From: Charles Cox [mailto:firstname.lastname@example.org]
Sent: Friday, June 29, 2012 5:10 AM
To: Charles Cox
Subject: MERS’ Owners Offer Bogus Title Certification
WE’VE GOT THEM ON THE RUN
Banks and servicers concede that title is probably not going their way in the courts
Editor’s Notes (from Neil Garfield):
SECURITIZATION SCAM REACHES NEW HIEGHTS IN DOCUMENT FABRICATION
In a bold move to head off obviously correct arguments about the lack of authenticity of title or authority to pursue fake foreclosures, the banks and services and title companies have come up with a new product: A Title Guarantee Certificate and Policy, that on its face will get Judges, lawyers and even homeowners thinking they were wrong to challenge the chain of ownership and that the foreclosure is legitimate. This gives cover to the investment bank who can now pitch bad loans over the fence onto investors who were explicitly and expressly protected from risks associated with bad or shaky loans.
Taken straight out of the pages of the con man’s playbook, the banks and servicers have come up with another fabricated piece of paper to waive in front of ignorant judges to prove that the chain of title "is what it is." This ignores the basic rule of evidence that while the title report and policy may be admitted into evidence they are not admitted (if the lawyer does his job) as to what is contained in them — nor, more importantly are they proof of title. But the newly minted "Foreclosure Title Guarantee Certificate and Policy" issued by 1st American title is probably going to shift the burden of persuasion over to the borrower at least temporarily. The only remedy for the homeowner is to file for discovery an convince the judge that you are entitled to full, complete, and accurate answers.
Here is the scam once used extensively with Lloyd’s of London. I had a client whose business was conning people out of their money but he stuck with large institutions and people with enough wealth they could afford to lose some money. He borrows several bars of lead made up in the shape of platinum bars. He buys a Lloyd’s certificate for a fee and his indemnification of Lloyd’s that neither he, nor anyone through him or even as co-beneficiary of the insurance policy will make a claim and if they do, he will pay for the defense and pay the damage award.
At the same time he has already sold the lead to someone else under an arrangement whereby he maintains the lead bars in the vault for safe-keeping. So like the rating companies and appraisers, Lloyd’s issues the policies, collects the fee, gets the signature of the buyer of the policy that no claims will be made, and Lloyd’s retreats into the background. So if Lloyd’s wants good faith money on deposit, this only reduces the "profit" or reward from the scam but it doesn’t eliminate it. At worst one scam will pay for the other.
The lead/iron bars are put into a high security vault with the Lloyd’s of London certificate, appearing to authenticate the bars as platinum and insuring them for millions of dollars. My client goes out and buys 3 Sheraton hotels in Houston using the "platinum" as collateral. He drains the hotels dry in three or four months, holds onto them another month or two and then gives the hotels back to the previous owners in lieu of foreclosure.
When the hapless former owners go to the vault and collect the collateral they bring it to a professional who states that it is not platinum it is lead and pretty rough lead at that looking nothing like platinum. So then they go to Lloyd’s who confirmed the issuance of the certificate and policy of insurance who informs them that the policy no longer covers the loss because of a breach of the indemnification.
This is what the banks, service companies and title companies who own MERS are suddenly coming up with and it is advertised that this special certificate and title insurance policy can be procured at the beginning or in the middle of a foreclosure. No such insurance product ever existed before and none will exist for very long now, but it might be enough to convince judges and demoralize homeowner and their attorneys to get another few hundred thousand foreclosures through the system.
What lawyer should do in practice is to demand to see the entire transaction and correspondence file. The title company will be forced to reveal the separate declaration in which the promise is made not to ever make a claim and that if there is one, the bank or servicer "indemnifies" the tile company and holds the title company harmless from any potential payment of any potential claim, although the payment will appear to look like it came from the title carrier. If they don’t show it, then they really are on the hook for the money supposedly guaranteed in the policy.
This is the same story as the fake securitization of badly originated loans in which the paperwork from the very start was wrong and the parties who loaned and borrowed money were left with no documents setting forth the terms of repayment — except the documentation contained in the PSA that establishes co-obligors and guarantors of payment.
Thus the newest document from the fake securitizers is another official looking instrument that effectively disposes of the issue of title — unless it is tested in court. The carrier dare not withhold the declaration that they can’t be responsible for payment without becoming responsible for payment bringing their exposure up from zero to hundreds of thousands of dollars on each transaction.
DO NOT ACCEPT TITLE POLICIES WITHOUT ASSURANCES THAT THEY WILL PAY AND THAT NO OTHER AGREEMENT EXISTS IN WHICH THE TITLE COMPANY IS PROTECTED FROM PAYING. ATTORNEYS SOULD BE ALERT FOR THIS IS A DEFINITE AREA OF POTENTIAL MALPRACTICE THAT IS MOST CERTAINLY GOING TO HIT OUR SHORES. HOMEOWNERS SHOULD MAKE CERTAIN THEY HIRE A LICENSED ATTORNEY WITH PLENTY OF EXPERIENCE IN NEGOTIATING THE TERMS OF THE TITLE COMMITMENT AND TITLE POLICY.