MERS ISSUE TO BE DECIDED BY OREGON COURT OF APPEALS; ACTION FILED FOR DAMAGES UNDER WASHINGTON STATUTE AUTHORIZING POST-FORECLOSURE REMEDIES; MORE LAWSUITS TO BE FILED ARISING OUT OF THE “YOU HAVE TO BE 3 MONTHS BEHIND ON YOUR PAYMENTS” LOAN MOD SCAM

January 26, 2012

The issue of whether MERS can be a “beneficiary” under the Oregon Trust Deed Act was argued by Jeff Barnes, Esq. in the Oregon Court of Appeals in Salem, Oregon on January 17, 2012. Mr. Barnes, admitted pro hac vice, represents the homeowners who appealed an adverse summary judgment ruling which was entered in the course of their action to challenge a non-judicial foreclosure. Although Federal and Bankruptcy courts in Oregon had, at the time of the summary judgment hearing, found that MERS was not a beneficiary in construing the Act, the pro tem trial court’s position as the Oregon decisions was: “not in my book”. The appeal is the first of its kind requesting an appellate determination in Oregon as to whether MERS can legally be a “beneficiary” under the Act.

Mr. Barnes also represents homeowners who are filing an action for damages under Washington’s post-foreclosure remedies statute, which permits homeowners to file claims for damages arising out of fraud and misrepresentation; failure of a trustee to comply with the Washington Deed of Trust Act; and certain other circumstances. There is no appellate case law in Washington as to the requirements for pleading a cause of action under the statute or how damages are quantified. The case will thus seek court determinations on these issues. Local counsel John Sterbick, Esq. will be working with Mr. Barnes on the case.

We have also been receiving many inquiries relating to the now infamous loan mod scam where the bank or servicer tells the homeowner that they have to be three months behind in their payments in order to be considered for a loan mod, but thereafter tell the homeowner that they cannot be considered for a loan mod because they are in default and have been referred for foreclosure. Of course, the “bank” or servicer never puts the requirement in writing, so they can later deny it and claim “statute of frauds” as a defense. The fact that this same modus operandi has been used by different “banks” and servicers in so many different states to manufacture homeowner defaults tells us that this is a well-entrenched pattern of fraudulent activity on the part of the “banks” and servicers to concoct fraudulent foreclosures.

Per a prior post, Mr. Barnes has already filed one action in Florida against Bank of America arising out of this scam, and he will shortly be filing a second action in Colorado where the same scam was perpetrated upon the homeowner by Citimortgage. In view of the number of inquiries we receive on this issue, we expect more such lawsuits to be filed in the near future.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

TENNESSEE UPDATE: BANK OF AMERICA (INCONSISTENTLY) ADMITS THAT THE NOTE IS OWNED BY A THIRD PARTY AFTER TAKING THE POSITION IN LITIGATION THAT IT DID

January 12, 2012

We previously advised on this website that in a case pending in the Tennessee Federal Court where the homeowner is represented by Jeff Barnes, Esq. and local counsel John Higgins, Esq. that Defendant Bank of America’s Motion to Dismiss the Plaintiff’s Complaint for Declaratory Relief was denied, as was a subsequent Motion by BOA for the Court to “Reconsider” its denial of BOA’s Motion to Dismiss. The Court determined that BOA had not shown that it owned the Plaintiff’s mortgage loan despite alleging that it purchased the loan in 2005. Defendant BOA took the position that it owned the loan throughout the motion stage of the litigation, with the Motion to Reconsider having been denied on September 29, 2011.

However, just over one month later on November 3, 2011, counsel for Defendant BOA admitted to Plaintiff’s counsel, in an e-mail, that “The Bank of New York Mellon, N.A. is the current holder of the Note.” There was no information, however, as to (a) when Bank of New York came into ownership of the Note; (b) by what manner, means, or vehicle BONY came into ownership of the Note; (c) under what circumstances BONY came into ownership of the Note; or (d) when BOA knew that BONY was the alleged owner of the Note.

The Plaintiff is filing a Motion to amend his Complaint to now add BONY as a Defendant. The Amended Complaint also contains a claim for unjust enrichment to the extent that any payments made to Defendant BOA by Plaintiff which were not legally entitled to be demanded or retained by BOA, and any payments which were transferred to BONY without any authority, be returned to the Plaintiff. The Court in a pending case in California (the Javaheri case) has previously determined that the Plaintiff may state such a cause of action to the extent that any payments made to a third party (who was not the original lender) under circumstances where there was no right for that third party to demand or accept payments from the homeowner gives rise to a claim for unjust enrichment.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

OREGON TRIAL COURT DECISION NIXES AUTHORITY OF MERS

January 9, 2012

The Circuit  Court for Jackson County, Oregon has issued 6 page ruling finding that the non-judicial foreclosure remedy was not available to Fannie Mae because of a defect in the chain of title caused by the MERS system, which precluded Fannie Mae from bringing an eviction action (termed a “forcible entry and detainer” in Oregon) due to the wrongful foreclosure.

The opinion analyzed Oregon cases which both support and attack MERS, and concluded that the anti-MERS decisions were on point: that the MERS system “is an evasion of the intentions of the Oregon Trust Deed Act” (which is the statutory vehicle in Oregon for a non-judicial foreclosure), and that the MERS system confuses the beneficiary, especially in cases involving securitization, multiple investors, and the involvement of mortgage insurers.

In highlighting the infirmities with the pro-MERS decisions, the court noted that “The decisions finding MERS a valid beneficiary simplistically take the language of the deed of trust at face value heedless that the underlying reality is more complex than that envisioned by the law.” We have been making this argument for years across the country: that when the non-judicial foreclosure laws were enacted, they never envisioned a creature like MERS or the complications of securitization, and instead of making MERS and securitized “trustee” banks comply with the law, the pro-MERS decisions have simply permitted MERS and the banks to ignore the strict requirements of the law and run roughshod over it.

The Oregon decision pointed out the probable reason for this and its consequences: “Decisions finding that the recording law has been followed [by MERS] engage in an incomprehensible and illogical attempt to explain how the deed of trust follows the note…The problem with the MERS system is that it bypasses this safety check in the law. Under MERS, no one can be sure who holds the rights, and the courts and public are expected to simply trust that arrangements made in secret are fair.”

The court also stated that “Many borrowers before Oregon courts complain that they were encouraged to default by servicers or lenders as a condition of considering a loan modification and, instead of receiving help, face eviction from their homes.” Mr. Barnes just recently filed a case against a lender based on this same fraud in the inducement fact pattern: the homeowner was told that they had to be in default to be considered for a loan modification. The homeowner relied on the “bank”‘s affirmative representation and stopped payments, but the loan modification was ultimately being denied on a basis known to the “bank” to be false. When the homeowner attempted to resume regular payments, the “bank” refused the payments and accelerated the entire loan balance in connection with its threat of foreclosure.  

In noting other problems with the MERS system, the Oregon court stated: “The judges upholding the MERS process are no doubt bothered by the prospect of defaulting home owners living rent free for months or years. However, the problem has been created by the lending industry with an unaccountable system that is unable or unwilling to work out an equitable resolution to the fall in home values. Instead the industry now seeks to make mostly low net worth individuals bear the bulk of the cost of their economic escapades.” (emphasis added)

The court found that “The MERS system amounts to private lawmaking which bypasses the protections of state law and creates a new scheme of governance solely for the benefit of investors.”

We could not have said it better. We just hope that more courts also see what is really going on.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com