July 6, 2010

In an extremely well-reasoned and detailed written opinion, New Jersey trial court Judge William C. Todd has issued a 53-page (yes, fifty-three page) Order dismissing a foreclosure action filed by Bank of New York as Trustee for Home Mortgage Investment Trust 2004-4 Mortgage-Backed Notes Series 2004-4, Docket No. F-7356-09, Atlantic County, New Jersey. The matter was decided on June 29, 2010 and the formal opinion was approved for publication this week after the matter was tried at the end of June, 2010.

The opinion sets forth an incredible analysis of a host of issues involving foreclosure in securitization contexts and highlights why a foreclosing plaintiff must comply with its obligations to prove standing in order to be able to pursue a foreclosure action. While we do not summarize the entire holding here, we do want to point out some of the significant findings.

The court found that there was no meaningful attempt by Bank of New York (hereafter “BONY”) to comply with applicable New Jersey procedural rules requiring a recitation of all assigments in the chain of title. BONY simple alleged that it had acquired possession of the note prior to the litigation being filed. However, the evidence at trial failed to establish this allegation, with the Court noting that there were missing documents incident to the securitization of the loan including the mortgage loan schedule that should have been attached to the mortgage loan purchase agreement. The Court also found that the “MERS assignment was potentially misleading”.

The Court found that there was a failure of proof as to BONY’s legal standing, warranting dismissal of the action and conditioning any refiling on a certification that the plaintiff is in possession of the original note at the time of filing. This is in line with the recent action of the Supreme Court of Florida which, as of February 11, 2010 by Administrative Order, requires all residential mortgage foreclosure complaints to be verified. It is no secret that Florida trial courts have and continue to dismiss foreclosure actions which do not comply with the verification requirement. It is hoped that the courts of New Jersey will adopt Judge Todd’s well-reasoned analysis and dismiss foreclosure complaints which do not comply with the New Jersey procedural rules requiring proof of legal standing to foreclose at inception and time of filing a Complaint for foreclosure.

Judge Todd also stated that additional discovery is to be produced when the foreclosure involves a securitization, lost note claims, or a holder in due course challenge (which may arise in the context of the purported assignment of a toxic loan to a securitized trust prior to the trustee of that trust instituting a foreclosure action, as well as any predatory loan claims against the original lender). Judge Todd recognized that there are dozens of legal issues and inquiries where a foreclosure involves a securitization, and that a borrower has both the right to know who owns the mortgage loan and whether a foreclosing party has the legal right to foreclose.

This incredibly significant decision will hopefully become the law in the state of New Jersey, and it is hoped that the Rules Committee for the New Jersey courts will soon adopt court rules requiring that all residential foreclosure complaints filed in New Jersey be accompanied by the filing of an appropriate Certification, and further requiring that all securitization discovery be produced in all foreclosure cases involving a securitized loan. We applaud and salute Judge Todd for his amazing effort to not only streamline foreclosure litigation in New Jersey, but also insuring that borrowers’ legal rights are protected as well.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 24, 2010

FDN attorney Jeff Barnes, Esq. has just had three separate foreclosure actions filed by three separate law Firms representing three separate Plaintiffs dismissed in a Key West, Florida court in a span of less than one hour.

The foreclosing Plaintiffs were Deutsche Bank as Trustee for a securitized mortgage loan trust, Countrywide Bank, and American Home Mortgage Servicing, Inc. The Court rejected the MERS assignment present in two of the three cases on the authority of the recent Collier County, Florida ruling which cites numerous anti-MERS cases from around the United States which have been previously discussed on this website. The Court found a “repugnancy” between the allegations of the Complaint and the exhibits attached to the Complaint, warranting dismissal.

