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Mass Supreme Court Rules Against Wells Fargo, Deutsche Case on Validity of Mortgage Transfers in Securitizations

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Bottom line: even thought the Supreme Court ruling in this Massachusetts case, Ibanez, was narrow, it still represents a major blow to the securitization industry, specifically, the argument made by the American Securitzation Forum and securitization law firms that have liability on opinions they provided on residential mortgage securitizations. It is also certain to fuel more challenges in court based on failures of the parties to securitizations to adhere to the requirements of their contracts.

The judges based their ruling strictly on Massachusetts law issues, and did not opine on the New York trust law issues we have highlighted. The ruling emphasized the horrible job the banks did in protecting and documenting their ownership interest and the overall carelessness of the securitization process. Massachusetts. law is somewhat unique in requiring that not only the note (the borrower IOU) be assigned correctly, but also that the lien (the so-called mortgage, or deed of trust) also be conveyed properly.

Effectively this shows the shortcomings of the fundamental design of the securitization process, of developing a one-size-fits-all process when some states have long-standing law (real estate is very well settled) that is idiosyncratic. How, in this case, could you design a securitiztion process that did NOT account for the need to handle the assignment of the mortgage, as Massachusetts requires?

As the ruling describes, one of the issues raised in the lower court case was “whether the plaintiffs were legally entitled to foreclose on the properties where the assignments of the mortgages to the plaintiffs were neither executed nor recorded in the registry of deeds until after the foreclosure sales.” Note that “out of time” assignments are common, often coming well after the timeframe required in the securitization documents, and even, as this case demonstrates, after foreclosure proceedings have commenced. At a hearing, the plaintiffs agreed that the documents they presented showed the transfer took place too late, but claimed they had other documents that would confirm that the transfer took place earlier. These documents, for the most part, were the original pooling and servicing related documents. In effect the argument was that there was an intent to transfer, and money had changed hands, which is a position the ASF and bank lobbyists have made repeatedly.

If you read the decision, you will see the judges recite the history of the two mortgages at issue and how they describe the language of the PSA and its requirements, how the banks did not adhere to its requirements, and how the documents the banks provided fail to link the properties in question specifically to the securitizations (meaning you can’t look at the closing documents and see clear evidence that the loans in question were even intended to be in these pools).

This is the key sentence from the decision, that the use of a securitization does not alter or reduce the requirements that apply to transfers and ownership of the loans and the related property:

Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone’s home or farm and must be treated as such.

Here is the decision:

Ibanez Decision

Further commentary from Bloomberg. Note the market reaction. This ruling increases the odds that more borrowers will sue bank servicers and trustees for wrongful foreclosures.

US Bancorp and Wells Fargo & Co. lost a foreclosure case in Massachusetts’s highest court that will guide lower courts in that state and may influence others in the clash between bank practices and state real estate law. The ruling drove down bank stocks.

The state Supreme Judicial Court today upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts….

The 24-company KBW Bank Index fell as much as 2.2 percent after the decision was handed down.

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108 comments

  1. Ina Deaver

    Finally, some law. I’ll have to read the opinion and see if I still feel good about it — but at least it appears to be a step in the right direction.

  2. K. Williams

    “This is the key sentence from the decision, that the use of a securitization does not alter or reduce the requirements that apply to transfers and ownership of the loans and the related property:

    Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone’s home or farm and must be treated as such.”

    But this sentence only applies in Massachusetts and the few other title-theory states, where the mortgage doesn’t follow the note. So the applicability of this decision seems quite narrow. At the same time, it’s not obvious to me that the banks even transferred the notes correctly, so they may well have been screwed even in a non-title-theory state. It’s pretty extraordinary that they weren’t able to produce the loan schedules for the securitizations. How much work could it have been to keep thise on file?

    1. Wendy

      That’s the most amazing part of this, the lack of documentation. It just must not exist, don’t you think? The concurrence implies this, commenting on the banks’ “utter carelessness.”
      The question is, can the banks close this loop? If the intermediate assignees no longer exist or are bankrupt, for example, the answer may be no, or it may be that they have to re-buy the assignment.

    2. Fractal

      K. you said “But this sentence only applies in Massachusetts and the few other title-theory states, where the mortgage doesn’t follow the note.” Please provide some proof. Cite a statute or a case in a state which you claim is NOT a “title-theory” state.

  3. profoundlogic

    It’s about time! Maybe the America is beginning to realize the importance of the rule of law. We can only hope.

  4. f247

    “This ruling increases the odds that more borrowers will sue bank servicers and trustees for wrongful foreclosures.”

    Assuming a borrower wins a wrongful foreclosure lawsuit, what happens with the default title policy? (Somebody on here had really precise legal knowledge about titles last fall.)

  5. Conscience of a conservative

    Yves,
    The ruling was careful to say this was not against MERS saying the assignmnets did not need to be rercorded before foreclosure only that they need to have been effectuated(i’m paraphrasing). Can you opine on this? I think it’s an important point.

    1. indio007

      The concurring opinion fired exactly that warning shot..

      “What is more complicated, and not addressed in this opinion,
      because the issue was not before us, is the effect of the conduct
      of banks such as the plaintiffs here, on a bona fide third-party
      purchaser who may have relied on the foreclosure title of the
      bank and the confirmative assignment and affidavit of foreclosure
      recorded by the bank subsequent to that foreclosure but prior to
      the purchase by the third party, especially where the party
      whose property was foreclosed was in fact in violation of the
      mortgage covenants, had notice of the foreclosure, and took no
      action to contest it.”

      1. Justicia

        The general bias in favor of protecting the bona fide 3rd party purchasers leads the courts to shield the title taken in foreclosure sales. Someone who’s harmed by a wrongful foreclosure can sue the party who foreclosed for damages.

        1. Nathanael

          And that is why, if any form of law exists in this country at all, the banksters are going to get hit from both sides. The law will try to make whole both the person whose land was illegally stolen, and the bona fide purchaser — as well as the municipalities depending on recording fees, and as well as any investors who were told that they had “secured” interests in trusts.

          The law makes no assumptions that the banksters who set up the stuff deserve to be paid anything, and they indeed may owe in four different directions.

  6. WB

    The banks lost becasue they “failed to prove that the underlying assignments of the mortgages …ever existed in any legally cognizable form before they exercised the power of sale.” The Court held that such assignments need not be in recordable form and need not be recorded before the foreclosure sale, PROVIDED that there was some form of valid assignment executed before the commencement of the foreclosure. The Court specifically recognized that an unrecorded assignment of a pool of mortgages to a securitzation trust could be a valid assignment. This decision does not invalidate MERS or the securitization process.

    1. Fractal

      Banks stocks lost two percent today after that decision was announced because everybody knows that the banks stopped following their own “securitization process” long ago. The banks are liars, racketeers and con artists. The banks wrote the PSAs and attempt to use them as a sword against homeowners, but the banks violate the PSAs on a continual basis because they don’t assign the notes.

