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The Trustee sale can be set aside

20 Dec

Bank of America, N.A. v. La Jolla Group II, 129 Cal. App. 4th 706, 15 710,717 (5th Dist. 2005) (void foreclosure sale required rescission of trustee’s deed returning title to the status quo prior to the foreclosure sale); Dimock v. Emerald Properties, 81 Cal. App. 4th 868, 874 (4th Dist. 2000) (sale under deed of trust by former trustee void, and tender of the amount due is unnecessary).



The harshness of non-judicial foreclosure has been recognized. “The exercise of the power of sale is a harsh method of foreclosing the rights of the grantor.” Anderson v. Heart Federal Savings (1989) 208 Cal.App.3d 202, 6 215, citing to System Inv. Corporation v. Union Bank (1971) 21 Cal.App.3d 137, 153.  The statutory requirements are intended to protect the trustor from a wrongful or unfair loss of his property Moeller v. Lien (1994) 25 Cal.App.4th 822, 830; accord, Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 503; Lo Nguyen v. Calhoun (6th District 2003) 105 Cal.App.4th 428, 440, and a valid foreclosure by the private power of sale requires strict compliance with the requirements of the statute. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.179; Anderson v. Heart Federal Sav. & Loan Assn., 208 Cal. App. 3d 202, 211 (3d Dist. 1989), reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Bisno v. Sax (2d Dist. 1959) 175 Cal. App. 2d 714, 720.

It has been a cornerstone of foreclosure law that the statutory requirements, intending to protect the Trustor and or Grantor from a wrongful or unfair loss of the property, must be complied with strictly. Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182.   “Close” compliance does not count. As a result, any trustee’s sale based on a statutorily deficient Notice of Default is invalid (emphasis added). Miller & Starr, California Real Estate (3d ed.), Deeds of Trust and Mortgages, Chapter 10 §10.182; Anderson v. Heart Federal Sav. & Loan Assn. (3dDist. 1989) 208 Cal. App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989); Miller v. Cote (4th Dist. 1982) 127 Cal. App. 3d 888, 894; System Inv. Corp. v. Union Bank (2d Dist. 1971) 21 Cal. App. 3d 137, 152-153; Saterstrom v. Glick Bros. Sash, Door & Mill Co.(3d Dist. 1931) 118 Cal. App. 379.

Additionally, any Trustee’s Sale based on a statutorily deficient Notice of Trustee Sale is invalid.  Anderson v. Heart Federal Sav. & Loan Assn. (3d Dist. 1989) 11 208 Cal.App. 3d 202, 211, reh’g denied and opinion modified, (Mar. 28, 1989). The California Sixth District Court of Appeal observed, “Pursuing that policy [of judicial interpretation], the courts have fashioned rules to protect the debtor, one of them being that the notice of default will be strictly construed and must correctly set forth the amounts required to cure the default.” Sweatt v. The Foreclosure Co., Inc. (1985 – 6th District) 166 Cal.App.3d 273 at 278, citing to Miller v. Cote (1982) 127 Cal.App.3d 888, 894 and SystemInv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 152-153.

The same reasoning applies even to a Notice of Trustee’s Sale.  Courts will set aside a foreclosure sale when there has been fraud, when the sale has been improperly, unfairly, or unlawfully conducted, or when there has been such a mistake that it would be inequitable to let it stand. Bank of America Nat. Trust & Savings Ass’n v. Reidy (1940) 15 Cal. 2d 243, 248; Whitman v. Transtate Title Co.(4th Dist. 1985) 165 Cal. App. 3d 312, 322-323; In re Worcester (9th Cir. 1987) 811 F.2d 1224, 1228.  See also Smith v. Williams (1961) 55 Cal. 2d 617, 621; Stirton v. Pastor (4th Dist. 1960) 177 Cal. App. 2d 232, 234; Brown v. Busch (3d Dist. 1957) 152 Cal.App. 2d 200, 203-204.

English: Foreclosure auction 2007

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Challenge Your Lender… Now!

13 Dec

Don’t delay – Opt in to the follow Blog and gain access to over 680 ideas and posts to hold your Lender accountable new post every day!

Do you want to hold your lender responsible for their illegal actions?

Challenge Your Lender… Now!


My name is Timothy McCandless, and I’m here to tell you what most banks and mortgage loan servicers don’t want you to know: More than 65 million homes in the US may not be subject to foreclosure after all, and your home is very likely one of the “safe” homes. The reason these homes are not technically subject to foreclosure is because the lenders, mortgage companies, mortgage servicers, and title companies broke the law throughout the process of managing your loan, both at the inception of your loan and throughout the life of the loan. Because of their fraudulent actions, they are unable to produce a title for, or show ownership of, your property. This causes what we call a “defect of title”, and legally prohibits your lender or servicer from foreclosing, regardless of whether or not your loan is current.

This situation is all over the news, and now, starting today, you can learn how to protect yourself from unlawful foreclosure.


