by Jamie Ranney, Esq.
Jamie Ranney, PC
4 Thirty Acres Lane
Nantucket, MA 02554 jamie@nantucketlaw.pro
508-228-9224
This memo will focus on MERS-designated mortgages in Massachusetts.
In this author’s opinion two (2) things are evident after a survey of Massachusetts law.
First, MERS cannot be a valid “mortgagee” under Massachusetts law and thus MERS designated mortgages are invalid in the Commonwealth of Massachusetts.
This is because MERS-designated mortgages by definition “split” the security instrument (the mortgage) from the debt (the promissory note) when they are signed. This “split” invalidates the mortgage under Massachusetts law. Where the security interest is invalid upon the signing of the mortgage, MERS cannot occupy the legal position of a “mortgagee” under Massachusetts law no matter what language MERS inserts into their mortgages that purports to give them the legal position of “mortgagee”. Since MERS-designated mortgages are invalid at their inception, it follows logically therefore that MERS mortgages are not legally capable of being recorded in the Commonwealth of Massachusetts by its Registers of Deeds.
Second, even if a MERS-designated mortgage were found to be a valid security instrument in Massachusetts, each and every assignment of the mortgage and note “behind” a MERS-designated mortgage must be recorded on the public land records of the Commonwealth in order to comply with the Massachusetts recording statute at M.G.L. c. 183, s. 4 which requires that “conveyances of an estate” be recorded to be valid. A mortgage is a “conveyance of an estate” under Massachusetts law. Since MERS-designated mortgages exist for the primary purpose of holding “legal” title on the public land records while the “beneficial” interest is transferred and sold multiple times (and a mortgage cannot exist without a note under Massachusetts law), MERS-mortgages unlawfully avoid recording fees due the Commonwealth for the transfer(s) of interests under MERS-designated mortgages.
“If you tell a lie that’s big enough, and you tell it often enough, people will believe you are telling the truth, even when what you are saying is total crap.”1
There is a bill pending in the Massachusetts Legislature called H-04083 that is designed to provide more requirements that lenders work with borrowers to provide real loan modifications before they can commence foreclosure and to hold lenders accountable where they unlawfully foreclose. Unfortunately, the bill suffers from some substantial weaknesses which I have tried to remedy with edits and amendments.
The bill is scheduled to be voted on – THIS WEDNESDAY MAY 16, 2012 – so your immediately action is needed.
I would ask that you take the time to immediately contact your state representative and state senator, ask them to stand up for the homeowners and borrowers of the commonwealth and request that they amend H-04083 to include these changes and amendments. You can email the edits and comments directly to your state rep and state senator.
“If you’re going to take someone’s home away, you’ve got to prove you have the right to do it, and you have to follow the law when you do it,” Atty Glenn Russell said.
Busines Week-
The highest court in Massachusetts is poised to rule as soon as this month on a foreclosure case that could lead to a surge in claims from home owners seeking to overturn seizures.
The justices are deciding whether to uphold a lower court ruling that gave a Boston home back to Henrietta Eaton after Sam Levine, a 25-year-old Harvard Law School student, argued in front of the nation’s oldest appellate court that the loan servicer made mistakes when it foreclosed because it didn’t hold the note proving she was obliged to pay the mortgage.
“If the Massachusetts court says this defense works, that would have a huge ripple effect across the country,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.
The Massachusetts Supreme Judicial Court justices signaled last month they may rule in favor of Eaton when they asked parties in the case to submit briefs arguing whether such a decision should be applied retroactively or only to future lending. If retroactive, it would cloud the titles of the 40,000 Massachusetts properties seized in the last five years and while the ruling only applies to the state, it could serve as a model for homeowners trying to overturn foreclosures in other states.
Bloomberg-
The highest court in Massachusetts is poised to rule as soon as this month on a foreclosure case that could lead to a surge in claims from home owners seeking to overturn seizures.
The justices are deciding whether to uphold a lower court ruling that gave a Boston home back to Henrietta Eaton after Sam Levine, a 25-year-old Harvard Law School student, argued in front of the nation’s oldest appellate court that the loan servicer made mistakes when it foreclosed because it didn’t hold the note proving she was obliged to pay the mortgage.
“If the Massachusetts court says this defense works, that would have a huge ripple effect across the country,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.
If you want to know where the bodies are buried, look no further. Here are a few snips from Marie’s brief:
In what has become common parlance among those investigating these securitization failures (including the Securities and Exchange Commission and the Department of Justice), we refer to this type of transfer as an “A to D” assignment because it skips over parties “B” and “C” and creates a “wild deed” (especially in title theory states such as Massachusetts).
The assignment of mortgage is the “breeder document” from which all other paperwork necessary to bring the foreclosure action; notice the sale; obtain judgment; and transfer title depends.
“The Eaton Defect” as described in our amicus brief occurs when an entity, such as Green Tree Servicing LLC takes the mortgage by assignment and prosecutes a foreclosure in itsown name when it neither owns nor holds the note.
“The Ibanez Defect” as described in this amicus brief occurs when an entity, such as OptionOne Mortgage Corporation, sells the loan for securitization purposes and later, after the loan has been sold multiple times, assigns the Note and Mortgage (or just the Mortgage) directlyto the Trustee of the Issuing Entity (securitized trust).
Supreme Judicial Court FOR THE COMMONWEALTH OF MASSACHUSETTS NO. SJC-11041 SUFFOLK COUNTY
HENRIETTA EATON, PLAINTIFF-APPELLEE,
v.
FEDERAL NATIONAL MORTGAGE ASSOCIATION & ANOTHER, DEFENDANTS-APPELLANTS.
ON APPEAL FROM AN INTERLOCUTORY ORDER OF THE SUFFOLK SUPERIOR COURT
SUPPLEMENTAL BRIEF OF AMICUS CURIAE MARIE MCDONNELL, CFE
Oral arguments in the case were heard on Oct. 3rd, 2011.
It is important to note that in Ibanez, the SJC was not willing to overturn long standing legal principles simply because of recent “innovation” in the way banks chose to record their security interest in real property (e.g. MERS), or because of the extraordinary liability such a ruling would have on what basically amounted to four years of mostly illegal foreclosure activity in the Commonwealth.
The Ibanez article published last January predated Eaton by some ten months, and since the SJC reviewed Eaton “sua sponte”, there was no way to know at the time, that Eaton would make it all the way to the SJC, so the following comments taken from the article are perhaps prescient:
” It is possible that from the banks perspective an invalid assignment of the note is the more serious concern for the following reasons:
1. Without first having proper ownership of the debt, the bank can not initiate any collection activity, let alone foreclosure.
2. Notes (ownership of the debt asset), may be subject to further contention in bankruptcy proceedings where many creditors have a vested interest in the assets of a defunct mortgage lender, particularly since these notes are often sold in bankruptcy for a fraction of their face value.
3. The trusts that are supposed to contain the validly conveyed notes will in fact, not actually contain them (because they are not bearer paper), thus violating the representations and warranties made to investors who purchase these securities. Therefore, it is unsecured debt, and potentially, no debt at all upon which to collect payments.
…
6. Even if the notes obtain a valid conveyance, or confirmation of conveyance at a later date, it is still may be impossible to place them into the MBS’s:
a. It will have been longer than 90 days (the typical expiry period to transfer assets into the trust)
b. If it is a foreclosure matter, the loan is in default (the PSA’s do not allow for the addition of defaulted loans)
c. Any effort on the part of the trust to insert old or defaulted loans would jeopardize the trusts favorable REMIC status – thus further harming already impaired returns.”
As pointed out in the Ibanez article, clear title to the property is important. If the assignment of the mortgage is invalid, then there is a “cloud on title”. The banks recognizing this, brought Ibanez before the land court of their own volition in order to clear this “cloud on title”. One of the key mistakes counsel for Eaton made, perhaps in their effort to establish the more serious problem of legitimate possession of the note, was overlooking the validity of the Mortgage assignment, (still incredibly important) which, as with most securitized loans, was so clearly fraudulent (see Amicus brief of Marie McDonnell). Incidentally, this was of particular interest to the court during oral arguments, however, because the issue was never raised by Eaton’s counsel in its complaint, it could not be addressed by the court. Thus the opportunity to cite the authority of Crowley v. Adams 22 Mass. 582 (1917) which concerned the fraudulent conveyance of a mortgage without a note, was lost. Within the context of discussing the assignees knowledge of the fraud, the court held:
“[the assignee] should be held to have known as to each transaction, the possession of the note was essential to an enforceable mortgage, without which neither mortgage could be effectively foreclosed.”Id. at 585.
