notes | FORECLOSURE FRAUD | by DinSFLA - Part 2

Tag Archive | "notes"

Delaware Attorney General Beau Biden also intends to intervene in the Bank of America case

Delaware Attorney General Beau Biden also intends to intervene in the Bank of America case


Lets not forget some of the trusts in the settlement were established under Delaware law…

(Reuters) –

A day after New York’s attorney general called Bank of America Corp’s (BAC.N) $8.5 billion mortgage-backed securities settlement “unfair” and “inadequate”, another state attorney general hinted he may also oppose the deal.

Delaware Attorney General Beau Biden plans on filing a motion to intervene next week, said an attorney from his office on Friday.

[REUTERS]

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New York Attorney General Accuses Bank Of New York Mellon Of Fraud, Moves To Block Bank Of America’s Mortgage Deal

New York Attorney General Accuses Bank Of New York Mellon Of Fraud, Moves To Block Bank Of America’s Mortgage Deal


First broke on this site last year, a Bank of America executive, Linda DeMartini, testified that Countrywide routinely did not convey crucial documents for loans sold to investors in KEMP v. Countrywide.

HuffPO

WASHINGTON — New York Attorney General Eric Schneiderman asked a state judge to reject a proposed $8.5 billion settlement agreement over soured loans between Bank of America and a group of investors, claiming in court documents that a separate bank representing the investors committed fraud for failing to ensure that the mortgage securities were created in accordance with state law and for failing to act in the investors’ best interest.

Bank of New York Mellon, the trustee representing the investors, “knowingly, repeatedly, and consistently” misled investors into thinking that the mortgage bonds were created properly, Schneiderman said in court documents. BNY Mellon also put its own interests before those of the investors it’s supposed to represent, he said.

[HUFFINGTONPOST]

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MBIA Ins. Corp. v Countrywide Home Loans, Inc. | NY Appeals Court “Fraud, Breach, Securitization, MBS”

MBIA Ins. Corp. v Countrywide Home Loans, Inc. | NY Appeals Court “Fraud, Breach, Securitization, MBS”


SUPREME COURT, APPELLATE DIVISION

[*1]MBIA Insurance Corporation, Plaintiff-Respondent-Appellant,

v

Countrywide Home Loans, Inc., et al., Defendants-Appellants-Respondents, Bank of America Corp., Defendant.

Cross appeals from the order of the Supreme Court, New York County (Eileen Bransten, J.), entered April 29, 2010, which, to the extent appealed from as limited by the briefs, granted the Countrywide defendants’ CPLR 3211 motion to dismiss the amended complaint to the extent of dismissing the negligent misrepresentation claim and narrowing the claim for breach of the implied duty of good faith and fair dealing, and denied said defendants’ motion to dismiss the fraud claim, and from the order, same court and Justice, entered July 13, 2009, which granted in part and denied in part the Countrywide defendants’ motion to dismiss the original complaint.

First Judicial Department
Angela M. Mazzarelli,J.P.
David B. Saxe
Dianne T. Renwick
Leland G. DeGrasse
Roslyn H. Richter, JJ.
4636-
Index 602825/08
4636A

RICHTER, J.

Plaintiff MBIA Insurance Corporation (MBIA) is in the business of providing financial guarantee insurance and other forms of credit protection on financial obligations. Defendant Countrywide Financial Corporation (Countrywide Financial), itself or through its subsidiaries, is engaged in mortgage lending and other real estate finance related businesses, including mortgage banking, securities dealing and insurance underwriting. Defendant Countrywide Home Loans, Inc. (Countrywide Home) originates residential home mortgage loans and, together with defendant Countrywide Home Loans Servicing LP (Countrywide Servicing), services those loans. Defendant Countrywide Securities Corporation (Countrywide Securities), a registered broker-dealer, underwrites offerings of mortgage-backed securities.[FN1]

In this action, MBIA alleges that the Countrywide defendants (collectively Countrywide) committed fraud and breached certain contracts in connection with the securitization of pools of residential mortgages [FN2]. Securitization involves packaging numerous mortgage loans into a trust, issuing debt securities in the trust and selling those notes, known as residential mortgage-backed securities, to investors. The securities are backed by the mortgages, and the borrowers’ payments of principal and interest on their mortgage loans are used to pay the investors who purchased the securities.

