Virginia Court Shoots Down “Splitting the Note” and “Double Recovery” Theories

Posted on April 15, 2010. Filed under: Banking, Case Law, Foreclosure Defense, Mortgage Law | Tags: , , , , , , |

In Forez v. Goldman Sachs Mortgage, Lexis 35099 (E.D Va. 2010) plaintiffs asserted that Defendants lacked “authority” to foreclose under Virginia’s non-judicial  foreclosure statutes. Second, Plaintiffs argued that loan  securitization bars foreclosure because securitization “splits” the Note from the  Deed of Trust or because “credit enhancements” related to securitized notes absolve borrowers of any liability under a  mortgage loan as a “doub1e recovery.”

The only problem was that there was no evidence the subject loan had been securitized. The loan had been originated by CTX Mortgage who had sold it to Goldman Sachs who subsequently sold it to Freddie Mac. The list of usual suspects included MERS as nominee for the lender and Litton as the servicer. Regardless, the court held that under Virginia law negotiation of a note or bond secured by a deed of trust or mortgage carries with it the security instrument without formal assignment or delivery. The court cited to Stimpson v. Bishop, 82 Va. 190, 200-01 (1886) (“It is undoubtedly true that a transfer of a secured debt carries with it the security without formal assignment or delivery.”). And in Williams v. Gifford, the Supreme Court of Virginia ruled:

[I]n Virginia, as to common law securities, the law is that both deeds of trust and mortgages are regarded in equity as mere securities for the debt and whenever the debt is assigned the deed of trust or mortgage is assigned or transferred with it.

139 Va. 779, 784, 124 S.E. 403 (1924).

“Thus, even if, as Plaintiffs assert without any factual support, there has been a so-called “split” between the Note and the Deed, the purchaser of the First Note, in this case GSMC and then Freddie Mac, received the debt in equity as a secured  party.”

The court further noted “federal law explicitly allows for the creation of mortgage-related securities, such as the Securities Act of 1933 and the Secondary Mortgage Market Enhancement Act of 1984. Indeed, pursuant to 15 U.S.C. § 77r-1, “[a]ny person, trust, corporation, partnership, association, business trust, or business entity . . . shall be authorized to purchase, hold, and invest in securities that are . . . mortgage related securities.” Id. § 77r-1(a)(1)(B). Foreclosures are routinely and justifiably conducted by trustees of securitized mortgages. Therefore, the court held “Plaintiffs arguments for declaratory judgment and quiet title based on the so-called “splitting” theory fail as a matter of law.”

According to Plaintiffs “any alleged obligation was satisfied, once the default was declared, because the various credit enhancement policies paid out making any injured party whole.” Plaintiffs averred that foreclosure on the Property to collect on payment owed under the First Note will result in a double recovery prohibited by Virginia statute and case law. However, the court went on to say that Plaintiffs’ double recovery argument against Defendants is based on false assumptions because neither MERS, Litton, nor Goldman own the Notes or securitized the Notes. Therefore, the court concluded, none of the named Defendants could receive a “double recovery,” assuming such claim existed.

Judge Claude Hilton reminded the Plaintiffs “no provision in the U.S. or Virginia Codes supports [their] argument that credit enhancements or credit default swaps (“CDS”) are unlawful. No decision from any court in any jurisdiction supports such a claim.”

Hilton further stated that “Plaintiffs’ double recovery theory ignores the fact that a CDS contract is a separate contract, distinct from Plaintiffs’ debt obligations under the reference credit (i.e. the Note). The CDS contract is a “bilateral financial contract” in which the protection buyer makes periodic payments to the protection seller. See Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 172 (2d Cir. 2004).”

If the credit event occurs, noted Hilton, the CDS buyer recovers according to the terms of the CDS contract, not the reference credit. “Any CDS “payout” is bargained for and paid for by the CDS buyer under a separate contract. See In re Worldcom, Inc. Sec. Litig., 346 F. Supp. 2d 628, 651 n.29 (S.D.N.Y. 2004) (explaining that a premium is paid on a swap contract to the seller for credit default protection, and if the default event does not occur, payer has only lost the premium).”

The court held that “CDS do not, as Plaintiffs suggest, indemnify the buyer of protection against loss, but merely allow parties to balance risk through separate third party contracts. Therefore, Plaintiffs’ “double recovery” argument fails as a matter of law.”