This was a error on the part of counsel, and eliminated a potential fifth source of authority in Eaton, as we wrote in January:
“1. If there must be a perfected interest in the mortgage (according to MA law) at the time of foreclosure, then how many foreclosures have taken place in Massachusetts with the same profile as Ibanez, and are thus invalid?
2. Clear title is important – In the statement of the case, the banks actually brought the complaint before the land court as independent actions in order to “remove a cloud on the title” – thus the banks recognize that such defects are a problem for future conveyance. All MA homeowners should be worried about the same (discussed further below).
3. To foreclose on a mortgage securing property in the commonwealth, one must be the holder of the mortgage. To be the holder of the mortgage, the bank must:
a. Be the original mortgagee
b. Be an assignee under a valid assignment of the mortgage
c. It is not sufficient to possess the mortgagor’s promissory note (bearer paper). Apparently most if not all securitized mortgages were endorsed in “blank”, in other words to the bearer.
4. The notice requirements set forth in G.L.c. 244, ss 14 unequivocally requires that the foreclosure notice must identify the present holder of the mortgage. This likely was not the case in past foreclosures in MA. For future foreclosure actions the question is can the real mortgage holder be found and will they cooperate in assigning the security interest?
5. Assignees of a mortgage must hold a written statement conveying the mortgage that satisfied the statute of Frauds or even the most basic elements of contractual requirements.
AG Coakley acknowledges that “the securitization regime was required to conform to state law prior to foreclosing, to ensure simply that legal ownership ‘caught up’ in order that the creditor foreclose legally in MA. The lenders, trustees and servicers could have done this, but apparently elected not to, perhaps on a ‘Massive Scale’ ” Saying that they “could have done this” within the context of MA law is one thing, within the context of IRS tax code, or NY trust law, is another.”
Further the article points out that a holder of the mortgage without the note, really only holds the security instrument in trust for the debt holder (thus anticipating Eaton), as pointed out in the following taken from the Ibanez article:
“4. The holder of the mortgage holds the mortgage in trust for the purchaser of the note, who has an equitable right to obtain an assignment of the mortgage, which may be accomplished by filing an action in court and obtaining an equitable order of assignment. If the average MBS has 5,000 notes for example, then we have to assume 5000 separate actions would have to be filed in court to ensure they are truly “Mortgage Backed Securities”, and that is only if the REMIC status isn’t jeopardized by such a revelation or action.”
However, the impasse for banks is the fact, that even if the court recognizes the authority of MERS to assign the mortgage to the foreclosing entity (usually the servicer), the following conditions still must be met:
a) The assignment must still be a valid assignment (most are not)
b) There must also be a valid assignment of the note to establish who exactly owns the debt.
The vast majority of these loans were sold into securitization trusts and are merely endorsed “in blank” (if they can even be found in the trust at all). Most schedules attached to the trust documents include little or no information on the details of the particular loans (as was the case in Ibanez), or sometimes include the address of particular properties, but no information on the barrowers, or curiously the loan amounts. Other failures include post-dated or otherwise invalid notarizations, and fraudulent signatures etc., which are all suggestive of fraud.
Given this, to speak of Eaton merely as a question over the validity of MERS and its assignments is incorrect. Even if Eaton is not affirmed by the SJC, the issue of validly conveyed notes, remains of vital importance.
That having been said, we believe the Appellants chances of prevailing are precisely zero, or maybe less. Taken together with Ibanez, this means serious problems for the bond holders in these securitization trusts and their bank administrators. With all the nuance of every day speak we could muster, we think it is put best by saying just; some of the debt-servants might escape. That isn’t to say that all measures won’t be taken to try to prevent this outcome.
On contemporary Pheronic thinking and the Pyramids that debt-servants build
We believe that this situation lends itself to the possibility of violence, as tragic an outcome as that is and would be. On June 3rd, 2011 we published our follow up to the Ibanez article entitled simply “On the ethics of mortgage loan default“. Four days later, the Essex county registrar of deeds John O’Brian, who we quote in the article, stopped recording fraudulent mortgage assignments (which many if not most are). It seems logical that this would be a “wake-up” call to the average homeowner, particularly since other registrars are prepared to follow suit. With the registrar’s decision, it has become a fact that title may no longer be recordable and ownership is in question. As it turns out, the homeowner who faithfully sends in monthly mortgage payments for years or decades (in an effort to “do the right thing”), may have no more clear ownership rights in the related property than a perfect stranger.
As the article “On the ethics of mortgage loan default” spread throughout the Internet with countless links and references, we were surprised to find comments that included (not unlike the allegory of the cave) the desire that the author “be shot“. We were equally surprised when the Hacktivist group “Anonymous” (which was not our target audience either) featured the article prominently in several of their sites.
It has been said “the rich rules over the poor, and the borrower is servant to the lender”. Perhaps in our Naiveté, we did not understand the sensitivity around the suggestion that a servant might want to be free one day. Nor did we recognize that the powerful human inclination to denial might elicit more than just a passive reaction. Like the prisoner who is freed from the cave and comes to understand that the shadows on the wall do not make up reality at all – later puts their life in danger from those who remain in the cave. Yet, the source of the light is truth and intelligence and those who would act prudently must see it.
These implications give rise to powerful questions in the current context. One such question regards the difference between a debt and a moral obligation? Why do we confuse the two so often in our society? Such that those who seek forgiveness of debt, are made to feel as if they are violating a moral code, or a cultural taboo? Perhaps the explanation lies in a more clear definition of the two. A moral obligation is something that can be forgiven with some flexibility, there is hardly exactness involved.
A monetary debt on the other hand can be calculated with the accuracy and immutability of math and the related science of accounting, and grown with the power of compounded interest, and therefore, in proper monetary debt, exist the possibility of subjugation in perpetuity, or at least for the entire natural life of the debtor.
Oddly, our society adds insult to injury in this failing of human civilization, and as if this dreadful revelation were not enough, adds on top of these accurately calculated and compounded financial obligations, the fallacy of a moral obligation, and in so doing the debt-servant is made to feel guilt regarding his moral character as well as his failure to pay.
When this sleight of hand is wedded to exhaustion (a pre-existing condition of many debt-servants), the odds of one actually fighting back against such a system, corrupt though it may be, are only minute. It must have been a genius who figured out that slavery with chains is inefficient. If a human could be conditioned to believe he is a free man, when he is not, and that already disillusioned he might be convinced that he is also a rich man, when he is not, then chains and their related complications are wholly unnecessary. All that is necessary then is to lower his idea of freedom and wealth substantially, and provide him with cut-rate imitations.
Under these circumstances, the average man would in fact work extraordinary hours, even if his paycheck was essentially diminished to less than zero by his existing debts (thus requiring him to take on new ones), and if by chance he was able to save, those funds too would be safely transferred to the hands of strangers (through “innovations” such as 401K’s, which could be convenient deducted from his paycheck electronically and instantly). These strangers are there to help the debt-servant loose what meager savings might be possible through sub-par investments (like internet stocks) which he never understood, but which is broker was always paid for trading.
Notably, this shell game can never be revealed to a debt-servant, because then he would understand that he is not really a free man, even though the real law is “…not on tablets of stone but on tablets of human hearts”, and yet this inclination of the heart is often resisted, even with violence. Nonetheless, In this law of the heart lies “a desire” which is so great that it over powers all other human constructs, including offensive debts.
In this respect, surely a few folks in Europe must have believed that the entire trade in chained slaves made the United States look like an economically and operationally primitive bunch – for the cost of that variety of servant is actually much higher, and had a far smaller pool of candidates, namely those with a particular tint to their skin. Yet, telling someone that they are inferior based merely on the color of their skin is a hard sell year after year. Conversely, telling someone they are free, when they have never tasted real freedom because they were born into debt, is easier to maintain, because it deals with more subtle issues, and the likelihood of confusion with moral obligation, and exploits the power of human denial.
