Debunking Banks’ “Procedural Problems” Defense on the Foreclosure Crisis

As more and more problems with foreclosures and borrower horror stories are coming to light, it isn’t hard to notice that banks are still gamely sticking with the pitch that the failings are technical and procedural even as the breadth of their response and the official reaction says otherwise. Suspending all foreclosures in the US, as Bank of America did today, is a very significant move. And the pressure appears to be escalating, as a multi-state effort is close to going live. Per Bloomberg:

Attorneys general in about 40 states may announce by next week a joint investigation into potentially faulty foreclosures at the largest banks and mortgage firms, according to a person with direct knowledge of the matter.

State attorneys general led by Iowa’s Tom Miller are in talks that may lead to the announcement of a coordinated probe as soon as Oct. 12, said the person, who asked not to be named because an agreement wasn’t completed. The number of states may change because several are deciding whether to join, the person said. New Mexico Attorney General Gary King said yesterday in a statement that his state will join a multi-state effort.

The Financial Times gives us Bank of America’s gloss on this shoddy situation:

Banks have downplayed the problem by saying it is a mere technicality, adding that they are only foreclosing on homeowners who are months behind on their mortgage payments. BofA reiterated that position on Friday, saying: “Our ongoing assessment shows the basis for foreclosure decisions is accurate.”

Yves here. Although we have chronicled the affidavit improprieties, we’ve kept our focus on the fact that these abuses are symptoms of much bigger, and we believe pervasive, problems with the securitizations. But in trying to give the big picture, we may have played into the bank narrative of minimizing the importance of the affidavit issue. Reader ella in comments provided a reminder:

An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying about. An affidavit is no different, in most if not all jurisdictions; the affiant swears to tell the truth by being placed under oath by the notary, the affiant states in the affidavit that they were sworn, are competent and that they have personal knowledge of the facts in the affidavit. The notary attests to the oath of the affiant and that the affiant is who he claims to be.

If a witness lies in court or in an affidavit then they could be charged with perjury. Perjury is lying to the court.

The affidavit issue is being portrayed in the MSM at a paperwork problem. Lying to the court is not a paperwork problem. Attorneys are prohibited from making a material misrepresentation to the court of fact or law. Further, attorneys in most jurisdictions have an affirmative duty to report known perjury by their clients to the court.

The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries’ knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

At the heart of any trial or hearing is the determination of the truth of the matter. It is the very purpose of the rules of evidence and what law and fact is presented to the court. If the affiants lied, as it appears, then the truth of whether they owned the note and held the mortgage and the borrower was in default is at issue. Courts, Attorneys General, and bar associations need to serious consider actions that will assure compliance with the rule of law.

This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paperwork problem.

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  1. Claremont

    Are people disputing whether these people are in fact behind on their mortgages, or on who actually owns the note? Because I would have a lot more sympathy for people who are in fact current on their obligation yet being foreclosed on, compared to a borrower who is seriously delinquent and being foreclosed on despite an automated signature.

    1. Yves Smith Post author

      You are missing the point.

      1. You are presupposing outcomes. Would you find it acceptable for the cops to throw everyone they arrested into prison? You are arguing for the same logic, bank as judge and jury. States have strict procedures on foreclosures precisely because the consequences of error are so high.

      2. This is ultimately about the rule of law. You are seriously willing to compromise that to convenience banks who have not behaved at all well on a lot of fronts (gotcha credit card charges, hidden fees on bank accounts, etc). If the banks had been models of probity, your view might be more defensible, but I find it remarkable that you assume that the banks deserve a break in light of their massive failure to adhere to procedures that they themselves devised.

      1. Lightbulb


        Having spent an entire career in financial services I must admit that this entire mess is beyond despicable. Banks taking shortcuts really for the sole purpose of higher profits and bonuses. I guess the real shock is that this still surprises me.

        I have every confidence that the docs are missing forever, perhaps intentionally in order to hide the evidence of the “original sin” — that the securitizers had stuffed deficient mortgages into the MBS in violation of their reps and warranties.

        One thing baffles me about MERS and the issue about whether the loans had ever been properly conveyed to the Trusts — where were the bankers lawyers?!?! These firms are usually represented by the best NY law firms. Did they simply turn a blind eye?

        1. Nobby

          As I recall, what happened was the lawyers were sitting on the trading floor with the “traders” and started to think of themselves more as deal makers than a control function. They tended to be obsessed about the next deal and handed the responsibility of making sure docs were correct to paralegals, who did not dare challenge. Add to that, the turnover of the back office staff tended to be very high, so the “boring” ex ante work was neglected as everyone just hunted for the money.

          It is a recurrent theme in all of this – when control functions (credit risk, market risk, legal risk) sees itself as part of the business, they no longer have right mindset. Add to that, senior management was too busy playing god to ever actually get their hands dirty and question how they were making so much.

      2. rd

        Ellen Brown has an interesting take on this from a legal perspective:

        “Increasingly, judges are holding that if MERS owns nothing, it cannot foreclose, and it cannot convey title by assignment so that the trustee for the investors can foreclose. MERS breaks the chain of title so that no one has standing to foreclose. The homes are effectively owned free and clear.

        That does not mean the homeowners don’t owe money to someone. They do. But the claim for relief is not in “law” (by virtue of an enforceable contract or rule) but in “equity” (a remedy provided just because it is fair), and MERS is not the proper plaintiff. Every MERS case involves a securitization, which means the real parties in interest are a group of investors somewhere; and before the homeowners can be made to pay, the investors have to come forward and prove not only that they are the parties owed the money, but the actual sums they are owed. In some cases they might already have been paid; for example, by insurers on credit default swaps held by the investment pool. The investors are entitled to recover in equity only so much as they are actually out of pocket, not the full amount of the original promissory notes, since they were not parties to those notes and there is no way to re-establish the chain of title.”

        This could be the legal-financial mess of the past couple of hundred years. There might need to be an entire court system set up on a state-by-state basis to handle this.

        1. Phil

          It would be interesting to see how an equity case would play out. I wonder if even court in equity could find standing for the investors or their trusts against the homeowners.

          The equity angle got me thinking though. All states have either a statutory or common law procedure to “quiet title”, in which any alleged competing claims to an interest in real property can be extinguished so the property can be conveyed free and clear. A more aggressive approach might be to bring an action against the servicing firms and trusts for creating a cloud on the title of the homeowners. Might be some actual damages there, especially if the result was loss of a home.

      3. rd

        I have an interesting question with regards to recourse states. If it turns out that MERS breaks the chain of title, then presumably the chain that would lead to suing for recourse on the short sale of the house would also be broken and there will be little or no recovery of mortgage principal above the foreclosure sale price. Would that be a correct reading?

        I assume that somebody would fight much harder to prevent their wages from being garnished than taking away an underwater house. Key court cases may actually arise from attempts to collect additional money in recourse states instead of the actual foreclosures themselves.

      4. Andy Scores

        You can’t use the argument that banks are guilty of perjury in all 50 states. There are two types of foreclosure. The courts are not involved in a non-judicial foreclosure and procedures follow state statutes. I’ve posted the definitions of both types below. If anyone knows how and why I’m wrong, please explain so I can have a better understanding about this.

        1.) Judicial Foreclosures
        Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security for the loan. The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court. If the court finds the debt valid, and in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale. The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps, to in front of the property being auctioned. Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale. Check your local procedures carefully. At the end of the auction, the highest bidder will be the owner of the property, subject to the court’s confirmation of the sale. After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property.

        2.) Non-Judicial Foreclosures
        Non-judicial foreclosures are processed without court intervention, with the requirements for the foreclosure established by state statutes. When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time. If the homeowner does not cure the default, a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publications. After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the deed. Auctions of non-judicial foreclosures will generally require cash, or cash equivalent either at the sale, or very shortly thereafter.

    2. Koshem Bos

      You are claiming, in essence, that the law doesn’t apply to the unemployed, sick and unfortunate; they can be foreclosed because the servicer wants to. That’s about what the kangaroo courts of Florida say. If I am delinquent in my payments to a servicer, you claim that the servicer can foreclose on my home even if the servicer cannot prove that it is the right to the house.

      I hope we didn’t reach that low yet.

      1. Tao Jonesing

        Actually, Claremont is saying that the rule of law does not apply to anybody so long as the debtor is a “deadbeat” in his opinion. Claremont has as much right to claim ownership of the “deadbeat’s” property, and if he were a corporation, he would do so because his only social responibility is to maximize shareholder value. Who cares if he has to commit fraud to take the “deadbeat’s” property? I mean, the “deadbeat” is a deadbeat, right? We need to make the “deadbeat” suffer so we feel better about paying our debts, even if that means breaking the law ourselves. We are righteous, after all, so our sins can and will be forgiven.

        Until they aren’t. Reap what you sow.

        1. Neil D

          Perhaps Claremont is expressing the same doubt I have. Namely, that there are varying degrees of culpability here. The bankers are evil as Ms. Smith has established so well. There was mortgage fraud on a grand scale in nearly every community in America. There were people who looted the equity in their homes to pay for trips to Vegas. Then there were people who simply wanted a new house or used home equity to pay off other debts who just got caught in a bad spot when housing prices fell or they lost a job.

          No one is arguing that innocent people haven’t been hurt.

          I would assert that many of the victims here are suffering from unrealistic expectations. And the first step to recovery is admitting you have a problem. We take it as a given that you should be able to buy a house, pay the mortgage, build equity, then sell it for a profit. That assumption was wrong. In particular, it was wrong if you put no money down, did cash out refis, or otherwise used home equity loans to pay for… whatever. The assumption was WRONG. The evil bankers took advantage of this assumption and were quite happy for many years to indulge this fantasy.

          It is not a crime to be taken advantage of, but unless you learn from the error, you are doomed to repeat it.

          1. skippy

            Who built the loan structures…eh…the consumer?

            No from its inception it is the *industry that has a duty* to its investors (equity and bond et al), its own employees, THE LAW etc etc.

            With out these loan structures there would have not been a meltdown, full stop. The industries involved in this debacle *own it* it is their BABY, they gave it life. The FBI raised a flag, it was dismissed by those, that could have averted this train wreck, but no their was to much money to be made quickly (bribes {cough campaign monies, bonus culture etc} and then run away.

            Get a grip, *consumers* are called that for a reason, they consume what is on offer, no offer, no sale, no meltdown.

            Skippy…the industry behind this fraud are the true deadbeats, bringing America to its knees w/a good chunk of the world. Yet your worried about people that bought hook line and sinker the lie of the American dream (take out a 30 year mortgage in this job market?), get left behind, copy flippers BTW which sales staff used as enticement, 24/7/365 advertising bombardment reinforcing indudstry social values etc…

          2. Neil D

            Hey skippy. What do you think of this?


            “Layer on top of that millions of borrowers who aren’t deleveraging yet, because Uncle Sam is telling them not to, and consumer advocates have swooped in to help. We’ve sold the American populace on the idea that their home truly is the American Dream, and that saving that dream is worth wallowing in bad debt and insolvency for years — rather than simply leaving it behind, deleveraging and moving on with their lives.”

            And this…

            “By subverting our nation’s real estate law to favor borrowers who have no intention of fulfilling their debts, we risk undermining everything that establishes private property rights in our country — and perhaps the coup de grâce of it all is that the American public will be cheering when it happens.

            How very eerily Orwellian of it all.

            The enemy at our gates threatening our very republic isn’t Wall Street, isn’t banks, isn’t foreclosure mills, isn’t botched paperwork, isn’t loan officers making empty promises, isn’t investment banks rolling loans into CDOs and other esoteric investments, isn’t rating agencies. Instead, we’ve met the enemy, and it’s us.”

            I couldn’t agree more. Have a nice day.

          3. DownSouth


            I got Neil D’s number early on when he was on here running interference for BP during the Gulf oil spill.

            He makes arguments that are verisimilar, having just enough truth to sound plausible.

            If you are interested in one Texas congressman who fought the bankersters till his death, who was also the first Mexican-American to be elected to the U.S. Congress, I recommend this paper published by him in 1994:

            The cherished home equity protection has been under sustained attack for several years by a group of bankers and other financiers for whom a homestead is nothing more than a type of collateral and another potential source of profit.


            Here are some biographical notes from Wikipedia that you might also find of interest:

            González became known for his liberal views. In 1963, Rep. Ed Foreman (R-Texas) called González a “communist” and a “pinko” and González confronted him. González was referred to as a “communist” in 1986 by a man at Earl Abel’s restaurant, a popular San Antonio eatery. The 70 year-old representative responded by punching him in the face. González was acquitted of assault for this incident.


            He was an outspoken critic of the Federal Reserve System and in 1993 proposed an audit of the central bank.


          4. Doug Terpstra

            To paraphrase Neil’s quote: “The enemy isn’t Wall Street predators, Bernie Madoff, liars, cheats, parasites, perjurers, or bribed politicians. Oh no, the real enemy is in the mirror; it is us.”

            That is double-good doublethink and doublespeak. Let us now prostrate ourselves, repent of our sins, and seek the mercy of our betters.