Dean Mostofi

National Loan Audits

301-867-3887

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IN RE DARRELL ROYCE SHERIDAN, SHERRY ANN SHERIDAN, Chapter 7 Debtors.

Posted on October 25, 2009. Filed under: bankruptcy, Case Law, Foreclosure Defense, Mortgage Law | Tags: , , , , , , , , , , , |

Sheridan_decision

In this Chapter 7 case, the trustee, Ford Elsaesser (“Trustee”), objects to amotion under § 362(d) for relief from the § 362(a) automatic stay.1 Motions under § 362(d) are common in bankruptcy cases.2 Most stay relief requests proceed promptly to entry of an order, after proper notice, without any objection.

However, changes in mortgage practices over the past several years have created a number of new issues. The one highlighted in this case is the standing of the moving creditor. Serial assignments of the mortgagee’s interest(s) and the securitization of mortgages have complicated what was previously a generally straight-forward standing analysis. Though many creditors provide in their motions adequate explanation and documentation of their standing to seek relief on real estate secured debts, Trustee challenges the adequacy of the subject motion in this case.

Following hearing and consideration of the arguments of the parties, the Court determines that Trustee’s objection is well taken and the same will be sustained. The motion for stay relief will be denied.

BACKGROUND AND FACTS

On June 24, 2008, Darrell and Sherry Ann Sheridan (“Debtors”) filed their joint chapter 7 bankruptcy petition, schedules and statements. They scheduled a fee ownership interest in a residence located in Post Falls, Idaho. See Doc. No. 1 at sched. A (the “Property”). Debtors asserted the Property’s value was $225,000.00. Id. They indicated secured claims existed in favor of “Litton Loan Servicing” ($197,000.00) and “Citimortgage” ($34,000.00). Id. at sched. D.

While this left no apparent equity in the Property, Debtors nevertheless claimed the benefit of an Idaho homestead exemption. Id. at sched. C.4

Sheridan_decision

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Deutsche Bank v. Debra Abbate Etal.

Posted on October 23, 2009. Filed under: Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , , , |

Deutsche Bank National Trust Company, AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CARRINGTON MORTGAGE LOAN TRUST 2005-OPT2, ASSET-BACKED CERTIFICATES, SERIES 2005-OPT2, Plaintiff

against

Debra Abbate, CARMELA ABBATE, KIM FIORENTINO, BOCCE COURT HOMEOWNERS ASSOCIATION, INC., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK CITY PARKING VIOLATIONS BUREAU, and “JOHN DOE No. 1″ through “JOHN DOE #10,” the last ten names being fictitious and unknown to the plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest in or lien upon the Mortgaged premises described in the Complaint, Defendants.

100893/07

Plaintiff was represented by the law firm of Frenkel Lambert Weiss & Weisman.

Defendant was represented by Robert E. Brown, Esq.

Joseph J. Maltese, J.

The defendants Kim Fiorentino, Debra Abbate, and Carmella Abbate’s motion to dismiss the plaintiff’s complaint is granted in its entirety.

This is an action to foreclose a mortgage dated February 24, 2005, upon the property located at 25 Bocce Court, Staten Island, New York. The mortgage was originated by Suntrust Mortgage Inc. (”Suntrust”) and was recorded in the Office of the Clerk of Richmond County on April 26, 2005. The plaintiff filed the Summons, Complaint, and Notice of Pendency on March [*2]1, 2007.[FN1] However, Suntrust assigned the first mortgage on this property to Option One Mortgage Corporation, which was executed on July 6, 2007. Another assignment to plaintiff Deutsche Bank National Trust Company (”Deutsche Bank”) was executed on March 7, 2007. Both assignments, which were recorded on July 23, 2007, contained a clause expressing their intention to be retroactively effective: the first one to date back to February 24, 2005, and the second one to February 28, 2007.[FN2] On November 19, 2007, this court issued an order of foreclosure and sale on the subject property. This court also granted two orders to show cause to stay the foreclosure on January 9, 2008 and April 8, 2008.[FN3]

Discussion

The Appellate Division, Second Department ruled and reiterated in Kluge v. Kugazy the well established law that “foreclosure of a mortgage may not be brought by one who has no title to it . . . .”[FN4] The Appellate Division, Third Department has similarly ruled that an assignee of a mortgage does not have a right or standing to foreclose a mortgage unless the assignment is complete at the time of commencing the action.[FN5] An assignment takes the form of a writing or occurs through the physical delivery of the mortgage.[FN6] Absent such transfer, the assignment of the mortgage is a nullity.[FN7]

Retroactive Assignments of a Mortgage are Invalid
The first issue this court must resolve is whether the clauses in the July 6, 2007 and March 7, 2007 assignments setting the effective date of the assignment to February 24, 2005 and February 28, 2007 respectively are permissible. This court rules that, absent a physical or written transfer before the filing of a complaint, retroactive assignments are invalid.

