Category: blogroll

Search terms for this blog

Search Views
timothy mccandless 1,564
substitution of trustee 861
http://www.timothymccandless.wordpress.com 599
mortgage electronic registration systems inc 481
timothy mccandless attorney 342
california civil code 2923.5 318
california civil code 2923.6 300
mortgage electronic registration system 292
timothy mccandless blog 260
tim mccandless 259
mers mortgage fraud 227
timothymccandless.com 222
loan audit checklist 196
timothymccandless 176
2923.5 158
mortgage audit checklist 155
mers mortgage 155
california civil code 2932.5 153
motion to consolidate california 152
when does a substitution of trustee have to be recorded in california 131
mortgage electronic registration systems 131
sue your lender 128
substitution of trustee california 124
tim mccandless attorney 117
civil code 2923.5 115
aurora loan services complaints 115
http://www.timothymccandless.com 109
california civil code 2823.6 91
2923.6 84
mers 82
sb 1137 80
aurora loan services v. stella d. onyeu 80
substitution of trustee foreclosure 76
wrongful foreclosure california 72
what is substitution of trustee 70
california civil code section 2923.5 69
motion to consolidate unlawful detainer 68
civil code 2932.5 68
tila complaint 64
california civil code section 2923.6 63
foreclosure class action 62
civil code 2923.6 61
timothy mccandless wordpress 61
law offices of timothy mccandless 60
foreclosure class action lawsuit 60
timothy mccandles 60
california motion to consolidate 58
beating foreclosure 58
ccp 1161a 54
ca civil code 2923.5 54
truth in lending checklist 53
loan compliance checklist 50
california civil code 2924 50
mortgage electronic registration systems inc registered agent 49
promissory note holder 48
civil complaint template 48
what is a substitution of trustee 48
ccp 2923.5 47
mers problems 45
how to fight an unlawful detainer 45
how to sue your lender 45
motion to consolidate 44
motion to consolidate cases california 43
sample wrongful foreclosure complaint 41
mers foreclosure california 41
ca civil code 2923.6 40
2932.5 40
mers california 39
sb1137 38
civil code section 2923.5 38
niel garfield 38
timothymccandless.wordpress.com 38
tim mccandless blog 37
eloise figueroa 37
livinglies.wordpress.com 37
mortgage loan audit checklist 37
mers class action 37
mers florida 36
lasalle bank v. lamy 36
substitution trustee 35
securitized mortgage litigation 35
mers issues 34
invalid foreclosure 34
california substitution of trustee 33
how to fight unlawful detainer 33
timothy mccandless weblog 33
fighting unlawful detainer 33
ca civil code 2932.5 33
mortgage electronic registration systems, inc. 32
how to stop an unlawful detainer 32
ccc 2923.5 31
tim mccandles 30
mers law 30
wrongful foreclosure 29
truth in lending audit 29
ccp 2932.5 29
mortgage electronic recording system 29
respa audit checklist 28
problem with mers 27
mers problem 27
respa compliance checklist 27
timothy mcandless 27
mortgage electronic registration systems, inc 26
what is mers 26
foreclosure defense checklist 26
mortgage electronic registration systems inc california 26
the problem with mers 25
motion to consolidate cases 25
senate bill no. 1137 24
california civil code 2923 24
civil conspiracy lender broker california 23
truth in lending audit checklist 23
wrongful foreclosure action 23
ccp 2015.5 23
mers litigation 23
civil code section 2923.6 22
template of a injunction and stop foreclosure in west virginia 22
predatory lending checklist 22
california code 2923.6 22
how to stop unlawful detainer 22
california civil code section 2932.5 22
mortgage compliance checklist 22
tro foreclosure 22
sample tila complaint 22
tim mccandless lawsuit 21
aurora loan complaints 21
california wrongful foreclosure 21
what is mers mortgage 20
mabry 2923.5 20
the law offices of timothy mccandless 20
2923.5 california civil code 20
what are the technical circumstances that can be used to stop the evictionon bankruptcy filed after the unlawful detainer case is lost the last day if we filed for bankruptcy in california 20
motion to stay unlawful detainer 20
foreclosure attorney fees 20
mortgage electronic registration 20
wells fargo wrongful foreclosure 19
promissory note enforcement 19
attorney timothy mccandless 19
civil code section 2932.5 19
fighting mers 19
law office of timothy mccandless 19
civil code 2924 19
mortgage electronic systems 19
2923.5 civil code 18
mortgage electronic registration systems inc flint mi 18
mers registration 18
class action foreclosure 18
ca civil code section 2923.6 18
california 2923.6 18
duly perfected 18
california code 2923.5 18
mers service of process 18
aurora loan services v. stella d. onyeu. 17
mortgage electronic 17
garcia v. homeq servicing corp. 17
2823.6 17
timothy mccandless esq 17
2923.6 california civil code 17
produce the note illinois 16
respa violations 16
ccp 2923.6 16
foreclosure cases, 521 f. supp. 2d 650, 2007 16
truth in lending audits 16
strategic bankruptcy 16
mers california foreclosure 16
amhsi mortgage company 16
mccandless timothy 16
california code section 2923.5 16
“timothy mccandless” 16
california civil code 2823.6(a) 16
hoepa checklist 15
timothy mccandless.com 15
mers real estate 15
wrongful foreclosure complaint 15
mers issue 15
ca civil code section 2932.5 15
mortgage registration systems 15
fight unlawful detainer 15
eb5 visa processing time 15
invalid substitution of trustee 15
californin 2932.5 15
servicer substitution fo trustee 15
“substitution of trustee” 15
mers attorney 14
cal civil code 2923.5 14
foreclosure ways to stay in house after eviction 14
timothy mcandles 14
cal civ code 2923.5 14
mers mortgages 14
wrongful foreclosure class action 14
holder promissory note 14
mccandless foreclosure 14
mortgage electronic registration systems inc. 14
foreclosure class action suits 14
mers short sale 14
2923.5 declaration 14
california civil cde 2923.5 tro 14
unlawful detainer delays 14
pretender lenders 14
wrongful foreclosure complaint california 13
perata mortgage relief act 13
renters in foreclosure what are their rights 13
where does the fraud begin 13
oliver@ipa.net 13
http://www.mariokenny.wordpress.com 13
subsitution of trustee 13
calif civil code 2923.5 13
holder of promissory note 13
linda harris de novo financial solutions 13
respa predatory loan remedy lawsuit instructions 13
california assignments must recorded 13
mers officers 13
california complaint template 13
brett mearkle 13
california 2923.5 13
ex parte application for stay of execution 13
how to sue mers 13
sb 94 13
stop unlawful detainer 13
timothy mccandless attorney ca 13
mortgage electronic recording systems 13
11 usc 362 13
electronic mortgage registration system 13
related:www.mersinc.org/ mers 13
sue lender 12
california 2932.5 12
tila foreclosure 12
ca civil code 2924 12
mark brajnikoff 12
civil code 2823.6 12
can fight unlawful detainer 12
produce the note california style 12
tender foreclosure california 12
how do i sue predatory lender in california 12
substituion of trustee: code violation 12
foreclosure class actions 12
tim mccandless, attorney at law 12
substitution of trustee in california 12
mabry v. aurora loan services, case number g042911 12
wrongful foreclosure cases 12
mortgage loan compliance checklist 12
timothymccandless’s weblog 12
jeffrey dembicer 12
motions to avoid foreclosure eviction 12
pretender lender 12
american broker conduit respa tila violations 12
mers registered agent 12
banks summary judgement for unlawful detainers 12
john mendaros 11
moore v. munger unlawful detainer demurrer 11
timothy mccandless foreclosure 11
https://timothymccandless.wordpress.com 11
ccc 2932.5 11
taylor v deutsche bank 11
fight mers 11
template adversary proceeding in bankruptcy court-fight foreclosure 11
injunction to stop foreclosure in california 11
mers litigation california 11
countrywide property 11
foreclosure sample civil discovery california 11
stay of execution eviction 11
lending compliance checklists 11
sample complaint for wrongful foreclosure 11
problems with mers 11
vella v. hudgins 11
predatory lending audit 11
carter v. deutsche bank 11
how to stop a unlawful detainer 11
litigation against mers 10
ccc 2923.6 10
motion to consolidate unlawful detainer california 10
california civil code 2823.6(b) 10
california civil code 2923.5 effective date 10
california code 2932.5 10
motion to consolidate ca 10
wrongful foreclosure damages 10
class action mers california 10
tim mcandless 10
temporary restraining order to stay the eviction 10
tort wrongful foreclosure 10
timothy mccandless law 10
mers fraud 10
mortgage electronic re 10
tila sample complaint 10
california mers rulings 10
invalid notice of default 10
tim mccandless foreclosure 10
section 2923.5 10
unlawful detainer trial 10
mers violations 10
motion to quash unlawful detainer 10
aurora loan services lost note 10
sue the lender 10
no assignment no foreclosure 10
what is mortgage electronic registration systems inc 10
aurora loan services 10
cal civil code 2932.5 10
johnny mendaros 10
mortgage electronic registration systems, inc. californa legal cases 10
unlawful detainer motion to consolidate 10
invalid trustee substitution 9
mortgage fraud mers 9
timothy mccandless, attorney at law 9
foreclosure defense george gingo book 9
issues with mers 9
hoepa audit 9
assignee liability respa 9
tim mc candless blog 9
injunction foreclosure california 9
eviction timothy 9
mers california court 9
affirmative defenses unlawful detainer 9
individual foreclosure stories 9
2923.5 effective date 9
trout v trout 220 cal 652 9
wrongful foreclosure tort 9
tim mccandless esq 9
mers electronic 9
california civil code 1161a 9
substitute trustee california 9
how to stop foreclosure timothy mccandless e 9
https://timothymccandless.wordpress.com/join-the-class-action-to-enjoin-wrongful-foreclosures/ 9
save your home post foreclosure!! facing unlawful detainer action? 9
timothy mccandless esq. 9
california civil code 3301 9
california civil complaint template 9
complaint for non-compliance 2923.5 9
lending audit 9
motion summary judgment template 9
ex parte app for tro template ca 9
app for tro for foreclosure 9
maher soliman 9
attorney fees for foreclosure 9
where’s the note who’s the holder 9
california class action wrongful foreclosures 9
service of process on mers 9
sample predatory lending complaint 9
california civil code §2932.5 9
pcu2008032 9
mers and mortgage fraud 9
mers in california 9
how to sue your mortgage company in federal court and get your deed 9
greenpoint brokers targeted by new york 9
mortgage electronic reg sys 9
foreclosure tro 9
mers california litigation 9
substitution document 9
substitution of trustees 9
mers foreclosure problems 9
does an nod have to be notorized 9
substitution of trustee foreclosure california 9
melissa tomlin mers 9
timothy mccandless california attorney 9
timmothy mcandles 9
mers in florida 9
tro foreclosure california 9
ca civil code section 2923.5 9
california civil code section 2923.5(b) 9
pharns genece 8
unlawful detainer demurrer sample california 8
downey savings foreclosures 8
ex parte motion to consolidate unlawful detainer action 8
stopping unlawful detainer 8
501-228-0877 8
ca duly perfected title after foreclosure 8
jeff dembicer 8
motion to consolidate california superior court 8
mortgage electronic registration systems foreclosure 8
sample wrongful foreclosure complaint, 2923.5 8
mortgage electronic registry system 8
cal. civ. code § 2923.5 8
california civil code 2923.5(c) 8
timothy mccandless legal documents in all motions in foreclosure 8
class action wrongful foreclosure 8
respa checklist 8
timothy candless 8
truth in lending compliance checklist 8
badbizfinder 8
mers corporate charter 8
cc 2923.6 8
bankruptcy unperfected mortgage 8
ca 2923.6 8
ca civil code 2823.6(b) 8
foreclosure defense options 8
how do you present issues of standing in court when your lender has filed foreclosure on your home 8
lime financial tila respa violations 8
how much are attorney fees for foreclosure 8
after the short sale i have second loan heloc purchase money chase bank put to the collection agency but is c .a law 8
mers cant no foreclosure in californai 8
unlawful detainer defense to 1161a 8
2046 balance sheet as it relates to the original loan 8
foreclosure cases+countrywide+california 8
california tender rule 8
tro to stop foreclosure 8
complaints against aurora loan services 8
truth in lending audit program 8
timothy l. mccandless esq 8
pro value properties inc v quality loan service corp 8
kevin lamson 8
mers loses in court 8
mortgage mers 8
sue my lender 8
ex parte application 8
california civil code 2932 8
petition to cancel note and mortgage, claim in recoupment, 8
napa county procedure to evict tenant after sheriff’s foreclosure sale pursuant to a writ of execution, california 8
timothy mccandels 8
bank of america foreclosure fraud 8
mccanless complaint for illegal foreclosure 8
site:timothymccandless.wordpress.com tim mccandless attorney 8
when was 2923.5 enacted 8
timothy mccandless law firm 8
foreclosured and facing eviction 8
wrongful foreclosure california complaint 8
california vs mers 8
fight foreclosure california 8
timothy mccandless motion for summary judgement 8
mortgage electronic registry systems 8
timothy mccandless class action no assignment no foreclosure 8
ccp 1162 7
timothy mccandless defendants motion for summary judgement ud 7
wrongful foreclosure template 7
mortgage electronic registration system california 7
california civil code 2932.5. 7
cause of action wrongful foreclosure 7
mortgage electronic registration systems inc mers 7
countrywide rico 7
(916)361-6583 7
ca civil code 2823.6 7
aurora loan services fraud 7
foreclosure complaint template 7
how to fight tender rule in california 7
foreclosure fraud 7
complaint to enjoin trustee’s sale ca 7
timothy mccandless removal of beneficiary 7
mers ocala florida 7
california civil code 29241 7
mers mortgage problems 7
mortgage electronic recording service 7
nielgarfield.wordpress .com 7
timothymccandles 7
678-380-3752 7
plaintiff must produce note at unlawful detainer 7
complaint form california stop foreclosure 7
is mers a creditor 7
california mccandless sample of notice of lis pendens 7
commercial holdover owner after foreclosure defenses to unlawful detainer in california 7
timothy mccandless sepora 7
mortgage electronic system 7
wrongful foreclosure california trustee sale 7
timothy maccandless 7
senate bill 1137 california civil code 7
duly perfected title 7
north american mortgage company correspondent lenders 7
civil code section 2923.6 lawsuits 7
aurora loan services lawsuit 7
california state\’s latest help for homeowners 7
complaint template 7
mers standing florida 7
notice of non-compliance ca stop foreclosure 7
chapter 11 bankruptcy individual 7
stop eviction attorneys in fresno, ca 7
enjoining foreclosures in probate 7
forclosure class action 7
timothy mccandless federal action for attempted theft 7
mccandless tim 7
can i sue mers 7
california foreclosure mers 7
timothy mccandless complaints 7
tila compliance checklist 7
sb 1137 declaration 7
substitution of trustee quality loan service 7
can mers foreclose in california 7
servicer of the loan liable for the fraud of the originator of the loan tila 7
timothy mccandless loan modifications 7
ccc 2823.6 7
notice of motion template 7
“mortgage electronic registration systems” 7
wrongful foreclosure settlement 7
timothy mc candless 7
asuncion case re unlawful detainer 7
lawyers guide for defense to an unlawful detainer 7
sample form complaint california produce the note 7
complaint to enjoin trustee’s sale, california 7
california commercial code 3301 7
2932.5 foreclosure 7
mortgage electronic registry 7
carter vs. deutsche bank cal 1-27-2010 7
sample form complaint respa tila violation note 7
timothy mccandless bank vs. martin, a – plaintiff’s motion for summary judgment – denied. the plaintiff as moving party has established a 7
kalima robertson 7
tila mortgage complaints 7
forecloser news 7
key elements in securitization mortgage foreclosure defense 7
lawyer timothy mccandless 7
-lamy a nominee of the owner of a note and mortgage may not effectively assign the note and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.”) 7
motion to consolidate unlawful detainer in california 7
substitution of trustee california foreclosure 7
what does the the new vito mean for mortgages under mers