          5. CaitlinO

            Claremont and Neil –

            Do you honestly believe that the only people whose chains of title were screwed up by the banks were those that were going to defaut in 3 to 5 years?

            If you have stayed scrupulously current on your mortgage payments, your title is more than likely also blighted if you:

            – bought your home since 2003
            – refinanced your home since 2003
            – took out a second since 2003
            – did none of the above but the bank sold/securitized your loan since 2003

            Honestly, is every homeowner in America, even those who have absolutely played by the rules, a deadbeat?

          6. skippy

            Neil you proffer a inside industry rag as your evidence??? The housing-wire site is a industry front facilitated by the masters of consumerist double speak see:


            Motto: “We know the power of the right idea. After all, it’s what we do — everyday.”

            All accompanied by fawning side bar testimonials so much reinforcement built up layer upon layer shezz, although they do have a funny bone still after screwing every one (hay its my day job) see:


            LOL…I still want 5 articles by lunch! (damn the facts Ive got a dead line)

            Any way the musical back drop to all of this should be this little ditty from some guys I used to hang with in the day see:

            Can’t Fight This Feeling


            Skippy…and good day to you too, mate.

          7. Neil D

            CaitlinO asks, “Honestly, is every homeowner in America, even those who have absolutely played by the rules, a deadbeat?”

            Here’s a hint – if you have a mortgage you aren’t a homeowner. If you raided the equity via cash out refi or home equity loan and are now underwater because of it, you are a looter.

            But let’s be honest, there are very few who played by the rules AND are in trouble. Really – that’s all I’m trying to say.

          8. skippy

            Neil think about artificially inflating the housing market, by whom, for what reason, and who profited from that exchange…fraudulently.

            Skippy…home ownership is the least of our worries, please try and think of you country for once, not your back pocket, your sense of morality…hell we might even show the world we are a country of laws and not just some banana republic.

            PS. my name is worth more than my bank / assets account.

          9. Skippy

            PS Neil, if I built a stadium and it collapsed, would the ticket holders filling the seats be liable or me the dodgy architect / builder.

            Skippy…if your not some shrill, then you really funny sense of morality, punish the uniformed, over the criminals, you have never broached their cupability…why.

          10. Neil D

            Skippy – I acknowledge the culpability of the banks in every post. Scroll up a bit and you’ll see it: “The bankers are evil as Ms. Smith has established so well.”

            I’ll be sure to say the same thing every time I post here. The entire finance and real estate “industry” is full of millions of evil people.

            So Steve Pearlstein from the Wash Post and even Calculated Risk have weighed in on this and the theme seems to be:

            “But if, as appears to be the case, the overwhelming majority of homeowners facing foreclosure have fallen far behind on their payments, then it is a good deal harder to summon up the same moral outrage over reports that the banks and loan service companies cut corners, failed to keep the right documents and engaged in shoddy and even fraudulent practices. Just because the banks and servicers have screwed up doesn’t mean they and their investors are no longer entitled to get their money back.”

            “But none of that changes the basic reality that there are millions of Americans who took out mortgages they could not support on houses they could not afford.”


            And Calculated Risk chimes in…

            “I’ve pointed this out several times: the basic facts are 1) the homeowners have a mortgage and 2) the homeowner is seriously delinquent.

            As Tom Lawler wrote “mortgage servicers who messed up should bear all of the costs associated with their mess up”. And I’d prefer alternatives to foreclosure (mortgage modification or even short sales / deed-in-lieu), but we also need to remember that the basic facts are not in dispute.”


            I may be shrill but I’m not a shill. I’m a renter whose very angry with the bankers, developers, real estate agents, Wall St. etc AND every yahoo with a mortgage. Sorry if that offends.

    3. Francois T

      Why is it so bothersome to you (and many others) that the law should be upheld?

      Even if the bank is on the right side of the matter, this cannot be a reason to break the law.

      BTW, quite a few people have been threatened with foreclosure by banks who didn’t even own the mortgage. I know of at least 2 cases in Florida where the homeowner got his house foreclosed even if he NEVER had a mortgage to begin with! (Paid cash for his house!!)

      That is the kind of stuff that happens when banks behave as if the law only applied to the “little people”.

      1. Just wondering...

        I have an idea: Let’s all stop paying our mortgage payments and use our monthly income to stimulate our economy. They can’t foreclose of all of us. Heck, they can’t even navigate to foreclose on a couple of million! (Reportedly, MERS includes around 60 million.)

        With the same amount of money we pay for our mortgages, we could increase our savings account, pay off debt, and buy a Ford. And in doing so, we could create and save REAL jobs.

        1. Greg Colvin

          If you are far enough underwater stopping payments might be a good idea. The mortgage contract does give you that right, and gives the bank the remedy of foreclosure. And if the bank messed up such that they can’t foreclose? That’s their problem for breaking the law.

    4. Tao Jonesing


      “Are people disputing whether these people are in fact behind on their mortgages”

      We have at least one instance in which a person who was foreclosed on DID NOT EVEN HAVE A MORTGAGE, so he could not have been behind on his mortgage.

      We also have at least one instance in which a person who was “behind” on her mortgage but not in default had her home broken into by her bank. Legally, the fact that a person is merely behind in her mortgage invests no rights in the mortgage holder. The bank actually committed a crime.

      “Are people disputing . . . who actually owns the note”

      Yes. And the fact that banks are engaging in fraud to establish that they own the note is strong evidence that they can’t prove ownership legitimately.

      So, let me put things into perspective for you. You know your next door neighbor is behind on her mortgage. Do you have the right to forge documents that assert your right to foreclose on her property and claim it as your own? More importantly, would you be okay having your neighbor do the same thing to you?

      This is not about “sympathy” for deadbeats. It’s about not tolerating criminal behavior by anybody. The deadbeats aren’t criminals. The banks are. Choose which side you want to throw in with, and accept the consequences.

      In closing, I have to say that your statement about “automated signatures” displays your complete and utter lack of any real understanding of the fraud that has been committed through forged documents. You seem to be conflating electronic notarization authorized by the now-vetoed HR 3808 with what is proving to be systemic foreclosure fraud.

      1. DownSouth

        Tao Jonesing,

        There’s a lot of history that pertains to foreclosures that the corporate shills would like to gloss over. Here’s a short overview from a decision by the Texas Court of Appeals:

        Homestead laws are a uniquely American institution, having their origins in the “great debtor revolution of the era of ‘Jacksonian Democracy․’ ” Estate of Johnson v. Comm’r, 718 F.2d 1303, 1307 (5th Cir.1983).   These laws sought to afford protection to the family by protecting the family home from creditors.   See id.   The broad purpose of these laws was to protect the family from dependence and pauperism.  Id. Further, “[h]omestead laws are not only based upon a tender regard for the welfare of the citizen, but have for their object the stability and welfare of the state.”  Andrews v. Sec. Nat’l Bank of Wichita Falls, 121 Tex. 409, 417, 50 S.W.2d 253, 256 (1932).

         Texas has a “strong pro-homestead tradition [that] pre-dates statehood, and the Republic of Texas was determined to protect homesteads from creditors.”  Norris v. Thomas, 215 S.W.3d 851, 854 (Tex.2007).   Under current Texas law, the homestead interest is a legal interest created by the Texas Constitution that provides prophylactic protection from all liens not specifically delineated therein.   See Tex. Const. art.   XVI, § 50.  “We construe homestead laws generously;  however, courts cannot unduly stretch the homestead laws beyond their constitutional and statutory moorings and protect that which is not a homestead.”  Norris, 215 S.W.3d at 853 (internal citations omitted).   Whether property is a homestead presents a fact question.  Brown v. Bank of Galveston, Nat’l Ass’n, 963 S.W.2d 511, 515 (Tex.1998).

    5. dsawy

      Put aside the issue of whether or not the people who are victims of legal fraud are deadbeats.

      They’re still afforded due process of law, and that is what is being shredded here: due process. You have a right, as a defendant in a US court, to expect that officers of the court are not lying. Period, full stop. Doesn’t matter whether you’re accused of not paying your bills or of running down nuns in a crosswalk.

    6. Dan

      How sad you presume the obligation valid just because the bank says it is. Your “sympathy” is worthless and meaningless.

      A promissory note secured by a mortgage is not a moral transaction – it is a financial transaction governed by contract law and the UCC. Read paragraph 9 of your Note. Not only does the borrower have an obligation to pay but so does “. . . any other person that is a co-obligor, surety or endorser.” Securitization added other entities to each Note in the form of CDS, cross-collateralization, over-collateraliszation, etc.

      The LAW in judicial states requires that the debt be proven before the security instrument can be acted upon to satisfy the debt. Absent a full accounting proving the status of the debt, your presumption that the homeowner is in default just because he is not making payments is seriously misplaced and based in your own moral judgments rather than in the rule of law. We are a country of laws not personal opinion.

    7. i on the ball patriot

      This Claremont sub thread is testimony to the perpetual conflict that is being intentionally instilled in the populace — the prudent pitted against the not so prudent. You can argue whether or not it is intentionally created, as I believe it is, but you can not dispute that it is a very real divisiveness and the Fox forces are now amplifying, agitating and promoting this divisiveness.

      Reader Ella, and many of the posters here, are in an, ‘I want to believe so badly’, la la land when it comes to the scam ‘rule of law’. The gross corruption at the bottom — that they have ignored for so long, and many activists have been warning them about for years — now rises up to bite them in the ass and consume them and they cling to the fantasy of equal justice.

      The sooner you all grasp the real concept, that it is ‘Just Us’, and you are not included, the better off we all will be. I repeat my comment from yesterday about Ella’s comment repeated by Yves today. It was in response to DownSouth who was also taken with it …

      Its an absolutely superb TEXT BOOK FANTASY comment.

      The reality is that cops commit perjury in courts across the land every day and absolutely nothing is done about it, in fact it is expected of them.

      This country is not a democracy and there IS “one set of law for the banks, corps, elites and another set of law for the rest of us.” Perjury and fraud on the court is NOT a very serious matter at all and cops smilingly refer to it as testilying or joining the Liar’s Club.

      This country has been hijacked by gross corruption and now stands as a rogue self empowered gangster government. The legal system and law enforcement reflect that reality.

      Deception is the strongest political force on the planet.

      1. ella

        A quick Google search establishes that cops are charged with perjury and sometimes convicted. Does perjury occur in courts, yes. Is there fraud on the court, yes. Is it prosecuted and punished, yes. Do bar association punish attorneys who commit perjury and fraud on the court, yes. Are there numerous incidents that are never caught and punished, sadly yes. But at the voluminous level it is likely occurring in the foreclosures, no…this is something most of us have never seen.
        It sounds as though you are a member of the criminal defense bar or a perhaps defendant who has reason to believe that you have seen perjured testimony. As you know it is always a matter of proof.

        1. i on the ball patriot

          Ella says: “As you know it is always a matter of proof.”

          Ella, the proof of the corruption in the scam ‘rule of law’ — and the present day brazenness of that corruption — is what you are dealing with right now in mortgage frauds across the country and the effects of that fraud that are being felt around the globe, the pervasiveness of it, and the LEVEL at which you are dealing with it.

          The bottom level is, right now, trust me on this, an ever enlarging sink hole of unconstitutional law and law enforcement bullying of the homeless and street people all across scamerica. That sinkhole of corruption now enlarges as more and more people of a higher level are sucked into its corrupt and spirit killing forces.

          Testilying …


          But it goes well beyond crooked scum bag cops and sell out pieces of human crap judges and politicians Ella. At the heart of the problem is the aggregate generational corruption that has so corrupted the electoral process that the scam ‘rule of law’ has been TOTALLY usurped by the wealthy elite and the resultant ‘government’ is a rogue self anointed gangster government that now stifles dissent, oppresses, exploits and preys boldly and openly upon its citizens at will.

          Your crumb supply is being intentionally throttled down and you grasp at the same scam ‘rule of law’ that has intentionally throttled that crumb supply down. You take another drink to alleviate the pain of last nights drinking. Sorry Ella, but it won’t work. Getting things right again is going to take some pain.

          You should instead be organizing election boycotts as a vote of NO CONFIDENCE!!!!! in this crooked scam hijacked rogue government and work on rewriting a new constitution while you still have the resources and opportunity to do so. The window of opportunity is rapidly closing.

          Deception is the strongest political force on the planet.

          1. DownSouth

            Gosh, i on the ball patriot, I could write a book in response to your comment. So what to respond to?

            Let me just start by saying that you, ella and I are all on the same team here.

            And I don’t know about ella, but I am in complete agreement with you that the United States has become a police state. There’s not an iota of difference between the U.S. and Mexico, other than the U.S. still has a lot of people who haven’t woke up to smell the coffee yet. We have rogue law enforcement officials. We have rogue prosecutors. And we have rogue judges. And as we saw with H.R. 3808, we have a rogue U.S. Congress and rogue U.S. Senate. And if the United States continues down this pathway, I don’t see how anyone with two brain cells to rub together can see this ending in anything but in violence. When a government loses legitimacy, which the U.S. government is on the fast track to do so, the result is a criminal insugency like Mexico is experiencing, a revolution as occurred with the American or French revolutions, or a hybrid like we see in Afghanistan and Iraq.

