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August 11, 2014

August 11, 2014

In a searing, 6-page opinion which does not mince words, The Hon. Jean Johnson, Circuit Judge of the 4th Judicial Circuit for Duval County (Jacksonville-area) Florida finds and holds that JPMorgan Chase and its attorneys Shapiro & Fishman committed fraud on the court through misrepresentations involving a fraudulent assignment and claims which JPM and S&F knew were fraudulent when filed. The law Firm of Parker & DuFresne, P.A. represented the homeowner. S&F was represented at the hearing on the homeowners’ Motion to Dismiss the foreclosure With Prejudice by the Greenberg Traurig Firm. The matter is styled JPMorgan Chase Bank National Association v. Pocopanni, Case Number is 16-2008-CA-3989.

WaMu had filed a foreclosure action through S&F in 2008 alleging that WaMu was the owner and holder of the Note, which had been originated by another bank. As alleged evidence of this, WaMu submitted an Assignment of Mortgage which represented to the Court that the mortgage was assigned from the original lender to WaMu. However, this directly contradicted a prior assignment from 1992 which assigned the mortgage to Fleet Real Estate Funding Corporation without recourse. On the same day, Fleet assigned the mortgage to Fannie Mae and reserved no right in the mortgage.

On July 5, 1996, Fannie Mae, also represented by S&F, filed a Lis Pendens to what the Court termed a “prequel” to commencing a foreclosure action. Then, on August 20, 1996, another assignment of mortgage was filed showing an assignment from Fleet to Fannie Mae. This assignment was also prepared by S&F. The Court noted that the Fannie Mae lookup tool shows that the current owner of the note and mortgage is Fannie Mae, and thus concluded that: “it is now undisputed that the plaintiff [JPM] is not, nor has ever been, the owner and holder of the Defendants’ note and mortgage.”

Judge Johnson thus found that “WaMu, with the assistance of its previous counsel Shapiro & Fishman, submitted the Assignment when WaMu and Shapiro & Fishman actually knew that only Fannie Mae was entitled to foreclose on the Mortgage, and that WaMu never owned or held the note and Mortgage.” The ruling goes on to find that “Shapiro & Fishman had itself prepared a false assignment of mortgage” and also found “by clear and convincing evidence that WaMu, Chase and Shapiro & Fishman committed fraud on this Court.” Further, “The Court finds that Shapiro & Fishman, at all times material, filed the Complaint, the Assignment, and the Motion for Substitution (of the Plaintiff) with actual knowledge that the averments and representations made in those papers were false.”

The Judge also stated that “these acts committed by WaMu, Chase and Shapiro & Fishman amount to a ‘knowing deception intended to prevent the defendants from discovery essential to defending the claim’ and are therefore fraud”, and dismissed the foreclosure with prejudice.

Kudos and bravo to Judge Johnson for exposing this fraud on the record. As those of you who follow this website know, one of our clients obtained an attorneys’ fee award against S&F’s client in another case in connection with a dismissal of the case by the Judge on Motion of Mr. Barnes. S&F appealed the decision and lost. Rather than paying the attorneys’ fee award, S&F continues to battle our client and refuses to pay the award even though it lost the appeal of the dismissal. A hearing on the matter is thus being scheduled.

Jeff Barnes, Esq., www/

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August 6, 2014

August 6, 2014

A trustee’s (foreclosure) sale has been stopped in Williamson County, Tennessee on Motion of the homeowner who is represented by Jeff Barnes, Esq. and local TN counsel John Higgins, Esq. This is the second sale which has been stopped by Mr. Barnes and Mr. Higgins in TN in a span of 11 days.

The case involves an origination by America’s Wholesale Lender (which stopped doing business in 2008) and an alleged transfer to a 2005 securitization Trust via MERS. Nationstar Mortgage LLC sought foreclosure as the servicer to the Trust.

Nationstar’s attorneys Rubin & Lublin PLLC sent a letter to the homeowner claiming that she had a loan with MERS. This statement was not only false in fact (as MERS does not lend money, is not the “Lender” on the Note, and is never a “lender”), but was also made more than six months after the Court of Appeals of Tennessee issued its decision in the MERS v. Ditto (No. E2012-02292-COA-R3-CV, opinion issued January 2, 2014) which held that MERS has no independent or protected interest despite MERS being named as the “beneficiary” or “nominee”.