The earliest evidence regarding market places and trade indicate that if you have something to sell that is of far lesser value than you are indicating, than it is wise to have the greatest physical distance possible between yourself and your counterpart – for in such a trade lies the inherent possibility of a violent reaction to the discovery on the part of the unsuspecting buyer, particularly when accurate accounts of credit and debt are kept and ruthlessly enforced. Some of the oldest recorded documents in history are of this variety; they are surprisingly, accounts of credit and debt. Perhaps human history is really a history of subjugation then. Cultural anthropologists are quite familiar with this idea of credit and debt in (even ancient) market places. It’s an old story. However, Americans are bread as consumers, not as economic or cultural anthropologist, because in that knowledge rests power, and power, by definition must belong to a coterie. For the greater the number of those subdued, the greater the power of the few who would subdue, just as with money, power deals only in transfers.
That is why the average American home owner is not allowed to have the true owner of their mortgage debts revealed – they are the counter party to an impolite deal. In these trades great profits were made, and in the pricing of the assets, great misrepresentations regarding intrinsic value. Wealth destruction therefore is a misleading expression in describing what happened; the accurate term is wealth transfer. During the housing “Pyramid” (this term is far more accurate than “bubble”, because it accurately describes an order) one of the greatest logical errors of all time was sold; that the intrinsic value of a home, which had within it the possibility of calculating (accurately) fair price was tied instead to a hyper speculative measure, that which is inherently impossible to price with any degree of accuracy, and which is immaterial; our notion of an ideal. As one might imagine, no price is too high to live an “ideal” – think of it as a seller’s paradise. After, a difficult stock market collapse, and an even more difficult terrorist attack, why would anyone be interested in mere stocks or bonds? After all the very place where these electronic slips are traded was very nearly destroyed. This new investment was allegedly concrete, and also patriotic. Americans were led to believe they had “…discovered a pearl of great value”, the only security whose price could never go down – it was like a “Dream”, like an “American Dream”.
However, when loan documents were to be signed a new broker suddenly appeared. Without any forewarning, with a name that was not before heard, or with anyone who had actually seen him, or understood how he operated, he made a subtle but powerful arrival on the scene. His name is Mr. MERS, and he instituted even greater secrecy than stock brokers and fund managers. Few have seen his physical appearance, or pulled back the curtain, it’s uninteresting anyways, because Mr. MERS is nothing more than a relational database, which only a very small fraction of the world’s population have access to (even democratically elected bodies, such as county recorders have no such access). He brokers the movements of trillions of dollars in capital. He is a construct of your trading partner, and because of his existence, you can never have a “level playing field”, or hope of a fair trade. In this brave new world, the requisite distance that precedes a bad trade, is no longer a measure of geography, it is a piece of software.
With this surreptitious matrix of relational database fields safely in place, how are all those houses, like so many stone blocks cut by ancient hands, turned into a pyramid? The answer seems self-evident; through a pyramid scheme naturally.
How would a contemporary mass exodus from such bondage look? Just as Fannie Mae and Green Tree divided the essential components of their security, It might look like ordinary debt-servants parting and dividing a sea of concrete, and traversing the depth of high rise buildings in New York, just as “by faith the people passed through the Red Sea as on dry land”.
The people in New York are criticized for their lack of direction, the fact that they appear to be lost in a veritable desert – but they are free, and in their hearts live an almost child-like innocence that we should desire to have. After all, their predecessors spent a good deal more time lost, and through it discovered a greater revelation, one that would lay the foundation to ultimate answers.
The popular accounts promulgated by Adam Smith and the contemporary science of modern economics as we were made to understand them, rely on more than one myth regarding the engineering of debt, and its related instrument – money. These underlying misrepresentations give rise to the possibility of great abuses, for the very nature of trade, and all else which rests upon it is thus misunderstood.
There are many reasons to despair over the future of our fragile state in the US today. However, the Massachusetts Supreme Judicial Court is not one of those reasons. By upholding the rule of law, and observing the incredibly important, and notably democratic foundations of land recording practice in the commonwealth they serve as a beacon for the rest of the country to follow and impart hope. This comes at a time when such hope is in scarce supply. If it is God’s will, than the light of wisdom handed down from prior ages on this point will shine through the darkness that has been created by corrupt forces. We can only hope.
A Road Map for Homeowners: Four Authoritative Guidelines
In Massachusetts law there exists four authoritative guidelines by which property may be foreclosed upon in order to redeem a debt (Five if Crowley v. Adams is included from above). Incidentally division is not a problem for these four authorities, for they stand equally well alone as they do in combination as requirements to validly exercise the power of sale of real property. Both the spirit and the letter of these sources are echoed in laws of other states, and as such can be taken as fundamentally universal. They are as follows:
The Common Law and the problem of Division
In Summary Eaton dealt with the following three realities of long standing Massachusetts law:
1. The assignee of a mortgage with no claim to the underlying debt cannot foreclose.
2. A mortgage separated from the debt it secures has no value in and of itself; it can only be held in trust for the note holder (naked title)
3. The trust relationship implied for the benefit of the note holder does not empower a mortgage assignee to foreclose as a “fiduciary” at any time.
It should be offensive even to the casual observer that in the case of Eaton, as would be the case for most home owners today, a valid promissory note memorializing the debt was and is missing. Who held it at the time of the foreclosure, how they obtained it, and what relationship they had if any to the appellants was and is still unknown.
Although a photo copy of the note was produced with the typical “endorsement in blank” markings, the appellants provided no document or other information indicating when the note was endorsed or who held it either then or now. The required assignments between intermediaries were never produced. Interestingly neither of the defending entities offered any testimony or other evidence in either court action to resolve these all important questions or otherwise identify the holder of the note. However, they did concede, that it was not the foreclosing entity Green Tree, LLC.
Conceivably this is because they do not know, and they do not want to know, and maybe they would even like to forget. Perhaps the note it is evidence.
Not surprisingly counsel for the appellants, despite this revelation, argued that the whereabouts and history of the promissory note was “irrelevant” and that they were entitled to foreclose nonetheless.
After a careful review of the full history of the mortgage foreclosure law in Massachusetts, as well as the related statutes and appellate decisions, The Superior court didn’t exactly see it that way – determining that no decision had ever overturned the established common law rule that a mortgage assignee must hold the note in order to enforce it through foreclosure.
Needless to say, this is of great concern to the banks, as predicted in the Ibanez article (cited above). Given the audacity of their claims, we believe it is reasonable to assume these folks would, if given the opportunity “send an orphan into slavery or sell a friend”. It has been difficult and time consuming to discover that notes were sold multiple times into multiple trust, thus creating a out-and-out pyramid of securities, upon which even more derivatives could be sold. However, something even more simple and obvious has been taking place in broad daylight, something peculiar that has been overlooked – the awkward problem of entire houses being stolen, by folks who have categorically no financial interest or otherwise is the properties.
Since this is the direct opposite of “The American Dream”, possibly the moniker “the American Nightmare” is appropriate.
Taking a step back, it is awful to consider that GreenTree, LLC had no interest in the debt, no interest in holding the property pre or post foreclosure, and had no material interest in the entire affair whatsoever, and yet they were the entity which sought to foreclose (or steal). Does it not appear as Les Trois Perdants with GreenTree, LLC acting as a shill?
For centuries promissory notes and the mortgages securing their repayment were held or assigned together. The separation of these two instruments, until recently was an anomaly and exception. Albeit no longer an anomaly, but rather the general business practice of approximately the last ten years, the SJC reaffirmed in Ibanez, that a trust implied by operation of law gave the note holder the right to sue to obtain an equitable assignment of the mortgage (U.S. Bank v. Ibanez, 458 Mass. 637 (2011) – which implies surprising possibilities (e.g. every note allegedly held in every securitized pool, would have an individual and related suit to perfect it’s claim). Implications aside, the court’s ruling established nonetheless a method by which the note holder (the person to whom the debt is owed) could be empowered to collect payment.
Incidentally, long before the bifurcation of the notes and mortgages was ubiquitous, this operation of law was periodically challenged by mortgage assignees who believed that they, as “mortgagees” could simply foreclose in their own names. However, since the 19th century, and as pointed out above, the SJC has ruled otherwise. In a series of decisions it articulated the rule that a mortgagee who has no interest in the debt underlying the note cannot conduct a foreclosure, insisting instead that that right is reserved for a holder of a valid note along with a valid mortgage.