            But regardless of all this, I am still optimistic. How can that be?

            To begin with, we were forewarned:

            If once [our people] become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves.
            –Thomas Jefferson in a letter to Colonel Edward Carrington, 16 January 1787

            Secondly, there seems to be some move to reign in rogue law enforcement and rogue prosecutors by stripping them of at least some of the immunity they currently enjoy. Here’s Texas Lawyer on an ongoing case taking place in Federal court in Texas:

            However, law enforcement and district attorneys usually assert immunity when they are sued, she says. Law enforcement has qualified immunity from suits, which protects them as long as they are acting in good faith. But district attorneys have prosecutorial immunity from civil suits, which is absolute.

            “It’s a higher test for the prosecutor. Prosecutorial immunity is an absolute immunity like judicial immunity. And that’s because there’s a public interest in prosecutorial discretion,” Diamond says. “The more discretion the law puts on a public official, the more the law protects that official so that they will be able to do their job without fear. And that’s why judges and prosecutors and legislators are immune.”

            But Guillory believes he can overcome immunity claims, should the defendants assert them. He believes the peace officers were not acting in good faith when they allegedly seized his clients’ property without evidence of a crime. He also believes he can overcome prosecutorial immunity.

            “There’s a whole line of cases out there that say prosecutors don’t get absolute immunity if they’re engaging in things outside of their capacity,” Guillory says. “We believe that these roadside shakedowns are so far outside her [Russell’s] role as a prosecutor.”

            Call me PollyAnnish, because it may indeed be true that the U.S. this time is too far gone, But we’ve been on the precipice before and the U.S. has managed to pull itself back, achieving some workable level of fairness and justice. I’m not quite ready to pull the plug on the Enlightenment yet and I still subscribe to what Reinhold Niebuhr wrote in “The Children of Light and the Children of Darkness”: “Man’s capacity for justice makes democracy possible, but man’s inclination to injustice makes democracy necessary.”

            Niebuhr gives this example of the U.S. pulling itself back from the precipice:

            The American labor movement was almost completely bereft of the ideological weapons, which the rebellious industrial masses of Europe carried. In its inception it disavowed ot only Marxist revolutionary formulas but every kind of political program. It was a pragrmatic movement, born of the necessity of setting organized power against organized power in a technical society. Gradually it became consciour of the fact that economic power does try to bend government to its own ends. It has, therefore, decided to challenge a combination of political and economic power with like combination of its own. These developments have been very recent; but they have also been very rapid.

            Naturally, the “semi-official” creed of a bourgeois community, as distinguished from the philosophy which informs our Constitution, was arrayed against this development. The right of collective bargaining was declared to be a violation of the rights of employers to hire or fire whom they would. Supreme Court decisions, directed against the labor movement, were informed by the generally accepted words of “Mr. Dooley,” the court decisions “followed the election returns.”
            –Reinhold Niebuhr, The Irony of American History

          2. DownSouth


            Screwed up that last quote.

            It should read as follows:

            Supreme Court decisions, directed against the labor movement, were informed by the generally accepted individualistic creed. But ultimately, in the words of “Mr. Dooley,” the court decisions “followed the election returns.”

          3. i on the ball patriot

            DownSouth, yes, I am on your team, but to be honest my mind’s jury is still deliberating on Ella.

            But for sure we all have different experiential viewpoints.

            And I for one will not spend one more microsecond engaging in PolyAnnish dialogue about the reigning in you see of the corruption in the scam ‘rule of law’, or, in discussing its scam, deflective, diversionary, and purposefully time wasting structure. The scam ‘rule of law’, in all of its; nuances, in and outs, protocols, procedures, complexities, etc. — just like voodoo economics — has been hijacked. Yes there are some old fashioned profit driven Vanilla Greed attempts at reform, but they stand as mere tokenism in the face of the control driven Pernicious Greed stranglehold that now exists in that scam ‘rule of law’ (and voo doo economics too).

            Just as those who vote validate and legitimize the corrupt electoral process, so too, those who put their hope, time, and energies, in engaging with, a time and time again, proven corrupt scam ‘rule of law’ also validate and legitimize that corrupt process. When you sit down at a known rigged table with criminals you deserve to lose.

            I am no longer a member of any specific religion but I retain the moral grounding that I received in my catholic upbringing and my study of many other religions throughout my lifetime and I still find great wisdom in biblical verse …

            “2 John 1:10-11 (American Standard Version)

            10 If any one cometh unto you, and bringeth not this teaching, receive him not into your house, and give him no greeting:

            11 for he that giveth him greeting partaketh in his evil works.”

            Shun these gangster impostors and you will no longer empower them.

            Use your time more wisely in making a new future now. See where the crowd is going, not where it is, and ready for the coming movement.

            See my post below which I posted before I was aware of yours.

            Deception is the strongest political force on the planet.

          4. hermanas

            I recall a Chinese proverb;
            “In confusion, there is opportunity.”
            There are people that game this system.

        2. liberal

          A quick Google search establishes that cops are charged with perjury and sometimes convicted.

          VERY rarely. The rate at which cops perjure themselves is far from trivial; the rate at which they’re indicted, on the other hand, is trivial.

        3. i on the ball patriot

          Ella, this might also interest you and give you some further insight as to the VERY rapidly changing attitudes towards the scam ‘rule of law’ and the escalating perpetual conflict we all face …

          Excerpt …

          ““Fuck the rules. Fuck playing the game the banksters want you to play. Fuck being the good citizen. Fuck filling out every form, fuck paying every tax. Fuck the government, fuck the banks who own them. Fuck the free-loaders, living rent-free while we pay. Fuck the legal process, a game which only works if you’ve got the money to pay for the parasite lawyers. Fuck being a chump. Fuck being a stooge. Fuck trying to do the right thing—what good does that get you? What good is coming your way?


          When the backbone of a country starts thinking that laws and rules are not worth following, it’s just a hop, skip and a jump to anarchy.””

          Deception is the strongest political force on the planet.

          1. ella

            Corruption and fraud is wide spread. The point of my original post was to clarify that the MSN is downplaying the problem by calling it a paperwork problem as though it is a mere technicality. It is not.

          2. Doug Terpstra

            i on the ball, your link to Gonzalo Lira’s post nails the tipping point, when everything you’ve been hammering home about a rigged game—including stacked courts—is finally seeping into critical mass consciousness. People finally get it: they’ve been played for suckers by chronic cheaters and free-riding parasites.

            So rapid change is dead ahead. As bush said in ’08, “this sucker’s goin’ down.” They had one shot at restoring integrity and they blew it big time. “Fool me once…”

    8. DownSouth

      Claremont asks: “Are people disputing whether these people are in fact behind on their mortgages…?”

      Yes, they are.

      I just got back from a trip to San Antonio, Texas and have a friend there who owns quite a number of rent houses.

      The bank foreclosed on one of her houses.

      She was not delinquent in the payments.

      And get this, the foreclosue process was signed, sealed and delivered before she ever knew the process was underway. She was never given notice that foreclosure proceedings were underway, as is required by law.

      Earlier this week the Texas Attorney General Greg Abbott suspended all foreclosures in the state of Texas:

      My friend is going to write a letter to AG Abbott detailing her experience, and I asked her to cc Yves.

      What you don’t seem to understand is that if we do away with the rule of law, with due process, then it doesn’t matter whether the homoeonwer is behind on her payments or not. The banks can foreclose against anyone they want, for whatever reason they want, and there is nothing the homeowner can do about it.

      1. Miguel Grande

        I think the larger problem here is that when the prudent citizen pays off their obligation in full, who has the standing to convey clear title? Certainly not the Tarp thieves who blackmailed Congress into a $13 trillion payout. There’s no profit in that.

    9. RueTheDay

      Actually, there have been reports of one case where a house that was paid off was mistakenly foreclosed upon and another case where two banks tried to simultaneously foreclose on the same property.

      However, as Yves notes, there is a bigger issue at stake here than whether or not the borrowers were in fact behind on their mortgage. There is a weird dichotomy in America with regard to the sanctity of contracts. If a consumer sued a business for making a false representation and when asked for the contract responded with “my dog ate it” he’d be laughed out of court. If a bank does what is effectively the same thing, “it’s just a minor paperwork error, proceed as planned”. If a Citibank trader has a contract to be paid a $100 million salary, the contract has to be upheld, even if it requires taxpayer support. Meanwhile, a UAW worker has a contract as well, and the same people want it voided because GM can’t afford to pay it and the worker should be forced to give up his claim. The double standard is disgusting.

    10. Jagger

      If banks cannot prove ownership of a home because they have sliced and diced mortgages and sold them all over the world, how can they provide clear title in 20 years to someone who is making their monthly mortgage payments?

      For example if I pay $2500 a month for 30 years, I would expect a clear and clean title from the owner when I finish giving them $900,000. If I have already paid them $300,000 and I discover I cannot sell my house now because the owner cannot provide a clear and clean title, I have been defrauded out of #300,000. If after paying the bank $900,000, they cannot provide me a clear and clean title in 30 years, I have been defrauded because I cannot prove I now own the house.

      If an owner of a mortgage cannot provide me with clear and clean title, why should I continue giving them money when my intent is ownership rather than renting?

      1. rd

        This is an important issue that goes to the heart of the “rule of law” drum that Yves Smith keeps banging, although the WSJ et al don’t want to listen. As a homeowner who is not underwater, can afford my mortgage, and am up to date on it, it is a very important question.

        Similarly, mortgage rates are dropping like a stone. They have dropped to the point where it may make sense to refinance. Do I want to refinance now if I am taking on a new mortgage without necessarily being assured that I can discharge the old one so it is truly gone?

        The banking industry has to get to the heart of this and resolve soon or they will have paralyzed the entire residential real estate market across the US.

      2. CathyG

        Exactly!! In February we will pay off the mortgage we took in 1997. Because this was before the SHTF on securitization and because the credit union where we have the mortgage has never sold a loan, I am actually hopeful that they will be able to return the note to us and retire the loan.

        But what about my family members who re-financed in 2005 and 2006?. What happens when they finish paying off their loans?

    11. rd

      My understanding is that there are several layers to this onion. Some or all may be in play for every mortgage in the country. Here is my list of what I understand the significant layers are in order of increasing systemic legal and financial risk:

      1. Missing paperwork regarding mortgage note and standing when filing for foreclosure;

      2. Falsified paperwork included in the filings, including “recreated” documents and affadavits ostensibly signed by an attorney and/or notary public who did not read the documents, did not sign them at the time or place noted, or had people forge their signature;

      3. Lost or destroyed notes which would effectively mean that the actual mortgage may no longer exist, even if scanned copies are available (the height of stupidity/incompetence if this actually happens frequently);

      4. The filing entity is not actually the owner of the note and so has no legal standing to file because the transfer of the note was improperly conveyed and recorded or not recorded at all in state/local offices;

      5. The note was bundled into a security that is not legally able to hold it so that the security owners may not actually have a legal claim on the assets. In this case, it would be very unclear who the note holder is and who would have standing in the court to file for foreclosure. There could also be some very pissed off security owners who will want to litigate to get compensation. It could also have serious impact to bank, insurance company, and pension fund reserves, among many holders. The lawyers who signed off on the original structure would probably want to move to another country without extradition if this were to come about.

      I will be surprised if a NY case regarding the trust structures does not end up in the Supreme Court with massive implications for the financial system stability.

    1. ella

      Excellent point. In title insurance states, one of the insurance products is the “Lenders Title Insurance policy”. The lender demands the policy which is paid for by the buyer or seller as requisite to the mortgage. The buyer’s title is insured as well. When there is no title insurance on a property it is doubtful there would be a mortgage. Where does that leave the buyer and seller? Where does that leave the real estate market?

      1. Charlie

        Ella your comment yesterday was awsome and right on the money. The primary problem in America now is a question of trust, who do we trust, the supreme court, white house and congress all bought off by big money, pentagon controlled by defense contractors, banks, mortgage firms and financial services all gambling on wall srteet with their investors and customers money then when they loose ask taxpayers for a bailout, wars based on lies, borrowing from foreign governments and leaving the bill for someone else to pay. All this fraud, malfeasance, corruption and incompetence, constant lies from our leaders who do we trust, even if the banks were telling the truth would we trust them after all the lies they have told.

          1. Charlie

            Peggy Noonan is a lying shill for the criminal conservative element in our society and anything she says is tainted with the stink of those who are destroying America.

          2. i on the ball patriot

            Worh repeating …

            “Peggy Noonan is a lying shill for the criminal conservative element in our society and anything she says is tainted with the stink of those who are destroying America.”

            Deception is the strongest political force on the planet.

  2. MyLessThanPrimeBeef

    Will they have to return foreclosed properties done with perjury to the delinquent owners (ot non-delinquent/all cash owners)?