To further confound the matter, on May 2, 2014, Nationstar advised the homeowner that the foreclosing party is The Bank of New York Mellon FKA The Bank of New York as successor Trustee to JPMorgan Chase Bank, N.A. as trustee for the Structured Asset Mortgage Investments II Trust. However, 7 weeks later (on June 23, 2014), Nationstar’s attorneys Rubin & Lublin claimed that an entity styled Bank of New York Mellon Corporation as the Trustee for the Structured Assets Mortgage Investments II, Inc. was the foreclosing party. The letter advised that the sale was scheduled for August 7, 2014.

It gets worse. On July 7, 2014, Nationstar sent a letter to the homeowner claiming that JPMorgan Chase Bank as Trustee for a trust with a different description was the owner of the loan. Four days later, Nationstar’s attorneys sent a letter to the homeowner again claiming that the homeowner had a loan with MERS, and again claimed that BNY “Corporation” as trustee for the Trust “Inc.” was foreclosing. There is no explanation for the change in entities, or how the loan rights went first to the 2005 Trust for either of the BNY entities, then to JPM, then back to BNY.

Accordingly, the Court, on papers researched and drafted by Mr. Barnes and filed by Mr. Higgins who handled the TRO proceeding, stopped the sale.

Jeff Barnes, Esq.,

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August 1, 2014

August 1, 2014

The Court of Appeals of New Mexico, in reversing a summary judgment in favor of The Bank of New York as the claimed “trustee” of a Countrywide securitization trust, has reaffirmed existing New Mexico case law that MERS cannot assign promissory notes, and that production of a Note with an “endorsement in blank” after the filing of the Complaint does not satisfy the standing requirement even if the foreclosing party is in possession of the Note. The decision in The Bank of New York Mellon, etc. v. Lopes, Docket No. 32,310 was issued on July 22, 2014.

BNY argued that the MERS assignment of mortgage entitled BNY to enforce the Note. The Court rejected that argument citing the New Mexico Supreme Court’s opinion in Bank of N.Y. v. Romero, 320 P.3d 1 (NM 2014), which held that MERS is merely a nominee for the lender and as such lacked any authority to assign the Note.

BNY then attempted to introduce the Note with a claimed “blank endorsement” at the summary judgment hearing, which had not been attached to the Complaint as of the time that suit was filed. BNY also claimed that it was the “holder” by mere possession of the Note. The Court also rejected that argument, stating that “possession is not necessarily sufficient to make one a holder”, again citing the NM Supreme Court’s Bank of N.Y. v. Romero decision.Summary judgment was reversed because BNY did not establish that it had standing at the time that the Complaint was filed.

Significantly, the Court noted that the Note was not payable to BNY, and that the “endorsement” was stamped by Michelle Sjolander, who we all know to be an admitted robo-signer who has testified under oath in a deposition that she never signed endorsements to notes.

We thank one of our dedicated followers for bringing this decision to our attention.

Jeff Barnes, Esq.,

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July 29, 2014

July 29, 2014

I have wanted to comment on this for some time, but let it go thinking that maybe the situation would change. It has somewhat, but not to the extent that one might think in view of the emerging law in foreclosure litigation.

For the past six years, I have all too often been asked this question by Judges across the US: “But, Mr. Barnes, your client did not pay the mortgage, right?” Of course, I then have to explain that we may deal with that issue if AND AFTER we get past the standing issue, which is the threshold issue which must be resolved before any claims of “defaults” or “amounts due” are approached. That is, “Your Honor, we first have to resolve whether these people on the other side even have the right to be here or request any relief.” It has been and continues to be a difficult hurdle. However, more and more Judges are getting it.

The problem is that, as one Judge told me years ago, “Mr. Barnes, I pay my mortgage and I do not know who owns it, so why should your client get away with not paying his?” My response is that maybe, Your Honor, you should question who owns your loan and whether or not you owe what the servicer claims you owe. You may be overpaying. The Judge offered to recuse himself and hire me to find out. Naturally, I declined for obvious reasons.