All three cases were argued in person by Mr. Barnes.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 22, 2010

FDN attorneys have stopped Trustee’s Sales in the states of Idaho and Oregon this week. Monica Flood Brennan, Esq., arguing a case prepared by Jeff Barnes, Esq., stopped a Trustee’s Sale this Monday, June 21 within hours of the sale. Elizabeth Lemoine, Esq. stopped a sale in Oregon as well on the same day.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 18, 2010

We recently advised of a Florida trial court decision which dismissed a foreclosure action filed by Aurora Loan Services LLC which had claimed the right to foreclose by virtue of a MERS assignment. In dismissing the Complaint, the Court specifically found that the purported assignment was “completely ineffective” and that the assignment was “invalid”, and ultimately finding that the Plaintiff had no standing and thus there was “no justiciable controversy between the parties”, mandating dismissal of the foreclosure action.

The Court specifically held that “There is no evidence of record that establishes that MERS was authorized to assign anything to Plaintiff”, citing the decisions from New York, Nebraska, Arkansas, Kansas, and California. This is what the courts of those states, and the courts of Idaho, Missouri, and Nevada have been saying over and over and over again. The Florida court found, like the Idaho did, that “MERS has no substantive rights itself and, therefore, cannot assign what it does not have”.

Fortunately, most courts have recognized that MERS does not have any authority to assign anything, and as it has no substantive rights, it cannot undertake any actions to further a foreclosure, whether judicial or non-judicial (such as substituting a trustee or claiming itself to be the “beneficiary” for purposes of a Notice of Default or Notice of Trustee’s Sale in the nonjudicial states). However, there are a few courts that still do not get it, and sadly buy into the simplistic argument of the foreclosing party as to the presence of the claimed default and that “the borrower is living in the house for free”.

The issue of the default does not and should even be permitted to be argued unless and until the foreclosing party can first establish that they had the legal right to file a foreclosure action (in a judicial state) or claim a default and schedule a Trustee’s Sale (in a nonjudicial state), for if there is no legal right to foreclose, one never gets to the next issue, which is the claimed default. If MERS is involved in any alleged “Assignment” of the mortgage or deed of trust “together with the Note”, any foreclosure action filed or threatened is legally infirm as MERS has no rights, period, as found by and is continuing to be found by court after court after court from all across the United States.

The tide is turning. It is up to us engaged in this war to make sure that the judiciary understands what MERS is and what it is not, and what MERS can and cannot do. 13 states, at the trial and appellate levels and at the Federal and Bankruptcy levels, could not have all gotten it wrong.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 18, 2010

A South Carolina court has relieved a couple from default status which they claim was wrongfully sought and obtained as they timely filed Motions directed to the Complaint per the instructions on the very Summons served upon them by the foreclosing Plaintiff. Although the South Carolina Rules of Civil Procedure provide only 15 days to respond to a Complaint, the Summons contained a 30-day response provision, which the pro se borrowers relied upon. The Plaintiff sought and obtained a default based on the 15-day procedural rule provision notwithstanding Plaintiff’s own Summons providing 30 days, and thereafter blocked the borrowers’ discovery requests based on the alleged default status.

FDN attorney Bill Sloan, Esq. filed a Motion seeking to set aside the default, which Motion has been granted. The ruling held the Plaintiff to its affirmative representations in its own Summons. The case now progresses into discovery.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 15, 2010

A Florida Circuit Court Judge has issued a 5-page written opinion dismissing a foreclosure filed by Aurora Loan Services, LLC finding that the Plaintiff (Aurora) lacked standing at the inception of the case and that the MERS assignment was invalid.

The court cited several Florida cases and the Bellistri v. Ocwen case from Missouri as to the necessity of standing being established and that it cannot be waived. Aurora claimed to have standing by an alleged “equitable transfer” of the note, possession of the original note, and the MERS assignment. The court stated very bluntly “These arguments are without merit”.

As to the “equitable transfer” argument, the court found that there was no indication in the assignment that the note and mortgage were physically transferred to Aurora, and could not have been in view of the second count of the Complaint to “enforce a lost note”. The “physical possession” argument was vitiated by the fact that the exhibits attached to the Complaint, including the Note and Mortgage, were executed in favor of an entity other than Aurora (which we all know is nothing more than a servicer which was the servicer for the now-bankrupt Lehman Brothers), and that when there is a conflict between what the Complaint alleges and what the exhibits show, the exhibits control. The court also found that none of the documents attached to the Complaint identified Aurora as the “holder”.