    How far back will they go?

  3. gf

    “This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us.”

    Hum …. Got news for yall, been that way for a long time now.

    The FBI was aware of the mortgage fraud since 2004 and they did nothing to stop it to speak of. Just the tip of the iceberg in my opinion.

    1. Tao Jonesing


      I respectfully disagree.

      First, you have to understand that most Americans weren’t paying much attention before now. They just assumed that we were a country of laws in which the sanctity of property was the centerpiece of our reality. What’s happening with fraudulent foreclosures has captured everybody’s attention, and with the exception of a few short-sighted, irrational people, everybody understands what we’re witnessing threatens the very conception of ourselves as individuals and as a country, regardless of political stripe.

      Second, the fact that Dubya’s administration aided and abetted mortgage fraud by looking the other way did not implicate the Obama administration and his Democratic Congress until Obama and the Democrats actually seemed to aid and abet the fraud. I don’t agree with some of the asserted indicia of complicity, but I cannot deny that Obama and the Democrats have been complict.

      The systemic foreclosure fraud that we’re witnessing in real time is the equivalent of the wake-up call provided by the Pecora Commission Report in 1934, which convinced even many among the economic elite at the time that the system was broken, that the promise of America was hollow and even capitalists were being preyed upon by banksters, which caused many capitalists and some banksters to throw themselves in with FDR and his New Deal in order to preserve the ideal of a democratic republic.

      I’m a cynic by nature, an optimist by choice informed by history.

    2. freepressmyass

      Actually, Bush and Paulson put a screeching halt to the FBI mortgage fraud investigations. One of the biggest pit bulls driving the investigation was Eliott Spitzer, and we know what they did to him. He was literally days away from disclosing what was going on with the banks, when they took him down with an everyday DC past time.

  4. Darby Shaw

    What happens to anyone with a lien or encumbrance of any sort against an MBS? I recall seeing CMOs CDOs et al being leveraged to pay for further reckless investing and speculation. In instances that the instrument itself was used as collateral, what happens to those claims? Were they already paid from the CDS payouts? If so, was it for all of them? Or are there claims to bonds owned by trusts that have been paid already and laden with violated pooling and servicing agreements that may effectively no longer exist?

  5. bs23

    great work Yves following this mess and writing about it in a clear way! One thing I’m still confused about, though, is who actually owns the notes now. Are they still with the originators or the sponsors of the mbs’s? Do they even still exist at all?

    Felix Salmon has a post up in which he proposes replacing the old loans with new ones (and then presumably being more careful about the paperwork) through refi, principal mod, or short sale. But if the mortgage is unenforceable because the note is lost either physically or legally, who would do this? The fine print would seem to say that if the note is gone, you don’t need to make payments on the house.

    1. Ina Deaver

      Possibly nobody. Apparently, the “paperless” system shredded some of these without any concern for the fact that under UCC, these documents have independent power. There is a REASON that you are returned the original note once you pay it off and then you BURN it so that it won’t fall into the wrong hands.

      Again, many of these things are creatures of state law, but the UCC is (as its name suggests) mercifully uniform. No note, no right to enforce the underlying obligation as security of the note.

      1. Yves Smith Post author

        Tom Adams and I are very confident the shredding the note story is pure urban legend (plus someone very stupid at the Florida Bankers’ Association using it as a justification.).

        Shredding notes is tantamount to burning a warehouse full of cash. These are bearer instruments with considerable monetary value.

        The reason a moron in Florida would promote that idea is probably: 1. High degree of confidence in their kangaroo court system (as in they are going to get bank friendly outcomes regardless) and 2. To justify an easy form of cover before the few judges in FL who might care re doing things right, which is using lost note affidavits.

  6. Darby Shaw

    And has anyone even begun to consider how this will impact experian, equifax and transunion? Per FACRA the onus is on them to affirm whether any account reported to them is valid at the consumers request. And as the servicers cannot prove they are legally entitled to collect a homeowner’s payment, the credit agency must omit it from the consumers report. Theoretically and practically, a homeowner could have their home foreclosed upon and purchase a new one with a clean bill of credit health. That is assuming of course that the impending systemic financial collapse doesn’t happen first.

    1. Jim Haygood

      Very good point, Darby. Once when I was disputing a credit card account with Bank of America (they failed to respond to FOUR letters, including two certified letters sent directly to their legal department), B of A was making derogatory reports about my credit to Trans Union.

      I repeatedly tried to get Trans Union to merely insert my comment, ‘This account is in dispute.’ Round and round and round we went. Trans Union would never respond directly, never tell me what action they were taking. They would only offer another free copy of my credit report, which showed time and time again that no action had been taken.

      Recently it’s happened again: I timely canceled a cell phone contract in writing, prior to the renewal date. The carrier ignored my written notice (telcos and credit card companies only want to do business over the phone, so there is no written record), renewed the contract anyway, and now is reporting me delinquent for refusing to pay.

      My impression is that these three agencies work solely for creditors. What the creditors report is taken as gospel. What you, your attorney, or a court of law may assert is of no interest to them, unless a creditor chooses to report it.

      Credit reporting agencies are designed to stiff-arm consumer input until they finally give up, as I did. A LOT of people are going to end up with impaired credit because of ‘robo-reporting’ by creditors — another blight on consumer finance.

      1. liberal

        What I don’t understand is why someone in your position can’t sue the credit agencies for defamation.

        Yeah, yeah, I’m sure there’s some reason for it, or statute, but this crap is ridiculous.

  7. dsawy

    If it can be proven that the lawyers knew the information contained in the affidavits was false, they could be charged with “fraud upon the court.” When a fraud upon the court has been committed, especially by an officer of the court, a decision based upon that fraud may be vacated (ie, the foreclosure action is reversed).

    The lawyers who are responsible for said fraud can be heavily fined, or (as we can hope in this case), lose their license to practice.

    I think some lawyers at these firms that submitted hundreds or thousands of affidavits that they knew were false are going to lose their licenses. If they don’t, then the entire legal profession should accept the ridicule and derision heaped upon them henceforth.

    To ella’s point, here’s a decision from Florida’s Sixth Judicial Circuit Court from March of 2010. The foreclosure was reversed, any standing by the bank (US Bank, NA) was extinguished, the case was dismissed with prejudice (meaning that it cannot be brought again). Oh, and the bank had to pay attorney fees of the defendant(s). ie, the bank came out of court with less than it went in.

    1. michael

      the question is…who is going to charge and prosecute fraud…your point is, properly, IF fraud is proven the decision based upon it is reversed.
      imagine any law enforcement agency charging fraud on the court by any FIRE sector high paid, deep pocketed attorney/large business firm??!!

      ‘They’ can and will drive trucks through the gapping holes of all the IFs mentioned in this conversation

  8. R Foreman

    Chris Whalen said another likely reason foreclosures are being suspended is because they don’t have the physical capacity to manage this many homes. They need to restructure themselves into a property management company, just like Fannie/Freddie are the largest landscaping companies in the USA today.

  9. Usha A

    I wonder if the 40 States Attorneys General, are taking this co-ordinated step to pre-empt individual action by wrongly foreclosed upon mortgage holders. Is this their way of protecting the financial institutions involved and protecting the CEOs and other executives from criminal proceedings abd from going to jail. From past experience, we have seen little justice being served by governmental enforcement authorities. The “fraudsters” are excused with a minimal slap on the wrist. Now that there is actual and provable illegality that has come to light, it is time for the administration to provide a buffer zone for the criminals. Do you actually think that these practices were completely unknown to the authorities? So far, the excuses for the lack of prosecutions in the financial scams and defrauding of the people, has been that no “laws were broken”. Well, now laws have been broken and the fraudsters must once again be bailed out!

    1. psychohistorian

      It continues to be my concern that this is just an edge of the lawlessness that exists in the financial sector. I expect that there is perjury and fraud behind the bailouts of a few years ago now but will that ever be prosecuted?

      One can only hope that rule of law can be “reestablished” before society devolves into anarchy.

    2. ella

      “Attorney General Richard Cordray said Wednesday the alleged fraud could involve hundreds of foreclosures in the state. The lawsuit claims the company’s employees signed and filed false affidavits to mislead courts. Cordray called the alleged fraud the “tip of an iceberg of industrywide abuse of the foreclosure process.””

      ella here, this is the Ohio AG.

      1. michael

        again, let’s try to imagine the pressure on this office NOT to charge and prosecute real fraud. Imagine the chaos unleashed if all those ‘hundreds’ (should read thousands) of cases were to revisited and title were put on hold.
        the defense used regarding ‘chaos’ is clear…bail them out, do the expedient thing all the whole system will collaspe…can’t have that now can we.
        clearly the recent history is that law, accountability and taxpayer is thrown under the bus.

    1. michael

      who does wapo suggest hold them accountable? no one of course…just a vague…the banks must….

  10. Dwight Baker

    This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paperwork problem.

    This may be the end to the rush toward the New World Order. This has and will continue to send the message out and here abroad that good people are not going to lie down and be steamrolled over. To mention all that is and has planned to go on to make mankind cower down and submit to evil tyranny now has been brought to light and tort lawyers in many positions can have they feast while doing.

    All the lies and cover ups of the truth in the BP blow out is coming out of the shadows and this foreclosure cries and crisis adds to the horrors that has been allowed to go on.

    Thus it is up to us to lead and raise the banner of our own Democratic Republic.

  11. Jim Haygood

    Although H.R. 3808 (Interstate Recognition of Notarizations Act of 2010) was pocket-vetoed by the president yesterday, there’s a sizzling anger out there in the blogosphere.

    On forums, people are just smoking with rage about this attempted larcenous heist. State attorneys general, who keep a moistened finger raised to sense the political winds, know this and are initiating a joint investigation.

    The foreclosure fraud issue has struck a nerve, and the collective consciousness is now echoing with 1930s-style populism. Neither the DemonRat nor the PukeLickin party is in any position to benefit from it, since they are regarded as the perpetrators, the bankster whores, the mendacious racketeers.

    Here’s to every single incumbent being ejected. I don’t just want to kick them out — I want to SHUT DOWN the failed institution of Congress, annul parliamentary immunity, and try all 535 of them en masse, while peasants with pitchforks and burning torches mass outside the courthouse.

      1. Jim Haygood

        Whoa, is that you in the photo?

        Rather fetching, I must say — even with those due corni sulla tua testa!

  12. Dan Duncan

    The coverage and commentary on this issue is abysmal.

    First off, the foreclosure suspensions began with Judicial Sale states. In these states, the homeowner that was foreclosed upon was served notice of the complaint (either by mailing, direct service, or publication of the notice), and had the opportunity to be heard before the court. The first issue before the court, then, was whether the homeowner defaulted. End of story.

    Did the homeowner default? This question has nothing to do with the Affidavit.

    From the default (which occurred in over 99% of the cases), the issue is the chain of lender’s security interest. Here is where the Affidavit comes into play. But by this time, the Borrower is out of the loop.

    The Affidavit purports to establish the Lender’s security interest. Unless the Lender has no security interest–and has knowledge that it has no interest–then it is a procedural issue.

    There is a difference between a purported creditor knowing it has no interest in property, but claiming that it does….

    And a creditor having an interest in the property, but not knowing how to clearly establish that interest (because of the problems associated with securitization).

    These cases revolve around the later. The titles are spaghetti loops, and the Lenders who created the mess are trying to avoid their responsibilities to untangle the mess. It is wrong, no doubt. But make no mistake, the vast majority of these cases are procedural. The Borrowers are not claiming that have lived up to the terms of their promise, and no other interested party is stepping forward to claim an interest in these properties.

    The only surprise is that this problem came up in Judicial Sale states before non Judicial states. Non Judicial states, where the Borrower is not heard before the court, are the ones most apt to have real abuses, as the Borrower loses the home without the benefit of Due Process.

    Regardless of how messed up this system is…the Borrowers still defaulted and the Lenders trying to foreclose are still owed money associated with these same Borrowers.

    The question is, how does a Lenders exercise its security interest in an antiquated title system that does not contemplate the slicing and dicing of mortgages?

    I agree, these improper affidavits are not satisfactory. But this is a procedural issue. How on earth it’s just coming to light now, after a decade of this garbage is baffling to say the least. And this is a failure of the legal profession.

    1. skippy

      Dan said 1.”The question is, how does a Lenders exercise its security interest… an antiquated title system that does not contemplate the slicing and dicing of mortgages?

      1. show the note of credit.

      2. the chain of responsibility is there for a reason (look it up), technology is a great way to circumvent said responsibility.

      Skippy…lets just make all things important stored by electrons OK, like birth certificates, no hard…wana play that game…one good solar flare and gone, hacking, virus et al, see Dan.

      BTW whose bright idea was it to do this in the first place and then 4sq. it, all off one note with counter CDOs…shezzz…and some lament antiquity.

      PS…lying in court is not a case of impropriety, it is a criminal act and punisable one.

      1. Sufferin' Succotash

        It’s hard to sympathize with the banksters for having “procedural” problems with the fine print since, as Jon Stewart put it with his customary eloquence, they invented the *%^$#@(+^%$! fine print in the first place.

