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Archive for the ‘MERS’ Category

Here it comes!

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has effectively eliminated homeowners’ and the public’s ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman. “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

I like it, I predicted it, and now we have an attorney general with a set of balls who has finally stood up and acted upon what, in my view, was both inevitable and necessary to clear the property title system, return it to a functional state, and ultimately allow the market to clear and housing prices to return to sustainable value.

This appears to be NY’s answer to the Miller-brokered “settlement”; it appears to be rather succinct and easily-understood too, distilled down into something like this:

Longtime readers know I’ve been covering the registers of deeds, county officials who wield some degree of power in the case of foreclosure fraud, because they hold in their offices a good deal of physical evidence about mortgage assignments and associated documents.  Jeff Thigpen, the register of deeds for Guilford County, North Carolina, did a preliminary investigation of a set of documents in his office and found widespread fraud, particularly from forged documents.  Thigpen’s key partner, John O’Brien, a register in Southern Essex County, Massachusetts, has been fighting this fight as well.  He vowed not to record any documents he suspected of fraud, which would slow some foreclosures.  He demanded that MERS pay millions of dollars in back recording fees which were not paid when banks tracked their own mortgage transfers on a database.  But O’Brien hadn’t done the work of auditing his office.  Until this week, at a convention for county registers.

At the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry.  The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010.  In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell’s Report includes the following key findings:
• Only 16% of assignments of mortgage are valid
• 75% of assignments of mortgage are invalid.
• 9% of assignments of mortgage are questionable
• 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute.
• The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%)
• There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

McDonnell told O’Brien… “What this means is that the degradation in standards of commerce by which the banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them because the assignments of mortgage were never prepared, executed and delivered to them in the normal course of business at the time of the transaction.  In a blatant attempt to engineer a ‘fix’ to the problem, the banks set up in-house document execution teams, or outsourced the preparation of their assignments to third parties who manufactured them out of thin air without researching who really owns the mortgage.”

This is why, and I’ll get into this in a future post, the Bank of America settlement with investors, which appears to indemnify the bank and facilitate a conspiracy of silence between banks and investors on these securitization issues, is a really raw deal.  It “solves” one problem, BofA’s exposure to the investors in its mortgage backed securities.  But it in no way solves the much larger problem, namely who actually owns these mortgages.  An independent auditor, after looking at the evidence, could not figure it out.

Predictably, after O’Brien vowed not to record fraudulent documents, the banks started getting back replacement documents, including five from Bank of America, all with brand-new signatures and officers and notaries.  They just whitewashed and redid the documents. ” These Lenders chose not to sign my affidavit, but rather to submit completely new documents,” O’Brien said.  “I believe the Bank’s actions speak louder than words and show their consciousness of guilt.”

O’Brien is engaged in some real activism.  He told every homeowner in his district to check the records at his website and see if their home mortgage documentation has been robo-signed.  He’s facilitating consumer protection complaints through the Massachusetts AG.  He has provided letters that homeowners can print out and send to their servicers, demanding their full chain of title pursuant to federal law.  This is his perspective:

O’Brien asked McDonnell what this means for his constituents.  “It is vitally important for your constituents to know that if they are in foreclosure now or if their homes have been foreclosed upon, they can stop the foreclosure from proceeding, or institute a court action to vacate a completed foreclosure. The Massachusetts Supreme Judicial Court has established the law of the land in its decisions U.S. Bank, N.A. v. Ibanez and Wells Fargo Bank, N.A. v. LaRace and I can tell you that every single assignment of mortgage that was recorded for the purpose of foreclosing the homeowner is invalid, overtly fraudulent, or criminally fraudulent. My findings also show that your constituents who are not in foreclosure, and have never been delinquent in their payments also have clouds on title due to the recording of defective and invalid discharges and assignments of mortgage.”

“My registry is a crime scene as evidenced by this forensic examination,” stated John O’Brien. “This crime that has affected thousands of homeowners in Essex County who, through no fault of their own, have had their property rights trampled on and their chain of title compromised. This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes.  This is disgusting, and this is criminal,” said O’Brien.

We literally have two registers of deeds doing the work that the federal government and state regulators should have engaged in for the last decade.

FireDogLake

From the “aw crap” file….

LEVENTHAL, J.This matter involves the enforcement of the rules that govern real property and whether such rules should be bent to accommodate a system that has taken on a life of its own. The issue presented on this appeal is whether a party has standing to commence a foreclosure action when that party’s assignor—in this case, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS) —was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes.