Green Tree, LLC and their Government handlers suggest that the parts of the whole, when taken independently have the properties of the whole. That is to say in this case, that since the mortgage contains the power to foreclose, the mortgage must have with it all the powers of the note – this proposition is patently wrong, and is the fallacy of Division. The instruments may function properly together, but have incomplete authority independently – and that is exactly what long standing statute (as outlined below) has upheld.
In Summary, Ibanez brought to light that banks holding only notes have only an unsecured debt – that is to say one that could be negotiated like any other. Eaton, on the other hand brings to our attention something of far greater importance; namely that a holder of a mortgage alone (even if validly assigned), without proper ownership of the underlying debt, has in fact nothing.
Call us speculators, but if SJC affirms the lower court’s decision we have a funny feeling more than one banks share price might be adversely affected.
In the end, suggesting independent authority of the mortgage, regardless of any concern for the note or the debt is just a bad argument – it’s not only “Division” it is also a great candidate for the “Non Sequitur” argument of the year award.
GreenTree, LLC – Affirming the Consequent
A thorough discussion of Massachusetts foreclosure law can be found in Howe v. Wilder, 77 Mass. 267 (1858). which resolved a foreclosure dispute by holding that a mortgagee, without the note, could not foreclose on the mortgage.
The court goes on to elaborate that because the party who would otherwise seek to foreclose was owed no debt, he cannot recover possession:
“For in pursuing such a suit [the party] has only the rights of a mortgagee, and is limited by the restriction imposed upon him…if nothing is found due to the plaintiff, it follows by necessary implication, from the provisions of the statute, that he can recover no judgment at all; none to have possession at common law, because that is expressly prohibited; and none under the statute, because where there is no condition to be performed, there can be no failure of performance, and no consequences can follow a contingency which in nature of things can never occur.”
Suggesting that by being an assignee of the mortgage, encompasses the right to foreclose is simply “Affirming the Consequent” and is just another logical fallacy.
MGL 244 § 14 and the Straw Man
Bifurcating the note and the mortgage was an extraordinary circumstance when the legislature decided the subject laws. At the time these laws were ameliorated there was no reason to explicitly delineate between the debt and the mortgage instrument securing it. To argue, as Green Tree has, that the term “Mortgagee” as used in MGL 244 § 14 means also “naked mortgagee”, (a mortgage holder not having any interest in the underlying debt) is a “Straw Man“. This suggestion overlooks the historical context in which the law was authored, the rise of the mortgage securitization industry, its related practices and the compulsory changes to recording which has taken place over the last decade. It is to overlook the privatization of land records that (as far as we know), no elected official or law maker had blessed beforehand.
If Green Tree’s argument were accurate, they would not assign the mortgages to third party servicers at all, and rather continue to foreclose in MERS name (more efficient) as had been the practice until several states supreme courts ruled against it, citing the fact that MERS had no economic interest in the mortgage, which is “but an incident to the note” or “a mere technical interest” (Wolcott v. Winchester) – this of course reaffirms the spirit of the law which Henrietta Eaton asserts in her complaint.
In particular the court stated that the assignee of a “naked Mortgage”:
“…must have known that the possession of the debt was essential to an effective mortgage, and that without it he could not maintain an action to foreclose the mortgage.” Wolcott v. Winchester, 81 Mass. 462 (1860)
Despite all of this, the bright idea of the securitization industry was to simply transfer the mortgage instrument to the servicer – a related party, sort of.
If Eaton is not affirmed by the SJC, we might as well make Three Card Monte our national pastime and get rid of baseball altogether. In such a scenario handicapping the future of the US economy and the ability to affectively and profitably speculate in the CDS market will be “duck soup”.
The authority of the UCC codified at G.L.c. 106
Because the common law involves a great deal of common sense, it just so happens to be mirrored in the Uniform Commercial Code. In particular G.L.c. 106. Article 3 of the UCC governs the negotiation and enforcement of negotiable instruments, including promissory notes secured by mortgages. Section 3-301, like the common law, provides that one must hold a (valid) note in order to validly enforce it. This rule serves the purpose of protecting consumers and barrowers against the very real possibility of double liability created when a debt is enforced. As in the current matter, Green Tree, LLC or any other mere mortgagee (even if they could get a valid assignment), would have no power or authority to discharge the actual debt. Thus if the operation of law were in any other capacity than it currently is, the mortgagee could foreclose on a property, while the debtor would still be left with a valid debt outstanding to an entirely unrelated party.
This lends itself to the requirement for transparency. During the oral arguments before the SJC, one justice asked why it mattered if the homeowner knew to whom they owed their debt. The answer is that homeowners have an important role to play in the outcome of the final settlement and discharge of their debt, and are above all the most interested party in ensuring that their payments are in fact reducing the outstanding principle balance as they are made. Otherwise, they may as well be directed to make their payments to any random stranger. It is absurd to suggest that a debtor be required to simply make payments to anybody who asks for it. That is to suggest that he is not only a debtor-servant, but also a mindless sheep – then again, perhaps that is the desired outcome.
In fact the entire matter may only be possible in a non-judicial foreclosure state, for if it were a civil complaint for the collection of an amount due, than would the debt instrument itself not be scrutinized as a first priority in the proceedings? Perhaps small unimportant questions like who actually owns the debt and is bringing the action would be relevant under such circumstances.
The authority of loan contracts
In the end, the entire action by Fannie Mae and Green Tree, violates the very contract which is being disputed. Even if no other statues or laws had operated or ever existed, Eaton’s argument would survive on this one point alone – and Eaton is not unaccompanied – she stands with some 60 million other homeowners in the US with virtually identical contracts.
In the case of Eaton standard mortgage loan documents were used, and they essentially all look alike. The terms of Eaton’s mortgage contract, as with virtually all others, authorizes only the note holder to exercise the power of sale. The one concession Green Tree, LLC made was that they are not the note holder and have neither argued, nor provided evidentiary support for the claim, that a foreclosure by anyone other than the note holder was necessary (not that it would be possible).
A bitter Fruit: Double Liability
It has been said, “By their fruit you will recognize them. Do people pick grapes from thorn bushes, or figs from thistles?”. No, because “every good tree bears good fruit, but a bad tree bears bad fruit” . Is Green Tree’s lawyer actually advocating that homeowners should just rely on the banks and servicers to be “nice guys” and not go after the debtors twice? It is already known that certain elements in the industry were willing to sell the same note multiple times into multiple pools which given Burnett v. Pratt, 39 Mass. 556 (1839), presents interesting problems for RMBS investors, who were essentially their business partners. If the architects of these systems can sell the same note twice, to their own business partners and customers, why would they not try to also collect twice from their debt-servants, who rank many orders below business partners and real customers?
If the severity of compound interest is not enough, the result may be plan “B” – “doubling up” where needed.
If the fact that being named on a valid mortgage is not sufficient to authorize a foreclosure, than automatically the question becomes who holds the note? The answer to the latter question is a bit more serious, for in the answer lies a good deal more than the banks would like to reveal.
Does greed have rational limits? It does not and it cannot because greed is not rational to begin with. Since nobody knows how the foreclosing mortgagee would actually go about paying the note holder, are homeowners to rely on a system of document management (which usually involves an Iron Mountain truck, and a whole lot of paper shredding) to ensure that debt-servants are set free if they ever pay off their “debts”?
Did barrowers really sign up for that when they signed their mortgage and note? If not, when and where are the limits?
It’s only a matter of time
Homeowners must examine the assignments on their mortgages and notes. If a foreclosure is imminent, a preliminary injunction should be sought in order to have an opportunity to examine the documents thoroughly and also to give time to the SJC to issue its ruling – Jurisprudence matters. When the final Eaton ruling is taken together with Ibanez, there will be a sea change – it’s only a matter of time.
It seems reasonable that in a world where bandwidth intensive videos can be encoded and uploaded over a high speed 4G network from the New York Stock Exchange and on the Internet in 30 sec. using a smartphone with 64 gigs of memory (that can fit on a SanDisk card the size of your fingernail), and join billions of other files that have highly accurate GPS data embedded in their metadata, that finding a note for multiple six or seven figures debt and bringing it to court with you would really be no big deal – but apparently it is.
Foreclosures that took place before Ibanez, likely involve an assignment of the mortgage which is invalid because it would have been assigned post foreclosure (as was the common practice at the time), thus invalidating a huge number of existing foreclosures.
