefore, that millions of foreclosures that have occurred in the past two years may be invalid. Investors who were part of the $8,000 tax credit program may not have valid mortgages and may not legally have the right to live in their home. Title insurance companies have stopped accepting mortgage titles from GMAC and other financial firms implicated in this situation.

Foreclosure Market is Coming to a Halt

The foreclosure market in the US is slowly grinding to a halt, with all this uncertainty about past and future mortgage rights, and with banks now recovering only 5% of the mortgage value in a forced sale. Professionals in the market are now speculating that the federal government may be forced to outlaw all home foreclosures, since there is so much doubt on whether banks have any legal right to foreclose on residential property. If this were to happen, the market mechanism essential to clearing defaulted properties from the market would cease to exist. Lost too would be the process known as price discovery, wherein neighboring properties can be appraised, making it much harder for any homeowner wishing to sell to do so. Not only is the foreclosure market subject to a freeze, but the entire home resale market could be crippled as well.

In fact, there may be yet another incentive for homeowners to strategically default, if theoretically the defaulter could live in the home free of charge should the party holding the mortgage be unable to produce the title. Already there are thousands of homeowners in the US who are living “rent free”, so to speak, while they wait for the bank to foreclose or for the courts to honor a bank’s foreclosure claim. These people are socking away tens of thousands of dollars in savings, or spending it for that matter, while the disposition of their property is in limbo. Even when the bank is finally able to proceed with the foreclosure, they are not suing the homeowner for back principal and interest due, in part because the delay may have been caused by the bank itself, and in part because some states do not allow banks to go after other homeowner assets once a default occurs.

As the months go by, the difference between a homeowner living rent free in their home, and de facto owning the home free and clear through a form of squatters rights, is becoming very gray. This is not going to sit well with the people who continue to pay down their mortgage even if they are underwater, nor will it sit well with those who paid off their mortgage. Good financial stewardship, a virtue in the past, is looking more and more like foolhardiness. There is both a legal and social breakdown that is occurring here, upending over a century of contract law and prudent behavior that underlay the housing market.

If strategic defaults spread in part because of this new uncertainty over foreclosure and who has the title to the home, the banks and the mortgage backed securities market would be put in a dreadful position. The day in and day out cash flow expected from millions of mortgage principal and interest payments would be impacted far more than it is already, with the banks unable to access their collateral to stanch the bleeding. Insolvencies among the banks and the investors holding mortgage securities would certainly rise.

The Federal Government is Ultimately Going to Own this Problem

How bad this could get is anyone’s guess, but continued deterioration will inevitably drag in the US government, which owns both Fannie Mae and Freddie Mac, by far the biggest issuers and guarantors of mortgage backed securities. The federal government also has an ownership stake in Citigroup and is sitting on billions of dollars of mortgage securities bought from all the big banks and from failing institutions like Bear Stearns. If the largest US banks are pushed into technical insolvency because of this problem, the federal government would inevitably own them too.

What is currently a legal problem could turn into a behavioral problem affecting the entire mortgage market, which in turn creates a massive political problem for the federal government. It is the behavioral problem which has to be of most concern for the government, because if people who could pay their mortgage decide it is uneconomic or unfair for them to do so, the relationship between borrower and lender is broken. Currently it is slightly fractured, and the government as well as industry leaders will do everything possible to downplay this situation, characterizing it as a technical matter that will be easily and quickly cleared up.

So far, though, the courts aren’t buying the quick fixes being proposed by the industry. The foreclosure laws that have arisen over the past 100 years are designed to protect the homeowner from hasty and incomplete processes, and as well from fraudulent foreclosures. The courts are saying that the banking industry not only was hasty and reckless in its mortgage securitization process, but that homeowner rights are being trampled upon, and the courts themselves are being defrauded along with the homeowners. More and more judges across the country are coming to this conclusion, and if they believe the rule of law has been seriously undermined in the mortgage market, why should any homeowner feel a moral or legal compulsion to continue to pay down their mortgage?

Duty to Maximize Net Present Value Owed to All Parties 2923.6.

2923.6.  (a) The Legislature finds and declares that any duty
servicers may have to maximize net present value under their pooling and servicing agreements is
owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to
any particular party in the loan pool or investor under a polling and servicing agreement, and that a
servicer acts in the best interests of all parties to the loan pool or investors in the pooling and
servicing agreement if it agrees to or implements a loan modification or workout plan for which both of
the following apply:
(1) The loan is in payment default, or payment default is
reasonably foreseeable.
(2) Anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery
through foreclosure on a net present value basis.
(b) It is the intent of the Legislature that the mortgagee,
beneficiary, or authorized agent offer the borrower a loan
modification or workout plan if such a modification or plan is
consistent with its contractual or other authority.
(c) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends that date.

