Ellen Brown, August 18th, 2010
WEBofDEBT

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles—and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”—an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

That means hordes of victims of predatory lending could end up owning their homes free and clear—while the financial industry could end up skewered on its own sword.

California Precedent

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:

Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.

The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:

This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee’s Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.

While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.

What Could This Mean for Homeowners?

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

An August 2010 article in Mother Jones titled “Fannie and Freddie’s Foreclosure Barons” exposes a widespread practice of “foreclosure mills” in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.

In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders’ case in 2004. Five years later, she says, some of the homeowners she’s helped are still in their homes. According to a Huffington Post article titled “‘Produce the Note’ Movement Helps Stall Foreclosures”:

Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action ‘quiets’ all other claims). Charney says she’s helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.

Criminal Charges?

Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used “the artifice of MERS to sabotage the judicial process to the detriment of borrowers;” that “to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;” that the scheme depended on “the MERS artifice and the ability to generate any necessary ‘assignment’ which flowed from it;” and that “by engaging in a pattern of racketeering activity, specifically ‘mail or wire fraud,’ the Defendants . . . participated in a criminal enterprise affecting interstate commerce.”

Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she shows how the Federal Reserve and “the money trust” have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.

© 2010-12 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.
www.StopForeclosureFraud.com

Just in yesterday’s post we were puzzled about how exactly JPMC is foreclosing on WAMU loans without finalizing the deal. This case is a perfect example.

2010 NY Slip Op 32126(U)

23 EAST 39th STREET DEVELOPERS LLC, FARZANEH YEROUSHALMI, and BEHROUZ BENYAMINPOUR, Plaintiffs,
v.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as successor to WASHINGTON MUTUAL BANK, ALLEN GUTTERMAN, 23 EAST 39th STREET MANAGEMENT CORP. JOSEPH J. BLAKE & ASSOCIATES, INC., MARIE RIOS, “JOHN DOE,” “ROBERT DOE” and “JANE DOE NO. 1 to 50,” the last being fictitious names, Defendants.

603703/09, Motion seq. No 001.

Supreme Court, New York County.

July 30, 2010

DECISION/ORDER

MARCY S. FRIEDMAN, Judge.

This action arises out of plaintiffs’ purchase of a $10.4 million townhouse located at 23 East 39th Street in Manhattan. Plaintiffs sue for rescission of the purchase and mortgage agreements based on fraud and misrepresentation of the value of the property. By separate motions, JPMorgan Chase Bank, National Association, as successor to Washington Mutual Bank (“Chase”) and Joseph J. Blake & Associates (“J.J. Blake”) move, pursuant to CPLR 3211(a)(1) and (7), to dismiss the complaint based on documentary evidence and for failure to state a cause of action.^[1]

The relevant facts are as follows: Plaintiffs purchased the townhouse pursuant to a five-year “lease back” agreement in which the sellers of the property agreed to rent the space from plaintiffs for $700,000 annually with an option to terminate after one year. Although the $7.25 million mortgage on the property was issued by Washington Mutual Bank (“Wamu”), Chase acquired the mortgage from the FDIC after the FDIC took over Wamu in late 2008. JJ. Blake prepared an appraisal of the property for Wamu. Within a few months after plaintiffs closed title, the sellers ceased paying rent to plaintiffs. Plaintiffs then defaulted on the mortgage and Chase commenced an action to foreclose on the property entitled JPMorgan Chase Bank, N.A. v 23 E. 39th St. Devs. LLC, et. al., (Sup Ct, New York County, Index No. 104639/09). By order in the foreclosure action dated February 11, 2010, this court granted Chase’s motion for summary judgment to foreclose, issued an order of reference to compute, and appointed a receiver to manage the property.

It is well settled that on a motion to dismiss addressed to the face of the pleading, “the pleading is to be afforded a liberal construction (see, CPLR 3026). Wc accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.” (Leon v Martinez, 84 NY2d 83. 87-88 [1994]. See 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144 [2002].) However, “the court is not required to accept factual allegations that are plainly contradicted by the documentary evidence or legal conclusions that are unsupportable based upon the undisputed facts.” (Robinson v Robinson, 303 AD2d 234, 235 [1st Dept 2003]. See also Water St. Leasehold LLC v Deloitte & Touche LLP, 19 AD3d 183 [1st Dept 2005], lv denied 6 NY3d 706 [2006].) When documentary evidence under CPLR 3211 (a)(1) is considered, “a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law.” (Leon v Martinez, 84 NY2d at 88; Arnav Indus., Inc. Retirement Trust v Brown, Raysman, Millstein, Felder & Steiner, L.L.P., 96 NY2d 300 [2001].)

