The States Take On Foreclosures

By JOE NOCERA
Published: October 29, 2010

Have you noticed that the lead dogs investigating the mortgage foreclosure mess are not any federal prosecutors or national bank regulators, but rather the state attorneys general? I sure have. I can’t think of a more encouraging development.

Yeah, yeah, a handful of federal investigations have also been announced, but we all know that they’re not going to amount to a hill of beans. Ever since the financial crisis began two years ago, the federal overseers of the banking industry have been consistently unwilling to take the rod to the institutions they regulate. The robo-signing scandal — and it is, unquestionably, a scandal — hasn’t changed that attitude one iota.

The Treasury Department and the Federal Reserve have made it clear that they are more concerned about keeping the foreclosure mill going full speed than they are about determining whether the banks broke the law. Somehow throwing people out of their homes quickly is supposed to help the economy. Or so they keep telling us.

Ah, but the states. They’re a different story. Soon after tales of robo-signing began making headlines, the state attorneys general, led by Tom Miller of Iowa, mobilized their forces. Practically overnight, all 50 of them agreed to conduct a joint investigation into the bank practices that led to the scandal.

Unlike the feds’ tepid efforts, this will be a serious investigation, led by a handful of assistant attorneys general who’ve worked together for years, and who see this as their chance to finally do something for beleaguered homeowners. They’ve got resources, subpoena power and a justifiable suspicion that the robo-signing shenanigans are just the tip of a very ugly iceberg.

And best of all, they have a very clear idea of what they are trying to accomplish. They don’t want to merely reform the foreclosure system (though that would be nice, wouldn’t it?). Nor do they particularly want a big financial settlement, which would be meaningless for a giant like Bank of America.

Rather, they hope to use their investigation as a cudgel to force the big banks and servicers to do something they’ve long resisted: institute widespread, systematic loan modifications. “Instead of paying a huge fine,” Mr. Miller posited to me the other day, on his way to an election rally, “maybe have the servicers adequately fund a serious modification process.” Getting the banks and servicers to take loan modification seriously is another in a series of areas where the Obama Treasury Department has failed miserably.

MERS Response to D.C. Attorney General’s Oct. 28, 2010 Statement of Enforcement

RESTON, Va., Oct. 28, 2010—In response to the Statement of Enforcement by the Attorney General for the District of Columbia, we agree that no homeowners should be subjected to deceptive practices during the foreclosure process. To ensure that homeowners readily have necessary information available to them, the MERS^® System provides free access to any member of the general public to identify the current servicer and the note owner, if the note-owner has agreed to be disclosed, on their loan. Ninety-seven percent of MERS members agree to be disclosed. The MERS^® System is the only comprehensive publicly available source of servicing and ownership of more than 64 million mortgage loans.

Mortgage Electronic Registration Systems, Inc. (MERS) holds the security interest in the deed of trust when MERS is identified as the beneficiary of record, as nominee for the lender and the lender’s successors and assigns. At closing, the lender and borrower name MERS as the beneficiary. The deed of trust is recorded with the Recorder of Deeds in compliance with the District of Columbia’s laws. MERS executes an assignment if the security interest is transferred from MERS to another entity and the assignment is recorded. For example, if the mortgage loan goes into default, and MERS is not the foreclosing entity, then MERS will execute an assignment showing the transfer of the security interest from MERS to the note-holder who will be foreclosing. The assignment is recorded as required under DC’s laws.

When MERS forecloses, MERS is already recorded in the land records as the security interest holder and requires under its membership rules to be in possession of the note in order to be the note-holder. Under either option, in compliance with DC’s laws, the notice of foreclosure sale represents to the homeowner the identity of the note-holder and that the note-holder’s security interest has been recorded.

Any MERS member who experiences a problem related to the recent Statement from the Attorney General for the District of Columbia is asked to immediately notify MERS. We will take steps to protect the lawful right to foreclose that the borrower contractually agreed to if the borrower defaults on their mortgage loan.

