Showing posts with label Adam Levitin. Show all posts
Showing posts with label Adam Levitin. Show all posts

Monday, July 11, 2011

NEVADA RULES!

Nevada Supreme Court: You Gotta Prove Chain of Title

Posted on July 11, 2011 by Neil Garfield

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MEDIATION: The Creditor Must Show Up!

Nevada Supreme Court: You Gotta Prove Chain of Title

posted by Adam Levitin

A pair of very interesting foreclosure rulings were handed down today by the Nevada Supreme Court. They provide further evidence that documentation problems are rife in the mortgage industry, including documents showing chain of title. They also provide another example of a state supreme court demanding proof of valid chain of title before permitting foreclosure.
Both cases arise from Nevada’s foreclosure mediation program. In one case, Pasillas v. HSBC Bank USA, the Nevada Supreme Court ordered sanctions against HSBC for failing to mediate in good faith. What was the failure? HSBC failed to show up at the mediation with the required loan documentation, namely two pages of the mortgage note were missing, the assignment to HSBC was incomplete, a BPO rather than an appraisal was provided.  Moreover, HSBC didn’t show up at the mediation with authority to settle because it still required “investor approval.” The foreclosure mediator refused on these ground to authorize the foreclosure. The district court ordered the foreclosure to proceed, but the Nevada Supreme Court reversed the ruling and remanded with instructions for the district court to determine appropriate sanctions.  
Three things are of note in this case.  First, it shows that the Nevada Supreme Court takes a very serious view of enforcing the requirements of the state’s foreclosure mediation program. This was a unanimous decision. Second, it’s another illustratation of the mortgage documentation SNAFU. And third, there’s a very long footnote discussing and endorsing the Massachusetts Supreme Judicial Court’s ruling in Ibanez v US Bank:  ”We agree with the rationale that valid assignments are needed when the beneficiary of a deed of trust seeks to foreclose on a property.”  That’s now two states Supreme Courts now that are making clear that there’s got to be good chain of title.  We can add to that the NC Court of Appeals and arguably New Jersey. 
All of this brings us to the second case, Levya v. National Default Servicing, Inc.,another unanimous decision. Again, this case arose from a foreclosure mediation. At the mediation, Wells Fargo produced a certified original copy of the note and deed of trust naming another entity as the lender.  Wells did not produce any assignments, just a notarized statement that it was in possession of the original note and DOT and any assignments thereto. (Gosh, I wonder if that employee had personal knowledge of the fact or not… Do you really think the employee looked at the physical paper?). The mediator found that Wells Fargo hadn’t met the statutory requirements for the mediation, but didn’t make a finding of bad faith.  The homeowner petitioned the district court for review, arguing that Wells Fargo acted in bad faith and should be sanctioned.  The district court concluded that there was no bad faith. The Nevada Supreme Court reversed on appeal.
What’s interesting in this case is an extended discussion of what constitutes a valid assignment of deeds of trust and of notes. For starters, the court noted that the transfers “are distinctly separate.” Nevada, like Massachusetts, is a title theory state. That indicates that the mortgage follows the note theory just doesn’t work there. And it’s not as if the Nevada Supreme Court were unaware of UCC Article 9. The court discusses Judge Markell’s 9th Circuit BAP decision in In re Veal that includes a detailed discussion of the working of UCC Article 9. [In re Veal never addressed the issue of whether UCC 9-203(g) applies to deeds of trust (which are sale and repurchases, not liens); the language of 9-203(g) could be read not to apply, but that need not concern us here.]  Instead, Nevada’s views a deed of trust as a conveyance of land, so the state’s Statute of Frauds applies, and it requires a written assignment. Wells never produced a chain of assignments from the originator to whatever trust was involved. Maybe Wells could do so, but it didn’t.
Similarly, without being able to prove that the note had been endorsed or otherwise transferred to Wells (meaning that it was given to Wells for the purpose of enforcement), Wells “has not demonstrated authority to mediate the note.”  Put differently, Wells failed to prove standing.
Now let me emphasize that just because Wells didn’t prove standing doesn’t mean that it can’t. But this should be raising a lot of questions. Does the paper exist? Can we verify that it is in fact the original and the dating of the signatures? If so, why isn’t Wells producing it? Who is bearing the cost of these screw-ups? Is it MBS investors or is Wells eating it?
This strikes me as further evidence that the proposed BoA MBS settlement is just too hasty. There’s simply too much evidence of major problems in the system for investors to settle without knowing more. It’s a very different settlement if the documentation is fine, but the servicer’s just incompetent and can’t produce it than if the documentation was never done right in the first place and there’s nothing the servicer can do. If I were an MBS investor, I’d want to know which situation I was facing.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor,Mortgage, securities fraud Tagged: | , , , ,, , , , , , , , , , , , , ,, 
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5 Responses