In order to plead a claim for fraud, plaintiff must allege “a material misstatement, known by the perpetrator to be false, made with an intent to deceive, upon which the plaintiff reasonably relies and as a result of which he sustains damages.” (Megaris Furs. Inc. v Gimbel Bros., Inc., 172 AD2d 209, 213 [1st Dept 1991] [emphasis omitted].) Moreover, “each element must be pleaded with particularity” and “the circumstances constituting the wrong shall be stated in detail.” (LaSalle Nat. Bank v Ernst & Young L.L.P., 285 AD2d 101, 109 [1st Dept 2001] [internal citation omitted]; CPLR 3016[b].) A cause of action seeking rescission based on fraud must be plead “with the specificity required by CPLR 3016(b)” (Accurate Copy Serv. of Am. v Fisk Bldg. Assocs. L.L.C., 72 AD3d 456 [1st Dept 2010]), and “is to be invoked only when there is lacking complete and adequate remedy at law.” Rudman v Cowels Communications. Inc., 30 NY2d 1, 13 [1972].)

Plaintiffs’ sole cause of action against Chase is to rescind the mortgage, mortgage note, and guarantee “[d]ue to the inflated appraised value and/or the 5-year lease.” (Ps.’ Amended Compl., Fourth Cause of Action, ¶ 61 [Ex. 3 to Supp. Aff. of Joseph Muccia].) However, plaintiffs fail to allege with any particularity that Chase engaged in any fraudulent acts that would provide a basis for rescission of the mortgage. Further, plaintiffs do not claim that, when Wamu issued the mortgage to them, Wamu (as opposed to the seller) made misrepresentations on which they relied that would constitute a fraud. Even if plaintiffs adequately plead a cause of action that would permit them to rescind the mortgage agreement, the specific language of the Purchase and Assumption Agreement between the FDIC and Chase states that Chase specifically does not assume “any liability associated with borrower claims for payment of or liability to any borrower for monetary relief, or that provide for any other form of relief to any borrower . . ., related in any way to any loan or commitment to lend made by [Wamu] prior to failure . . ., or otherwise arising in connection with [Wamu's] lending or loan purchase activities.” (Muccia Aff., Ex. ¶ 2.5.) Thus, pursuant to the express terms of the Purchase and Assumption Agreement, any potential liability by Wamu to plaintiffs was not transferred to Chase. (See Cassesc v Washington Mut., Inc., 2008 WL 7022845, *3 [ED NY 2008].) Accordingly, plaintiffs’ fourth cause of action will be dismissed.

Plaintiffs’ sole cause of action against J.J. Blake appears to allege fraudulent misrepresentation. Specifically, plaintiffs claim that JJBlake “inflated the value of the property so WAMU will underwrite the Mortgage,” “exaggerated the square footage of the Property,” and “knew that there was no 5-year lease with one-year option to renew.” (Ps.’ Amended Compl., Fifth Cause of Action, ¶¶ 38a, 38f, 38g.) Plaintiffs fail, however, to allege any facts demonstrating that they relied on any of the alleged misrepresentations in the appraisal when they purchased the property. Moreover, J.J. Blake conclusively shows, based on the affidavit of plaintiff Behrouz Benyaminpour, that plaintiffs did not receive the appraisal until after they closed on the property. (Aff. of Jonathan Bruno, Ex. H., ¶ 26.) Contrary to plaintiffs’ apparent suggestion, this large-scale commercial transaction docs not implicate a consumer fraud. Plaintiffs’ fifth cause of action against J.J. Blake will accordingly be dismissed.

In light of plaintiffs’ complete failure to set forth any misrepresentations to them by Chase or J.J. Blake, or otherwise to adequately plead causes of action against Chase and J.J. Blake, plaintiffs’ claimed need for discovery is not a basis for denying the instant motions.