According to the amended complaint, Countrywide Home originated or acquired residential mortgages, selected certain of those loans for securitization and transferred them into Countrywide-created trusts that issued the notes. Either Countrywide Home or Countrywide Servicing acted as the servicer for the mortgage loans. Countrywide Securities underwrote the securitizations and sold the securities to investors.

In order to make the securities more marketable, Countrywide engaged MBIA to provide [*3]financial guarantee insurance. Between 2002 and 2007, MBIA entered into 17 insurance contracts with Countrywide Home and Countrywide Servicing relating to 17 of Countrywide’s securitizations; 15 of these, spanning from 2004 through 2007, are at issue in this action. Each securitization generally comprised one or two pools of mortgage loans consisting of between approximately 8,000 and 48,000 loans. All of the loans in the securitizations were either home equity lines of credit (HELOCs) or closed-end second mortgages (CESs).[FN3]

Pursuant to the insurance contracts, MBIA guaranteed the payments of interest and principal to the investors. Because the trusts’ obligations were backed by MBIA, in its capacity as insurer, any shortfalls in trust payments to the investors would be covered by MBIA. According to the amended complaint, MBIA’s guarantee allowed Countrywide to market the securities based on a AAA credit rating, rather than the lower credit rating the notes would otherwise have obtained.

In the late fall of 2007, there was a material increase in delinquencies, defaults and subsequent charge-offs of the loans underlying the securitizations. As a result, the trusts were unable to meet their payment obligations to the investors who held the securities and MBIA was forced to pay out on its insurance policies. As of August 29, 2009, MBIA had paid $1.4 billion on its guarantees and faces future claims in excess of hundreds of millions of dollars more.

MBIA commenced this action alleging that the various Countrywide entities made material misrepresentations and breached warranties concerning the origination and quality of the mortgage loans underlying the securitizations. MBIA alleges that Countrywide falsely represented that the loans were made in strict compliance with its underwriting standards and guidelines, as well as industry standards. In fact, MBIA claims, Countrywide abandoned those guidelines by knowingly lending to borrowers who could not afford to repay the loans, or who committed fraud in loan applications or whose applications could not satisfy basic criteria for responsible lending.

For each securitization, Countrywide Home solicited bids from MBIA and provided it with “loan tapes” – key statistics about each underlying loan in the pool – that purportedly contained materially false information indicating that the borrowers were more creditworthy than [*4]they actually were [FN4]. In addition, Countrywide is alleged to have falsely represented that appraisals of residential properties were conducted by independent third-party appraisers. In fact, MBIA alleges, the appraisers were not independent but rather were affiliated with Countrywide, which led to a conflict of interest and increased the risk of inflated appraisals. In addition, Countrywide Securities gave MBIA prospectuses for the securities MBIA was going to insure. MBIA alleges that these documents too contained false representations.

Countrywide also provided MBIA with “shadow ratings” on the proposed pools of mortgage loans selected for the securitizations. A shadow rating, issued by a credit rating agency based on information provided by Countrywide as to the credit quality of the mortgage loans, represents the rating the securitization would have had without MBIA’s financial guarantee. All of the securitizations had shadow ratings of at least BBB- or the equivalent. MBIA contends that in the absence of credit quality reflected by a shadow rating of at least BBB-, it would not have agreed to provide the financial guarantees. MBIA alleges that the shadow ratings were false, misleading or inflated.

According to the amended complaint, as a result of Countrywide’s alleged misconduct and fraudulent misrepresentations concerning the quality of the loans underlying the securitizations, thousands of mortgage loans went into default and MBIA was forced to pay out on its guarantees. MBIA contends that if it had known that Countrywide’s representations about the loans were false, MBIA would never have guaranteed the notes and suffered the losses alleged.

In its amended complaint, MBIA asserts causes of action against the various Countrywide entities for, inter alia, fraud, negligent misrepresentation and breach of the implied duty of good faith and fair dealing [FN5]. Countrywide moved to dismiss these claims pursuant to CPLR 3211(a)(1) and (7), and in a decision entered April 29, 2010, the motion court dismissed the negligent misrepresentation cause of action, but declined to dismiss the fraud cause of action. With respect to the breach of the implied duty of good faith and fair dealing cause of action, the court dismissed the claim except for MBIA’s allegation that Countrywide deliberately refused to take corrective action on defaulting loans so that it could collect more fees. Both plaintiff and Countrywide now appeal.