    2. Yearning to Learn

      Dan Duncan said:
      From the default (which occurred in over 99% of the cases)

      source please. this is simply a claim you have made without evidence.
      (on a side note, I don’t disagree that your number is accurate, only showing that you have no factual basis to make your claim).

      the Borrowers still defaulted and the Lenders trying to foreclose are still owed money associated with these same Borrowers.

      Yes and no.
      IF the allegations are true, then the Lenders (or MBS investors or whatever) ARE owed money by the Borrower, but the LOAN IS UNSECURED BY THE HOUSE.


      In order to have a secured loan the loan must have been processed correctly. If the lender cannot prove that the loan was secured by the asset then that loan is UNSECURED.

      For example: should a credit card company be able to foreclose on a deadbeat’s house if the deadbeat doesn’t pay his or her credit card bill? why not? what if the CC company can provide an allonge signed by a robosigner at the last second showing that indeed they can have the house? Nobody disputes that the deadbeat owes the bank money for the cc debt. The reason: THEY MUST PROVE THAT THEIR DEBT IS SECURED BY THE ASSET.

      Let’s pretend that you buy a car and go to the DMV. What do they ask you for? the title. What if you can’t provide the title? Does the DMV register your car and give you plates? No. why? Because you must prove ownership based on established state law.

      you don’t legally own the car until you can provide the title. Likewise, these banks legally own NOTHING except an unsecured loan until they can provide proof of the note.

      One set of laws for everybody. There’s a reason for that.

      on a side note, this snafu may actually benefit home-debtors because then they can get rid of the house without having to go through bankruptcy. (easier to dump a home loan secured by a house compared to an unsecured loan)

    3. Jim Haygood

      Even if, for the sake of argument, defective affidavits are called a ‘procedural problem,’ there’s still a fairness issue.

      Ever sued someone, or been sued? In either case, personal service of paperwork on the defendant is a requisite step. If you can’t serve them, you can’t proceed.

      The point is, ordinary folks are held strictly liable to procedural requirements, whether they are substantive or not. It is unacceptable for the financial industry to seek a legislative waiver from them.

      The finance industry could have tried to pass H.R. 3808 when they first started packaging MBS in mass-production fashion. But there was a failure of foresight — and that’s THEIR PROBLEM. No one retroactively bails out my lapses of foresight!

      How dare these welfare-Rolls Royce TARP-feeders expect a different standard? If they can’t comply with every jot and tittle of the procedural minutiae, then LET EM BLEED!

    4. Jackrabbit

      I don’t see how securitization complicates the “procedural issue” of getting the Note from the Trust. Should be straightforward and not very costly. Oh sure, you might expect a few notes to get misplaced but the foreclosure mills are churning out large numbers of fake/fraudulent docs. Very suspicious.

      And if investors dispute the validity of the securitization contracts then there is a real question of who owns the note: the Bank or the Trust.

      Why wouldn’t the investors make such a dispute? They were sold a bill of goods. This is their opportunity to right that wrong and recover hundreds of billions.

      Lastly, if the legally mandated procedures don’t matter then why are we so worked up over illegal immigration? (and Obama’s birth certificate :) , etc.) And hey, I’d really like to go to my local bank and get a “loan.” I promise to come up with the paperwork at some future time that is convenient for me.

    5. michael

      it comes to light now..and becomes an issue now NOT because of some interest in protecting the consumer..but rather because various factions of the FIRE sector are vying for the same peice of the pie.
      if they were not fighting among themselves with lawyers that they can afford (bankrupt homeowners cannot)then this would not be an issue.
      the fact that its being taken now as a populous issue is only posturing…after the elections, back to normal denial.

  13. doom

    The Red Army Faction encountered a similar procedural issue when its meticulously legitimated claim on expropriated capital was challenged in the agencies and courts.

    1. Jagger

      Exactly. Why should I pay someone $900,000 over 30 years of monthly payments for ownership of a home, if there is no owner able to provide me with clear and clean title proving my ownership after providing them $900,000? I need proof now that there is someone capable of handing me a clean title. I don’t want to discover 30 years from now, I won’t receive a good title.

  14. Pascal Blacque

    If I understand it correctly, all notes and mortgages that were securitized since 2005 (or earlier) contain faults in their title chain and have been subject to illegal or inadequate assignments. Whether it is a technicality that can be remedied in short order is for the law to rule.

    However, while this creates problems for foreclosures as lenders cant prove legal standing, doesn’t it also have implications for all securitized notes, not just delinquent ones?

    If lenders looking to foreclose are fabricating documents because they lack proper claims to the home or delinquent notes, then it stands to reason they may also lack legal claims to the mortgage payments of non-delinquent borrowers.

    Is it not likely that non-delinquent borrowers have been paying their monthly mortgage bill to lenders that are not legally entitled to the payments?

    If that is the case, then couldn’t we imagine a scenario where all borrowers would stop paying lenders (or paying into a third party escrow account) until they can prove legal note assignments per Trust rules?

    Wouldn’t that create a sudden stop in the whole financial system? Who owns what all over again? That could unleash a whole slew of investment/return issues for banks, servicers, investors, retirees, etc. No?

    1. Jagger

      Exactly. Why should I pay someone $900,000 over 30 years of monthly payments for ownership of a home, if there is no owner able to provide me with clear and clean title proving my ownership after providing them $900,000? I need proof now that there is someone capable of handing me a clean title. I don’t want to discover 30 years from now, I won’t receive a good title.

    2. rd

      I think that this is at the heart of the brain-freeze by the MSM. MBS’s are the single biggest asset group in the world. It would potentially have a huge impact on the global financial system.

      It makes you think that the banking sector can’t possibly have been this stupid. But then, we just need to look at what was uncovered about subprime mortgages and derivatives in 2007-2008 and you realize that there is no limit to the stupidity of large groups of greedy people who believe that they are entitled to protection by the state.

      Slowly, a key case will work its way up through the courts addressing the fundamental structure of some of these securities and their relationship to state law, particularly the structure of the trusts and the mechanical process of recording and assigning mortgage notes. At that time, all will be made clear, but the outcome may be very ugly. I don’t think that I would want to be the judge ruling on this case.

      1. Pascal Blacque

        rd and jagger,

        Yup… could be Fall 2008 all over again… one bailout after another… but first we need to find out if this is really an issue for lenders and banks. Meaning do they have any legal claims on non-delinquent mortgage payments without having the associated notes or do they have some sort of escape hatch? If they dont … the potential $$$ hole is equal in size to the RMBS securitization market since at least 2005 …

        That’s the question I’m trying to get Yves and Gretchen at the NYT to answer …

  15. Charlie

    It appears that the lenders who sold the loans to investors are trying to receive revenue from both those who took the loans and the investors. Is that or is that not the fraud? Why would an investor invest in a questionable loan or loans?

  16. nowhereman

    It is a shame it has come to this. I recall that, not so long ago, there were infomercials even on the major networks, and full page advertisements in the Main Stream Media, touting “How to become a Millionaire through Real Estate”.
    I also recall pieces in all the media telling potential home buyers, “If you don’t jump in now, you’ll never be able to afford a home.”
    Do you remember this? For me there are two groups, real estate speculators, and legitimate home buyers. The former, I have no sympathy for, the later I feel they deserve better from the “machine” that created their predicament.
    I know, I know, anyone who didn’t fall for the real estate hysteria of the ’00s can sit back all holier than thou, and blame the consumer, but this fraud was so pervasive that it was like the mo-town solid wall of sound. We were all immersed in it, like a constant background noise.
    The Fed’s ZIRP forced investers into this market. The feeding frenzy forced prices skyward and young families were scared into a market in a bubble.
    There is plenty of blame to go around, lot’s of stupidity, but, and this is the but that says it all! The FRAUD ran rampant, and all those government agencies responsible to police this market were either complicit, or asleep at the switch.
    The Rule of Law has been trampled under foot, and it is a David and Goliath battle for who gets to say what’s what. What’s REAL?
    People that bought multiple condos on spec, should not be rewarded, but they must not be cheated by the system as well. They need to take their medicine.
    But the poor sap that bought into the wall of hype and purchased a “HOME” for his family aided by aggressive mortgage lenders who encouraged liar loans and fraud to feed the greed on Wall Street. These people need to be rescued from the MAW of corporate greed.
    It may look like these people were niaive, or even “stupid” to buy into what was called at the time “the American Dream of Home Ownership”, but it is extremely callous to suggest that they be required to bare the brunt of one of the biggest FRAUDS in the history of the US.

    1. F. Beard

      The Fed’s ZIRP forced investers into this market. The feeding frenzy forced prices skyward and young families were scared into a market in a bubble. nowhereman

      Indeed! Since the Federal Government in effect caused the stampede into housing (via the threat of being priced out of the housing market forever) then it has a moral obligation to rescue the victims.

      As for the savers who were cheated of honest interest rates, they should demand a bailout too.

      As for those who fear money printing, the banks “printed” massive amounts of temporary money (credit) via 20-30 to 1 leverage. That temporary money can be replaced with permanent money by sending a big check to every US adult while at the same time imposing leverage restrictions on the banks. And no new debt is necessary, the US Treasury can spend without limit as it is a sovereign issuer of money.

  17. Mia


    Could you put all of this in perspective for those of us who are not – and will not be- behind on our mortgages? We bought a house in 2006 and we’ve thus far had 4 servicers. I have no way to know how many times the note has changed hands, or if it even ever did. I could continue paying on this mortgage for another decade – we plan to sell this house in 10 years – and THEN find out that I can’t sell it because the note’s still with the original signer, or has been destroyed altogether? What happens then? Should we hire an attorney how, and try to quiet title?

    I just think this goes way, way beyond foreclosures, which is all everyone is talking about. The reality is that millions of current borrowers are probably sending their monthly payments to what is, ultimately, the wrong party. Many titles are clouded, not just the ones currently being foreclosed on.

    1. Pascal Blacque


      You are absolutely right! Read my comment posted at 11:00am (2 or 3 comments above yours).

      I have asked the same question last week on this site and on the NYT site (Gretchen Morgenson) … to no avail.

      It seems obvious to me that if lenders have no legal standing in their foreclosure efforts because the securitization process clouded all title chains, then they also have no standing in receiving payments from non-delinquent borrowers. Untangling that mess could take a long long time …

      Unless I am wrong, I think that is the 800 lb gorilla in the room. Imagine the fear?

      If I were you I would definitely get a legal opinion from a competent real estate and mortgage attorney.

      1. Give Sympathize Control

        So, let me see if I understand all this correctly. At first the scam seemed to be that mortgage originators would loan out large amounts of money to which they really didn’t have access to people who had little to no chance of ever repaying it. Then they sold these destined-to-fail mortgages to investment bank type entities who then packaged them together into CDOs or SIVs or some similar type thing and, amazingly enough, sold these destined-to-fail securities to investors. And then the investment bank type entities entered into a CDS or similar type of insurance/hedging bet with AIG and/or other “investors” that these securities would eventually explode.

        But now we’re saying that the real scam wasn’t that these mortgage backed securities that those “investors” bought were designed to fail; it’s that they really bought the CDO equivalent of an empty box. Is that correct?

        If so, I have to say that it was hard for me to believe before that the fund managers (or whoever) that bought the mortgage backed securities didn’t know they were toxic junk– but it is impossible for me to believe that they didn’t know it was an empty box. Maybe I just don’t understand the paper/photon-shuffling world of securities and suchlike, but how could no one on the buy side of these things not notice for 5-7 years that they really didn’t know where the IOUs they had bought were????????

        1. Pascal Blacque

          Yes you are right. It seems investors bought an “empty box” or an “unfunded trust”… They relied upon “put back” clauses that should have provided ample incentives to “perfecting the securities” but it never happened. Instead, cutting corners became too easy and profitable … till the music stopped, as in NOW.

          The problem, as I see it, is that lenders may not be legally entitled to payments from non-delinquent borrowers.

          If that is true (I don’t know and am searching for legal opinions) then you can imagine what that will do all RMBS investors and the mortgage market. Why would they invest a penny if proper collateral cannot be legally proven?

          Hello double dip?

  18. Sheepdog

    How can the original note be sent back to a homeowner who comes into some money and pays off their home mortgage? No problem years ago, but how about today?

    In other words, is there any way for a suddenly mortgage free homeowner to be secure that the note received showing payment in full is from the original mortgage documentation and not fraudulent?

    Is there currently a big employment market for someone good at forging signatures?

  19. Darby Shaw


    You are more right than you know. Johny Lunchbucket owns a home, pays on time and has a real hard time doing it. He struggles to make ends meet, and worries constantly about tough choices he has to make. He works hard, loves his kids, baseball, and apple pie, and is a generally good American who wants to do the right thing. However, Johny has been watching his neighbor Jimmy Deadbeat not pay his mortgage for a year and a half and not only is Jimmy still in his house, not paying, living rent free, and actually making out way better than Johny because Jimmy doesn’t have to worry about a little expense called his mortgage payment and thus has a tremendously unfair percentage of more disposable income . Johny doesnt like it, actually resents the hell out of Jimmy, but Johny knows he is doing the right thing by paying his mortgage on time because he believes Jimmy will get his. Well, Johny is going to get up late on Sunday, flip on “Meet the Press” and start seeing talking heads discussing facts that quickly lead Johny to understand that Jimmy wont be getting thrown out of his home for living up to his last name.

