REMINDER: You may owe federal income taxes in 2013 if you have a short sale, foreclosure

Florida Today-

Because mortgages and foreclosures are such important issues in today’s shared ownership communities, we wanted to begin our column this week with a couple of legal notes and warnings.

First, a comment about short sales and taxation issues. If a homeowner sells their home for less than the amount owed on the mortgage (typically accomplished through a short sale), the amount of loan forgiveness (that is, the portion of the mortgage that will go unpaid) would ordinarily be subject to taxation on the homeowner as gain. Because of the potential impact of this rule on a large number of financially depressed homeowners, Congress passed a law in 2007 that allowed homeowners to avoid paying taxes on forgiven debt for their primary residence. However, that law expires at the end of 2012. Unless Congress extends the law, sellers should be aware that they may face significant taxes on their short sales.

[FLORIDA TODAY]

Great idea. But how many times must they have their hands dirty in order for the regulators to get them good? Pretty much any law you can think of that involves a banker, has been broken.

Bloomberg-

Here’s an idea for improving the regulation of banks: Treat them more like restaurants.

One of the great things about eating out in New York, where I work, is that you can go to the local health department’s website and get inspection information for each of the city’s 24,000 restaurants. So, for example, if you want to look up whether A+ Thai Place in Manhattan had rats during its last inspection, you can. (It did.) Eateries also must conspicuously post the grade they got (A+ Thai received a “C”) so every customer who walks in can see.

With banks, you can’t get report cards like this from regulators. And heaven forbid a U.S. lender ever wants to disclose its own supervisory rating to outsiders. The Federal Deposit Insurance Corp. has long said that is confidential information, the release of which can lead to criminal charges.

[BLOOMBERG]

Sheila Bair and Neil Barofsky discuss problems with the relationship between big banks and the federal government.

[CNN]

.

KCCI-

A Des Moines woman came home to find her belongings gone.

A police report shows that last Thursday a crew that cleans out foreclosed homes arrived at the house on University Avenue and broke the lock off the back door when the homeowner was not home.

The team entered the home and removed items.

[KCCI]

Obama sure loves Wall Street judging by most or all he’s appointed.

FDL-

Everybody get on the commodity speculation train.

A federal judge today threw out the Dodd-Frank provision that empowered the Commodity Futures Trading Commission to set position limits on commodity trading. Judge Robert Wilkins said in his ruling that the CFTC did not prove the necessity of position limits to curb runaway speculation, and that the law itself did not “constitute a clear and unambiguous mandate to set position limits, as the Commission argues.”

Here’s the punchline: Judge Wilkins was appointed by President Obama in 2010.

CFTC already set the position limits, and they were weeks from going into effect in the oil, grain, coffee, gold and other markets, 28 in all. At the time, Sens. Bernie Sanders, Maria Cantwell and others called it weak. Under CFTC’s rule, a single speculator could still hold as much as 25% of all deliverable oil supply in any given month. But now there will be no rule at all, unless CFTC can come up with a better rationale. Judge Wilkins sent the rule back to the CFTC for “further consideration.” But this, of course, is how Wall Street rules get watered down. The initial rule wasn’t all that effective, and yet the industry managed to litigate that away. Any substitute would have to be even more compromised to avoid the ire of the judge. And at that point it becomes close to meaningless.

[FIRE DOG LAKE]

Cross posted with permission from Chink in The Armor

In April of 2000,  Morgan Stanley Dean Witter produced a white paper for their more sophisticated investors entitled “The B2B Internet Report:  Collaborative Commerce”.  This report was a snapshot of how the internet had influenced commerce up to that time.  It also speculated how the internet was due to influence commerce into the future.  It demonstrated how the internet had made information more transparent between business partners and how business partners,  both buyers and sellers,  would benefit from deeper collaboration in online B2B Commerce.

“B2B [business to business] is closer to a construction project with many synchronized processes between specialists,  whereas B2C [business to consumer] is closer to buying the house once all that’s been completed.  Unlike B2C,  there’s a lot more to relationships between trading partners in the B2B world.  These “collaborations” – shared,  essential business processes,  which facilitate commerce – represent obstacle and opportunity.  Almost every business process between business partners can be improved or completely restructured by taking it online.

Throughout the 90’s and the early 2000’s,  the sort of consolidation and collaborative online business relationships this paper reported upon developed and continued to develop as predicted.  Supply chain management became the buzzword throughout Information Technology departments across the country.  The business world saw mergers and acquisitions as regional competitors became integrated partners dominating their specific industry.  Companies whose main stock in trade was knowledge of individual differences between regions were either absorbed or fell to the wayside as transparency of knowledge came to dominate the marketplace.  This happened in several industries including aviation,  automobile assembly,  and defense manufacturing.  In the process,  it also  reached into the logistical support each these industries needed in order to function.

Nowhere was this supply chain management concept applied more diligently than in the mortgage banking industry in the follow up to the S&L mess of the Reagan/Bush era.  Mortgage banking,  up until the late mid 90’s,  was a labor and paper intensive endeavor.  Computer and information technology brought an extreme streamlining to the process of delivering retail mortgage products to the individual.  This B2B automation reduced to a minimum the number of people and companies involved in selling a mortgage B2C.

Throughout the 00’s,  B2B collaboration between Mortgage Banking and the Shadow Banking System it supported became ever more integrated.  It developed to where the consumer was able to purchase or refinance a home without ever signing or handling a piece of paper.  It was all on line.  There was a machine on the other side of the door in the closing room that took over the moment the homeowner walked out of the ceremony.  This machine finished processing the paperwork the homeowner had signed and using the internet and computers,  almost immediately produced the end product traded in the secondary,  “Shadow Banking System”.  The homeowner had no idea of just what his signature or check mark in a box had just created.

Individual home mortgages became just one piece in a long supply chain of items which ended up financing the world economy.  The banking industry created a series of derived value financial products ranging from the value of the real estate involved (including water and mineral rights) to the credit ratings and payment histories of each individual home buyer including the future value thereof.  This was done in the individual as well as the aggregate.  The individual homeowner was totally unaware of all of this and no amount of due diligence on his part could have possibly revealed the sophisticated financial products his signature created.

These created financial products literally run the world.  Films are made,  hospitals are built,  oil is shipped,  all based upon the supply chain management of individual mortgage products and the aggregated cash flows they represent. Were it not for these structured products,  you would not be eating strawberries in December.  This flow of information and its corresponding cash flow to it created the link between the real economy and the virtual economy.

In order to understand what really happened to the finances of the world,  one must cease looking upon foreclosures as a real property issue and come to see how real property fits into a much larger,  virtual economic system.  This system leverages the cash flows of aggregated mortgage payments,  automobile payments,  cell phone payments,  satellite and cable television payments, student loan payments and any other contracted payment streams into highly structured banking products that literally run the world economic system.  In the process,  the bankers hijacked the ownership of all property and sold their future value many times over while keeping the attendant profits and control of all of the assets for themselves.

This is the world the individual homeowner entered into when he bought his home.  The individual homeowner is just a small,  albeit critical piece in the supply chain management of highly structured financial products.  A mortgage is really a marketing plan to induce you to assume your role in the world economic system without you knowing about it.  The banks use your identity,  your payment histories,  your credit rating to make billions of dollars in profits for themselves while putting the risk upon others without their knowledge.