Recently, trial courts have been faced with the situation where the plaintiff commenced a [*3]foreclosure action before the assignment of the mortgage.[FN8] In those cases the trial courts have held,

. . . where there is no evidence that plaintiff, prior to commencing the foreclosure action, was the holder of the mortgage and note, took physical delivery of the mortgage and note, or was conveyed the mortgage and note by written assignment, an assignment’s language purporting to give it retroactive effect prior to the date of the commencement of the action is insufficient to establish the plaintiff’s requisite standing. . .[FN9]

In this case, the plaintiff failed to offer any admissible evidence demonstrating that they became assignees to the mortgage on or before March 1, 2007; as such, this court agrees with its sister courts and finds that the retroactive language contained in the July 26, 2007 and March 7, 2007 assignments are ineffective. This court therefore rules that it lacks jurisdiction over the subject matter when the plaintiff has no title to the mortgage at the time that it commenced the action.

The next issue this court must resolve is whether the defendants waived subject matter jurisdiction because they did not raise that issue in their prior applications to this court.

Affirmative Defense of Standing

At the outset of any litigation, the court must ascertain that the proper party requests an adjudication of a dispute.[FN10] As the first step of justiciability, “standing to sue is critical to the proper functioning of the judicial system.”[FN11] Standing is a threshold issue; if it is denied, “the pathway to the courthouse is blocked.” [FN12]

The doctrine of standing is designed to “ensure that a party seeking relief has a sufficiently cognizable stake in the outcome so as to present a court with a dispute that is capable [*4]of judicial resolution.”[FN13] “Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.”[FN14] Where the plaintiff has no legal or equitable interest in a mortgage, the plaintiff has no foundation in law or in fact.[FN15]

A plaintiff who has no standing in an action is subject to a jurisdictional dismissal since (1) courts have jurisdiction only over controversies that involve the plaintiff, (2) a plaintiff found to lack “standing is not involved in a controversy, and (3) the courts therefore have no jurisdiction of the case when such plaintiff purports to bring it.”[FN16]

On November 7, 2005, in the case of Wells Fargo Bank Minn. N.A. v. Mastropaolo [“Mastropaolo”], this court found that “Insofar as the plaintiff was not the legal titleholder to the mortgage at the time the action was commenced, [the Bank] had no standing to bring the action and it must be dismissed.”[FN17] Erroneously, this court “[o]rdered, that the plaintiff’s summary judgment motion is denied in its entirety and that this action is dismissed with prejudice.”[FN18]

This Court should have ordered that this matter was dismissed without prejudice, which would have given the plaintiff the right to start the action again after it had acquired title to the note and mortgage. Unfortunately, the plaintiff, did not seek a motion to reargue that error, which would have been corrected promptly. Instead, the plaintiff appealed the decision to the Appellate Division, Second Department, which rightfully reversed the decision 18 months later on May 29, 2007 based upon the dismissal with prejudice as opposed to a dismissal without prejudice to refile the action. However, in what appears to be dicta, the court went on to discuss whether lack of standing is tantamount to lack of subject matter jurisdiction. The court further stated that the failure of the initial pro se defendant to make a pre-answer motion or a motion to dismiss, the defense of lack of standing would be waived. But the Appellate Division did not address the issue of subject matter jurisdiction, which may not be waived. [*5]

In the instant case, this court is again faced with similar facts, which raise the issue that the Bank must have title to the mortgage before it can sue the defendant. Clearly, having title to the subject matter (the mortgage) is a condition precedent to the right to sue on that mortgage. This has always been the case, but since the Appellate Division, Second Department’s comments in Mastropaolo, that issue has been clouded.

