Thursday, January 13, 2011

foreclosure defense



If the ASF keeps this sort of nonsense up, it’s soon going to have the status of Pravda in the later stages of the Soviet Union, a mouthpiece of falsehoods that the officialdom is particularly eager to promote.


Immediately after the Ibanez ruling, in which two foreclosure actions were voided due to the failure of the servicers to prove that the trusts who allegedly owned the mortgages had standing, the American Securitization Forum issued a press release that said:


The ASF is pleased the Court validated the use of the conveyance language in securitization documents as being sufficient to prove transfers of mortgages under the unique aspects of Massachusetts law. Importantly, unlike the lower court, the Court also said assignments of mortgage can be executed in blank, as long as a complete chain of transfers can be shown through the applicable deal documents.


Even odder, people who ought to know better, ranging from Amherst Securities to FT Alphaville, are uncritically parroting the ASF party line.


Let’s look at what the decision actually says.


Where a pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder.


First, note the use of the word “may”. This is hardly definitive, it can be read in isolation as the the SJC saying this was arguable (as in “may” = “does”) or that they had considered the argument but were not reaching a firm conclusion.


But you can’t even make the more aggressive reading of that sentence, since the next one states:


However, there must be proof that the assignment was made by a party that itself held the mortgage.


And later, the ruling states:


Even if there were an executed trust agreement with the required schedule, US Bank failed to furnish any evidence that the entity assigning the mortgage – Structured Asset Securities Corporation — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale


This certainly seems to say the chain of title represented in the PSA must be followed by the actual mortgage documents if you want to use the PSA as evidence of standing. Since this appears almost never happened, it will prove quite difficult to cure. For the depositor to record the assignment into the trust to “cure” the standing, the depositor must show how he got title, and so on.


So we are back to square zero, which is needing to look at the chain of assignment and whether the parties that made the assignment were “holders” which generally requires both physical possession and valid ownership.


This decision in NO way supports the securitization industry argument that the PSA itself is evidence of assignment and transfer. And we are far from the only ones to read the decision this way. Kate Berry from the far from bank unfriendly American Banker noted this AM (boldface ours):



The ruling is an effective rejection of the industry’s fallback defense on botched securitization procedures. The American Securitization Forum and numerous securitization attorneys working for the industry have argued that evidence of intended transfers of a mortgage are sufficient to demonstrate legal standing. The Massachusetts high court disagreed….


“There must be proof that the assignment was made by a party that itself held the mortgage,” Justice Ralph D. Gants wrote. “The plaintiffs were not the original mortgagees to whom the power of sale was granted; rather, they claim the authority to foreclose as the eventual assignees of the original mortgagees.”


Grants also wrote “that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title.”


Perplexingly, the American Securitization Forum issued a press release hailing the court’s ruling as upholding the validity of assignments in blank. A spokesman for the organization could not be reached to explain its interpretation.


In other words, the judge writing the decision SPECIFICALLY says it nixed the idea of assignment in blank, yet the ASF is asserting the exact opposite!


Also note this section of a concurring opinion by Judge Cordy:


Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it….The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments.


That does not seem terribly supportive of the “PSA constitutes transfer” argument, since both servicers presented the PSAs, yet the judge also expects to see “underlying assignments (note plural) now does it?


But the securitization industry is clearly desperate to keep its fantasy going, presumably to deter investors, who have deep pockets and are being badly damaged by this colossal negligence, from suing trustees (who repeatedly certified that all the paperwork was in order) and servicers.



Boehner’s spokesman raised the spectre of “groups similar to ACORN”, which no longer exists, as a recipient of this money. What it will actually go toward is legal services, defending borrowers who would otherwise have no way to afford access to the legal system.


And this is a state’s rights issue. This bill wouldn’t mandate legal services money; it would allow states to elect, if they so chose, to use their Hardest Hit Fund dollars in the manner to which they see fit. In the typical conservative game, state’s rights mean a lot except when that goes against their ideological goals. Plus, it doesn’t cost a dime, as the money is going to the states anyway. They should get to decide how to use it.


It’s unclear that this legislation is even necessary. Treasury only reverts back to TARP rules when talking about how legal aid services aren’t allowable as recipients, though it showed wide latitude in handing out money to whatever bank wanted a piece previously. But Geithner is insisting on it. His “enthusiastic support” of the House measure belies the fact that there’s no Republican co-sponsor in the Senate, and moving the bill on unanimous consent in the dwindling days of the lame duck session is dubious. If Geithner supports allowing states to decide if foreclosure victims can have access to justice, all he has to do is sign off on it as Treasury Secretary.


The funding problem for foreclosure legal defense is “part of the banks’ strategy,” says Bubba Grimsley, a leading foreclosure defense attorney. Foreclosure defense lawyers have been extremely successful in uncovering robo-signing and a host of other irregularities in the foreclosure process, but they have to be able to sustain themselves:



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