As you read the rest of this series,  please keep these concepts of supply chain management in mind.  It will help make sense of what might otherwise seem nonsensical.

image: supplychainmanagementdefinition.net

Here’s the first part to this story, back in August 2012 – Brookline man fighting to save the home he built from BofA foreclosure mix-up

Nashua Telegraph-

One Brookline family is pretty happy that this time the little guy won.

Ray Lavoie, a self-employed carpenter whose home was sold at auction this summer, is breathing easier after Bank of America agreed to reverse the sale and modify his mortgage under the terms of a billion-dollar Department of Justice mortgage settlement, allowing Lavoie, his wife and their two daughters to stay.

Lavoie mostly built his Cleveland Hill Road home 21 years ago, along with a large workshop beside the house where he earns his livelihood.

[NASHUA TELEGRAPH]

Welcome to another episode of The Twilight Zone!

New York Times-

GREETINGS, unhappy homeowners! Here’s some wonderful news:

“We are canceling the remaining amount you owe Chase!” says a letter that JPMorgan Chase sent recently to thousands of home loan borrowers. “You are approved for a full principal forgiveness of your Home Equity Account,” says another, from Bank of America.

Jackie Esposito, of Guilford, Conn., got a letter like that. But she wasn’t elated — because she doesn’t owe the money anymore. She and her husband filed for bankruptcy three years ago. The roughly $64,000 they owed Chase has been legally wiped out.

What’s going on?

[NEW YORK TIMES]

You’re either a parent or a student in some crisis these days…or both.

ZeroHedge-

Whereas earlier today we presented one of the most exhaustive presentations on the state of the student debt bubble, one question that has always evaded greater scrutiny has been the very critical default rate for student borrowers: a number which few if any lenders and colleges openly disclose for fears the general public would comprehend not only the true extent of the student loan bubble, but that it has now burst. This is a question that we specifically posed a month ago when we asked “As HELOC delinquency rates hit a record, are student loans next?” Ironically in that same earlier post we showed a chart of default rates for federal loan borrowers that while rising was still not too troubling: as it turns out the reason why its was low is it was made using fudged data that drastically misrepresented the seriousness of the situation, dramatically undercutting the amount of bad debt in the system.

Luckily, this is a question that has now been answered, courtesy of the Department of Education, which today for the first time ever released official three-year, or much more thorough than the heretofore standard two-year benchmark, federal student loan cohort default rates. The number, for all colleges, stood at a stunning 13.4% for the 2009 cohort. The number is stunning because it is nearly 50% greater than the old benchmark, which tracked a two year default cohort, and which was a “mere” 8.8% for the 2009 year. Broken down by type of education, and using the new improved, and much more realistic benchmark, for-profit institutions had the highest average three-year default rates at 22.7 percent, with public institutions following at 11 percent and private non-profit institutions at 7.5 percent. In other words, more than one in five federal student loans used to fund private for-profit education, is now in default and will likely never be repaid!

And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.

Ladies and gentlemen: meet the new subprime.

[ZERO HEDGE]

Alison is an excellent source to follow for all legal matters involving MBS’s.

Reuters on the case-

Brad Karp of Paul, Weiss, Rifkind, Wharton & Garrison and Max Berger of Bernstein Litowitz Berger & Grossmann share an elevator bank at 1285 6th Avenue in New York City. Bernstein Litowitz, a 50-lawyer plaintiffs’ firm, has space on the 36th and 38th floors. Paul Weiss’s 750 lawyers occupy much of the rest of the office building. Karp and Berger are also old frenemies: In 2004, they negotiated Citigroup’s $2.65 billion settlement of shareholder claims in the WorldCom accounting fraud case. Over the last several months, with Karp representing Bank of America and Berger one of the lead counsel for shareholders suing over the bank’s acquisition of Merrill Lynch in 2008, the two have spent a lot of time riding the elevator between Berger’s office on the 36th floor and Karp’s on the 30th, discussing a resolution of the class action.

With an Oct. 22 trial date looming and no sign from U.S. District Judge Kevin Castel that he would end the case by granting summary judgment to either side, those elevator rides (and sessions with mediator Layn Phillips of Irell & Manell) led to the $2.43 billion settlement that Bank of America announced Friday. It’s the fourth-largest-ever securities class action settlement by a single defendant (behind Tyco’s $2.975 billion deal in 2007; Cendant’s $2.83 billion settlement in 1999; and the Citi agreement in 2004) and the largest in a case that involved no accounting fraud or criminal convictions. The settlement is vindication for Richard Cordray of the Consumer Financial Protection Bureau, who launched the litigation on behalf of two Ohio pension funds back in 2009, before he was voted out of office as Ohio’s attorney general, and for the three shareholders’ firms that litigated the case for almost four years: Bernstein Litowitz; Kessler Topaz Meltzer & Check; and Kaplan Fox & Kilsheimer.

[REUTERS On THE Case]

And homeowners won’t suffer? Don’t you think they have suffered enough?

StlToday-

A St. Louis County Circuit Court judge on Thursday blocked the county from implementing a new ordinance that requires banks to participate in formal mediation before foreclosing on county residents.

Associate Circuit Judge Brenda Stith Loftin granted a temporary restraining order at the request of the Missouri Bankers Association Inc. and Jonesburg State Bank.

“The Court finds plaintiffs will suffer immediate and irreparable financial and property damage if the Defendants are allowed to implement or enforce the Ordinance prior to a determination on the merits,” Loftin wrote in her ruling.

[STLTODAY]

* eAppraiseIT accused of inflating home appraisals

* Agrees to pay $7.8 million to end lawsuit

* eAppraiseIT now part of CoreLogic Inc

* NY AG Schneiderman took case to trial

* Schneiderman to bring new mortgage-related action soon

Reuters-

A company accused of inflating home appraisals under pressure from Washington Mutual Inc before the housing crisis agreed to pay $7.8 million on Thursday to settle with the New York attorney general.

EAppraiseIT, a unit of CoreLogic Inc, resolved the charges with New York Attorney General Eric Schneiderman while on trial.

The case, filed in New York state court in 2007, is one of the few related to the housing meltdown that the government has brought to trial. The trial was in recess when the settlement was reached.

Schneiderman is co-chair of the federal mortgage fraud task force formed in January to probe actions that led to the financial crisis. He has said he plans to take legal action against other targets soon.

[REUTERS]

Credit Slips-

There’s no question that we at the Slips take a particular interest in the Massachusetts Senate race. But usually we don’t have much to say about it. Still, something Scott Brown said today struck me as rather significant–much more so than a lot of the things that have been covered in the media about the Senate race. 

It turns out that Senator Scott Brown (R-Mass.) is a real estate attorney among other things. (Beats modeling, I guess.) Brown apparently did real estate closings and title work.  His clients included local banks as well as some “mortgage companies,” including some that are no longer in business, as well as Fidelity National and First American, two large real estate services companies that provide a range of services, including relating to foreclosure.  Fidelity National, is also the former parent of LPS, which owned DocX, the document forgery firm featured on 60 Minutes and home of the Robosign. LPS is under a consent order with the Federal Reserve Board for its servicing activities, and DocX was criminally indicted by Missouri (and subsequently settled). Brown was doing work for Fidelity National when it still owned LPS.

[CREDIT SLIPS]

image: NPR.org

Benzinga-

Under terms of the proposed settlement, Bank of America would pay a total of $2.43 billion and institute certain corporate governance policies. Plaintiffs had alleged, among other claims, that Bank of America and certain of its officers made false or misleading statements about the financial health of Bank of America and Merrill Lynch.