At the time that the plaintiff improperly commenced the action, the pathway to the Courthouse should have been blocked. Deutsche Bank had no legal foundation to foreclose a mortgage in which it had no interest at the time of filing the summons and complaint. Lack of a plaintiff’s interest at the beginning of the action strips the court’s power to adjudicate over the action.[FN19] Lack of interest and controversy is protected by the umbrella of subject matter jurisdiction. Whenever a court lacks jurisdiction, a defense can be raised at any time and is not waivable.[FN20] In other words, for there to be a cause of action, there needs to be an injury. At the time that the action was commenced, the instant plaintiff suffered no injury and had no interest in the controversy. Since the plaintiff filed this action to foreclose the mortgage before it had title to it, there was no controversy between the existing parties when the action commenced. Therefore, the court lacked subject matter jurisdiction to adjudicate the present case. The defendants are consequently entitled to a dismissal without prejudice because the court lacked jurisdiction over a non-existent controversy.

Accordingly, it is hereby:

ORDERED, that the defendants Kim Fiorentino, Debra Abbate, and Carmella Abbate’s motion to dismiss the plaintiff’s complaint is granted, without prejudice to the plaintiff having the right to refile within the time provided by the Statute of Limitations; and it is further

ORDERED, that the parties and counsel shall appear before this court to further conference this matter on November 20, 2009 at 11:00AM.

ENTER,

DATED: October 6, 2009

Joseph J. Maltese

Justice of the Supreme Court

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Memoranda in Support of Motions to Dismiss Foreclosure

Posted on October 21, 2009. Filed under: Case Law, Foreclosure Defense | Tags: , , , , , , , , , , , , , |

2.3     Memoranda in Support of Motions to Dismiss Foreclosure

2.3.1  Memorandum in Support of Motion to Dismiss, Case #4

IN THE CIRCUIT COURT, FOURTH

JUDICIAL CIRCUIT, IN AND FOR

DUVAL COUNTY, FLORIDA.

CASE NO.:

DIVISION:

MORTGAGE ELECTRONIC REGISTRATION

SYSTEMS, INC.,

Plaintiff,

vs.

[DEFENDANT], DECEASED, ET AL

Defendants.

SEPARATE DEFENDANT, [SEPARATE DEFENDANT]’S MOTION TO CANCEL SUMMARY JUDGMENT HEARING, DISMISS PLAINTIFF’S COMPLAINT, OR IN THE ALTERNATIVE, MOTION FOR MORE DEFINITE STATEMENT

The Separate Defendant, [Separate Defendant],by and though her undersigned attorney, files this motion to cancel the summary judgment hearing, and dismiss the Plaintiff’s Complaint for failure to join an indispensable party, or in the alternative, for more definite statement, pursuant to Rules 1.460,  1.210(a), 1.130(a) and 1.140(b)(7) of the Florida Rules of Civil Procedure and states:

1.  This defendant was not able to access legal representation prior to her contact with Attorney [Attorney for Defendant] of Jacksonville Area Legal Aid, Inc., on February 23,

2.  This separate defendant was served with a summons and complaint in this foreclosure action on January 1, 2005 and she was noticed for the February 24, 2005 summary judgment hearing on January 24, 2005.

3.  Counsel for Defendant has made known to Plaintiff’s attorney this request for continuance of the scheduled hearing so that this defendant is able to have the benefit of legal representation to defend and protect her interests in this residential foreclosure.  However, counsel for plaintiff advises that he does not have authority without further contact with the plaintiff to consent to such continuance.

5.  No prejudice will result to Plaintiff because of this Motion for Continuance.

WHEREFORE, for the above stated reasons, Defendants request that the Court grant a continuance of the hearing on the Plaintiff’s Motion for Summary Final Judgment.

MOTION TO DISMISS PLAINTIFF’S COMPLAINT, OR IN THE ALTERNATIVE, MOTION FOR MORE DEFINITE STATEMENT

1.   This separate defendant is the owner of the property which is the subject of this mortgage foreclosure Complaint.  She requests the Court dismiss this action pursuant to Rule 1.210(a) and 1.140(7), because it appears on the face of the Complaint that a person other than the Plaintiff is the true owner of the claim sued upon and that the Plaintiff is not the real party in interest and is not shown to be authorized to bring this action.  In re: Shelter Development Group, Inc., 50 B.R. 588 (Bankr.S.D.Fla. 1985) [It is axiomatic that a suit cannot be prosecuted to foreclose a mortgage which secures the payment of a promissory note, unless the Plaintiff actually holds the original note, citing Downing v. First National Bank of Lake City, 81 So.2d 486 (Fla. 1955)],  See also 37 Fla. Jur. Mortgages and Deeds of Trust §240 (One who does not have the ownership, possession, or the right to possession of the mortgage and the obligation secured by it, may not foreclose the mortgage)