  1. carie, on July 11, 2011 at 12:44 pm said:
    THAT’S the Huffington Post headline I’m waiting for:
    MORTGAGE DOCUMENTATION ILLEGAL FROM THE START
    NO REAL MORTGAGES
    WHAT DO WE DO NOW???
  2. carie, on July 11, 2011 at 12:40 pm said:
    “the documentation was never done right in the first place”.
    EXACTLY. Until THAT is properly addressed, America will continue to sink…
    But, they don’t want to address that, because if they do the mega banks will fail.
    BRING IT ON.
  3. carie, on July 11, 2011 at 11:30 am said:
    from article:
    The Justice Department is pressing state attorneys general to release the banks from liability for a host of alleged violations in exchange for a far-reaching settlement, people familiar with internal discussions said. The Justice Department declined to comment.
    BofA, JPMorgan, Wells Fargo, Citigroup and Ally Financial are willing to pay a large sum in fines for use in pools that will be used to lower monthly payments for struggling homeowners, but only in exchange for broad amnesty, these people said. In May, the banks offered just $5 billion for the alleged wrongdoing, angering the government officials on the other side of the negotiating table.
    In April, these banks signed consent orders with federal bank regulators, promising to clean up bad practices. They neither admitted nor denied wrongdoing.
    All five banks declined to comment for this story.
    State and federal authorities’ failure to collect more evidence of wrongdoing by mortgage servicers comes in contrast to the public statements of influential officials who have cast the banks as culprits in a national epidemic of foreclosures.
    Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation, told a Senate panel in May that “flawed mortgage banking processes have potentially infected millions of foreclosures.”
    BROAD AMNESTY FOR THE GREATEST CRIMES IN HISTORY…I want to throw up!
  4. Gene, on July 11, 2011 at 11:30 am said:
    Technical violations related to the Modification Statutes for NV. Key points.
    Passillas – Must bring certified copies OR originals of Deed, Note and all Assignments to mediation. Lender did not do so.
    Assignment was in blank. No assignee listed. This matched the requirements of the PSA, but not NV law. Assignment needed assignee named.
    A Chain of Assignments was not called for, only all Assignments. Big difference in the two.
    Levya – Wells did not bring Assignments to the hearing, nor the endorsement of the Note. Probably used copies of the recorded documents
    Bottom line- Easily correctable. And if done prior to future Mediation Hearings, not an issue.
    They will not err like this again.
  5. Ilene Goldstein Ardine, on July 11, 2011 at 10:49 am said:
    awesome, the court is paying attention. nevada is non-judicial






































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Monday, January 31, 2011

LIVINGLIES GARFIELD CONTINUUM "SECURITIZERS LOOKING FOR JUDICIAL BAILOUT; BANKS WALKING AWAY FROM HOMES?"

Detail of a New York Times Advertisement - 1895Image via WikipediaMortgage Lenders Committed 
Massive Fraud and Now 
Wall St. Wants to Escape the Law
Here they come looking for an out-clause and a way to keep their coffers full. We need to repeat a simple mantra: No more bailouts for Wall Street.
By Joshua Holland
January 27, 2011 |

They committed widespread fraud – largely whitewashed by the corporate media – and, in the process, threw the economy into a tailspin. They’ve broken into and stolen people’s homes, and, in the name of “efficiency,” bilked state governments out of billions of dollars in real estate transfer fees. They’ve even admitted to ripping off – and foreclosing on – soldiers deployed overseas, in violation of the law.