Consumer Law E-mail Groups

NCLC
NATIONAL CONSUMER
LAW CENTER’
Advancing Fairness in the Marketplace for All

Why Join an E-Mail Group?
• They are free; all you need is an e-mail address
• Get instant answers to your questions from experts around the country
• Hear the latest developments, practice ideas, and litigation issues
• Obtain copies of pleadings and other useful documents
• Get into the nitty-gritty of the actual practice of consumer law
• Join a community of like-minded attorneys focused on the same subject area
NCLC and NACA sponsor a number of email groups for those representing consumer interests. These groups are not open to those who represent the industry that is the topic of the group or other adverse parties.
NATIONAL CONSUMER LAW CENTER E-MAIL GROUPS
1. Autofraud (Contact: Jon Sheldon) To join: owner-autofraud@lists.nclc.org
This is one of the oldest and most active consumer law e-mail groups with over 350 members, and much email traffic each day. The group focuses on many different issues related to motor vehicles, from financing to sales practices to lemons to repossessions. Like all NCLC e-mail groups, you can perform key-word searches in the archives for past e-mails.
2. Manufactured Homes (Contact: Odette Williamson)
To join: manufacturedhomes-request@lists.nclc.org and CC: owilliamson@nclc.org
If manufactured home cases ever come to your office, this is the e-mail group for you, covering issues of financing, defects, sales, and parks.
3. Student Loans (Contact: Deanne Loonin)
To join: studentloan-request@lists.nclc.org
(dloonin@nclc.org if experiencing technical problems)
This is NCLC’s first group, dating back over 10 years. The discussion covers student loan collections, offsets, vocational schools, and related topics.
4. FCRA – Fair Credit Reporting Act (Contact: Chi Chi Wu)
To join: cwu@nclc.org
A large group of experts exchanging ideas about credit reporting issues.
5. E-payments (Contact: Lauren Saunders) To join: http://lists.nclc.org/subscribe
This is the e-mail group for anyone concerned with the electronic payment of food stamps and other state benefits.
6. UtilityNetwork – Massachusetts (Contact: Charlie Harak)
To join: http://lists.nclc.org/subscribe
Covers issues of utility terminations, energy affordability, payment sources for utility bills, and low-income utility programs FOR MASSACHUSETTS ONLY.
7. EnergyNetwork – National (Contact: Charlie Harak, Olivia Wein, or John Howat)
To join: http://lists.nclc.org/subscribe
Covers issues of utility terminations, energy affordability, telephones, and low-income utility programs. Keep current on policy and programmatic issues.
8. Bankruptcy (Contact: John Rao) To join: http://lists.nclc.org/subscribe
This group is for legal services attorneys and pro bono coordinators and covers many issues relating to representation of low-income consumers in bankruptcy.
9. DC Updates (Contact: Lauren Saunders). To join: http://lists.nclc.org/subscribe
Provides updates on legislative and administrative developments in Washington, including agency comment opportunities and critical moments for legislative input. Open to NACA members and nonprofit consumer advocates (including non-attorneys).
10. California (Contact: Lauren Saunders). To join: http://lists.nclc.org/subscribe
Provides a forum for sharing of information on consumer law activities in California. Open to nonprofit attorneys and to NACA members willing to partner with or mentor nonprofit attorneys.
11. Carchange- Auto Ownership, Finance, and Policy (Contact John Van Alst)
To join: http://lists.nclc.org/subscribe
A new group for advocates seeking to improve the ability of low-income families to get, keep, and use a reliable, affordable car. Includes topics of car finance, sales, and ownership as well as anyone working on broader issues that affect access to transportation for low-income workers and their families (e.g., insurance, driver’s licenses, maintenance, etc.).
NATIONAL ASSOCIATION OF CONSUMER ADVOCATES E-MAIL GROUPS Tlie lists operated by NACA require NACA membership for admission to those lists.
12. Mortgage (Contact: Jeff Dillman) To apply for admission: jdillman@thehousingcenter.org
This NACA group has over 600 members and covers all aspects of protecting a homeowner against foreclosure, from predatory lending to servicer abuses.
13. Class Action (Contact: Steve Gardner) To apply for admission: sgardner@cspinetorg
The place to be if your office handles class actions, if you are interested in co-counseling with other NACA offices experienced in class cases, or if you just want to learn more about the class action remedy.
14. Stop Binding Mandatory Arbitration Campaign (Contact: Cora Ganzglass)
To join: cora@naca.net
This NACA list is to help build awareness and support for state and federal legislation that fights back against binding mandatory arbitration clauses.
15. Statewide Listserves (Contact: Chris Wojcik) To join: chris@naca.net
NACA Statewide listserves exist for NACA members in Alabama, Arkansas, Arizona, DC, Florida, Iowa, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Montana, North Carolina, New York, New Jersey, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Virginia, Washington state, and Wisconsin. The listserves provide support, share documents and information, call attention to recent developments, and facilitate group action to protect and promote consumer rights.
16. Military Statewide Listserves (Contact: Chris Wojcik) To join: chris@naca.net A special Military NACA list for military attorneys in any state.
17. Doing Well by Doing Good list (Contact: Chris Wojcik) To join: chris@naca.net A listserve open to all NACA members.

