February 1, 2012

In what appears to be a direct attack on the alleged authority of “robo-indorsements”, the Court of Appeals of North Carolina has issued an opinion dated December 6, 2011 In The Matter of the Foreclosure of Deed of Trust executed by Tonya R. Bass, Case No. COA11-565, which upheld the trial court’s dismissal of a foreclosure attempted by U.S. Bank National Association as Trustee, which claimed to be the “holder” of the Note based on a blank, unsigned indorsement. The opinion is approximately 23 pages, and sets forth a detailed analysis of the issues surrounding the burden of a foreclosing party to demonstrate “holder” status, which is required as to a foreclosure proceeding brought under NCGS 45-21.16(d).

North Carolina’s nonjudicial foreclosure procedure under the Statute is initiated by the filing of a Petition by the foreclosing party and a preliminary hearing before the Clerk of the Court who determines whether there is sufficient evidence from the Petitioner to satisfy the four separate 45-21.16(d) factors to justify the entry of an Order authorizing a foreclosure sale. The Statute provides for an automatic right of appeal before the presiding Judge as to the Clerk’s determination, and an automatic stay of the sale pending the outcome of the appeal.

The trial court, on such appeal, takes evidence and determines whether all four of the statutory factors have been met to warrant a sale. The trial court’s determination may then be appealed to the Court of Appeals of North Carolina, which is what occurred in the Bass case.

The promissory note in the Bass case contained three stamps purportedly indorsing and transferring the note among prior lenders and ultimately to U.S. Bank. The attack was on the first endorsement, which was a stamp without a handwritten signature. The Court first went through the method by which someone can acquire “holder” status under North Carolina law, and also what constitutes proof thereof. The holding specifically states “Moreover, an indorsement does not prove itself, but must be established…by proper testimony. Our Supreme Court has specifically held that a stamp may constitute an indorsement, but only if the stamp is executed by a person having the intent and authority to do so.”

The Court found that U.S. Bank’s witness had no personal knowledge of the prior transfers of the note beyond what was reflected in records which she reviewed. The trial court concluded that U.S. Bank was not the “holder” of the note as there was no evidence or testimony that the blank, unsigned indorsement was placed on the note by someone with authority to do so, and thus U.S. Bank failed to satisfy subpart (a) of NCGS 45-21.16(d). The trial court dismissed the foreclosure, which dismissal was upheld by the Court of Appeals.

Bravo to the Court of Appeals to North Carolina for holding a foreclosing bank to its burden of proving the validity of indorsements on promissory notes. We all too often see courts blindly accepting the “well, it is a blank indorsement which makes the note fully negotiable” argument being made by “banks” and servicers, with no evidentiary burden whatsoever being placed on the foreclosing party to prove that the blank indorsement was placed on the note by someone with authority to do so.

We hope that other states will see the importance of this decision and adopt the evidentiary burden placed on foreclosing party by the Court of Appeals of North Carolina. We thank one of our dedicated followers for bringing this case to our attention.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

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

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

January 9, 2012

The FDN Foreclosure Defense Seminar which was scheduled for January 20, 2012 is being rescheduled as Mr. Barnes will be in Oregon that day for a specially set court hearing. The new date the the location will be posted on this website.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

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

Decembr 29, 2012

In view of the number of inquiries we have already received since our recent post regarding upcoming seminars, we are scheduling our next Foreclosure Defense seminar for Friday, January 20, 2012. The location will be at or near our new offices in Beverly Hills, California, with the location depending on the number of confirmed registrants.

The seminar is open to attorneys and paralegals only, and has been accredited for 7.0 General CLE hours by The Florida Bar. As always, breakfast and lunch, and refreshments, will be served. Parking and a detailed handbook, which is now upwards of 350 pages and includes sample pleadings, motions, responses to motions, discovery, case law, court rulings, and other important documents for foreclosure defense, are also provided to each registrant and included in the registration fee.

Interested attorneys and paralegals may obtain a registration form by e-mailing us using the “Contact Us” link above.

Jeff Barnes, Esq.