      1. Fractal

        dead tree version of NYT on Saturday reported that while WFC share price did in fact lose 2% on Friday Jan. 7, the KBW banks index lost only 0.9% for the day, not 2.2%. The other bank involved in the MA case lost only about 1%, according to the Times.

  7. Blurtman

    It has been alleged that the dodgy paperwork trail was intentional to hide mortgage multiplexing, i.e. selling the same mortgage multiple times. We’ll see.

    1. WB

      Yes, the Court held that assignments in blank are invalid in Massachusetts, for the same reason that a deed without a named grantee is invalid. And the Court said that a confirmatory assignment cannot be used if there was no actual prior assignment. Even so, it is obvious that the Court did not wish to invalidate all securitization schemes. The banks in this case were extraordinarily sloppy and could not even produce the complete securitization documents which purportedly transferred the loans.

      1. Mormaer

        They probably could provide it, but it would be a lengthy and expensive process and show the property mortgages showing up in multiple packages. In other words they would be establishing proof of their own fraud. Hence the foot dragging, delays and outright lying. They are literally caught between a rock and a hard place. Arrogance, Thy Name is Hubris. Dumb-asses.

        1. readerOfTeaLeaves

          They probably could provide it, but it would be a lengthy and expensive process and show the property mortgages showing up in multiple packages. In other words they would be establishing proof of their own fraud.

          This best fits the facts that I’ve been able to identify. Zero oversight for CDOs, and those were being created multiple times. In other words, I think you’re spot-on.

          1. psychohistorian

            So are there multiple sets of “books”?

            It is impossible to me to think that the banks don’t know what they did with all those mortgages. They may not want to admit the collusion and criminality but I have to believe that there are computers somewhere with databases containing very damming evidence.

            If the rich would just hire more moral folks to run their banks we wouldn’t be having these problems. Kinda makes one think they want things to evolve this way.

            We may have to coin another term about To Big To Be Brought To Justice. (TBTBBTJ) ugly!

        2. shtove

          That documentation should be available in discovery. I wonder if the plaintiffs sought it specifically. Or perhaps it’s not strictly relevant to establish the plantiff’s claim.

      2. Fractal

        WB you said “The banks in this case were extraordinarily sloppy.” No. The banks are intentionally “sloppy” (i.e. fraudulent thieves) in the vast majority of cases. You keep harping on how insignificant the MA decision was, I’ll keep harping on how the street (i.e. stock market) doesn’t believe a word the banks say, esp. not about whether or not the banks followed their own “securitization process.”

  8. retr2327

    WB:

    True, it doesn’t invalidate MERS or the securitization process, per se. And it does seem limited to Massachusetts and those few other states where the mortgage does not automatically follow a validly assigned note.

    On the other hand, the potential for problems in Mass. and any similar states is signficant. The Court holds that assignments in blank are invalid, and further holds that such assignments can’t just be cured by a post-foreclosure confirmatory assignment.

    1. WB

      Yes, the Court held that assignments in blank are invalid in Massachusetts, for the same reason that a deed without a named grantee is invalid. The Court also held that a confirmatory assignment cannot be used if there was no actual prior assignment. Even so, it is obvious that the Court did not wish to invalidate all securitization schemes. The banks in this case were extraordinarily sloppy and could not even produce the complete securitization documents which purportedly transferred the loans.

      1. AR

        Perhaps the reason they couldn’t produce the paperwork is because there never was any paperwork: merely MERS electronic ‘handshakes,’ and Excel spreadsheets.

      2. Fractal

        It’s obvious WB is a hired troll for the banks with the talking point of the day being “these particular few isolated situations occurred because the banks were extraordinarily sloppy.” Bullshit. They are all fraudulent; they all violate their own PSAs continually; they deliberately do not assign the notes as required by the PSAs.

  9. Lynn

    And another significant point:

    The judge ruled that the banks acquired the mortgage notes only after the foreclosure sale.

    The Court looks at the case specifics, and each one has its “quirks.”

  10. Lynn

    This ruling involves a title theory state, as opposed to a lien theory state where the mortgage follows the note.

    1. Fractal

      I can’t use Scribd because I refuse to “subscribe” to obtain public documents. Could you quote us a line or two from the decision which actually makes the distinction you and others rely upon, i.e., that Massachusetts is not a “lien theory” state but is a “title theory” state. And do you view “title theory” states as being in the minority?

      1. Bob

        “In a “title theory state” like Massachusetts, a mortgage is a transfer of legal title in a property to secure a debt. See Faneuil Investors Group, Ltd. Partnership v. Selectmen of Dennis, 458 Mass. 1, 6 (2010). Therefore, when a person borrows money to purchase a home and gives the lender a mortgage, the homeowner-mortgagor retains only equitable title in the home; the legal title is held by the mortgagee. See Vee Jay Realty Trust Co. v. DiCroce, 360 Mass. 751, 753 (1972), quoting Dolliver v. St. Joseph Fire & Marine Ins. Co., 128 Mass. 315, 316 (1880) (although “as to all the world except the mortgagee, a mortgagor is the owner of the mortgaged lands,” mortgagee has legal title to property); Maglione v. BancBoston Mtge. Corp., 29 Mass.App.Ct. 88, 90 (1990). Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone’s home or farm and must be treated as such.”

      2. Jim the Skeptic

        Fractal said: “Could you quote us a line or two from the decision which actually makes the distinction you and others rely upon, i.e., that Massachusetts is not a “lien theory” state but is a “title theory” state. ”

        From the opinion Page 7 paragraph 3: “In a “title theory state” like Massachusetts …”

        So the court’s opinion is making this distinction.

  11. Wandering Mind

    Two things to note about the Court’s decision.

    First, the Court says that “confirmatory assignments” (that is, assignments which are drafted and recorded only for the purpose of confirming an assignment which was made before the foreclosure but not recorded) are ok. This part of the ruling invites the same kind of robo-signing fraud which has taken place in Florida and elsewhere. The banks who are affected by this ruling will now be tempted to appoint “vice-presidents” or “assistant clerks” at foreclosure firms who will then attest to the “fact” that an assignment was filled out properly but not recorded, then record this “confirmatory assignment.”

    Secondly, the concurring opinion in this case pointed out that the decision does not address the issue of innocent purchasers for value who now own properties which have this defect. So, let’s say that Wells Fargo erroneously forecloses on a home and then sells it afterwards to Joe Homeowner. Based on this decision, Joe Homeowner now has a problem, but the nature of that problem and the solution to it is not set out in this opinion. That will come later as part of the aftermath of this decision.

    1. WB

      I agree that the banks and servicers will try to use confirmatory assignments to cover up the lack of proper assignments. The legislature should declare that if there is to be a foreclosure, all assignments of the mortgage must be in the proper form and must be recorded prior to the exercise of the power of sale.

    2. emca

      Confirmatory assignments are not ok unless they have something to confirm.