[BENZINGA]

IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT

DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Trustee Under the Pooling and
Servicing Agreement Dated as of November 1,
2005, GSAMP Trust 2005-WMC-2,
Plaintiff and Counterdefendant-
Appellee,

v.

JAMES L. GILBERT,
Defendant and Counterplaintiff-
Appellant

(Mortgage Electronic Registration Systems,
Inc., WMC Mortgage Corp., and Unknown
Owners, Defendants).
_____________________________________________________________

EXCERPT:

¶ 6 On August 25, 2008, MERS (as nominee for WMC Mortgage) executed a document titled
“Assignment of Mortgage” (Assignment). The Assignment stated that MERS, for certain
consideration “the receipt of which is hereby acknowledged,” “assigned and transferred” to Deutsche
Bank, “as Trustee under the Pooling and Servicing Agreement dated as of November 1, 2005,
GSAMP Trust 2005-WMC2,” all interests in Gilbert’s mortgage. On September 12, 2008, Deutsche
Bank filed an amended complaint, attaching the Assignment as an exhibit. Gilbert filed an answer,
raising the affirmative defense of lack of standing on the ground that the Assignment showed that
Deutsche Bank did not own the indebtedness when it originally filed the foreclosure. Gilbert also
filed a counterclaim, in which he alleged that WMC Mortgage’s disclosures to him at the time of
closing violated TILA (15 U.S.C. § 1601 et seq. (2006)) by stating only that the initial interest rate
might be discounted, although WMC Mortgage knew for certain that the rate was discounted.
Gilbert asserted that Deutsche Bank was liable for these violations as the assignee of the mortgage.

¶ 7 In September 2009, both sides filed motions for summary judgment. Gilbert argued that he
was entitled to a dismissal of the foreclosure (on the ground that Deutsche Bank lacked standing to
bring the suit at the time the suit was filed) and judgment in his favor on his counterclaim. Deutsche
Bank contended that it did have standing at the time it filed suit, because the Assignment simply
memorialized an earlier transfer of interest. In support, it submitted an affidavit from William F.
Loch, an employee of a company that serviced loans for Deutsche Bank, in which Loch averred that,
based on his review of “the documents contained in the Gilbert loan file,” MERS assigned its interest
to Deutsche Bank on November 1, 2005. Loch did not state how he knew that this was when the
assignment occurred, and he did not attach any documentary evidence that the assignment had
occurred on this date. Deutsche Bank also argued that the counterclaim was defective on a number
of bases, including that it was untimely and that the conditions necessary for Deutsche Bank to have
assignee liability had not been met.

¶ 8 On November 23, 2009, after the motions had been fully briefed and orally argued, the trial
court issued its initial ruling. As to the standing issue, it granted Gilbert’s motion for summary
judgment and dismissed the foreclosure, finding that Deutsche Bank was not the holder of the
indebtedness at the time it filed the suit. The trial court noted Loch’s averment that Deutsche Bank
was the holder on the date of filing, but found it “to be a legal conclusion and just because he says
it does not make it so.” The trial court further noted that there was no document showing when the
assignment took place. As to the counterclaim, the trial court denied both parties’ motions for
summary judgment because it believed that there were issues of fact regarding whether the violations
of TILA could be seen on the face of the loan documents and thus whether Deutsche Bank could be
liable as an assignee.

¶ 9 Deutsche Bank filed a motion for reconsideration, arguing that the Assignment “clearly
stated” that MERS assigned its interest to Deutsche Bank on November 1, 2005. In addition,
Deutsche Bank argued, the counterclaim was time-barred, and Deutsche Bank was not subject to
assignee liability because the alleged TILA violations were not apparent on the face of the loan
documents. The motion was fully briefed, but on the hearing date, only the attorney for the bank
showed up. The trial court listened to Deutsche Bank’s arguments. It then granted reconsideration
and reversed its earlier rulings, granting summary judgment for Deutsche Bank on all claims.
Regarding the counterclaim, the trial court found that there was no assignee liability for the alleged
TILA violations because the violations were not “really clear” from the face of the documents. In
addition, it found that the counterclaim was time-barred.

¶ 10 The court entered a judgment of foreclosure, and the home was sold to Deutsche Bank,
resulting in a deficiency of approximately $250,000. (Because the deficiency judgment was in rem,
Gilbert was not personally liable for it.) In due course, the sale was approved. Gilbert filed a timely
notice of appeal.

¶ 11 ANALYSIS

¶ 12 On appeal, Gilbert contends that the trial court erred in granting the motion for
reconsideration and entering summary judgment in favor of Deutsche Bank on both the foreclosure
and the counterclaim. We begin by examining the trial court’s entry of judgment in Deutsche Bank’s
favor on the foreclosure.

¶ 13 Standing to Bring the Foreclosure

¶ 14 The validity of Deutsche Bank’s foreclosure action against Gilbert rests on one issue: whether
Deutsche Bank had standing—that is, whether it owned the mortgage—on the date that it filed the
foreclosure action. There are no disputes about the relevant facts, and the issue is thus a purely legal
one that was appropriate for disposition by summary judgment. 735 ILCS 5/2-1005(c) (West 2008).
We review the grant of summary judgment de novo. Ioerger v. Halverson Construction Co., 232
Ill. 2d 196, 201 (2008).

¶ 15 “The doctrine of standing is designed to preclude persons who have no interest in a
controversy from bringing suit.” Raintree Homes, Inc. v. Village of Long Grove, 209 Ill. 2d 248, 262
(2004). A party’s standing to sue must be determined as of the time the suit is filed. Village of
Kildeer v. Village of Lake Zurich, 167 Ill. App. 3d 783, 786 (1988). “[A] party either has standing
at the time the suit is brought or it does not.” Id. An action to foreclose upon a mortgage may be
filed by a mortgagee, i.e., the holder of an indebtedness secured by a mortgage, or by an agent or
successor of a mortgagee. See Mortgage Electronic Registration Systems, Inc. v. Barnes, 406 Ill.
App. 3d 1, 7 (2010); see also 735 ILCS 5/15-1208, 15-1504(a)(3)(N) (West 2008). Lack of standing
to bring an action is an affirmative defense, and the burden of proving the defense is on the party
asserting it. Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252 (2010).

¶ 16 Here, Gilbert raised the affirmative defense of lack of standing both in his answer and in his
motion for summary judgment. To support his argument that on the date the foreclosure action was
filed Deutsche Bank had no standing to sue him, Gilbert pointed to the note and the mortgage
attached to the complaint, both of which identify the mortgagee as MERS—not Deutsche Bank.
Moreover, the Assignment attached to the amended complaint was dated August 25, 2008, and
Gilbert argued that this showed that MERS did not assign its interest in the mortgage until several
months after the foreclosure action was filed. We find that this evidence met Gilbert’s burden to
show that Deutsche Bank lacked standing when the suit was filed, because the note and the mortgage
identified the lender as WMC Mortgage and the holder of the mortgage as MERS. Deutsche Bank’s
name does not appear on either of these documents. Thus, so far as the documents attached to the
complaint establish, Gilbert was correct that Deutsche Bank did not own the indebtedness. As he
made out a prima facie showing that Deutsche Bank lacked standing, the burden shifted to Deutsche
Bank to refute this evidence or demonstrate a question of fact. Triple R Development, LLC v.
Golfview Apartments I, L.P., 2012 IL App (4th) 100956, ¶ 12.