The law on standing is pretty clear in the 30+ states I have worked in since 2008. The problem is that the “we have the Note, therefore we win” mantra of the “bank” attorneys too often carries the day. We actually have two cases on appeal at this time where our expert (a former Wall Street national securitization manager for one of the largest investment banks and who actually put securitizations together and had the responsibility for making sure that the securitizations complied with Federal laws and regulations) testified, without any rebuttal or any cross-examination, that pursuant to public filings and documents from the involved parties that the foreclosing “bank” does not, did not, and could not own the loan. Notwithstanding that unrebutted evidence, the Judge signs the “form” boilerplate Final Judgment of Foreclosure anyway.

This results in more appeals being filed, thus causing an additional burden on the courts and expending of taxpayer dollars to show the appeals court that the trial Judge did not follow the evidence or the law. Even if the appeal does not result in a reversal, the time, expense, and labor involved drains the public coffers, all because the Judge did not follow the law in the first instance. For some reason, some Judges just cannot rule against a bank, and others never met a bank they didn’t like.

Those of you who have followed this website since 2008 know what a fight this has been. The fight is now progressing to the legislatures and the higher appellate courts. In California, for example, one division of an appeals court recently filed an opinion which essentially insulted the intelligence of the Judges who issued the Glaski opinion (which came from another division of the California appeals courts), with the rhetoric being mocking and demeaning. What will this lead to? You got it: more litigation, and thus more draining of taxpayer dollars.

Judges: don’t be afraid of the evidence. Don’t be afraid of the law. Don’t be afraid to rule against the banks. If the facts and the law do not support the bank’s claim, it is ok to rule against the bank. In fact, the 4th District Court of Appeal in Florida issued one decision where the Court essentially said to the trial court whose decision it reversed: in case you didn’t hear us the first time, we are telling you again, as we did before, that you are wrong, and thus the summary judgment is reversed because the bank did not satisfy its burden for the same reason as in the prior appeal on the same issue.

We need more appeals courts to adopt this stance of following the law, and more trial court Judges to follow those appellate rulings.

Jeff Barnes, Esq.,

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July 24, 2014

July 24, 2014

A trustee’s (foreclosure) sale has been stopped in Davidson County, Tennessee with the entry of a Temporary Restraining Order on Motion filed by the homeowner against Nationstar Mortgage LLC, MERS, and the law Firm acting as the substitute trustee. The homeowner is represented by Jeff Barnes, Esq. and local Tennessee counsel John Higgins, Esq., who also recently stopped another sale in Tennessee on a case where he and Mr. Barnes were retained (see webpost of May 19, 2014)

The original lender had been sold to Discover Bank in 2012. Two years later, MERS attempted to assign the Deed of Trust (DOT) to Nationstar, which advised the homeowner in 2013 that the “servicing” of the loan had been transferred to Nationstar from Bank of America (BOA). Nationstar did not identify the owner of the loan. The MERS Assignment also purported to transfer the Note. It is well known that MERS never originates loans and does not own promissory notes, and as such it cannot transfer something it does not own.

The Complaint and Motion for Temporary Restraining Order and Preliminary Injunction filed by the homeowner (prepared by Mr. Barnes at the request of Mr. Higgins and the homeowner) set forth that the Court of Appeals of Tennessee had issued a decision in January of 2014 holding that MERS has no independent interest in real property or any protected interest in real property, and as a “nominee” only holds “bare legal title”. The homeowner thus alleged that the MERS Assignment was a legal nullity and Nationstar was thus precluded from foreclosing.

The Court initially set the bond to stop the sale at $90,000.00, but on request of Mr. Higgins, reduced the bond amount to just over $900.00 as there was no evidence that Nationstar would suffer damages of $90,000.00 during the time that any sale was not permitted, and as Nationstar’s standing to even seek the remedy of foreclosure is being challenged by the homeowner’s lawsuit.

Jeff Barnes, Esq.,

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July 8, 2014

July 7, 2014

The Maine Supreme Judicial Court has further debunked MERS’ alleged authority, vacated a foreclosure judgment, and affirmed sanctions against the attorney for Bank of America (which filed the foreclosure action) in its July 3, 2014 opinion in the matter of Bank of America v. Greenleaf, No. 2014 ME 89. The 24 page decision explains why BOA did not have standing to foreclose on the Mortgage despite having possession of the Note endorsed in blank, which the Court found only gave BOA the right to enforce the debt evidenced by the Note.