CLASS ACTION FILED AGAINST STERN, MERS


Posted on July 28, 2010 by Neil Garfield

Entered on the Court docket of the Southern District of Florida, a class action for damages has been filed against MERS, the Stern Law Firm and David Stern individually.The lawsuit alleges racketeering under the RICO (Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. Sec. 1962 and 1964) statute, alleging that MERS was created “in order to undermine and eventually eviscerate long-standing principles of real property law…”. It also cites the “lost note” syndrome we are all so familiar with by now.

The lawsuit filed by Kenneth Eric Trent, Esq. in Fort Lauderdale, Florida reads like a mystery novel. He probably has an incorrect chronology of a few details of the actual way securitization played out, but on the whole, the complaint is worth a read and he should get all the help you can give him. He includes actual testimony in the complaint taken from other cases in addition to a very well-written narrative. Here is one quote I liked —

“Unbeknownst to the borrowers and the public, the billions of dollars spent to fund these loans were expended to “prime the pump.” The big institutions and the conspirators were making an investment, but the expected return was NOT the interest they pretended to anticipate receiving as borrowers paid the mortgages. The lenders knew that the new loans were “bad paper;” this was of little concern to them because they intended to realize profits so great as to render such interest, even if it had been received, negligible by comparison. Part of the reason this fraudulent scheme has gone largely unnoticed for such an extended period of time is that its sophistication is beyond the imagination of average persons. Similarly beyond the imagination of most persons is and was the scope of the DISHONESTY of the lenders and those acting in furtherance of the scheme, including the present Defendants.”

Gretchen “Gets It” but misses the mark

Posted on July 25, 2010 by Neil Garfield

It’s no secret that I admire Gretchen Morgenson of the New York Times. Her articles have penetrated deeper and deeper into the realities and logistics of the Great Financial Meltdown. But she continues to drag myth alongside of reality. True, it is difficult to get your mind around the idea that Wall Street managers WANTED bad mortgages, but that simple piece of truth is unavoidable. In the article below she draws ever nearer to this truth, saying that the real question is “what did they know and when did they know it?”
She even spots the extremely important fact that the worse the loan the more money was made by Wall Street. My objection is why not ask the next obvious question, to wit: “If Wall Street’s profits went up as the quality of mortgages went down, isn’t the obvious incentive to create increasingly bad paper?” And in what world has Wall Street ever done anything to diminish profits on moral grounds?
But her spotting is defective. She sees a 5 point spread (Yield Spread Premium) between what was paid for the loans and the price charged to investors. She correctly points out that the most Wall Street usually gets on trades like this is around 2 points. But think about it. Could such a small spread actually account for the ensuing mayhem that resulted?
What she fails to point out is the actual logistics. Investors, and for that matter, even the rating agencies, were never given the actual loans to look at and kick the tires. They were given descriptions of the loans which were incorporated into a narrative that portrayed the loans in a much better light than anything a loan underwriter would agree with. The final description of the loans was so loaded with misrepresentations that even a small amount of due diligence would have revealed major discrepancies that would have stopped this money machine from operating, for good.
Gretchen’s error is reflected in most articles by journalists and government officials. They all miss a major part of the transaction. Do the math. How could a five point spread account for the actual 8-10 point spread that was used to massage the description of the pool? There is a whole other SIV transaction that everyone is ignoring. The size of it will astonish you.

If for the purpose of one extreme example we isolate a single loan transaction, you can see how it works.
John Smith, an unemployed, homeless migrant worker with a gross income of $500 per month is pulled off the street by a “loan adviser.” The salesman gets John to sign a bunch of papers and tells him to go move into a $500,000 house. The interest rate on the loan is 18%, which is $90,000 per year. John doesn’t have to pay anything for the first 3 months and then only $100 per month for the first year, when he must pay a higher amount, still not as much as the monthly interest of $7,500 per month, let alone amortization, taxes, and insurance.
Now go to the investor who has been promised, for this example 9% annual return. The investor gives the investment banker $1,000,000 dollars believing that the investment banker is taking a 2% fee ($20,000). In other words, the investor is expecting $980,000 of his money to be invested. But that is NOT what happened — not ever, in ANY example. The investor, expecting a 9% annual return on his $1 million is therefore expecting $90,000 per year in income.
So in our over-simplified example the investment banker goes to the mortgage aggregator, and says give me the crappiest mortgage you have that says the interest is $90,000 per year. The aggregator (Countrywide, for example) sells the John Smith Mortgage to a structured investment vehicle off-shore for $500,000. The SIV sells the John Smith Mortgage to another entity (Seller) created by the investment bank for $980,000. The Seller sells the John Smith Mortgage to an “investment pool” for $1 million.
Watch Carefully! What just happened is that the John Smith mortgage was created that would never be paid. The interest rate on that mortgage was 18% and the principal was $500,000. So the annual interest to be paid by borrower was $90,000. The investor gave $1 million to the investment banker and thus “bought” the $90,000 in “income” from John Smith.
The surface transaction that Gretchen and others are looking at is that last transaction where the investment banker appears to pick up a few points as a fee. The underlying transaction, the substance of the real deal, is that the investment banker took $1 million from the investor and funded a $500,000 mortgage, thus creating a yield spread premium total of $500,000. In other words, the investment banker, in our oversimplified example, made a profit EQUAL TO THE MORTGAGE PRINCIPAL.
Not all the borrowers were John Smith. They ranged from him to people with the ability to pay anything. But the Mary Jones Mortgage where she had a credit score of 815 and assets of over $10 million was a key ingredient to this fraud. May Jones Mortgage was put in the top level of the “pool.” She was the gold plating covering dog poop underneath.
The identity of Mary Jones and her credit score HAD to be there, HAD to be used without her permission in order to sell the John Smith Mortgage. I think that is called identity theft. I think it was interstate commerce and I think it was a pattern of conduct. I think that is racketeering, breach of the the Truth in Lending Act and Securities Fraud, based upon appraisal (ratings) fraud at both ends (borrower and investor) of the transaction.
And let’s not forget that all these sales and transfers were undocumented. The only thing that moved was the money. And of course there are all those third party insurance and bailout payments that were never credited to the investor or the borrower. The investment banker kept those too.
——————————————————————————————–
July 24, 2010
Seeing vs. Doing
By GRETCHEN MORGENSON

“WHAT did they know, and when did they know it?” Those are questions investigators invariably ask when trying to determine who’s responsible for an offense or a misdeed.

But for the Wall Street banks whose financing of the subprime mortgage machine placed them at the center of the credit crisis, it’s becoming clear that a third, equally important question must be asked: “What did they do once they knew what they knew?”

As investigators delve deeper into the mortgage mess, they are finding in too many cases that Wall Street firms did nothing when they learned about problem loans or improprieties in lending. Rather than stopping practices of profligate originators like New Century, Fremont and Ameriquest, Wall Street financiers, which held the purse strings for these companies, apparently decided to simply look the other way.

Recent cases have provided glimpses of this conduct. Last week, the Financial Industry Regulatory Authority accused Deutsche Bank Securities, a unit of the huge German bank, of misleading investors about how many delinquent loans went into six mortgage securities worth $2.2 billion that the firm underwrote. Deutsche Bank underreported the delinquency rates among loans when it created the securities in 2006, Finra contends, and then sold them to investors.

Deutsche Bank also understated historical delinquency rates in 16 subprime securities it packaged in 2007, Finra said. Even after it discovered the errors, the authority added, Deutsche Bank continued to report the misstated figures on its Web site, where investors checked the performance of past mortgage pools.

Deutsche Bank settled without admitting or denying the allegations; it paid $7.5 million. The firm said Friday that it had cooperated and was pleased to have the matter behind it.

James S. Shorris, acting chief of enforcement at Finra, said that this was just the first of such cases and that he oversees a team of more than a dozen people investigating firms involved in mortgage securities.

While the Finra case showed Deutsche Bank failing to report problem loans in its securities, investigators in other matters are learning that some firms used information about lending misconduct to increase their profits from the securitization game — without telling investors, of course.

Here is what investigators have learned, according to two people briefed on the inquiries who spoke anonymously because they were not authorized to discuss them publicly. The large banks that provided money to mortgage originators during the mania hired outside analytics firms to conduct due diligence on the loans that Wall Street bought, bundled into securities and sold to investors.

These analysts looked for loans that failed to meet underwriting standards. Among the flagged loans were those in which appraisals seemed fishy or the mortgages went to borrowers with credit scores far below acceptable levels. Loans on vacation properties erroneously identified as primary residences were also highlighted.

The analysts would take their findings back to the Wall Street firms packaging the securities; the reports were not made available to investors.

In 2006-07, amid the mortgage craze, more loans didn’t meet the criteria. But instead of requiring lenders to replace these funky mortgages with proper loans, Wall Street firms kept funneling the junk into securities and selling them to investors, investigators have found.

Cases brought against Wall Street firms by Martha Coakley, attorney general of Massachusetts, have brought some of these practices to light. “Our focus has been on the borrower,” she said in an interview last week, “but as we’ve peeled back the onion we’ve gotten the picture of the role Wall Street played through the financing of these loans.”

But some on Wall Street went further than simply peddling loans they knew were bad, according to the people briefed on some investigators’ findings. They say the firms used these so-called scratch-and-dent loans to increase their profits in the securitization process.

When due-diligence reports turned up large numbers of defective loans — known as exceptions — the banks used this information to negotiate a lower price on the mortgages they bought from the original lenders.

So, instead of paying 99 cents on the dollar for the problem loans, the firm would force the lender to accept 97 cents or perhaps less. But the firm would still sell the mortgage pool to investors at 102 cents or higher, as was typical on high-quality loan pools.

Wall Street enjoyed the profits these practices generated. And because lenders were financed by the Wall Street firms bundling the mortgages into securities, they were hesitant to reject too many dubious loans because doing so would slow the securitization machine.

FOR their part, Wall Street loan packagers were loath to imperil their relationship with lenders like New Century; as long as Wall Street’s lucrative mortgage factories were humming, it needed loans to stoke them. Forcing New Century to eat its bad loans might prompt it to take its business elsewhere.