      The ruling further states a mortgage ownership cannot be established post-foreclosure through claims of a pre-foreclosure assignment effective date. Such evidence can be non-recorded, but the plaintiffs have failed unsurprisingly, to provide such proof.

      This would crimp the idea of robo-signing and other hi-jinx based on a confirmatory or post-transfer assignment. Lack of adequate documentation (recorded or otherwise) on sale seems to be is a widespread problem in mortgage securitization, so this would be a serious problem.

      Are I wrong?

  12. Zoe

    I guess some of us got excited and then started peeling back the onion to find another layer to be considered. Still, for some, this is very good news.

  13. rational

    It’s really interesting that Mass has this idiosyncratic approach to conveyance…anybody know other states that take this approach?

    1. WB

      Massachusetts does not recognize the validity of assignments in blank or of assignments made after the exercise of the power of sale, the reason being that a mortgage in Massachusetts is just like a deed, i.e., it conveys legal title to real estate; therefore, the same formalities apply to both deed and mortgages. States that treat mortgages as liens rather conveynaces may reach different conclusions about the validity of purported assignments within securitizations. Massachusetts also requires the foreclosing mortgagee to be the actual holder of the note as well as the assignee of the mortgage. Other states may follw a different rule. The point here is that every state has its own laws, which cannot be over ridden by private securization documents.

      1. Francois T

        “The point here is that every state has its own laws, which cannot be over ridden by private securization documents.”

        I’d say this is the key principle of law re-affirmed by the Mass SC today. (let’s call it the “Ibanez doctrine”)

        Meaning, irrespective of every State legal particularities afferent to real estate, courts will be mightily tempted and compelled to see if securitization actors aren’t trying to pull a fast one or two at the expense of the rule of law.

        That would be a welcome development; it sure would teach the Korporations they’re NOT the law.

    2. Justicia

      Here’s the NY precedent:

      Chauncey v. Arnold, 24 NY 330 (N.Y. 1862):
      “No mortgagee or obligee was named, and no right to maintain an action thereon, or to enforce the same, was given to the the plaintiff or any other person. It was, per se, of no more legal force than a simple piece of blank paper.”

  14. phidda

    Those gates are already open. My take is that plaintiffs will cite this case like they cite the one from Kansas and Nevada but at the end of the day, each state’s recording/foreclosure statues are different.

    1. Bank of American Terror

      This is a ruling in a non-judicial state.
      Neil Garfield writes:
      “The fact that this decision took place in a state where court action is not required to commence foreclosure means that the decision is applicable to ALL states. “

  15. bokun59

    The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs’ apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.

    Being a Mass. lawyer, that is an ass-spanking by the Court. Basically, they uphold the rule of law. Notice how many cases were cited from the 1800′s for crissakes… I am not at all surprised as the Mass. SJC is a stickler for rules/laws. You ignore them at your own peril.

  16. dejavuagain

    I wonder what JPE has to say now. In reply to his/her posting of December 5, 2010 said “What New Haven [a US Mass. Bankruptcy Case) tells us that is that breaks in the endorsement chain aren’t fatal to a claim against the debtor.”

    I responded:

    “jpe: watch what you cite, and not not build an empire on the decision of a US Magistrate interpreting state law.”

    And then I wrote:

    “New Haven is weak authority for building a house of cards. Hope you have something better from the Commonwealth of Mass. higher courts.”

    After the Supreme Court of Mass. decision today, I await jpe’s analayis.

    See comments under:
    http://www.nakedcapitalism.com/2010/12/adam-levitin-shreds-the-american-securitization-forum-defense-of.html

    1. jpe

      You’ll note that the MA Supreme Court says that assignment documents – like a PSA that identifies the mortgage and uses language of present assignment – would have been sufficient to prove ownership:

      “Where a pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder.”

      The endorsement chain for the MA court isn’t a necessary condition for ownership, but is rather another piece of evidence that can be used to show it.

      1. Justicia

        Note the next sentence:

        “However, there must be proof that the assignment was made by a party that itself held the mortgage.”

        The chain of assignors (only valid holders can only transfer valid interests) still matters very much.

        1. dejavuagain

          Than you Justicia -

          Humpty dumpty can be put back together again – but, someone is going to have to put it back together or show that it was put back together – and deal with issues such a bankrupt entities in the chain.

          But …

          If the assignment to the trust is late – there goes REMIC and if not done in accord with the terms of the trust agreement, then a late acceptance by the NY trust may be ultra vires. Congress can take care of the first issue – Cuomo will be needed to take care of the second issue.

          So, Certificate holders, especially those pensions funds that bought the junk, are no doubt looking to put back certificates to the MBS issuers (as distinguished from the trust putting back the mortgages to the MBS packagers.)

          As said before, MBS should be considered a dangerous structure to be handled with care. The financial “engineers” here did not include, as real engineers understand, a margin of error. If I were doing 50 state deals, I would just say: no instruments in blank, no MERS, documents signed in real time by real employees, and record all assignments (yup, I know, but, this it the conservative over-engineered approach to work in all 50 states). When the Trust is sold, the Attorneys have to do due diligence inspections of the assignment of note and mortgage files, as well as the accountants. This should not be costly if the files were complete in the first place.

          Oddly, enough, if no corners are cut, then the process could be more streamlined as a straight-forward process with not variation and exceptions.

          I sort of like a house of cards with trusses, tie-downs, and embedded in concrete.

          1. Justicia

            Apply waterproofing and it might not perform like a house of cards.

            Your point about the transfers being out of time for the REMIC (it was series 2006-Z) is on the money. I wonder if the IRS is opening an investigation?

          1. dejavuagain

            I am not sure I understand the implication of that statement.

            In any event, the court seemed to say that intent to assign was not sufficient.

            All they said is that that there must be an assignment document at each stage – i.e. an assignment of the mortgage. Now, everyone is fond of saying that the mortgage follows the notes.

            I guess in Mass., it does not. But, the court then still allowed the mortgage assignment perhaps to be fixed if the note was clearly assigned.

            The problem, JSE, is that we now have to see in what circumstances a court in Mass will allow the assignments of mortgages and/or notes to be “fixed” after the fact.

            The court allowed that this could be happened, but, that was dicta for this case.

            Let’s see how this dicta is applied in real world situations. There are sure to be twists and turns – and I do not believe that some of the robo-signed documents are going to qualify as “assignments” in the Mass. courts.

            And, once again, the document that may be “allowed” by the state court may bust the NY trust or bust the tax exempt REMIC status or give certificate holders the right to put back the certificates.

            As to other comments below, because of the variations of state law, all cases are going to be idiosyncratic – just as the NJ bankruptcy case last month was applying the New Jersey version of the UCC.

            Also, MERS is not mentioned at all in the decision – not even once.

            Finally, MERS is passive – it does not “do” anything. The MERS system could provides one socially useful function – registering a mortgage that is to be securitized by compiling the metes and bounds description-or block and number etc. for the mortgage, the basis mortgage data, and assigning a unique number to the mortgage and storing the scanned original note and mortgage (which it does not do now). After that, MERS becomes socially destructive, rather than socially useful.

