Your humble blogger is in no position to speculate how this curious set of circumstances came about, but we have a good news, bad news situation, and hope readers can help remedy the bad news part.
The good news part is the California Court of Appeal endorsed what we’ve called the New York trust theory in mortgage securitizations in a recent decision called Glaski v. Bank of America (ruling below). One of the big issues in mortgage securitizations has turned out to be whether the party seeking to foreclose on a delinquent borrower has the legal authority (“standing”) to do so. Advocates of the New York trust theory (the overwhelming majority of subprime mortgage securitizations elected New York law to govern the trust) argue that New York trust law is particularly unforgiving, that both statute and case law require that a trustee act only as specifically stipulated in the trust documents. Any other action is void, meaning it has no legal effect.
The wee problem is the documents that created these trusts, the pooling and servicing agreement, stipulated specific dates as to when all the mortgages had to be conveyed to the trusts (and conveyed means not just paid for, but endorsed through a chain of title and in the possession of the trustee or its custodian). The big reason for the fixation on getting everything done by a certain date was that the 1986 Tax Reform Act created REMICs (real estate mortgage investment conduits) and these trusts were intended to qualify as REMICs. The various cutoff dates were set up in order to conform with the REMIC requirements. But whoops, it appears that those carefully crafted procedures stop being followed in the 2000s by a lot of the industry participants.
The Examiner (hat tip April Charney) provided a good layperson’s summary of the case:
When Thomas A. Glaski of Fresno County fell behind his mortgage payments, as with hundreds of distressed homeowners he was confronted with a rigid lender that offered no meaningful attempt to modify his troubled loan.
Glaski’s lender, now defunct WaMu, promptly commenced a foreclosure action after declaring his loan in default, and in the foreclosure bank friendly state of California where foreclosures occur essentially on the strength of a simple bank declaration, the sale of Glaski’s home was finalized.
Through his attorney, Glaski had filed suit to stop the bank sale but was initially unsuccessful. However Glaski appealed to the state’s higher court arguing that the bank lacked the rights or “legal standing” to foreclose and sell his home and the high court resoundingly agreed. The higher court reversed the bank’s foreclosure sale.
The appeals court found fatal flaws in bank transactional practices during the securitization or loan pooling process which occurs systemically after the loan closes…
A non judicial state means that a bank foreclosure requires no judicial intervention and can occur solely within a closed arrangement between the bank and its assigned Trustee. Glaski has changed those stakes.
So a well-respected court provided a carefully-reasoned pro-borrower ruling. And you would think it’s even better news because courts in California have generally not been terribly receptive to the securitization fail argument.
So what’s the bad news? The opinion is unpublished. That means other litigants typically cannot cite it in briefs, and it is not good law in California.
However, interested parties have until August 20, 2013 to submit a request for publication to the court. I’m court usually makes publication decisions within two weeks of the ruling (which was July 31), so in reality, there is another week to get letters in.
I’m going to see if I can get a letter in and I am also pinging Occupy the SEC, which is very good at turning around letters quickly. Please write if you are unhappy about bank abuses in foreclosures. There is a very strict procedure for how to to this (for instance, you need to mail copies of your letter to the defendant and plaintiff attorneys), but helpfully, this post tells you everything you need to do (even names and addresses of everyone who needs to get a letter, a form for the proofs of service) and even provides a sample letter.
Glaski v. Bank of America, CA Court of Appeal Opinion 7-31-2013 by webber3292
The highest California Court is the Supreme Court. There are several Courts of Appeal, which are intermediate appellate courts, so this decision only affects one California judicial district. The interesting question is whether the bank will appeal. Losing in the Supreme Court would be completely devastating to bankster interests. Of course, I have no idea of the composition of the Supreme Court. For all I know it could be composed of industry lawyers and tokens on the make. Does anybody know who these solons are and what interests they represent?
“So what’s the bad news? The opinion is unpublished. That means other litigants typically cannot cite it in briefs, and it is not good law in California.”
If CA is like NY, this is not a true statement. An unpublished decision can be cited in a subsequent case. Although not binding precedent, the decision gets what is called “respectful consideration.” Respectful consideration can be persuasive in a subsequent case, and can end up as a holding, and eventually end up being a published and binding decision in subsequent cases.