The bottom line: the more problematic the loans, the better the bargaining power and the higher the profits for Wall Street.

To be sure, the securities’ offering statements noted, in legalese, that the deals might contain “underwriting exceptions” and those exceptions could be “material.” But as investigators get closer to understanding how Wall Street used these exceptions to jack up its earnings, that disclosure defense may ring hollow.

Filed under:

Securitized Mortgage: A Basic Roadmap

The Parties and Their Roles

The first issue in reviewing a structured residential mortgage transaction is to differentiate between a private-label deal and an “Agency” (or “GSE”) deal. An Agency (or GSE) deal is one involving Fannie Mae, Freddie Mac, or Ginnie Mae, the three Government Sponsored Enterprises (also known as the GSEs). This paper will review the parties, documents, and laws involved in a typical private-label securitization. We also address frequently-occurring practical considerations for counsel dealing with securitized mortgage loans that are applicable across-the-board to mortgages into both private-label and Agency securitizations.

The parties, in the order of their appearance are:

Originator. The “originator” is the lender that provided the funds to the borrower at the loan closing or close of escrow. Usually the originator is the lender named as “Lender” in the mortgage Note. Many originators securitize loans; many do not. The decision not to securitize loans may be due to lack of access to Wall Street capital markets, or this may simply reflect a business decision not to run the risks associated with future performance that necessarily go with sponsoring a securitization, or the originator obtains better return through another loan disposition strategy such as whole loan sales for cash.

Warehouse Lender. The Originator probably borrowed the funds on a line of credit from a short-term revolving warehouse credit facility (commonly referred to as a “warehouse lender”); nevertheless the money used to close the loan were technically and legally the Originator’s funds. Warehouse lenders are either “wet” funders or “dry” funders. A wet funder will advance the funds to close the loan upon the receipt of an electronic request from the originator. A dry funder, on the other hand, will not advance funds until it actually receives the original loan documents duly executed by the borrower.

Responsible Party. Sometimes you may see another intermediate entity called a “Responsible Party,” often a sister company to the lender. Loans appear to be transferred to this entity, typically named XXX Asset Corporation.

Sponsor. The Sponsor is the lender that securitizes the pool of mortgage loans. This means that it was the final aggregator of the loan pool and then sold the loans directly to the Depositor, which it turn sold them to the securitization Trust. In order to obtain the desired ratings from the ratings agencies such as Moody’s, Fitch and S&P, the Sponsor normally is required to retain some exposure to the future value and performance of the loans in the form of purchase of the most deeply subordinated classes of the securities issued by the Trust, i.e. the classes last in line for distributions and first in line to absorb losses (commonly referred to as the “first loss pieces” of the deal).

Depositor. The Depositor exists for the sole purpose of enabling the transaction to have the key elements that make it a securitization in the first place: a “true sale” of the mortgage loans to a “bankruptcy-remote” and “FDIC-remote” purchaser. The Depositor purchases the loans from the Sponsor, sells the loans to the Trustee of the securitization Trust, and uses the proceeds received from the Trust to pay the Sponsor for the Depositor’s own purchase of the loans. It all happens simultaneously, or as nearly so as theoretically possible. The length of time that the Depositor owns the loans has been described as “one nanosecond.”

The Depositor has no other functions, so it needs no more than a handful of employees and officers. Nevertheless, it is essential for the “true sale” and “bankruptcy-remote”/“FDIC-remote” analysis that the Depositor maintains its own corporate existence separate from the Sponsor and the Trust and observes the formalities of this corporate separateness at all times. The “Elephant in the Room” in all structured financial transactions is the mandatory requirement to create at least two “true sales” of the notes and mortgages between the Originator and the Trustee for the Trust so as to make the assets of the Trust both “bankruptcy” and “FDIC” remote from the originator. And, these “true sales” will be documented by representations and attestations signed by the parties; by attorney opinion letters; by asset purchase and sale agreements; by proof of adequate and reasonably equivalent consideration for each purchase; by “true sale” reports from the three major “ratings agencies” (Standard & Poors, Moody’s, and Fitch) and by transfer and delivery receipts for mortgage notes endorsed in blank.

Trustee. The Trustee is the owner of the loans on behalf of the certificate holders at the end of the securitization transaction. Like any trust, the Trustee’s powers, rights, and duties are defined by the terms of the transactional documents that create the trust, and are subject to the terms of the trust laws of some particular state, as specified by the “Governing Law” provisions of the transaction document that created the trust. The vast majority of the residential mortgage backed securitized trusts are subject to the applicable trust laws of Delaware or New York. The “Pooling and Servicing Agreement” (or, in “Owner Trust” transactions as described below, the “Trust Indenture”) is the legal document that creates these common law trusts and the rights and legal authority granted to the Trustee is no greater than the rights and duties specified in this Agreement. The Trustee is paid based on the terms of each structure. For example, the Trustee may be paid out of interest collections at a specified rate based on the outstanding balance of mortgage loans in the securitized pool; the Master Servicer may pay the Trustee out of funds designated for the Master Servicer; the Trustee may receive some on the interest earned on collections invested each month before the investor remittance date; or the Securities Administrator may pay the Trustee out of their fee with no charges assessed against the Trust earnings. Fee amounts ranger for as low as .0025% to as high as .009%.

Indenture Trustee and Owner Trustee. Most private-label securitizations are structured to meet the Internal Revenue Code requirements for tax treatment as a “Real Estate Mortgage Investment Conduit (“REMIC”). However some securitizations (both private-label and GSE) have a different, non-REMIC structure usually called an “Owner Trust.” In an Owner Trust structure the Trustee roles are divided between an Owner Trustee and an Indenture Trustee. As the names suggest, the Owner Trustee owns the loans; the Indenture Trustee has the responsibility of making sure that all of the funds received by the Trust are properly disbursed to the investors (bond holders) and all other parties who have a financial interest in the securitized structure. These are usually Delaware statutory trusts, in which case the Owner Trustee must be domiciled in Delaware.

Primary Servicer. The Primary Servicer services the loans on behalf of the Trust. Its rights and obligations are defined by a loan servicing contract, usually located in the Pooling and Servicing Agreement in a private-label (non-GSE) deal. The trust may have more than one servicer servicing portions of the total pool, or there may be “Secondary Servicers,” “Default Servicers,” and/or “Sub-Servicers” that service loans in particular categories (e.g., loans in default). Any or all of the Primary, Secondary, or Sub-Servicers may be a division or affiliate of the Sponsor; however under the servicing contract the Servicer is solely responsible to the Trust and the Master Servicer (see next paragraph). The Servicers are the legal entities that do all the day-to-day “heavy lifting” for the Trustee such as sending monthly bills to borrowers, collecting payments, keeping records of payments, liquidating assets for the Trustee, and remitting net payments to the Trustee.

The Servicers are normally paid based on the type of loans in the Trust. For example, a typical annual servicing fee structure may be: .25% annually for a prime mortgage; .375% for an Alt-A or Option ARM; and .5% for a subprime loan. In this example, a subprime loan with an average balance over a given year of $120,000 would generate a servicing fee of $600.00 for that year. The Servicers are normally permitted to retain all “ancillary fees” such as late charges, check by phone fees, and the interest earned from investing all funds on hand in overnight US Treasury certificates (sometimes called “interest earned on the float”).

Master Servicer. The Master Servicer is the Trustee’s representative for assuring that the Servicer(s) abide by the terms of the servicing contracts. For trusts with more than one servicer, the Master Servicer has an important administrative role in consolidating the monthly reports and remittances of funds from the individual servicers into a single data package for the Trustee. If a Servicer fails to perform or goes out of business or suffers a major downgrade in its servicer rating, then the Master Servicer must step in, find a replacement and assure that no interruption of essential servicing functions occurs. Like all servicers, the Master Servicer may be a division or affiliate of the Sponsor but is solely responsible to the Trustee. The Master Servicer receives a fee, small compared to the Primary Servicer’s fee, based on the average balance of all loans in the Trust.

Custodian. The Master Document Custodian takes and maintains physical possession of the original hard-copy Mortgage Notes, Mortgages, Deeds of Trust and certain other “key loan documents” that the parties deem essential for the enforcement of the mortgage loan in the event of default.

• This is done for safekeeping and also to accomplish the transfer and due negotiation of possession of the Notes that is essential under the Uniform Commercial Code for a valid transfer to the Trustee to occur.
• Like the Master Servicer, the Master Document Custodian is responsible by contract solely to the Trustee (e.g., the Master Document Custodial Agreement). However unlike the Master Servicer, the Master Document Custodian is an institution wholly independent from the Servicer and the Sponsor.
• There are exceptions to this rule in the world of Fannie Mae/Freddie Mac (“GSE”) securitizations. The GSE’s may allow selected large originators with great secure storage capabilities (in other words, large banks) to act as their own Master Document Custodians. But even in those cases, contracts make clear that the GSE Trustee, not the originator, is the owner of the Note and the mortgage loan.
• The Master Document Custodian must review all original documents submitted into its custody for strict compliance with the specifications set forth in the Custodial Agreement, and deliver exception reports to the Trustee and/or Master Servicer as to any required documents that are missing or fail to comply with those specifications.
• In so doing the Custodian must in effect confirm that for each loan in the Trust there is a “complete and unbroken chain of transfers and assignments of the Notes and Mortgages.”
• This does not necessarily require the Custodian to find assignments or endorsements naming the Depositor or the Trustee. The wording in the Master Document Custodial Agreement must be read closely. Defined terms such as “Last Endorsee” may technically allow the Custodian to approve files in which the last endorsement is from the Sponsor in blank, and no assignment to either the Depositor or the Trustee has been recorded in the local land records.
• In many private-label securitizations a single institution fulfills all of the functions related to document custody for the entire pool of loans. In these cases, the institution might be referred to simply as the “Custodian” and the governing document as the “Custodial Agreement.”

Typical transaction steps and documents (in private-label, non-GSE securitizations)

1. The Originator sells loans (one-by-one or in bundles) to the Securitizer (a/k/a the Sponsor) pursuant to a Mortgage Loan Purchase and Sale Agreement (MLPSA) or similarly-named document. The purpose of the MLPSA is to sell all right, title, claims, legal, equitable and any and all other interest in the loans to the Securitizer-Sponsor. For Notes endorsed in “blank” which are bearer instruments under the UCC, the MLPSA normally requires acceptance and delivery receipts for all such Notes in order to fully document the “true sale.” Frequently a form is prescribed for the acceptance and delivery receipt and attached as an exhibit to the MLPSA.