The Court went on to show why the MERS assignment was a legal nullity, citing the LaSalle Bank v. Lamy case from New York, the MERS v. Nebraska Department of Finance case, the Arkansas and Kansas Supreme Court cases on the lack of authority of MERS, the Saxon v. Hillery case from California, and the In Re Vargas case from the California Bankruptcy Court to demonstrate that MERS’ capacity is limited and that MERS had no authority to execute the assignment. The Court held the assignment to be invalid.

The Court finally noted that the lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed, citing a Florida appeals case from the same appellate court which issued the BAC Funding case on standing (which we previously discussed on this website).

The Court dismissed the foreclosure and reserved jurisdiction to address the borrower’s request for attorneys’ fees.

The importance of this April 28, 2010 opinion is severalfold: first, it shows that trial court Judges are willing to accept the law on MERS from other jurisdictions. Second, it shows that trial court Judges are going to hold foreclosing parties to their legal obligations of proving standing by competent evidence. Third, it shows that courts will dismiss legally infirm foreclosure cases and entertain borrower requests for attorneys’ fees in having to defend a legally infirm foreclosure.

Thanks to one of our devoted readers for providing us with this opinion today.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 14, 2010

In a new case where FDN’s Jeff Barnes, Esq. and local New Jersey counsel Michael Jacobson, Esq. have been retained, Deutsche Bank as Trustee for a securitized mortgage loan trust (Plaintiff, “DB”) filed a foreclosure action claiming entitlement to the mortgage and note by virtue of an alleged assignment which DB admits was unrecorded as of the date that the Complaint was filed, and where DB also admits that the loan was claimed to be in default over 4 months before the alleged assignment of mortgage was executed. As such, DB has admitted that it has assigned a loan which it knew to be toxic into a securitized mortgage loan trust as of the time of the alleged assignment.

This is exactly the same situation, also involving Deutsche Bank, which was the subject of the Ronaldo Campbell decision in New York from 2008 (the case having been filed in 2007) where Deutsche Bank purchased a loan which was 142 days in default from MERS, as “nominee” of the original lender, for placement into a securitized mortgage loan trust. The court in that case indicated that this act was a violation of Deutsche Bank’s fiduciary duty to the noteholders of the trust. The NY court conditioned any refiling of DB’s motion for summary judgment, which was denied without prejudice, on several conditions, including an affidavit from an officer of the trust explaining why DB, as “trustee” for the trust, purchased a nonperforming loan from MERS. 

To date and despite repeated discovery requests from FDN attorneys in several cases, DB has failed and refused to provide any evidence of any source of authority for DB, as a “trustee” of a securitized mortgage loan trust, to transfer a known toxic loan into a securitized mortgage loan trust, which trust was allegedly created for the purpose of serving as collateral for mortgage-backed investments and where the income stream from the mortgage loans placed into the trust was intended to, among other things, satisfy overcollateralization requirements, fund expenses of the trust, and pay dividends to the noteholders.

We suspect that Deutsche Bank manufactured the purported “assignment” so that it could tap credit enhancements such as excess interest reserves, interest rate cap agreement payments, LPMI, and other insurances so that it could be paid at least once (and possibly more than once) on the Note (which is essentially the thurst of the SEC v. Goldman Sachs litigation), and then manufacture a fraudulent foreclosure so that it could take the borrower’s property as well.

As such, Deutsche Bank is still today, in 2010, doing with impunity what at least one court found to be very suspect two years ago.

Jeff Barnes, Esq., www/.ForeclosureDefenseNationwide.com

June 14, 2010

FDN attorneys Jeff Barnes, Esq. and Ronald Grant, Esq. have stopped a summary judgment in a judicial foreclosure in Hawaii where Deutsche Bank, as trustee for a securitized mortgage loan trust, claimed there was no genuine issue of material fact as to the foreclosure. The borrower had been proceeding pro se until the summary judgment was set for hearing.

Deutsche Bank claimed entitlement to foreclose by virtue of a MERS assignment from Home 123, which was a subsidiary of the bankrupt New Century Mortgage. The problem is that the subject “assignment” was executed by MERS “as nominee for Home 123” some 17 months after the mortgage lender’s license of Home 123’s parent New Century had been revoked in California, and where Hawai’i had revoked Home 123’s registered agent’s authority.