It is hereby ORDERED that the motions of JPMorgan Chase Bank, National Association, as successor to Washington Mutual Bank, and Joseph J. Blake & Associates to dismiss the complaint is granted to the extent of dismissing the complaint as against them; and it is further

ORDERED that the remaining claims are severed and shall continue; and it is further

ORDERED that the remaining parties are directed to appear in Part 57 (60 Centre Street, Room 335) for a preliminary conference on Thursday, September 30, 2010, at 11:00 a.m.

This constitutes the decision and order of the court.

[1] Although Chase moved to dismiss plaintiffs’ original complaint (Chase’s Motion, Ex. A), in its supplemental reply, Chase addresses the allegations in plaintiffs’ amended complaint (Supp. Aff. of Joseph Muccia, ¶ 3). Accordingly, the court will consider Chase’s motion as to plaintiffs’ amended complaint. (Sec Sage Realty Corp. v Proskauer Rose LLP, 251 AD2d 35, 38 [1st Dept 1998].)

© 2010-12 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.
www.StopForeclosureFraud.com

Written by Jeff Nielson Tuesday, 17 August 2010 11:50

Old habits are hard to break, and in the United States of America, there are few “habits” as common as mortgage-fraud. In 2006, the world discovered that the U.S. housing market was the most-fraudulent market in history. However, since that time, even that level of fraud has been surpassed – by the U.S. housing market of 2010.

Incredibly, four years after learning that the U.S. housing market was the global fraud-capital, U.S. mortgage-fraud has continued to increase every year. There is simply too much material here to cover even a small portion. For inquisitive readers, I recommend doing a simple Google-search for “U.S. mortgage-fraud increasing”.

In addition to coming up with an endless list of articles covering the last four years, one of the first “results” which readers will encounter is a Reuters article from June. That article reported a large haul of fraudsters: 1,215 people were charged in numerous frauds, totaling $2.3 billion in losses for victims. Thanks to the “magic” of search-engines, readers will also encounter a further list (on the left side of the page) of the recent Reuters articles on “U.S. mortgage-fraud increasing”.

One of the more hilarious/disturbing search-results was a Reuters article from April 2009, where the U.S. Justice Department “urged Congress” to force U.S. banks to keep records of their mortgages. The Justice Department stated unequivocally that such record-keeping would make it much easier to crack-down on fraud.

Naturally, nothing has been done on that front – since the U.S. government likes mortgage-fraud. Here’s why. A Reuters article released today on U.S. mortgage-fraud reported the case of a run-down Chicago home, which sold for $25,000 in a foreclosure auction, and then was quickly “flipped” in a fraudulent transaction for $355,000.

Pull out your calculator, and you’ll discover that this phony transaction resulted in a (fraudulent) price-rise of more than 1,300%. Put another way, if there were 100 non-fraudulent transactions, each of which reported a 5% decline in prices, and we add in the one fraudulent “sale”, suddenly those 101 sales show a “rising” U.S. housing market, once averaged-out (instead of the falling market which exists in the real world).

Of course, with U.S. mortgage-fraud steadily increasing (even though total sales in this market have plummeted to a tiny fraction of their bubble-peak), obviously the rate of fraud is much higher than merely 1% of transactions. This is especially true given that the vast majority of offenders are “insiders”: “mortgage brokers, appraisers, real estate agents or loan officers”. In other words, the supposed “rising prices” which the Obama regime and media-parrots cited to conclude that the U.S. housing market had “stabilized”, were in fact nothing more than a fraud-induced mirage.

Equally disturbing, even in the FBI “crackdown” on mortgage-fraud, of the $2.3 billion in victim-losses, only a paltry $147 million was recovered – less than 10%. This is of tremendous significance to U.S. taxpayers, since their government has made them “guarantors” of all U.S. mortgage-debt – including this endless stream of fraudulent transactions.

Even the “detected” fraud is leading to losses of 90+% for taxpayers. Meanwhile, the much larger mountain of undetected fraud naturally means losses of virtually 100%. For readers who dispute the premise that mortgage-fraud is a “way of life” in the United States, I will simply refer them to a superb, PBS expose on the U.S.’s fraudulent markets.