The MLPSA will contain representations, attestations and warranties as to the enforceability and marketability of each loan, and specify the purchaser’s remedies for a breach of any “rep” or “warrant.” The primary remedy is the purchaser’s right to require the seller to repurchase any loan materially and adversely affected by a breach. Among the defects and events covered by “reps” and “warrants” are “Early Payment Defaults,” commonly referred to as “EPD’s.” An EDP occurs if a loan becomes seriously (usually, 60 or more days) delinquent within a specified period of time after it has been sold to the Trust. The EDP covenants are always limited in time and normally only cover EDPs that occur within 12 to 18 months of the original sale. If an EDP occurs, then the Trust can force the originator to repurchase the EPD note and replace it with a note of similar static qualities (amount, term, type, etc.)

2. The Securitizer-Sponsor sells the loans to the Depositor. This takes place in another MLPSA very similar to the first one and the same documents are created and exchange with the same or similar terms. These are typically included as exhibits to the PSA.

3. Depositor, Trustee, Master Servicer and Servicer enter into a Pooling and Servicing Agreement (“PSA”) in which:

— the Depositor sells all right, title, legal, equitable and any other interest in the mortgage loans to the Trustee, with requirements for acceptance and delivery receipts, often including the prescribed form as an exhibit, in similar fashion to the MLPSA’s;

— the PSA creates the trust, appoints the Trustee, and defines the classes of securities (often called “Certificates”) that the trust will issue to investors and establishes the order of priority between classes of Certificates as to distributions of cash collected and losses realized with respect to the underlying loans (the highest rated Certificates are paid first and the lowest rated Certificates suffer the first losses-thus the basis for the term “structured finance”); and

— the Servicer, Master Servicer and Trustee establish the Servicer’s rights and duties, including limits and extent of a Servicer’s right to deal with default, foreclosure, and Note modifications. Some PSA’s include detailed loss mitigation or modification rules, and others limit any substantive modifications (such as changing the interest rate, reducing the principal debt, waiving default debt, extending the repayment term, etc.)

4. All parties including the Custodian enter into the Custodial Agreement in which:

• the Depositor agrees to cause the Notes and other specified key loan documents (usually including an unrecorded, recordable Assignment “in blank”)(NB that several recent courts have raised serious legal questions about the assignment of a real estate instrument in blank under such theories as the statute of frauds and whether or not an assignment in blank is in fact a “recordable” legal real estate document) to be delivered to the Custodian (with the Securitizer to do the actual physical shipment);
• the Custodian agrees to inspect the Notes and other documents and to certify in designated written documents to the Trustee that the documents meet the required specifications and are in the Custodian’s possession; and
• establishes a (supposedly exclusive) procedure and specified forms whereby the Servicer can obtain possession of any Note, Mortgage, Deed of Trust or other custodial document for foreclosure or payoff purposes.

Finding Documents on the S.E.C.’s website (the EDGAR filing system):

• If you know the name of the Depositor and the name of the Trust (e.g. “Time Bomb Mortgage Trust 2006-2”) that contains the loan in question, then the PSA and Custodial Agreement probably can be found on the SEC’s website (www.sec.gov):
• On the SEC home page look for a link to “Search for Company Filings” and then choose to search by “Company Name,” using the name of the Depositor. (Alternatively, click on the “Contains” button on the search page and then search by the series, i.e. 2006-2 in the above example.)
• Hopefully, this will enable you to find the Trust in question. If so, the PSA and the Custodial Agreement should be available as attachments to one or more of the earliest-filed forms (normally the 8-K) shown on the list of available documents. Sometimes the PSA is listed as a named document but other times you just look for the largest document in terms of megabytes filed with the 8-K form.
• The available documents also should include the Prospectus and/or Prospectus Supplement (Form 424B5) and the Free Writing Prospectus (“FWP”). The latter documents (at least the sections written in English, as opposed to the many tables of financial data) can be very helpful in providing a concise and straightforward description of the parties, documents, and transaction steps and detailed transactional graphs and charts in the particular deal. And because these are SEC documents, the information serves as highly credible evidence on these points, and the Court can take judicial notice of any document filed with the SEC.
• For securitizations created after January 1, 2006, SEC “Regulation AB” requires the parties to file a considerable amount of detailed information about the individual loans included in the Trust. This information may be filed as an Exhibit to the PSA or to a Form 8-K. This loan-level data typically includes loan numbers, interest rates, principal amount of loan, origination date and (sometimes) property addresses and thus can be very useful in proving that a particular loan is in a particular Trust.

Dealing with Notes and Assignments:

There are two basic documents involved in a residential mortgage loan: the promissory note and the mortgage (or deed of trust). For brevity’s sake these are referred to simply as the Note and the Mortgage.

A Note is: a contract to repay borrowed money. It is a negotiable instrument governed by Article 3 of the Uniform Commercial Code (UCC). The Note, by itself, is an unsecured debt. Notes are personal property. Notes are negotiated by endorsement or by transfer and delivery as provided for by the UCC. Notes are separate legal documents from the real estate instruments that secure the loans evidenced by the Notes by liens on real property.

A Mortgage is: a lien on, and an interest in, real estate. It is a security agreement. It creates a lien on the real estate as collateral for a debt, but it does not create the debt itself. The rights created by a Mortgage are classified as real property and these instruments are governed by local real estate law in each jurisdiction. The UCC has nothing to do with the creation, drafting, recording or assignment of these real estate instruments.

A Note can only be transferred by: an “Endorsement” if the Note is payable to a particular party; or by transfer of possession of the Note, if the Note is endorsed “in blank.” Endorsements must be written or stamped on the face of the Note or on a piece of paper physically attached to the Note (the Allonge). See UCC §3-210 through §3-205. The UCC does not recognize an Assignment as a valid means of transferring a Note such that the transferee becomes a “holder”, which is what the owners of securitized mortgage notes universally claim to be.

In most states, an Allonge cannot be used to endorse a note if there is sufficient room at the “foot of the note” for such endorsements. The “foot of the note” refers to the space immediately below the signatures of the borrowers. Also, if an Allonge is properly used, then it must describe the terms of the note and most importantly must be “permanently affixed” to the Note. Most jurisdictions hold that “staples” and “tape” do not constitute a “permanent” attachment. And, the Master Document Custodial Agreement may specify when an Allonge can be used and how it must be attached to the original Note.

Mortgage rights can only be transferred by: an Assignment recorded in the local land records. Mortgage rights are “estates in land” and therefore governed by the state’s real property laws. These vary from state to state but in general Mortgage rights can only be transferred by a recorded instrument (the Assignment) in order to be effective against third parties without notice.

In discussions of exactly what documents are required to transfer a “mortgage loan” confusion often arises between Notes versus Mortgages and the respective documents necessary to accomplish transfers of each. The issue often arises from the standpoint of proof: Has Party A proven that a transfer has occurred to it from Party B? Does Party A need to have an Assignment? The answer often depends on exactly what Party A is trying to prove.

Scenario 1: Party A is trying to prove that the Trustee “owns the loan.” Here the likely questions are, did the transaction steps actually occur as required by the PSA and as represented in the Prospectus Supplement, and are the Trustee’s ownership rights subject to challenge in a bankruptcy case?

The answers lie in the UCC and in documents such as:

• the MLPSA’s;
• conveyancing rules of the PSA (normally Section 2.01);
• transfer and delivery receipts (look for these to be described in the “Conditions to Closing” or similarly named section of MLPSA’s and the PSA);
• funds transfer records (canceled checks, wire transfers, etc);
• compliance and exception reports provided by the Custodian pursuant to the Master Document Custodial Agreement; and
• the “true sale” legal opinions.

Some of these documents may or may not be available on the SEC’s EDGAR system; some may be obtainable only through discovery in litigation. The primary inquiry is whether or not the documents, money and records that were required to have been produced and change hands actually do so as required, and at the times required, by the terms of the transaction documents.

Another question sometimes asked when examining the “validity” of a securitization (or in other words, the rights of a securitization Trustee versus a bankruptcy trustee) is, must the Note be endorsed to the Trustee at the time of the securitization? Here are some points to consider:

• Frequently the only endorsement on the Note is from the Securitizer-Sponsor “in blank” and the only Assignment that exists, pre-foreclosure, is from the Securitizer-Sponsor “in blank” (in other words, the name of the transferee is not inserted in the instrument and this space is blank).
• The concept widely accepted in the securitization world (the issuers and ratings agencies, and the law firms advising them) is that this form of documentation was sufficient for a valid and unbroken chain of transfers of the Notes and assignments of the Mortgages as long as everything was done consistently with the terms of the securitization documents. This article is not intended to validate or defend either this concept or this practice, nor is it intended to represent in any way that the terms of the securitization documents were actually followed to the letter in every real-world case. In fact, and unfortunately for the certificate holders and the securitized mortgage markets, there are many instances in many reported cases where these mandatory rules of the securitization documents have not been followed but in fact, completely ignored.
• Often shortly before foreclosure (or in some cases afterwards) a mortgage assignment is produced from the Originator to the Trustee years after the Trust has closed out for the receipt of all mortgage loans. Such assignments are inconsistent with the mandatory conveyancing rules of the Trust Documents and are also inconsistent with the special tax rules that apply to these special trust structures. Most state law requires the chain of title not to include any mortgage assignments in blank, but assignments from A to B to C to D. Under most state statutes, an assignment in blank would be deemed an “incomplete real estate instrument.” Even more frequent than A to D assignments are MERS to D assignments, which suffer from the same transfer problems noted herein plus what is commonly referred to as the “MERS problem.”

Scenario 2: Party B seeks to prove standing to foreclose or to appear in court with the rights of a secured creditor under the Bankruptcy Code. OK, granted the UCC (§3-301) does provide that a negotiable instrument can be enforced either by “(i) the holder of the instrument, or (ii) a non-holder in possession of the instrument who has the rights of a holder.”

• Servicers and foreclosure counsel have been known to contend that this is the end of the story and that the servicer can therefore do anything that the holder of the Note could do, anywhere, anytime.

• The Fannie Mae and Freddie Mac Guides contain many sections that appear to lend superficial support to this contention and frequently will be cited by Servicers and foreclosure counsel as though the Guides have the force of law, which of course they do not.

• There are many serious problems with this legal position, as recognized by an increasing number of reported court decisions.

