VICTORY IN MONTANA: SUPREME COURT CONCLUDES MERS IS NOT THE BENEFICIARY UNDER MONTANA’S NON-JUDICIAL FORECLOSURE STATUTE; REVERSES SUMMARY JUDGMENT

November 25, 2013

In a 21-page opinion issued today, the Supreme Court of Montana held that MERS is not the “beneficiary” under Montana’s Small Tract Financing Act (Montana’s non-judicial foreclosure statute). Jeff Barnes, Esq. represented the homeowners in the appeal, assisted by local Montana counsel Eric Hummel, Esq. Mr. Barnes wrote the Briefs and argued the matter before the full panel of Justices on September 25, 2013. The decision is now the law in the State of Montana.

The Court relied upon the Brandrup decision from Oregon (the companion case to the Niday decision from the Supreme Court of Oregon which also held that MERS is not the “beneficiary” under Oregon’s non-judicial foreclosure statute), and other cases cited by Mr. Barnes (who successfully argued the Niday decision in Oregon as well at both the Court of Appeals and Supreme Court levels).

In concluding that MERS is not the beneficiary under the statute, the Court quoted the homeowners’ argument ┬áthat “MERS was not the lender, did not extend any credit, and is nothing more than an electronic tracking entity”. Thus, the DOT was not and could not have been executed “for the benefit” of MERS. The Montana statute, which is practically identical to Oregon’s, requires that the “beneficiary” under the statute be the person “for whose benefit a trust indenture is given”.

The Court also rejected MERS’ argument that it is a “special agent” of the lender, finding no evidence to support this argument which the Court found that MERS wrongfully attempted for the first time on appeal. The Court held that there are no extenuating circumstances or new developments in the law to justify MERS’ not asserting an agency theory at the trial level. The Court further held that even if it had decided the agency issue using the language in the DOT, that evidence is reasonably susceptible to more than one inference and thus the legal relationship between MERS and the lender is not purely a question of law, with the term “nominee” being subject to more than one interpretation based on the context of its use.

The Court stated: “MERS relies on the same vague and confusing claim of authority as dispositive for the agency issue in this case”, referring to the Supreme Court of Oregon’s finding in Brandrup that the DOT only obfuscates MERS’ status by first granting the narrow designation of “nominee” holding “only legal title”, but then grants MERS the right to exercise “any and all” interests of the lender “as necessary”. The Court concluded that the facts of the case are susceptible to a determination that MERS was the kind of nominee that is not an agent.

The summary judgment entered by the trial court was thus also reversed.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

MOTION TO DISMISS/SUMMARY JUDGMENT DENIED IN NEW JERSEY CASE WITH FIVE ASSIGNMENTS; RHODE ISLAND FEDERAL COURT PERMITS ATTACK ON SECURITIZATION ASSIGNMENT

November 22, 2013

A New Jersey Chancery Judge has just denied a Motion to Strike a homeowner’s Contesting Answer and Defenses and dismiss his Counterclaim in a New Jersey case involving five (5) claimed Assignments which involve MERS, EMC, and Wells Fargo. In what appears to be a unique case, Wells Fargo has requested, in its Complaint, that the Court declare that three of the Assignments are void and of no effect. Counsel for Wells Fargo attempted to argue the Motion as one for summary judgment although it was not styled as such. Motions for Summary Judgment are decided under a completely different set of rules and case law in New Jersey.

The Judge stated that he has never seen a chain of title to a mortgage loan which is so complex, thus giving rise to issues of material fact and warranting denial of the Motion to Strike and Dismiss.

Jeff Barnes, Esq. represents the homeowner together with local New Jersey counsel Michael Jacobson, Esq. Mr. Barnes is admitted pro hac vice in the case and argued the matter within the last hour.

Separately, the United States District Court for the District of Rhode Island issued an opinion on November 5, 2013 in the matter of Cosajay v. MERS, 2013 WL 5912569, which rejected the Magistrate’s Report and Recommendation which dismissed the homeowner’s lawsuit based on a lack of standing to challenge the assignments. The U.S. District Court held that the homeowner has standing to challenge the foreclosure attempt, which challenge is based upon the 2008 purported MERS assignment to a securitized mortgage loan trust which closed in 2007. The homeowner asserts that on these facts, there was thus nothing for MERS to assign in 2008.

The opinion is similar in its reasoning to the Glaski decision from California, although it does not rely on Glaski but on cases from Massachusetts and on Rhode Island non-judicial foreclosure statutes. The Court stated that its “decision finding standing is buttressed by Defendants’ extreme and incongruous argument that would allow Ms. Cosjay no relief because she is not a party to the assignment”, thus putting the kebash on decisions from other states which have taken this “extreme and incongruous” position.