      2. Bob

        There’s an aspect of this case that isn’t getting enough attention. Both of the plaintiff banks are TBTFs. I believe this case was in the lower court (Land Court) for more than a year. Despite that, US Bank wasn’t able to produce the trust agreement/PSA for the Ibanez mortgage. Wells Fargo did produce the PSA, but could not produce a schedule of loans showing that the LaRace mortgage was included in the securitization, could not produce any proof that the entity which purportedly assigned the mortgage to the securitization trust ever owned the mortgage before the assignment was made and could not produce any evidence that the record holder of the mortgage ever assigned it to anyone else. What does that tell us about the way records were kept?

  17. bokun59

    Oh, and that is a unanimous decision- no wavering by the Court. The Court is basically saying: hey there, Mr. Bank, um, the statutes and the courts run the show; so do it the right way or ef off. And don’t even go there with the : they owed the money anyway routine. As I believe the Wayman bros said: “Homie don’t play that game.”

    1. Skippy

      I concur with both your comments bokun59, to wit, Mass is a very stoic judiciary, so the language should be read with this in mind. I see the Mass court opines in a historical light, the cultural memory passed down by the originators of this republic, land is king and all that endeavors to unravel century’s of deliberation is an *enemy of the state*.

      Skippy…let them securitize payday loans…me thinks. Preferably in some seedy back ally, away from young children’s eyes, lest they think this is normal human behaver.

  18. Justicia

    Hmm, what are we to make of this … a “special tribunal” for foreclosures in MA?

    FT
    http://www.ft.com/cms/s/0/92f0e18e-1a9c-11e0-b100-00144feab49a.html#axzz1AIhO3OLM

    US foreclosure ruling to reverberate

    By Suzanne Kapner in New York

    [...]
    “This screams out for some sort of national correction to impose standards that insure lenders keep track of who owns these loans,” said William Galvin, the secretary of the commonwealth of Massachusetts. Mr Galvin said he feared the ruling would have a “chilling effect on the real estate market” and that he wants to establish a special tribunal to resolve outstanding cases.

    1. Skippy

      Dirt law is state law right? I would be very troubled by a national approach. Where do you stand on this.

      1. Justicia

        If we “federalize” real property law, what’s left of state sovereignty? Any attempt to do so would draw opposition from all sorts, Tea Partiers to Locavores.

        1. psychohistorian

          While the loan may be local when multiple are aggregated, potentially across state borders by banks and sold as securities I think that the Federal gov will say that it has jurisdiction and there will be exceptions made for the to big to be prosecuted.

          1. skippy

            Mono-culture has been shown to have a dark side, down the historical road…eh.

            Skippy…devastation is the only mitigating question, to me.

          2. Justicia

            Federal law already applies to the securities that the bundle of mortgages supposedly backs. However, federal law does not apply to the underlying mortgages (their creation, recording, interpretation) and there’s no reason why it should.

    2. lambert strether

      I’m sure that advocates of Galvin’s “national correction” will use the phrase “going forward” a lot, and that the end result, fully intended by all the elite, will be to immunize the banksters from prosecution — exactly as the telcos were immunized against prosecution for warrantless surveillance under FISA “reform” (for which Obama voted).

  19. kravitz

    Philly blocked foreclosure sales for 50 days. And adding to the problem pile, New Jersey and Vermont officially added an ‘Affirmation Affidavit” like New York State has.

    Clock on the wall goes ticky tock…

  20. 60sradical

    Great article Yves!!
    I keep mumbling about “critical mass,” since that’s what happened in 60s and 70s re:several big issues. One wonders if today’s critical mass(at least re: securitization fraud)is, indeed, every single mortgage/note borrower!! We have to come up with a catch phrase like “Do you know the chain of title on your home?”
    “Where’s the note?” seems out there somewhat, but a challenge for NAKEDCAPITALISM AND ITS MIGHTY BLOGGERS might be; how to bring forth the slumbering giant–the mass of mortgage/note borrowers?? Here, being proactive means to awaken the.borrower who is totally current(and dangerously sleepy) regarding the monthly payment. Whaddya think?
    Also, thanks for answering my quandry re: NY trust law as per Mass. law.

    1. lambert strether

      “Do you know the chain of title on your home?”

      That’s very good, actually. Better than “Produce the note,” since it speaks to those who are not (yet) in trouble.

      The danger is that a policy answer would be to normalize MERS and make it better technically (“check the website”), while retaining elite impunity.

  21. Fractal

    WB, while I noticed that Yves said that the Massachusetts decision is “idiosyncratic,” and while other commenters here seem to agree with you that the ruling only applies in states which are “title theory” states, it remains to be shown that “title theory” states are in the minority and/or that “lien theory” states hold the majority view. So, I’m not sold that this is a narrow decision in a peculiar or “idiosyncratic” state.

    Unfortunately, I think you are giving us double-talk about the decision’s likely impact on the banks. At 2:24 you said “This decision does not invalidate MERS or the securitization process.” Then, at 4:02 you said “the Court did not wish to invalidate all securitization schemes.” You repeated that exact phrase one minute later at 4:03. Then at 5:34 you said “every state has its own laws, which cannot be over ridden by private securization documents.”

    Did you contradict yourself? You said first that the decision did not invalidate the securitization process, then you said that the state laws cannot be overruled by the securitization process, which means that the state laws DID overrule the securitization methods used in THESE cases. The court held the foreclosures void under MA state law because the assignment methods violated state law. Did the assignment methods used in those cases comply with the securitization process or not?

    1. dejavuagain

      Having observed the oft-repeated statement that in 45 states the “mortgage follows the note”, I still have been unable to find a list of the 5 states where the note follows the mortgage.

      Mass. is one – what about the other four, or are you suggesting there are more than four.

      The structural engineers really made a mess of this – in the engineering profession, over-design is the rule, to account for the instances where a bolt here and there is left out. No single point of failures. Critical path analysis. Sensitivity analysis to factors such as variation of default rates.

      We should all be thankful that these financial structural engineers are not allowed to design dams and bridges.

  22. razzz

    Oh, this is gonna leave a mark. How many transactions were based on one fraudulent mortgage(s)? Any entity involved along the line can now sue in a scratch back for investments based on a fraud note/deed.

    1. skippy

      Are not proceeds (interest, dividends et al) from fraudulent activity’s subject to confiscation, how many market activity’s have been funded by false value…cough…created by RMBS / CMBS.

      Skippy…the biggest illusion ever pulled off!

    2. readerOfTeaLeaves

      How many transactions were based on one fraudulent mortgage(s)?

      I think this is a key, critical question.

      I expect the correct answers range from anywhere between 0 – 20+, probably based on some ratio created by multiplying the risk of foreclosure [which fluctuates over time for any give home buyer] with the mortgage [which also fluctuates over time].

  23. razzz

    Wasn’t this where defendants asked that the ruling only be applied to the current case? Gotta be sweating bullets to make that request.