The Pretender Lender says they do loan Mods but they don’t

Notice of Sale – Additional 90 Days
2923.52.  (a) Notwithstanding paragraph (3) of subdivision (a) of
Section 2924, a mortgagee, trustee, or other person authorized to take sale shall not give notice of sale
until at least 90 days after the lapse of three months as set forth in paragraph (2) of
subdivision (a) of Section 2924, in order to allow the parties to
pursue a loan modification to prevent foreclosure, if all of the
following conditions exist:
(1) The loan was recorded during the period of January 1, 2003, to January 1, 2008, inclusive, and is
secured by residential real property.
(2) The loan at issue is the first mortgage or deed of trust that
the property secures.
(3) The borrower occupied the property as the borrower’s principal residence at the time the loan
became delinquent.
(4) The notice of default has been recorded on the property.
(b) This section does not apply to loans serviced by a mortgage loan servicer if that mortgage loan
servicer has obtained a temporary or final order of exemption pursuant to Section 2923.53 that is
current and valid at the time the notice of sale is given.
(c) This section does not apply to loans made, purchased, or
serviced by:
(1) A California state or local public housing agency or
authority, including state or local housing finance agencies
established under Division 31 (commencing with Section 50000) of the Health and Safety Code and
Chapter 6 (commencing with Section 980) of Division 4 of the Military and Veterans Code.
(2) Loans that are collateral for securities purchased by an
agency or authority described in paragraph (1).
(d) This section shall become operative 14 days after the issuance of regulations, which shall include
the form of the application for mortgage loan servicers, by the commissioner pursuant to subdivision
(d) of Section 2923.53.(e) This section shall remain in effect only until January 1, 2011, and as of that
date is repealed, unless a later enacted statute, that is enacted before January 1, 2011, deletes or
extends that date.

