More Judges Taking on Foreclosures Without Document Trails

Gretchen Morgenson of the New York Times reports on the latest instance of judges taking issue with the rather haphazard procedures of lenders and servicers in handling mortgage assignments.

As most people know (and many by first hand experience) mortgages often pass through a lot of hands, and the securitization industry has played plenty fast and loose in making sure the transfers are handled properly. The system by which these sales are executed is coming under increasing scrutiny. From Pam Martens:

The problems grew out of the steps required to structure a mortgage securitization. In order to meet the test of an arm’s length transaction, pass muster with regulators, conform to accounting rules and to qualify as an actual sale of the securities in order to be removed from the bank’s balance sheet, the mortgages get transferred a number of times before being sold to investors. Typically, the original lender (or a sponsor who has purchased the mortgages in the secondary market) will transfer the mortgages to a limited purpose entity called a depositor. The depositor will then transfer the mortgages to a trust…

Because of the expense, time and paperwork it would take to record each of the assignments of the thousands of mortgages in each securitization, Wall Street firms decided to just issue blank mortgage assignments all along the channel of transfers, skipping the actual physical recording of the mortgage at the county registry of deeds.

Yves here. I know I have said this before, but I am gobsmacked every time I read this stuff. When I was briefly in the securities business (early 1980s), even a teeny weeny error in a securities offering was completely unacceptable, a career limiting event for lawyers and bankers involved. And even though due diligence wasn’t what it should have been, there were certain steps that were absolutely necessary to avoid liability (having the deal counsel read the issuer’s board minutes and having someone from the lead manager visit the major facilities of a first-time issuer, for instance).

The finesse in mortgage securitizations was a company called MERS. Fore those not familiar with their procedures, Marten gives a good overview:

on August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court took an intensive look at a “straw man” some Wall Street firms had set up to handle the dirty work of foreclosure and serve as the “nominee” as the mortgages flipped between the various entities. Called MERS (Mortgage Electronic Registration Systems, Inc.) it’s a bankruptcy-remote subsidiary of MERSCORP, which in turn is owned by units of Citigroup, JPMorgan Chase, Bank of America, the Mortgage Bankers Association and assorted mortgage and title companies…

In recent years, MERS has become less of an electronic registration system and more of a serial defendant in courts across the land…

MERS doesn’t have a big roster of employees or lawyers running around the country foreclosing and defending itself in lawsuits. It simply deputizes employees of the banks and mortgage companies that use it as a nominee. It calls these deputies a “certifying officer.” Here’s how they explain this on their web site: “A certifying officer is an officer of the Member [mortgage company or bank] who is appointed a MERS officer by the Corporate Secretary of MERS by the issuance of a MERS Corporate Resolution. The Resolution authorizes the certifying officer to execute documents as a MERS officer.”

Kansas Supreme Court Judge Rosen wasn’t buying MERS’ story… Judge Rosen wrote:

“The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS’s designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage ‘in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.’ ” (Landmark National Bank v. Boyd A. Kesler)

Yves here. So you see what happened? The securitization industry decided to impose the convenience of “street name” holdings of securities to mortgages, simply ignoring hundreds of years of precedent and a thicket of local laws (no joke here, the US precedent on the primacy of title documents goes back to at least 1818 in the US. No deed is like “no tickie, no laundry.”) Back to Marten:

Lawyers for homeowners see a darker agenda to MERS. Timothy McCandless, a California lawyer, wrote on his blog as follows:

“…all across the country, MERS now brings foreclosure proceedings in its own name — even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home. While up against the wall of foreclosure, consumers that try to assert predatory lending defenses are often forced to join the party — usually an investment trust — that actually will benefit from the foreclosure. As a simple matter of logistics this can be difficult, since the investment trust is even more faceless and seemingly innocent than MERS itself. The investment trust has no customer service personnel and has probably not even retained counsel. Inquiries to the trustee — if it can be identified — are typically referred to the servicer, who will then direct counsel back to MERS. This pattern of non-response gives the securitization conduit significant leverage in forcing consumers out of their homes. The prospect of waging a protracted discovery battle with all of these well funded parties in hopes of uncovering evidence of predatory lending can be too daunting even for those victims who know such evidence exists. So imposing is this opaque corporate wall, that in a ‘vast’ number of foreclosures, MERS actually succeeds in foreclosing without producing the original note — the legal sine qua non of foreclosure — much less documentation that could support predatory lending defenses.”