FDN’s Jeff Barnes, Esq. researched and prepared the borrower’s Supplemental Memorandum in Opposition to Deutsche Bank’s Motion for Summary Judgment and discovery requests for the borrower. Deutsche Bank’s counsel stipulated to cancel the summary judgment hearing upon the filing of the borrower’s Supplemental Memorandum and service of the discovery, which has been filed by local Hawai’i counsel Ronald Grant, Esq.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

Jeff Barnes, Esq.

June 9, 2010

In a stunning ruling, a California Superior Court has today entered a Restraining Order cancelling and enjoining a trustee’s sale of the borrower’s property one day before the scheduled sale, with the Order compelling Defendants US Bank National Association as Trustee for the Holders of Bear Stearns ARM Trust Mortgage Pass-Through Certificates Series 2006-2, MERS, and ReconTrust Company, N.A. to “promptly” provide to the borrower “all documents pertaining to foreclosure proceedings, trustee’s sales, assignments with respect to Plaintiff’s residence or mortgage, including a copy of the Pooling and Servicing Agreement pertaining to Plaintiff’s mortgage and any and all documents pertaining to any credit enhancements and/or credit default swaps that cover Plaintiff’s mortgage pool”.

This is the first such ruling that we are aware of that orders, at the TRO stage, full production of foreclosure authority and securitization documents from those who instituted the foreclosure. The ruling is in line with the prior foreclosure dismissal orders discussed on this website yesterday which conditioned refiling of a dismissed case on full production of the borrower’s discovery.

The significance of this ruling, especially for foreclosure cases in California, cannot be underestimated or overstated, especially as we commented yesterday that foreclosing parties are regularly reluctant to provide the borrower’s discovery during normal discovery in litigation.

The Complaint, legal Memorandum of Points and Authorities, and other documents were researched and prepared by Jeff Barnes, Esq. The TRO was obtained by local California counsel Alan Geraci, Esq., to whom we give many thanks for his efforts, literally at the last minute.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 8, 2010

We had previously reported in May that a Key West, Florida court had dismissed a foreclosure action filed by the Bank of New York as Trustee for a securitized mortgage loan trust due to the Plaintiff’s failure to comply with the Court’s Pretrial Order and failure to comply with discovery. The Order confirming the dismissal was received today.

The Order specifically provides that the case may not be refiled absent complete compliance with the borrower’s prior discovery including his First Request for Production, which sought numerous documents including those relating to the chain of title to the note and mortgage; authority to foreclose; formation of the securitized trust; securitization of the mortgage loan; MERS-related documents; and claims against any credit enhancements or insurances which may provide payment against the claimed default. Bank of New York failed and refused to provide the subject documentation as it and others (including Deutsche Bank, Bank of America, US Bank, and Wells Fargo) have consistently failed and refused to do in numerous cases.

This is the 4th foreclosure case in 2 separate states which FDN attorney Jeff Barnes, Esq. has had dismissed because the foreclosing party failed and refused to provide the borrower’s discovery. A 5th dismissal, taken voluntarily by the foreclosing Plaintiff which admitted it cannot provide the subject discovery as ordered by the court, is on the way, with the Voluntary Dismissal having been filed this week. Prior dismissal orders in those other cases also conditioned any refiling on full compliance with the borrower’s discovery. To date, none of the dismissed actions have been refiled, and none of the subject discovery has been produced.

The ruling is a clear signal that the courts are no longer going to tolerate noncompliance by foreclosing parties with borrower discovery requests which go to the threshold issues of standing, chain of title, authority to foreclose, and setoffs. All too often, we see the foreclosure mills asserting “form” objections to borrower discovery followed by the filing of a Motion for Summary Judgment which is obviously filed in an attempt to avoid lawful discovery obligations. This ruling, and others preceeding it based on the same grounds, demonstrate that the courts will not permit a foreclosing party to ignore its discovery obligations and simultaneously attempt to railroad a summary judgment against the borrower.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com