December 24, 2011

FDN’s and Mr. Barnes’ Firm’s new California office is scheduled to open Wednesday, December 28, 2011. The Newport Beach office closed yesterday, December 23, 2011. Monday, December 26, 2011 is a holiday, and on Tuesday, December 27, the internet technology and communications providers will be finalizing their work in the new CA office.

The new office address is: 9350 Wilshire Boulevard, Suite 308, Beverly Hills, California 90212. The new phone and fax numbers, which are scheduled to be up and running as of Wednesday, December 28, 2011, are: phone: (310) 275-5150; fax: (310) 275-5157.

Mr. Barnes’ e-mail address and that of FDN will remain the same.

The new office will have its own private conference room. The next foreclosure defense seminar will be scheduled on a Friday in late January, 2012. Due to increasing demand, Mr. Barnes is planning to schedule two (2) seminars each month beginning in February, 2012.

Happy holidays!

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

December 20, 2011

We were recently requested to become involved with a foreclosure case concerning an entity which calls itself Kondaur Capital Corporation. Wells Fargo assigned the loan to Kondaur post-foreclosure.

Who/what is Kondaur Capital Corporation? From Bloomberg Business Week, today:

   “Kondaur Capital Corporation purchases scratch and dent residential mortgage loans. It bids family residential loans, including story loans, hyper-defaulted loans, loans secured by unique properties, loans with origination fraud, loans with regulatory violations, and loans rejected for investor purchase.”

   You saw that correctly; there are no typos. “Scratch and dent” residential loans. “Hyper-defaulted” loans. “Loans with origination fraud”. “Loans with regulatory violations.” “Loans rejected for investor purchase.”

   Now you ask, how much did Kondaur pay for these loans? How much was paid on the loans before they were sold or assigned to Kondaur? What return on its investment is Kondaur expecting/projecting from loans with known issues and problems including fraud and regulatory violations? Is Kondaur betting that most homeowners will simply accept a statement that Kondaur “purchased” their loan and is now entitled to foreclose and evict? 

   Those are just the preliminary questions. However, the more obvious issue is that Kondaur cannot assume or claim status as a bona fide purchaser with no knowledge of defenses. If Kondaur knowingly accepts mortgage loans which have fraud, regulatory violations, have been rejected for investor purchase (for what reasons, pray tell), or other “scratches” and “dents”, Kondaur takes the loans subject to all legally available defenses. 

   Googling the principals of Kondaur reveals that its CEO was the former Director of Strategic Planning at Encore Credit Corporation before becoming a Senior Vice President of a subsidiary of the now bankrupt New Century Mortgage. He also was previously associated with Option One and Long Beach Mortgage. All of these entities, which those of you who follow this website and foreclosure litigation developments know, are at the forefront of mortgage foreclosure litigation, including massive securitization, origination of predatory loans, and problematic “assignments”. 

   Thus, BOLO (be on the lookout) for any Kondaur foreclosure. By revealing publicly what types of mortgage loans it purchases, it has advised the world that there are defenses to any foreclosure it is involved in, and has also let us know what type of discovery should be propounded in any Kondaur foreclosure as well.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

December 8, 2011

As those of you who follow this website know, New Century, which was one of the larger California securitization origination “lenders”, filed for Bankruptcy in 2007. However, thereafter and to this day, MERS continues to execute foreclosure documents, including assignments, as “nominee” of New Century.

The big problem for MERS and those using such assignments is that they are absolutely fraudulent, as New Century repudiated its contract with MERS as part of its Bankruptcy, and there is no evidence of any grant of authority from the New Century Bankruptcy Court which would permit MERS to execute such assignments in the first place. This issue has come to the fore in several of our cases in different states.

Further, the separate company which purchased the New Century brand out of bankruptcy has made it clear on its “Legal” page that the company has no connection to or power over the old company’s loans. As such, any “new” assignments by the “new” New Century are also most likely fraudulent.