¶ 17 Deutsche Bank attempted to rebut this apparent lack of standing by pointing to the
Assignment and the Loch affidavit. However, these items lack evidentiary value. Before the trial
court, Deutsche Bank argued that the language of the Assignment established that the transfer of the
mortgage had occurred years earlier, on November 1, 2005. On appeal, however, Deutsche Bank
wisely abandons that argument (which finds no support in the actual language of the Assignment),
and now concedes that the Assignment “does not establish anything about when Plaintiff [Deutsche
Bank] obtained its interest in the subject loan.” We agree with this statement. Although the
Assignment contains two dates—the date of the trust for which Deutsche Bank is a trustee, and the
date on which the Assignment was executed and notarized—it does not explicitly state when the
mortgage was assigned to Deutsche Bank. All that can be known about when the assignment took
place is that it was no later than the date on which the Assignment was executed.

¶ 18 Instead, Deutsche Bank now relies solely on the Loch affidavit to refute the lack of standing
shown by the note and the mortgage. Deutsche Bank points to Loch’s statement that the assignment
occurred on November 1, 2005, and contends that his statement must be taken as true in the absence
of contrary evidence. This legal principle applies only to admissible evidence, however. Complete
Conference Coordinators, Inc. v. Kumon North America, Inc., 394 Ill. App. 3d 105, 108 (2009) (only
admissible evidence may be considered in support of or opposition to summary judgment). Loch’s
statement about the date of the assignment was not admissible, because it was unsupported by any
foundation.

¶ 19 The use of affidavits on motions for summary judgment is governed by Illinois Supreme
Court Rule 191(a) (eff. July 1, 2002). Under that rule, affidavits must set out the facts on which the
affiant’s claims are based, and attach all documents upon which the affiant relies. Loch, however,
did not state how he knew that the assignment took place on November 1, 2005, and he failed to
attach any documents supporting his assertion. (As we noted, the Assignment itself provides no
support for Loch’s assertion.) Accordingly, Loch’s statement about the date of the assignment does
not comply with Rule 191(a) and may be disregarded. Outboard Marine Corp. v. Liberty Mutual
Insurance Co., 154 Ill. 2d 90, 132 (1992) (unsupported conclusions and opinions were insufficient
to raise an issue of fact); Madden v. Paschen/S.N. Nielson, Inc., 395 Ill. App. 3d 362, 388 (2009)
(legal conclusions and unsupported statements were properly stricken). Disregarding Loch’s
unsupported statement, the sole evidence that Deutsche Bank ever became the holder of the
indebtedness was the Assignment and, as Deutsche Bank concedes, that document does not establish
when Deutsche Bank became the holder.

¶ 20 Deutsche Bank argues that, because lack of standing is an affirmative defense, Gilbert bears
the burden of proving that it did not own the loan on the date that Deutsche Bank filed the
foreclosure. This, of course, is true. U.S. Bank National Ass’n v. Sauer, 392 Ill. App. 3d 942, 946
(2009). However, Gilbert’s documentary evidence that Deutsche Bank did not own the loan (the
mortgage and the note, and an assignment executed after the date of filing) constituted prima facie
evidence of lack of standing. “ ‘A “prima facie” defense is sufficient at law unless and until rebutted
by other evidence.’ ” Cordeck Sales, Inc. v. Construction Systems, Inc., 382 Ill. App. 3d 334, 366
(2008) (quoting Darling & Co. v. Pollution Control Board, 28 Ill. App. 3d 258, 264 (1975)).
Deutsche Bank also argues that its standing to bring the action was established by its complaint,
which alleged that it was the holder of the indebtedness and attached copies of the note and the
mortgage. See Barnes, 406 Ill. App. 3d at 6 (a plaintiff sufficiently pleads a cause of action for
foreclosure if it alleges that it holds the mortgage and attaches a copy of the note and the mortgage).
However, the attached note and mortgage did not show that Deutsche Bank owned the loan, and thus
they contradicted Deutsche Bank’s allegation that it did own the loan when it filed the suit. Burton
v. Airborne Express, Inc., 367 Ill. App. 3d 1026, 1034 (2006) (“Exhibits are a part of the complaint
to which they are attached,” and facts contained within an exhibit serve to negate inconsistent
allegations contained within the body of the complaint). Moreover, it is well established that a party
may not rely on the allegations of its pleadings to contradict evidence produced by the movant that
would entitle it to judgment. Triple R Development, 2012 IL App (4th) 100956, ¶ 12. As Deutsche
Bank produced no competent evidence rebutting Gilbert’s prima facie showing that the bank lacked
standing at the time of filing, Gilbert was entitled to summary judgment in his favor on this issue.

¶ 21 In a last-ditch effort to avoid this result, Deutsche Bank argues that section 2-407 of the Code
of Civil Procedure (Code) (735 ILCS 5/2-407 (West 2008)), which allows the joinder of necessary
parties after the commencement of a suit, protects against the dismissal of its complaint for lack of
standing. Deutsche Bank argues that its amendment of the complaint, which attached the recently
executed Assignment, acted as a “joinder” of itself in a new capacity—as the now-undisputed owner
of the loan. Not surprisingly, Deutsche Bank is unable to point to any case law supporting such a
novel application of section 2-407 to cure a plaintiff’s lack of standing. To the contrary, standing
must exist when the suit is filed. Village of Kildeer, 167 Ill. App. 3d at 786. As Deutsche Bank
lacked standing at the time of filing, the foreclosure action was defective ab initio and Deutsche
Bank could not cure this defect by “joining” the suit as a proper party at a later date.

¶ 22 In summary, Gilbert was entitled to judgment in his favor on the foreclosure, because
Deutsche Bank lacked standing to bring that foreclosure. Bayview Loan Servicing, L.L.C. v. Nelson,
382 Ill. App. 2d 1184, 1186 (2008). We note that, although there is little case law on this specific
issue in Illinois, our sister courts in New York have held repeatedly that, unless an assignment of a
mortgage is executed prior to the date on which the foreclosure action is filed, the assignee lacks
standing to bring the foreclosure and the action should be dismissed, even where the assignment was
executed only a few months after the complaint was filed. See Wells Fargo Bank, N.A. v.
Marchione, 887 N.Y.S.2d 615, 619 (N.Y. App. Div. 2009); LaSalle Bank National Ass’n v. Ahearn,
875 N.Y.S.2d 595, 597 (N.Y. App. Div. 2009). Other states have taken a similar approach. “It is
a fundamental precept of the law to expect a foreclosing party to actually be in possession of its
claimed interest in the note, and to have the proper supporting documentation on hand when filing
suit, *** so that the defendant is duly apprised of the rights of the plaintiff.” U.S. Bank National
Ass’n v. Baber, 2012 OK 55, ¶ 6, 280 P.2d 956; see also Wells Fargo Bank Minnesota, N.A. v.
Rouleau, 2012 VT 19, ¶ 16, 46 A.3d 905; Davenport v. HSBC Bank USA, 739 N.W.2d 383, 385
(Mich. Ct. App. 2007) (foreclosure must be vacated where bank “did not yet own the indebtedness
that it sought to foreclose”). We see no flaws in this reasoning. Accordingly, the order granting
Deutsche Bank’s motion for reconsideration and entering judgment in favor of Deutsche Bank must
be reversed, the judgment of foreclosure and the order confirming the sale must be vacated, and the
foreclosure must be dismissed.