2.         Fla.R.Civ.P. Rule 1.130(a) requires a Plaintiff to attach copies of all “bonds, notes, bills of exchange, contracts, accounts, or documents upon which action may be brought” to its complaint.  The plaintiff has failed to attach a copy of the Promissory Note upon which its claim is based and the assignment attached to plaintiff’s complaint is only an assignment of the mortgage and not the note.  The assignment attached to the plaintiff’s complaint conflicts with the allegation in paragraph 3 of the plaintiff’s complaint which alleges that the assignment is of the mortgage and the promissory note.

.           3.         Fla.R.Civ.P. Rule 1.310(b) provides that all exhibits attached to a pleading shall be considered a part of the pleading for all purposes.  It appears on the face of MERS’ Complaint that it is not the proper party to bring this action

4.  Further, although the plaintiff names itself in the complaint as “Mortgage Electronic Registration Systems, Inc., as Nominee For Homecomings Financial Network, Inc.” the documents attached to the plaintiff’s complaint conflict and therefore cancel out said allegations.

5.    In this case, MERS’ allegations of material facts claiming it is the owner of the subject note are inconsistent with the documents attached to the Complaint.   Further, MERS has alleged it does not have the original promissory note.  When exhibits are inconsistent with the plaintiff’s allegations of material fact as to who the real party in interest is, such allegations cancel each other out. Fladell v. Palm Beach County Canvassing Board, 772 So.2d 1240 (Fla. 2000); Greenwald v. Triple D Properties, Inc., 424 So. 2d 185, 187 (Fla. 4th DCA 1983); Costa Bella Development Corp. v. Costa Development Corp., 441 So. 2d 1114 (Fla. 3rd DCA 1983).

6.  Rule 1.210(a) of the Florida Rules of Civil Procedure provides, in pertinent part:

“Every action may be prosecuted in the name of

the real party in interest, but a personal representative,

administrator, guardian, trustee of an express trust, a party

with whom or in whose name a contract has been made for

the benefit of another, or a party expressly authorized by

statute may sue in that person’s own name without joining

the party for whose benefit the action is brought…”

The plaintiff in this action meets none of these criteria.

7.  The plaintiff must allege that it is the owner and holder of the note and mortgage in question in order to be entitled to maintain an action on the note and mortgage which the plaintiff has not properly alleged in this case. Your Construction Center, Inc. v. Gross, 316 So. 2d 596 (Fl. 4th DCA 1975)

8. Plaintiff Mortgage Electronic Registration Systems, Inc. (“MERS”) does not have standing to pursue this action.  Standing depends on whether a party has a sufficient stake in a justiciable controversy, whether a legally cognizable interest would be affected by the outcome of the litigation.  Nedeau v Gallagher 851 So.2d 214, 2003 Fla. App. LEXIS 9762, 28 Fla. L. Weekly D 1537 (1st District, 2003).

9.  Standing encompasses not only the “sufficient stake” definition, but at the at least equally important requirement that the claim be brought by or on behalf of one who is recognized by the law and a “real party in interest”, that is “the person in whom rests, by substantive law, the claim sought to be enforced.  Kumar Corp. v Nopal Lines, Ltd, et al 462 So. 2d 1178, 1985 Fla.App.  LEXIS 11940.41U.C.C. Rep. Serv. (Callaghan) 69; 10 Fla. L. Weekly 189 (3rd District1985).

10. It is axiomatic that a suit cannot be prosecuted to foreclose a mortgage which secures the payment of a promissory note, unless the Plaintiff actually holds the original note. A Plaintiff that does not hold the original notes sued has no standing and such action must be dismissed with prejudice Shelter Development Group v. MMA of Georgia, Inc 50 B.R. 588 (USBC, S.D. Florida 1985) Downing v. First National Bank of Lake City, , 81 So. 2d 486, (Fla., 1955) Tamiami Abstract and Title Company v.  Berman, 324 So. 2d 137 (Fla 3rd DCA> 1975) Laing v. Gainey Builders, Inc. 184 So. 2d 897 (Fla. 1st DCA 1966).  See also Davanzo v. Resolute Insurance Company, et al. 346 So.2d 1227, 1977 Fla.App. LEXIS 16014  (One who holds legal title to a mortgaged property is an indispensable party in suit to foreclose a mortgage).