This decision should be used in any case, as legally permitted, where the foreclosing “bank” or servicer claims that the homeowner cannot attack the assignment because they are not a party to it. The battle as to this significant issue thus continues, but the only cases which really explain the fallacy in the position that the homeowner cannot challenge the assignment because they are not a party to it are the decisions which explain why this position cannot legally stand. The decisions which take the “incongruous” position simply adopt it without much if any legal reasoning.

A copy of the decision, which has already been widely published on the internet, is also available upon e-mail request to us.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

FLORIDA JUDGES DENY ORDER TO SHOW CAUSE WHY FORECLOSURE JUDGMENT SHOULD NOT BE ENTERED; DISMISS ANOTHER CASE; AND ASSESS ATTORNEYS FEES IN A THIRD CASE; COLORADO COURT ENJOINS SALE IN SECURITIZATION CASE

November 20, 2013

In a span of 3 business days, one Florida Judge has denied a servicer’s request for the entry of a foreclosure judgment without a summary judgment motion or trial in one case; another Florida Judge has dismissed a Bank of New York securitization case and assessed attorneys’ fees against Bank of New York in another case; and a Colorado District Judge has enjoined a non-judicial foreclosure sale on a foreclosure attempt by Bank of New York. The homeowners in each of the cases are represented by Jeff Barnes, Esq.

On November 14, 2013, a Lee County (Ft. Myers, Florida) Judge denied Nationstar’s Motion for an Order to Show Cause why a foreclosure judgment should not be entered pursuant to Florida Statute 702.10, as amended, which permits a foreclosing party to request that the Court enter a Final Judgment of foreclosure without even a motion for summary judgment being filed and without a trial.

The statute essentially reverses centuries of civil jurisprudence to place a burden of proof on a homeowner to show that they have valid defenses to a foreclosure when a foreclosing party files for what is called an Order to Show Cause. The hearing on the Motion, which is conducted without the protections of Rule 1.510 of the Florida Rules of Civil Procedure and without the protections of decisional law, permits the foreclosing party to request the entry of summary judgment without a Motion for Summary Judgment even being filed, and without requiring the foreclosing party to comply with any of the summary judgment requirements of Florida law. We have taken the position that the Statute is unconstitutional.

Yesterday, a Key West, Florida Circuit Judge dismissed a case filed by Bank of New York as the claimed trustee of a Countrywide securitization. The action was never properly served, and the “Amended Notice of Action” filed by BONY’s successor counsel did not comply with the verification requirements for Florida foreclosure cases.

The same Judge also yesterday assessed attorneys’ fees against BONY as the claimed trustee of a Bear Stearns securitization in another case incident to a prior dismissal of that case. The dismissal was entered as BONY failed to comply with a prior Order of the Court which had dismissed the prior action due to BONY’s noncompliance with discovery and Pretrial Orders of the Court, which dismissal conditioned any re-filing of the case on full compliance with the prior discovery and pretrial orders. BONY re-filed the case without any such compliance in violation of the prior dismissal Order. Florida case law permits attorneys’ fees to be assessed against a foreclosing party whether the dismissal is with or without prejudice, and even if the dismissal is not a ruling on the merits.

A Colorado District Judge has entered an Order enjoining a non-judicial foreclosure sale incident to a foreclosure filed by BONY as the claimed trustee of (another) Bear Stearns securitization. As our readers know, in Colorado, the precipitating procedure for a non-judicial foreclosure is the filing of a request for an Order Authorizing Sale (OAS) in a Rule 120 proceeding. Any ruling from that proceeding which results in a sale date being set may be challenged by the filing of a separate action, and there is no res judicata or collateral estoppel effect of the prior Rule 120 ruling on the subsequent action.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

US BANK ADMITS, IN WRITING FROM THEIR CORPORATE OFFICE, THAT THE BORROWER IS A PARTY TO AN MBS TRANSACTION; THAT SECURITIZATION TRUSTEES ARE NOT INVOLVED IN THE FORECLOSURE PROCESS; HAVE NO ADVANCE KNOWLEDGE OF WHEN A LOAN HAS DEFAULTED; THAT THE “TRUE BENEFICIAL OWNERS” OF A SECURITIZED MORTGAGE ARE THE INVESTORS IN THE MBS; AND THAT THE GOAL OF A SERVICER IS TO “MAXIMIZE THE RETURN TO INVESTORS”

November 6, 2013

We have been provided with a copy of U.S. Bank Global Corporate Trust Services’ “Role of the Corporate Trustee” brochure which makes certain incredible admissions, several of which squarely disprove and nullify the holdings of various courts around the country which have taken the position that the borrower “is not a party to” the securitization and is thus not entitled to discovery or challenges to the mortgage loan transfer process. The brochure accompanied a letter from US Bank to one of our clients which states: “Your account is governed by your loan documents and the Trust’s governing documents”, which admission clearly demonstrates that the borrower’s loan is directly related to documents governing whatever securitized mortgage loan trust the loan has allegedly been transferred to. This brochure proves that Courts which have held to the contrary are wrong on the facts.

