February 6, 2010

For almost a year, FDN has been literally deluged with offers from numerous companies and individuals to enter into agreements to conduct seminars and webinars. After much discussion with several of these companies, FDN’s principal Jeff Barnes, Esq. has made the decision to contract with a group of professionals based in west Florida who have significant prior and current experience in producing and conducting seminars and webinars.

The foreclosure defense webinar program will be divided into a series of presentations ranging from introductory to intermediate to advanced, and will cover foreclosure defense issues, techniques, and practices in judicial, non-judicial, and quasi-judicial proceedings, including Mediation as Mr. Barnes is a Certified Circuit Civil Mediator having been certified by the Supreme Court of Florida, and having also been previously certified as a Qualified Neutral by the State of Minnesota. Mr. Barnes also holds a Master’s Degree in Education from the University of Miami (Florida), and was both a teacher and college professor prior to entering law school, having developed and implemented curricula and creating his own teaching materials for all levels.

The first series of webinars will consist of twelve (12) separate topic areas and are designed to give the participant a background in the threshold issues of foreclosure defense, with principles and techniques for use in defense of foreclosure actions in both judicial and non-judicial states. Many of the techniques to be taught are the product of Mr. Barnes’ experience in defending foreclosures in numerous jurisdictions including Massachusetts, Vermont, New York, New Jersey, Maryland, Georgia (state and Federal levels), South Carolina, Florida, Ohio (state and Federal levels), Iowa, Indiana, Minnesota, Wisconsin, Texas, Arizona, Montana, Oregon, California (state and Federal levels), Washington, and Hawaii, as those of you who regularly and historically follow this website are well aware of.

The webinars are slated for CLE credit which can be used in any mandatory CLE state as provided by applicable CLE rules and regulations. A portion of the content will be derived from Mr. Barnes’ prior all-day seminar which was approved by The Florida Bar for 9.5 CLE credits. Mr. Barnes will also be scheduling day-long seminars in foreclosure defense for attorneys to be conducted on Fridays at the office complex in Las Vegas, Nevada where Mr. Barnes’ maintains his Western US office.

More details as to the program, webinar content, registration procedures, early registration discounts, and the like will be posted on this website within the coming weeks.

FDN 

February 5, 2010

For the second time since January 22, 2010, FDN has stopped a foreclosure sale in the State of Oregon. The borrower has sued Bank of America Home Loans, MERS, and ReContrust Company challenging their right to seek a foreclosure. A Temporary Restraining Order was entered by the Crook County Circuit Court Judge which precludes the Defendants from proceeding with any sale of the borrower’s property.

FDN wishes to thank local counsel Philip Anderson, Esq. of Bend, Oregon for his assistance in this matter.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

February 2, 2010

We have previously made much reference to the Landmark (Kansas) decision on this website. The appeal of the original decision makes mention of the decision of the Supreme Court of Arkansas in the matter of Mortgage Electronic Registration Systems, Inc. (MERS) v. Southwest Homes of Arkansas, 2009 WL 723182 (Ark.). Although the case concerned MERS’ claim that it was a “necessary party” to a foreclosure proceeding because it held “legal title” to the mortgage, the Court disagreed. We highlight specific findings made by the Arkansas Supreme Court as to MERS.

The Court found that the deed of trust provided that all payments are to be made to the lender and that the lender makes decisions on late payments. The Court found that no payments on the underlying debt were ever made to MERS; that MERS did not service the loan in any way; and that MERS did not oversee payments or delinquency of payments or the administration of the loan in any way.

Notwithstanding these undisputed facts, MERS argued that it held an interest in the property through holding “legal title”. The Court rejected MERS’ position, finding that the deed of trust is a deed conveying title to real property to a trustee as security until the grantor repays the loan; that the trustee is limited in use of the title to passing it back to the grantor/borrower in the event of payment or to the lender in the event of foreclosure; and that MERS, which is not a trustee, is not conveyed title and that the deed of trust does not convey title to MERS. The Court concluded that MERS is not the beneficiary even though so designated in the deed of trust: the lender (not MERS) is the beneficiary, as it receives payments on the debt.