Most Mortgage Assignments are Illegal

In a major ruling in the Massachusetts Supreme Court today, US Bank National Association and Wells Fargo lost the “Ibanez case”, meaning that they don’t have standing to foreclose due to improper mortgage assignment. The ruling is likely to send shock waves through the entire judicial system, and seriously raise the stakes on foreclosure fraud. Bank stocks plummeted after this ruling. These assignments are what people need to challenge in their own mortgages.

I am prepared to show you the most amazing information on how you can actually Challenge Your Lender. Once you opt in for our free ebook (just enter your email address above and to the right), you’ll get immediate access to our first, very informative webinar, as well as to our free ebook. You’ll learn more about the Challenge Your Lender program, and more importantly, how the US mortgage system is rigged to take advantage of you and how to can fight back. My program will show you exactly how to get a copy of your loan documents that your lender or loan servicer currently has in their possession, and then how to begin examining these documents to learn more about how your lender, as well as other parties involved, has used your name and credit to make millions of dollars. Analyzing your loan documents is a crucial first step in beginning the Challenge Your Lender process.

Save your home from foreclosure

The information that you will be receiving in my free material and webinar will further your knowledge on what most lenders are doing to homeowners, and how you can save yourself from foreclosure. You will have the opportunity to acquire a free copy of my Challenge Your Lender workbook and learn how to begin building the paper trail that you will need to defend yourself and to prove the wrongdoings of your lender and loan servicer. Once you go through the workbook and listen in on the free webinar, you will be on top of your Challenge and ready to begin the program.

The Challenge Your Lender program will help put you in a position of power and control over your loan, and will allow you to decide what you would like to do with your property. This leverage will be advantageous when you begin negotiating your foreclosure. Most importantly, your lender or loan servicer should not be able to foreclose on you once you notify them that you have identified fraudulent activity. My program is your first step in saving your property from foreclosure.

Don’t wait – opt in today. Every day counts in the battle against your lender.

Best regards,

Foreclosure Fraud in a Nutshell why its FRAUD

7 Dec

Freddie Mac

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and How Newt Gingrich Abetted the Theft of Average Joe’s Home – by Bill ButlerThe untold story in the foreclosure crisis unfolding across America is that, following a foreclosure perpetrated by one of the October 2008 Bailout Banks (e.g. Bank of America, Citibank, JPMorgan, Wells Fargo) Fannie Mae or Freddie Mac suddenly appear as the record owner of Average Joe’s home. These federal government sponsored entities then go into local housing court and get a court order authorizing them to evict Joe. If Joe resists, these supposedly charitable institutions obtain a writ ordering the local sheriff to forcibly remove Joe from his home.

Newt Gingrich recently admitted to accepting $1.8 million from Freddie Mac ($25,0000 to $30,000 a month during one span of time) for advising this proto-fascist entity. Gingrich claims that he supports Fannie and Freddie because he believes the federal government “should have programs to help low income people acquire the ability to buy homes.” But Fannie and Freddie don’t do this and never have. When government “helps” someone by subsidizing the purchase of something (through easy credit or lower-than-market rates), it makes that something more expensive. Helping someone buy something that is overpriced because of your help is not help. Fannie/Freddie subsidies not only hurt the low income people they intend to help, they hurt everyone by subsidizing, and therefore distorting, the entire housing market. Fannie/Freddie’s charity has now taken a dark turn. Like their Depression-era New Deal predecessor the Regional Agricultural Credit Corp., Fannie/Freddie are now repossessing homes at an increasing and alarming rate.

Mr. Gingrich either does not understand economics – government subsidies make things more expensive, not less expensive, and therefore hurt their intended beneficiaries – or he is a vain, selfish, and cynical man with no interest in actually helping his neighbor.

You decide.


The facts indicate that the Federal Reserve “printed” at least 16 trillion dollars as part of the 2008 bailouts. The bigger questions, however, who got it, why and what did the Fed get in return? The Fed doesn’t just print money. It prints money to buy stuff. Most often this is U.S. Treasuries. That changed in October of 2008. In and after October 2008 the Fed printed new money to buy mortgage-backed securities (MBS) that were defaulting at a rapid rate. Want proof? Here is a link to the Federal Reserve balance sheet which shows that the Fed is holding over a trillion dollars in mortgage backed securities that it began acquiring in 2008.

Why is the Federal Reserve holding all these MBS? Because when “the market” collapsed in September of 2008, what really collapsed is the Fannie/Freddie/Wall Street mortgage “daisy chain” securitization scheme. As increasing numbers of MBS went into default, the purchasers of derivatives (naked insurance contracts betting on MBS default) began filing claims against the insurance writers (e.g. AIG) demanding payment. This started in February 2007 when HSBC Bank announced billions in MBS losses, gained momentum in June of 2007 when Bear Stearns announced $3.8 billion in MBS exposure in just one Bear Stearns fund, and further momentum with the actual collapse of Bear Stears in July and August of 2007. By September of 2008, the Bear Stearns collapse proved to be the canary in the coal mine as the claims on off-balance sheet derivatives became the cascading cross defaults that Alan Greenspan warned could collapse the entire Western financial system.