Pre-Foreclosure – Required Notice and Duty to Confer with Borrower –

Pre-Foreclosure – Required Notice and Duty to Confer with Borrower –
2923.5.
(a) (1) A mortgagee, trustee, beneficiary, or authorized
agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made
as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in
subdivision (g).
(2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone
in order to assess the borrower’s financial situation and explore options for the borrower to avoid
foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the
borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee,
beneficiary, or authorized agent shall schedule the
meeting to occur within 14 days. The assessment of the borrower’s financial situation and discussion
of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose.
In either case, the borrower shall be provided the toll-free telephone number made available by the
United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing
counseling agency. Any meeting may occur telephonically.
(b) A notice of default filed pursuant to Section 2924 shall
include a declaration that the mortgagee, beneficiary, or authorized agent has contacted the borrower,
has tried with due diligence to contact the borrower as required by this section, or that no contact was
required pursuant to subdivision (h).
(c) If a mortgagee, trustee, beneficiary, or authorized agent had already filed the notice of default prior to
the enactment of this section and did not subsequently file a notice of rescission, then the mortgagee,
trustee, beneficiary, or authorized agent shall, as part of the notice of sale filed pursuant to Section
2924f, include a declaration that either:
(1) States that the borrower was contacted to assess the borrower’s financial situation and to explore
options for the borrower to avoid foreclosure.
(2) Lists the efforts made, if any, to contact the borrower in the
event no contact was made.
(d) A mortgagee’s, beneficiary’s, or authorized agent’s loss
mitigation personnel may participate by telephone during any contact required by this section.
(e) For purposes of this section, a “borrower” shall include a
mortgagor or trustor.
(f) A borrower may designate, with consent given in writing, a
HUD-certified housing counseling agency, attorney, or other advisor to discuss with the mortgagee,
beneficiary, or authorized agent, on the borrower’s behalf, the borrowers financial situation and options
for the borrower to avoid foreclosure. That contact made at the direction of the borrower shall satisfy
the contact requirements of paragraph (2) of subdivision (a). Any loan modification or workout plan
offered at the meeting by the mortgagee, beneficiary, or authorized agent is subject to approval by the
borrower.
(g) A notice of default may be filed pursuant to Section 2924 when a mortgagee, beneficiary, or
authorized agent has not contacted a borrower as required by paragraph (2) of subdivision (a) provided
that the failure to contact the borrower occurred despite the due diligence of the mortgagee,
beneficiary, or authorized agent. For purposes of this section, “due diligence” shall require and mean
all of the following:
(1) A mortgagee, beneficiary, or authorized agent shall first
attempt to contact a borrower by sending a first-class letter that
includes the toll-free telephone number made available by HUD to find a HUD-certified housing
counseling agency.
(2) (A) After the letter has been sent, the mortgagee,
beneficiary, or authorized agent shall attempt to contact the
borrower by telephone at least three times at different hours and on different days. Telephone calls
shall be made to the primary telephone number on file.
(B) A mortgagee, beneficiary, or authorized agent may attempt to contact a borrower using an automated
system to dial borrowers, provided that, if the telephone call is answered, the call is connected to a
live representative of the mortgagee, beneficiary, or authorized agent.
(C) A mortgagee, beneficiary, or authorized agent satisfies the
telephone contact requirements of this paragraph if it determines, after attempting contact pursuant to
this paragraph, that the borrower’s primary telephone number and secondary telephone number or
numbers on file, if any, have been disconnected.
(3) If the borrower does not respond within two weeks after the telephone call requirements of
paragraph (2) have been satisfied, the mortgagee, beneficiary, or authorized agent shall then send a
certified letter, with return receipt requested.
(4) The mortgagee, beneficiary, or authorized agent shall provide a means for the borrower to contact it
in a timely manner, including a toll-free telephone number that will provide access to a live
representative during business hours.
(5) The mortgagee, beneficiary, or authorized agent has posted a prominent link on the homepage of its
Internet Web site, if any, to the following information:
(A) Options that may be available to borrowers who are unable to afford their mortgage payments and
who wish to avoid foreclosure, and instructions to borrowers advising them on steps to take to explore
those options.
(B) A list of financial documents borrowers should collect and be prepared to present to the mortgagee,
beneficiary, or authorized agent when discussing options for avoiding foreclosure.
(C) A toll-free telephone number for borrowers who wish to discuss options for avoiding foreclosure
with their mortgagee, beneficiary, or authorized agent.
(D) The toll-free telephone number made available by HUD to find a HUD-certified housing counseling
agency.
(h) Subdivisions (a), (c), and (g) shall not apply if any of the
following occurs:
(1) The borrower has surrendered the property as evidenced by either a letter confirming the surrender
or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent.
(2) The borrower has contracted with an organization, person, or entity whose primary business is
advising people who have decided to leave their homes on how to extend the foreclosure process and
avoid their contractual obligations to mortgagees or beneficiaries.
(3) A case has been filed by the borrower under Chapter 7, 11, 12, or 13 of Title 11 of the United States
Code and the bankruptcy court has not entered an order closing or dismissing the bankruptcy case, or
granting relief from a stay of foreclosure.
(i) This section shall apply only to mortgages or deeds of trust
recorded from January 1, 2003, to December 31, 2007, inclusive, that are secured by owner-occupied
residential real property containing no more than four dwelling units. For purposes of this subdivision,
“owner-occupied” means that the residence is the principal residence of the borrower as indicated to
the lender in loan documents.
(j) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends that date.

Mortgage Broker duty defined

Broker’s Duty to Borrower
2923.1.
(a) A mortgage broker providing mortgage brokerage services to a borrower is the fiduciary of the
borrower, and any violation of the broker’s fiduciary duties shall be a violation of the mortgage broker’s
license law. This fiduciary duty includes a requirement that the mortgage broker place the economic
interest of the borrower ahead of his or her own economic interest. A mortgage broker who provides
mortgage brokerage services to the borrower owes this fiduciary duty to the borrower regardless of
whether the mortgage broker is acting as an agent for any other party in connection with the residential
mortgage loan transaction.
(b) For purposes of this section, the following definitions apply:
(1) “Licensed person” means a real estate broker licensed under the Real Estate Law (Part 1
(commencing with Section 10000) of Division 4 of the Business and Professions Code), a finance
lender or broker licensed under the California Finance Lenders Law (Division 9 (commencing with
Section 22000) of the Financial Code), a residential mortgage lender licensed under the California
Residential Mortgage Lending Act (Division 20 (commencing with Section 50000) of the Financial
Code), a commercial or industrial bank organized under the Banking Law (Division 1 (commencing with
Section 99) of the Financial Code), a savings association organized under the Savings Association
Law (Division 2 (commencing with Section 5000) of the Financial Code), and a credit union organized
under the California Credit Union Law (Division 5 (commencing with Section 14000) of the Financial
Code).
(2) “Mortgage broker” means a licensed person who provides
mortgage brokerage services. For purposes of this section, a licensed person who makes a residential
mortgage loan is a “mortgage broker,”and subject to the requirements of this section applicable to
mortgage brokers, only with respect to transactions in which the
licensed person provides mortgage brokerage services.
(3) “Mortgage brokerage services” means arranging or attempting to arrange, as exclusive agent for
the borrower or as dual agent for the borrower and lender, for compensation or in expectation of
compensation, paid directly or indirectly, a residential mortgage loan made by an unaffiliated third party.
(4) “Residential mortgage loan” means a consumer credit
transaction that is secured by residential real property that is
improved by four or fewer residential units.
(c) The duties set forth in this section shall not be construed to limit or narrow any other fiduciary duty of
a mortgage broker.