Authors’ General Conclusions and Observations:

• Servicers and foreclosure firms are either wrong, or at least not being cautious, if they attempt to foreclose, or appear in court, without having a valid pre-complaint or pre-motion Assignment of the Mortgage. Yet at the same time, Servicers and note holders place themselves at risk of preference and avoidable transfer issues in bankruptcy cases if, for example, endorsements and Assignments that they rely upon to support claims to secured status occur or are recorded after or soon before bankruptcy filing.

• In addition any Servicer, Lender, or Securitization Trustee is either wrong, or at least not being cautious, if it ever: (1) claims in any communications to a consumer or to the Court in a judicial proceeding that it is the Note holder unless they are, at the relevant point in time, actually the holder and owner of the Note as determined under UCC law; or (2) undertakes to enforce rights under a Mortgage without having and recording a valid Assignment.
• The UCC deals only with enforcing the Note. Enforcing the Mortgage on the other hand is governed by the state’s real property and foreclosure laws, which generally contain crucial provisions regarding actions required to be taken by the “note holder” or “beneficiary.” State law may or may not authorize particular actions to be taken by servicers or agents of the holder of the Note.

• For the Servicer to have “the rights of the holder” under the UCC it must be acting in accordance with its contract. For example, if the Servicer claims to have possession of the Note, did it follow the procedures contained in the “Release of Documents” section of the Custodial Agreement in obtaining possession? Does the Servicer really have “constitutional” standing under either Federal or State law to enforce the Note even if it is a “holder” if it does not have any “pecuniary” or economic interest in the Note? In short, the concept of constitutional standing involves some injury in fact and it is hard to see how a mere “place-holder” or “Nominee” could ever over-come such a hurdle unless it actually owned the Note or some real interest in the same.

• The Servicer should have the burden of explaining the legal reasons supporting its standing and authority to act. Sometimes Servicers have difficulty maintaining a consistent story in this regard. Is the Servicer claiming to be the actual holder, or the holder and the owner, or merely an authorized agent of the true holder? If it is claiming some agency, what proof does it have to support such a claim? What proof is required? Sometimes this is just academic legal hair-splitting but many times it involves serious issues of fact. For example, what if the attorney for the Servicer asserts to the court that his or her client actually owns the Note, but the Fannie Mae website reports that Fannie is the owner? What if the MERS website reports that the Plaintiff is just the “Servicer?” What if the pre-complaint correspondence to the borrower names some entirely different party as the holder and indicated that the current plaintiff is only the Servicer?

• Finally, the Servicer always has an obligation to be factually accurate in borrower communications and legal proceedings, and to supervise employees and vendors and attorneys to assure that Note endorsements, Assignments of Mortgage, and affidavits are executed by persons with valid corporate authority, and not falsified nor offered for any improper purpose.

The focus of the default servicing industry must move from “how fast we can get things done” to “how honestly and accurately can we be in presenting the proper documentation to the courts and to the borrowers”. Judicial proceedings are not like NASCAR races where the fastest lawyer always wins. Judicial proceedings are all about finding the truth no matter how long it takes and regardless of the time and difficulties involved.

California Court Rules: MERS Can’t Foreclose, Citibank Can’t Collect

California Court Rules: MERS Can’t Foreclose, Citibank Can’t Collect

“Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is VOID under California Law.”

If you read that sentence and thought… “MERS,” then you’re already in the club. If you’ve never heard of MERS, and have no idea what is meant by being “in the club,” don’t worry, this is a club that just about every homeowner is invited to join. In fact, you may already be a member and not even know it.
MERS is the acronym used to describe Mortgage Electronic Registration Systems, Inc. Best I can tell, our friends in the mortgage banking industry created MERS to make it easier for banks and servicers to sell and transfer our mortgages at the speed of light during the real estate bubble. According to the company’s Website:
MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper. Our mission is to register every mortgage loan in the United States on the MERS®System.
MERS acts as nominee in the county land records for the lender and servicer. Any loan registered on the MERS®System is inoculated against future assignments because MERS remains the nominal mortgagee no matter how many times servicing is traded.

I have to tell you… I hate these guys already. Their attitude alone bothers me. I looked at pictures of their three top executives on their Website and thought to myself… “No way I’d be friends with these guys.” Probably not very fair of me, but as far as I’m concerned, when it comes to anything that talks like that and was created by the mortgage banking industry… “fair,” is where you go on Sunday to have popcorn and cotton candy. Just so we’re clear.
MERS, which is a company that I hear doesn’t even have employees, has been about as controversial as you get ever since houses started dropping like flies into foreclosure back in 2007-08. God forbid you find yourself losing your home to foreclosure, you’ll very likely find a representative from MERS looking smug and acting like the owner of your mortgage. But, MERS is not the owner of your mortgage, of course, and now a bankruptcy court judge in the Eastern District of California has officially said that he agrees.
MERS is a relatively new development in the mortgage world, and as the foreclosure crisis began the courts pretty much let them do whatever they wanted to do, as the party in interest in a foreclosure action.
But, that was before the foreclosures became a full fledged tsunami, and homeowners watched the bankers first get bailed out, and then pay out billions in bonuses before treating every single American homeowner/taxpayer who applied for a loan modification like insignificant garbage.
In response, homeowners, having been trained for over 200 years in the fine art of pushing back when shoved, went to their lawyers, and those lawyers started asking questions, as they are prone to do. Many started with questions like: “Who the heck is this MERS guy and why does he think he has any right to be foreclosing on my client’s home?”
For almost two full years, it seemed to me that judges, who frankly weren’t used to foreclosures being challenged, basically yawned and gave the house back to the bank. Then, starting about a year ago, give or take, things started to change. Judges started to listen to the points being raised as related to MERS showing up as the party in interest ready to foreclose, and the more the judges learned, the more they saw problems with what MERS was doing. As time went on the tide seemed to shift a bit and several decisions weren’t falling as MERS would have liked for one reason or another.
According to the company’s Website, MERS “is a proper party that can lawfully foreclose as the mortgagee and note-holder of a mortgage loan.” Here’s what it says on the MERS Website:
FORECLOSURES
(“MERS”) is In mortgage foreclosure cases, the plaintiff has standing as the holder of the note and the mortgage. When MERS forecloses, MERS is the mortgagee and it is the holder of the note because a MERS officer will be in possession of the original note endorsed in blank, which makes MERS a holder of the bearer paper.

But, in this latest decision, the bankruptcy judge in California didn’t agree, writing in his opinion:
“Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.”

Did you get that? Since MERS didn’t own the underlying note, it couldn’t transfer the beneficial interest of the Deed of Trust to Citibank.

According to several attorneys, this opinion should serve as legal basis to challenge a foreclosure in California that has been based on a MERS assignment. It could also be used when seeking to void any MERS assignment of the Deed of Trust, or the note, to a third party for purposes of foreclosure; and should be sufficient for a borrower to obtain a TRO against a Trustee’s Sale, and a Preliminary Injunction preventing any sale, pending litigation filed by the borrower that challenges a foreclosure based on a MERS assignment.
In this decision the court found that MERS was acting “only as a nominee,” under the Deed of Trust, and that there was no evidence of the note being transferred. The judge’s opinion in this case also said that “several courts have acknowledged that MERS is not the owner of the underlying note and therefore could not transfer the note, the beneficial interest in the deed of trust, or foreclose on the property secured by the deed”, citing cases of: In Re Vargas, California Bankruptcy Court; Landmark v. Kesler, Kansas decision as to lack of authority of MERS; LaSalle Bank v. Lamy, a New York case; and In Re Foreclosure Cases, the “Boyko” decision from Ohio Federal Court.
And the court concluded by stating:
“Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.”

Oh my… well, that really is something. MERS can’t foreclose and Citibank can’t collect? I believe you would have to say that MERS and Citibank were already in a hard place when the judge inserted a rock. MERS can’t foreclose and Citi can’t collect… I am absolutely loving this, I have to say, but I suppose giddy would be an inappropriate response, so I’ll just say, “how interesting”.
This decision means that if a foreclosing party in California, that is not the original lender, claims that payment is due under the note, and that they have the right to foreclose on the basis of a MERS assignment, they’re wrong… based on this opinion. The bottom line is that MERS has no authority to transfer the note because it never owned it, and that’s a view that even seems to be supported by MERS’ own contract, which says that “MERS agrees not to assert any rights to mortgage loans or properties mortgaged thereby”.
What this may mean to California’s homeowners in bankruptcy court…
· It should serve as a legal basis to challenge any foreclosure in California based on a MERS assignment.
· It should serve as the legal basis for voiding a MERS assignment of the Deed of Trust, or the note, to a third party for purposes of foreclosure.
· It should be an adequate basis for obtaining a TRO against a Trustee’s Sale
· It should be the basis for a Preliminary Injunction barring any sale pending litigation filed by the borrower that challenges a foreclosure based on a MERS assignment.
In addition, some lawyers believe that this ruling is relevant to borrowers across the country as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because this opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.
I don’t know about you, but I feel like watching a marching band. 76 trombones, baby, 76 trombones.
“Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is VOID under California Law.”

The Proof of Claim at issue, listed as claim number 5 on the court’s official
claims registry, asserts a $1,320,650.52 secured claim. The Debtor objects to
the Claim on the basis that the claimant, Citibank, N.A., did not provided any
evidence that Citibank has the authority to bring the claim, as required by
Federal Rule of Bankruptcy Procedure 3001(c), rendering the claim facially
defective.
The court’s review of the claim shows that the Deed of Trust purports to have
been assigned to Citibank, N.A. by Mortgage Electronic Registration Systems,
Inc. as nominee for Bayrock Mortgage Corporation on March 5, 2010. (Proof of
Claim No. 5 p.36-37, Mar. 19, 2010.) Debtor contends that this does not
establish that Citibank is the owner of the underling promissory note since the
assignor, Mortgage Electronic Registration Systems, Inc. (“MERS”), had no
interest in the note to transfer. Debtors loan was originated by Bayrock
Mortgage Corporation and no evidence of the current owner of the promissory
note is attached to the proof of claim. It is well established law in the
Ninth Circuit that the assignment of a trust deed does not assign the
underlying promissory note and right to be paid, and that the security interest
is incident of the debt. 4 WITKIN SUMMARY OF CALIFORNIA LAW, SECURED TRANSACTIONS IN REAL
PROPERTY §105 (10th ed).