[…]

They are trying to go virtually paperless along with your digital signature…just as reported back on July/2010 – Introducing eVAULT Service (MERS v2)? & eMortgages, eNotes …Get Ready For The No-DOC Zone

But… “To resolve legal issues tied to the securitization of mortgages, the Corker bill also advocates for the creation of a uniform pooling and servicing agreement to create certainty in the securitization process.”

(b) MERS2- The Director shall establish, by rule, a Mortgage Electronic Registration System (in this section referred to as `MERS2′) based on the Mortgage Electronic Registration System in use on the date of enactment of this Act. MERS2 shall incorporate a single national database for all mortgage title transfers, to be maintained and operated by FHFA. The rules of the Director shall ensure that property title is transferred in accordance with all applicable provisions of law. All mortgage transfers shall take place according to national standards and shall be recorded in the MERS2 system.

(c) Uniform Regulatory Practices- The Comptroller of the Currency, Chairperson of the Federal Deposit Insurance Corporation, Director, Chairman of the Board of Governors of the Federal Reserve System, and Director of the Bureau of Consumer Financial Protection shall, jointly, under the direction of the Director, develop uniform regulatory practices for the mortgage market.

S 1834 IS

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Residential Mortgage Market Privatization and Standardization Act of 2011′.

SEC. 2. DEFINITIONS.

For purposes of this Act, the following definitions shall apply:

(1) COVERED MORTGAGE LOAN-

(A) IN GENERAL- The term `covered mortgage loan’ means any residential mortgage loan, including any single-family and multifamily loan, that is originated, serviced, or subserviced, in whole or in part, owned directly or indirectly, including through any interest in a security that is backed in whole or in part by a mortgage loan, or securitized or resecuritized, by an entity or affiliate or subsidiary thereof that is regulated by any of the agencies listed in subparagraph (B).

(B) AGENCIES- The agencies listed in this subparagraph are–

(i) the Board of Governors of the Federal Reserve System;

(ii) the Department of Agriculture;

(iii) the Department of Housing and Urban Development;

(iv) the Federal Deposit Insurance Corporation;

(v) the Federal Housing Finance Agency;

(vi) the Farm Credit Administration;

(vii) the Federal Trade Commission;

(viii) the Office of the Comptroller of the Currency;

(ix) the National Credit Union Administration; and

(x) the Securities and Exchange Commission.

(2) ENTERPRISES- The term `enterprises’ means, individually and collectively, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

(3) FHFA; DIRECTOR- The terms `FHFA’ and `Director’ mean the Federal Housing Finance Agency and the Director thereof, respectively.

(4) MORTGAGE DATA-

(A) IN GENERAL- The Director shall define mortgage data, by regulation, consistent with this paragraph.

(B) SINGLE-FAMILY LOANS- For single-family covered mortgage loans, the term `mortgage data’ means, as of the date of origination–

(i) the loan origination date and the loan maturity date;

(ii) whether the loan is a purchase loan or a refinance, and for refinance loans–

(I) the date on which the refinanced loan was originated;

(II) the identity of the lender on the refinanced loan; and

(III) the unpaid principal balance of the refinanced loan that was repaid by the new loan;

(iii) the value of the collateral property on which the lender relied, and how the lender determined the value;

(iv) the credit score or scores that the lender used or on which it relied, and the entity that supplied each;

(v) debt-to-income ratios, including–

(I) the ratio of the total debt of the borrower and coborrowers, expressed as a monthly payment amount, to the total current and expected future income of the borrower and any coborrowers on which the lender relied, expressed as a monthly income amount; and

(II) the ratio of the first scheduled payment on the loan, expressed as a monthly payment amount, to the total current and expected future income of the borrower and any coborrowers on which the lender relied, expressed as a monthly income amount;

(vi) the total value of borrower assets, but not including the value of the collateral and not including income, on which the lender relied;

(vii) the principal amount of the loan;

(viii) the interest rate on the loan;

(ix) if the interest rate may adjust under the loan terms, the terms and limits of any permissible adjustment, including the index and margin, if applicable, when the rate may adjust, and any caps or floors on any such adjustment;

(x) if the principal may increase under the loan terms at origination, the terms and limits of any permissible increase, including when the increase or increases may occur, how the amount and timing of any increase is determined, and any caps on any such increases;

(xi) if the payment amount may adjust, independently of a rate adjustment or of an increase in the principal amount, the terms and limits of any permissible adjustment, including when the adjustment may occur, how the amount and timing of any adjustment is determined, and any caps or floors on any such adjustments;

(xii) whether, under the loan terms, the borrower may be required to pay any prepayment penalty, and if so, the potential amount and timing of any such penalty;

(xiii) any permissible grace periods and late fees under the loan terms, including fee amounts permitted on the loan;

(xiv) whether the borrower or any coborrower has stated an intent to reside in the property as a principal residence;

(xv) whether the loan is assumable under the loan terms at origination and if so, the conditions on which any assumption may be denied;

(xvi) whether the originating lender was or is aware of any subordinate or senior lien on the property at the time at which the loan was originated, and if so, the identity of all lenders or other lienholders of such other loans, the relative lien position of each, and the date of origination of each lien if it secures a mortgage loan;

(xvii) the type of mortgage insurance relating to the loan, including who pays it, and the amount and scheduled payment dates of any premiums;

(xviii) whether flood insurance is required in connection with the loan, and if so, the amount and timing of premiums;

(xix) whether the loan has an escrow account and if so, the amount of the initial deposit into the escrow account and the amount of the monthly payments scheduled to be deposited into the escrow account;

(xx) the amount of points, fees, and settlement charges paid to originate the loan, including the amount of any compensation paid to a mortgage broker, and who paid it;

(xxi) whether the borrower or borrowers have any payment assistance at origination, such as government or private subsidies or buydowns, and if so, the amounts, terms, and timing of such assistance; and

(xxii) the address of the real property securing the mortgage loan.

(C) MULTIFAMILY LOANS- For multifamily covered mortgage loans, the term `mortgage data’ means, as of the date of origination–

(i) the number of dwelling units in each property securing each loan;

(ii) the rent on each dwelling unit, or, if more than 1 has the same rent, the number of units at each rent level;

(iii) the occupancy status of each dwelling unit;

(iv) whether the rent is subsidized by any government agency and, if so, in what amounts, under what terms and conditions, and for what period of time;

(v) whether the rent on the units is current, and if not, how many days or months the rent for each unit is delinquent; and

(vi) all of the information described in subparagraph (B), except as modified by the Director, by regulation, consistent with this Act.

(D) AFTER ORIGINATION- For both single-family and multifamily covered mortgage loans, beginning the day after the date of origination of the loan, and reported not less frequently than monthly thereafter until the loan ceases to exist, the term `mortgage data’ includes–

(i) the amount and date of payments received each month, including–

(I) whether each payment is received by the due date or within a grace period, and if a payment is received after the scheduled due date, how many days past due;

(II) the amount of any payment deposited into an escrow account;

(III) amounts paid for other loan charges, with an identification of the amount and type of such other charge; and

(IV) the amount of any prepayments;

(ii) for loans on which any payment or partial payment is overdue, the number of days since the loan was current;

(iii) whether property taxes, hazard insurance premiums, and any flood insurance premiums required in connection with the loan are paid by the borrower or borrowers as required, and if any such item is not paid as required–

(I) the number of days since the payment was required, and the amount of the missed payment;

(II) whether the servicer or other party on behalf of the servicer paid property taxes on the property, and in what amount; and

(III) whether the servicer or other party on behalf of the servicer force-placed hazard or flood insurance, and if so, the amount of the premium and the identity of the insurer;

(iv) the amount of any interest paid to the borrower on any escrow;

(v) the type and date of any actions taken by or on behalf of the servicer due to default, including nonpayment default, and the amount charged to the borrower or borrowers as a result of the action or actions; and

(vi) if the servicer is aware of any damage to the property securing the loan, the type and extent of the damage and of any repairs, the amount of insurance proceeds paid, the amount of such proceeds disbursed or paid to the borrower, and the amount held by the servicer, and the date and results of any inspection done by or on behalf of the servicer.