Trust Deed/Mortgage defined

“Mortgage” Defined
2920.  (a) A mortgage is a contract by which specific property,
including an estate for years in real property, is hypothecated for the performance of an act, without the
necessity of a change of possession.
(b) For purposes of Sections 2924 to 2924h, inclusive, “mortgage” also means any security device or
instrument, other than a deed of trust, that confers a power of sale affecting real property or an estate
for years therein, to be exercised after breach of the obligation so secured, including a real property
sales contract, as defined in Section 2985, which contains such a provision.

Property in possession of adverse claimant
2921.  A mortgage may be created upon property held adversely to the mortgagor.

Writing-Formalities
2922.  A mortgage can be created, renewed, or extended, only by writing, executed with the formalities
required in the case of a grant of real property.

Lien-Special-Possession
2923.
The lien of a mortgage is special, unless otherwise expressly agreed, and is independent of
possession.

A TAKING OF PROPERTY WOULD BE OTHERWISE UNCONSTITUTIONAL

Defective Procedure

The trustee’s failure to comply with the statutorily mandated procedures for a foreclosure sale is an important basis for attacking the foreclosure sale. The trustor bears the onus of establishing the impropriety of the sale, for a foreclosure is presumed to be conducted regularly and fairly in the absence of any contrary evidence Stevens v. Plumas Eureka Annex Min. Co. (1935) 2 Cal.2d 493, 497; 41 P.2d 927; Sain v. Silvestre (1978) 78 Cal.App.3d 461, 471 n. 10; 144 Cal.Rptr. 478; Hohn v. Riverside County Flood Control & Wat. Conserv. Dist. (1964) 228 Cal.App.2d 605, 612; 39 Cal.Rptr. 647; Brown v. Busch (1957) 152 Cal.App.2d 200, 204; 313 P.2d 19.] The presumption can be rebutted by contrary evidence [See, e.g., Wolfe v. Lipsv (1985) 163 Cal.App.3d 633,639; 209 Cal.Rptr. 801] and the courts will carefully scrutinize the proceedings to assure that the trustor’s rights were not violated. [See e.g., System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d 137, 153; Stirton v. Pastor (1960) 177 Cal.App.2d 232, 234; 2 Cal.Rptr. 135; Brown v. Busch, supra, 152 Cal.App.2d 200, 203-04; Pierson v. Fischer (1955) 131 Cal.App.2d 208, 214; 280 P.2d 491; Pv v. Pleitner, supra, 70 Cal.App.2d 576, 579.]

a.  Defective Notice of Default

A foreclosure may not be predicated on a notice of default which fails to comply strictly with legal requirements: “. . . a trustee’s sale based on a statutorily deficient notice of default is invalid.” With the enactment of The California Foreclosure prevention act Civil coded 2924 and 2923.5 and 2923.6 the recent decision in Mabury  the requirements are to be strictly complied with”  Miller v. Cote (1982) 127 Cal.App.3d 888, 894; see System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d 137, 152-53; Lockwood v. Sheedy. supra, 157 Cal.App.2d 741, 742.] Defective service of the notice of default will also invalidate the sale procedure. [See discussion in Chapter II, supra, “Adequacy of Notice to Trustor.]