MERS AND CITIBANK ARE NOT THE REAL PARTIES IN INTEREST
Under California law, to perfect the transfer of mortgage paper as collateral
the owner should physically deliver the note to the transferee. Bear v. Golden
Plan of California, Inc., 829 F.2d 705, 709 (9th Cir. 1986). Without physical
transfer, the sale of the note could be invalid as a fraudulent conveyance,
Cal. Civ. Code §3440, or as unperfected, Cal. Com. Code §§9313-9314. See ROGER
BERNHARDT, CALIFORNIA MORTGAGES AND DEEDS OF TRUSTS, AND FORECLOSURE LITIGATION §1.26 (4th
ed. 2009). The note here specifically identified the party to whom it was
payable, Bayrock Mortgage Corporation, and the note therefore cannot be
transferred unless the note is endorsed. See Cal. Com. Code §§3109, 3201, 3203,
3204. The attachments to the claim do not establish that Bayrock Mortgage
Corporation endorsed and sold the note to any other party.
TRANSFER OF AN INTEREST IN THE DEED OF TRUST ALONE IS VOID
MERS acted only as a “nominee” for Bayrock Mortgage under the Deed of Trust.
Since no evidence has been offered that the promissory note has been
transferred, MERS could only transfer what ever interest it had in the Deed of
Trust. However, the promissory note and the Deed of Trust are inseparable.
“The note and the mortgage are inseparable; the former as essential, the later
as an incident. An assignment of the note carries the mortgage with it, while
an assignment of the latter alone is a nullity.” Carpenter v. Longan, 83 U.S.
271, 274 (1872); accord Henley v. Hotaling, 41 Cal. 22, 28 (1871); Seidell v.
Tuxedo Land Co., 216 Cal. 165, 170 (1932); Cal. Civ. Code §2936. Therefore,
if on party receives the note an another receives the deed of trust, the holder
of the note prevails regardless of the order in which the interests were
transferred. Adler v. Sargent, 109 Cal. 42, 49-50 (1895).

Further, several courts have acknowledged that MERS is not the owner of the
underlying note and therefore could not transfer the note, the beneficial
interest in the deed of trust, or foreclose upon the property secured by the
deed. See In re Foreclosure Cases, 521 F. Supp. 2d 650, 653 (S.D. Oh. 2007);
In re Vargas, 396 B.R. 511, 520 (Bankr. C.D. Cal. 2008); Landmark Nat’l Bank
v. Kesler, 216 P.3d 158 (Kan. 2009); LaSalle Bank v. Lamy, 824 N.Y.S.2d 769
(N.Y. Sup. Ct. 2006). Since no evidence of MERS’ ownership of the underlying
note has been offered, and other courts have concluded that MERS does not own
the underlying notes, this court is convinced that MERS had no interest it
could transfer to Citibank.
Since MERS did not own the underling note, it could not transfer the beneficial
interest of the Deed of Trust to another. Any attempt to transfer the
beneficial interest of a trust deed with out ownership of the underlying note
is void under California law. Therefore Citibank has not established that it
is entitled to assert a claim in this case.
MULTIPLE CLAIMS TO THE BENEFICIAL INTEREST IN THE DEED OF TRUST AND OWNERSHIP
OF PROMISSORY NOTE SECURED THEREBY
Debtor also points out that four separate entities have claimed beneficial
ownership of the deed of trust. (Obj. to Claim 3-5, Apr. 6, 2010.) The true
owner of the underling promissory note needs to step forward to settle the
cloud that has been created surrounding the relevant parties rights and
interests under the trust deed.
DECISION
11 U.S.C. §502(a) provides that a claim supported by a Proof of Claim is
allowed unless a party in interest objects. Once an objection has been filed,
the court may determine the amount of the claim after a noticed hearing. 11
U.S.C. §502(b). Since the claimant, Citibank, has not established that it is
the owner of the promissory note secured by the trust deed, Citibank is unable
to assert a claim for payment in this case. The objection is sustained and
Claim Number 5 on the court’s official register is disallowed in its entirety,
with leave for the owner of the promissory note to file a claim in this case
by June 18, 2010.
The court disallowing the proof of claim does not alter or modify the trust
deed or the fact that someone has an interest in the property which can be
subject thereto. The order disallowing the proof of claim shall expressly so
provide.
The court shall issue a minute order consistent with this ruling.

eviction defense court documents

briefsamended ud answer

CABESAS-MOTION LIMINE

Cabesas-Notice and demrrure to complaint

Cabesas-Notice and Demurrer to cmplaint

CAPARAS, Herm UD Plaintiff’s MSC Brief

Dancy+Opening+Brief

Dancy+Opening+Brief-1

defendant michelle cabesas special interrogaroties to plaintiff fannie mae national association

Exerpts+from+1161a+UD+appellate+brief

Motion to Consolidate P & A

notice of demurrer to complaint

Notice of Motion to Consolidate

our points and authorities re mot to consol

plaintiff’s responses to request for admission- genuineness documents

CAPARAS, Herm UD Plaintiff’s MSC Brief

EXHIBITS COMPILATION
declaration of timothy mccandless in opp to mtn for summ judg
SEPARATE STATEMENT OF DISPUTED FACTS
EVIDENTIARY OBJECTION TO DECLARATION OF MAC JOHNSON

Cabesas-Notice and demrrure to complaint

Bombshell – Judge Orders Injunction Stopping ALL Foreclosure Proceedings by Bank of America; Recontrust; Home Loan Servicing; MERS et al

June 7, 2010 by TheWryEye
Filed under New World order

Leave a comment
0diggsdigg

Posted by Foreclosure Fraud on June 6, 2010
(St. George, UT) June 5, 2010 – A court order issued by Fifth District Court Judge James L. Shumate May 22, 2010 in St. George, Utah has stopped all foreclosure proceedings in the State of Utah by Bank of America Corporation, ; Recontrust Company, N.A; Home Loans Servicing, LP; Bank of America, FSB; http://www.envisionlawfirm.com. The Court Order if allowed to become permanent will force Bank of America and other mortgage companies with home loans in Utah to adhere to the Utah laws requiring lenders to register in the state and have offices where home owners can negotiate face-to-face with their lenders as the state lawmakers intended (Utah Code ‘ 57-1-21(1)(a)(i).). Telephone calls by KCSG News for comment to the law office of Bank of America counsel Sean D. Muntz and attorney Amir Shlesinger of Reed Smith, LLP, Los Angeles, CA and Richard Ensor, Esq. of Vantus Law Group, Salt Lake City, UT were not returned.

The lawsuit filed by John Christian Barlow, a former Weber State University student who graduated from Loyola University of Chicago and receive his law degree from one of the most distinguished private a law colleges in the nation, Willamette University founded in 1883 at Salem, Oregon has drawn the ire of the high brow B of A attorney and those on the case in the law firm of Reed Smith, LLP, the 15th largest law firm in the world.

Barlow said Bank of America claims because it’s a national chartered institution, state laws are trumped, or not applicable to the bank. That was before the case was brought before Judge Shumate who read the petition, supporting case history and the state statute asking for an injunctive relief hearing filed by Barlow. The Judge felt so strong about the case before him, he issued the preliminary injunction order without a hearing halting the foreclosure process. The attorney’s for Bank of America promptly filed to move the case to federal court to avoid having to deal with the Judge who is not unaccustomed to high profile cases and has a history of watching out for the “little people” and citizen’s rights.

The legal gamesmanship has begun with the case moved to federal court and Barlow’s motion filed to remand the case to Fifth District Court. Barlow said is only seems fair the Bank be required to play by the rules that every mortgage lender in Utah is required to adhere; Barlow said, “can you imagine the audacity of the Bank of America and other big mortgage lenders that took billions in bailout funds to help resolve the mortgage mess and the financial institutions now are profiting by kicking people out of them homes without due process under the law of the State of Utah.

Barlow said he believes his client’s rights to remedies were taken away from her by faceless lenders who continue to overwhelm home owners and the judicial system with motions and petitions as remedies instead of actually making a good-faith effort in face-to-face negotiations to help homeowners. “The law is clear in Utah,” said Barlow, “and Judge Shumate saw it clearly too. Mortgage lender are required by law to be registered and have offices in the State of Utah to do business, that is unless you’re the Bank of America or one of their subsidiary company’s who are above the law in Utah.”

Barlow said the Bank of America attorneys are working overtime filing motions to overwhelm him and the court. “They simply have no answer for violating the state statutes and they don’t want to incur the wrath of Judge Shumate because of the serious ramifications his finding could have on lenders in Utah and across the nation where Bank of America and other financial institutions, under the guise of a mortgage lender have trampled the rights of citizens,” he said.

“Bank of America took over the bankrupt Countrywide Home Loan portfolio June 3, 2009 in a stock deal that has over 1100 home owners in foreclosure in Utah this month alone, and the numbers keep growing,” Barlow said.

The second part of the motion, Barlow filed, claims that neither the lender, nor MERS*, nor Bank of America, nor any other Defendant, has any remaining interest in the mortgage Promissory Note. The note has been bundled with other notes and sold as mortgage-backed securities or otherwise assigned and split from the Trust Deed. When the note is split from the trust deed, “the note becomes, as a practical matter, unsecured.” Restatement (Third) of Property (Mortgages) § 5.4 cmt. a (1997). A person or entity only holding the trust deed suffers no default because only the Note holder is entitled to payment. Basically, “[t]he security is worthless in the hands of anyone except a person who has the right to enforce the obligation; it cannot be foreclosed or otherwise enforced.” Real Estate Finance Law (Fourth) § 5.27 (2002).

*MERS is a process that is designed to simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans. http://www.mersinc.org

Does MERS Registration and Mortgage Fractionalization Extinguish Mortgage Rights?

By: Cynthia Kouril Wednesday September 30, 2009 5:00 pm

Mortgage – Rev Dan Catt

The Kansas Court of Appeals has issued a decision that is both stunning in its own right, but also demonstrates the trend in courts all over this nation which spells HUGE changes in the real estate and mortgage landscape. Realtors and banksters take note:

In a long and thoughtful decision in the case of Landmark Nat’l Bank v. Kessler the Kansas Court of Appeals has held that MERS (Mortgage Electronic Registration Systems, Inc.) does not have standing to bring foreclosure actions on behalf of the owners of mortgage notes archived in its system.

Some background:

In the good old days, the legislatures of the various states set up a system for recording mortgages, usually in the County Clerk’s Office. Anyone wishing to know what obligations were imposed upon the real estate, like for instance a title search company, could go to the County Clerk’s Office and look up the block and lot number of the property and know who owned what, who owed what and to whom and whether there were any liens or mortgages on the property and who had what priority.

