November 1, 2011

As most of you who follow the foreclosure websites know, the Attorney General of Delaware has recently instituted claims against MERS for fraudulent practices and other wrongful acts. We are glad to see that another AG has recognized what MERS is versus what it claims to be, and has taken action accordingly.

Jeff Barnes, Esq. represents borrowers, with the assistance of local counsel, in Delaware where MERS either filed the foreclosure action or was otherwise involved with the alleged “assignment” of the mortgage to a third party for purposes of either instituting or furthering a foreclosure. In each case, we have sought discovery as to MERS, including all sources of authority which would permit MERS to undertake any action to institute or further a foreclosure. In one case where we did, MERS (the Plaintiff in the foreclosure action) substituted with another entity.

Those of you who have even an inkling of the MERS issues know that MERS’ own self-imposed Terms and Conditions preclude the use of the MERS system to either create or transfer any beneficial interests in mortgage loans, and MERS disclaimed any status as a lender, servicer, credit advancer, or similar characteristic in the Nebraska Dept. of Finance v. MERS litigation years ago in order to avoid having to register as a mortgage broker and pay attendant fees, etc. Notwithstanding these affirmative representations by MERS’ own attorneys to the Nebraska Supreme Court, MERS then alleges, in the other 49 states, that it is the “beneficiary” of a Deed of Trust or the “mortgagee” of a mortgage or otherwise has the right to undertake actions directly related to the creation or transfer of a beneficial interest in a mortgage loan, such as executing an assignment of mortgage or deed of trust (oftentimes to a securitized mortgage loan trust years after the trust closed, which is not permitted by the trust documents), or substituting the original trustee (in a non-judicial foreclosure state) with a third-party “trustee sale company” (such as ReconTrust, Northwest Trustee Services. Quality Loan Service, Trustee Corps, etc.), for purposes of furthering a foreclosure.

For years, we have argued, based on numerous cases from over a dozen states which have addressed the issue, that these actions of MERS are illegal and fraudulent. We thank the AG of Delaware for recognizing that these actions are fraudulent and must be punished.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

October 26, 2011

         (Mr. Barnes had dental surgery last week and was out for several days; hence no articles last week)

The Appellate Division of the State of New Jersey has reversed a summary judgment which had been entered in favor of Aurora Loan Services, LLC. The opinion cited decisional law that a party must generally “own or control the underlying debt” in order to foreclose, and if the debt is evidenced by a negotiable instrument such as a promissory note, the determination whether a party owns or controls the underlying debt is governed by Article III of the UCC.

The Court found that Aurora was neither a holder of the note nor a person not in possession who is entitled to enforce, and that the Certification of Aurora’s “Vice President” did not state that she personally confirmed that the copies of the note, mortgage, and assignment were copies of originals in Aurora’s files.

More importantly, the Court found that the assignment, signed by a “Vice President” of MERS as nominee for Lehman Brothers, was ineffective first as there was no Certification by this VP or any other representatiive of MERS regarding the VP’s authority to execute the assignment or circumstances of the assignment. The problem with the assignment was further compounded by the fact that Lehman filed for Bankruptcy in 2008, which was before the date of what the Court termed the “purported assignment” in 2009, and the Court thus questioned whether Lehman’s designation of MERS as nominee remained in effect after Lehman filed BK absent ratification of that designation by the BK Trustee.

This same situation is present is many of our cases: the original lender (e.g. Lehman, WaMu, American Home Mortgage, Accredited Home Lenders, and others) files for BK, and the securitized trustee or servicer then purports to foreclose based on a post-BK filing assignment without any evidence that the assignment was permitted by the BK trustee. This opinion is what we believe to be the first which actually addresses this precise issue which relates directly to the threshold issues in any foreclosure of standing, real party in interest, and the “person entitled to enforce” issue under the UCC.