###

Source: MERS

October 27, 2010

Attorney General Issues Statement on Foreclosures in DC

Attorney General Peter Nickles issued an enforcement statement today describing when the notices used to commence foreclosures in DC may mislead homeowners and violate the District’s consumer protection law. The statement clarifies that a foreclosure may not be commenced against a DC homeowner unless the security interest of the current noteholder is properly supported by public filings with the District’s Recorder of Deeds.

A noteholder’s security interest in a DC home should normally be reflected in the public land records maintained by the District’s Recorder of Deeds. Under District law, in contrast to the laws of many states, each deed or other document transferring a mortgage interest must be recorded with the Recorder of Deeds within 30 days of execution. This requirement is not satisfied by private tracking of mortgage interests through the Mortgage Electronic Registration Systems (MERS).

The District has a non-judicial foreclosure process that begins with a Notice of Foreclosure on a form prescribed by the Recorder of Deeds. The form requires identification of a “Holder of the Note” and a “Security Instrument recorded in the land records of the District of Columbia.” According to today’s enforcement statement: “The homeowner who receives such a notice is entitled to presume that the recordation of the security interest complies with District law, and that each intermediate transfer of the security interest between the original maker of the note and the current holder of the note is documented in the public record.”

When a foreclosure sale notice misrepresents to a homeowner that the foreclosing noteholder has a recorded security interest, the homeowner may fail to seek legal help in determining whether there may be a good basis for challenging the foreclosure in court. Misrepresentations of material facts, when made to homeowners or other consumers, violate the District’s Consumer Protection Procedures Act, which is enforced by the attorney general.

The enforcement statement invites “homeowners or their advocates” to inform the Office of the Attorney General (OAG) if foreclosures “continue to be commenced or pursued with deceptive foreclosure sale notices” so that the Office may consider bringing enforcement actions to stop foreclosure proceedings and seek restitution for consumers.

“A homeowner should not be misled into believing that a threatened foreclosure is supported by the District’s public records when it is not,” Nickles said.

Continued use of deceptive foreclosure sale notices may be reported to the attorney general’s consumer hotline at 202-442-9828.

Foreclosure Statement*

Source: Office of D.C. Attorney General

Thanks to a tip from California’s hero Brian Davies:

Lenders Turning Their Backs on MERS, Going Back to Paper

With more borrowers filing legal challenges to foreclosure, many mortgage lenders have turned their back on using MERSCORP Inc., which operates an electronic loan registry, to bring foreclosure actions. Some lenders are even returning to the old-fashioned, paper-based system of physically recording mortgage assignments at county recorder offices to ensure an unbroken chain of title.

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One judge to hear all MERS-related cases in the state

01:00 AM EDT on Sunday, October 31, 2010

By Christine Dunn

Journal Staff Writer

PROVIDENCE –– One Providence Superior Court judge, Allen P. Rubine, has been assigned to hear all cases in Rhode Island that are related to the Mortgage Electronic Registration System.

Alice B. Gibney, presiding justice of the Superior Court, issued an administrative order in September directing the courts in Kent, Washington and Newport counties to transfer all their MERS-related cases to Justice Rubine.

Formed by the mortgage finance industry, MERS was created to increase profits and efficiency by eliminating the need to record changes in mortgage ownership at local government property registries when loans are sold multiple times and/or bundled and sold together in pools. MERS is a corporation that also acts as a nominee for lenders and their successors.

An Aug. 25, 2009, decision by Providence Superior Court Judge Michael A. Silverstein upheld the right of MERS to foreclose in Rhode Island.

The case, brought by Anthony and Stephanie Bucci, of Cranston, through their lawyer, George E. Babcock, of Providence, has been appealed to the Rhode Island Supreme Court. The defendants in the case are Lehman Brothers Bank, FSB, a federal savings bank, MERS, and Aurora Loan Services, LLC.

Judge Silverstein ruled that Rhode Island law “does not prohibit MERS from invoking the Statutory Power of Sale [foreclosure]” because “statutes should not be construed to reach an absurd result.”