Part of what happened in October 2008 is that the Federal Reserve paid AIG’s and others’ derivative obligations to the insureds (pension funds, hedge funds, major banks, foreign banks) who held the naked insurance contracts guaranteeing Average Joe’s payments. To understand this, imagine that a cataclysmic event occurred in the U.S. that destroyed nearly every car in the U.S. and further that Allstate insured all of these cars. That is what happened to AIG. When the housing market collapsed and borrowers began defaulting on their securitized loans, AIG’s derivative obligations exceeded its ability (or willingness) to pay. So the Fed stepped in as the insurer of last resort and bailed out AIG (and probably others). When an insurer pays on a personal property claim, it has “subrogation” rights. This means when it pays it has the right to demand possession of the personal property it insured or seek recovery from those responsible for the loss. In Allstate’s case this is wrecked cars. In the case of AIG and the Fed, it is MBS. That is what the trillions of MBS on the Fed’s balance sheet represent: wrecked cars that Fannie and Freddie are now liquidating for scrap value.

Thank you Mr. Gingrich. Great advice.


To understand how it came to be that the Fed has paid Average Joe’s original actual lender (the MBS purchaser) and now Fannie and Freddie are trying to take Joe’s home, you first have to understand some mortgage law and securitization basics.

The Difference Between Notes and Mortgages

When you close on the purchase of your home, you sign two important documents. You sign a promissory note that represents your legal obligation to pay. You sign ONE promissory note. You sign ONE promissory note because it is a negotiable instrument, payable “to the order of” the “lender” identified in the promissory note. If you signed two promissory notes on a $300,000 loan from Countrywide, you could end up paying Countrywide (or one of its successors) $600,000.

At closing you also sign a Mortgage (or a Deed of Trust in Deed of Trust States). You may sign more than one Mortgage. You may sign more than one Mortgage because it does not represent a legal obligation to pay anything. You could sign 50 Mortgages relating to your $300,000 Countrywide loan and it would not change your obligation. A Mortgage is a security instrument. It is security and security only. Without a promissory note, a mortgage is nothing. Nothing.

You “give” or “grant” a mortgage to your original lender as security for the promise to pay as represented by the promissory note. In real estate law parlance, you “give/grant” the “mortgage” to the “holder” of your “promissory note.”

If you question my bona fides in commenting on the important distinction between notes and mortgages, I know what I am talking about. I tried and won perhaps the first securitized mortgage lawsuit ever in the country in First National Bank of Elk River v. Independent Mortgage Services, 1996 WL 229236 (Minn. Ct. App. No. DX-95-1919).

In FNBER v. IMS a mortgage assignee (IMS) claimed the ownership of two mortgages relating to loans (promissory notes) held by my client, the First National Bank of Elk River (FNBER). After a three-day trial where IMS was capably represented by a former partner of the international law firm Dorsey & Whitney, my client prevailed and the Court voided the recorded mortgage assignments to IMS. My client prevailed not because of my great skill but because it had actual, physical custody of the original promissory notes (payable to the order of my client) and had been “servicing” (receiving payments on) the loans for years notwithstanding the recorded assignment of mortgage. The facts at trial showed that IMS rejected the loans because they did not conform to their securitization parameters. In short, IMS, as the “record owner” of the mortgages without any provable connection to the underlying notes, had nothing. FNBER, on the other hand, had promissory notes payable to the order of FNBER but did not have “record title” to the mortgages. FNBER was the winner because its possession of and entitlement to enforce the notes made it the “legal owner” of the mortgages.

The lesson: if you have record title to a mortgage but cannot show that you have possession of and/or entitlement to enforce the promissory notes that the mortgage secures, you lose.

This is true for 62 million securitized loans.

Securitization – The Car That Doesn’t Go In Reverse

There is nothing per se illegitimate about securitization. The law has for a long time recognized the rights of a noteholder to sell off pro-rata interests in the note. So long as the noteholder remains the noteholder he has the right to exercise rights in a mortgage (take the house) when there is a default on the note. Securitization does not run afoul of traditional real estate and foreclosure law when the mortgage holder can prove his connection to the noteholder.

But modern securitization doesn’t work this way.

The “securitization” of a “mortgage loan” today involves multiple parties but the most important parties and documents necessary for evaluating whether a bank has a right to foreclose on a mortgage are:

(1) the Borrower (Average Joe);

(2) the Original Lender (Mike’s Baitshop and Mortgages or Bailey Savings & Loan – whoever is across the closing table from Joe);

(3) the Original Mortgagee (could be Mike’s B&M, but could be anyone, including Fannie’s Creature From the Black Lagoon, the mortgagee “nominee” MERS);

(4) the “Servicer” of the loan as identified in the PSA (usually a Bank or anyone with “servicer” in its name, the entity to whom Joe makes his payments);

(5) the mortgage loan “pooling and servicing agreement” (PSA) and the PSA Trust created by the PSA;

(6) the “PSA Trust” is the “special purpose entity” created by the PSA. The PSA Trust is the heart of the PSA. It holds all securitized notes and mortgages and also sells MBS securities to investors; and

(7) the “Trustee” of the PSA Trust is the entity responsible for safekeeping of Joe’s promissory note and mortgage and the issuer of MBS.