Yves again. Again, I know this has been rumbling around in the news for months, but it is hard for me to believe this has gone on as long as it has. I have heard (from my attorney first hand on situations she has been involved in, not urban legend) of a corporate lawsuit being thrown out of court because the contract between the parties had the name of the entities wrong….by a comma! Now real estate law is a different area, but title is one of its fundamental principles. Selling securities in a trust when the trust does not have clear title to assets in the trust is fraud. If judges keep nixing foreclosures based on the servicer (acting on behalf of the trust) not being able to demonstrate ownership, we could see a very interesting knock-on, of investor litigation against the trusts. But it’s too early to tell.

But it isn’t surprising that judges are plenty unsympathetic, and in cases, outraged. The law is all about sanctity of process, both the underlying law and court proceedings. Cases typically revolve around disputes of fact or grey areas of the law. This isn’t grey (whether a party has standing to file a suit is fundamental) and the law in this area is well established. Basically, the securitization industry tried creating rules outside any established legal framework and judges are having none of it.

Morgenson offers an interesting new sighting, involving a Federal judge in the Southern District of New York. This is significant because the Federal bench is generally pretty high caliber, and the Southern District of NY is particularly well respected. Moreover the ruling can’t be dismissed as a judge favoring the locals over the big bad out of town servicer:

…..on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.

Yves here. Translation: the judge was pissed. He could have dismissed the case without prejudice, meaning PHH could get its ducks in a row and try again, but he sent a much stronger message. Back to the story:

….the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court…..

Yves here. Lawyers can correct me, but I believe “fraud on the court” would mean that lawyers that bringing that sort of action could be sanctioned. Back to Morgenson:

According to court documents, the borrower bought the house in 2001 with a mortgage from Wells Fargo; four and a half years later she refinanced with Mortgage World Bankers Inc.

She fell behind in her payments, and David B. Shaev, a consumer bankruptcy lawyer in Manhattan, filed a Chapter 13 bankruptcy plan…

Mr. Shaev said that when he filed the case, he had simply hoped to persuade PHH to modify his client’s loan. But after months of what he described as foot-dragging by PHH and its lawyers, he asked for proof of PHH’s standing in the case…..

Mr. Shaev received a letter stating that PHH was the servicer of the loan but that the holder of the note was U.S. Bank, as trustee of a securitization pool. But U.S. Bank was not a party to the action.

Mr. Shaev then asked for proof that U.S. Bank was indeed the holder of the note. All that was provided, however, was an affidavit from Tracy Johnson, a vice president at PHH Mortgage, saying that PHH was the servicer and U.S. Bank the holder.

Among the filings supplied to support Ms. Johnson’s assertion was a copy of the assignment of the mortgage. But this, too, was signed by Ms. Johnson, only this time she was identified as an assistant vice president of MERS, the Mortgage Electronic Registration System. This bank-owned registry eliminates the need to record changes in property ownership in local land records.

Another problem was that the document showed the note was assigned on March 26, 2009, well after the bankruptcy had been filed….

According to a transcript of the Sept. 29 hearing, Mr. DiCaro [representing PHH] said: “In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don’t happen at the time they should. It was standard operating procedure for many years.”

Judge Drain rejected that argument, concluding that what had been presented to the court just did not add up. “I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person,” he said. “That’s the problem. And that’s because the claimant has not shown an assignment of a mortgage.”….

Late last week, PHH appealed the judge’s ruling. But Mr. DiCaro and PHH are in something of a bind. Either they will return to court with a clear claim on the property — including all the transfers and sales that are necessary in the securitization process — or they won’t be able to produce that documentation. If they do produce it, they will then have to explain why they didn’t produce it before.

Yves again. And given that they presented that little assignment with a date after the bankruptcy was filed….that would seem to say that any cleaned up paper trail was fraudulent.

Of course, presumably everyone in foreclosure land will get smarter and at least post date their documents more carefully. But maybe not.

And we have an even more interesting set of possibilities. Say servicers and MERS fail to clean up their act, and more judges start throwing out foreclosures. Kansas Supreme Court Judge Rosen didn’t just say he didn’t see an acceptable paper trail; elements of his ruling were a much more fundamental attack on MERS. If more judges start challenging MERS’s legitimacy, that could strike at the heart of foreclosures in securitizations. In other words, a few more of these rulings may accomplish what the folks in DC have been unwilling and unable to do: force banks to negotiate. The problem, of course, is the impact will be very inconsistent. Some jurisdictions and judges will no doubt be more sympathetic to this line of argument than others.