We answer this question in the negative.

This is far more important than it first appears.  It would appear that the bottom line is that MERS cannot prosecute foreclosures in its own name (it has stopped attempting this in several jurisdictions after losing a number of cases.)

This case, however, make an interesting point that may go well beyond that.

In October 2006 the defendants Stephen Silverberg and Fredrica Silverberg (hereinafter together the defendants) borrowed the sum of $450,000 from Countrywide Home Loans, Inc. (hereinafter Countrywide), to purchase residential real property in Greenlawn, New York (hereinafter the property). The loan was secured by a mortgage on the property (hereinafter the initial mortgage). The initial mortgage refers to MERS as the mortgagee for the purpose of recording, and provides that the underlying promissory note is in favor of Countrywide. Further, the initial mortgage provides that “MERS holds only legal title to the rights granted by the [defendants] . . . but, if necessary to comply with law or custom,” MERS purportedly has the right to foreclose and “to take any action required of [Countrywide].” On November 2, 2006, the initial mortgage was recorded in the office of the Suffolk County Clerk.

Ok, so the original loan was funded by Countrywide and MERS was named as the nominee.  So far we have the standard way that securitized junk, er, paper was originated during the go-go years.

Also in April 2007, the defendants executed a consolidation agreement in connection with the property in the sum of $479,000 in favor of MERS, as mortgagee and nominee of Countrywide . Countrywide was the named lender and note holder. The consolidation agreement purportedly merged the two prior notes and mortgages into one loan obligation. The consolidation agreement was recorded in the office of the Suffolk County Clerk on June 12, 2007. The consolidation agreement, as with the prior mortgages, recites that MERS was “acting solely as a nominee for [Countrywide] and [Countrywide's] successors and assigns . . . For purposes of recording this agreement, MERS is the mortgagee of record.” Countrywide, however, was not a party to the consolidation agreement.

There was a second (which I’ve elided) and the borrowers consolidated both loans.  That consolidation was recorded.  The borrowers then (nine months later, roughly) defaulted.

In December 2007 the defendants defaulted on the consolidation agreement. Meanwhile, on April 30, 2008, by way of a “corrected assignment of mortgage,” MERS, as Countrywide’s nominee, assigned the consolidation agreement to the Bank of New York, as Trustee For the Benefit of the Certificate Holders, CWALT, Inc., Alternate Loan Trust 2007-14-T2, Mortgage Pass-Through Certificates Series 2007-14T2 (hereinafter the plaintiff). On May 6, 2008, the plaintiff commenced this mortgage foreclosure action against the defendants, among others.

In June 2008 the defendants moved pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing. In support of their motion, the defendants submitted, inter alia, the underlying mortgages, the summons and complaint, the second note, and an attorney’s affirmation. In the affirmation, the defendants argued, among other things, that the complaint failed to establish a chain of ownership of the notes and mortgages from Countrywide to the plaintiff. In opposition to the defendants’ motion, the plaintiff submitted, inter alia, the corrected assignment of mortgage dated April 30, 2008.

Oh oh.

Borrowers defaulted and it appears that there was an attempt to “fix” the loans by assigning them late to a trust that should have been closed in 2007.

On appeal, the defendants argue that the plaintiff lacks standing to sue because it did not own the notes and mortgages at the time it commenced the foreclosure action. Specifically, the defendants contend that neither MERS nor Countrywide ever transferred or endorsed the notes described in the consolidation agreement to the plaintiff, as required by the Uniform Commercial Code. Moreover, the defendants assert that the mortgages were never properly assigned to the plaintiff because MERS, as nominee for Countrywide, did not have the authority to effectuate an assignment of the mortgages. The defendants further assert that the mortgages and notes were bifurcated, rendering the mortgages unenforceable and foreclosure impossible, and that because of such bifurcation, MERS never had an assignable interest in the notes.

There it is; the assertion that the assignments never happened as required under the PSA and UCC.  The “assignment” couldn’t take place as MERS lacked the authority to do so.

The principal issue ripe for determination by this Court, and which was left unaddressed by the majority in Matter of MERSCORP (id.), is whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS’s right to, or possession of, the actual underlying promissory note.

“Can you assign something you never possesed?”  It is amusing that this is a novel issue, but apparently it is.