The PSA Servicer is essentially the Chief Operating Officer and driver of the PSA. Without the Servicer, the securitization car does not go. The Servicer is the entity to which Joe pays his “mortgage” (really his note, but you get it) every month. When Joe’s loan gets “sold” multiple times, the loan is not actually being sold, the servicing rights are. The Servicer has no right, title or interest in either the promissory note or the mortgage. Any right that the Servicer has to receive money is derived from the PSA. The PSA, not Joe’s Note or Joe’s Mortgage, gives the Servicer the right to take droplets of cash out of Joe’s monthly payments before distributing the remainder to MBS purchasers.

The PSA Trustee and the sanctity of the PSA Trust are vitally important to the validity of the PSA. The PSA promoters (the usual suspects, Goldman Sachs, Lehman Bros., Merrill, Deutchebank, Barclays, etc.) persuaded MBS purchasers to part with trillions of dollars based on the idea that they would ensure that Joe’s Note would be properly endorsed by every person or entity that touched it after Joe signed it, that they would place Joe’s Note and Joe’s Mortgage in the vault-like PSA Trust and the note and mortgage would remain in the PSA Trust with a green-eyeshade, PSA Trustee diligently safekeeping them for 30 years. Further, the PSA promoters hired law firms to persuade the MBS purchasers that the PSA Trust, which is more than100 percent funded (that is, oversold) by the MBS purchasers, was the real owner of Joe’s Note and Joe’s Mortgage and that the PSA Trust, using other people’s money, had purchased or soon would purchase thousands of similar notes and mortgages in a “true sale” in accordance with FASB 140.

The PSA does not distribute pool proceeds that can be tracked pro rata to identifiable loans. In this respect, in the wrong hands (e.g. Countrywide’s Angelo Mozilo) PSAs have the potential to operate like a modern “daisy chain” fraud whereby the PSA oversells the loans in the PSA Trust, thus defrauding the MBS investors. The PSA organizers also do not inform Joe at the other end of the chain that they have sold his $300,000 loan for $600,000 and that the payout to the MBS purchasers (and other derivative side-bettors) when Joe defaults is potentially multiples of $300,000.

The PSA organizers can cover the PSA’s obligations to MBS purchasers through derivatives. Derivatives are like homeowners’ fire insurance that anyone can buy. If everyone in the world can bet that Joe’s home is going to burn down and has no interest in preventing it, odds are that Joe’s home will burn down. This is part of the reason Warren Buffet called derivatives a “financial weapon of mass destruction.” They are an off-balance sheet fiat money multiplier (the Fed stopped reporting the explosive expansion of M3 in 2006 most likely because of derivatives and mortgage loan securitization fraud), and create incentive for fraud. On the other end of the chain, Joe has no idea that the “Lender” across the table from him has no skin in the game and is more than likely receiving a commission for dragging Joe to the table.

A serious problem with modern securitization is that it destroys “privity.” Privity of contract is the traditional notion that there are two parties to a contract and that only a party to the contract can enforce or renegotiate that contract. Put simply, if A and B have a contract, C cannot enforce B’s rights against A (unless A expressly agrees or C otherwise shows a lawful agency relationship with B). The frustration for Joe is that he cannot find the other party to his transaction. When Joe talks to his “bank” (really his Servicer) and tries to renegotiate his loan, his bank tells him that a mysterious “investor” will not approve. He can’t do this because they don’t exist, have been paid or don’t have the authority to negotiate Joe’s loan.

Joe’s ultimate “investor” is the Fed, as evidenced by the trillion of MBSs on its balance sheet. Although Fannie/Freddie purportedly now “own” 80 percent of all U.S. “mortgage loans,” Fannie/Freddie are really just the Fed’s repo agents. Joe has no privity relationship with Fannie/Freddie. Fannie, Freddie and the Fed know this. So they are using the Bailout Banks to frontrun the process – the Bailout Bank (who also have no cognizable connection to the note and therefore no privity relationship with Joe) conducts a fraudulent foreclosure by creating a “record title” right to foreclose and, when the fraudulent process is over, hands the bag of stolen loot (Joe’s home) to Fannie and Freddie.

Record Title and Legal Title

Virtually all 62 million securitized notes define the “Noteholder” as “anyone who takes this Note by transfer and who is entitled to receive payment under this Note…” Very few of the holders of securitized mortgages can establish that they both hold (have physical possession of) the note AND are entitled to receive payments on the notes. For whatever reason, if a Bailout Bank has possession of an original note, it is usually endorsed payable to the order of some other (often bankrupt) entity.