The first heading of the brochure is styled “Distinct Party Roles”. The first sentence of this heading states: “Parties involved in a MBS transaction include the borrower, the originator, the servicer and the trustee, each with their own distinct roles, responsibilities and limitations.” MBS is defined at the beginning of the brochure as the sale of “Mortgage Backed Securities in the capital markets”. The fourth page of the brochure also identifies the “Parties to a Mortgage Backed Securities Transaction”, with the first being the “Borrower”, followed by the Investment Bank/Sponsor, the Investor, the Originator, the Servicer, the Trust (referred to “generally as a special purpose entity, such as a Real Estate Mortgage Investment Conduit (REMIC)”), and the Trustee (stating that “the trustee does not have an economic or beneficial interest in the loans”).

The second page sets forth that U.S. Bank, as Trustee, “does not have any discretion or authority in the foreclosure process.” If this is true, how can U.S. Bank as Trustee be the Plaintiff in judicial foreclosures or the foreclosing party in non-judicial foreclosures if it has “no authority in the foreclosure process”?

The second page also states: “All trustees for MBS transactions, including U.S. Bank, have no advance knowledge of when a mortgage loan has defaulted.” Really? So when, for example, MERS assigns, in 2011, a loan to a 2004 Trust where the loan has been in default since 2008, no MBS “trustee” bank (and note that it says “All” trustees) do not know that a loan coming into the trust is in default? The trust just blindly accepts loans which may or may not be in default without any advanced due diligence? Right. Sure. Of course. LOL.

However, that may be true, because the trustee banks do not want to know, for then they can take advantage of the numerous insurances, credit default swaps, reserve pools, etc. set up to pay the trust when loans are in default, as discussed below.

The same page states that “Any action taken by the servicer must maximize the return on the investment made by the ‘beneficial owners of the trust’ — the investors.” The fourth page of the brochure states that the investors are “the true beneficial owners of the mortgages”, and the third page of the brochure states “Whether the servicer pursues a foreclosure or considers a modification of the loan, the goal is still to maximize the return to investors” (who, again, are the true beneficial owners of the mortgage loans).

This is a critical admission in terms of what happens when a loan is securitized. The borrower initiated a mortgage loan with a regulated mortgage banking institution, which is subject to mortgage banking rules, regulations, and conditions, with the obligation evidenced by the loan documents being one of simple loaning of money and repayment, period. Once a loan is sold off into a securitization, the homeowner is no longer dealing with a regulated mortgage banking institution, but with an unregulated private equity investor which is under no obligation to act in the best interest to maintain the loan relationship, but to “maximize the return”. This, as we know, almost always involves foreclosure and denial of a loan mod, as a foreclosure (a) results in the acquisition of a tangible asset (the property); and (b) permits the trust to take advantage of reserve pools, credit default swaps, first loss reserves, and other insurances to reap even more monies in connection with the claimed “default” (with no right of setoff as to the value of the property against any such insurance claims), and in a situation where the same risk was permitted to be underwritten many times over, as there was no corresponding legislation or regulation which precluded a MBS insurer (such as AIG, MGIC, etc.) from writing a policy on the same risk more than once.

As those of you know who have had Bloomberg reports done on securitized loans, the screens show loans which have been placed into many tranches (we saw one where the same loan was collateralized in 41 separate tranches, each of which corresponded to a different class of MBS), and with each class of MBS having its own insurance, the “trust” could make 41 separate insurance claims AND foreclose on the house as well! Talk about “maximizing return for the investor”! What has happened is that the securitization parties have unilaterally changed the entire nature of the mortgage loan contract without any prior notice to or approval from the borrower.

There is no language in any Note or Mortgage document (DOT, Security Deed, or Mortgage) by which the borrower is put on notice that the entire nature of the mortgage loan contract and the other contracting party may be unilaterally changed from a loan with a regulated mortgage lender to an “investment” contract with a private equity investor. This, in our business, is called “fraud by omission” for purposes of inducing someone to sign a contract, with material nondisclosure of matters which the borrower had to have to make the proper decision as to whether to sign the contract or not.

U.S. Bank has now confirmed, in writing from its own corporate offices in St. Paul, Minnesota, so much of what we have been arguing for years. This brochure should be filed in every securitization case for discovery purposes and opposing summary judgments or motions to dismiss where the securitized trustee “bank” takes the position that “the borrower is not part of the securitization and thus has no standing to question it.” U. S. Bank has confirmed that the borrower is in fact a party to an MBS transaction, period, and that the mortgage loan is in fact governed, in part, by “the Trust’s governing documents”, which are thus absolutely relevant for discovery purposes.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com