The Court held: “The interest in the note is only part of the standing analysis, however; to be able to foreclose, a plaintiff must also show the requisite interest in the mortgage…Thus, whereas a plaintiff who merely holds or possesses - but does not necessarily own - the note satisfies the note portion of the standing analysis, the mortgage portion of the standing analysis requires the plaintiff to establish ownership of the mortgage.” (original emphasis, case citations omitted here).

The Court then analyzed the MERS language in the Mortgage in the context of the purported MERS assignment to BAC. The Court concluded that “notwithstanding its reference to MERS as the ‘mortgagee of record’, the mortgage in fact granted to MERS ‘only the right to record the mortgage’ as the lender’s nominee, and ‘having only that right, MERS did not qualify as the mortgagee pursuant to our foreclosure statute.” The Court held that MERS did not have any right to foreclose on the property, and that the Mortgage only conveyed to MERS the right to record the Mortgage as nominee for the original lender. Thus, the MERS assignment to BAC only transferred what MERS had, which was a right to record the mortgage, period. The series of assignments demonstrated “the right to record the mortgage as nominee, but no more”.

The Court concluded that BOA lacked standing to seek foreclosure, and vacated the trial court’s foreclosure judgment.

The Court also affirmed the award of sanctions against BOA’s attorney who failed to comply with Maine’s civil procedure rules governing filings on summary judgment and had “inappropriately sought to create a foundation for the admission of the Bank’s business records by submitting an affidavit of his knowledge of the Bank’s recordkeeping practices” and other matters about which he lacked personal knowledge.

The Court also concluded that that the representative of BOA (who testified that she is a bank employee who testifies at trials) did not testify as to the requirements for the admissibility of the bank’s records under the business records exception to the hearsay rule (Rule 803(6)). There was no testimony as to how long or in what capacities she worked for the bank, what type of familiarity with the records were required for her job as “litigation liason”, and that her first encounter with the “Account Information Statement” (which BOA attempted to admit into evidence) was through obtaining the document from the law firm representing BOA in the foreclosure case and not through BOA. The Court found that the requirements of Rule 803(6) were not supported by the record.

This is the second recent decision which is finally unraveling the MERS myths which have been perpetrated on the courts nationwide for far too long. Brave to the Maine Supreme Court!

Jeff Barnes, Esq.,

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July 3, 2014

July 3, 2014

The United States District Court for the Eastern District of Pennsylvania has issued a 45 page opinion in the matter of Montgomery County, Pennsylvania Recorder of Deeds v. MERSCORP and MERS, Case No. 2:11-cv-06968-JCJ. The opinion was just filed July 1, 2014.

The opinion traces the history of promissory notes and mortgage instruments in Pennsylvania and the statutory recording requirements incident to such transfers. Five questions were presented on cross-motions for summary judgment. MERS’ Motion for summary judgment was denied in its entirety, while the Plaintiff Recorder of Deeds’ Motion for summary judgment was granted in part.

The Court noted, on page 28 of the opinion, that “the most challenging issue” in the case was whether the MERS Defendants have been the transferor or transferee of unrecorded secured debt and if not, whether they are the proper parties who are subject to the mandates contained in the (Pennsylvania) recording statutes.

The Court noted that the MERS Defendants had repeatedly taken the position that MERS did not and does not negotiate or transfer promissory notes secured by mortgages. The Court then noted MERS’ inconsistent statement that “It is MERS that serves as the mortgagee of record in the public land records as the “nominee” for a lender (noteholder) and its successors and assigns.” The Court found that in contradiction to its own argument, MERS initially admits that it is in fact involved with the transfer of the note by virtue of its service as the mortgagee of record as the nominee for a lender/noteholder, and that when required to facilitate a foreclosure, MERS itself can become a note-holder.

We also know that MERS assignments almost always have the phrase that the mortgage or DOT is assigned “together with the note or other evidence of indebtedness”, which is also contradictory to the position taken by MERS that it does not negotiate or transfer mortgage-related notes.

MERS filed the Declaration of William C. Hultman, who has testified in numerous MERS-related cases. The Court found, in citing to specific deposition testimony of Hultman, that MERS is both named as the mortgagee and acts as agent for the lenders, including both the original lender and any downline claimed holders of the note. The Court found that MERS is “clearly” involved with the transfer of the note and mortgage. The Court also found that MERS is an agent of the lenders.