If you are a Bailout Bank and you have physical possession of an original securitized note, proving that you are “entitled to receive payment” on the note is nearly impossible. First, you have to explain how you obtained the note when it should be in the hands of a PSA Trustee and it is not endorsed by the PSA Trustee. Second, even if you can show how you obtained the note, explaining why you are entitled to receive payments when you paid nothing for it and when the Fed may have satisfied your original creditors is a very difficult proposition. Third, because a mortgage is security for payments due to the noteholder and only the noteholder, if you cannot establish legal right to receive payments on the note but have a recorded mortgage all you have is “record” title to the mortgage. You have the “power” to foreclose (because courts trust recorded documents) but not necessarily the legal “right” to foreclose. Think FNBER v. IMS.

The “robosigner” controversy, reported by 60 Minutes months ago, is a symptom of the banks’ problem with “legal title” versus “record title.” The 60 Minutes reports shows that Bailout Banks are hiring 16 year old, independent contractors from Backwater, Georgia to pose as vice presidents and sign mortgage assignments which they “record” with local county recorders. This is effective in establishing the Bailout Banks’ “record title” to the “mortgage.” Unlike real bank vice presidents subject to Sarbanes-Oxley, Backwater 16-year olds have no reason to ask: “Where is the note?”; “Is my bank the noteholder?”; or “Is my Bank entitled to receive payments on the note?”

The Federal Office of the Comptroller of the Currency and the Office of Thrift Supervision agree with this analysis. In April of 2011 the OCC and OTS reprimanded the Bailout Banks for fraudulently foreclosing on millions of Average Joe’s:

…without always ensuring that the either the promissory note or the mortgage document were properly endorsed or assigned and, if necessary, in the possession of the appropriate party at the appropriate time…

The OCC and OTS further found that the Bailout Banks “failed to sufficiently oversee outside counsel and other third-party providers handling foreclosure-related services.”

Finally, Bailout Banks consented to the OCC and OTS spanking by admitting that they have engaged in “unsafe and unsound banking practices.”

In these “Order and Consent Decrees,” the OCC and the OTS reprimanded all of the usual suspects: Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife, MERSCorp, PNC Bank, US Bank, Wells Fargo, Aurora Bank, Everbank, OneWest Bank, IMB HoldCo LLC, and Sovereign Bank.

Although the OCC and OTS Orders are essentially wrist slaps for what is a massive fraud, these orders at least expose some truth. In response to the OCC Order, the Fannie/Freddie-created Mortgage Electronic Registration Systems (MERS), changed its rules (see Rule 8) to demand that foreclosing lawyers identify the “noteowner” prior to initiating foreclosure proceedings.


Those of us fighting the banks began to see a disturbing trend starting about a year ago. Fannie and Freddie began showing up claiming title and seeking to evict homeowners from their homes.

The process works like this, using Bank of America as an example. Average Joe had a securitized loan with Countrywide. Countrywide, which might as well have been run by the Gambino family with expertise in “daisy chain” fraud, never followed the PSA, did not care for the original notes and almost never deposited the original notes in the PSA Trust. Countrywide goes belly up. Bank of America (BOA) takes over Countrywide in perhaps the worst deal in the history of corporate America, acquiring more liabilities than assets. Bank of America realizes that it has acquired a big bag of dung (no notes = no mortgages = big problem) and so sets up an entity called “BAC Home Loans LLP” whose general partner is another BOA entity.

The purpose of these BOA entities is to execute the liquidation the Countrywide portfolio as quickly as possible and, at the same time, isolate the liability to two small BOA subsidiaries. BOA uses BAC Home Loans LLP to conduct the foreclosure on Joe’s home. BAC Home Loans LLP feeds local foreclosure lawyers phony, robosigned documents that establish an “of record” transfer of the Countrywide mortgage to BAC Home Loans LLP. BAC Home Loans LLP, “purchases” Joe’s home at a Sheriff’s sale by bidding Joe’s debt owed to Countrywide. BAC Home Loans LLP does not have and cannot prove any connection to Joe’s note so BAC Home Loans LLP quickly deeds Joe’s property to Fannie and Freddie.

When it is time to kick Joe out of his home, Fannie Mae shows up in the eviction action. When compelled to show its cards, Fannie will claim title to Joe’s house via a “quit claim deed” or an assignment of the Sheriff’s Certificate of sale. Adding insult to injury, while Joe may have spent years trying to get BOA to “modify” his loan, and may have begged BOA for the right to pay BOA $1000 a month if only BOA will stop the foreclosure, Fannie now claims that BOA deeded Joe’s property to Fannie for nothing. That right, nothing. All county recorders require that a real estate purchaser claim how much they paid for the property to determine the tax value. Fannie claims on these recorded documents that it paid nothing for Joe’s home and, further, falsely claims that it is exempt because it is a US government agency. It isn’t. It is a government sponsored entity that is currently in conservatorship and run by the US government.

Great advice Newt.


It is apparent that the US government is so broke that it will do anything to pay its bills, including stealing Average Joe’s home.

That’s change that both Barack Obama and Newt Gingrich can believe in.