The consistency of the Court decisions from Arkansas, Idaho, Nevada, Vermont, New York, South Carolina, California, and others which have repeatedly dismissed MERS’ purported “authority”, when taken together, demonstrate that MERS’ alleged “authority” to do anything (other than perhaps clerical recordkeeping) is a fantasy and a fiction created solely in the minds of MERS, the foreclosure mill attorneys, ”trustees” of securitized mortgage loan trusts, and other purported MERS “assignees” for the express purpose of perpetrating a fraud upon the courts and a theft upon borrowers. Thankfully, these courts have seen through the MERS facade and have held MERS to its limited role, holding that MERS never had the authority to transfer anything. We will continue in our efforts to carry this message to courts throughout the country who have yet to speak on the issue.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

February 1, 2010

The Rutland, Vermont Superior Court has expressly rejected any authority of MERS to foreclose either in its own name or as “nominee”. The 19-page decision in MERS v. Johnston et al., Rutland Superior Court Docket No. 420-6-09, is a literal treatise of MERS law from recent decisions around the United States including the Kansas decision in Landmark National Bank v. Kesler (which opinion was previously posted on this blog). The decision highlights the inconsistent positions taken by MERS in litigation against its representations in mortgage documents, and thoroughly dispenses of the “agent” position taken by other courts (such as the U.S. District Court for the District of Arizona in the Blau case, although the Vermont decision does not cite Blau by name).

Significantly, even after granting MERS a default judgment, the Vermont Court raised the issue of MERS’ standing “sua sponte” (on its own), after the Landmark (Kansas) decision was issued and vacated its prior default judgment which had been entered in favor of MERS. The Court discussed, in detail, who can enforce a mortgage and who can foreclose; cited the pertinent portions of the mortgage document which identified MERS and what its alleged authority was; and set forth how MERS purported to expand its otherwise limited authority without legal authority.

The Court held that “Importantly, MERS and the lender WMC purposely chose to use the specific legal term ‘nominee’, and not  ‘agent’ or ‘power-of-attorney’. MERS also chose not to define the term “nominee”. Furthermore, the mortgage deed consistently referred to the Lender’s rights in the property, and not MERS’s”.

Rejecting MERS’ standing to foreclose either in its own right or as “nominee” for some other entity, the Vermont Court relied not only the Landmark (Kansas) decision, but also on the In Re Sheridan decision from the Bankruptcy Court of Idaho which held that “if MERS is only the mortgagee, without ownership of the mortgage instrument, it does not have an enforceable right”.

The Court went on to hold, in discussing the language in mortgage instruments which gives MERS “only legal title” to the mortgage that “legal title does not necessarily signify full and complete title or a beneficial interest”, and that ”solely as nominee”, with all rights as to notice, payment and interest in the property being kept with the lender, that there was no indication that MERS was an agent or power-of-attorney for the lender. The Court thus declined to accept the “agent” logic utilized by some other courts (e.g. the Arizona Federal Court) ”as it ignores black letter mortgage law”.

The Court found that “MERS and the lender intentionally split the obligation and the mortgage deed” as “This split was necessary to create the MERS system and facilitate the growth of the secondary mortgage market”, citing an article from the Idaho Law Review which stated that “for mortgages sold into the secondary market, legal title and equitable ownership are commonly severed. Mortgage servicers retain bare legal title to facilitate mortgage servicing; equitable interests are transferred to the investor”.

As MERS has no authority because it lacks an ownership in the mortgage instrument (which ownership interest was, on a massive scale, transferred into tranches of securitized mortgage loan trusts in connection with the creation of mortgage-backed securities, a/k/a “mortgage pass-through certificates”), MERS cannot “assign” anything as it never owned the thing which it purports to assign. The Vermont decision thus provides support for the attack upon the validity of any MERS assignment, for if MERS cannot foreclose either in its own right or as “nominee”, it certainly cannot undertake any action to foreclose by indirect action which would include a purported “assignment” of either the mortgage or the Note for purposes of instituting or maintaining a foreclosure. (MERS also cannot assign the Note for other reasons previously discussed on this blog in connection with the Idaho U.S. District Cout decision in the Wilhelm case).    