    Johny is pissed. Really pissed.

    Thoughts start occurring to Johny. Thoughts like “Why should I bother paying MY mortgage on time?” and “I’ve been paying on time and have gotten NO relief, but I know of plenty of others who are way late who not only qualify for govt programs and modifications etc., but now CANNOT be even be evicted”

    Johny gets even more pissed. Gets his wife riled up. Talks to his neighbors and co-workers about these and other injustices that Johny is fed up and mad as hell about.

    So what does Johny do? He say’s F-U to the grassholes at the bank and stops paying.

    There are millions upon millions of Johnys.

    To me, this is the real systemic risk, because it cannot be controlled. Cannot. Can…..Not. Can? Not!

    Perception is everything, and this prior scenario is very very real, and so is the systemic risk.

    1. F. Beard

      So what does Johny do? He say’s F-U to the grassholes at the bank and stops paying.

      There are millions upon millions of Johnys. Darby Shaw

      Excellent! Banks create money from nothing (via government privilege) and exchange it for a pledge to repay the principle PLUS interest that does not necessarily even EXIST (impossible contract). Let the banks therefore be repaid nothing (see your lawyer first) until THEY demand a bailout of their victims including savers.

      “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” Lord Acton

  20. Periwinkle

    If you think Lehman was interconnected enough to bring down the banking Matrix, here we go again

  21. liberal

    I took a mortgage out in 2008 and have refi-ed twice.

    First time, they sent the note back.

    Second time, they sent back some kind of affirmation (notarized) that the loan was paid off. But not the note.

  22. Darby Shaw

    Sorry Pascal, I had to cut up my reply to your reply it was a little long lol:

    There are millions of Americans like Johny who have been barely able to hang on to their house and every month debate whether to pay the mortgage or….health insurance. Then mortgage or….second car. Mortgage or….food. You get the idea.

    What if these millions upon millions of homeowners who have been on the fence about whether to pay the mortgage for months now suddenly have the same thoughts that Johny starts to have?

    This is a classic moral hazard. And its real, and its happening already. Over the coming weeks more and more homeowners will reach the same conclusion that Johny has, and simply stop paying. And why wouldn’t they? The servicers collecting have no legal right to. Period. Hell, the servicers really have nowhere to send the money they arent allowed to collect anyway as claims were paid out via a CDS on the RMBS.

    So back to Johny. Now that he and his millions have discovered these cruel and rather ironic twists, they just stop paying. But they don’t do it overnight. Mortgages run on calander months, so Johny and his gang have weeks to stew this over as well, thereby creating even more fear and uncertainty…for the banks!

    They know this, and they know they have screwed the pooch, and they are crapping biscuits. BOA is being set up to fall on their sword very soon. Why did Wells settle the other day to the tune of 773 mil? Probably because they see this whole MERS fiasco coming and also know that those old world pick-a-pays are not only a ticking time bomb (Most of which were done up on a 5 year schedule, so all of those resets are coming due rather soon) but as a way to determine if a affirmation or reaffirmation of debt by way through an internal modification gets them past the MERS issue by getting the homeowner to effectively sign on a new dotted line. Wells probably also figures that by not halting foreclosures yet, that BOA, chase etc will be in the crosshairs first just by virtue of the media attention and subseuquent run of defaults for reasons mentioned earlier.

    Im sure the line of thinking is that BOA will go down first, promting the gov to step in with “Son of TARP” and to bail out the others. The issue is, that amount of money would be simply to big to bear, even for the US.

  23. Darby Shaw

    and now for the finale:

    How can BOA stay solvent with no way to move their REO tape, million upon millions of new defaults CAUSED by the foreclosure freeze, dubious claims to title on all their other mortgage backed collateral and the amazing amount of litigation they are about to experience?

    I can see a very quick nightmare scenario started early next week as these truths become evident to all these populist blowhard politcians screaming for a “foreclosure freeze” and BOA’s stock literally tanks overnight, causing the dominoes to all start falling just like 2 years ago, except its all gone so FUBARed that you cannot stop what has started. Next step, nationalization of the banks, and more than likely, the US govt. becomes de facto owner of most of the mortgages in America. Nice.

    Even if it doesnt happen that fast, its still going to happen. Remember Johny and Jimmy? Well, they are real people. Thats what everyone forgot when they made these MBSs, that the bond itself were made up of little parts that were backed by actual real property and owned by millions of Johnys; you simply can’t jut sweep that under the rug because the Johny’s of the world have one simple piece of leverage, the ability to NOT pay on their mortgage, and suddenly have an almost unionized opportunity to unwittingly stick it to the banks. The question really is does this new found moral hazard not only stick its to the banks, but eventually to all of us?

    Delicious irony to be sure.

    Johny’s coming kids….and he is really pissed.

    1. Pascal Blacque


      Couldn’t agree more. That is the risk I am talking about. If the lenders who bought securitized notes have no standing in foreclosing or collecting payments … then the whole mortgage financing market is up in the air.

      This is not just about foreclosures, legal improprieties, the rule of law, unfunded trusts, etc. This could unleash the last leg of the GFC…

      Thanks for your Johnny – Jimmy metaphor. Right on!

    2. F. Beard

      The question really is does this new found moral hazard not only stick its to the banks, but eventually to all of us? Darby

      But of course. If everyone behaves with morals of the counterfeiting cartel then it cannot work. The system depends on an asymmetric moral code. The victims are expected to dutifully pay the bankers who use them. The implicit social contract is that the victims will pay as long as the economy is good but the bankers have ruined that so all bets are off.

  24. Eclaire

    What’s a little perjury when the NYT today features an OpEd by a former Assistant Attorney General and now Harvard professor arguing that if we can’t get a “terrorist” convicted in a civilian court we should opt for “indefinite” military detention.

    “But…but…he’s a terrorist!” you argue. Well, any one of us could someday be labelled a “terrorist” and indefinitely detained.

    Just as any one of us could have a bank claim that they were foreclosing on our house and blithely hand over forged documents to the court.

    “Deadbeat”, “terrorist”, “illegal”, “gypsy”, “faggot”, “jew”, “heretic” , “commie”, – all these terms have been used to label and and dehumanize classes of people that we then can deem unworthy of receiving due process from our judicial systems.

    1. i on the ball patriot

      Good comment, the demonization is important!

      Deception is the strongest political ,force on the planet

  25. MinnItMan

    I’ve been at a loss to figure out how the banks will extract themselves from this, and even though I’m on the other side, I did think there could be some social value to figuring this out. I was wrong to even consider a conciliatory posture.

    What needs to happen is that the financials get no quarter on this whatsoever. The WSJ’s “The Politics of Foreclosure” op/ed today was a marvel of obtuseness, mendacity and hypocrisy, all from the folks who never let an opportunity pass to spout of about the “Discipline of the Marketplace” and “Rule of Law,” the latter phrase even being “branded” by it for a regularly appearing column on its op/ed page for years.

    The WSJ says: “Welcome to Washington’s financial crisis of the week.” No, this is the financial sector’s crisis, and is the crisis of the decade, if not century. Politicians didn’t sign affidavits providing false foundations for evidence of default (a/k/a “perjury,” “fraud on the court” and/or “obstruction of justice”). GMAC, BOA, JPMC et al did this all by themselves in how they approached the cost of doing business. And the CRA didn’t require this, either.

    THE WSJ editorial page has steadfastly advocated for free markets for a variety of reasons, but none was more important than the marketplace being the best guarantor that a business provide quality and value to its customers, or suffer the consequences. This is the WSJ’s First of all First Principles.

    Mortgage lenders (broadly speaking to include banks, servicers, securitized trusts etc.) are in the business of trying to make secured loans at a profit. Hopefully, they make very few loans that won’t get paid back. For those loans that don’t get paid back, hopefully the lenders have the wherewithal to efficiently avoid losses by lawfully repo-ing the security. Having failed miserably as a business to do this profitably, and now, legally, the mortgage lenders (again very broadly speaking) have embodied hoping in one hand and crapping in the other and being astonished at which gets filled first.

    The WSJ tirelessly advocates for clear legal rules that everybody understands that allow for predictability in determining the cost of doing business. The duty of “candor toward the tribunal,” is about as fundamental rule of law as there is. It is the reflection of “thou shall not bear false witness.” Because these affidavits get to the “foundation” for the substantive evidence offered to the court, this is not a mere technicality, but a critical technicality. Most, if not all, law is technical, and the WSJ is blowing this ancient rule off at the “foundational” level.

    The kicker is when it goes on to say: “Attorney General Eric Holder announced that his Financial Fraud Enforcement Task Force is examining the issue. But even if one believes this is more than a technicality, the issue is whether the banks violated state laws, not federal ones.”

    Ah, states’ rights. I don’t even know where to start on this claim, but suffice it to say, that repeated criminal actions by enterprises can be matters the feds take an interest in.

    Among other things, “the law is a teacher.” There are way too many people who obviously fail to grasp a fundamental lesson here and need to be schooled.

    1. F. Beard

      Well said!

      Having failed miserably as a business to do this profitably, and now, legally, the mortgage lenders (again very broadly speaking) have embodied hoping in one hand and crapping in the other and being astonished at which gets filled first. MinnitMan

      Thanks. I never heard that expression before. Better late than never.

      1. Sid

        You obviously do not know my father. We are in the process of translating Volume IA (“Men and Women”) of his sayings into Polish.

  26. William Jensen

    Yves, thanks for your site; I’m lerning a ton. The debate in the comments section has been particularly interesting.

    At the end of the day, the issue comes down to whether the entities that foreclosed on the properties had the right to do so and whether those foreclosed upon were afforded due process during the foreclosure process. God only knows what the answers are but my inital impression is that there are serious due process issues that will be litigated, which will take some time to sort out.

    For now, while the litigation proceeds, there are going to be a lot losers, some of whom are as follows:

    1. Title companies. They have issued policies on foreclosed properties where the title may not be good. I can’t imagine that they have enough in reserves to cover the claims. I don’t see title companies writing policies on foreclosed properties in the future and suspect a lot of them may be out of business soon.

    My guess is the foreclosure market just dried up and there are now two classes of properties: foreclosed properties and non-foreclosed properties.

    2. Buyers of foreclosed properties. They don’t have clear title and are going to have to clean up the title, which, it seems to me, means they will have to track down who has the note and get some sort of court order clearing up the problem. How they do that is anyone’s guess but I’m thinking lawsuits against the “sellers” of foreclosed properties is the only route.

    3. Banks. Okay, this one I don’t feel so bad about. It’s about time they took some hits on these silly securitization products. They are going to get hit with lawsuits from every direction in every venue throughout the country because they didn’t take the trouble to complete the paperwork, which is sort of ironic given you can’t leave a bank without filling out some sort of form. Evidently, the customer has to do the paperwork correctly but not the bank.

    4. Taxpayers. I don’t know how and I don’t know when, but we will end up having to bail out the financial services sector, again. I hope this time we get something for our money – ownership interests, control of salaries, some power to terminate employees, etc.

    5. Those who signed affidavits. If what is being said is true, they have committed perjury and are subject to criminal charges.

    6. Attorneys. There are going to be judges that have issued orders on foreclose properties based on false affidavits. I doubt very many of them are going to admit they did anything wrong, which leaves the attorney who handed them the improper affidavits as the fall guy.

    The one thing that interests me is what impact the recent developments will have on property values. In some sense, the recent developments will reduce the supply of salable homes – no one can guarantee clean title and title insurance will be unavailable – so prices for homes with clear titles may go up.

    We will see, but this is another “fascinating” subject that has its roots in the sale of those stupid CDO’s that were suppossed to better allocate resources and risk. Well, it looks to me more like snake oil of the worse kind.

    1. dunnage

      How about this: to hell with blame, but show me the legit holder of the paper. Otherwise who is it that is doing this foreclosure. We are really talking the basics, the whole alphabet, not the i’s and t’s.

      Do you want to buy the resulting paper — oh, that’s right I’ll buy the paper when the Fed does Qaunt Easing for the Brokerage Houses.

  27. Richfam

    There’s some validity on both sides of this issue:

    At the most basic level bank makes loan borrower can’t pay so what do we do about it. Foreclose, renegotiate, etc..

    But it’s never that simple (first kill all the lawyers): The very reason that we pay all those awful closing fees and involve so many parties in the purchase of a home is to protect both parties when things change ( like the borrower can’t pay).

    So what’s the deal… The banks have fucked up here but we don’t really know how yet. I think the desire on the part of the blogger and many of the posters on this site is to find that gotcha smoking gun thing and they’re probably on to something. I wonder what the objective of that desire is. Maybe just give the borrower the house without a loan? Maybe.