(E) ADJUSTMENTS CONSISTENT WITH THE PURPOSES OF THIS ACT- The Director may adjust the items that are included in or excluded from the definition of mortgage data consistent with this Act, as appropriate to protect the privacy of individual consumers.

(F) PRIVACY- The regulations required by subparagraph (A) may require rounding off of the debt to income ratios required to be included as mortgage data to protect the privacy of the borrower, taking into consideration the information that is already available on the Internet or in other ways.

SEC. 3. GSE WINDDOWN.

(a) Fannie Mae- Section 304 of the National Housing Act (12 U.S.C. 1719) is amended by adding at the end the following:

`(h) Winddown of Enterprises-

`(1) ANNUAL GUARANTEE REDUCTIONS- Not later than 180 days after the date of enactment of the Mortgage Market Privatization and Standardization Act of 2011, and annually thereafter, the Director shall begin reducing the percentage of the value of a trust certificate or other security that may be guaranteed by the corporation by not less than 10 percent per year.

`(2) STRUCTURE- The percentage of the bond guaranteed by the corporation can be structured on either a pro-rata or senior-subordinated basis, as determined by the Director. The Director shall pursue a strategy that allows for market signals to assist Congress and the Director to monitor and assess the price that private market participants are assigning to mortgage credit risk.’.

(b) Freddie Mac- Section 305 of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454) is amended by adding at the end the following:

`(d) Winddown of Enterprises-

`(1) ANNUAL GUARANTEE REDUCTIONS- Not later than 180 days after the date of enactment of the Mortgage Market Privatization and Standardization Act of 2011, and annually thereafter, the Director shall begin reducing the percentage of the value of a trust certificate or other security that may be guaranteed by the corporation by not less than 10 percent per year.

`(2) STRUCTURE- The percentage of the bond guaranteed by the corporation can be structured on either a pro-rata or senior-subordinated basis, as determined by the Director. The Director shall pursue a strategy that allows for market signals to assist Congress and the Director to monitor and assess the price that private market participants are assigning to mortgage credit risk.’.

SEC. 4. RESIDENTIAL MORTGAGE MARKET TRANSPARENCY.

(a) In General- Mortgage data relating to all covered mortgage loans shall be put into the public domain in accordance with this section.

(b) Agency Action- Each agency named in section 2(1)(B) shall, not later than 1 year after the date of enactment of this Act, require, by regulation, that all entities regulated by such agency shall put mortgage data relating to covered mortgage loans into the public domain, in accordance with this Act and the regulations issued under this Act. Such regulations shall require that the data be reasonably accurate and complete.

(c) Manner and Form of Data- Not later than 1 year after the date of enactment of this Act, the Director shall, by regulation–

(1) establish the manner and form by which all mortgage data required to be put into the public domain by this section shall be put into the public domain; and

(2) require that such mortgage data be made available in a uniform manner, in a form designed for uniformity of data definitions and forms, ease and speed of access, ease and speed of downloading, and ease and speed of use.

(d) Update- All entities required to put mortgage data into the public domain under this Act shall continuously update the mortgage data, not less frequently than monthly, as long as the entities exist, whether in conservatorship, receivership, or otherwise. All updates shall be reasonably accurate and complete.

(e) Responsibility of Regulated Entities- The mortgage data required to be put into the public domain in accordance with this Act shall include all mortgage data related to all covered mortgage loans, to the extent practicable.

(f) Duplication of Effort- If 2 or more entities are required by this Act to report the same mortgage data relating to the same mortgage loan, they may, by agreement, determine that only 1 of such entities will report the data. If 1 of such entities reports the required mortgage data, it shall not be a violation of this section for the other entities not to report the data.

(g) Date of Access to Data- The Director shall establish, and cause to be published in the Federal Register, the initial date on which–

(1) the public shall begin to have access to any data put into the public domain in accordance with this Act; and

(2) all mortgage data is required to be put into the public domain, in accordance with this Act.

(h) Costs to FHFA- The FHFA shall pay the cost of establishing the database of mortgage data that is put into the public domain under this section, and of providing public access to that database. If the FHFA ever ceases to exist without being replaced, and unless otherwise provided by Act of Congress, the cost of maintaining the database shall be borne by the remaining agencies named in section 2(1)(B), by agreement.

SEC. 5. ENCOURAGING A MARKET FOR HIGH QUALITY RESIDENTIAL MORTGAGE FUTURES.

(a) In General- Subpart A of part 2 of subtitle A of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4541 et seq.) is amended by adding at the end the following:

`SEC. 1327. ENCOURAGING A MARKET FOR HIGH QUALITY RESIDENTIAL MORTGAGE FUTURES.

`(a) Definitions- In this section, the following definitions shall apply:

`(1) DELIVERABLE RESIDENTIAL MORTGAGE-

`(A) IN GENERAL- The terms `deliverable residential mortgage’ and `DRM’ have the meaning given those terms by rule of the Director, in consultation with participants in the TBA market, taking into consideration underwriting and product features that historical loan performance data indicate result in a lower risk of default, such as–

`(i) documentation and verification of the financial resources relied upon to qualify the mortgagor;

`(ii) standards with respect to–

`(I) the residual income of the mortgagor after all monthly obligations;

`(II) the ratio of the housing payments of the mortgagor to the monthly income of the mortgagor; and

`(III) the ratio of total monthly installment payments of the mortgagor to the income of the mortgagor;

`(iii) mitigating the potential for payment shock on adjustable rate mortgages through product features and underwriting standards;

`(iv) mortgage guarantee insurance or other types of insurance or credit enhancement obtained at the time of origination, to the extent such insurance or credit enhancement reduces the risk of default; and

`(v) prohibiting or restricting the use of balloon payments, negative amortization, prepayment penalties, interest-only payments, and other features that have been demonstrated to exhibit a higher risk of borrower default.

`(B) LIMITATION ON DEFINITION- The Director, in defining the term `deliverable residential mortgage’, as required by subparagraph (B), shall define that term to be no broader than the definition of the term `qualified mortgage’, as provided under section 129C(c)(2) of the Truth in Lending Act and regulations adopted thereunder.

`(2) PARTICIPANT IN THE TBA MARKET- The term `participant in the TBA market’ means a private investor in or dealer of mortgage-backed securities, particularly mortgage-backed securities issued by the enterprises, that routinely enters into forward contracts for the sale of mortgage-backed securities that do not specify the particular mortgage-backed securities that will be delivered to the buyer.

`(3) PROGRAM- The term `program’ means the program established under subsection (b).

`(4) DRM FUTURES MARKET- The term `DRM futures market’ means a market for forward contracts for the sale of mortgage-backed securities collateralized exclusively by deliverable residential mortgages.

`(5) TBA MARKET- The term `TBA market’ means the market for forward contracts for the sale of mortgage-backed securities that do not specify the particular mortgage-backed securities that will be delivered to the buyer.