b.  Defective Notice of Sale

Some cases hold that a sale held without proper notice of sale is void. [See Scott v. Security Title Ins. & Guar. Co. (1937) 9 Cal.2d 606, 613; 72 P.2d 143; United Bank & Trust Co. v. Brown (1928) 203 Cal. 359; 264 P. 482; Standlev v. Knapp (1931) 113 Cal.App. 91, 100-02; 298 P. 109; Seccombe v. Roe (1913) 22 Cal.App. 139, 142-43; 133 P. 507; see also discussion in Chapter II B 4 supra, “Giving the Notice of Sale”.] However, if a trustee’s deed has been issued that states a conclusive presumption that all notice requirements have been satisfied, the sale is voidable and may be vacated if the trustor proves that the conclusive presumption does not apply and that notice was defective. The conclusive presumption may not apply if there are equitable grounds for relief such as fraud or if the purchaser is not a bona fide purchaser for value. [See Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1359; 233 Cal.Rptr. 923;

Moreover, a serious notice defect that was directly prejudicial to the rights of parties who justifiably relied on notice procedures may independently justify setting aside a sale, especially if the trustee’s deed has not been issued and the highest bidder’s consideration has been returned. [See Little v. CFS Service Corp., supra. 188 Cal.App.3d 1354, 1360-61.]

c.  Improper Conduct of Sale

As discussed above, the trustee must strictly follow the statutes and the terms of the deed of trust in selling the property. [See discussion in Chapter II B, supra, “Nonjudicial Foreclosure”.] For example, the Court of Appeal has declared that:

The power of sale under a deed of trust will be strictly construed, and in its execution the trustee must act in good faith and strictly follow the requirements of the deed with respect to the manner of sale. The sale will be scrutinized by courts with great care and will not be sustained unless conducted with all fairness, regularity and scrupulous integrity …. Pierson v. Fischer, supra, 131 Cal.App.2d 208, 214.

Postponements

One of the major problems occurring at sales involves postponements: the trustee may fail to postpone a sale when the trustor needs a postponement or the trustee may unnecessarily postpone the sale and thereby discourage the participation of bidders. Current law expressly gives the trustee discretion to postpone the sale upon the written request of the trustor for the purpose of obtaining cash sufficient to satisfy the obligation or bid at the sale. [Civ. Code § 2924g(c) (1). ] There are no limitations on the number of times the trustee may postpone the sale to enable the trustor to obtain cash. The trustor is entitled to one such requested postponement, and any postponement for this reason cannot exceed one business day. (Id.) Failure to grant this postponement will invalidate the sale. [See discussion in Chapter II B 7, supra, “Conduct of the Foreclosure Sale”.] However, the trustee is under no general obligation to postpone the sale to enable the trustor to obtain funds, particularly when the trustor receives the notices of default and sale and has months to raise the money. [See Oiler v. Sonoma County Land Title Co. (1955) 137 Cal.App.2d 633, 634-35; 290 P.2d 880.] In addition, the trustee’s duty to exercise its discretion to favor the trustor is tempered by the trustee’s duty to the beneficiary; thus, for example, the trustee may be more obliged to postpone the sale at the trustor’s request if only the beneficiary appears at the sale

to bid than if other bidders appear who are qualified to bid enough to satisfy the unpaid debt.

The foreclosure sale may also have to be postponed if there is an agreement between the beneficiary and the trustor for a postponement. An agreement to postpone a trustee’s sale is deemed an alteration of the terms of the deed of trust and is enforceable only if it assumes the form of a written agreement or an executed oral agreement. [See Civ. Code § 1698; Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 121; 92 Cal.Rptr. 851; Stafford v. Clinard (1948) 87 Cal.App.2d 480, 481; 197 P.2d 84.] Thus, a gratuitous oral promise generally is insufficient to support an agreement to continue the sale; however, if the oral agreement is predicated on a promissory estoppel or if the trustor fully performs the trustor’s consideration for the oral agreement, the trustor may enforce the beneficiary’s oral promise to postpone. Raedeke v. Gilbraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665; 111 Cal.Rptr. 693.] In Raedeke, the trustor could obtain a responsible purchaser for the property, and the beneficiary agreed. The trustor obtained the purchaser, but the beneficiary foreclosed. The Supreme Court held that the trustor fully performed its promise — to procure a buyer — which was good consideration for the agreement to postpone and that the beneficiary’s breach entitled the trustor to damages for the wrongful foreclosure.