In Missouri, a probate Judge has dismissed a claim by HSBC Bank USA, N.A. as the claimed trustee of a series of Nomura “Asset-Backed Certificates”, finding that HSBC is not a “person” under either of the Missouri statutes which permit a “person” to make a claim in a probate proceeding. The Motion which precipitated the dismissal characterized HSBC as Trustee for the certificates as “nothing more than a stack of paper”. Apparently the Court agreed, and found that HSBC had no standing to sue.

This decision is important as it relates directly to who can make a claim relating to a mortgage and note. If a particular state statute provides only that a “person” may institute a foreclosure, and the trustee of a series of MBS does not quality as a “person”, then there should be no standing for that trustee to foreclose. Obviously, the individual state statute must be consulted, but this ruling provides a new avenue of attack on securitized “trustees” seeking to make claims.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

October 13, 2011

An Orange County (Orlando) Florida Judge today denied Wells Fargo’s Motion for Summary Judgment after the borrower filed papers detailing the incomplete nature of discovery and setting forth how WF did not meet its burden for summary judgment, including reference to the transcript of a prior hearing on the same motion where the Judge told WF: “you do not own the note” and that WF would not only have to prove ownership of the Note but the source of authority given to WF to foreclose when it was not the original lender. The homeowner, who originally proceeded pro se, served discovery through her counsel Jeff Barnes, Esq. seeking discovery on the very issues highlighted by the Judge in the prior hearing.

Florida Default Law Group, which represents WF, objected to all of the homeowner’s pro se discovery and failed to ever serve a response to the homeowner’s discovery served by Mr. Barnes, only filing an open-ended Motion for Extension of Time to respond to the discovery some 37 days after the expiration of the 30 days permitted by the Florida Rules of Civil Procedure to serve a response to the discovery.

At today’s hearing, the Judge stated: “The law in Florida is very clear: if discovery is incomplete, there is no summary judment.” WF’s Motion was thus denied, again, as it was at the prior hearing in June of 2010. Despite having 16 months to provide discovery, WF has failed to do so, as it also failed to do in the Iowa case where Mr. Barnes represents the homeowner where WF recently voluntarily dismissed its case just weeks before the trial was scheduled (per prior post on this website of October 4, 2011).

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

October 12, 2011

Today, a New Mexico court granted a homeowner’s Motion for Judgment on the Pleadings in a foreclosure case filed by BAC Home Loans Servicing LP fka Countrywide Home Loans Servicing LP, neither of which was the original lender. The ruling was as to the record version of the Complaint. The Court did grant BAC 30 days to file an Amended Complaint, but was convinced that BAC did not have a proper chain of title to either the Note or the Mortgage, and invited a summary judgment motion on the MERS issue.

BAC filed the case with one Assignment which was from the original lender to MERS. A second Assignment unnotarized Assignment, which failed to identify who the “lender” was, purported to assign the Note and Mortgage from MERS to BAC. The homeowner claimed entitlement to judgment on the pleadings pursuant to New Mexico rules of civil procedure and New Mexico case law which provides that such a remedy is available where there is a “fatal variance” between what a foreclosing party pleads in its complaint and what it has to prove to be entitled to foreclose. The homeowner also attacked the ability of MERS to do anything based on the restrictions which MERS has placed upon itself and case law restricting what MERS is and can do.

The ruling is believed to be the first of its kind in the State of New Mexico. The homeowner is represented by Jeff Barnes, Esq. and local New Mexico counsel John R. Fox, Esq. of Santa Fe. Mr. Barnes prepared the Motion and legal memoranda, with Mr. Fox arguing the Motion in court today.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

October 10, 2011

As most of you know, Deutsche Bank National Trust Company sued JPMorgan Chase and the FDIC back in 2009 over claimed breaches of contract as to WaMu initiated mortgage loans which were made part of securitized mortgage loan trusts where DB is the “trustee”. The case is pending in the United States District Court for the District of Columbia under Case No. 1:09-CV-1656 RMC. One of the issues in the case is whether the sellers of the mortgage loans (e.g. WaMu) must exercise repurchase obligations as to mortgage loans which did not comply with the “Representations and Warranties” provisions of the Trust documents as the loans were in default, in danger of being in default, etc. at the time that they were allegedly “transferred” to the hundreds of securitized mortgage loan trusts of which DB is the “trustee”.