    So I guess my question is now what? if the lawyers don’t like the way the paperwork was filed I guess the bank is screwed and the borrower keeps the house, right? And that’s the end? Justice is done?

    I agree, the lenders are in a pickle here but I’m not sure it means the loan doesn’t still need some resolution. What’s the goal?

  28. F. Beard

    So I guess my question is now what? if the lawyers don’t like the way the paperwork was filed I guess the bank is screwed and the borrower keeps the house, right? And that’s the end? Justice is done? Richfam

    Yes, a rough form of justice but good enough? I perceive you do not understand the implications of the government backed counterfeiting cartel. It killed 50-86 million in WWII alone due to the Great Depression it caused.

    Too bad the savers won’t reap a bonanza too since they could if they insisted on a general bailout of the population with new legal tender fiat. Instead they risk being the losers for insisting on making the borrowers suffer.

    But I guess a bailout of the population is premature. I guess our system has to blow up real good for lessons to be learned. Will we survive the lesson though?

    1. Richfam

      Somewhere in there I think we agree, that is the government response is to push the saver by bailing out both the borrower and the lender and leave the saver holding the bag through debasement, taxation, and regulation… So there’s the real injustice but it’s surely lost on most responders

      1. F. Beard

        Both savers and borrowers could be fixed at the expense of the banks in real terms (though the banks would be fixed too in nominal terms).

        However, borrowers and savers must realize that they are BOTH victims of the government backed counterfeiting cartel and unite against their common enemy.

      2. Anomar

        Most of us are borrowers and savers. My retirement funds went into my home. Proof went the collapse. Gone are the retirement funds into the underwater house.

        If I get to the point I can’t pay the mortgage and can’t sell the house, I got taken on both ends.

        Extreme capitalism has already failed. We are all just pretending and having an increasingly hard time doing so.

        1. F. Beard

          Extreme capitalism has already failed. Anomar

          I am sorry for your loss but it is not free market capitalism that has failed but a form of fascism. The banking cartel has the government protected privilege of issuing credit in OTHER people’s goods and services. Technically we have a government backed fractional reserve banking cartel using a government enforced monopoly money supply. Sound like the free market to you?

          But heck bring on as much socialism as necessary to prevent misery. While (and until) we learn how to do capitalism properly let none be rich while others starve.

        2. Eric

          Retirement funds went into your home? This is ridiculously imprecise. Much more accurate would be to say you bought a house that you now regret having bought and, in hindsight, feel it would have been better to not have spent the money in that manner. Having made my share of bad investments, I understand your feelings, but to describe your situation as one in which you are somehow on the verge (I guess) of being taken “on both ends” is absurdly egocentric. Who decided that the house had a price you’d be willing to pay? You did. And who decided that taking a specific amount of loaned money to meet that price was what you would do? You did. But cheer up – maybe your note has been lost or destroyed.

  29. Bill

    Check out “The Daily Show’s” take on the Financial Crisis.

    And check out Ellen Brown’s work, author of “Web of Debt.”

    Ellen Brown was ahead of the curve on this. See her article on the underlying culprits MERS and Tranches.

    She also offers solutions to the current financial debacle.
    Try her articles at…

  30. dunnage

    The “Banks” do not know who holds mortgage, therefore somebody signs a name and your home is gone. I do not understand how anybody, regardless of what they have paid or not paid, can have their home foreclosed by basically anybody that now has the time. I mean throw all the laws out — and I say when underwater WALK at your convenience.

  31. readerOfTeaLeaves

    The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries’ knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

    Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

    Or, as Prof William Black might say, a criminogenic environment generates fraud and criminal conduct. Even, apparently, in the courts.

    Basically, it appears that the courts have been allowing themselves to be lied to and treated like dupes by fraudsters.

    All the talk about economic stimulus strikes me as b.s. until trust is restored to the system. Trust can’t be restored until the criminogenic environment is cleared up.

    1. Richfam

      Ok fine, now, what do you want to do with the loan and the home? After you put the banker in jail I assume.

      1. Anomar

        Precisely the problem. Everything freezes for lots of bad reasons, but the last culprit is the person residing in the home who is at the mercy of forces way beyond him or herself.

      2. Darby Shaw

        So far, the only viable idea I can see is some kind of reaffirmation of debt by the homeowner. This exists of course, through the use of a modification of the loan, which banks and servicers were loath to do, but ironically enough, may not even be able to do any longer. Why? Well, for one they have no clear chain of title, they can’t enter into a modification if they cant prove they have the right to service the loan! So the bank essentially would have NO leverage and it would be entirely up to the homeowner to agree to any modification that would reaffirm the debt. I am not entirely clear if this option is even possible in light of the broken chain of title, but it would be somewhat amusing if Obama had to go on national television to ask American Homeowners really really nicely to make their mortgage payments let alone literally beg them to agree to a modification.

        The world has truly gone mad.

        1. F. Beard

          The world has truly gone mad. Darby Shaw

          It has been mad since bankers insisted that money could be in more than one place at the same time.

  32. recaldo

    In the Matter of Merscorp, Inc. v. Romaine, 2006 N.Y. Slip Op. No. 09500, 2006 WESTLAW 3716017

    Although the opinion is a bit vague on the point, it appears that the original mortgage was executed to MERS as nominee of a named lender, and that the first recording was of this mortgage. Thereafter, of course, MERS maintained on its electronic records information pertaining to the successive assignment of the debt, with the accompanying mortgage. The case does not indicate, nor would it likely be relevant, whether the note was kept by the original lender as trustee, by the trustee of a securitized fund held by a special purpose vehicle, or physically transferred from one assignee to another. All the likely assignees participated in the MERS master agreement, and they agreed to look to the MERS records as the final determinant as to who held the rights under the mortgage.

    This issue may not go beyond the foreclosure question.

  33. recaldo

    Remember, MERS is the mortgagee of record and acts as the note holder’s agent. If the noteholder wants to foreclose, MERS needs to carry out their responsibilities to their client. MERS, like any mortgagee, needs to produce documentation (often signed original note/deed) as indisputable evidence of ownership in a mortgage. In some cases where MERS did not or cannot produce the documentation, the foreclosure actions have been cancelled. However, the right for a lender or a lender’s agent to foreclose because of a lost Deed or assignment does not, generally speaking, expunge a borrower’s obligation to pay a debt – it just might not be a collateralized loan anymore.

    1. Pascal Blacque


      Thanks for the link and for your insights.

      If you are right, it might reduce the whole foreclosure problem to mere “technicalities” (the note exists somewhere, the Trust is funded, the IRS will accept post assignments, the debt is owed … in other words, all will be fixed in due time – just as the industry claims)… only leaving hanging the issue of potential delays and high penalties for the lenders’ fraud on the court. That scenario would explain the unbelievably muted reaction on Wall Street: it’s a manageable problem with little material adverse impacts… seems to be the message. Moreover … If the problem does go beyond foreclosure … then I think Wall Street knows that more bailouts will surely be forthcoming as this is the mother of all TBTF markets. It would be another double fraud perpetrated on the taxpayers… let’s see

      I appreciate your input and wished that we could get some valid legal opinions to weigh in on this issue.

      1. Darby Shaw

        Here is the deal: when these MBS’s were broken into tranches the AAA tranches didn’t “legally” own anything until all the other tranches defaulted.MERS is not the lender nor a title holder. It can’t legally do anything. It is a company that runs….a…. computer….program.

        I’m tired tonight, I’ve been at this for a year and a half, so please excuse my laziness while I cut and paste a little ; )

        First,you must read Ellen Brown’s piece at

        “The clever designers of these vehicles tried to have it both ways by conveying the properties to an electronic dummy conduit called MERS (an acronym for Mortgage Electronic Registration Systems), which would hold them in the meantime. MERS would then assign them to the proper tranche as the defaults occurred. But the rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing; and courts have started to take notice of this defect. They are concluding that if MERS owns nothing, it can assign nothing, and the chain of title has been irretrievably broken ….”

        Then read:
        And here is a great piece from July (Seems long ago eh?):
        “According to the company’s Website, MERS “is a proper party that can lawfully foreclose as the mortgagee and note-holder of a mortgage loan.” Here’s what it says on the MERS Website:
        (“MERS”) is In mortgage foreclosure cases, the plaintiff has standing as the holder of the note and the mortgage. When MERS forecloses, MERS is the mortgagee and it is the holder of the note because a MERS officer will be in possession of the original note endorsed in blank, which makes MERS a holder of the bearer paper.

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

        Since MERS didn’t own the underlying note, it couldn’t transfer the beneficial interest of the Deed of Trust to Citibank

        Kinda blows your wig back doesn’t it?

        This rabbit whole goes farther down than you can possibly imagine Pascal, and I mean that. There are many things I would prefer not to commit to the internet yet quite frankly. But your asking all the right questions. Where are they taking you?

  34. Josh

    These banks are out of control. Doing things like sending people to break into people’s homes. They’re going to get people killed. This stuff needs to be stopped.

    1. Pascal Blacque


      Thanks for the follow-up and excellent links you provided. Denninger makes a convincing case that this fraud should go beyond foreclosure. But will it?

      You ask “Where are they taking me?” You are right; the point is not just asking the right questions, but getting the right answers. Not being an attorney and knowing that the devil is always in the details, getting a definite answer to my question would require intimate knowledge (of applications and legal precedents) of the MERS, NY Trust law, IRS / REMICs rules, OCC rules, MERS by-laws, etc. … Therefore, I think it best to defer to the experts on these issues. Ironically, I have been asking Yves and others in the blogosphere to address the question but without much success. Why?

      But to answer your question, here are some thoughts:

      1) My feeling is that is does leave open the possibility that non-delinquent borrowers stop making direct payments to their “lenders” until note ownership is proven. It could come about as you describe in your Johnny-Jimmy story; or it may arise as a result of ambitious attorneys defending borrowers’ rights; or it may emerge as a result of infighting between various classes of investors; or judges and politicians may simply force the issue on lenders – moratorium on all foreclosures and payments. In my mind, that is the Nuclear bomb we should all attempt to defuse…

      2) Yes I agree that all this goes beyond finance and politics… and sausage-making… it aims right at the heart and soul of American institutions: the Rule of Law. As an ex-consultant to the State Department and World Bank, I can affirm that we have enjoyed our post-WWII “exceptionalism” and “reserve currency” status mainly as a result of, no not Hollywood, our well-established and world-respected rule of law. Our capital markets (really Laws re contract, property, recourse, etc.) are the mother of all safe havens (not Gold, sorry) … witness the dollar’s reaction in times of excessive fear. So this fraud is certainly a black eye for all of us. But to overly focus on this issue is a little silly to me at this point. I mean in the same week all this came out, we also learned of an US Government-backed syphilis experiment conducted in Guatemala in the 1940s. Our foray into Iraq is another chink in the armor. Habeas corpus issues in Guantanamo are another. Abu Ghraib, Iran (1953 coup), etc. Our sacred Rule of Law institution has taken many hits before and this one will hurt no doubt … but it won’t bring the house down!

      3) What will bring the house down are the economic/financial implications of this fraud…

      4) The RMBS market is in the Trillions…

      1. DownSouth

        Pascal Blacque,

        Your argument comes dangerously close to advocating disaster capitalism.

        First we were told that there would be world chaos if we didn’t bail out the TBTF banks.

        Now we are being told that there will be world chaos if we don’t gut the Bill of Rights, the Constitution and the rule of law.

        1. Pascal Blacque


          I am not advocating any argument. You can argue all you want about the Rule of Law and America’s other great institutions… not me, not at this time. I am, however, very heartened and not so surprised at the fact that our courts and judges are now focusing narrowly on this issue. I am also convinced the rule of law will prevail.

          I am much more interested in the real economic and financial impacts this foreclosure/note fraud has in store for us in the short and medium term. That is why I am trying to ascertain whether all notes are impacted and whether lenders are even entitled to the current payments from borrowers. If they’re not, I think we’re all in for another punch on the nose. What do you think?

          If you have any insights into this issue, please share.

  35. Chris

    I apologize if this post is unseemly and overly opportunistic, but as a young, hungry newly minted attorney I am seeing a lot of opportunity in this whole mess. I have no experience in business or real estate law (beyond a few classes). I probably only understand about 60% of the denser financial discussion that I’ve been reading on this blog for the last 6 months or so. Obviously I need to study my state’s foreclosure statutes, and Art. 9 for securitizations. What else? Can anyone offer some perspective or guidance? I’m starting my own practice, and I don’t know if I should pursue this or leave it alone and focus on immigration law which has been my plan for a while. I apologize to all who believe all lawyers are parasites because this comment must seem disgusting…

    1. bokun59

      Chris: I am a retired lawyer from Mass.. I can help you in general without giving legal advice unless you are in Mass..

      1. Chris

        That would be much appreciated, your comments below are very helpful as well. I’m not in Mass., I’m in Oregon so things may be a little different because we are non-judicial foreclosure. How do commenters on NC get in touch without giving their e-mail to trolls and spammers? I could give you my student e-mail because I won’t be using it much longer.