However, as “nominee,”MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the lender (see Black’s Law Dictionary 1076 [8th ed 2004] [defining a nominee as "(a) person designated to act in place of another, (usually) in a very limited way"]). Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS’s authority as nominee or agent of the lender.

DING DING DING DING DING! 

You can only execute on those powers as a nominee that you have had conferred to you via some means.  If the power you seek to use was never conferred to you, such as a beneficial interest in the note, you cannot assign that which you never had the power to act upon.

….Coakley indicates that this Court has determined that such broad provisions in mortgages, such as the initial mortgage and second mortgage here, standing alone, grant MERS, as nominee and mortgagee for the purpose of recording, the power to foreclose. On the contrary, the Coakley decision does not stand for that proposition. This Court’s holding in Coakley was dependent upon the fact that MERS held the note before commencing the foreclosure action.

Exactly.  You cannot bring a foreclosure unless you have acquired the interest in the indebtedness prior to filing the action.  Such a transfer can be by many means, but it must have taken place.  It did not in this case, ergo, what MERS attempted to execute upon was without standing.

MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10,  2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.

Thank you New York Supreme Court.

Now, about those alleged Trusts that appear to not have anything actually in them……

The Market-Ticker

Hattip 4closurefraud.org

Bank of NY v Silverberg

Here we join everyone’s favorite Communist dictator in his bunker after receiving the news that the truth has come out about MERS (Mortgage Electronic Registration Systems) and that the key to his little mortgage securitization scheme has been exposed.  (Warning: NSFW, strong language.)

Live video streaming starts Wednesday May 25, 2011 at 9:45 AM.   Tune in right here to see it. Just click the photo below.

Bill Hultman of MERS will testify before the Banking and Financial Services Committee, of which Marty Knollenberg is the Chair.

Marty is my Representative and a long-time follower of FedUpUSA.  The following is my letter to him:

Marty,

I understand you are having a meeting with a representative from MERS tomorrow.  I wanted to be there tomorrow, but I can’t because I must be at work.  While I know this is rather a late message, I just wanted to urge you to take no BS from these guys.  I know you’ve been a VERY long time follower of FedUpUSA and have therefore, gotten ALL of the truth about MERS sent to you pretty much on a weekly basis for the past three years – but I wanted to personally urge you to get some hard questions answered.

1.  I’m sure you’re familiar with the recent Michigan Court of Appeals ruling that states (among other things) that MERS is in breach of MCL 600.3204(1)(d).    Further, the Appellate Court stated that MERS never had standing to foreclose on anyone because they never had the notes to begin with.  Which then begs the question:  If they never had the notes, then how can they ‘convey’ those notes to anyone else?   This is how the majority foreclosures in Michigan are being done and how MERS is going to circumvent the Appellate Court in the future.  They’re going to ‘create’ documentation that states they have transferred their rights to foreclose to the servicer. 

2.  MERS sells ‘corporate kits’ for $25.00.  For $25.00 anyone can be any officer of any banking entity they’d like.  I could buy a $25.00 MERS corporate kit  and become CEO of Bank of America for signing purposes tomorrow.  Exactly how is this remotely in compliance with contract law that requires parties act in ‘good faith’?   How could one not come to the conclusion that MERS was intentionally circumventing contract law?  (And I’m not even going to mention the outright forged documents.)

3.  MERS is an entity entirely owned by the banks for which they ‘transferred’ property.  Their corporation is nothing but a shell, their ‘officers’ being various officers of those banks.  They hold no assets and have no employees.  Their sales pitch to smaller mortgage lenders specifically stated that their purpose was to circumvent taxing authorities and recording fees.  Ask them exactly how anyone is supposed to believe this was legal or to believe that their very existence was not based on the idea of defrauding municipalities.  Why should state government be amenable to allowing fraud to be perpetrated upon its municipalities?

This was no ‘paperwork snafu’; this was intentional fraud from MERS’s very inception.  It is no small consideration that MERS was created by the big mortgage servicers for THEIR purposes.  While MERS may have done the dirty work, they were created specifically for that purpose by the big banks which are now being entirely propped up by the US taxpayer.

Marty:  stop the fraud.  Protect the citizens of Michigan.  This is precisely why I felt it was so important to educate you with all the information I have provided over the past three years.  You are now in a position to truly do something about the fraud and corruption.    Don’t let these guys walk without asking these hard questions.  Then, let’s work on getting some legislation, some HARD CORE legislation, in place to protect property rights in Michigan.  No entity should EVER be able to initiate foreclosure proceedings without first proving their right to do so with original documentation, with wet-ink signatures, and without fake signatures from phony corporate officers.