The Court ultimately concluded that the MERS Defendants are those who may be liable for and subject to the mandates of the Pennsylvania Recording Statutes, and also found that because over the years that the number of documents recorded by MERS has steadily increased that this has caused a decrease in the amount of recording fees collected by the County Recorders of Deeds, resulting in financial injury to Community Legal Services, the Legal Aid Network, and the Housing Alliance, all of which receive much of their funding from the collection of recording fees.

The Recorder also retained two expert witnesses, one of whom found that there were missing assignments that should have been recorded, that the MERS Milestones data was incomplete AND IN CONTRADICTION TO SECURITIZATION DEAL DOCUMENTS, and that title to the property had been corrupted by MERS’ failure to record a complete chain of title.

The second expert stated in his Declaration that licensed title agents have no access to information in MERS bar codes, which means that title searchers and consumers are denied the ability to ascertain who currently owns the note secured by a MERS mortgage and that neither the borrower nor the courts can ascertain the chain of events OR EVEN THE VALIDITY OF A TRANSACTION. The result is an “erosion of Pennsylvania’s land records and THE INABILITY TO EVALUATE THE MARKETABILITY OF TITLE AND CREDIT WORTHINESS OF THE CONSUMER. (note: we have capitalized the words above for emphasis).

The Court also noted the Recorder’s testimony that over the past several years, a number of residents who were facing foreclosure didn’t know who owned their mortgage or to whom they should be making their mortgage payments, and the Recorder attributed this to the fact that MERS is not recording all of the note assignments with the results of both a loss of revenue and land title records being incomplete.

The Plaintiff’s testimony showed that as a result of a forensic audit that a MERS-affiliated mortgage was transferred on average between 4 and 12 times, resulting in a loss to the county of $15.7 million in unpaid recording fees. The Court highlighted the testimony of MERS representative R. K. Arnold in a case in Alabama and held that the testimony was tantamount to an admission that by maintaining the recording system in Pennsylvania that the county recorders confer a benefit on MERS which MERS appreciates but does not pay for.

The Court granted the Recorder’s Motion for Summary Judgment on the claim for Declaratory Judgment, and held that the assignment or transfer of a promissory note secured by a mortgage on real estate is equivalent to a mortgage assignment, and that the MERS’ Defendants’ failure to create and record documents evincing these transfers violates Pennsylvania statutory law, thus determining that MERS was liable for damages and that the amount of damages will be taken up at trial.

This is a “Milestone” opinion. MERS’ inconsistent positions, myths, and fallacies have finally been debunked by a Federal court, and MERS’ liability for damages has been proven as well by a Federal Declaratory Judgment. Our congratulations to counsel for the Recorder who filed and continues to pursue this case, and to the Pennsylvania Federal court for this landmark decision which will hopefully start to “tear down the MERS wall.”

Jeff Barnes, Esq.,

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July 2, 2014

July 2, 2014

The Florida Third District Court of Appeal has upheld the dismissal of a foreclosure action filed by Bank of New York Mellon (BNYM) which was dismissed due to BNYM’s repeated violations of court Orders. Jeff Barnes, Esq. represented and continues to represent the homeowner through his Firm. W. J. Barnes, P.A., as he does in all cases.

In June of 2010, a Key West, Florida Circuit Court Judge dismissed the foreclosure action upon finding that BNYM had violated multiple court Orders including discovery and pretrial Orders, and conditioned any re-filing of the action on compliance with the prior Orders. Three (3) years later, BNYM, using a different law Firm, re-filed the action without complying with the prior Orders including the Order which placed the conditions on any re-filing. The homeowner filed a Motion to Dismiss the re-filed case, which was granted. At that hearing, the Judge found that the conduct of BNYM was appalling.

BNYM appealed the decision.  The homeowner filed an appeal brief explaining why the dismissal was proper by the Circuit Judge, and why BNYM was incorrect in its arguments.

The Florida appeals court affirmed the decision today without opinion. The homeowner may now assess his attorneys’ fees in defending the case against BNYM.