Vermont has thus done what the states of Kansas, Arkansas, Idaho, Washington, South Carolina, and others have done: hold MERS to its affirmative representations in mortgage instruments and nullify its purported attempt to expand its stated limited authority. It is hoped that other states will adopt this well-reasoned opinion just as the Vermont opinion adopted well-reasoned decisions from Kansas, New York, Idaho and other jurisdictions.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

January 26, 2010

For those defending foreclosure, it is important to keep current on the property taxes and insurance on the property for at least two reasons. It is also important to investigate the status of any “escrow” or “impound” account on a mortgage loan.

“Escrow” or “impound” loans take a portion of the monthly mortgage payment and apply it to an “impound” or “escrow” to build a reserve to pay property taxes and insurance unless the borrower elected a “no impound” or “no escrow” loan, in which case the borrower is responsible for property taxes and insurance from day one. Most loans, however, are “escrow” or “impound”. The reserve is maintained at an amount in excess of future expenses so that when expenses (taxes and insurance) are billed they can be paid immediately. When a property goes into foreclosure, however, the lender or servicer has no monthly mortgage payment coming in, and thus may either (a) stop funding the reserve, or (b) fund it and seek to assess it against the borrower later.

If a borrower is in foreclosure and has an “escrow” or “impound” loan, the borrower should contact the servicer or lender or whoever maintains the reserve to ascertain its status. As long as there is a surplus, this is used to pay property taxes and insurance. When the reserve is close to being exhausted, the borrower should make arrangements with the taxing authorities to pay the property taxes and also take out an insurance policy on the property for two reasons.

The first is obvious. If the taxes are not being paid, the taxing authorities will take the property regardless of any defense being asserted to the foreclosure, and if there is no insurance and the property is destroyed through fire, flood, etc., the servicer or “lender” will seek damages for destruction of the collateral.

The second is not so obvious unless the borrower is defending a foreclosure and asserting standing, chain of title, and related defenses. In nonjudicial foreclosure states, the posting of a bond is necessary as a condition of an injunction being granted to stop a foreclosure sale. There is no such requirement in judicial states, as the foreclosure is litigated to judgment before any sale is scheduled, and thus no sale can be scheduled until the case concludes by judgment and thus there is no need for an injunction to “stop a sale”.

The calculation of the amount of the bond is a matter of evidence. A typical argument made by the servicer or “lender” is: “Well, Judge, we will have to be paying taxes and insurance on the property pending the litigation, so we need to be protected as to those expenses, and thus we need a bond for at least a year’s worth of insurance and taxes”. If the borrower takes care of the taxes and insurance, this argument goes out the window. In fact, a borrower in a case FDN is defending in Georgia was presented with this same argument by counsel for the servicer, which counsel was astonished to hear the borrower testify that she had not only paid the taxes and they were current, but that the insurance was current as well. As such, the servicer’s whole argument was rejected.

There is actually a third reason for a borrower to maintain their own insurance on the property. If there is no insurance or it lapses due to nonpayment (when the reserve is exhausted), the servicer will “force place” insurance on the property and charge the borrower double, triple, or more for the same coverage which the borrower could have obtained on their own by simply calling up an insurance company and getting their own policy. 

Another scam that the “lenders” or “servicers” try to get away with is sending the borrower a letter stating that they have assumed servicing of the loan and that the insurance which the borrower obtained at closing is “insufficient for our standards”, and if the borrower does not pony up the additional monies, the servicer will “force place” insurance. This practice is totally illegal, as one acquiring servicing or other rights to a mortgage loan has no right to unilaterally insist on increasing the amount of insurance as the borrower did not agree to this. We caught Saxon Mortgage trying to pull this nonsense several years ago, and when they were confronted with the law on assignment and assumption of contracts, they backed off. However, for those borrowers who did not challenge this practice, Saxon got away with it.