  24. Jim the Skeptic

    Opinion Page 8 Para 2
    “We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice. Where a pool Where a pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage”

    Opinion Page 9 Para 3
    “… Where the earlier assignment is not in recordable form or bears some defect, a written assignment executed after foreclosure that confirms the earlier assignment may be properly recorded. See Bon v. Graves, 216 Mass. 440, 444-445 (1914). A confirmatory assignment however, cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time. …” “… In this case, based on the record before the judge, the plaintiffs failed to prove that they obtained valid written assignments of the Ibanez and LaRace mortgages before their foreclosures, so the postforeclosure assignments were not confirmatory of earlier valid assignments.

    So my layman’s reading is:
    Number 1: The assignments do not have to be recorded before the foreclosure sale. It is enough for the foreclosing entity to have a valid assignment from the last recorded owner, and said assignment does not have to be recorded. But he must have that assignment at the time of the notice of sale and the sale.

    Number 2: Confirmatory assignments are not new proofs in and of themselves. They confirm a previous assignment and the foreclosing entity must prove there was a previous assignment.

    All this brings up an interesting subject. If you are documenting assignments in a database, how do you document the appropriate bits in the database.

    Has MERS been documenting those bits by using them to fill in what looks like a traditional assignment? This seems a little shady unless notice of that is included on the assignment. But if all states recognize a “Confirmation of assignment” then maybe a lawyer sees no problem. The opposition would argue that if these are a “Confirmation assignment” then they have to be backed by a provable previous assignment.

    How do you prove bits in a data base? How can you prove that a database can not be corrupted by non-employees?

    1. Fractal

      This is the hard part, grinding through the actual text of the decisions & orders we comment on here every day. I deeply appreciate the time Jim devoted to this kind of due diligence and so do a lot of other commenters, I suspect. I won’t try to tackle the “proving the bits” question, but there are answers out there.

    2. readerOfTeaLeaves

      All this brings up an interesting subject. If you are documenting assignments in a database, how do you document the appropriate bits in the database.

      Jim, I’m a bit unclear. Are you inquiring about database design and security….?
      The way that ‘assignments’ are documented in a database is a function of the design of that dB. In any well-designed dB that I’ve ever seen or worked around, the database fields perform this function. In addition, items can be ‘tagged’. (To offer an example, each blog post is an item in a blog database; each blog owner can create category tags with which to ‘tag’ – identify – the post semantically for easier search and retrieval by any user. I hope this makes sense as you read this attempt to explain. In a more straightforward dB, say a bookseller dB, there are fields for title, author, pubDate, etc, etc… each of those ‘fields’ are arguably one part of documenting the content. However, I honestly can’t tell whether I’m answering what you want to understand. I’m giving it a shot though ;-)

      Has MERS been documenting those bits by using them to fill in what looks like a traditional assignment? This seems a little shady unless notice of that is included on the assignment. But if all states recognize a “Confirmation of assignment” then maybe a lawyer sees no problem. The opposition would argue that if these are a “Confirmation assignment” then they have to be backed by a provable previous assignment.

      IIRC, one of the honchos around this blog was once explaining that he found it **incredible** that there were about 7 layers of permissions into that MERS dB. Also, it was almost as if any Tom, Jill, or Larry could login and create a new user ID. If true, that’s beyond scandalous — although I don’t have accurate facts (maybe someone else does).

      Also, why would anyone design or maintain a dB that didn’t give them the data they needed? That doesn’t even make sense (unless it was simply a mafia front or pure scam). A *legitimate* business would want to be damn sure the dB design tracked every single detail they needed, with places to expand over time. In addition, you need to build in maintenance processes, including deleting old, unused data.

      If some of the critical data that you need to track is: “assignment confirmed, then you would design in subfields — of the top of my head, they could look something like this:
      assignmentConfirmed: Y/N,
      dateConfirmed [datePulldown]
      confirmingAuthorityID,
      notificationOfAssignmentSent (Y/N),
      notificationSentTo [enter recording body here]
      notificationConfirmationID [think of something like a tracking number, configured to encode date + other key info]

      Anyway, you get the idea….
      It’s totally possible — so if this was not done, it’s simply inexplicable to me. Lawyers, schmawyers… any atty without enough brain cells to talk to a dB expert has zilch sympathy from this blog commenter.

      How do you prove bits in a data base? How can you prove that a database can not be corrupted by non-employees?

      This is in the computer forensics area, and I steer clear of that field.

      I can say that **anytime and EVERYtime** that I have worked in a corporate dB, I have user ID numbers, and I document **everything** that I touch or change. This is coded to show who changed what, when, and the reason for the change (even if it is deleting, updating, etc). This is partly CYA on my part, but more importantly to make sure the next person can see what was done, and why; think ‘good footnotes’.

      The bigger problem lies in unauthorized access; again, out of my realm.
      But definitely a risk that has been raised here and at FDL a number of times. My personal view is that with ’7 levels of authorization’ and people coming and going off the MERS dB, the probability that it wasn’t hacked is probably very small.

      I hope my comments have not added to the confusion.
      Not sure whether I addressed your questions, or not…

      1. Jim the Skeptic

        Thanks to readerOfTeaLeaves.

        Actually my question “How do you prove bits in a data base? ” has to do with what should a court accept as though it were a written assignment with the agent’s and notary’s signature.

        In the old manual system, the assignment document was executed by the bank’s employee who had the knowledge and authority to do the assignment and a notary’s signature to validate the signature. That document would then be recorded at the court house. It became public information. YEARS LATER, THAT RECORDED FORM COULD BE TAKEN INTO COURT AS PRESUMPTIVE PROOF OF THE ASSIGNMENT. A defendant could examine the dates, bank name, and signatures of a document executed at the time of the assignment, not something done from memory. The courthouse was a completely unbiased third party providing a data storage service.

        Now flash forward to today.

        Apparently banks and MERS are not recording these documents. Instead they are entering the assignment data into a database, not the image. (Bank name, agent, possibly the notary data?) Years later they do a database report which may look like the old manual paperwork, but it is just a report showing the condition of the database years after the assignment!

        Number 1. CREDIBILITY: How does the court satisfy itself that this information is absolutely correct? What credibility should a database report be given when the database is maintained by a party providing a paid service to the plaintiff. Where is the independent unbiased holder of the data?

        Number 2. TIMING: At some point, we arrive at a very disconcerting conclusion. It is true because the plaintiff’s agent says it is true on the date of the report. We have no way of independently knowing what the database said on the claimed date of assignment.

        Number 3: HEARSAY: Think of it this way. In 2005 bank X’s employee asks ME to REMEMBER that it was assigning a mortgage to bank Y. Years later bank Y wants to foreclose, so it asks ME to fill out a sworn affidavit that the mortgage was assigned to them. I am a third party and I have no notes, just my memory. A court would not trust my capacity to memorize and retain such data. If I had made notes concurrent with the original request the court would probably accept those.(CREDIBILITY) BUT WORSE, Isn’t my affidavit just based on hearsay? I had no authority to assign the bank’s assets! I am just remembering what I was told.