Jeff Barnes, Esq.,

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June 19, 2014

June 19, 2014

We have two separate cases involving Branch Banking & Trust (BB&T) in two separate states (Tennessee and Delaware) where matters which have occurred demonstrate that BB&T cannot be trusted. Jeff Barnes, Esq. represents the borrowers in both actions, assisted by local counsel Andrew Farmer, Esq. in the Tennessee case, and local counsel Stephen Brauerman, Esq. in the Delaware case.

In the Tennessee case, the borrowers had a series of construction loans which had been originated by a lender which was thereafter bought by BB&T. The series of loans involved several parcels of real estate being developed as part of a planned resort community. For a period of three years (from 2006 through 2009), BB&T continually amended the time for performance of payments under the loans on request of the borrowers without ever threatening default or foreclosure. The requests for extensions of time to make payments were the result of numerous factors incident to construction issues.

At some time in 2009, BB&T notified the borrowers that there was an error in the loan documents which had been prepared by the bank, and that as a result, BB&T did not have perfected lien rights against the properties. BB&T requested that the borrowers jointly participate in legal proceedings to reform the loan documents to correct the errors. The borrowers agreed to do so on the condition that the relationship between them and BB&T as to extending the time for performance (payment) on the loans, which BB&T had been doing with the borrowers for the prior 3 years, did not change. BB&T agreed to this.

The proceeding to reform the documents to correct the bank errors consummated. However, shortly thereafter, BB&T refused to grant any modifications to the time for the borrowers to make payments under the loans, and thereafter declared the borrowers in default and initiated foreclosure proceedings. It is thus more than evident that BB&T lied to the borrowers so that BB&T could (a) correct bank errors in the loan documents which errors resulted in BB&T having no lien rights so that (b) BB&T could then set up the borrowers for foreclosure. The borrowers have sued for fraud in the inducement/misrepresentation, breach of contract, unjust enrichment, and injunctive relief to enjoin any foreclosure activity.

The original foreclosure Complaint in the Delaware case had been filed by MERS. The homeowner challenged the Complaint on the grounds that MERS was not one of the specific parties identified in the applicable Delaware statute governing who is entitled to institute a foreclosure. That action was dismissed.

BB&T filed a subsequent action and prevailed on summary judgment, which the homeowner appealed. However, the form of the Memorandum Opinion did not conform to the proper form of a final order which Delaware law permits to be appealed. The homeowner’s counsel, Mr. Brauerman, and BB&T’s counsel thus negotiated a stipulation dismissing the appeal without prejudice to permit the trial court to enter the proper form of Order so that the summary judgment ruling could be appealed.

However, BB&T’s counsel did not include the homeowner’s counsel (Mr. Brauerman) on the form of Order submitted to the Court, only listing, as the borrower’s counsel, an attorney who had previously represented the borrower but who had left the law Firm representing the borrower long before. That attorney had not been involved in the negotiation of the stipulation and his name was not on the stipulation. At all times, BB&T’s attorney only dealt with Mr. Brauerman as to the agreement to dismiss the appeal without prejudice, which BB&T’s counsel knew was being done so that the trial court could enter an appealable form of Order, and was thus on notice that Mr. Brauerman fully intended to appeal the summary judgment decision (as he had already done as to the Memorandum decision which granted BB&T’s Motion for Summary Judgment).

As a result of BB&T’s counsel placing the name of an attorney who did not represent the borrower on the Order and not including Mr. Brauerman’s name on the Order, no notice of the proposed Order nor the Order itself were provided to Mr. Brauerman. The homeowner only learned of the existence of the (erroneous) Order when the property was posted for sale, which was after the appeal period had already expired.

The homeowner filed a Rule 60 Motion to vacate the Order. Incredibly, BB&T’s counsel took the position that the time for appeal had expired and thus the homeowner could not appeal, period. The court apparently saw through the unethical and prejudicial actions of BB&T’s counsel and granted the homeowner’s Rule 60 Motion, vacating the infirm Order.

BB&T’s conduct in these two cases is reprehensible and beyond atrocious: lying to homeowners in Tennessee so BB&T could try to steal valuable resort property, and trying to take advantage of a BB&T-manufactured misleading court filing situation in Delaware. The moral: Beware BB&T!