Ambac Sues Bank of America Over Countrywide Bonds

By Karen Freifeld and David Mildenberg – Sep 29, 2010 4:46 PM ET

Ambac Assurance Corp. sued Bank of America Corp. over $16.7 billion of mortgage-backed securities, saying the bank’s Countrywide Financial Corp. unit fraudulently induced Ambac to insure bonds backed by improperly made loans.

Ambac found that 97 percent of 6,533 loans it reviewed across 12 securitizations sponsored by Countrywide didn’t conform to the lender’s underwriting guidelines, according to the complaint filed yesterday in New York state Supreme Court. Many of the loans were made to borrowers with limited or no ability to meet their payment obligations, Ambac said.

The lawsuit follows negotiations between Bank of America, which acquired Countrywide in 2008, and Ambac over mounting losses caused by loans made during the early 2000s as U.S. housing prices soared. Ambac has paid $466 million in claims from more than 35,000 Countrywide home-equity loans that have defaulted or been charged off, according to the lawsuit.

“Bank of America probably didn’t settle because they didn’t want to swallow the amount of money that it’s going to take to satisfy Ambac,” said Alan White, a law professor at Valparaiso University who specializes in housing industry issues. “Nobody wants to be left holding the bag.”

Shirley Norton, a spokeswoman for the Charlotte, North Carolina-based lender, and Ambac spokesman Pete Poillon, declined to comment on the lawsuit.

Repurchase of Billions

Repurchases of home loans from buyers and insurers of mortgage securities have already cost the four biggest U.S. lenders $9.8 billion, according to Credit Suisse Group AG. Bank of America has said it faces $11.1 billion of unresolved claims.

MBIA Insurance said it paid more than $459 million in claims stemming from losses on Countrywide-sponsored mortgage- backed bonds, according to a 2008 lawsuit in New York State Supreme Court.

The Ambac case involves 12 Countrywide-sponsored pools of home loans that were created from 2004 to 2006, including nine involving home equity lines of credit and three that involve fixed-amount second-lien loans.

Bank of America should repurchase as much as $20 billion in home loans that were based on wrong or missing information, the Association of Financial Guaranty Insurers said in a Sept. 2 letter to Bank of America Chief Executive Officer Brian Moynihan. More than half of the soured home-equity credit lines and residential mortgages created from 2005 through 2007 that insurers examined were candidates for repurchase, the group said.

Letter Below:

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Just a few weeks ago Wells Fargo made an announcement that there were no problems at all blah blah blah…and now they have passed the baton to Lender Processing Services…

Wells Fargo has found fraud errors… sigh.

LPS: no defects in related foreclosures, no fee-splitting

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEVADA

In re JOSHUA & STEPHANIE MITCHELL)

Case No. BK-S-07-16226-LBR ) Chapter 7 )
Debtor(s).)

Excerpt:

In Hawkins the motion was brought by MERS “solely as nominee for Fremont Investment
& Loan, its successors and/or assigns.” However, in his affidavit at ¶ 6, Victor Parisi states 45 46
that the beneficial ownership interest in the Hawkins note was sold by Fremont Investment &
Loan and ownership was transferred by endorsement and delivery. While the affidavit goes on to
the say that MERS was a holder at the time the motion was filed, it is obvious that MERS has no
rights to bring the motion as nominee of Fremont given that Fremont no longer had any interest
in the note.

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SUPREME COURT – STATE OF NEW YORK I.A.S. PART 21 – SUFFOLK COUNTY

JPMORGAN CHASE as Trustee of Equity One

against

ALBA MUNOZ

EXCERPTS:

the affidavit of its Vice President, Victor Parisi, who alleges that Premium, its
signor. paid valuable consideration for the mortgage. Mr. Parisi points to a copy of the HUD
Settlement Statement from the Premium closing, which indicates that out of the $315,000.00 loan
proceeds~ $222.S62.63 was paid to Washington Mutual to satisfy a prior mortgage, $237.00 was paid to
satisfy an obligation to CBUSASears, and $71,228.07 was disbursed to Munoz. Additionally, Mr. Parisi
asserts that Premium did not know or have reason to know about O’Connor’s claim. He argues that at
the time of the mortgage, O’Connor’s judgment had not yet been docketed and there was nothing in the
property records that disclosed Zambrano’s liability to O’Connor. Thus, alleges Mr. Parisi, having
paid valuable consideration and having taken without knowledge or notice of O’Connor’s claims,
Premium and Chase are bona fide mortgagees ofthe premises and are entitled to protection under Real
Property Law 266 and Debtor and Creditor Law $278(1). In addition, Mr. Parisi alleges that even if
O’Connor was able to show that Premium was on notice of Zambrano’s liability or alleged fraudulent
conveyance. pursuant to Debtor and Creditor Law $278(2), Chase would be entitled to retain and enforce