If you took out a mortgage from bank A, and A later resold your mortgage to refinance company B, well B would go to the County Clerk’s Office and record the transfer of the mortgage. Are you following me so far? B would also receive the original signature copy-the one where you wrote your name in blue ink-of the mortgage paperwork. In order to foreclose, the mortgagee/creditor is supposed to present the original documents in court as one way of proving that it is the true party to whom the debt is own and for whom the mortgage trust (the interest in the real estate) exists.

There are filing fees and costs to have a person go down to the County Clerk’s Office to record the mortgage transfer.

Some “genius” got the bright idea of forming a private entity to circumvent the government filing system; and “poof” MERS was born.

Banks pay a fee to “join” MERS. They then send all their mortgage records or at least their mortgage record information (MERS is very secretive about just how they do what they do) to MERS. MERS is supposed to keep track of the information about each mortgage. Then the mortgage gets split. The Promissory Note, that is the right to receive payments from the borrower, gets either sold or farmed out to a servicer who is paid “fees” to collect the payments and do other administrative tasks like manage any payments for taxes and the like out of escrow funds.

The mortgage deed or mortgage trust, that is the legal interest in the real estate that would normally give a lender the right to foreclose in the event of non-payment-may be sold to someone else. The payments themselves are “securitized” that is bundled with other mortgages and sold as Credit Backed Securities, which we now know as Wall Street Toxic Assets.

Up until recently when a homeowner fell behind in the mortgage payments and the it came time to foreclose, the servicer – who owned no interest whatsoever in the real estate – would appear as plaintiff and the lawyer would fill out an affidavit saying that the actual, blue ink signature, original copy of the mortgage documents were lost, or destroyed, but that the court should waive that requirement because MERS can appear on behalf of the owner of the right to foreclose and certify that the owner is somewhere in the MERS system. The transfers are not recorded in the County Clerk’s Office and all you will see is the transfer to MERS, if that, but not any subsequent transfers within MERS.

In the beginning, homeowners did not realize and often stipulated to waive presentation of the original documents. STUPID, STUPID, STUPID. Then a few wised up and found that their cases got postponed indefinitely. Not a “win” but at least they still had a roof over their heads for the time being.

Then banks got the bright idea of saying that MERS was the agent for the true owner. The Kansas decision says that won’t fly either.

BUT, now for the good part:

The court opined that

Indeed, an assignment of a mortgage without the debt transfers nothing. 55 Am. Jur. 2d, Mortgages § 1002. Thus, the mortgagee, who must have an interest in the debt, is the lender in a typical home mortgage.

Understand the possible implications of this. If other states take the same approach as Kansas, that means the splitting of the debt from the mortgage note effectively cancels the “mortgage interest” that is the power over the real property and converts the debt to a simple unsecured personal debt just on a promissory note. Which means they couldn’t take your house in foreclosure, though they can sue you personally on the debt, just like any other unsecured creditor can. I am assuming, without going to deep into it today, that as a personal debt, it may be dischargeable in bankruptcy. But we will have to wait for a few test cases to prove this.

What this also means is, that in the meantime, if you are trying to buy a house, you have to find out if your seller has a mortgage that may have been repackaged and lodged in MERS because you will have no way of knowing – since your title company cannot tell who actually might own the mortgage interest in your real estate if all the County Clerk’s records say is “MERS”.

This makes for a scary time for title insurers, I’m guessing.

There will be more on this case, I’m sure, it will just take some time to suss out all the ramifications.

Update: The NYTimes take on it.

Possession of the note “NO” recorded assignment “YES” civil code 2932.5 CARTER v. DEUTSCHE BANK NATIONAL TRUST COMPANY (N.D.Cal. 1-27-2010)

Some courts appear to have reasoned that plaintiff’s position
Page 29
would create an explicit conflict with the statute’s provisions.
The statute authorizes the “trustee, mortgagee, or beneficiary,
or any of their authorized agents” to initiate foreclosure. Cal.
Civ. Code § 2924(a)(1). Under California Civil Code
section 2924(b)(4), a “person authorized to record the notice of default
or the notice of sale” includes “an agent for the mortgagee or
beneficiary, an agent of the named trustee, any person designated
in an executed substitution of trustee, or an agent of that
substituted trustee.” Several courts have held that this language
demonstrates that possession of the note is not required,
apparently concluding that the statute authorizes initiation of
foreclosure by parties who would not be expected to possess the
note. See, e.g., Spencer v. DHI Mortg. Co., No. 090925,
2009 U.S. Dist. LEXIS 55191, *23*
24 (E.D. Cal. June 30, 2009)
(O’Neill, J.). However, the precise reasoning of these cases is
unclear.[fn14]
A second argument adopted by sister district courts is that
even if requiring possession of the promissory note does not
contradict the statute’s provisions, it nonetheless extends them,
and such extensions are impermissible. See, e.g., Bouyer v.
Countrywide Bank, FSB, No. C 085583,
2009 U.S. Dist. LEXIS 53940, *23*
24 (N.D. Cal. June 25, 2009). California courts have
described the statute as establishing a “comprehensive scheme”
for nonjudicial
foreclosures. Homestead Sav. v. Darmiento,
Page 30
230 Cal. App. 3d 424, 433 (1991)). Because this scheme “is intended to be
exhaustive,” California courts have refused to incorporate
additional obligations, such as allowing a debtor to invoke a
separate statutory right to cure a default. Moeller,
25 Cal. App. 4th at 834 (refusing to apply Cal. Civ. Code § 3275). The
California Supreme Court has similarly held that “[t]he rights
and powers of trustees in nonjudicial foreclosure proceedings
have long been regarded as strictly limited and defined by the
contract of the parties and the statutes.” I.E. Associates v.
Safeco Title Ins. Co., 39 Cal. 3d 281, 288 (1985). I.E.
Associates held that while a trustee has a statutory duty to
contact a trustor at the trustor’s last known address prior to
nonjudicial
foreclosure, the Court could not impose a further
duty to search for the trustor’s actual current address. Id.
District courts have applied I.E. Associates and Moeller to hold
that the trustee’s duties are “strictly limited” to those
contained specifically in the nonjudicial
foreclosure statute,
section 2924 et seq. See, e.g., Bouyer v. Countrywide Bank, FSB,
2009 U.S. Dist. LEXIS 53940, *23*
24 (N.D. Cal. June 25, 2009).
These courts have held that because section 2924 does not specify
that any party must possess the note, such possession is not
required. Id. Courts have similarly refused to require a trustee
“to identify the party in physical possession of the original
promissory note prior to commencing a nonjudicial foreclosure.”
Ritchie v. Cmty. Lending Corp.,
Page 31
2009 U.S. Dist. LEXIS 73216, *20 (C.D. Cal. Aug. 12, 2009).[fn15]
contained specifically in the nonjudicial
foreclosure statute,
section 2924 et seq. See, e.g., Bouyer v. Countrywide Bank, FSB,
2009 U.S. Dist. LEXIS 53940, *23*
24 (N.D. Cal. June 25, 2009).
These courts have held that because section 2924 does not specify
that any party must possess the note, such possession is not
required. Id. Courts have similarly refused to require a trustee
“to identify the party in physical possession of the original
promissory note prior to commencing a nonjudicial foreclosure.”
Ritchie v. Cmty. Lending Corp.,
Page 31
2009 U.S. Dist. LEXIS 73216, *20 (C.D. Cal. Aug. 12, 2009).[fn15]
Finally, while the above arguments have focused on and rejected
a requirement of production of the note, a series of opinions by
Judge Ishii have held that under California law, possession of
the note is not required either. Garcia v. HomEq Servicing Corp.,
2009 U.S. Dist. LEXIS 77697 *11 (E.D. Cal. Aug. 18, 2009), Topete
v. ETS Servs., LLC, 2009 U.S. Dist. LEXIS 77761 *10*
11(E.D. Cal. Aug. 18, 2009), Wood v. Aegis Wholesale Corp.,
2009 U.S. Dist. LEXIS 57151, *14 (E.D. Cal. July 2, 2009). These opinions
reason as follows. Under Cal. Civ. Code § 2932.5, when the
beneficial interest under the promissory note is assigned, the
assignee may exercise a security interest in real property
provided that the assignment is “duly acknowledged and recorded.”
See, e.g., Wood, 2009 U.S. Dist. LEXIS 57151 at *14. The Ninth
Circuit has applied California law to hold that promissory notes
arising out of real estate loans could be sold without transfer
of possession of the documents themselves. Id. (citing In re
Golden Plan of Cal., Inc., 829 F.2d 705, 707, 708 n. 2, 710 (9th
Cir. 1986)). Judge Ishii concluded that because a party may come
to validly own a beneficial interest in a promissory note without
possession of the promissory note itself, and because this
Page 32
interest, if recorded on the deed of trust, carries with it the
right to foreclose, possession of the promissory note is not a
prerequisite to nonjudicial
foreclosure. Id.
Having reviewed the arguments adopted by the district courts,
the court is left with the sense that reasonable minds could
disagree. Notably, I.E. Associates held that trustee’s duties are
“strictly limited” to those arising under the “statutes,” and a
reasonable jurist could conclude that the plural “statutes”
incorporates the Commercial Code. Although the Civil Code
authorizes a number of parties to initiate nonjudicial
foreclosure, it could be that whichever of those parties
possesses the note may foreclose.
At some point, however, the opinion of a large number of
decisions, while not in a sense binding, are by virtue of the
sheer number, determinative. I cannot conclude that the result
reached by the district courts is unreasonable or does not accord
with the law. I further note that this conclusion is not
obviously at odds with the policies underlying the California
statutes. The apparent purpose of requiring possession of a
negotiable instrument is to avoid fraud. In the context of
nonjudicial
foreclosures, however, the danger of fraud is
minimized by the requirement that the deed of trust be recorded,
as must be any assignment or substitution of the parties thereto.
While it may be that requiring production of the note would have
done something to limit the mischief that led to the economic
pain the nation has suffered, the great weight of authority has
reasonably concluded that California law does not
CARTER v. DEUTSCHE BANK NATIONAL TRUST COMPANY (N.D.Cal. 1-27-2010)

Page 33
impose this requirement.
While the court concludes that neither production nor
possession is required, the court need not decide whether this is
because promissory notes are not “negotiable instruments,” or
instead because Cal. Civ. Code § 2924 et seq. render the
Commercial Code inapplicable. The court leaves that question for
the California courts. The court solely concludes that neither
possession of the promissory note nor identification of the party
in possession is a prerequisite to nonjudicial
foreclosure.