And they shredded a bedrock principle of capitalism, throwing hundreds of years of settled property law into doubt and in turn creating a massive drag on Main Street’s economic “recovery.”

They got rich in the process. The mortgage industry did all of that for a fat stream of profits while the going was good, but now that they face the prospect of being held accountable by the justice system — as would you or I had we routinely broken the laws — analysts expect the “banksters” to lobby hard for another bailout.

They won’t be looking for the Fed to shower them with free money or buy up trillions worth of “toxic assets” weighing down their books – they already got that sort of bailout once, the voters detested it and with the Tea Party ascendant in the GOP, the political atmosphere precludes a repeat performance.
No, the mortgage industry – with the help of its political lackeys in Washington– is reportedly looking for a judicial bailout that would retroactively allow loan servicers to foreclose on properties without running up the costs of getting their paperwork in order, and limit investors’ – and possibly the states’ – ability to sue them for the mess they created in the housing market.

Third Way, the financial industry’s Trojan Horse in Democratic policy circles (which is very well represented in the White House), released a policy memo last week urging Congress to step into the chaos caused by the banks’ “robo-signing” scandal and immunize the banks from liability from the robo-signing mess (PDF).

As economics writer Yves Smith noted, the proposal “advocates Congressional intervention into well established, well functioning state law.”

This proposal guts state control of their own real estate law when the Supreme Court has repeatedly found that “dirt law” is not a Federal matter. It strips homeowners of their right to their day in court to preserve their contractual rights, namely, that only the proven mortgagee, and not a gangster, or in this case, bankster, can take possession of their home.

This sort of protection is fundamental to the operation of capitalism, so it’s astonishing to see neoliberals so willing to throw it under the bus to preserve the balance sheets of the TBTF banks. Readers may recall how we came to have this sort of legal protection in the first place. England learned the hard way in the 17th century what happens with low documentation requirements: abuse of court procedures, perjury and corruption become the norm.

Lenders are playing down the mess they created, suggesting they’re simply dealing with some isolated “paperwork” issues. But the Third Way memo comes in the wake of a series of judicial setbacks for the banks that indicate their legal problems are likely to be anything but “minor.”

Last year, the New York Times reported that “in numerous opinions, judges have accused lawyers of processing shoddy or even fabricated paperwork in foreclosure actions when representing the banks.” In both New York and Florida, courts “have begun requiring that lawyers in foreclosure cases vouch for the accuracy of the documents they present,” which “could open lawyers to disciplinary actions that could harm or even end careers.” Stephen Gillers, an expert in legal ethics at New York University, told the Times, “when … it turns out there are documents being given to the courts that have no basis in reality, the profession gets a very big black eye.” The bar association is, understandably, up in arms over the requirement.

Last week, in response to a class action suit, GMAC Mortgage thew out approximately 1,000 foreclosure filings in Maryland that had been “verified” – at a rate of as many as 10,000 per week – by infamous robo-signer Jeffrey Stephan. Anthony Depastina, an attorney for Civil Justice, Inc., a public interest law-firm representing the mortgage-holders, explained to AlterNet that in an affidavit, “the signer is supposed to attest that they verified the numbers … they’re attesting under the penalties of perjury that the information contained in the affidavit …are true and accurate. Plus they’re supposed to sign it in the presence of a notary.” But in the robosigning scandal, “none of this happened.”

In fact, the Associated Press reported that “financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in ‘foreclosure expert’ jobs with no formal training.” In depositions reviewed by the AP, “many of those workers testified that they barely knew what a mortgage was. Some couldn’t define the word ‘affidavit.’”

The Maryland case was the first ever “defensive” class action suit filed. GMAC responded by offering to dismiss the foreclosure proceedings against the homeowner whose case sparked the suit. “We argued that was just an attempt to get around what was right,” said Depastina. “At the end of the day we would have to file on behalf of some other Maryland homeowner after we found there was a falsified affidavit.” GMAC can refile the foreclosures, but they have to start at square one.