More and more courts are agreeing that the banks “inside” the PSA do not have legal standing (they have no skin in the game and so cannot show the necessary “injury in fact”), are not “real parties in interest” (they cannot show that they followed the terms of the PSA or are otherwise “entitled to enforce” the note) and that there are real questions of whether any securitized mortgage can ever be properly perfected.

The banks’ weakness is exposed most often in bankruptcy courts because it is there that they have to show their cards and explain how they claim a legal right, rather than the “of record” right, to foreclose the mortgage. More and more courts are recognizing that, without proof of ownership of the underlying note, holding a mortgage means nothing.

The most recent crack in the Banks’s position is evidenced by the federal Eight Circuit Court of Appeals’ decision in In Re Banks, No. 11-6025 (8th Cir., Sept. 13, 2011). In Banks, a bank attempted to execute a foreclosure within a bankruptcy case. The bank had a note payable to the order of another entity; that is, the foreclosing bank was “Bank C” but had a note payable to the order of “Bank B” and endorsed in blank by Bank B. The bank, Bank C, alleged that, because the note was endorsed in blank and “without recourse,” that it had the right to foreclose. The Court held that this was insufficient to show a sufficient chain of title to the note, reversed the lower court’s decision and remanded for findings regarding when and how Bank C acquired the note.

See also, In Re Aagard, No. 810-77338-reg (Bankr. E.D.N.Y., Feb. 10, 2011) (Judge Grossman slams MERS as lacking standing, working as both principal and agent in same transaction, and exposes MERS’ alleged principal US Bank as unable to produce or provide evidence that it is in fact the holder of the note); In Re Vargas, No. 08-17036SB (Bankr. C.D. Cal., Sept. 30, 2008) (Judge Bufford correctly applied rules of evidence and held that MERS could not establish right to possession of the 83-year old Mr. Vargas’ home through the testimony of a low-level employee who had no foundation to testify about the legal title to the original note); In Re Walker, Bankr. E.D. Cal. No. 10-21656-E-11 (May 20, 2010) (holding that neither MERS nor its alleged principal could show that they were “real parties in interest” because neither could provide any evidence of the whereabouts of, much less legal title to, the original note); Landmark v.Kesler, 216 P.2d 158 (Kan. 2009) (in this case the Kansas Supreme Court provides the most cogent state court analysis of the problem created by securitization – the “splitting” of the note and the mortgage and the real party in interest and standing problems that the holder of the mortgage has when it cannot also show that it has clean and clear legal title to the note); U.S. Bank Nat’l Ass’n v. Ibanez, 941 NE 40 (Mass. 2011), (the Massachusetts Supreme Court denied two banks’ attempts to “quiet title” following foreclosure because the banks’ proffered evidence did not show ownership of the mortgages – or for that matter, the notes – prior to the Sheriff’s sale); and Jackson v. MERS, 770 N.W.2d 489 (Minn. 2009) (this federal-gun-to-the-head – certified question from federal court asking for state court blessing of its already decided ruling – to the Minnesota Supreme Court is most notable for the courageous dissent of NFL Hall of Fame player and only popularly elected Justice Alan Page who opined that MERS should pound sand and obey state recording standards).

November 28, 2011

Bill Butler [send him mail] is a Minneapolis attorney and the owner of Butler Liberty Law.

Copyright © 2011 by Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Clouds on Title

19 Nov



ALTA Counsel Discusses Recourse for Homeowners in Foreclosure Scandal


Many homeowners who lost their homes over the past few years are wondering what the robo-signing scandal means for them. Steve Gottheim, ALTA’s Legislative Counsel, tells a reporter at NBC News that homeowners who purchased a house at a foreclosure sale should have obtained an Owner’s Title Insurance Policy.


The statements by Steve Gottheim, ALTA’s Legislative Counsel, are not doubt the last thing the four surviving major commercial members of the title insurance industry wanted publicly stated by a major player in that industry. In prior correspondence with the group and others we have expressed the potential affect and concerns the ongoing mortgage fraud foreclosure crisis has had upon the title insurance industry. The issue first appeared in a DIRT discussion relating to “insuring title to foreclosed properties in the face of litigation” back in mid-May of this year. It confirms what we had previously then stated. To which Ms. Charney replied (i) “the knowledge of the defects are open, notorious and obvious to all, the defect may be fatally defective . . . so egregious as to render the title serving as the underlying security for the debt to be defective and pass no insurable interest whatsoever along to the alleged assignee.” Professor Whitman then chimed in stating: “Bill – actually, I think you are right on target. There have been many questionable foreclosures, and in some cases the defects are doubtless sufficient to make the foreclosure either void or voidable (the latter meaning that the sale won’t be set aside if the property has passed to a BFP). Moreover, since the defects in many cases are a matter of public record, it could be very difficult for a buyer to satisfy a court that he is a BFP. To which he added (iii) “In time many of these sales are going to come back and bite the title insurers who insured them. Obviously, the industry would rather not call attention to this likelihood, but it is there all the same.” And again, (iv) “if the defect is curable, it is important the curing documents be placed of record for the benefit of future title examiners”. To which both I and the recent Report of the ACS concluded (v) “the burden of proving the right to foreclose must be placed on the foreclosing party; i.e., if a remote assignee or securitization trustee claims the right to foreclose, it must prove the legal basis for that claim. It cannot be the case that a remote party can claim the right to foreclose, with the property owner then forced to disprove its entitlement to that action.