        Now go back to the computer database. Isn’t this report just hearsay evidence from a computer? Or maybe worse yet, isn’t this just a confirmation of assignment providing the an eligible employee made the data entry. Then this assignment exists only in the database of the computer hardware and software.

        And last but not lease, I have written a little software, if I control the database I can make it report anything today as though it was always true! :^)

        Or am I playing mind games with myself.:^)

        1. dejavuagain

          The image of the assignment should be filed on MERS within 30 days of the date of assignment.

          MERS should date stamp the image on the day of filing.

          The information should be available to the public.

          The database should not be alterable.

          Download feeds to Bloomberg, etc. should be allowed. Not only would this provide better public and professional access, but alterations would be easy to find.

          The database should be indexable by Google.

        2. readerOfTeaLeaves

          And last but not lease, I have written a little software, if I control the database I can make it report anything today as though it was always true! :^)

          Or am I playing mind games with myself.:^)

          Ah ;-))
          You’re not playing mind games with yourself.
          It’s the old, “if it’s digital and we don’t know how the dB was set up and operated, why should we believe a damn thing” question.

          I definitely see your points ;-)

    3. Bob

      Jim – Since Mass. is a title theory state, when a homeowner grants a mortgage to a lender, the lender acquires title to the property. When the lender assigns the mortgage, it assigns title to the property to the assignee. The Mass. statute of frauds (and every state probably has a similar statute of frauds) requires the contracts for the sale of land be in writing and to be “signed by the party to be charged therewith or by some person thereunto by him lawfully authorized.” Since a mortgage assigment conveys title to land, the assignment must be in writing to comply with the statute of frauds. When MERS is the mortgagee in a foreclosure proceeding, I think the questions are going to be with regard to standing to foreclose: 1) are there written mortgage assignments that pre-date a foreclosure proceeding? 2) if not, is electronically recording A mortgage assignment in the MERS database the equivalent of a writing within the meaning of the statute of frauds? 3) if so, are these electronically recorded assignments also signed? I don’t know if anyone knows the answers to these questiosn right now, but I’d interested in anyone’s opinion.

    4. mannfm11

      There is no chain in MERS. MERS never quits being what it is through the transfers. I have read MERS has no employees. There has to me more than a mere notation something has been sold and in real estate, it has to be sold to someone specific. MERS would have a much better chance of working if they sold the mortgages and left the notes with MERS.

    5. mannfm11

      Jim, what that first part is saying is that the master document is the assignment of the mortgage in the trust. The particular mortgage doesn’t not have to have an assignment in recordable form as long as it is clearly assigned as part of the pool. At issue here was that the depositing institution didn’t have a clear assignment, but instead held an assignment in blank. A mortgage (deed of trust has to have a chain of title recordable in the records of the state or county. This means they could assign in blank with the master agreement, but they couldn’t be assigned in blank. I believe the last outfit that held a valid position was Option One as there was no definable sale of the definable instrument to a definable party afterwards.

  25. plschwartz

    Yves:
    as usual you have been right on top of this.
    For those who wish minimize this ruling I suggest you go back to the original case and first level review wto see just how far cupidity dulls reality. This case includes the alteration after the fact of a notarized document, the banks lawyers failure to produced promised documentation etc.
    The MA court ma have ruled narrowly but the surely held plenty in reserve!
    It is not as if this case came out of the blue.In 2007 there was a case in federal bankruptcy court he Sima Schwartz decision which should have been a wake-up call. (http://lawyersweekly.p2ionline.com/specialsections/popup/index.aspx?webstoryid=18144349&area=SS&type=art&AdgroupID=187657&AdID=2367775).
    Instead the mortgage cabal chose to respond as narrowly as possible. There is no reason to cry for them. However the Schwartz decision might be a convenient date to alllow appeals on foreclosures.
    It will be interesting to see if the GOP in the House tries to increase the role of the Federal Government by superseding the States in preempting title law.
    I am sure Obama will support the right. Be there 4iyeomen tried and true in the Senate?

  26. bokun59

    Look, I think people are missing the main point of the decision: the rules/laws that need to be followed and the evidence needed to be shown to prove adherence to the same have been around, in some cases, for over a hundred and fifty years. Every lawyer takes real property in school and every lawyer is told that the only entity that can foreclose on real property is the entity that owns the note. It is that simple. It is NOT complicated.

    What is complicated (as the SJC implies) is that the banks have made it complicated- for themselves- to prove that they own the note. The rules/laws have not changed. They have stood the test of time and insure against confusion in titles. The banks created their own mess at their own peril.

    As to a ‘federal’ resolution: it is hard to see how fifty states and their counties are going to give up their fees/rules/laws that have worked well for them. The rules/laws in Mass. go back to the founding of our country based on law that goes back even further in England. They work. And does one think that some farmer in Idaho is going to ask his/her senator to allow the feds to control the sale of his/her land? They hate the feds in the wild west. I just don’t see it at all.

  27. Elaine S

    Will someone name the other title-theory states? What is Colorado? I know they are a public trustee system with a deed of trust for most residential transactions.

    In Colorado there is a clear statute that the foreclosing lender indemnifies the forced homeower, if there has been fraud in the foreclosure by the foreclosing lender/lender agent. Just search “colorado revised statutes foreclosure” and read a few pages. The whole section isn’t very long. Also look in the definitions for the real estate statutes, electronic registries can’t be holders.

      1. Fractal

        Just awesome work! Thanks to Elaine for repeating the question and to Justicia for drilling the Toobz for an answer. Naturally, Your Mileage May Vary (YMMV), but accepting the map at face value shows that BOTH theories are widely adopted. There are 31 “title theory” (T) states (32 if you count D.C., which homeowners there would like you to do), and 19 “lien theory” (L) states. In the way I was taught to read law, it would be a stretch to say that a group of 19 states is a “minority.” Naturally, being in New England, the MA court feels it is in the “minority” because only only one other state in New England is a “T” state (NH), and only five of the 14 northeast states are shown as “T” states (including DC).

        If we do want to be pejorative, we could use the map to claim that the MAJORITY of states are “judicial” foreclosure states, so the other states need to get with it and require judicial review of what we now see is a criminally-abused foreclosure process.

        1. mannfm11

          I think the title states have more homeowner defense, in that the deeds have no written sale behind them and real estate has to be a written sale. The deed of trust is the ownership document of the property, held in trust until the homeowner performs the duties within. The trusts have no chain of title giving them the ownership interests and thus actually can’t foreclose if challenged. This is going to be a real mess.

      2. rd

        This appears to indicate that CA and NV are title theory states and this ruling could be a precedent. Since these two states are major ground-zero housing basket cases, this case could be an interesting precedent.

        It doesn’t look like this case will be particularly relevant to FL.