These guys didn’t want to be responsible for upending the entire apple cart. They want more “cover.” Look for other CA courts now to adopt this line of reasoning and start to pile on.
California is not like New York. Check California Rules of Court, Rule 8.1115(a) and (b).
I sent it to a BK Trustee who will make sure it gets around.
As long as the judges know that Tom Stone wants this decision published–it’s a done deal. ;-) (Hey Tom! xo)
I think there is enormous pressure on these judges who are willing to go out on a limb for us–and any way in which we can “plow the road road” for them is potentially very helpful.
I apologize if I have posted this info before, but I don’t believe I have. I found this on one of my forays on to Google Patent quite some time ago. It is a U.S. Patent that was issued to a big fish in the CA foreclosure mill biz, Paul Jackson (who, IIRC, is the father of the guy who does the Housing Wire blog?)
If the link fails, just go to Google Patents and search for Paul Jackson, Robert J. Jackson, US8244572 B1 It is known as “Systems and Methods for Managing Security Interest Enforcement Actions” (In plain English–evictions and dispossesories)
You will need to actually download the pdf for the patent to be able to do the (control-find thingie) and search for the words “judge” and “judicial.” The one page I remember the reference being on is page 41 (the numbering is tricky–it is numbered in columns–so you’ll need to go to the page that has a 41 and 42 at the top. It’s Column 41 and it’s in the paragraph that begins: “Referring to FIG. 33”). The last sentence of that paragraph–which is so fleeting–says a lot. (There are more references–just can’t remember them off the top of my head.)
But, anyway…..they have the ability with this tracking software to find out who the judge is going to be that will be handling the eviction/dispossessory–PRIOR to their assignment of the attorney who will actually appear before the judge. That way, they can assign to any case–the lawyer and judge pairing that has had, shall we say, the best “history.”
And the judge could be (and probably is) completely unaware of this. He or she is probably being tracked and targeted without his or her knowledge. It could be so subtle. Member of the same church? Went to same Law School? Member of same country club? Worked on the same Habitat For Humanity build? (Or any other sort of civic affiliation.)
In this manner, the scheme could conceivably play out whereby the foreclosure/eviction mill could have particular lawyers cozying up to particular judges. (Playing on the basic human instinct of trusting the person you know over the foreclosure defense lawyer/pro se litigant that you don’t know–it could easily skew the favorable results to the foreclosure mills’ advantage.)
And I don’t EVEN want to think about judicial campaign contributions and such! Argh. What a recipe for corruption, no?
I think this would make a great article for someone to write–I even have a title for it, “They Track Judges, Don’t They?” But I don’t think anyone with pending foreclosure cases should author it. But if you know of someone who might want to dig into the story and write it–feel free to pass the info along!
I burned out and dropped out for a while and am just now trying to get my nerve up to see if the world is still out there. Naked Capitalism is the first place I checked. Whew! Thanks for still being here, Yves!!!
It’s an old saw in the legal profession. “A good lawyer knows the law. A great lawyer knows the judge.” The Patent Office issued a patent ON THAT?
!! Glaski PUBLISHED
(Posting as reply to Tom so all can read it ‘up front’ of rest of the post.)
Yves : I got a response fromn the Washington State AG’s office about recording fees the banks owe the state. He said that the state can’t do anything about it since “assignments” aren’t recorded. I replied that “Long-standing black letter mortgage law – the 1872 US Supreme Court precedent Carpenter v. Longan, 83 U.S. 271, at 274, inter alia, which states any separation of the Note from the Deed of Trust is a Nullity. “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity”.
An assignment of the mortgage loan alone is not legal as it breaks the contract with the borrower and also renders the mortgage a nullity. The deed and the assignment MUST always travel together and them not traveling together is illegal, breaks the contract and renders the loan a nullity. This was how the banks escaped paying recording fees. The banks owe the states hundreds of millions and probably billions in recording fees.
Is your state going broke? Get your AG to file a case for the banks evading recording fees by illegally separating the note from the deed. I’m waiting to hear back from the AG’s office. The first response was quick – this one is over a week. Obviously this has them thinking.
What do the recording statutes in Washington require? If recording is required that is the statutorily supported argument you could/should be making.