For foreclosures or those facing foreclosure in the post Ibanez era, than it is highly likely that the assignment of the mortgage is both invalid and fraudulent, as Mrs. McDonnell so accurately points out is endemic in most registry of deeds. If it’s the note than that servicers intend to rely on, they may need to dream up a new strategy, because those are all “missing” as we see in Eaton. New strategies it seems are now in short supply.
A few more questions and thoughts
The “pump and dump” is as old as “market places” are. Whether it’s a street vendor in morocco extolling the virtues of his wares he wants to sell, or a the salesmen of shares in Netflix and Linkedin at impossiblele valuations – this “pump and dump” technique often is done with considerable misrepresentations, which result in artificially high prices for a time, and makes true price discovery impossible for buyers.
If you’re on the wrong side of the transfer, as a buyer of such stocks or bonds, you would have claims against the salesman – it’s called securities fraud. Now this ‘old time’ operation has been executed in the real estate market as well, and real estate, although most people don’t think of it this way, is also a security just like any other (it’s really not the American Dream, as has been sold – because as pointed out above, when something goes beyond the parameters of a mere security, to that of a “dream”, no price is too high). Just like stocks, these securities were pumped, and then dumped (but only after the related CDS’s were purchased by the architects).
What’s being described is an activity based on fraudulent misrepresentations, like most other such schemes. The “Pump” part involved a lot of paper shuffling, so that when the “dump” took place, the profiteers could not be easily identified. The same is true today. That is why debt-servants are not allowed to know their lender-masters – because it is the beginning of the paper trail, and as any certified fraud examiner will indicate, it all starts with the paper trail.
By focusing the attention of the court and the people on the intricacies of the letter of the law – even though they are wrong at that as well, the banks are taking attention away from the more obvious question, which is why? Why fight to interpret the law that way? That is the real question: Why. Why not produce the note. Why not reunite the note with the Mortgage?
Why would notes go missing? These are not credit card bills, they are documents outlining typically multi-six figure sums, or seven figure sums in some cases. Isn’t it logical that these documents would be kept in a safe place? And tracked? How could so many notes just disappear?
Why would the SJC and the American people at large not be alarmed by entities who foreclose on a property and yet have no idea who actually holds the debt?
The securitization process, in which so many notes were resold is subtle, but complex and riddled with a taxonomy that makes it as understandable as a foreign language to the casual observer. Yet, more careful scrutiny reveals that there is nothing even vaguely sophisticated about it’s operation.
The business of taking homes without any debt being owed is so obvious and simple so as to lend itself to denial. For example, one member of the SJC panel actually asked the attorney for Eaton why the barrower needed to know who owned the debt that they were paying? We thought maybe it was a joke – sadly it may not have been.
Yet, we know that notes have been sold multiple times into multiple pools and trusts, thus creating multiple creditors.
Any consumer should want to know if there debt is actually going to be discharged, and in order to know this, they would have to know who the actual debt holder is.
These debts are not secured. They are negotiable. This week alone, there was talk of bankruptcy proceedings for Eastman Kodak and American Airlines, Friendly’s, after more than 80 years in business, including operating during the last depression, actually did file. As commercial entities, they will be allowed before, during and after bankruptcy to work with their creditors in a completely transparent way.
Why is the average American expressly forbidden this simple aspect of business dealing? Though they entered into such obligations at far greater disadvantage than their corporate cousins?
It is clear that by introducing multiple parties that there are conflicting incentives and interests. It was surprising that the SJC brought up inadvertently during the oral arguments that the lender may have contractually sold their rights to have any say whatsoever in negotiations with the debt holder.
It is now well established that the servicers have the greatest financial incentives to foreclose, and apparently answer to no one, perhaps not even the lender, who nobody appears to be able to find.
The following question regarding Green Tree, MERS and the Eaton case are worth asking:
– Why would they go to such great lengths to keep the “lender” or holder of the debt in “secret”? What is there to gain? Would it not be much more expeditious to just reunite the note with the mortgage and then foreclose?
– Foreclosing with just a mortgage used to be an anomaly? But now it is the rule – what changed? Why would lenders take such an extraordinary risk with trillions of dollars?
– Does the claim that the notes are “lost”, or “missing” seem credible in light of the extraordinary technological world we live in?
– Is the imbalance in power between the home buyer (as signer) and the lawyer (as author) of the contract important? 99% of home buyers had no clue what they were signing – their attorney’s didn’t understand the assignee aspect of MERS or how it functioned either.
– Why would the servicer hide the debt holder? Why go through all of this trouble? Is it because it is really the US government by proxy of Fannie and Freddie?
– Were the notes used in a pyramid scheme? Were they sold multiple times intentionally in order to accommodate increasing degrees of leverage that the derivatives market required to sustain itself?
– Are RMBS pools really “Dark Liquidity” or simply “Dark Pools” and is that why MERS is necessary?
A final note on reverse transfers
In the Commonwealth of Massachusetts servicers in possession of mortgages only (which is basically all of those who represent securitized notes) are barred by common law rule, by statute, by the Uniform Commercial Code, and by the terms of the mortgages themselves from conducting foreclosures. If they have already done so, those foreclosures are void. We believe these principles do and will extend beyond the commonwealth eventually to all of the US.
The reason the banks are fighting this is because there exists a very real fear that homeowners stuck with inflated debts, which are the equivalent to indentured servents, might actually gain some negotiating power to settle these debts, at prices which not only reflect the prudent risk management which should have taken place in prior years, but also the related and more realistic asset prices which should have prevailed at the time of the original transactions.
From a purely business point of view, the asset prices were inflated, and the average home buyer with a home loan vintage 2002-2007 had little or no choice in the setting of those prices. However, there is another group who did, and they were writing “loans” and selling them as fast as the CPU and the RAMM on MERS’ servers would allow them (thankfully cloud computing, with its superior ability to process data, and elastic memory and bandwidth wasn’t yet widely used).
Yet the securitization industry and their very elite and very wealthy captains are not having any of that – because it is a reverse transfer. To be a debt-servant is to be the servant of another man by force. Humans are not designed or built for that – that is a construct of an unfortunate human condition, which we should want to change.
How a mortgage payment can be made with fidelity every month into a authentic black hole, and the attendant psychology which enables this behavior is beyond the scope of this article. The Common Law, the MGL and UCC and even the contracts themselves make it clear though, if a mortgagor expects a discharge of the debt, they need to know who exactly they are paying.
Taking a step forward requires some courage, but less than those who have taken to the streets in NY, Boston or other cities – they are doing really hard and courageous work. Not paying a mortgage in light of the a priori evidence cannot even qualify as an act of civil disobedience. The average homeowner and mortgagor is not called to such a high calling in this instance – they are merely called to follow the mundane laws of the land which have been set down for over 150 years. It is just simple prudence. It is the lack of denial, and a willingness to recognize the truth, no matter how unpleasant. Participation in the system as it is, while concurrently declining to examine the issues intelligently is not defensible.
Paradoxically the hand of the strong which moved to Divide (the notes) and Affirm (title interest) – when taken in God’s hands, has destroyed (the notes) and preserved (the legitimate ownership).
About Gregory M. Lemelson
Author – Amvona.com blog. Entrepreneur. Find joy in teaching and writing. Founded companies in retail, real estate and Internet technology.
Summary (prepared by Suffolk University Law School)
Mortgage Foreclosure– This case deals with the validity of a foreclosure sale conducted by a mortgagee who did not hold the underlying promissory note.
Appealed From
Appeals Court, Single Justice, Justice Judd J. Carhart
Supreme Judicial Court FOR THE COMMONWEALTH OF MASSACHUSETTS NO. SJC-11041
HENRIETTA EATON, PLAINTIFF-APPELLEE, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION & ANOTHER, DEFENDANTS-APPELLANTS.
.
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ON APPEAL FROM THE APPEALS COURT SINGLE JUSTICE
BRIEF OF AMICUS CURIAE MARIE MCDONNELL, CFE
“It is incumbent upon consumers, their attorneys,
registry staff, clerks of court, and judges to learn
how to recognize these sham assignments because they
are corrupting the chain of title in our land records;
and because, once recorded, courts afford them
deference rather than seeing them for what they are:
counterfeits, forgeries and utterings.
The MERS System is no replacement for the timehonored
public land recording system that is the
foundation of our freedom, our prosperity, and our
American way of life. By privatizing property transfer
records MERS has been allowed to set up a “control
fraud” of epic proportions that has facilitated the
largest transfer of wealth in human history, and it
should be abolished.”