On May 12 of this year after a battle over whether the lawsuit even stated a cause of action, the Court has ordered discovery of the documents in JPM’s possession, which include the mortgage loan files. JPM had taken the position that DB did not state a cause of action for breach of contract but simultaneously denied DB access to the very mortgage loan files which would reveal whether the loans were problematic. Although DB made the requisite demans for document inspection, JPM refused to permit access to the mortgage loan files. Recall that JPM has taken the position in this case that it is “not the successor in ingterest to WaMu”, and that it only assumed certain assets and liabilities of the failed WaMu as of September 25, 2008, yet has filed hundreds of foreclosures where it claims, in certain instances under oath, to be able to foreclose on the WaMu loan as it is “the successor in interest to WaMu.”

The Court has also ordered discovery, to be completed by May 11, 2012, “as to the meaning of the Purchase and Assumption Agreement”, which is the operative agreement by which JPM has taken the position that it has the right to institute foreclosure of WaMu originated mortgage loans, which assumption is referred to generally in the last paragraph of the “FDIC Affidavit” that JPM and Chase Home Finance routinely file in foreclosure actions. The document production is to be done pursuant to a lengthy “Confidentiality Order”.

The Court’s rulings present significant issues for individual foreclosure actions filed by DB, JPM, and Chase Home Finance (CHF).

If JPM has taken the position that it will not even allow the trustee of securitized mortgage loan trusts access to the very mortgage loan documents as to mortgages which were allegedly transferred to the securitized mortgage loan trusts of which DB is the trustee, then how does JPM legally take the position that it has owner and holder rights to the loan for purposes of foreclosure?

If the parties in the case do not even know what the Purchase and Assumption Agreement means and which liabilities remained with the FDIC, how can JPM go around the country claiming to be able to institute foreclosures pursuant to that very Agreement?

If it is unknown whether a mortgage loan was a liability at the time a foreclosure action is filed (because the loan was in default, in danger of being in default, subject to defenses, etc.) and it is thus unknown whether (a) it remained with the FDIC after WaMu’s failure or (b) it is subject to repurchase obligations by the seller, then how does JPM claim, in a foreclosure action, that is owns the loan?

If DB is claiming that the mortgage loans were not what they were represented to be at the time of the PSA, then how did the loan remain a part of a securitized mortgage loan trust so that DB could claim it owned the loan for purposes of having standing to foreclose?

If DB suspects that the loans did not comply with the representations and warranties (and, as we all know, DB had actual knowledge that hundreds of loans were bad when they attempted to transfer them into a trust through MERS or another entity), how did they let MERS or someone else transfer a known toxic loan into a trust and how can they now cry foul?

The bottom line is that this infighting between DB, JPM, and the FDIC is raising literally dozens of legal and factual issues which should be brought to the fore in individual foreclosure cases both in discovery and in motion practice, especially in opposing motions for summary judgment filed by DB, JPM, or CHF.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

October 4, 2011

Wells Fargo has voluntarily dismissed a foreclosure action in Iowa after the state Court Judge denied Wells Fargo’s Motion for Summary Judgment and set the case for trial. This case, which began in 2005, has been discussed several times on this website throughout its interesting history.

The homeowner, who had originally represented herself, had been told by Wells Fargo back in 2005 that Lehman Brothers was the “investor” on the loan. Notwithstanding this issue relating directly to chain of title to the note and mortgage and the ability of the servicer (WF) to foreclose, the Court granted summary judgment to WF in 2005, which it later vacated in 2010 after WF brought Lehman into the case as a party Defendant and made certain admissions as to lack of ownership of the mortgage loan. The Court was concerned as to many issues, including how WF could claim under oath in 2005 that it owned the loan but admitted in 2010 that it did not and that the Note was lost, with WF not knowing the details as to the “loss”.