  28. kravitz

    Both banks appear to be denying fault in their press releases. Desperately trying to protect their stock price? I’m reminded again by the Yano-Horoski defense… “We didn’t know breaking the law could get us punished that badly – by losing the money we can’t really prove is owed to us.”

    US Bancorp’s best line : “THAT IS THE ONLY REASON OUR NAME APPEARS IN THIS CASE.” So if they’re not really involved in this particular foreclosure, I guess they can’t really ever foreclose on this account ever really either. File under “My Name Is Wes. I Ain’t Behind This Mess.”

    U.S. Bancorp Statement on Massachusetts Supreme Court Ruling

    “Our role in this case is solely as trustee for a securitization trust that owned the mortgage at issue. U.S. Bank is not the originator, owner or servicer of the loan in question, nor is it the sponsor or depositor for the securitization trust. The foreclosure in question was conducted by the servicer on behalf of, and in the name of, the securitization trust. That is the only reason our name appears in this case. As trustee, U.S. Bank has no responsibility for the terms of the underlying mortgage, foreclosure procedure, the conduct of the servicer, the process by which the mortgage is transferred to the trust, or the sufficiency of the mortgage documentation.”

    Wells Fargo Comments On Massachusetts Supreme Court Ruling

    “The loans at issue in the court’s ruling were not originated, owned, serviced or foreclosed upon by Wells Fargo. As trustee of a securitized pool of loans, Wells Fargo expects the entities who service these loans to abide by all applicable state laws, including those laws that govern foreclosure sales.

    Wells Fargo believes the court’s ruling does not prevent foreclosures on loans in securitizations. The court simply set forth a standard legal process that mortgage servicers must follow in Massachusetts.”

      1. AR

        AHMS services both trusts, and is owned by Wilbur Ross. It was Option One’s servicer.

        “American Home Mortgage Servicing, Inc. is the current servicer for these trusts; however the challenged foreclosures were conducted by a prior servicer. ”
        http://www.earthtimes.org/articles/press/consolidated-ibanez-larace-appeals,1607184.html

        “AHMSI is based in Coppell, Texas, with servicing operations in Irvine, Calif., Jacksonville, Fla., and Pune, India. It is funded by Wilbur Ross & Co. LLC., a private equity firm based in New York…”
        https://ahmsi3.com/servicing/ahmsi_aboutus.asp

        The Marie McDonnell brief gives the forensics on the loans. Apparently Linda Green signed at least one of the assignments. McDonnell concludes:

        The lesson here also demonstrates how opaque the system has become and that a forensic examiner with specialized knowledge and access to privileged information is required to “follow the mortgage,” especially when that information is being suppressed.

        Various Ibanez briefs available at http://homeequitytheft-cases-articles.blogspot.com/2010/10/massachusetts-high-court-hears.html

        More on scribd: http://www.scribd.com/doc/46497852/IBANEZ-Decision-Case-File-Compendium

        1. skippy

          Don’t forget this see:

          Atlanta –– October 3, 2006 –– AMVESCAP PLC today announced it has completed its previously announced acquisition of WL Ross & Co. LLC, one of the industry’s leading financial restructuring groups. WL Ross & Co., led by Wilbur Ross and his team, will assume responsibility for the direct private equity business of AMVESCAP, with $4.4 billion in combined assets (as of June 30, 2006) for institutions and high net worth individuals.

          AMVESCAP is a leading independent global investment manager, dedicated to helping people worldwide build their financial security. Operating under the AIM, AIM Trimark, INVESCO, Invesco Perpetual and Atlantic Trust brands, AMVESCAP strives to deliver outstanding products and services through a comprehensive array of enduring investment solutions for our retail, institutional and private wealth management clients around the world. The company is listed on the London, New York and Toronto stock exchanges under the symbol “AVZ.”

          http://www.invesco.com/media/press_releases/2006_10_03.pdf

          More at see:

          Wilbur L. Ross, Jr. (November 28, 1937 –)[1] is an American investor known for restructuring failed companies in industries such as steel, coal, telecommunications, foreign investment and textiles. He specializes in leveraged buyouts and distressed businesses. In 2005, Forbes magazine listed Ross as one of the world’s billionaires for the first time.[2] He was ranked #346 the Forbes list of the 400 richest Americans,[3] with an estimated net worth of $1.7B. According to a recent New York Times article,[4] he has been bottom-fishing in mortgages and mortgage companies. He apparently commands far greater sums than his net worth would suggest.

          “Starting in the mid-’70s, Ross built his reputation as the country’s foremost bankruptcy adviser. Ross saw himself as cleaning up the messy results of Michael Milken’s junk-bond financings, but by 1997 he wanted to do more than just cajole others into doing it his way. For three years he ran a private-equity fund within Rothschild. But Ross couldn’t invest in deals on which the firm was advising, shutting him out of one in three bankruptcies.”[5]

          Ross was born in Weehawken, New Jersey[1] and grew up well off in suburban New Jersey. His father was a lawyer and his mother a schoolteacher. He serves on the board of advisors of Yale School of Management. His second wife was former New York Lt. Governor Betsy McCaughey Ross, whom he divorced in 2000.[5]

          http://en.wikipedia.org/wiki/Wilbur_Ross

          Skippy….seems like a regular guy too me.

          1. AR

            Wilbur Ross’s American Home Mortgage Faces Servicing Lawsuits
            http://www.bloomberg.com/news/2010-10-28/wilbur-ross-s-american-home-sued-by-homeowner-texas-for-mortgage-practice.html

            Wilbur Ross Defies Bruce Rose in Battle Over Housing Villains
            Jody Shenn, Bloomberg, March 24, 2009

            Carrington’s Feb. 9 suit in Connecticut Superior Court in Stamford accuses Irving, Texas-based American Home of putting its interests ahead of those of bondholders the company is required to protect.
            http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aisktM__QegI

            American Home Fires Back, Sues Hedge Fund for Racketeering
            Teri Buhl, HousingWire, March 19th, 2009

            After finding itself dragged into court by hedge fund manager Bruce Rose of Greenwich-based Carrington Capital, Irving, Tex.-based mortgage servicer American Home Mortgage Servicing, Inc. fired its own volley back at both Rose and Carrington on Thursday, suing for alleged acts of racketeering and a scheme to profit illegally from holding REO hostage at the servicing firm.

            it’s tranche warfare up there in Wall Street’s suites.

            I think Ross was accused of buying the risky tranches, betting against them, buying his own servicer in order to assure defaults so he could collect on his bets.
            ——–
            More interesting, I’ve been reading Marie McDonnell’s Amicus brief to the Land Court in the Ibanez case.

            [McDonnell refers the Court’s attention to the Official Records maintained by the Assessor’s Office for the City of Springfield,] specifically the Sales/Ownership History that shows what happened to [the Ibanez property] after U.S. Bank foreclosed.

            Ibanez acquired 20 Crosby Street on December 2, 2005 from a real estate investor by the name of Knaggs Wilkenson who had purchased the property from U.S. Bank National Association fourteen (14) months earlier for the sum of $ 35,000.00.