  36. bokun59

    The whole affidavit problem is big but the bigger problem is the standing of the underlying note; several points:

    1- throughout the history of the invention of who owns things, real property has been treated specially; it has had a sacrosanct spot in the annals of ownership; for example the Statue of Frauds mandates that all contracts involving real property be in writing; Registry of Deeds were created in all counties in the land in order to process this necessity of writing and as a means of making sure that real property was handled properly- in writing; there are countless other examples;

    2- adherence to contract law and the rule of contract is vital to the free flow of property (real and personal) in our society; the creation of the Uniform Commercial Code is an example of the recognition that contracts need be adhered to and executed properly;

    3- a mortgage is a real contract about real property (yes, I know obvious, but needs stating) and the reason mortgage contracts are so long and contain so many clauses is to specify the rights of all parties under all existing law; it binds BOTH parties- the lender and the lendee;

    4- in order to ensure that only the true holder of the note can kick a person off their real property, a paper trail is specified and required; everyone needs to know who owns the debt so that some other entity cannot claim ownership of the debt;

    5- when the ownership trail of the true holder of the note is broken, chaos ensues because ONLY the holder of the note can exercise his/her foreclosure rights; so if no one know who owns the note, NO ONE has the legal right to foreclose to re-claim the real property

    6- THAT is the true problem here; if these notes are not done properly or lost or not transferred properly vis-a-vis NY law (I use NY laws because most of the trusts wherein the notes were to be allegedly transferred stated NY law governs), then poof- the right to re-claim is- well, you can figure out what that means….

    7- it may seem ‘unfair’ that the banks lose the right to foreclose when the mortgagor cannot/does not pay but that is the risk inherent in creating a contract; you have to play by the rules or really, the meaning of contract is gone-poof… ; who would make a contract if only one party had to play by the rules? If I screw up and don’t pay my mortgage or something happens, the banks will foreclose. But if the banks do not follow the law/rules and cannot foreclose- whose fault is that?

    A final note is that it is my guess that unless ones mortgage stayed with the group that made the loan, the transfer of the note was never done properly and any foreclosure done was illegal. It amazes me that any title company would certify title on a recently foreclosed property.

    That means even if you are current on your mortgage there can be problems with the title due to the mistakes made in transferring the note. And this applies even if you are current on your mortgage; the note may not have been transferred correctly and is void.

    There is no way to fix this without abrogating millions of contracts.

    1. Pascal Blacque


      You write: “That means even if you are current on your mortgage there can be problems with the title due to the mistakes made in transferring the note. And this applies even if you are current on your mortgage; the note may not have been transferred correctly and is void.

      There is no way to fix this without abrogating millions of contracts.”

      Then would you agree that non-delinquent borrowers have the right to request their lender (to who they pay their mortgage) to show proof of note. Failing which they could withhold payments or pay a third party escrow account.

      If so, wouldn’t that suck the life out of all the mortgage financing system … and wouldn’t most of the mortgage investors and banks be materially hurt. It could actually tilt the global economy into a nasty double-dip.

      What’s your view?

      And that might provide an opportunity for Chris.

  37. Pascal Blacque

    MUST READ this MERS link and caption from Yves:

    “‘Statement by CEO of Mortgage Electronic Registration Systems Kansas City Register.’ Wow, this is an almost perfect statement from the Ministry of Truth. Virtually every statement is a lie or very disingenuous. I’m seeing if I can get a lawyer with recognized credentials to shred it; that will be more effective than if I do.”

    This is exactly what we need: facts and competent legal opinions. Its getting tense out there… If MERS is feeling pressure to put out such a defensive press release… the heat must be on.

  38. bokun59

    I am a retired lawyer and cannot offer legal advice and my field was not Secured Transactions, but I can do research and give you the info freely available on the web. For starters:

    This is from the MERS website regarding how they handle foreclosure:

    Mortgage Electronic Registration Systems, Inc. (“MERS”) is a proper party that can lawfully foreclose as the mortgagee and note-holder of a mortgage loan. MERS Membership Rule 8 provides required guidelines that must be followed when MERS is the foreclosing entity. Please click here to access the Rules of Membership, and reference the Rule 8 requirements.

    In mortgage foreclosure cases, the plaintiff has standing as the holder of the note and the mortgage. When MERS forecloses, MERS is the mortgagee and it is the holder of the note because a MERS officer will be in possession of the original note endorsed in blank, which makes MERS a holder of the bearer paper. MERS will not foreclose unless the note is endorsed in blank and held by MERS.

    Notice how MERS acknowledges that only the holder of the note and the assigned mortgagee will it foreclose. They know they need both. They want the note in blank so that it remains a bearer instrument: “… when the endorsement is “in blank” – then only the party with actual possession of the note can be paid on it. Essentially, “in blank” is like turning the note into cash and so only the person with the cash in hand can spend it. [See California Commercial Code Section 3205].”

    The note is the key; without the note all else fails. The note is the obligation; not the mortgage. And ONLY the entity that has the note can enforce the note. These blank bearer notes can be a problem because it isliving document. Anyone who finds it can sue to enforce it. Here is the actual rule that MERS uses for foreclosures:

    RULE 8
    Section 1. (a) With respect to each mortgage loan for which Mortgage Electronic
    Registration Systems, Inc. is the mortgagee of record, the beneficial owner of such mortgage loan
    or its servicer shall determine whether foreclosure proceedings with respect to such mortgage
    loan shall be conducted in the name of Mortgage Electronic Registration Systems, Inc., the name
    of the servicer, or the name of a different party to be designated by the beneficial owner.
    (b) The Member servicing a mortgage loan registered on the MERS
    System shall be responsible for processing foreclosures in accordance with the applicable
    agreements between such Member and the beneficial owner of such mortgage loan.
    (c) In the State of Florida, the authority to conduct foreclosures in the
    name of MERS granted to a Member’s Certifying Officers under Paragraph Three of the
    Member’s MERS Corporate Resolution is revoked. Effective June 1, 2006, the Member shall be
    sanctioned $10,000.00 per violation for commencing a foreclosure in Florida in the name of
    (d) In the event that the beneficial owner or its designated servicer
    determines that foreclosure proceedings shall be conducted in the name of a party other than
    Mortgage Electronic Registration Systems, Inc., the servicer designated on the MERS® System
    shall cause to be made an assignment of the mortgage from Mortgage Electronic Registration
    Systems, Inc. to the person designated by the beneficial owner, and such beneficial owner shall
    pay all recording costs in connection therewith.
    Section 2: (a) If a Member chooses to conduct foreclosures in the
    name of Mortgage Electronic Registration Systems, Inc., the note must be endorsed in blank and
    in possession of one of the Member’s MERS certifying officers. If the investor so allows, then
    MERS can be designated as the note-holder.
    (i) The Member shall not plead MERS as the note-owner in
    any foreclosure document; including but not limited to, the
    foreclosure complaint.
    (ii) The Member shall not plead MERS as a co-plaintiff in a
    foreclosure action.
    (iii) If the note is lost or cannot be located, the Member shall not
    commence a foreclosure action in the name of MERS, but rather
    must assign the mortgage out of MERS.
    (b) In non-judicial foreclosure states, if the Member chooses to foreclose
    in MERS name under the power of sale provision in the security instrument and is not seeking a
    deficiency judgment, then the note does not need to be in the possession of the Member’s MERS
    Certifying Officer when commencing the foreclosure action; provided, however, that under no
    circumstances may the Member allege that the note is in their possession unless it so possesses.
    (c) If the Member pleads MERS as the note-owner or as a co-plaintiff or
    commences a foreclosure in the name of MERS when the note is lost or cannot be located, it
    shall be considered a violation of the MERS Membership Rules and MERS may dismiss such
    foreclosure action. Effective June 1, 2006, the Member shall be sanctioned $1,000.00 for the
    first violation and $5,000.00 for each subsequent violation of this Rule.
    (d) For all foreclosures conducted in the name of MERS, the member
    shall take all reasonable and necessary steps to avoid having Mortgage Electronic Registration
    Systems, Inc. take title to the applicable property that is the subject of a mortgage loan.
    Mortgage Electronic Registration Systems, Inc. shall not be obligated to take title to any property
    that is the subject of a mortgage loan; provided, however, that if the Member so requests,
    Mortgage Electronic Registration Systems, Inc. may take title at the conclusion of the foreclosure
    sale upon prior written consent to the Member from Mortgage Electronic Registration Systems,
    Inc. If title is taken in the name of Mortgage Electronic Registration Systems, Inc., the Member
    shall take all necessary and reasonable steps to remove Mortgage Electronic Registration
    Systems, Inc. from title as soon as possible.
    (e) If title is put into Mortgage Electronic Registration Systems, Inc.’s name and
    there is a violation of state, county or city codes or any other applicable regulation; including, but
    not limited to, non-payment of tax bills, the Member shall be responsible to promptly take all
    necessary action to prevent fines or judgments from being entered against MERS. If the Member
    fails to do so, MERS may take such action and will sanction the member for all costs and
    expenses; including, but not limited to, attorney fees.

    Actual physical possession is quite critical. Now, the note may become ‘lost’ or ‘destroyed’ but that raises other issues. Mers handles it this way:

    MERS rules don’t allow members to submit lost-note affidavits in place of mortgage notes, said R.K. Arnold, the company’s CEO.

    “A lot of companies say the note is lost when it’s highly unlikely the note is lost,” Arnold said. “Saying a note is lost when it’s not really lost is wrong.”

    The usual way to get around the lost note is via affidavit by the party seeking to enforce the note that after due diligence the ORIGINAL note cannot be found and attached is a certified COPY. Of course, that begs the question of how do you produce a copy when you say you lost the original? Moreover, who goes around losing original notes for hundreds of thousands of dollars (or more) of debt?

    So you can see why production of the original note is so important.

    1. Chris

      But there wouldn’t be a direct legal consequence for not following the membership rules, would there? Instead it is strong evidence that the mortgage has been mishandled and the lender does not have standing to foreclose?

  39. Ridiculousness

    They have reached the point where the illusion won’t work anymore, and they’re going to have to make some token heads roll to convince everyone that “real change” is happening. Of course, the hard part this time will be convincing people after all the fraud comes out to go ahead and bail them out as a reward for destroying everything.

  40. Ken

    Keep it simple people and you will know what to do. First know that the ‘Fed’ is a private banking cartel that prints money out of thin air and sells it to the government in the form of Bonds. Good name as bondage it is. The government is beholden to this banking cartel. Many odious laws exist but the world is awakening to this and we must now support the honest government officials, such as judges whom are brave enough to enforce the laws which protect all citizens in their homes.
    Usury, at it’s finest, is what the world is witnessing today.
    Take no quarter and destroy banking as it is known. Eliminate factional reserve banking, have governments take back their rights to print money and spend it into the economy interest free and declare a ‘mortgage holiday’.
    This trilateral action would instantly reinvigorate the economy, maintain sustainable economies and stop the exponential growth of human population.
    All these things I mention are historical facts as they have happened in the past, but international banking/criminal cartels always stirred the pot for their profits.
    Time has come, the true deadbeats are criminal bankers and their hour of departure is near.

  41. Katie

    The person who signs a note is legally obligated to pay the holder of the note.

    The person who signs a note is NOT legally obligated to pay anyone OTHER THAN the holder of the note.

    So if a bank does NOT hold the note, the bank has no legal right to receive payment and no legal right to foreclose.

    If a person refuses to pay this non-holder bank or refuses to give their house to this non-holder bank, does that make the person a “deadbeat”?

    Of course not. You’d have to be a complete fool to pay thousands of dollars to someone (e.g. a non-holder bank) who has no legal right to the money.

    So the people who are refusing to pay are NOT “deadbeats.” The people who are still paying – to banks who have no legal right to collect – are fools.

    In about five minutes, people who are currently paying their mortgages are going to figure this out and when they do – the banks are going to have very serious problems indeed.

  42. Randy Gaumond, Sui Juris

    OK, the main thing to look at here in this whole mess is that there was fraud from the very start and then all of the way through it. The banks created some phony baloney bookkeeping entries out of thin air (see The Credit River decision about this) and made a promissory note for the “borrower” to sign their name to, thusly allegedly making a valid and binding contract. BUT… since there was fraud in the inducement as well as in the execution, how can it possibly be a valid/bona fide contract? Nothing that is alleged to be a bona fide contract can stand in the face of fraud, threat, duress, coercion, mistake, illegality, impossibility or immorality. If such is the case, where we must allow ourselves to be a victim of a crime of any kind or magnitude, then please just show me the court case saying so. Call up any lieyer you may wish to, and ask them to give you a straight and honest answer to these Two Magic Questions; What is the EXACT AMOUNT of fraud that anyone has the right to commit? What is the EXACT AMOUNT of fraud that anyone has an obligation to endure?
    Do a search for “fraud vitiates” and see what you come up with.

    Randy Gaumond, Sui Juris

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