<SNIP>

Chase has failed to make such a prima facie showing. The affidavit of Victor Parisi is not in
admissible form because it was signed and notarized in the State of New Jersey, and is not accompanied by the required certificate of conformity with the laws of the State of New Jersey. For an out-of-state affidavit to be admissible, it must comply with CPLR 2309 [c] which requires that an out-of-state
affidavit accompanied by a certificate of Conformity (see Real Property Law $ 299-a [l]; PRA ZU,
b , L ( ’ 1 4 CoitialeZ. 54 AD3d 917, 864 NYS2d 140 [2008]). In the absence ofa certificate of conformity,
the affidavit, is, effect, unsworn (see Worldwide Asset Purchasing, LLC v Simpson, 17 MiscSd
’ ISA. 851 YYS2d 75 [ 20071). Consequently, Mr. Parisi’s affidavit cannot be considered by the Court.

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New York Supreme Court, Kings County

HSBC BANK USA, NATIONAL ASSOCIATION AS INDENTURE TRUSTEE FOR PEOPLE’S CHOICE HOME LOAN SECURITIES TRUST SERIES 2006-1, PLAINTIFF,
v.
MARCIE PERBOO ET. AL., DEFENDANTS.

Excerpt:

Plaintiff’s moving papers for an order of reference fails to present an “affidavit made by the party,” pursuant to CPLR § 3215 (f). The application contains an “affidavit of merit and amount due,” by Victor F. Parisi, who states that he is “the Vice-President of, EQUITY ONE, INC. [EQUITY ONE] AS AUTHORIZED SERVICER FOR HSBC BANK USA, NATIONAL ASSOCIATION AS INDENTURE TRUSTEE FOR PEOPLE’S CHOICE HOME LOAN SECURITIES TRUST SERIES 2006-1, Plaintiff.” For reasons unknown to the Court, plaintiff HSBC has failed to provide any power of attorney authorizing EQUITY ONE to proceed on HSBC’s behalf with the instant foreclosure action. Therefore, the proposed order of reference must be denied without prejudice. Leave is granted to plaintiff HSBC to comply with CPLR § 3215 (f) by providing an “affidavit made by the party,” whether by an officer of HSBC or someone with a valid power of attorney from HSBC.

Further, plaintiff must address a second matter if it renews its application for an order of reference upon compliance with CPLR § 3215 (f). In the instant action, as noted above, Victor F. Parisi, in his affidavit, dated December 14, 2007, states he is Vice President of EQUITY ONE. Yet, the September 28, 2007 assignment from MERS as nominee for PEOPLE’S CHOICE to HSBC is signed by the same Victor F. Parisi, as Vice President of MERS. In my November 20, 2007 decision and order in HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR NOMURA HOME EQUITY LOAN, INC. ASSET-BACKED CERTIFICATES SERIES 2006-FM2 v SANDOVAL, Index Number 8758/07, the same Victor F. Parisi assigned the underlying mortgage and note as Vice President of MERS to HSBC on March 13, 2007, and then signed the affidavit of merit as Vice President of EQUITY ONE, authorized servicer for HSBC, the next day, March 14, 2007. Did Mr. Parisi change his employment from March 13, 2007 to March 14, 2007, and again from September 28, 2007 to December 14, 2007? The Court is concerned that Mr. Parisi might be engaged in a subterfuge, wearing various corporate hats. Before granting an application for an order of reference, the Court requires an affidavit from Mr. Parisi describing his employment history for the past three years.