            One (1) year later, lbanez paid Wilkenson $115,000.00 and spent approximately $20,000.00 of his own money improving the property.

            Appellant U.S. Bank foreclosed on July 5, 2007 and on May 23, 2008 recorded its foreclosure deed which indicated it paid $94,350.00 at the sale.

            On December 15, 2008, Appellant U.S. Bank sold the property to Blue Spruce Entities LLC for $0.00; in a simultaneous transaction, Blue Spruce Entities LLC sold the property to HomeSolutions Properties LLC for $5,500.00.

            These facts raise serious questions about why Appellant U.S. Bank would pay $94,350.00 at auction for the Ibanez property and sell it for $0.00.

            Typically, the acquisition price for a foreclosing mortgagee is a bookkeeping entry, not a cash payment. The fact that Appellant U.S. Bank could give away the Ibanez property for no consideration whatsoever suggests that it may have lacked a pecuniary interest in the Ibanez loan to begin with.

            This raises the question of whether Appellant U.S. Bank had standing to institute the original foreclosure action because it apparently would not have suffered any damages if it never collected what was alleged to be owed by the borrower Ibanez.

            Steal houses much?

        2. dejavuagain

          AR and Skippy

          Thank you. Wow.

          This is a morass – you cannot even figure out who to blame for the incompetence and the idiocy and the appearance if not actuality of fraud.

          Who called the shots of the litigation – The servicers or the the bank-trustee.
          This one case is worth an entire book just mapping out the relationships.

          Now to read the briefs on the Sunday morning. Is the servicer on autopilot

          What is interesting is that the way in which the servicer proceeded with the foreclosure has put these trusts at risk.

          It is also interesting that in the Rose Mortgage, the bank creating the deal was Lehman – entities apparently in bankruptcy Lehman Brothers Bank, FSB and Lehman Brothers Holdings, Inc and Structured Assets (caveat – not sure exactly what the status is of each of the Lehman entities). Interesting to see how and who would sign the intervening assignments. I wonder who wrote the legal opinion for this trust? I would think the investors would have the mortgages put back to Lehman.

          Then, Bank of America appears to be the bank creating the trust of the LaRace mortgage.

          1. dejavuagain

            The name of Lehman Brothers Bank, FSB was changed to Aurora Bank FSB – it was not in bankruptcy.

            But, Lehman Brothers Holdings Inc., in the chain of title for the Ibanez mortgage, is the entity that is in Chapter 11.

            So, I wonder whether the LBHI bankruptcy court has approved robo-signing???

          2. mannfm11

            AR, I read that as well. Makes me wonder who was screwing who when the sales of a house that sold for $115,000, was improved $20,000 and then sells for zero and $5500 on a 1 day flip? I would suspect some financial stealing going on. Maybe a brother in law deal.

  29. Bill

    It’s good to see the Mass court make this decision. I agree with the opinion of some here who have stated that the notes were very likely sold multiple times. If this is true then there exists a consortium of players who are really hoping to see more defaults so they can collect on their hedge positions. Do the sellers of hedge vehicles have a way to make sure the same bad mortgage isnt in multiple pools? Can we create a new investment vehicle that pays when multiple banks are forced to buy back the same loan sort of like the royal match bet? This could be the wave of the future.

    What would the world look like if the masses came to the conclusion that they need not pay their mortgage?

    Is it more benificial for the poor and the rich to figure out a financial reset button at this point?

    Homeowners should make a deal with pres. Obama. All the money we would have spent on mortgages in the next two years will go to his re election campaign. In return, he will ensure that we have some sort of system in place for mortgages that is transparent, fair, and cant be put in peril again.

    1. Fractal

      could we please leave the preznit out of this? We are doing a great job — you included — exploiting this important high court decision. Homeowner defense counsel nationwide will benefit from that decision. The CFPB and Elizabeth Warren will make hay with that decision. But the preznit, I’m sad to say, is now worthless to everyone but the banking billionaires.

  30. skippy

    I’m looking forward to the day that…everyone walks into court, and drops their…*drawers*…the discovery should be interesting. The amount of legalistic prosthesis hitting the floor might carry a tune, of which a sampling could be taken, and a theme song constructed.

    Skippy…Ummm…*This whore house ain’t cheep and somebody has to pay the rent* sounds like a good title.

  31. Blurtman

    So the MBS’ are not asset backed then? Their risk therefore increases, and as they offer fixed revenue streams, their value plummets, no? This goes beyond non-peforming mortgages.

  32. rd

    “Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that “one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void”

    “What is surprising about these cases….is the utter carelessness with which the plaintaff banks documented the titles to their assets.”

    The MA Supreme Court is telling the banks that they are obliged to self-regulate themselves since they do not have effective immediate jusdicial oversight.

    In effect, the banks elected not to self-regulate but just take the cheapest route assuming that centuries of laws and precedence did not apply to them. The MA Supreme Court begs to disagree and is prepared to void entire transactions due to their diregard for the law.

    This case is another nail in the coffin of the banks’ purported ability to self-regulate since they would not rationally take actions that would injure themselves. Every time evidence turns up on this issue, it is clear that the banks not only were irrational in their economic behavior but turned out to be perfectly willing to play Russian Roulette with a fully loaded revolver.

    The term “risk” can’t even be used to describe their activities in the way that one would normally describe loan underwriting. Instead, their activities fall into the categories of gross negligence and flagrant disregard for the law and contracts.

  33. Foghorn leghorn

    I found it hysterical that both banks in Ibanez said that basically they had no liability because, “they didn’t own, originate or service” the loans, they were just the trustee for the trust!

    Seems they failed to mention it was their job to insure the trust had the proper chain of title on the front end. And they certified, on the front end they did that.

    I know, I know, picking at kernels, but that’s what us chickens do…….

  34. mannfm11

    I read this and some other stuff related to it. There is no chain of title other than some nonsense the banks can put together through MERS. MERS don’t own the notes and have no beneficial interest in the notes and the notes and deeds of trust have to remain with each other. You can’t endorse an assignment in blank on a land title and have a sale. This is as old as Wall Street itself. I can tell you that the regular mortgage business understood this because I have done refinances as a broker before and gone to closing. There is a document that assigns the rights of the old deed of trust to the new deed of trust. This may have been done for homestead purposes, as there weren’t any equity extraction loans allowed in Texas back in 1993. But the point is that it is Texas law that all real estate sales must be in writing and you can’t have a sale to no one, which is what a transfer in blank is.

    We are either going to see transfer back to the last legitimate holder in due course or we are going to see more documentary fraud. No one can look at this entire mess with a brain and not at least have some suspicion that the entire charade was put together to commit fraud in some fashion. Transfers in blank keep the names of the offending parties out of the spotlight. Plus, the depositors never lawfully owned the deeds of trust. The notes can be transferred in blank, but not the deeds of trust. As the judge wrote, the bankers were in too big a hurry to earn their securitization fees to pay attention to lawful detail.

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