The motion court properly concluded that the fraud cause of action is not duplicative of the contract claim alleging breaches of certain representations and warranties. In order to [*5]establish fraud, a plaintiff must show a material misrepresentation of an existing fact, made with knowledge of its falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages (Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]). General allegations that a defendant entered into a contract with the intent not to perform are insufficient to support a fraud claim (New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]; Univec, Inc. v American Home Prods. Corp., 265 AD2d 403, 403 [1999]).

A fraud claim will be upheld when a plaintiff alleges that it was induced to enter into a transaction because a defendant misrepresented material facts, even though the same circumstances also give rise to the plaintiff’s breach of contract claim (First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 291-292 [1999]). “Unlike a misrepresentation of future intent to perform, a misrepresentation of present facts is collateral to the contract . . . and therefore involves a separate breach of duty” (id. at 292; see also Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986]; GoSmile, Inc. v Levine, 81 AD3d 77, 81 [2010]; Selinger Enters., Inc. v Cassuto, 50 AD3d 766, 768 [2008]; WIT Holding Corp. v Klein, 282 AD2d 527, 528 [2001]). We find that MBIA has sufficiently pleaded a fraud independent of the contract claim. The amended complaint alleges that: (i) for each securitization, Countrywide Home provided MBIA with loan documentation, including requests for bids, loan tapes and underlying transaction documents; (ii) representations made in this documentation, such as the loan-to-value ratio, the debt-to-income ratio and the borrower’s FICO score, were false and misleading; (iii) for each securitization, Countrywide Securities provided MBIA with prospectuses; (iv) these prospectuses contained false representations about Countrywide’s compliance with its underwriting guidelines, the independence of the third-party appraisers, and Countrywide’s knowledge of facts that would have caused a reasonable originator to conclude that a borrower would not be able to repay the loan; (v) Countrywide provided MBIA with false, misleading or inflated “shadow ratings” for the loans selected for securitization; (vi) Countrywide made regular presentations to MBIA falsely representing its risk-management systems and loan origination practices; and (vii) all of these representations were made with knowledge of their falsity and to induce MBIA to enter into the insurance agreements. MBIA further alleges that Countrywide Financial directed the activities of Countrywide Home and Countrywide Securities.

Because MBIA alleges misrepresentations of present facts, and not future intent, made with the intent to induce MBIA to insure the securitizations, the fraud claim survives (see First Bank, 257 AD2d at 292 [“defendants intentionally misrepresented material facts about various individual loans so that they would appear to satisfy [the] warranties” in the parties’ agreements]). It is of no consequence that some of the allegedly false representations are also contained in the agreements as warranties and form a basis of the breach of contract claim (see id. [“a fraud claim can be based on a breach of contractual warranties notwithstanding the existence of a breach of contract claim”]; Jo Ann Homes at Bellmore v Dworetz, 25 NY2d 112, 119-121 [1969] [allowing fraud claim to proceed in tandem with a contract claim, where the seller misrepresented facts as to the present condition of his property, even though these facts [*6]were warranted in the parties’ contract]). “It simply cannot be the case that any statement, no matter how false or fraudulent or pivotal, may be absolved of its tortious impact simply by incorporating it verbatim into the language of a contract” (In re CINAR Corp. Secs. Litig., 186 F Supp 2d 279, 303 [ED NY 2002]).

There is no merit to Countrywide’s claim that the fraud cause of action fails to satisfy the particularity pleading requirements of CPLR 3016(b). Although CPLR 3016(b) requires a plaintiff to detail the allegedly fraudulent conduct, “that requirement should not be confused with unassailable proof of fraud” (Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 492 [2008]). The amended complaint sufficiently identifies Countrywide’s misrepresentations and describes when and how they were made to MBIA, including through false and misleading loan tapes and prospectuses. The fraud claim also lists 4,689 loans that allegedly failed to comply with Countrywide’s underwriting guidelines, specifies that the defective loans had debt-to-income ratios or combined loan-to-value ratios exceeding maximum guideline levels and alleges that the loans were approved on the basis of unverified borrower-stated income that was patently unreasonable. These allegations are “sufficient to permit a reasonable inference of the alleged conduct” (id. at 492). Furthermore, the amended complaint sufficiently identifies Countrywide Securities and Countrywide Financial’s roles in the alleged fraud.