Also, while MERS served as nominee for PEOPLE’S CHOICE, the mortgage servicer for the PERBOO mortgage was POPULAR MORTGAGE SERVICING, INC. [POPULAR], [exhibit B of application - July 24 default letter to PERBOO], whose address is 121 Woodcrest Road, Cherry Hill, New Jersey 08003. The MERS as nominee for PEOPLE’S CHOICE to HSBC assignment lists HSBC’s address as 121 Woodcrest Road, Cherry Hill, New Jersey 08003. The instant verified complaint [part of exhibit B of application] states that EQUITY ONE’S address is 121 Woodcrest Road, Cherry Hill, New Jersey 08003. How convenient to have the assignor’s servicer, the assignee’s servicer and the assignee all at the same address. This makes for one-stop shopping! The Court needs to know what corporate chicanery is being played at 121 Woodcrest Road, Cherry Hill, New Jersey 08003. Is the building large enough to house POPULAR, EQUITY ONE, MERS and HSBC under the same roof? Is there enough closet space to store Mr. Parisi’s various corporate hats?

Last, the verified complaint notes, in ¶ 6, that defendant PERBOO defaulted with her February 1, 2007 principal and interest payment. The first sentence in the July 24, 2007-POPULAR default letter to defendant PERBOO states “[p]lease be advised that your account is presently in default.” On September 28, 2007, 240 days after the instant mortgage loan ceased to perform, and 72 days subsequent to the POPULAR default letter to PERBOO, plaintiff HSBC accepted the assignment of the instant non-performing loan from MERS as nominee for PEOPLE’S CHOICE. The Court needs a satisfactory explanation of why HSBC, whose directors have a fiduciary responsibility to HSBC’s shareholders, purchased a non-performing loan from MERS as nominee for PEOPLE’S CHOICE, in an affidavit by an officer of HSBC.

<SNIP>

Plaintiff has failed to submit “proof of the facts” in “an affidavit made by the party.” The “affidavit of facts” is submitted by Victor F. Parisi, “Vice-President of, EQUITY ONE, INC. AS AUTHORIZED SERVICER FOR HSBC.” Mr. Parisi, must have, as plaintiff’s agent, a valid power of attorney from HSBC to EQUITY ONE for that express purpose. Additionally, if a power of attorney is presented to this Court and it refers to pooling and servicing agreements, the Court needs a properly offered copy of the pooling and servicing agreements, to determine if the servicing agent may proceed on behalf of plaintiff. (EMC Mortg. Corp. v Batista, 15 Misc 3d 1143 (A) [Sup Ct, Kings County 2007]; Deutsche Bank Nat. Trust Co. v Lewis, 14 Misc 3d 1201 (A) [Sup Ct, Suffolk County 2006]).

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At an I AS Term, Part 2 1 of the Supreme
Court of the State of New York, held in and
for the County of Kings, at the Courthouse,
at the Oivic Center, Brooklyn, New York on
the 4th (Lay of December, 2006
1 —-X Index No.: 16705/2006

PRESENT:

HON. LAURA L. JACOBSON
Justice
—————-L————————————-
EQUITY ONE AS SERVICER FOR NOMURA
HOME EQUITY LOAN INC. HOME EQUIl’Y
LOAN TRUST SERIES 2006-FM1, ASSET
BACKED PASS-THROUGH CERTIFICATE S,
SERIES 2006-FM1,
,
-against-

JANICE JAMES, MERS, INC. AS NOMINEE FOR
FREMONT INVESTMENT & LOAN ; PEOPLE OF
THE STATE OF NEW YORK; NEW YORK CITY
PARKING VIOLATIONS BUREAU; NEW YORK
CITY ENVIRONMENTAL CONTROL BOARD;
TRANSIT ADJUDICATION BUREAU, “JOHN DOE 1
to JOHN DOE 25″, said names being fictitiouh, the
persons or parties, corporations or entities, if any,
having or claiming an interest in or lien upon the
mortgaged premises described in the complaint,

excerpt:

The Affidavit of Merit submitted by the plaintiff appears to have been prepared by one Victor F. Parisi. The signor or the assignment of the mortgage, on behalf of MERS, Inc. as nominee for Fremont Investment & Loan, is also named Victor F. Parisi. Are these two signators the same people? If so, movant must submit an affidavit/affirmation advising the Court as to whether the assignment is a valid transfer or simply a paper one.