Depastina said he expects these issues to extend far beyond the home mortgage industry. It’s “only symptomatic of a greater attempt by lending institutions of all types to circumvent the processes set up by the courts, the judiciary and legislatures in an effort just to increase their bottom line,” he said. “And I don’t think the foreclosure industry is the only problem – you’re going to see it in credit cards, in debt buying, in assignment of debt, in the auto industry… You know, the same individuals signed off on billions of dollars of debt every year. They’re supposed to verify all that debt information. Do they verify it? I have my doubts.”

The case came only weeks after the Massachusetts Supreme Court dealt the banks a serious blow in US Bank National Association (as trustee) vs. Antonio Ibanez. The case hinged on whether the banks (the case combined two separate foreclosure proceedings) actually had clear titles for properties they claimed to own.

At the heart of the case was the practice of slicing up and bundling hundreds of loans into investment vehicles – “securitizing” the debt. In the process, loans change hands a lot – they were assigned and reassigned from investor to investor, and a servicer dealt with the homeowners. But along the way, paperwork was required by law each time the mortgage changed hands. When the banks showed up to to foreclose, they didn’t have the required chain of title – the court found they were essentially trying to foreclose on properties they didn’t own.

The ruling only applied to Massachusetts, but it sent shockwaves across the mortgage industry. According to Harvard legal scholar Adam Levitin, “there are lots of securitization deals where the mortgages might not be enforceable in title theory states like Massachusetts … and that could well be fatal to enforcement of these trusts’ mortgages in Massachusetts at the very least, and possibly in” many more states.
Then there is the banks’ potentially massive liability stemming from the MERS mess. MERS is a private company established by the banking industry to allow investors to instantly trade debt back and forth. The idea was simple: instead of assigning and reassigning loans and filing the required paperwork with the states, MERS would oversee a database of all of the securitized mortgages in the US – about half of the total number of loans. It would theoretically “own” all the securitized loans, and transfer them within its network instantaneously. The problem is that when a deed changes hands, a recording fee has to be paid to the state or locality where the property is located, and MERS allowed investors to skirt these fees, costing communities untold billions.

Creating a privately operated registry of deeds in order to skirt local filing requirements was a remarkable act of hubris. “Fees are paid for a service performed, and if a document is eliminated because it is no longer necessary, no fee is due because there is nothing to record,’’ reads a statement on the MERS Web site. But that’s nonsense; when a state charges a $50 filing fee, it doesn’t represent the cost of the piece of paper. Those fees make up the revenues that finance state and local government and all the services they provide.

But the key point is that they’re required to file those documents by law, a law the home loan industry believes doesn’t apply to mortgage-lenders. Now they face not only investigations by all 50 state attorneys general, but potentially a wave of lawsuits from investors who may claim that the losses they took on these mortgage backed securities weren’t just the product of the market’s ups and downs, but a consequence of widespread misrepresentation on the part of Big Finance.

But the damage is, unfortunately, in no way being contained on Wall Street. According to data compiled by Housing Wire, the robo-signing boondoggle is largely responsible for a 50 percent drop in the number of foreclosures being completed over the past few months, shifting 250,000 from 2010 to 2011. It’s good for those homeowners to stay in their places for another year, but potentially disastrous for the economy to have a large overhang of distressed properties weighing down the market. According to an analysis by Barclay’s Capital, cited by Housing Wire, “If the worst happens… [if] widespread issues are found throughout the process and foreclosures are not allowed to be carried out, the damage could mean frozen home sales and new lending nationwide.”

In other words, the uncertainty around these chains of ownership may add to the “shadow inventory” of distressed properties that will come onto the market at some point down the road, a number estimated to be as high as seven million homes.
There are also untold numbers of homes that the banks are simply walking away from. Just as many homeowners have seen the value of “strategically defaulting” on their loans, these are properties so far under water that lenders have no financial incentive to take possession of and maintain them until they can be sold. A study conducted in Chicago by the Woodstock Institute, an advocacy group, found 1,896 “red flag” homes in the city that appeared to have been abandoned by loan servicers. The properties were disproportionally located in already distressed low-income communities.

Woodstock Institute VP Geoff Smith told AlterNet that the abandoned properties “add to the destabilization of these neighborhoods. They further effect surrounding property values.” He added that from the city’s perspective, “a lot of times they have to step in and secure these properties because nobody else will. That’s a cost to the city there. If there’s criminal activity, the city has to respond, adding to the cost. They have to demolish these properties in many cases, again adding to the cost for the city. All of this is an extra layer of impact for communities that are already experiencing some distress.”