WHEREFORE, this separate defendant requests the Court to dismiss the Plaintiff’s complaint with prejudice; or alternatively to order the Plaintiff to add the owner and holder of the subject note and mortgage as an indispensable party to this foreclosure action, and award this defendant attorney’s fees and all other relief to which she proves herself entitled.

CERTIFICATE OF SERVICE

The undersigned certifies that a true copy of this document has been faxed and mailed by U.S. Mail to [Attorney for Plaintiff] this _______________________________.

JACKSONVILLE AREA LEGAL AID, INC.,

____________________________________

[Attorney for Separate Defendant]

Attorneys for Separate Defendant

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Ruling by judges rattles mortgage industry

Posted on October 4, 2009. Filed under: Banking, bankruptcy, Case Law, Foreclosure Defense, Loan Modification, Mortgage Audit, Mortgage Fraud, Mortgage Law | Tags: , , , , , , , , , , , , |

A bankruptcy judge here, joining judges across the country, is throwing a bit of sand in the gears of the mortgage machine and its ruthless foreclosure blade.

She has raised this issue: In many home foreclosures springing out of bankruptcy proceedings, the foreclosure is being triggered by a representative of the lender — a surrogate that may not have a legal, equity stake in the proceedings.

As a result, it is conceivable — though still something of a legal long shot — that the homeowner who is filing for bankruptcy protection could end up saving his house.

The argument that a lender’s surrogate can’t trigger foreclosure has drawn notice of Nevada homeowners, who are preparing a class action lawsuit. They are seeking a preliminary injunction this month to stop their foreclosures.

First, some background:

Law and custom have long required that property transactions be recorded with a county clerk or “recorder of deeds,” along with information about the person who holds the mortgage, and, if there are multiple mortgages, the place in line of each creditor.

For big lenders, tracking that information in hundreds of jurisdictions across the country was an onerous process, so the biggest, including Fannie Mae and Freddie Mac, set up a company that would do it all electronically. It is called Mortgage Electronic Registration Systems and is recognized by its acronym.

The MERS name wound up on millions of mortgages, including more than 987,000 in Nevada alone, according to the company.

via Ruling by judges rattles mortgage industry – Saturday, Oct. 3, 2009 | 2 a.m. – Las Vegas Sun.

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Massive Relief for Homeowners and Trouble for Banks

Posted on September 23, 2009. Filed under: Bailout, Banking, Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law, Predatory Lending | Tags: , , , , , , , , , , , , |

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose — on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

Eliminating the “Straw Man” Shielding Lenders and Investors from Liability

The development of “electronic” mortgages managed by MERS went hand in hand with the “securitization” of mortgage loans — chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into “financial products” called “collateralized debt obligations” (CDOs), ostensibly insure them against default by wrapping them in derivatives called “credit default swaps,” and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of “corporate shield” that protects investors from claims by borrowers concerning predatory lending practices. California attorney Timothy McCandless describes the problem like this:

via Ellen Brown: Landmark Decision Promises Massive Relief for Homeowners and Trouble for Banks.

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U.S. partners in home loan modifications accused of broad abuses

Posted on August 9, 2009. Filed under: Foreclosure Defense, Fraud, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: , , , , , , , , , , , , , , , , , |

WASHINGTON — Billions of dollars that the government is spending to help financially pressed homeowners avert foreclosure are passing through — and enriching — companies accused of preying on the people they are supposed to help, an Associated Press investigation has found.The companies, known as mortgage servicers, collect monthly payments from homeowners and funnel the money to the banks or investors who hold the loans. As the link between borrowers and lenders, they’re in the best position to rework the terms of loans under the government’s$50 billion mortgage-modification program.The servicers are paid by the government if the changes keep home-owners from falling behind on payments for at least three months.But the industry has a checkered history. At least 30 servicers have been accused in lawsuits of harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies. More recently, the companies also have been criticized for not helping homeowners quickly enough.The biggest players in the servicing industry — Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. — all face litigation.But the industry’s smaller players, which specialize in riskier subprime loans and loans already in default, face harsher accusations that they systematically abused borrowers.

More…

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Washington Mutual v. Raymond & Rhonda Payne

Posted on July 8, 2009. Filed under: Case Law, Foreclosure Defense, Housing, Mortgage Law | Tags: , , , , , , , , , , , , , , , , |

WASHINGTON MUTUAL BANK, NA, Plaintiff,
v.
RAYMOND R. PAYNE AND RHONDA K. PAYNE, Defendants.