`(b) Program Established- The Director, in consultation with participants in the TBA market, shall establish a program to encourage the development of a DRM futures market that–

`(1) compliments the TBA market;

`(2) creates incentives for trading by participants in the TBA market; and

`(3) has the potential to replace the TBA market.

`(c) Technology and Infrastructure- The Director shall consult with participants in the TBA market to develop the technology and infrastructure necessary to carry out the program established under this section.

`(d) Annual Report- The Director shall submit to Congress an annual report on the program established under this section.’.

(b) Securities Laws Exemptions-

(1) SECURITIES ACT OF 1933- Section 3(a) of the Securities Act of 1933 (15 U.S.C. 77c(a)) is amended by adding at the end the following:

`(14) Any mortgage-backed security collateralized exclusively by deliverable residential mortgages, as such term is defined under section 1327 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.’.

(2) SECURITIES EXCHANGE ACT OF 1934- Section 3(a)(12)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)) is amended–

(A) by redesignating clauses (vi) and (vii) as clauses (vii) and (viii), respectively; and

(B) by inserting after clause (v) the following:

`(vi) any mortgage-backed security collateralized exclusively by deliverable residential mortgages, as such term is defined under section 1327 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992;’.

SEC. 6. MONETIZATION OF BUSINESS VALUE.

Pursuant to the authority of the Director as conservator of the enterprises under section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617), the Director shall–

(1) identify any property of the enterprises that would be of value to nongovernmental entities, including–

(A) historical databases containing information on prepayment, delinquency, and default rates;

(B) proprietary home price indices;

(C) technology used in the securitization of mortgages; and

(D) patents relating to the securitization of mortgages, automated underwriting systems, and other processes; and

(2) sell any property identified under paragraph (1) to nongovernmental entities.

SEC. 7. UNIFORM UNDERWRITING STANDARDS.

(a) Standards Established- Notwithstanding any other provision of this Act or any other provision of Federal, State, or local law, the Federal banking agencies (as that term is defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)), in consultation with the FHFA and the Secretary of Housing and Urban Development, shall jointly establish specific minimum standards for mortgage underwriting, including–

(1) a requirement that the mortgagee verify and document the income and assets relied upon to qualify the mortgagor on the residential mortgage, including the previous employment and credit history of the mortgagor; and

(2) a down payment requirement that–

(A) is equal to not less than 5 percent of the purchase price of the property securing the residential mortgage;

(B) in the case of a first lien residential mortgage loan with an initial loan to value ratio that is more than 80 percent and not more than 95 percent, includes a requirement for credit enhancements, as defined by the Federal banking agencies, until the loan to value ratio of the residential mortgage loan amortizes to a value that is less than 80 percent of the purchase price;

(C) uses a method for determining the ability of the mortgagor to repay the residential mortgage that is based on factors including–

(i) all terms of the residential mortgage, including principal payments that fully amortize the balance of the residential mortgage over the term of the residential mortgage; and

(ii) the debt to income ratio of the mortgagor; and

(D) any other specific standards that the Federal banking agencies jointly determine are appropriate to ensure prudent underwriting of residential mortgages.

(b) Updates to Standards- The Federal banking agencies, in consultation with the FHFA and the Secretary of Housing and Urban Development–

(1) shall review the standards established under this section not less frequently than every 5 years; and

(2) based on the review under paragraph (1), may revise the standards established under this section, as the Federal banking agencies, in consultation with the FHFA and the Secretary of Housing and Urban Development, determine to be necessary.

(c) Compliance- It shall be a violation of Federal law–

(1) for any mortgage loan originator to fail to comply with the minimum standards for mortgage underwriting established under subsection (a) in originating a residential mortgage loan;

(2) for any company to maintain an extension of credit on a revolving basis to any person to fund a residential mortgage loan, unless the company reasonably determines that the residential mortgage loan funded by such credit was subject to underwriting standards no less stringent than the minimum standards for mortgage underwriting established under subsection (a); or

(3) for any company to purchase, fund by assignment, or guarantee a residential mortgage loan, unless the company reasonably determines that the residential mortgage loan was subject to underwriting standards no less stringent than the minimum standards for mortgage underwriting established under subsection (a).

(d) Implementation-

(1) REGULATIONS REQUIRED- The Federal banking agencies, in consultation with the FHFA, shall issue regulations to implement subsections (a) and (c), which shall take effect not later than 270 days after the date of enactment of this Act.

(2) REPORT REQUIRED- If the Federal banking agencies have not issued final regulations under subsections (a) and (c) before the date that is 270 days after the date of enactment of this Act, the Federal banking agencies shall jointly submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that–

(A) explains why final regulations have not been issued under subsections (a) and (c); and

(B) provides a timeline for the issuance of final regulations under subsections (a) and (c).

(e) Enforcement- Compliance with the rules issued under this section shall be enforced by–

(1) the primary financial regulatory agency as that term is defined under section 2 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5301) of an entity, with respect to an entity subject to the jurisdiction of a primary financial regulatory agency, in accordance with the statutes governing the jurisdiction of the primary financial regulatory agency over the entity, and as if the action of the primary financial regulatory agency were taken under such statutes; and

(2) the Bureau of Consumer Financial Protection, with respect to a company that is not subject to the jurisdiction of a primary financial regulatory agency.

(f) Exemptions for Certain Nonprofit Mortgage Loan Originators-

(1) IN GENERAL- Not later than 180 days after the date of enactment of this Act, the Federal banking agencies, in consultation with the Secretary of Housing and Urban Development and the Secretary of the Treasury, may jointly issue rules to exempt from the requirements under subsection (a)(2), mortgage loan originators that are exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986.

(2) DETERMINING FACTORS- The Federal banking agencies shall ensure that–

(A) the lending activities of a mortgage loan originator that receives an exemption under this subsection do not threaten the safety and soundness of the banking system of the United States; and

(B) a mortgage loan originator that receives an exemption under this subsection–

(i) is not compensated based on the number or value of residential mortgage loan applications accepted, offered, or negotiated by the mortgage loan originator;

(ii) does not offer residential mortgage loans that have an interest rate greater than zero percent;

(iii) does not gain a monetary profit from any residential mortgage product or service provided;

(iv) has the primary purpose of serving low income housing needs;

(v) has not been specifically prohibited, by statute, from receiving Federal funding; and

(vi) meets any other requirements that the Federal banking agencies jointly determine are appropriate for ensuring that a mortgage loan originator that receives an exemption under this subsection does not threaten the safety and soundness of the banking system of the United States.

(3) REPORTS REQUIRED- Before the issuance of final rules under subsection (a), and annually thereafter, the Federal banking agencies shall jointly submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that–

(A) identifies the mortgage loan originators that receive an exemption under this subsection; and

(B) for each mortgage loan originator identified under subparagraph (A), explains the rationale for providing an exemption.

(4) UPDATES TO EXEMPTIONS- The Federal banking agencies, in consultation with the Secretary of Housing and Urban Development and the Secretary of the Treasury–

(A) shall review the exemptions established under this subsection, not less frequently than every 2 years; and

(B) based on the review under subparagraph (A), may revise the standards established under this subsection, as the Federal banking agencies, in consultation with the Secretary of Housing and Urban Development and the Secretary of the Treasury, determine to be necessary.