Remember, the foreclosure business is about money, and the more money the servicer or “lender” can make through inflated insurance charges, inflated “potential” expenses, and the like, the better for their balance sheet. It is a simple matter for the borrower to take the wind out of the “lender” or servicer’s sails as to these matters by making two phone calls and taking care of the taxes and insurance on their own.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com 

January 22, 2010

FDN successfully stopped three separate Trustee’s sales in three separate states in a span of 19 hours from 5:30 p.m. Thursday, January 21 to 2:30 p.m. Friday, January 22. The result of the Idaho case was published earlier today.

FDN attorney Jeff Barnes, Esq., with the assistance of local Arizona counsel Lynn Keeling, Esq., extended a prior restraining order to one of indefinite duration in a case in Arizona this afternoon. Yesterday FDN local Oregon counsel Philip Anderson, Esq., filing and prosecuting papers prepared by Jeff Barnes, Esq., obtained a restraining order with indefinite duration against a sale in Oregon.

We hope this is a sign of good things to continue in 2010 for borrower victims.

Jeff Barnes, Esq.

January 21, 2010

In what has been hailed an enormously significant victory for Idaho borrowers, the Kootenai County District Court in Coeur D’Alene, Idaho converted a temporary restraining order obtained by FDN attorneys Jeff Barnes, Esq. and local Idaho counsel Monica Flood Brennan, Esq. into a temporary injunction late yesterday afternoon in a case where the borrower sued Bank of New York as the Trustee for a securitized mortgage loan trust which had attempted to sell the borrower’s home at a Trustee’s Sale. This is the first known state court decision on the issues which involved securitization and a MERS assignment. The decision was based on the pleadings and Affidavit of the borrower and was grounded on the Idaho and Nevada Bankruptcy Court decisions which were recently discussed on our website.

The Trustee had requested that the bond be increased from $1,000.00 to the amount of the claimed arrearage, which request was summarily denied by the Court as the Trustee failed to present any evidence of any alleged damages to be suffered from being wrongfully enjoined. Idaho, like most states, requires some form of security to be posted as a condition of the granting of an injunction.

As this is the first known state court level decision on the issues involving a securitized mortgage loan trustee attempting to foreclose based on a MERS assignment, the decision could potentially become the law on these issues for the State of Idaho, as FDN’s recent victory in New Jersey on the questionable nature of MERS assignments could become the law of the state of New Jersey, as no New Jersey appeallate court has yet spoken on the issue. FDN attorney Jeff Barnes, Esq. prepared the court filings and argued for the borrower at yesterday’s hearing.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

January 18, 2010

FDN attorneys Jeff Barnes, Esq. and local NJ counsel Michael Jacobson, Esq. have scored a stunning victory in New Jersey resulting in the reversal of a previously entered summary judgment and where the court made significant findings as to factual issues surrounding what appears to have been a double assignment by MERS first to CitiMortgage and then to IndyMac. Although the 5-page written trial court opinion is unpublished, the decision cites applicable New Jersey Rules of Civil Procedure and decisional law applied to the facts of the case.

Plaintiff IndyMac had alleged that it was the current holder of the note and mortgage. In granting the borrower’s Motion to Vacate the previously entered summary judgment, the court determined that the lack of clarity in the assignment history warranted vacatur of the summary judgment. As the Motion to Vacate was granted under Rule 4:50-1(f), the one-year limitation to file such a motion was found not to apply.

The court found that the plaintiff had still not established the assignment history of the mortgage as required by Rule 4:64-1(b)(10), and this was a “substantial factual issue” because the plaintiff is required, at the very least, to provide proof of standing to foreclose by some evidence that it has a “stake in the outcome of the action”. The court also found that whether MERS, as nominee, is not in a position to assign the mortgage is a “substantial issue in and of itself” which the courts in New Jersey have not yet addressed.