John O’Brien, Southern Essex District Register of Deeds in Salem, Massachusetts extends an invitation to banks and all attorney generals to visit his registry.
O’Brien who has been leading the national effort to hold lenders accountable and was the first in the nation to refuse to record robo-signed documents, has invited the CEO’s of the nation’s largest banks including Bank of America, JP Morgan Chase, Wells Fargo along with the 50 states’ attorneys general to come to the Salem Registry and view first-hand the damage that these banks and the Mortgage Electronic Registration System (MERS) has caused to thousands of Essex County homeowners’ chains of title.
“It’s as if a hurricane came through here,” said Register John O’Brien, referring to the financial havoc and damage done to property records at the Registry of Deeds.
“Following any disaster, the powers-that-be generally visit the scene to assess the damage. That is what I would like these major lenders and the attorneys general to do – a visit to my registry sooner rather than later, may help these lenders to truly appreciate the extent of the damage” O’Brien said.
O’Brien believes that a sweetheart deal, in the form of a settlement to grant lenders immunity from prosecution, is in the works. O’Brien stated, “There can be no settlement granting the lenders immunity and at the same time letting MERS of the hook”. “I believe the responsible thing to do would be to see the damage before they talk settlement. They owe the American people that. If they are truly sincere about cleaning up this mess then they should take me up on my offer”.
The settlement currently in negotiations with the banks is being led by Tom Miller, the Iowa Attorney General who just last week removed New York Attorney General Eric Schneiderman, a vocal critic of the proposed settlement. O’Brien has expressed his outrage over the ouster and has called for Miller to step aside. O’Brien said “we need more Eric Schneidermans fighting the fight. He is the voice of Main Street not Wall Street”. According to O’Brien, any settlement at this time would be a total sellout of the American property owner and their property rights.
We still do not know the extent of the damage and just how much they have fleeced from taxpayers in lost recording fees, which in my opinion run into billions of dollars.
These CEO’s have to step up and take full responsibility for what they have allowed to happen. They have played fast and loose with people’s property rights, and have corrupted the chains of title to hundreds of thousands of property owners across this country,” O’Brien says.
In addition, O’Brien believes that the only way lenders and the attorneys general can fully appreciate the ramifications of the schemes (including the recording of fraudulent documents, which in some cases were used to take people’s homes illegally; the use of robo-signers; and the failure to record assignments) is to travel to Salem, sit across the table from him and review the documents. Only then, will they fully understand the extent of the damage that’s been caused.
“Hopefully,” O’Brien says, “By viewing the thousands of fraudulent documents recorded in my Registry, they will begin to understand how serious this issue is and work with Registers of Deeds across this country to correct the wrongs that have been committed.”
“All I am looking for is justice for these homeowners. I have said all along, that the banks need to talk to Registers of Deeds. What better way, than to come to an actual Registry and see first-hand what I am talking about. It would be the responsible thing for them to do. We would be able to have an open and frank discussion which hopefully would lead to a solution. The last thing the American people need now is to have this issue swept under the rug and settled for pennies on the dollar,” O’Brien said.
NEW YORK (AP) — Lawmakers and enforcement agencies called for hearings and further investigation Tuesday after learning that the illegal practice known as robo-signing has continued in the mortgage industry.
The Associated Press reported on Monday that county officials in at least three states — Massachusetts, North Carolina and Michigan — say they have received thousands of mortgage documents with questionable signatures since last fall. That’s when forged signatures and false affidavits — also called robo-signing — led to a temporary halt to foreclosures. Banks and mortgage processers promised to stop the practice. But the findings of the county officials indicate that robo-signing is still a widespread problem.
Sen. Sherrod Brown, D-Ohio., chair of the Financial Institutions and Consumer Protection Subcommittee, said the subcommittee will hold a hearing on the robo-signing issue.
“Wall Street and some in Washington want us to believe that robo-signing is a thing of the past,” said Brown. “But the same risky practices that put our economy on the brink of collapse continue to infect the housing market.”
Rep. Maxine Waters, D-Calif., a senior member of the House Committee on Financial Services said the lenders who continue the practice “need to be investigated and prosecuted.” She told The Associated Press that she believed regulators should step in and that the absence of stronger regulation is “the reason why the system broke down in the first place.” She said the county officials’ findings show lenders will not stop practices like robo-signing on their own.
“(The lenders) have complete disregard for the damage they have already caused and have no intention of changing their ways,” said Waters, who also called for more hearings on the issue.
County officials who are responsible for keeping land records, including property deeds, say that they have received thousands of robo-signed documents filed in their offices since October.
In Essex County, Mass., the office that handles property deeds has received almost 1,300 documents since October with the signature of “Linda Green,” but in 22 different handwriting styles and with many different titles.
In Guilford County, N.C., the office that records deeds says it received 456 documents with suspect signatures from Oct. 1, 2010, through June 30. And in Michigan, a fraud investigator who works on behalf of homeowners says he has uncovered documents filed this year bearing the purported signature of Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates.
Early Tuesday, an official from the office of Minnesota attorney general, Lori Swanson, contacted the Essex County’s John O’Brien to get more information for its own investigation into robo-signing. The Massachusetts attorney general’s office also confirmed that it is meeting with several of the state’s 21 registers of deeds to assess the extent of robo-signing in the state.
Also on Tuesday, nine recorders of deeds in Illinois held a press conference to say they will assist the state’s attorney general Lisa Madigan who is investigating robo-signing in her state.
Rep. Waters, meanwhile, says the Office of the Comptroller of the Currency, or the OCC, is the main federal regulator for banks. As such, it’s the OCC’s responsibility to investigate the banks.
The OCC has been criticized by lawmakers and consumer advocates for going easy on banks in the past. The same criticism has resurfaced since the robo-signing scandal broke in September. Last fall, The Associated Press found that robo-signed documents led to banks wrongfully foreclosing on people who had paid their mortgages in full. When asked about the issue, an OCC spokesman flatly denied that any such thing had ever occurred.
The OCC partnered with other federal regulators and conducted a review of bank procedures including robo-signing in December. In April, the 14 largest national banks entered into a consent decree with the OCC in which they vowed to submit action plans as to how they would address such systemic issues as robo-signing.
Last week, the banks delivered those action plans to the OCC, which is now reviewing them, a spokesman said.
Mortgage industry employees are still signing documents they haven’t read and using fake signatures more than eight months after big banks and mortgage companies promised to stop the illegal practices that led to a nationwide halt of home foreclosures.
County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as “robo-signing,” remain widespread in the industry.
The documents have come from several companies that process mortgage paperwork, and have been filed on behalf of several major banks. One name, “Linda Green,” was signed almost two dozen different ways.
Lenders say they are working with regulators to fix the problem but cannot explain why it has persisted.
Last fall, the nation’s largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs, suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork.
Critics say the new findings point to a systemic problem with the paperwork involved in home mortgages and titles. And they say it shows that banks and mortgage processors haven’t acted aggressively enough to put an end to widespread document fraud in the mortgage industry.
“Robo-signing is not even close to over,” says Curtis Hertel, the recorder of deeds in Ingham County, Mich., which includes Lansing. “It’s still an epidemic.”
In Essex County, Mass., the office that handles property deeds has received almost 1,300 documents since October with the signature of “Linda Green,” but in 22 different handwriting styles and with many different titles.
Linda Green worked for a company called DocX that processed mortgage paperwork and was shut down in the spring of 2010. County officials say they believe Green hasn’t worked in the industry since. Why her signature remains in use is not clear.
“My office is a crime scene,” says John O’Brien, the registrar of deeds in Essex County, which is north of Boston and includes the city of Salem.
In Guilford County, N.C., the office that records deeds says it received 456 documents with suspect signatures from Oct. 1, 2010, through June 30. The documents, mortgage assignments and certificates of satisfaction, transfer loans from one bank to another or certify a loan has been paid off.
Suspect signatures on the paperwork include 290 signed by Bryan Bly and 155 by Crystal Moore. In the mortgage investigations last fall, both admitted signing their names to mortgage documents without having read them. Neither was charged with a crime.
And in Michigan, a fraud investigator who works on behalf of homeowners says he has uncovered documents filed this year bearing the purported signature of Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates. Isaacs’ name did not come up in last year’s investigations, but county officials across Michigan believe his name is being robo-signed.