Supreme Court, Suffolk County.
Decided June 15, 2009.
Shapiro & DiCaro, LLP, Rochester, NY, Attys. for Plaintiff.
David Gevanter, ESQ., Hicksville, NY, Attys. for Defendants.
THOMAS F. WHELAN, J.
ORDERED that this motion (#004) by defendant, Raymond R. Payne, for an order staying the public sale of the subject premises, vacating the judgment of foreclosure and sale and dismissing the complaint is considered under CPLR 5015 and is denied.

The plaintiff obtained a judgment of foreclosure and sale in this action on December 1, 2003. Prior thereto, the default on the part of the mortgagor defendants (Raymond and Rhonda Payne) was fixed and determined in an order appointing a referee to compute amounts due under the mortgage. For reasons not reflected in the record adduced on the instant motion, the public sale contemplated by the December 1, 2003 judgment has not yet been consummated.
By prior motion returnable February 23, 2007, the mortgagor/defendants, Raymond R. Payne and Rhonda Payne, moved to stay any impending sale of the premises, for a vacatur of the judgment of foreclosure and sale and dismissal of the complaint on the grounds that the plaintiff failed to acquire personal jurisdiction over them by due service of the summons and complaint. By order dated September 28, 2007, this court denied that application without a hearing, finding that the same was unmeritorious.
By the instant motion, defendant, Raymond R. Payne, moves again for a stay of the impending sale of the subject premises, an order vacating the judgment of foreclosure and sale and dismissal of the complaint pursuant to CPLR 5015. Although the order to show cause by which this motion was interposed lists several grounds for the requested relief, including improper service of the summons and complaint, the gravamen of the defendant’s demands for relief rest upon claims that the plaintiff lacked standing to commence and maintain this action due to its lack of ownership of the subject note and mortgage at the time of commencement of this action. For the reasons set forth below the motion is denied.
Recent case authorities emanating from the Second Department have held that the issue of the plaintiff’s standing is not a matter of subject matter jurisdiction but rather, is more akin to the issue of the plaintiff’s capacity to sue. In Wells Fargo Bank Minnesota National Association v Mastropaolo, 42 AD3d 239, 837 NYS2d 247 (2d Dept 2003), the Appellate Division, Second Department, instructed that “[w]here standing is put into issue by a defendant’s answer, a plaintiff must prove its standing if it is to be entitled to relief (see TPZ Corp. v Dabbs, 25 AD3d 787, 789, 808 NYS2d 746 [2d Dept 2006]; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769, 570 NYS2d 778 [1991] [standing is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation’ [emphasis added])”.
Continuing, the Court in Mastropaolo instructed that “where a defendant does not challenge a plaintiff’s standing, the plaintiff may be relieved of its obligation to prove that it is the proper party to seek the requested relief”. The Court went on to hold that “an argument that a plaintiff lacks standing, if not asserted in the defendant’s answer or in a pre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211(e)” [citations omitted]). (see Wells Fargo Bank Minn., NA v Mastropaolo, 42 AD3d 239, 242, 837 NYS2d 247, 250).
More recently, the Appellate Division, Second Department held that a defaulting defendant who moves for vacatur of a judgment of foreclosure and sale and a dismissal of the complaint on the grounds that the plaintiff was without standing to prosecute its claims for foreclosure and sale due to its lack of ownership of the note and mortgage, could not prevail on such application because said defendant waived the standing defense by failing to assert it in an answer or by way of a pre-answer motion to dismiss under CPLR 3211 (see HSBC Bank v Dammond, 59 AD3d 679, 875 NYS2d 490
Page 3
[2d Dept 2009]).

Since the moving defendant here has taken the same position as the unsuccessful movant in Dammond, this court denies defendant’s motion to vacate the judgment of foreclosure and sale on the grounds that the plaintiff lacked standing to prosecute that claim.
To the extent that this motion may be read as one for a stay of the sale, a vacatur of the December 3, 2003 judgment and a dismissal of the complaint on the grounds of lack of personal jurisdiction, it is denied. This second application for such for relief by the moving defendant, Raymond R. Payne, is procedurally improper and substantively insufficient in light of his prior, unsuccessful application for the same relief and the absence of any proof whatsoever, in support thereof.