Although the failure to postpone may be a problem, the trustee’s improper granting of postponements is generally a far greater problem. Notice of a postponement must be given “by public declaration” at the time and place “last appointed for sale,” and no other notice need be supplied. [Civ. Code § 2924g(d).] Therefore, any prospective bidder will have to attend each appointed time for sale to discover whether the sale will occur or be postponed. As a result, prospective bidders will be discouraged from participating in a sale involving numerous postponements, and there will be less chance that an active auction will occur which will generate surplus funds to which the trustor may be entitled. [Cf. Block v. Tobin (1975) 45 Cal.App.3d 214; 119 Cal.Rptr. 288.]

The abuse of the postponement procedure prompted the Legislature to curb the trustee’s ability to make discretionary postponements. The trustee may make only three postponements at its discretion or at the beneficiary’s direction without re­commencing the entire notice procedure prescribed in Civ. Code § 2924f. [Civ. Code § 2924g(c)(1).] In addition, the trustee must publicly announce the reason for every postponement and must maintain records of each postponement and the reason for it. [Civ. Code § 2924g(d).]

A lawyer representing a client whose home has been sold at a foreclosure sale involving discretionary or beneficiary directed

postponements should, at the first opportunity for discovery, obtain production of the foreclosure file and any documents relating to it, and any documents relating to the postponement and reasons for it, including the statutorily mandated record concerning the postponement, as well as any notes, telephone messages, logs, or calendar entries relating to the postponement. In addition, the lawyer should quickly discover who attended the sale to determine whether the reason for the postponement was given “by public declaration” and, if so, whether the same reason is indicated for the postponement in the record maintained by the trustee.

The failure to postpone properly should invalidate the sale. Certainly, a sale held without any public announcement of the date, time, and place to which the sale has been postponed is invalid. [See Holland v. Pendelton Mortgage Co. (1943) 61 Cal.App.2d 570, 573-74; 143 P.2d 493.] The cases upholding sales made on postponed dates are based on the trustee’s compliance with the notice of postponement requirements prescribed by statute or contained in the trust deed. [See e.g., Cobb v. California Bank (1946) 6 Cal.2d 389, 390; 57 P.2d 924; Craig v. Buckley (1933) 218 Cal. 78, 80-81; 21 P.2d 430; Alameda County Home Inv. Co. v. Whitaker (1933) 217 Cal. 231, 234-35; 18 P.2d 662.] Since the trustee sale must be conducted in strict compliance with the notice requirements, a notice of postponement which does not contain a statement of the

reason for the postponement is defective.  Any sale held pursuant to the defective notice may be held to be improper.

Moreover, the records relating to the postponement may reveal that the postponement was unnecessary or may lead to evidence establishing that the postponement was made in bad faith. As discussed above, fraud, unfairness, and irregularity in the conduct of the sale should render the sale invalid.

TREBEL THE DAMAGES AND OFFSET THE DEBT

These pretender lenders are not banks and are thereby subject to usury law when you add all the undisclosed profits and appraisal fraud is easy to see that the interest exceeds 10% and this could be offset as against the loan.The trustor also may offset against the amount claimed by the beneficiary any amount due the trustor from the beneficiary. [See Hauger v. Gates (1954) 42 Cal.2d 752, 755; 249 P.2d 609; Richmond v. Lattin (1883) 64 Cal. 273; 30 P. 818; Goodwin v. Alston (1955) 130 Cal.App.2d 664, 669; 280 P.2d 34; Cohen v. Bonnell (1936) 14 Cal.App.2d 38; 57 P.2d 1326; Zarillo v. Le Mesnacer (1921) 51 Cal.App. 442; 1196 P.902 (damages for conversion offset against debt secured by chattel mortgage); Williams v. Pratt (1909) 10 Cal.App. 625, 632; 103 P. 151.]  In Goodwin, supra, the mortgagor established that the mortgagee charged usurious interest, and the penalty of the trebled interest payments along with other amounts were setoff against the mortgage debt. As a result, the debt was effectively satisfied, the mortgage was thereby extinguished and no foreclosure was permitted, and the mortgagee was held liable to the mortgagor for damages.  (See 130 Cal.App.2d at 668-69.)