“The Warning” is a PBS documentary which goes back to the roots of current, U.S. mortgage-fraud, during the years of the Clinton regime. Of principal note was the position of U.S. Federal Reserve Chairman, Alan Greenspan – who was adamant that “market fraud” should not even be illegal in the U.S. Greenspan’s position was that the market should be left alone to “resolve” this fraud “in its own way” (i.e. through the fraudsters taking every last dime of the “sheep”).

What more needs to be said when you have the government of the world’s largest economy taking the position that rather than being a “problem”, that mortgage-fraud was a “solution to problems” (i.e. the crashing U.S. housing market)? Let the fraudsters artificially pump-up the prices of U.S. homes through their phony transactions, et voila we have a “U.S. housing recovery”.

Indeed, regular readers will be familiar with my previous articles on the “MERS” registry system. This was a fraud-facilitation entity created by Wall Street bankers during the mid-1990’s. It’s entire purpose was to replace the mortgage record-keeping of individual, financial institutions – so that it would be much easier to engage in serial mortgage-fraud via “mortgage securitization”, as the U.S. financial crime syndicate commenced their housing-bubble crime-wave.

The “MERS” registry has been regularly rejected in numerous court-decisions for being woefully inadequate in its record-keeping. This has resulted in a number of U.S. homeowners who, instead of losing their property to foreclosure were handed free and clear title to their properties – because the MERS registry had failed to provide adequate documentation of title.

However, none of the previous documentation of fraud in this commentary can compare with the most-brazen admission of mortgage-fraud – by the banksters themselves. In a previous commentary, I referred to a Wall Street Journal article about yet another mortgage-fraud court case.

In that incident, the bankers of JP Morgan were asked to explain a mortgage document where, instead of a buyer’s name appearing, there were the words “Bogus Assignee”. The hilarious explanation of Michelle Kersch, the lawyer defending the case was that the “name” wasn’t an indication of a fraudulent transaction in-progress. Instead, “Bogus Assignee” was merely a generic term, or a “placeholder”, which had been used on “a few occasions”.

In other words, instead of using the five-letter word “buyer” as its generic term on loan documents, we are supposed to believe that the substition of the two words “Bogus Assignee” was merely a random choice of words, to which we should attach no meaning whatsoever.

For market participants, the message is simple: invest in a U.S. bank and you are investing in fraud. Invest in a U.S. home-builder, and you are investing in fraud. Even though home-builders have not been directly connected to this fraud, when you create the “supply” for a fraud-saturated market, you become equally affected by that fraud – irrespective of the fact that these entities did not participate in this crime-wave.

As I have already demonstrated previously, even without mortgage-fraud, the U.S. housing market was doomed to a much worse, much longer collapse – now that this market has clearly begun another slide. However, as we become more aware of the massive levels of fraud in this market, it would appear that I have been guilty of understatement.

Simply put, there is nothing more that the Bush regime, and its successor the Obama regime could have done to destroy the U.S. housing market. This matters not at all to the U.S. government, which clearly believes that fraud is “good for business”. This is the attitude of the Wall Street Oligarchs as well, who engage in serial-fraud as a basic ingredient of their “business model”.

The Oligarchs defraud a client or business partner (generally numerous times). If the fraud becomes so obvious that U.S. regulators can’t simply pretend it doesn’t exist (any longer), then the bankster is taken to court by the U.S. “regulator”. A sweetheart-settlement is reached where a) the banker isn’t required to admit any “wrong doing” (since U.S. officials don’t consider fraud a “crime”); and b) the fine levied against the Oligarch is generally only a tiny portion of the profits they obtained through the fraud.

The fact that U.S. mortgage-fraud continues to soar, four years after this fraud-saturated market was exposed tells us that the U.S. government is intentionally under-funding law enforcement in this area. Law enforcement officials must be extremely demoralized. Not only are they unable to obtain the necessary “resources” to properly police this crime-wave, but the “big players” (i.e. the Wall Street Oligarchs) are essentially “immune” to any law-enforcement actions.

Never in history, never in any other part of the world, and never in any other market have the words “caveat emptor” carried as much weight.

Source- BullionsBullCanada

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www.StopForeclosureFraud.com