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October 28, 2010, 7:50 PM EDT

By Dakin Campbell

Oct. 28 (Bloomberg) — OneWest Bank, formed in the aftermath of IndyMac Bancorp’s failure, may have its mortgage- servicing ratings downgraded by Moody’s Investors Service, which cited “potential irregularities” in the foreclosure process.

The ratings of IndyMac Mortgage Services, a division of OneWest, may be downgraded if faulty foreclosures increase the time it takes to sell bank-owned homes or boost legal costs, Moody’s said today in a statement. OneWest is resubmitting affidavits in certain cases after a review, Moody’s said.

“Employees signing affidavits may not have had full personal knowledge of every item in the affidavit,” Linda Stesney and Cecilia Lam, analysts at New York-based Moody’s, said in the statement. “Notaries may not always have been physically present at the time of signing.”

Court documents surfaced this year showing employees of the largest U.S. lenders signed paperwork without ensuring accuracy. Attorneys general in all 50 states started a probe into those practices and Bank of America Corp., JPMorgan Chase & Co. and Ally Financial Inc. suspended some foreclosure sales or evictions, pending reviews.

Moody’s assigns a rating of SQ3, or average, to IndyMac as a primary servicer of prime home loans, and SQ3- as a primary servicer of subprime home loans or as a special servicer, or overseer of distressed debt.

IndyMac had a servicing portfolio of more than 565,000 loans with an unpaid balance of $133.5 billion at the end of June, Moody’s said. The company is the ninth-largest U.S. home- loan servicer, according to Barclays Capital Inc

P RESEN T:
HON. ARTHUR M. SCHACK

HSBC BANK USA, N.A., AS INDENTURE TRUSTEE
FOR THE REGISTERED NOTEHOLDERS OF
RENAISSANCE HOME EQUITY LOAN TRUST
2005-3, RENAISSANCE HOME EQUITY LOAN
ASSET-BACKED NOTES, SERlES 2005-3,
Plaintiff,

- against -

CANDIDA VALENTIN, CANDIDE RUIZ, et. al.,

Excerpts:

Additionally, plaintiff HSBC must address, a third matter if it renews its application for an order of reference. In the instant action, as noted above, Scott Anderson, as Vice President of MERS, assigned the instant mortgage to HSBC on May 1, 2007. Doris Chapman, the Notary Public, stated that on May 1,2007, “personally appeared Scott Anderson, of 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409.” In HSBC Bank, N.A. v Cherry, 4t 3, I observed that:

Scott Anderson, in his affidavit, executed on June 15,2007, states he is Vice President of OCWEN. Yet, this June 13,2007 assignment from MERS to HSBC is signed by the same Scott Anderson as Vice President of MERS. Did Mr. Anderson change his employer between June 13,2007 and June 15,2007. The Court is concerned that there may be fraud on the part or HS I E , or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from Mr. Anderson describing his employment history for the past three years.

Plaintiff has failed to submit “proof of the facts” in “an affidavit made by the party.” The affidavit is submitted by Jessica Dybas, “a Foreclosure Facilitator of OCWEN LOAN SERVICING, LLC, servicing agent and attorney in fact to the holder of the bond and mortgage sought to be foreclosed herein.” There must be an affidavit by an officer of HSBC or a servicing agent, possessing a valid power of attorney from HSBC for that express purpose. Additionally, if a power of attc mey is presented to this Court and it refers to pooling and servicing agreements, ihe Court needs a properly offered copy of the pooling and servicing agreements, to determine if the servicing agent may proceed on behalf of plaintiff. (EMC Mortg. Corp. v Batistu, 15 Misc 3d 1143 (A) [Sup Ct, Kings County 20071; Deutsche Bank Nut. Trust Co. v Lewis, 14 Misc 3d 1201 (A) [Sup Ct, Suffolk County 20061).

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