(g) Rules of Construction- Nothing in this section may be construed to permit–

(1) the enterprises to make or guarantee a residential mortgage loan that does not meet the minimum underwriting standards established under this section; or

(2) the Federal banking agencies to issue an exemption under subsection (f) that is not on a case-by-case basis.

(h) Definitions- In this section, the following definitions shall apply:

(1) COMPANY- The term `company’–

(A) has the same meaning as in section 2(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(b)); and

(B) includes a sole proprietorship.

(2) MORTGAGE LOAN ORIGINATOR- The term `mortgage loan originator’ means any company that takes residential mortgage loan applications and offers or negotiates terms of residential mortgage loans.

(3) RESIDENTIAL MORTGAGE LOAN- The term `residential mortgage loan’–

(A) means any extension of credit primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent security interest in a dwelling or residential real estate upon which is constructed or intended to be constructed a dwelling; and

(B) does not include a mortgage loan for which mortgage insurance is provided by the Department of Veterans Affairs or the Rural Housing Administration.

(4) EXTENSION OF CREDIT; DWELLING- The terms `extension of credit’ and `dwelling’ have the same meanings as in section 103 of the Truth in Lending Act (15 U.S.C. 1602).

(i) Repeal of Credit Risk Retention and QRM Rules- Section 15G of the Securities Exchange Act of 1934 (15 U.S.C. 78o-11) is repealed, and any rule or regulation promulgated under that section shall have no force or effect, effective on the date of enactment of this Act.

SEC. 8. RESIDENTIAL MORTGAGE SERVICING STANDARDS.

(a) Uniform PSA-

(1) DEVELOPMENT-

(A) IN GENERAL- The Director, in consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System, shall, not later than 1 year after the date of enactment of this Act, develop a uniform pooling and servicing agreement (in this section referred to as a `uniform PSA’). The Director shall work with industry groups, including servicers, originators, and mortgage investors to develop the uniform PSA.

(B) CRITERIA- The uniform PSA shall–

(i) address all issues relating to the pool trustee, and shall be based on pooling and servicing agreements in use by the enterprises on the date of enactment of this Act; and

(ii) create uniform loss mitigation standards, including standards for a single point of contact for troubled borrowers, an industry wide net-present-value model for determining when to conduct a loan modification rather than foreclosure, and national standards for the foreclosure process.

(2) EFFECT OF UNIFORM PSA- Beginning 1 year after the date of enactment of this Act, all mortgage backed securities issued by national or State chartered banks in the United States will be affected in accordance with the uniform PSA.

(b) MERS2- The Director shall establish, by rule, a Mortgage Electronic Registration System (in this section referred to as `MERS2′) based on the Mortgage Electronic Registration System in use on the date of enactment of this Act. MERS2 shall incorporate a single national database for all mortgage title transfers, to be maintained and operated by FHFA. The rules of the Director shall ensure that property title is transferred in accordance with all applicable provisions of law. All mortgage transfers shall take place according to national standards and shall be recorded in the MERS2 system.

(c) Uniform Regulatory Practices- The Comptroller of the Currency, Chairperson of the Federal Deposit Insurance Corporation, Director, Chairman of the Board of Governors of the Federal Reserve System, and Director of the Bureau of Consumer Financial Protection shall, jointly, under the direction of the Director, develop uniform regulatory practices for the mortgage market.

END

source: http://thomas.loc.gov

image: omeguis.deviantart.com

Isn’t going to happen because they’re mostly all shareholders of MERS and as long as MERS is around letting 20K + people sign any documents involving title to homes, they will always have problems.

The Journal Gazette

A top bank official put his best foot forward in Fort Wayne a day after eligible Hoosiers learned they could join a national mortgage settlement.

As part of the deal, more than 37,000 Indiana homeowners who were foreclosed on and subject to an error by a mortgage servicer between Jan. 1, 2008, and Dec. 31, 2011, will split $31.4 million in cash payments.

The average disbursement – $840 per household – is payback for charges of “robo-signing” that pushed mortgage applications through without proper review. Indiana and 48 other states this year joined the federal government’s settlement with five major lenders and servicing institutions to settle the claim: Ally/GMAC, Bank of America, Citi Bank, JPMorgan Chase and Wells Fargo.

[The Journal Gazette]

TheLCN-

The buyer of a property parcel at the Livingston County tax auction in July has been informed that the county needs to postpone transfer of the title to him pending resolution of the bankruptcy of the previous owner.

The proceeding has been complicated by the former owner’s claim that the county’s seizure of the title is fraudulent under the bankruptcy.

Livingston County Attorney David Morris has stated that the legal strategy being used to thwart county property foreclosure has, in this instance, potential to “lead to a real mess for all counties, not just Livingston.”

New York State counties are legally empowered to seize through foreclosure the title and full value of any parcel for which property tax, or a component thereof, has gone unpaid for more than two years.

[THELCN]

Look who they mention..the same people guarding the foreclosure fraud reviews.

Bloomberg-

Something very unusual happened at the Securities and Exchange Commission this week: The SEC accused three former bank executives of committing fraud by deliberately understating their company’s loan losses during the financial crisis. Such accusations have not been made often in recent years.

Unless you happen to live in Nebraska, you probably haven’t heard of Lincoln-based TierOne Corp., which had about $3 billion assets when it failed in 2010. Yet it’s an important story because of what it shows about the state of securities-law enforcement in the U.S.

[…]

TierOne’s auditor was KPMG LLP, which also was the auditor for Countrywide. (The other Big Four firms are Ernst & Young LLP, PricewaterhouseCoopers LLP and Deloitte & Touche LLP.) Neither KPMG nor any of its personnel were named as defendants in the SEC’s complaint this week. One of the allegations against the former TierOne executives was that they lied to KPMG auditors. Under the Sarbanes-Oxley Act, passed in 2002, lying to an auditor is a punishable offense.

[BLOOMBERG]

Change-

When my wife and I learned that we could afford a home, we thought it was too good to be true. It turned out that it was.

Within weeks of moving in, my wife, my two year old son, and I all started experiencing terrible dry-mouth and mouth sores.  Then we started to have trouble breathing, and I developed sinus headaches and nosebleeds.  It was so hard watching my son scream in pain when he tried to eat or even drink water. That’s when we learned why we were getting sick: our new home used to be a meth lab.

My home was contaminated with methamphetamine. But even worse, it was filled with traces of the toxic stew used to cook the drug. In a sense, my family got off easy – we learned why we were getting sick early on. Other families spend years unaware that their homes are making them sicker. Children my son’s age sometimes develop lifelong illnesses and developmental disabilities as a result of their exposure to these chemicals.

[CHANGE.ORG]

The author of this article recently wrote about possible ramifications of REMICs.

Law-

Local governments across the country are considering an innovative use of eminent domain. They propose to condemn underwater mortgages (those that exceed the fair-market value of the home) in their communities and restructure them so that home­owners can afford their payments and so that the new mortgage is for less than the fair market value of the property. If this proposal is implemented, the local government will pay the owner of mortgages of “underwater” homes the fair market value for the mortgages. The local government will then restructure each mortgage by reducing the principal amount owed to be in line with a mortgage that would be appropriate for the fair market value of the home. This will result in lower monthly payments. It will also result in a sustainable transaction, one in which homeowners can imagine ultimately paying off their mortgages, the American Dream of owning one’s home free and clear.

The financial industry is alarmed by this proposal, claiming that the sky will fall if it is implemented. But this proposal is constitutional, beneficial and administratively feasible. Local governments should give it a try as they seek to stabilize their communities.

[LAW.com]