O’Brien caused a stir in June at a national convention of county clerks by presenting his findings and encouraging his counterparts to investigate continued robo-signing.
The nation’s foreclosure machine almost came to a standstill when the nation’s largest banks suspended foreclosures last fall. Part of the problem, banks contended, was that foreclosures became so rampant in 2009 and 2010 that they were overwhelmed with paperwork.
The banks reviewed thousands of foreclosure filings, and where they found problems, they submitted new paperwork to courts handling the cases, with signatures they said were valid. The banks slowly started to resume foreclosures this winter and spring.
The 14 biggest U.S. banks reached a settlement with federal regulators in April in which they promised to clean up their mistakes and pay restitution to homeowners who had been wrongly foreclosed upon. The full amount of the settlement has not been determined. But it will not involve independent mortgage processing firms, the companies that some banks use to handle and file paperwork for mortgages.
So far, no individuals, lenders or paperwork processors have been charged with a crime over the robo-signed signatures found on documents last year. Critics such as April Charney, a Florida homeowner and defense lawyer, called the settlement a farce because no real punishment was meted out, making it easy for lenders and mortgage processors to continue the practice of robo-signing.
Robo-signing refers to a variety of practices. It can mean a qualified executive in the mortgage industry signs a mortgage affidavit document without verifying the information. It can mean someone forges an executive’s signature, or a lower-level employee signs his or her own name with a fake title. It can mean failing to comply with notary procedures. In all of these cases, robo-signing involves people signing documents and swearing to their accuracy without verifying any of the information.
Most of the tainted mortgage documents in question last fall were related to homes in foreclosure. But much of the suspect paperwork that has been filed since then is for refinancing or for new purchases by people who are in good standing in the eyes of the bank. In addition, foreclosures are down 30 percent this year from last. Home sales have also fallen. So the new suspect documents come at a time when much less paperwork is streaming through the nation’s mortgage machinery.
None of the almost 1,300 suspect Linda Green-signed documents from O’Brien’s office, for example, involve foreclosures. And Jeff Thigpen, the register of deeds in North Carolina’s Guilford County, says fewer than 40 of the 456 suspect documents filed to his office since October involved foreclosures.
Banks and their partner firms file mortgage documents with county deeds offices to prove that there are no liens on a property, that the bank owns a mortgage or that a bank filing for foreclosure has the authority to do so.
The signature of a qualified bank or mortgage official on these legal documents is supposed to guarantee that this information is accurate. The paper trail ensures a legal chain of title on a property and has been the backbone of U.S. property ownership for more than 300 years.
The county officials say the problem could be even worse than what they’re reporting. That’s because they are working off lists of known robo-signed names, such as Linda Green and Crystal Moore, that were identified during the investigation that began last fall. Officials suspect that other names on documents they have received since then are also robo-signed.
It is a federal crime to sign someone else’s name to a legal document. It is also illegal to sign your name to an affidavit if you have not verified the information you’re swearing to. Both are punishable by prison.
In Michigan, the attorney general took the rare step in June of filing criminal subpoenas to out-of-state mortgage processing companies after 23 county registers of deeds filed a criminal complaint with his office over robo-signed documents they say they have received. New York Attorney General Eric Schneiderman’s office has said it is conducting a banking probe that could lead to criminal charges against financial executives. The attorneys general of Delaware, California and Illinois are conducting their own probes.
The legal issues are grave, deeds officials across the country say. At worst, legal experts say, the document debacle has opened the property system to legal liability well beyond the nation’s foreclosure crisis. So someone buying a home and trying to obtain title insurance might be delayed or denied if robo-signed documents turn up in the property’s history. That’s because forged signatures call into question who owns mortgages and the properties they are attached to.
“The banks have completely screwed up property records,” says L. Randall Wray, an economics professor and senior scholar at the University of Missouri-Kansas City.
In the Massachusetts case, The Associated Press tried to reach Linda Green, whose name was purportedly signed 1,300 times since October. The AP, using a phone number provided by lawyers who have been investigating the documents since last year, reached a person who said she was Linda Green, but not the Linda Green involved in the mortgage investigation.
In the Michigan case, a lawyer for the Orlans Associates law firm, where Isaacs works, denies that Isaacs or the firm has done anything wrong. “People have signatures that change,” says Terry Cramer, general counsel for the firm. “We do not engage in ‘robo-signing’ at Orlans.”
To combat the stream of suspect filings, O’Brien and Jeff Thigpen, the register of deeds in North Carolina’s Guilford County, stopped accepting questionable paperwork June 7. They say they had no choice after complaining to federal and state authorities for months without getting anywhere.
Since then, O’Brien has received nine documents from Bank of America purportedly signed by Linda Burton, another name on authorities’ list of known robo-signers. For years, his office has regularly received documents signed with Burton’s name but written in such vastly different handwriting that two forensic investigators say it’s highly unlikely it all came from the same person.
O’Brien returned the nine Burton documents to Bank of America in mid-June. He told the bank he would not file them unless the bank signed an affidavit certifying the signature and accepting responsibility if the title was called into question down the road. Instead, Bank of America sent new documents with new signatures and new notaries.
A Bank of America spokesman says Burton is an assistant vice president with a subsidiary, ReconTrust. That company handles mortgage paperwork processing for Bank of America.
“She signed the documents on behalf of the bank,” spokesman Richard Simon says. The bank says providing the affidavit O’Brien asked for would have been costly and time-consuming. Instead, Simon says Bank of America sent a new set of documents “signed by an authorized associate who Mr. O’Brien wasn’t challenging.”
The bank didn’t respond to questions about why Burton’s name has been signed in different ways or why her signature appeared on documents that investigators in at least two states have deemed invalid.
Several attempts by the AP to reach Burton at ReconTrust were unsuccessful.
O’Brien says the bank’s actions show “consciousness of guilt.” Earlier this year, he hired Marie McDonnell, a mortgage fraud investigator and forensic document analyst, to verify his suspicions about Burton’s and other names on suspect paperwork.
She compared valid copies of Burton’s signature with the documents O’Brien had received in 2008, 2009 and 2010 and found that Burton’s name was fraudulently signed on hundreds of documents.
Most of the documents reviewed by McDonnell were mortgage discharges, which are issued when a home changes hands or is refinanced by a new lender and are supposed to confirm that the previous mortgage has been paid off. Bank of America declined comment on McDonnell’s findings.
In Michigan, recorder of deeds Hertel and his counterparts in 23 other counties found numerous suspect signatures on documents filed since the beginning of the year.
In June, their findings led the Michigan attorney general to issue criminal subpoenas to several firms that process mortgages for banks, including Lender Processing Services, the parent company of DocX, where Linda Green worked. On July 6, the CEO of that company, which is also under investigation by the Florida Attorney General’s office, resigned, citing health reasons.
Southern Essex Registry of Deeds Audit Reveals That 75% of Assignments of Mortgage Are Invalid; O’Brien Says Banks Responsible for an Epidemic of Fraud. Once again urges Attorney’s General to stop Bank settlement talks.
Yesterday at the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry. The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.
McDonnell’s Report includes the following key findings:
– Only 16% of assignments of mortgage are valid
– 75% of assignments of mortgage are invalid.
– 9% of assignments of mortgage are questionable
– 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute.
– The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%)
– There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.
McDonnell told O’Brien, “I have been auditing residential mortgage loans for the past twenty years on a one-by-one basis. In the process, I have been cataloging the ramp up in predatory lending and mortgage fraud for all of those years, but I was not prepared for the shocking results of my audit. What this means is that the degradation in standards of commerce by which the banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them because the assignments of mortgage were never prepared, executed and delivered to them in the normal course of business at the time of the transaction. In a blatant attempt to engineer a ‘fix’ to the problem, the banks set up in-house document execution teams, or outsourced the preparation of their assignments to third parties who manufactured them out of thin air without researching who really owns the mortgage.”
O’Brien asked McDonnell what this means for his constituents. “It is vitally important for your constituents to know that if they are in foreclosure now or if their homes have been foreclosed upon, they can stop the foreclosure from proceeding, or institute a court action to vacate a completed foreclosure. The Massachusetts Supreme Judicial Court has established the law of the land in its decisions U.S. Bank, N.A. v. Ibanez and Wells Fargo Bank, N.A. v. LaRace and I can tell you that every single assignment of mortgage that was recorded for the purpose of foreclosing the homeowner is invalid, overtly fraudulent, or criminally fraudulent. My findings also show that your constituents who are not in foreclosure, and have never been delinquent in their payments also have clouds on title due to the recording of defective and invalid discharges and assignments of mortgage.”