We reject Countrywide’s contention that the fraud claim should have been dismissed for failure to plead a causal link between Countrywide’s alleged conduct and MBIA’s damages. To demonstrate fraud, a plaintiff must show, inter alia, that a defendant’s misrepresentations were the direct and proximate cause of the claimed losses (Laub v Faessel, 297 AD2d 28, 30 [2002]). “A fraudulent misrepresentation is a legal cause of a pecuniary loss resulting from action or inaction in reliance upon it if, but only if, the loss might reasonably be expected to result from the reliance” (Stutman v Chemical Bank, 95 NY2d 24, 30 [2000], quoting Restatement [Second] of Torts § 548A).

The amended complaint alleges that (i) Countrywide knowingly lent to borrowers who could not afford to repay their loans, who committed fraud in loan applications, or who otherwise did not satisfy the basic risk criteria for prudent and responsible lending that Countrywide claimed to use; (ii) Countrywide falsely represented to MBIA that the loans were made in strict compliance with its underwriting standards and guidelines, and made numerous other misrepresentations about the quality of the loans; (iii) the number of delinquencies and defaults was extremely high because the loans materially failed to comply with Countrywide’s underwriting guidelines; (iv) a review conducted by MBIA revealed that 91% of the defaulted or delinquent loans showed material discrepancies from underwriting guidelines; and (v) as a result of the defaults, MBIA has been forced to make billions of dollars in claims payments on the insurance agreements.

These allegations are sufficient to show loss causation since it was foreseeable that MBIA would suffer losses as a result of relying on Countrywide’s alleged misrepresentations about the mortgage loans (see Silver Oak Capital L.L.C. v UBS AG, 82 AD3d 666, 667 [2011] [loss causation sufficiently alleged “since it was foreseeable that (the plaintiffs) would sustain a [*7]pecuniary loss as a result of relying on (the defendant’s) alleged misrepresentations”]; Teamsters Local 445 Frgt. Div. Pension Fund v Bombardier, Inc., 2005 US Dist LEXIS 19506, *57-58 [SD NY 2005]; see also Hotaling v Leach & Co., 247 NY 84, 93 [1928] [“The loss sustained is directly traceable to the original misrepresentation of the character of the investment the plaintiff was induced to make”]). It cannot be said, on this pre-answer motion to dismiss, that MBIA’s losses were caused, as a matter of law, by the 2007 housing and credit crisis (see In re Countrywide Fin. Corp. Sec. Litig., 588 F Supp 2d 1132, 1174 [CD Cal 2008] [it is the job of the fact-finder to determine which losses were proximately caused by misrepresentations and which are due to extrinsic forces]).

The motion court properly dismissed the negligent misrepresentation cause of action. A claim for negligent misrepresentation requires a showing of a special relationship of trust or confidence between the parties which creates a duty for one party to impart correct information to another (OP Solutions, Inc. v Crowell & Moring, LLP, 72 AD3d 622, 622 [2010]; Hudson Riv. Club v Consolidated Edison Co. Of N.Y., 275 AD2d 218, 220 [2000]). Generally, a special relationship does not arise out of an ordinary arm’s length business transaction between two parties (Aerolineas Galapagos, S.A. v Sundowner Alexandria, LLC, 74 AD3d 652, 653 [2010]; ESE Funding SPC Ltd. v Morgan Stanley, 68 AD3d 676, 677 [2009]).

The allegations in the amended complaint are insufficient to show that MBIA and Countrywide shared the type of business relationship that would give rise to a duty on the part of Countrywide to impart correct information. The transactions in question were conducted by two sophisticated commercial entities: MBIA, a long-established insurance company experienced in writing financial guarantee policies, and Countrywide, then an industry leader in the residential mortgage industry. MBIA’s claim of a long-standing relationship between the parties is belied by the allegations in the amended complaint that MBIA insured only two Countrywide securitizations in a short period prior to the transactions in question. MBIA and Countrywide’s limited prior dealings do not elevate this arm’s length transaction into a relationship of trust or confidence.