The Supreme Court made clear in Hauaer, supra, that the trustor, in the context of the nonjudicial foreclosure of a deed of trust, could use the right of setoff. [See 42 Cal.2d at 755.] Normally, setoff is employed defensively through an affirmative defense or cross-complaint (or formerly counterclaim) in response to an action for money. The court in Hauaer, however, saw no distinction between the right of setoff held by a trustor defending a foreclosure action or by a trustor affirmatively attacking a nonjudicial foreclosure proceeding. (Id. at 755-56.) Accordingly, the Supreme Court held that the trustor, as plaintiff, could establish the impropriety of a foreclosure by showing that the trustor was not in default on his obligation since the obligation was offset by an obligation which the beneficiary owed to him. (Id. at 753, 755.) The court further held that the trustor did not have to bring an independent action to establish the setoff. (Id. at 755.) Moreover, the court declared that unliquidated as well as liquidated amounts could be setoff; thus, the court allowed the trustor to setoff an unliquidated claim for damages for breach of contract.

Hauaer and the other cases cited above are based on former Code of Civ. Proc. § 440 which has been superseded by Code of Civ. Proc. § 431.70. The rule of these cases should not be altered because the new section appears broader than the old. Furthermore, the Legislative Committee Comment to section 431.70 not only states that the new section continues the substantive effect of section 440 but also approvingly cites Hauaer.

The right of setoff has substantial significance in contesting the validity of any foreclosure since the trustor may establish that no default occurred or, indeed, no indebtedness exists because of an offsetting amount owed by the beneficiary to the trustor. As discussed above, this offset may be a liquidated or an unliquidated claim. In addition, the claim which the trustor may wish to offset may be barred by the statute of limitations at the time of the foreclosure, but as long as the trustor’s claim and the beneficiary’s claim coexisted at any time when neither claim was barred, the claims are deemed to have been offset. [See Code of Civ. Proc. § 431.70.] The theory is that the competing claims which coexisted when both were enforceable were offset to the extent they equaled each other without the need to bring an action on the claims. Therefore, since the offsetting claim is deemed satisfied to the extent it equaled the other claim, there was no

existing claim against which the statute of limitation operates. See Jones v. Mortimer (1946) 28 Cal.2d 627, 632-33; 170 P.2d 893; Singer Co. v. County of Kings (1975) 46 Cal.App.3d 852, 869; 121 Cal.Rptr. 398; see also Hauger v. Gates, supra, 42 Cal.2d 752, 755.]

The right of setoff not only gives the trustor the ability to setoff liquidated and unliquidated claims for money paid or for damages, but also permits setoffs for statutory penalties to which the trustor may be entitled because of the beneficiary’s violation of the law. In Goodwin v. Alston, supra, 130 Cal.App.2d 664 the debtor in a foreclosure action offset his obligation against the treble damages awarded to him for the creditor’s usury violations. Similarly, the penalty for violating the federal Truth in Lending Act — twice the amount of the finance charge but not less than $100 or more than $1,000 [15 U.S.C. § 1640(a)(2)(A)(i)] — may be offset against the obligation owed the creditor.-‘ [See 15 U.S.C. § 1640(h); Reliable Credit Service, Inc. v. Bernard (La.App. 1976) 339 So.2d 952, 954, cert, den. 341 So.2d 1129, cert, den. 342 So.2d 215; Martin v. Body (Tex.Civ.App. 1976) 533 S.W.2d 461, 467-68].

Although Truth in Lending penalties may be offset against the creditor’s claim, the debtor may not unilaterally deduct the penalty; rather, the offset must be raised in a judicial proceeding, and the offset’s validity must be adjudicated.  [15 U.S.C. § 1640(h); see e.g., Pacific Concrete Fed. Credit Union v. Kauanoe (Haw. 1980) 614 P.2d 936, 942-43; Lincoln First Bank of Rochester v. Rupert (App.Div. 1977) 400 N.Y.S. 618, 621.]

Although no cases have authorized the trustor’s offset of punitive damages against the obligation owed, no reason appears to prevent the offset of punitive damages. Normally, if punitive damages were appropriate, sufficient fraud, oppression, or other misconduct would be established to vitiate the entire transaction. But even if the transaction were rescinded, the injured trustor likely would be required to return any consideration given by the offending beneficiary. The trustor almost always will have spent the money, usually to satisfy another creditor or to purchase goods or services which cannot be returned for near full value. A punitive damage offset may reduce or eliminate the trustor’s obligation to restore consideration paid in a fraudulent, oppressive, or similarly infirm transaction.

Trial Mods or forbearance agreements may be a waiver of Foreclosure

Trial Mods or forbearance agreements may be a waiver of Foreclosure

Waiver or Estoppel to Claim Payment or Default

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

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

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