If recording is not required the AG, and the clerks/recorders, will likely just say “Oh, there is no requirement they be recorded.”
Carpentar v Longan is probably not helpful.
Hi Stupendous : In Washington state transfers of deeds have to be recorded. The banks found their way around paying those fees by just selling the note and keeping the deed with MERS. All states have mandatory recordings for transfers / sales of deeds to my knowledge. The deed must travel with the assignment. I read that Dallas County alone is owed over $100 million in recording fees.
If I weren’t so bone tired and disappointed and heart broken by all the devastation caused by the destruction of the economy to millions of citizens, businesses and homeowners, I would send a letter. I’m glad to hear a California appeals court made such a good decision. Unless chain of title is maintained the whole system of private property, not just real estate, is non-sensical. I often think our big investment banks want it that way so they can commodify and trade everything at their favorite high frequency for ever and ever.
I wonder how this impacts the City of Richmonds eminent domain push? If a bank or servicer does not have legal standing to foreclose becuase they cannot prove ownership how can the City of Richmond pay for them for a mortgage?
This Glaski case is CA Fifth District Appellate Court and Richmond is First District. So first comment at top seems be on point, will bank appeal to CA Supreme Court?
Also of interest? I heard a KQED Forum discussion of Richmond and eminent domain. Two guests took opposing sides. The realtor said if there’s a trustee or servicer to foreclose, then that’s who should be modifying the loans, not the city saying we’re making you an offer you can’t refuse, like a gangster. Then the MRP chairman, pusher of eminent domain to cities, said they had reached out to servicers and trustees to find out where to send the letters of requests for purchase, and the trustees told them we don’t have the power to make this decision, send them to the servicers, and the servicers said we don’t have the power, send them to the trustees. So the city sent letters to both because “between them they must have the power.”
http://www.kqed.org/a/forum/R201308080900 (@ around 42:00 in podcast)
This opinion is unlikely to be published. My take on the CA 5th COA opinion is it wants further proceedings in the trial court in respect of Glaski’s 3rd, 4th, 5th, 8th and 9th causes of action. The COA opinion overruled the trial courts dismissal of those causes. The COA opinion did NOT determine finally those causes.
I’m hopeful, but my posture is “wait and see.”
I’m an Arizona attorney representing homeowners and I plan to write a letter for Glaski to be published, and have encouraged my blog readers to do the same.
The Glaski court made a common sense decision, that evenly applied the law, and didn’t bias its reasoning against the homeowner based on hidden (false) premises about the legitimacy of the bank’s arguments.
The court acknowledged that to survive a 12(b)(6) dismissal, the plaintiff asserting a theory based on the argument that the defendant was not the true beneficiary under the deed of trust must allege facts that show the defendant who invoked the power of sale was not the true beneficiary. Thus, a rote statement that the defendant is not sufficient, but alleging facts that show WHY the defendant is not the true beneficiary is sufficient. (Note to Arizonans: this is what I think our Arizona Supreme Court was saying in Hogan, i.e., you need to allege some facts that show how the defendant could not be the beneficiary. I do not think the court was saying you can never state a claim for lack of authority based on ownership of the note or beneficial status under the deed of trust, as the bank attorneys try to persuade the court and extend the Hogan holding).
The court held that the borrower has standing to raise a defect in an assignment if it would result in the assignment being void. Again, this is a common law precept, and Arizona also has a case that repeated this precept, Greene v. Read.
The Court went on to look at the securitization facts, and understood that a transfer made post-Closing Date to a securitized trust would be void under the NY law that governs the securitization (per the terms of the securitization agreement creating the Trust).
As always, Yves, thanks for staying on top of this. This case arose pre-adoption of CA’s Homeowners Bill of Rights and is an important addition to a developing body of law. I will write a letter asking that the opinion be published.
It’s published, as of this morning.
That’s very good news.
Would it make sense to write thank you letters?
No. I think at this point the idea is to let it go to publication.
I prefer my crow baked, with wild rice and a vinegar based red cabbage cole slaw.
A different link than Timothy provided above.
Yours is best link, has one more page: “CERTIFIED FOR PUBLICATION”
THE COURT ORDERED GLASKI V B OF A PUBLISHED YESTERDAY.