Stay tuned, this looks certain to get even more interesting.

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  1. Gerard

    It’s not just a matter of sloppy paperwork. When a mortgage is transferred, all kinds of fees and taxes may be due and MERS was conceived as a way of circumventing that. Which is all well and good as far as I’m concerned, but you can’t have it both ways . . . if you are not going to pay for the government to certify your title through fees, don’t expect the government to jump up and enforce your title.

    1. Yves Smith Post author

      Very good point. I had thought only of administrative cost savings (not having to prepare all those pesky documents required for filings). I must confess I never thought of saving on fees as well. This really is a scam.

      1. rd

        I am just a civil engineer, inexperienced in the world of the great financial pooh-bahs. When I was first hearing about all of these mortgage securitizations in the mid-2000s I really scratched my head on how the financial sector was able to address all of the documentation issues with property deeds and mortgages that are really not much different than what was going on in Elizabethan times. I had assumed that they had set up a MERS-type of organization with a network of folks around the country to handle all of that tedious paperwork. I also couldn’t figure out how it was such a profitable business flipping all of these securities considering each flip might need a a person to go into a multitude of county clerks offices around the country. I guess I couldn’t conceive of the brilliance of using a “signing statement” to say that centuries of jurisprudence did not apply in this instance.

        As homeowners, we always get this laundry list of fees and expenses whenever we close on a mortage. There are lawyer’s fees, county clerk filing fees, title insurance fees, and the list goes on. Everytime a new mortgage is obtained, it is not unusual for the administrative fees to be 1% or more of the mortgage value – even if you are replacing the same mortgage with another one from the same company! In the Northeast where the land ownership records can go back 200 years or more, just the title search alone can be 1% or more of the purchase price.

        I expect that the County clerks’ offices around the country are going to figure out really soon that 60 million mortgages held by MERS with multiple assignments of those mortgages will be a useful mechansim for balancing county budgets. Even a small fee like $100 per assignment could very quickly rack up into many billions of dollars. I don’t expect county and state courts to simply roll over on this one so that the financial sector can be bailed out again at the expense of the local taxpayer. It also looks like the Federal Courts aren’t going to stick their paws up in the air and give in either.

        1. oldtimer

          In the Northeast where the land ownership records can go back 200 years or more, just the title search alone can be 1% or more of the purchase price.

          … which is why we’ll never see an honest-to-god modernization of the system, because database searches would cost only pennies. And where would be the profit in that.

      2. Francois T

        Yves and Gerard,
        Do I understand this correctly: The MERS tried to avoid paying fees due to the government? (“if you are not going to pay for the government to certify your title through fees…”)

        I’m not a lawyer, but couldn’t this be construed as a de facto grand theft?

        1. Larry J. Busch Jr.

          Ironically, the lenders are just stealing from themselves. By not recording title properly on transfers, they can’t prove they own anything, and so can’t enforce the lien.

          We have seen cases where one lender has the note, another has the deed of trust, and neither can do anything. The note lender is unsecured, and the secured lender has no loan to do anything about.

          I just hope this train keeps rolling.

  2. Kevin Smith

    It would be fun to check a hundred consecutive mortgages where MERS is involved and see if all the right taxes and fees were paid, and paid on time.

    I wonder if the the jurisdictions involved offer rewards when cheaters are turned in, and money is recovered?

    Could be a good revenue stream for someone!

  3. Richard

    Where does this leave the title insurance companies? If there is no clear title on foreclosures then there also is no clear title on other properties that have securitized mortgages.
    What percentage of American homes are potentially unsaleable as a result of the lack of clear title?

  4. koshem bos

    If MERS is a front for Citigroup, JPMorgan Chase, Bank of America, the Mortgage Bankers Association and assorted mortgage and title companies, aren’t these companies in gross violation of the law as well as owe heavy millions of dollars in fees?

    Are we slowly converging to the point were we finally realize that our largest financial institutions are criminal enterprises?