Sincerely,

Stephanie S. Jasky
Troy, MI
(248) 250-8700
http://www.FedUpUSA.org

As we reported here on April 26th, the Michigan Court of Appeals handed down a ruling that pretty much shuts down non-judicial foreclosures by MERS in Michigan.  As we indicated at the time, this is probably the most sweeping mortgage foreclosure case since Ibanez and has even further reaching consequences than any of the other MERS decisions handed down this year.   (See Residential Funding LLC v. Saurman, Case No. 290248 ).

As we had hoped at the time, this means things are a-changin’ in Michigan.  Since appellate court rulings set precedent in their respective states, lower courts are now required to take their cues from this case when hearing foreclosure suits before them.  Now it is just a matter of getting suits filed on behalf of wronged homeowners. 

Taking the lead in this regard is Justin Grove of the Dailey Law Firm, P.C. in Royal Oak, Michigan.  In addition to filing a class action lawsuit against Bank of America, Justin has now filed more than 15 actions to quiet title.   While these suits will take time, and there are no guarantees, the precedent now set by the Michigan Court of Appeals has given these homeowners a shot at leveling the playing field against the rampant and prolific number of fraudulent foreclosures perpetrated by the big mortgage banks in this state.

Just as important, is that the Dailey Law Firm is getting the word out about the fraud and corruption.  They’re bending more than a few ears, too.  With a weekly radio program airing in two markets, Detroit and Chicago, they are educating homeowners in a vast portion of the Midwest on two of the biggest mega-watt radio stations, WJR and WLS. 

In the past couple of years, almost as many scam law firms have sprung up taking advantage of homeowners, as there are fraudulent mortgage companies.  Unfortunately, an unsuspecting homeowner, desperate for help, may not recognize a scam when they see one.  A page everyone should bookmark and keep for reference for helping to spot a scam is READ THIS FIRST — DON’T GET SCAMMED!  This is also permanently linked on our Links page here on FedUpUSA.

However, let me assure you that Justin Grove and the Dailey Law Firm, P.C. are no scam.  They’ve not only done their homework, but as the Founder and Director of FedUpUSA, I’m going to personally vouch for their integrity.  Much of their work in this area to date has essentially been pro bono.  Filing suits on behalf of homeowners in foreclosure in a non-judicial state with absolutely no case precedent for defense, is a heck of a long shot.  Yet, they did it anyway.  Why?  Because fraud is a crime, but it is not a crime to default on a debt. 

As we’ve said before, this isn’t about anyone getting a free home; this is about the rule of law.  Those rules have been thrown three sheets to the wind in the past 4 years.  Property law has been violated by the banks; rules of accounting have been violated and circumvented (much with the blessing of Congress making special ‘exceptions’); and tax law has been completely thrown out the window, which has resulted in horrific losses of revenue for municipalities.  All of this is FRAUD.  Yet, no one has gone to jail.  Sure, there’ve been fines handed out here and there, but no one has been prosecuted — but many people have lost their homes, and a good portion of those have been the lenders utilizing the aforementioned methods of fraud.

So where does it end?  That’s the question we here at FedUpUSA have been asking since April of 2008.  Perhaps it ends when good people no longer remain silent and good attorneys are willing to stand up and say, ‘You know, there’s no point in my having a job, no point to my profession, unless the rule of law can actually be restored and followed.’  Justin Grove is one of those lawyers.

So, if you’re facing foreclosure, if you’re worried about the chain of title to your home, if you know MERS is part of that chain of title, tune in to The Law Show With Brian Dailey.   Get educated, and if you’re in Michigan and MERS has initiated foreclosure proceedings on your home, then call the Dailey Law firm.: (248) 744-5005 or (866) 66-Lawyer (866-665-2993)

FedUpUSA will be featuring permanent links to The Law Show in our side bar and the Dailey Law Firm, P.C. contact information can be found on our Links page.

Live Video Stream DETROIT Sunday 11:00 AM Eastern:

Live Video Stream CHICAGO Saturday 10:00 AM Central:

And in case you missed it, Justin Grove talked foreclosures and the recent Michigan Appeals Court ruling on their May 8, 2011 show.  Give a listen.

Justin Grove, Esq.