The statements of the ALTA Legislative Counsel only confirm our prior warning. They

may be found at Questions for Homeowners in Foreclosure Scandal, NBC News | November 17, 2011.

Fighting Foreclosure in California

11 Nov

Using the Courts to Fight a California or Other Non-Judicial Foreclosure – 3-Stage Analysis – including a Homeowner Action to “Foreclose” on the Bank’s Mortgage Security Interest – rev.



California real property foreclosures are totally different from foreclosures in New York and many other states. The reason is that more than 99% of the California foreclosures take place without a court action, in a proceeding called a “non-judicial foreclosure”. Twenty-one states do not have a non-judicial foreclosure. [These states are CT, DE, FL, IL, IN, KS, KY, LA, ME, MD, MA, NE, NJ, NM, NY, ND, OH, PA, SC, UT, VT. – Source:] In California, the lending institution can go through a non-judicial foreclosure in about 4 months from the date of the filing and recording of a “Notice of Default”, ending in a sale of the property without any court getting involved. The California homeowner can stop the sale by making full payment of all alleged arrears no later than 5 days prior to the scheduled sale. Unlike a judicial foreclosure, the homeowner will have no right to redeem the property after the sale (“equity of redemption”, usually a one-year period after judicial foreclosure and sale). For a visual presentation of the timeline for California and other state non-judicial foreclosures, go to Visual Timeline for California Non-Judicial Foreclosures.

A 50-state analysis of judicial and non-judicial foreclosure procedures is available at 50-State Analysis of Judicial and Non-Judicial Foreclosure Procedures.]

The problem I am going to analyze and discuss is under what circumstances can a homeowner/mortgagor go into court to obtain some type of judicial relief for wrongful or illegal conduct by the lender or others relating to the property and mortgage. My discussion applies as to all states in which non-judicial foreclosures are permitted.

There are three distinct stages that need to be separately discussed. These stages are the borrower’s current situation. The three stages are:


  • Homeowner is not in any mortgage arrears [declaratory judgment action]
  • Homeowner is behind in mortgage payments – at least 5 days before auction [injunction action, which could even be called an action by a homeowner to “foreclose” upon or eliminate the lending institution’s mortgage security interest]
  • Property was sold at auction [wrongful foreclosure action]


I. Homeowner Is Not in any Mortgage Arrears [Declaratory Judgment Action]

As long as a homeowner keeps making the mortgage payments, and cures any occasional short-term default, the homeowner is in a position to commence an action in federal or state court for various types of relief relating to the mortgage and the obligations thereunder. One typical claim is a declaratory judgment action to declare that the mortgage and note are invalid or that the terms are not properly set forth. There are various other types of claims, as well. The filing of such an action would not precipitate a non-judicial foreclosure. Compare this to a regular foreclosure, in which the homeowner stops paying on the mortgage, gets sued in a foreclosure action, and then is able in the lawsuit to raise the issues (as “defenses”) which the California homeowner would raise as “claims” or “causes of action” in the lawsuit being discussed for this first stage.

II. Homeowner Is Behind in Mortgage Payments – at Least 5 Days before Auction [Injunction Action seeking TRO and Preliminary Injunction, which you might say is a homeowner’s own “foreclosure proceeding against the bank and its mortgage interest”]

This is the most difficult of the three stages for making use of the courts to oppose foreclosure. The reasons are: foreclosure and sale is apt to take place too quickly; the cost of seeking extraordinary (injunctive) relief is higher because of the litigation papers and hearing that have to be done in a very short period of time to obtain fast TRO and preliminary injunctive relief to stop the threatened sale; the cost of this expensive type of injunctive litigation is probably much higher for many homeowners than just keeping up the mortgage payments; and, finally, you would have to show a greater probability of success on the merits of the action than you would need to file a lawsuit as in Stage 1, so that the homeowner’s chances of prevailing (and getting the requested injunction) are low and the costs and risks are high.

Nevertheless, when the facts are in the homeowner’s favor, the homeowner should consider bringing his plight to the attention of the court, to obtain relief from oppressive lending procedures. The problem with most borrower-homeowners is that they do not have any idea what valid bases they may have to seek this kind of relief. What anyone should do in this case is talk with a competent lawyer as soon as possible, to prevent any further delay from causing you to lose an opportunity to fight back. You need to weigh the cost of commencing a court proceeding (which could be $5,000 more or less to commence) against the loss of the home through non-judicial foreclosure.