Equally unavailing are the vague and conclusory claims of fraud which said defendant now asserts by his counsel against the plaintiff (see Wells Fargo Bank v Linzenberg, 50 AD3d 674, 853 NYS2d 912 [2d Dept 2008]; Aames Capital Corp. v Davidsohn, 24 AD3d 474, 808 NYS2d 229 [2d Dept 2005]).

In view of the foregoing, the instant motion is in all respects denied.

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Why banks want you all alone when negotiating a loan modification

Posted on July 5, 2009. Filed under: Banking, bankruptcy, Case Law, Foreclosure Defense, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Law, Politics, Predatory Lending, Refinance | Tags: , , , , , , , , , , , , , , , |

They are telling you to run away from loan modification companies who charge a fee. They are paying the politicians to introduce laws making it difficult for you to hire an attorney when negotiating a loan workout. They want you to contact them directly and without the assistance of an advocate. They are scaring you to think that anyone who charges a fee for helping you negotiate a loan modification must be a crook. They claim all mortgage professionals, lawyers and forensic loan examiners who charge a fee are scam artists. They say it should all be free because theoretically you can do all of it yourself.

Just like you can file your own taxes and represent yourself in court, you can also spend the time and effort to learn the ins and outs and nuances of negotiating a favorable loan modification with the same predatory bank that put you in the mess you are in. You can stay up all night and study law so you can go up against their high priced lawyers. You can take time off work and stay on the phone four hours a day trying to get through to their loss mitigation departments. You can re-send the same documents over and over again because mysteriously they keep losing your entire file more than once. That is right you can certainly do this all yourself.

And the reason why you should go to the negotiating table all alone and without any backup is because they want to protect you from the big bad lawyers, mortgage auditors and loan modification companies who have the nerve to charge a fee for helping you! Imagine that. People actually want to make a living while providing a valuable service. What a crime.

Is anyone with an IQ above 10 buying this nonsense? If you had a choice would you go to an IRS audit without a skilled CPA? Would you defend yourself in a criminal trial without the best lawyer money could buy? So why should negotiating with a bank be any different than negotiating with the IRS? Because bankers are more ethical than IRS agents? That must be it.

More….

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Loan Modifications up 55% in Q1

Posted on July 1, 2009. Filed under: Foreclosure Defense, Loan Modification, Mortgage Law | Tags: , , , , , , , , , , |

U.S. loan modifications up 55 pct in Q1 from Q4

* Seriously delinquent mortgages up 9 pct in Q1 from Q4

* Foreclosures in process up 22 pct in Q1 from Q4

WASHINGTON, June 30 (Reuters) – The pace of home loan modifications shot up during the first quarter, but so did mortgage payment delinquencies and foreclosures, U.S. bank regulators said on Tuesday.

The quarterly report on mortgage metrics showed that the quality of modifications improved, with more than half of them resulting in lower monthly principal and interest payments.

But the report released by the Office of the Comptroller of the Currency and the Office of Thrift Supervision presented mixed signals of improvement and distress as rising unemployment and other economic pressures weighed on borrowers.

“While I’m very concerned about the rise in delinquent mortgages and foreclosure actions, the shift in emphasis by servicers to more sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” Comptroller of the Currency John Dugan said in a statement.

As the Obama administration’s Making Home Affordable loan modification plan gains traction, he said, regulators will continue to see progress in future reports.

Another report issued on Tuesday showed that prices of U.S. single-family homes had declined in April from the prior month, but the pace had moderated, according to Standard & Poor’s/Case Shiller home price indexes. That suggested stability was emerging in some regions.

GOVERNMENT DATA

The U.S. government report showed that servicers implemented 185,156 loan modifications during the first quarter, up 55 percent from the prior quarter.

The report also showed that seriously delinquent mortgages, defined as loans that are 60 or more days past due, increased by nearly 9 percent from the prior quarter to 5 percent of all mortgages in the portfolio.

The portfolio includes 34 million loans worth $6 trillion, or about 64 percent of all mortgages in the United States.

Prime loans experienced the biggest increase in serious delinquencies, which rose by more than 20 percent from the prior quarter to 2.9 percent of all such mortgages.

Foreclosures in process increased 22 percent during the first quarter to 844,389, or about 2.5 percent of all serviced loans, the report said. (Reporting by Karey Wutkowski; Editing by Lisa Von Ahn)

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