The court held that based on the alleged assignment history recited by the plaintiff in its amended complaint for foreclosure, MERS as nominee for IndyMac assigned the mortgage to the plaintiff approximately 20 months AFTER it had already assigned the mortgage to MERS as nominee for CitiMortgage, Inc. The court thus stated: “How the plaintiff can foreclose on a mortgage ostensibly assigned to it after the assignor had already assigned the mortgage to another assignee is certainly a triable issue”.

The opinion is consistent with the plethora of opinions previously issued by the United States Supreme Court and the state courts of New York, Ohio, California, and other jurisdictions which have repeatedly held that it is the burden of the plaintiff, in a foreclosure action, to demonstrate that it has standing to foreclose by providing evidence that it has a stake in the outcome of the foreclosure action.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

January 12, 2010

FDN attorney Jeff Barnes, Esq., together with the efforts of local Idaho counsel Monica Flood Brennan, Esq. (a recent addition to the FDN network) caused a Trustee’s Sale of a borrower’s residence to be stopped literally within hours of the scheduled sale. The Idaho District Court entered a temporary restraining order cancelling and enjoining the sale, adding the following findings: “This Court specifically finds that the Plaintiff may lose his residence wrongfully without the issuance of this temporary restraining order, and that said injury may be irreparable through the scheduled foreclosure sale”.

The borrower, obviously pleased with the result, advised FDN that it “did what no one in the entire town thought could possibly be done”. A full evidentiary hearing on the preliminary injunction is scheduled for January 21, 2010.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

January 8, 2010

It is no secret that whether a MERS assignment is valid and legal or not depends on what part of the country you are in. The California courts have said yes and no depending on the circumstances; the Arizona courts apparently believe that whatever MERS does cannot be challenged; the Supreme Court of Kansas recently ate away at MERS’ purported authority; the Idaho Bankruptcy Court has held that purported assignments of the Note in a MERS assignment of mortgage is ineffective; and many state appeals courts have not spoken on the issue at all.

The U.S. Bankruptcy Court for the District of Nevada is the only court we know of so far which has resoundingly rejected MERS’ authority to assign anything. In the matter of In Re Joshua and Stephanie Mitchell, Case No. BK-S-07-16226-LBR, the Court did not mince words:

     MERS does not have standing merely because it is the alleged beneficiary under the deed of trust. It is not a beneficiary, and, in any event, the mere fact that an entity is named beneficiary in a deed of trust is insufficient to enforce the obligation.

Citing the standard MERS language in a Deed of Trust that it is both a nominee and a beneficiary and also citing MERS’ “Terms and Conditions” in its corporate documents whereby MERS affirmatively states that it has no rights to any payments on the mortgage loans, no servicing rights, and agrees not to assert any rights with respect to the mortgage loans or mortgaged properties, the Court then set forth the legal definition of a “beneficiary” and held:

   But is is obvious from MERS’ “Terms and Conditions” that MERS is not a beneficiary as it has no rights whatsoever to any payments, to any servicing rights, or to any of the properties secured by the loans. To reverse an old adage, “if it doesn’t walk like a duck, talk like a duck, and quack like a duck, then it’s not a duck”.

The law is fairly standard in all states that if a state has not spoken on a particular legal issue in an appellate decision that the trial court considering the issue may look to the law of other states for guidance. The Ohio courts did just that in adopting the opinions of Judge Arthur Schack from New York as to standing issues in foreclosure cases. As there are MANY states which have not yet spoken on the issue of MERS alleged authority, continued litigation will be necessary, in the absence of any pronouncement from the United States Supreme Court, in order to resolve MERS’ alleged authority to assign mortgages/Deeds of Trust and Notes in those states which are to date silent on the issue, and as such, the defense as to the lack of MERS’ authority continues to be viable in foreclosure defense cases in those states where there is no opinion on the issue.

Jeff Barnes, Esq. www.ForeclosureDefenseNationwide.com