III. Property Was Sold at Auction [Wrongful Foreclosure Action]

If the property has already been sold, you still have the right to pursue your claims, but in the context of a “wrongful foreclosure” lawsuit, which has various legal underpinnings including tort, breach of contract and statute. This type of suit could not precipitate any foreclosure and sale of the property because the foreclosure and sale have already taken place. Your remedy would probably be monetary damages, which you would have to prove. You should commence the action as soon as possible after the wrongful foreclosure and sale, and particularly within a period of less than one year from the sale. The reason is that some of your claims could be barred by a short, 1-year statute of limitations.

If you would like to talk about any possible claims relating to your mortgage transaction, please give me a call. There are various federal and state statutes and court decisions to consider, with some claims being substantially better than others. I am available to draft a complaint in any of the 3 stages for review by your local attorney, and to be counsel on a California or other-state action “pro hac vice” (i.e., for the one case) when associating with a local lawyer.

Fannie Mae Foreclosure Lawyers Acted Improperly

10 Oct

Thumbnail image for Foreclosure.jpgHomeowners in Northern California have questioned the practices of Fannie Mae and Freddie Mac in foreclosure proceedings. If you are facing a foreclosure, you may be able to keep the property by filing for bankruptcy. You should consult with an attorney regarding your legal options.

After news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, Fannie Mae’s overseer started to scrutinize the conduct of its attorneys. The inspector general of the Federal Housing Finance Agency severely criticized the FHFA’s oversight of Fannie Mae and the practices of its foreclosure attorneys in a report issued Tuesday. “American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse,” Inspector General Steve Linick told the New York Times. “Increased oversight by F.H.F.A. could help to prevent these abuses.”

According to the New York Times, the report is the second in two weeks in which the inspector general has outlined lapses at both the Federal Housing Finance Agency and the companies it oversees Federal National Mortgage Assn (Fannie Mae) and Federal Home Loan Mortgage Corp (Freddie Mac). The agency has acted as conservator for the companies since they were taken over by the government in 2008. Its duty is to ensure that their operations do not pose additional risk to the taxpayers who now own them. The companies have tapped the taxpayers to cover mortgage losses totaling about $160 billion. The new report from the inspector general tracks Fannie Mae’s dealings with the law firms handling its foreclosures from 1997, when the company created its so-called retained attorney network. At the time, Fannie Mae was a highly profitable and powerful institution, and it devised the legal network to ensure that borrower defaults would be resolved with efficiency and speed.

The law firms in the network agreed to a flat-rate fee structure and pricing model based on the volume of foreclosures they completed. The companies that serviced the loans for Fannie Mae, were supposed to monitor the law firms’ performance and practices, the report noted

After receiving information from a shareholder in 2003 about foreclosure abuses by its law firms, Fannie Mae assigned its outside counsel to investigate, according to the report. That law firm concluded in a 2006 analysis that “foreclosure attorneys in Florida are routinely filing false pleadings and affidavits,” and that the practice could be occurring elsewhere. “It is axiomatic that the practice is improper and should be stopped,” the law firm said.

The inspector general’s report said that it could not be determined whether Fannie Mae had alerted its regulator, then the Office of Federal Housing Enterprise Oversight, to the legal improprieties identified by its internal investigation.

The inspector general said that both Fannie Mae and its regulator appear to have ignored other signs of problems in their foreclosure operations. For example, the Federal Housing Finance Agency did not respond to borrower complaints about improper actions taken by law firms in foreclosures received as early as August 2009, even though foreclosure abuse poses operational and financial risks to Fannie Mae.

The report cited a media report from early 2008 detailing foreclosure abuses by law firms doing work for Fannie Mae. Nevertheless, a few months later and just before its takeover by the government, Fannie Mae began requiring the banks that serviced its loans to use only those law firms that were in its network. By then, 140 law firms in 31 jurisdictions were in the group. Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices,.

Finally last fall, after an outcry over apparently forged foreclosure documents and other improprieties, the Federal Housing Finance Agency began investigating the company’s process. In a report issued early this year, it determined that Fannie Mae’s management of its network of lawyers did not meet safety and soundness standards. Among the reasons: the company’s controls to prevent or detect foreclosure abuses were inadequate, as was the company’s monitoring of the law firms. “If a law firm self-reported no issues as it processed cases,” the inspector general said, “then Fannie Mae presumed the firm was doing a good job.” The agency is still deciding how to handle the lawyer network, the inspector general said.

Officials at the housing agency have agreed with the recommendations in the inspector general’s report. Corinne Russell, a spokeswoman for F.H.F.A. said the agency was concluding its supervisory work in this area and would direct Fannie Mae to take necessary action when the work was completed.

In a response, the agency said that by Sept. 29, 2012, it would review its existing supervisory practices and act to resolve “deficiencies in the management of risks associated with default-related legal services vendors.”

If you are having problems with a loan or foreclosure, we provide free legal consultations for bankruptcy in San Francisco County, Sacramento County, Alameda County, Contra Costa County, San Mateo County, Santa Clara County, Stanislaus County, San Joaquin County, Marin County, Solano County and throughout Northern California. Contact us for a free legal consultation today.925-957-9797

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