WF nonetheless moved for summary judgment a second time in 2011. The homeowner asserted numerous disputed issues of material fact, including the failure of WF to file or record any Assignment pursuant to a Servicing Agreement between WF and Lehman; failure of WF to demonstrate compliance with the Seller’s Warranties in the Servicing Agreement; failure to demonstrate compliance with the Custodial Agreement; Plaintiff’s admission that it has no knowledge of the true and present owner of the Note; failure to offer any proof as to when the Note was lost; failure to identify the nature and extent of admitted interests in the Note on the part of a Lehman securitized trust; infirmities in WF’s “Affidavit” of the “Default Litigation Specialist”; and failure to satisfy Iowa Code Sec. 554.1201 (relating to proof requirements in lost note claims).

The Court issued a written opinion denying WF’s second Motion for Summary Judgment. The case was thereafter set for trial. Today, the Notice of Voluntary Dismissal was received.

The homeowner is represented by Jeff Barnes, Esq. (who was admitted pro hac vice in the case and prepared the opposition to WF’s second Motion for Summary Judgment) and local Iowa counsel Christine Sand, Esq. of the Beverly Wild Law Office.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

September 30, 2011

A Tennessee Federal Judge has issued an Order denying Defendant Bank of America’s “Motion to Reconsider” the Court’s prior Order which denied B of A’s Motion to Dismiss the homeowner’s Complaint for declaratory relief. The homeowner had originally sued B of A in state court claiming that B of A had no interest in either the Note or the Deed of Trust. B of A removed the case to Federal Court and filed a Motion to Dismiss, which the Court denied upon finding that the Court could not find, as a matter of law, whether B of A had legal or equitable rights in either the Note or the Deed of Trust, and could not do so on a Motion to Dismiss.

B of A filed a “Motion to Reconsider”, citing hearsay material about “public knowledge” of B of A’s acquisition of Countrywide, etc., and essentially re-argued the same matters in its Motion to Dismiss. The “Motion to Reconsider” was not grounded upon any of the factors cited in case law set forth by B of A within its own Motion. The Court denied the “Motion to Reconsider”, setting forth its reasoning from its prior Order. Apparently, B of A did not understand the Court the first time.

The homeowner is represented by Jeff Barnes, Esq. and local Tennessee counsel John Higgins, Esq. Mr. Barnes is admitted pro hac vice in the case and researched and prepared both the Response to the Motion to Dismiss and the Response to the “Motion to Reconsider”.

Separately, FDN Maui, Hawai’i counsel James Fosbinder, Esq. has successfully opposed a Motion for Summary Judgment filed by the bank against the homeowner. The same Court has jurisdiction over this case and another case where Mr. Fosbinder represents the homeowner. At a hearing last Friday, the Court cautioned the bank’s counsel in the second case that the issues “are the same issues” as in the case where the Court already denied the bank’s summary judgment motion.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

September 22, 2011

Our offices will be closed on Thursday, September 29, 2011 in observance of Rosh Hashana. We wish everyone a happy, healthy, and prosperous New Year.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

September 21, 2011

We recently predicted that the David Stern debacle, which left over 100,000 Florida foreclosure cases in limbo, would soon result in significant re-filings of these foreclosure cases by other law Firms which have and are being retained by the former Stern clients. This is exactly what has happened and is happening now.

Since our article was published, we have received a slew of inquiries from Florida homeowners whose cases, which had originally been filed by the Stern Firm and had been previously dismissed, are now being re-filed by other other law Firms. The Plaintiff in most of these re-filed cases is the alleged “trustee” of a securitized mortgage loan trust. As most of the cases were dismissed on procedural grounds (e.g. lack of record activity in the case or failure of a Stern attorney to appear for a court status conference), the dismissals were “without prejudice”, meaning that the cases can be re-filed under Florida law.