The world is finally starting to wake up to the massive, pervasive, nationwide fraud which has been engaged in with impunity by MERS, Deutsche Bank, Wells Fargo, Bank of America, US Bank, and their servicers and “trustees” in their never-ending quest to reap massive profits at the expense of homeowners and damn the consequences. It is no longer homeowners who are seeking relief. Attorneys General are also taking action: the Attorney General of Massachusetts has sued several of the “banksters” for fraudulent mortgage practices; the Attorney General of Delaware has sued MERS for fraudulent practices both in foreclosure and its attempt to avoid recording fees; and yesterday, the Attorneys General of California and Nevada formed a joint task force to pursue foreclosure fraud. It is no longer a situation of simply foreclosure defense: the new wave is grounded in affirmative claims against the banks and their agents for their outright fraudulent conduct all over the United States.

The good news is that the CEO of one of them, that being JPMorgan Chase CEO Jamie Dimon, has publicly announced that JPM has plenty of reserves to defend the lawsuits against it. On behalf of the Attorneys General and  private litigants who are going after JPM for its nationalized pattern of fraudulent conduct, we thank you, Jamie, for affirming that JPM is a still a collectible entity.

Jeff Barnes, Esq., ForeclosureDefenseNationwide.com

December 7, 2011

A Cuyahoga County, Ohio Court has issued a 9-page opinion which ultimately held that the foreclosing bank did not have standing to foreclose and was not the real party in interest, denying the Bank’s Motion for Summary Judgment and granting the homeowners’ MSJ. The Court’s reasoning is based on exactly what we have been and continue to argue as to MERS in cases all over the United States: that MERS, not being the payee on the Note and having no ownership rights in the Note, cannot transfer it.

This decision now joins the legion of cases which have similarly held MERS to its very limited position as “nominee”, notwithstanding MERS’ inconsistent attempt to anoint itself with additional powers which are not permitted by MERS’ own Terms and Conditions. MERS’ consistent violation of its own self-imposed internal restrictions is part of the recent action filed by the Delaware Attorney General against MERS.

In the Cuyahoga County, Ohio case (Huntington National Bank v. Brown, Case No. CV-09-702894), as with literally millions of other foreclosure cases filed nationally, the original Note was made payable to a third party. Huntington purported to claim entitlement to summary judgment on the basis of a MERS assignment, in this case where there was no endorsement in blank on the Note as well. The opinion states:

     It is beyond peradventure that one cannot transfer rights in property that one does not own. Since MERS was not the original payee on the note, and since the note was never endorsed to MERS or endorsed in blank, MERS had no legal rights by the tenor of the note and therefore was not legally capable of transferring the note to anyone.” The opinion also states that without the blank endorsement, Huntington could not claim status as a “holder” of the Note.

Significantly, the opinion also states that “Possession alone of a negotiable instrument does not establish that a party has the right to receive payments under it”, citing Ohio case law. This statement exemplifies the misleading nature of the argument consistently made by foreclosing banks, servicers, and securitized “trustees”: “we have possession of the Note, therefore we are entitled to enforce it and foreclose.” The question which is not answered by this position is “How did you come into possession of the Note and how did you acquire the rights to enforce it and the mortgage instrument?”. This, of course, implicates potentially numerous questions, especially in an securitization case.

A promissory note executed in connection with a mortgage instrument is not a simple “negotiable instrument” transaction. As the Court held in the recent In Re Veal case from the 9th Circuit Bankruptcy Appellate Panel, a promissory note tied to a mortgage instrument implicates Article 9 of the UCC (which governs secured transactions) in addition to Article 3 (which governs negotiable instruments). Thus, a foreclosing party should have to prove not only proper possession and ownership of the Note and the rights under it, but also intent of delivery, manner of delivery, and actual delivery of the mortgage instrument under Article 9 of the UCC. Those of you who have reviewed PSAs know that the Mortgage Loan Conveyance Provisions of the PSA set forth the requirements to prove intent of delivery, manner of delivery, and actual delivery of the mortgage instrument, and that these requirements are consistently ignored in securitization cases.

Congratulations to Ohio for getting it right as to MERS. We would hope that those jurisdictions which have not yet addressed the issue realize the true fallacy in MERS assignments and what MERS really is: that is, nothing more than a simple “nominee” without the power to transfer a Note which it did not, does not, and can never own.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com