  5. Tim Duncan

    I am a lawyer who has been involved in corporate finance for over 25 years. First, if you beleive that securitization offers benefits (cost reductions) to consumers then MERS is not per se a bad thing in that it reduces overall transation costs which should in part be passed on to the homeowner borrower. As you note, the problem is more a change in standards (perhaps ethics and morality) in the last ten years in the industry.

    The problem is not MERs by itself but how the securitization industry has changed in recent years to the detriment of cosumers and investors in the banks and other companies that have blown up as a result of an important industry being turned into basically a circus. I can share my own expereince as a homeowner to demonstrate how crazy things have become.

    I had a mortgage on my home that was originated over 15 years ago at a local bank. The mortgage had been sold (through five intervening transactions)over the years to Washington Mutual. Two years ago I decided to pay the loan off. At the end of a month, I sent in a check for the full balance of principal and interest on the loanand requested a deed release be filed. This was all in accordance with the terms of my promissory note and mortgage the legal agreement governing all parties.

    Two weeks later I received my check back in the mail from WMU with a letter stating that the payoff was not in accordance with Washington Mutual policy. No one at Washington Mutual had bothered to read the mortgage agreement (the legal agreement binding the parties). Instead the letter stated that payoffs had to be preceeded by paying $75 for a “payoff quotation” and must be made by wire transfer and other terms which were obviously made to increase the profitablity to WMU which had no basis in the legal agreements.

    Since WMU had no legal basis for its demands, I stopped paying my mortgage. Within three months my credit score had been lowered 300 points, all of my credit cards were canceled (I never kept a balance on any card) and I was receiving daily harrassing collection calls. Eventually, I sent a couple of letters to the WMU General Counsel’s office and began to work towards a class action lawsuit. Despite this, it took another three months to get someone’s attention at WMU who could put two and two together and I finally received a call and letter from a senior attorney who agreed to forgive thousands of dollars in interest, put a person full time on reestoring my FICO score etc etc. and fix the problems that never should have occured.

    The point is that the securitization industry 5-10 years ago made a collective choice to ignore the terms of contracts, state and local laws and legal convesntions developed over hundreds of years. Why? Because they could. Our legal system and conventions were built on the assumption that most businesses would choose to follow them. Instead, the securitization industry simply developed a cost/benefit approach to following the law and adhering to contracts. It worked quite well becaseu most individuals just aren’t equipped to read and enforce their mortgage agreements or fully understand the law.

    This is why the banks are fighting so hard against the Consumer Financil Protection Agency. The CFPA will have the ability to level the playig field and thus change the economics of banks simply ignoring laws, contracts and convention.

    1. rd

      Maybe it is time for the financial sector to take their bonus pools and invest it in updating MERS so that it can be able to complete the necessary assignments. They could also put a system in to help digitize county property records and enable the county clerks to do their job as quickly as the financial sector will want it to happen.

      Then again, maybe it smarter for them to simply grab the cash and run, kind of like Wille Sutton.

      I am very concerned though that what used to be a very systematic and relatively fair property transfer and mortgage system is now turning into a game of roulette where you can owe $200k if somebody actually did the paperwork or didn’t sell your mortgage and owe nothing where they had serial screw-ups. Ultimately, a political and economic system is doomed to instability if it is not reasonably fair and orderly. That concept has been entrenched in the Britain and North America since the Magna Carta.

    2. Anonymous Jones

      Thanks for the story, Tim. Very enlightening. These types of fact sets are the primary reasons for judges currently bringing the slap down to the mortgage holders. Regarding the case mentioned by Yves regarding the missing “comma,” there is a little cliche about “bad cases making bad law.” It’s more widespread than most think. A large percentage of cases that actually make it to trial have one side that is completely out of its mind or completely loathsome, and the judge often looks for *any* reason to slap down that side, even a missing comma.

  6. jedwards

    Yves, what does this do to the MBS industry? The price of MBS’s are supposedly well understood and well-modelled. This now introduces a new form of risk, where mortgages in default can no longer be swapped out for the foreclosure value of the underlying house. Trying to account for this, if it becomes more widespread, makes the modelling much more difficult. It seems to me that this would have a negative effect on the value of MBSs.

    Could this cause the value of even the highest tier MBS’s to take a valuation hit, and cause more capitalization issues for the banks, hedge funds, etc?

  7. lambert strether

    Yyves writes:

    Selling securities in a trust when the trust does not have clear title to assets in the trust is fraud.