Jeff Barnes, Esq.,

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June 6, 2014

June 6, 2014

We have been dealing lately with a flood of “substitution” related claims: where the foreclosing party is suddenly requesting that another party be “substituted” as the “new” foreclosing party which new party has allegedly inherited the interest in a mortgage loan through nothing more then an unverified, undocumented assertion of the attorney for the party seeking to foreclose. Such “substitutions” beget numerous issues which affect defenses, discovery, readiness for trial, and the progress of a foreclosure. Three recent cases from three different states demonstrate the numerous problems with these claimed “substitutions.”

As those of you who follow this website are aware, Colorado foreclosures begin with a “Rule 120″ proceeding where the party seeking to foreclose files a Motion for an Order Authorizing Sale (”OAS”). The standard for this probable cause proceeding is low, but there is case law from the Colorado Supreme Court which permits the assertion of “real party in interest” defenses at a 120 proceeding. The Judge presiding over the 120 proceeding must take these defenses into account if timely and properly raised.

Recently, a situation came up where in a case where the foreclosing party sought to “substitute” the 120 movant (U.S. Bank National Association as trustee for a securitized mortgage loan trust) with Citibank, N.A. based on a claimed “transfer” of the Note and Deed of Trust (DOT) to Citibank. However, no Affidavit was filed to support the claimed transfer; no documentation was filed evidencing what was transferred, when the alleged transfer occurred, or by what means it took place; and no attorney consenting to the transfer on behalf of Citibank filed any papers in the case. The homeowner, who is represented by Mr. Barnes, challenged the transfer.

Colorado case law requires that any challenged transfer be the subject of an evidentiary hearing, and that the court must make detailed findings of fact and conclusions of law as to the alleged transfer sufficient to permit review by a court of appeals. The Judge in the case granted with substitution without an evidentiary hearing despite being presented with the binding law at the hearing, and thus the matter is now on appeal.

In Florida, JPMorgan Chase has recently sought to substitute a private trust, through “MCM Capital Partners LLC, its trustee”, as the foreclosing Plaintiff in two separate cases where the homeowner is represented by Mr. Barnes. As with the Colorado case, no Affidavit was filed evidencing the alleged transfer; no documentation was filed demonstrating what was transferred, when the alleged transfer occurred, and by what means it occurred; and no evidence of any kind has been presented to prove the alleged transfer. However, the case is set for trial, which presents several problems.

First, the homeowner is now being forced to trial with a last-minute change of the party seeking foreclosure through an undocumented transfer. Due process requires that the homeowner be permitted to amend his pleadings to include defenses as to this alleged and undocumented transfer, and to conduct discovery on the alleged transfer as to what was transferred, when it allegedly occurred, how it occurred, the source of authority for the transfer, and what documents evidence the transfer. Was it a bogus MERS Assignment? Was it an impermissible transfer to a securitization trust? Was the transfer in violation of law?. The homeowner has filed a Motion to amend his defenses.

Second, the case is also no longer in a posture to be tried, as the foreclosing party is amending its pleading as to who is seeking to foreclose and by a different theory [that being now a multiple transfer of interests in the Note and Mortgage to yet another downline party]. Forcing the case to trial would result in an illegal “trial by surprise” and a denial of basic fundamental rights.

In Tennessee, a homeowner represented by Mr. Barnes and local Tennessee counsel John Higgins, Esq. filed an action for Declaratory Relief to determine the rights in a Note and DOT which was originated by one party but sought to be enforced by another. In Tennessee (as in all states), one must name, in a Declaratory Relief action, all parties who may claim an interest in the matters sought to be declared, or who may have an interest in the Declaratory Judgment being sought, or who may be affected thereby.

The originating bank filed a Motion to Dismiss claiming, again in unsworn fashion and without any documentation being filed, that it no longer had any interest in either the Note or the DOT as it had transferred same. The Tennessee Court, at a hearing today, denied the originating bank’s Motion to Dismiss because (a) the Complaint stated a cause of action for declaratory relief, and (b) there was no admissible evidence of the claimed transfer which may have otherwise entitled the originating bank to be dismissed from the action.

The bottom line of all of this is that requests to substitute the foreclosing party should never be taken lightly, and strict proof, by admissible evidence, must be demanded as to any claimed transfer. Never take as gospel or otherwise a naked assertion by a foreclosing party’s attorney that the claimed substitution is “simple”.

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Jeff Barnes, Esq.,

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