“My registry is a crime scene as evidenced by this forensic examination,” stated John O’Brien. “This crime that has affected thousands of homeowners in Essex County who, through no fault of their own, have had their property rights trampled on and their chain of title compromised. This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes. This is disgusting, and this is criminal,” said O’Brien.
O’Brien continued “Once again I am asking Attorney General Martha Coakley and the other state Attorney’s General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked the taxpayers for their failure to pay recording fees.”
This report was published with Marie McDonnell’s permission. Please note: This hard work was done on a pro bono basis and Marie’s contribution to you all.
TO: John O’Brien
Register of Deeds Southern Essex County, Commonwealth of Massachusetts
FROM: Jamie Ranney, Esq.
Jamie Ranney, PC
4 Thirty Acres Lane
Nantucket, MA 02554
508.228.9224 (tel)
508.228-4752 (fax)
DATE: June 18, 2011
RE: Legal authority of Registers of Deeds in Massachusetts to reject document(s) and/or instrument(s) for recording in their registries
QUESTION PRESENTED
What legal authority does a Register of Deeds in Massachusetts have to reject for recording (unregistered land) or registration (Land Court registered land) document(s) and/or instrument(s) in his Registry and where is such legal authority derived from?
SUMMARY
It is without question that a Register of Deeds has an important and fiduciary relationship and responsibility – especially in the Commonwealth where his position is elected – to all of his constituents, as well as to the public at large, all of whom rely and who should be able to rely on the Register’s efforts, supervision, and oversight in assuring, maintaining and promoting the integrity, transparency, accuracy, and consistency of a County’s land records.
The Register’s work and supervision of his registry most often revolves around tasks and responsibilities that are generally ministerial in nature. The Register is typically concerned with the daily task of recording of legal document(s) and/or instrument(s) affecting real property where such document(s) and/or instrument(s) are properly presented to the registry for recording on the public land records.
However, the Register’s fiduciary duty goes well beyond these usual ministerial acts in circumstances where the Register has actual knowledge or a subjective good-faith belief/basis for believing that document(s) and/or instrument(s) being presented for recording or registration in the registry for which he has responsibility are fraudulent or otherwise not executed or acknowledged under applicable law. In such cases the Register may lawfully refuse to record such document(s) and/or instrument(s).
If you’ve ever bought or sold a home…you need to hear this. Hank found a signature buried deep in your mortgage documents could be a ticking time bomb for thousands of Massachusetts homeowners. For those in foreclosure: it could be a lifesaver. It’s a shocking, amazing, unbelievable story. Hank Investigates.
Working with island attorney Jamie Ranney, state Representative Tim Madden has sponsored a bill that would address a number of controversial issues surrounding contested foreclosures cases, including the valid recording of assignments of securitized loans, so-called “robo-signing” by lenders and their agents, and perceived abuses by Mortgage Electronic Registration System, or MERS.
This is a very important bill to start cleaning up the mess created by the banks in the foreclosure crisis that is sweeping MA and the rest of the country.
Highlights include the elimination of MERS’s ability to “hide” transactions and avoid recording fees, defining what a mortgagee is in MA, requiring that all notary acknowledgements be completed in accordance with the requirements for notaries laid down by the Governor and others.
PLEASE forward this to as many people as you know that can contact their MA state Senator AND Rep. and send in written support for it.
Massachusetts’s highest court is poised to rule on whether foreclosures in the state should be undone because securitization-industry practices violate real- estate law governing how mortgages may be transferred.
The fight between homeowners and banks before the Supreme Judicial Court in Boston turns on whether a mortgage can be transferred without naming the recipient, a common securitization practice. Also at issue is whether the right to a mortgage follows the promissory note it secures when the note is sold, as the industry argues.
A victory for the homeowners may invalidate some foreclosures and force loan originators to buy back mortgages wrongly transferred into loan pools. Such a ruling may also be cited in other state courts handling litigation related to the foreclosure crisis.
“This is the first time the securitization paradigm is squarely before a high court,” said Marie McDonnell, a mortgage-fraud analyst in Orleans, Massachusetts, who wrote a friend-of-the-court brief in favor of borrowers. The state court, under its practices, is likely to rule by next month.
Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether hundreds of thousands of foreclosures were properly documented as the housing market collapsed. The probe came after JPMorgan Chase & Co. and Ally Financial Inc. said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp. froze U.S. foreclosures. Massachusetts is one of 27 states where court supervision of foreclosures generally isn’t required.
They did such a good job depressing the housing market and sending the economy into a tailspin, why not trust the banking cabal with keeping track of all property titles?
John O’Brien, the Essex County register of deeds, isn’t buying it, and neither should you.
O’Brien, of Lynn, is in the forefront of a national effort to challenge the policies and practices of the Mortgage Electronic Registration Systems Inc. (MERS). The agency was established in 1995 by a group of banking conglomerates including Bank of America, Countrywide Home Loans and Wells Fargo, to keep track of loans issued against property titles — a task previously performed by the public registries of deeds.
In a Nov. 18 letter to Attorney General Martha Coakley, O’Brien alleged that MERS “has failed to pay the proper recording fees required under Massachusetts statute when a lender assigns a mortgage to another entity.” And this week Coakley announced that she will join her colleagues in several other states in an investigation to see whether MERS is skirting laws regarding such transactions.
by Jamie Ranney, Esq.
Jamie Ranney, PC
4 Thirty Acres Lane
Nantucket, MA 02554 jamie@nantucketlaw.pro
508-228-9224
This memo will focus on MERS-designated mortgages in Massachusetts.
In this author’s opinion two (2) things are evident after a survey of Massachusetts law.
First, MERS cannot be a valid “mortgagee” under Massachusetts law and thus MERS designated mortgages are invalid in the Commonwealth of Massachusetts.
This is because MERS-designated mortgages by definition “split” the security instrument (the mortgage) from the debt (the promissory note) when they are signed. This “split” invalidates the mortgage under Massachusetts law. Where the security interest is invalid upon the signing of the mortgage, MERS cannot occupy the legal position of a “mortgagee” under Massachusetts law no matter what language MERS inserts into their mortgages that purports to give them the legal position of “mortgagee”. Since MERSdesignated mortgages are invalid at their inception, it follows logically therefore that MERS mortgages are not legally capable of being recorded in the Commonwealth of Massachusetts by its Registers of Deeds.
Second, even if a MERS-designated mortgage were found to be a valid security instrument in Massachusetts, each and every assignment of the mortgage and note “behind” a MERS-designated mortgage must be recorded on the public land records of the Commonwealth in order to comply with the Massachusetts recording statute at M.G.L. c. 183, s. 4 which requires that “conveyances of an estate” be recorded to be valid. A mortgage is a “conveyance of an estate” under Massachusetts law. Since MERS-designated mortgages exist for the primary purpose of holding “legal” title on the public land records while the “beneficial” interest is transferred and sold multiple times (and a mortgage cannot exist without a note under Massachusetts law), MERS-mortgages unlawfully avoid recording fees due the Commonwealth for the transfer(s) of interests under MERS-designated mortgages.
“If you tell a lie that’s big enough, and you tell it often enough, people will believe you are telling the truth, even when what you are saying is total crap.”1
Bay State lawyers who specialize in fighting home seizures are declaring war on the banking industry, which is admitting that thousands of U.S. foreclosure cases might involve flawed paperwork.
“Foreclosure defense and fraud litigation is going to make (1998’s $200 billion tobacco-industry settlement) look like a grocery-store slip-and-fall case,” Nantucket lawyer Jamie Ranney predicted after Bank of America halted foreclosures in 23 states over the weekend.
The moratorium, which GMAC and JP Morgan Chase launched last week, doesn’t currently include Massachusetts. But Attorney General Martha Coakley has asked lenders to add the Bay State to the list.
![[VIDEO] Essex County, MA Locates 6,000+ DOCx “Linda Green” Documents](https://stopforeclosurefraud.com/wp-content/themes/gazette/thumb.php?src=wp-content/uploads/2011/05/linda-green2.jpg&w=100&h=57&zc=1&q=90)
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