    Since this is systemic, that’s a consequence of executive level decisions. That makes this accounting control fraud.

  8. Mike Dillon

    Yves, with all due respect, what the hell do you think Mortgage Servicing Fraud victims have been screaming about for the last DECADE?!?!? I know that I’ve brought this to the attention of both Ms. Morgenson multiple times over the last 3-5 years, spoken to her at length over the phone to the point where I thought she understood what was going on. I also attempted to bring this to Ms. Martens’ attention in the past. These concepts don’t just apply to MERS either. This applies to each and every RMBS trust that has been in existence since Lewie Ranieri started the whole RMBS mess…

    Attorney Duncan, above, describes a near classic case of Mortgage Servicing Fraud. What I WILL point out against MERS being beneficial to consumers is that not only has/does MERS easily hide the true owner(s) of a note but by registering a note with MERS, county registries/recorders of deeds are, and have been, losing tens of millions of dollars in recording fees. Fees that help bolster registry and county budgets. Additionally, as MERS tends to hire employees of the various servicers to act as “Vice Presidents” of MERS, this creates a serious conflict of interest whenever a note/assignment of mortgage is transferred by a MERS “VP”. How so many trusts can use 3815 SW Temple, Salt Lake City, UT or 1270 Northland Rd, Mendota Heights, MN or 1661 Worthington Rd
    West Palm Beach, FL as business addresses when those addresses are, at best, the addresses of the servicers handling the trusts is beyond me.

    I’ve noticed that on assignments of mortgage being handled by MERS, both the “assignee” and “assignor” commonly use identical business addresses, that the address is most commonly the address of the servicing entity involved and that the assignment shows a note being transferred into an RMBS trust already being serviced by the servicing entity. I believe Judge Arthur Schack has ruled that this is potentially a serious conflict of interest in SEVERAL cases before him. A quick search for “Judge Arthur Schack” and “Scott Anderson” (Ocwen) or “Laura Hescott” (FNIS) will illustrate my points. I’ve also noticed the identical issue happening with a “Bill Koch” of Select Portfolio Servicing who acts as an agent of MERS.

    This can really only be referred to as a known racket at this point. Period. On any given day, throw a dart at your local public notices and pick the nearest foreclosure to it that has been securitized. I GUARANTEE that if you look up the trust that is bringing the FC action at you will find that the trust filed a 15-15D (Suspension of Duty to Report) within 18 months of issuance thereby ending the paper trail of financial docs. So much for transparency.

    Attorney Duncan, I would be interested in speaking with you with regard to Mortgage Servicing Fraud cases, should you be so inclined. Although they are becoming more common, a good attorney who understands the complexities and intricacies of an MSF case is still a rare thing. I’m easy enough to find on the web.

  9. Michael Donner

    Oh, the poor MBS market…call me naive..and some will of course..but this and all other ‘innovative financial products’ sold and contributing to the GDP without anything of ‘real value’ created for everyday use (food, cars etc) is the root of the current problem.
    In a ‘must grow or die’ economy where somehow money creates money for a few wealth is a corrupt system that needs to be dismantled. MBSs and all other such “products” simply create more leverage that is, at its root, fundamentally unstable (as addressed here often)
    but the conversation needs to get to the point where the entire system is scowered of useless ‘products counted towards GDP (double, triple counting of the same dollars??) to maintain the illusion of growth.
    discussing regulations that will basically entrench this behaviour is to join the conspiracy. does anyone really believe, for example, that IF some consumer protection agency for financial products was put in place..either by the do nothing congress or the banking systems that…in this case..they would just rule that MBSs are essential, that MERS is good, that streamlining is important to be competitive,that the laws need to be changes to the ‘loopholes’ can be closed and the whole thing can continue merrily along without the ‘burden’ of proving ownership and tilte???
    are we really imagining a system of regulation that won’t get gamed by the FIRE sector. oh, the cries of ‘how expensive it will be’ to have to continually register a title each the fees each time..oh my god…the cost of mortgages will go thru the roof they will say..pricing out the average joe and making mortgages unafordable…never once raising the question…and certainly the press will not rasie the question of maybe the system of mortgages just 20-30 yrs ago worked just fine for everyone.
    oh, but there were not huge bonuses then nor outsized profits for the FIRE sector and it was just 15% or the GDP, not 30 % as now (or whatever)
    the question will can we keep the leveraged system growing not whether its good…or too big..or really contributing to society.