According to Smith, the issue “raises questions about servicer accountability. How are [they] accountable for the decisions they make and the impact those decisions have on communities? If it’s not in their economic interests to take possession of the properties, then how does that effect the community” as a whole?”

The answer is that the consequences are disastrous, which may in turn provide the argument that the mortgage industry will use to seek judicial relief from the mess it created. It’s a good bet that they will once again claim they are “too big to fail” – or too big to bear the brunt of widespread litigation on the part of struggling homeowners, investors and state governments.

It would be scandalous to reward the lending industry with an effective pardon for its wanton, fraudulent practices. The good news is that the banksters face a much steeper climb this time around. In October, only 26 percent of the public said that George W. Bush’s Wall Street bailout was “good for the country, and disapproval spanned the political spectrum.

So defeating a judicial bailout for the loan industry should be a winnable fight against an opponent that the public views as a toxic influence on the economy. Back in November, rumors floated around about a potential “MERs whitewash bill” that would immunize the firm from lawsuits, but such a bill never materialized in Congress. Reaction to the trial balloon was swift and angry, and nobody on Capitol Hill has dared to introduce such a measure.

If a judicial fix ends up being debated, the outcome will likely be determined by which side wins the battle of narratives. The lending industry will say that it’s necessary to keep the Main Street economy afloat. In order to defeat that message, opponents need to repeat a simple mantra: No more bailouts for Wall Street.
Joshua Holland is an editor and senior writer at AlterNet. He is the author of The 15 Biggest Lies About the Economy (and Everything else the Right Doesn’t Want You to Know About Taxes, Jobs and Corporate America). Drop him an email or follow him on Twitter.
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Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud
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5 Responses

E. Tolle, on January 31, 2011 at 7:31 pm said:

Louise, there’s an in your face problem with the Third Way wanting to legitimize all of the fraud, which, when understood for what it truly is, is an attempt at handing over to the bankers the keys to the realm.

If that occurs, when it sinks in as another 12-15 million houses are lost, it’ll be time to get fitted for a civil war uniform. Only this time, it will be three piece suits against Joe6pack flannel, and it won’t be pretty. I’d place a wager on Joe against the suits, just like our 1700′s militia against the powdered wigs in bright easy to shoot at red uniforms marching slowly in file.

I love this country, when it works. And it’s not doing that right now. Working meaning as in functioning properly, but also as in people working…. at jobs….it’s all broken.

When enough Americans feel the heat, or the growl of an empty belly, I have no doubt that Wall Street, the Treasury, the Central Banks, the Capitol, all will wish that they’d done things a little differently. Egypt is a precursor.

Step on the states at your own peril feds. And Wall Streeters.

Louise, on January 31, 2011 at 6:57 pm said:

E. Tolle, I am sure many people are starting to think like you. The President is in the middle of this as well. How long is he going to look the other way? It is not going to be good for reelection. I wonder if any of his cabinet and advisers realizes that. Time to boycott mega banks and just put them out of business. Burmese8@yahoo.com

TW, on January 31, 2011 at 6:26 pm said:

AIG $70 Billion
Asset Guarantee Program $12.5 Billion
Bear Stearns $29 Billion
Capital Purchase Program $218 Billion
Commercial Paper Facility $1.8 Trillion
Fannie/Freddie bailout $400 Billion
FHA rescue $320 BIllion
GSE debt purchases $200 Billion
GSE Mtg Backed purchases $1.25 Trillion
Making Home Affordable $50 Billion
PPIP $100 Billion
TALF $70 Billion
TARP $70 Billion
TIP $40 Billion

*owning Congress…. “priceless”

usedkarguy, on January 31, 2011 at 5:41 pm said:

Had a banker friend today tell me the FDIC “dumped” 300 houses on them after taking over “other” assets from a failed bank.

E. Tolle, on January 31, 2011 at 4:53 pm said:

If they judicialize the fraud by tramping over state’s rights, they’ll attempt to take my house at a very high risk of bodily harm. Extremely high.

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