Separately, actions have been instituted in New York and Nevada alleging that Countrywide did not actually deposit mortgage loans into securitized trust pools, and thus Countrywide had no legal authority to seek foreclosure on the properties the subject of the non-placed mortgage loans. This will probably lead to massive litigation against Countrywide for fraud-based claims and punitive damage requests, which may be one of the reasons why Bank of America has recently disclosed that Countrywide may be filing bankruptcy as we reported on this website earlier this week.

Which, again, leads to the importance of the immediate establishment of a separate Borrowers’ Committee in any Countrywide Bankruptcy. Otherwise, and as we cautioned in our article on this matter, Countrywide may seek to destroy literally millions of documents upon filing bankruptcy, and borrower claims may be relegated to the general unsecured creditors’ committee.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

September 19, 2011

The Huffington Post reported on Saturday, September 17 that Countrywide Financial’s losses could compel its parent company Bank of America Corporation to “put the unit on the bankruptcy block”. Countrywide Financial, the parent company which was purchased by B of A in 2008 (before it purchased Countrywide Home Loans separately in 2009) could file BK independantly as it maintained a separate legal identity notwithstanding the 2008 sale to B of A. According to the article, B of A has lost more than $22 billion from its consumer mortgage division in the past year, in large part because of loan losses and litigation settlements linked to Countrywide.

In August, AIG sued B of A for over $10 billion, claiming B of A was liable for Countrywide’s mortgage bonds as its legal successor thereto. Previously, the Association of Financial Guaranty Insurers, which insures securitized mortgage loans, had demanded that B of A exercise its repurchase options on billions of “bad” mortgage loans. B of A took the position that each loan had to be evaluated separately, but a court ruling prevented B of A from furthering that position, which would have dragged the litigation on for years.

What effect a CTW Bankruptcy would have on active and pending foreclosures is unknown, but what we do know, from our experience in the American Home Mortgage and Accredited Home Loans Bankruptcies (both of which were filed in the U.S. Bankruptcy Court for the District of Delaware) is that a separate borrowers’ Committee should be formed ASAP after any such filing, which committee should be independant of any “unsecured creditors” Committee. One reason is that one of the first things a lender does when it files Bankruptcy is to file Motions for permission to destroy documents, claiming that maintaining voluminous amounts of documents is a “burden on the estate”. The disasterous effect on borrowers seeking discovery in foreclosure actions involving CTW with the granting of any such Motion is beyond obvious.

The second reason is that the unsecured creditors’ Committee does not have any reason or impetus to exercise remedies to protect mortgage loan borrowers, as they have their own interests which are obviously diverse from (and sometimes antagonistic to) the interests of mortgage loan borrowers. Unless borrowers set up their own separate Committee with people who understand borrowers’ interests and will take aggressive action to protect borrowers, the rights of borrowers could be negatively impacted or lost outright in any lender bankruptcy.

We saw this personally when an attempt was made in the Accredited Bankruptcy to form such a Committee. The Motion for appointment of the separate borrowers’ Committee was denied by the Court because a pro se borrower, who herself was in foreclosure, was already on the general unsecured creditor’s Committee, claiming that she was “representing” the interests of mortgage loan borrowers. The position was thus taken by the Debtor lender that “borrowers are already represented within the Unsecured Creditors’ Committee” (which obviously and in reality they were not), and that a separate borrowers’ Committee would be “redundant”.

We also know from the AHM Bankruptcy that it is possible that the servicing unit could be sold separately out of the BK, as AHMSI (American Home Mortgage Servicing Inc.) was to an individual who then initiated thousands of foreclosures nationwide in the name of AHMSI as “servicer” while the parent “lender”, which filed BK in 2007, remained (and is still) in BK.

Bottom line is that borrowers have to keep a watchful and close eye on the maneuverings of B of A as to its “Countrywide Unit”, and prepare, in advance, for any Bankruptcy filing.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com