  10. i on the ball patriot

    If I did not think that the ‘rule of law’ was a complete and total beyond redemption scam — and that all lawyers suck simply for legitimizing that scam — I would say that this RICO suit is the approach to take …


    “Class Claims Lender Destroyed Records

    ALBANY (CN) – Bank of America and Countrywide Home Loans destroyed mortgage documents, and “recreate” them by “insert(ing) data as they see fit,” to cover up their own failure to keep records – or their fraud – according to a federal RICO class action.
    “To cover up the servicing mistakes and fraud and misrepresentation in the servicing of a consumer escrow, Defendants ‘recreate’ letters, insert data as they see fit, and fail to produce the entire HUD complaint form. This way, a consumer is left in the dark about the fraud that occurred to them,” the complaint states.
    Lead plaintiff Kim Gorham says that when she sent a letter seeking information about her escrow account, she was informed that it had been “destroyed by a letter opener.””

    More here;

  11. Siggy

    I am delighted that more judges are raising a challenge as to whether the filer of a foreclosure motion has standing.

    I recently did a refi to lower my interest rate. I made application to a major, ‘primary dealer’ bank; received a rate lock notice and then waited 136 days for the loan to close. The loan-to-appraised value was 40% and debt service, plus taxes and insurance amounted to less that 20% of current disposable income. Should have been a no brainer. My impression of the delay is that the minions of bank were no-brainer’s.

    I don’t see securitization itself as the problem, I see incompetent people coupled with reckless origination and packaging as being the problem.

    When the income streams of an the B piece and lower traunches of an existing MBS are securitized you achieve a concentration of risk. It is my impression that CDOs and CDO^2 issues are fraudulent if it is represented that any of their traunches are capable of commanding a AAA rating. But then, it was view of Greenspan that there was no need to prosecute financial fraud as the efficient market would take care of that consideration.

    I would like to read the indenture for a residential, or any mortgage backed securities issue. That’s the contract that guides what has been and may be done in the future.

  12. Vinny G.

    “Oh what a tangled web we weave, When first we practise to deceive!”

    Serves them right! On top of that, the judge should transfer this case to criminal court and have MERS and its executives (including executives of bank shareholders) be processed as the ordinary criminal that they obviously are.

    Ah, the birth pains of Universal Debt Jubilee are upon us. What a beautiful baby will that be!

    Vinny G.

  13. Tracy Coyle

    I know the atty in the SDNY personally and work for bankruptcy attorneys in 9 districts. His case is not unique, or even rare. Routinely, mortgage servicers can not produce documents or even accurate accounting of payments received. We had one servicer in Bankruptcy Court on a violation in a bankruptcy plan; the VP was testifying and the Court told him that their business practice violated the law. The VP’s response? “What do you expect us to do? Change the way we do business?” No, really, that was his response to being told his business practice was illegal. They lost and the client got credit for the payments.

    More and more attorneys are getting judges to pay attention to complaints that servicers and lenders are flat out lying in document production and accounting.

    The case in SDNY is going to appeal, but PHH will have to explain it’s actions and either potential answer will get them in trouble. Frankly, couldn’t happen to nicer people.

    MERS is a black hole. Before this is over, I expect it to be ‘disbanded’.

  14. Deontos


    During the housing boom, lenders passed around mortgages as if they were whiskey bottles at a frat party. Notes were lost, destroyed, sold into multiple pools. Mortgages were not recorded and exorbitant fees were collected by the big firms on Wall Street.

    Now that the bubble has burst, “lenders” are trying to collect on loans they do not own, in most cases never lent a dime on the transaction, have no right to, or were paid 30 times over in bailouts, insurance, credit default swaps, etc.

    They are doing this because they can. They are steamrolling the courts rocket dockets because hardly anyone is contesting their foreclosures. Think about it. If you could go into a court and file thousands of foreclosures a week, and only a mere 10% challenged the authority of the foreclosing entity, what would you do if you were the greedy bankster?

    The crises is even worse in non judicial states…

    In almost every case these pretender lenders do not and did not own the loan. Almost all loans during the boom were securitized and it was investors that put up the money. Not the banks.

    Now these “pretender lenders” are trying to steal the homes by filing fraudulent assignments, by the thousands, to process the foreclosures.

    Don’t believe me? See for you yourself.



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