The claim that Countrywide had superior knowledge of the particulars of its own business practices is insufficient to sustain the cause of action (see Sebastian Holdings, Inc. v Deutsche Bank AG, 78 AD3d 446, 447 [2010] [“Plaintiff’s alleged reliance on defendant’s superior knowledge and expertise in connection with its foreign exchange trading account ignores the reality that the parties engaged in arm’s-length transactions pursuant to contracts between sophisticated business entities that do not give rise to fiduciary duties”]). Because MBIA has failed to allege facts showing that these sophisticated commercial entities engaged in anything more than an arm’s length business transaction, the negligent misrepresentation claim was properly dismissed.

The motion court should have dismissed in its entirety the cause of action for breach of the implied duty of good faith and fair dealing. Both the claim as pleaded in the amended complaint and the claim as upheld by the motion court are duplicative of the breach of contract claims because they arise from the same facts (see Logan Advisors, LLC v Patriarch Partners, [*8]LLC, 63 AD3d 440, 443 [2009]). MBIA’s newly-crafted claim on appeal fares no better. The allegation that Countrywide exercised its discretion in bad faith merely restates the contract-based claims that Countrywide failed to abide by industry standards.

Accordingly, the order of the Supreme Court, New York County (Eileen Bransten, J.), entered April 29, 2010, which, to the extent appealed from, as limited by the briefs, granted the Countrywide defendants’ CPLR 3211 motion to dismiss the amended complaint to the extent of dismissing the negligent misrepresentation claim and narrowing the claim for breach of the implied duty of good faith and fair dealing, and denied said defendants’ motion to dismiss the fraud claim, should be modified, on the law, to dismiss the implied duty claim in its entirety, and otherwise affirmed, without costs. The appeals from the order, same court and Justice, entered July 13, 2009, which granted in part and denied in part the Countrywide defendants’ motion to dismiss the original complaint, should be dismissed, without costs, as moot.

All concur.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered April 29, 2010, modified, on the law, to dismiss the implied duty claim in its entirety, and otherwise affirmed, without costs. Appeal and cross-appeal from order, same court and Justice, entered July 13, 2009, dismissed, without costs, as moot.

Opinion by Richter, J. All concur.
Mazzarelli, J.P., Saxe, Renwick, DeGrasse, Richter, JJ.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JUNE 30, 2011 [*9]

CLERK

Footnotes

Footnote 1: Countrywide Home, Countrywide Servicing and Countrywide Securities are all wholly-owned subsidiaries of Countrywide Financial. After the events set forth in the amended complaint, defendant Bank of America merged with Countrywide Financial and acquired these subsidiaries. Bank of America is not a party to this appeal.

Footnote 2: The facts set forth here are from the amended complaint which, unless contradicted by documentary evidence, must be accepted as true for purposes of this CPLR 3211 motion.

Footnote 3: With a HELOC, the equity in the property collateralizes a specified line of credit that may be drawn down by the borrower. A CES is also collateralized by the borrower’s equity, but the loan is of a fixed amount. Both HELOCs and CESs are second liens on residential property and are junior in priority to the first lien mortgage. Thus, if the property is foreclosed, the proceeds must be used to fully satisfy the first lien before the second lien is paid. Accordingly, both HELOCs and CESs present more risk than a first-lien mortgage.

Footnote 4: The loan tapes generally included information such as the loan-to-value ratio for each loan, the debt-to-income ratio for each borrower, and the borrower’s FICO score, which measured the borrower’s creditworthiness.

Footnote 5: Since MBIA’s original complaint was superseded by the amended complaint, we dismiss as moot the appeal and cross-appeal from the motion court’s July 13, 2009 order addressed to the original complaint.

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Prof. Levitin | About Those Notes…Evidence of Securitization Fail

Prof. Levitin | About Those Notes…Evidence of Securitization Fail


You’re either pregnant or you ain’t. Can’t be both!

Credit Slips-

Since last October, shortly after the robosigning scandal broke, I’ve been talking until I turned blue in the face about robosigning being the tip of the iceberg with mortgage problems and that the real issue was chain of title. Robosigning appeared to be an almost unexpected deposition by-product; the real goal in the depositions that uncovered the robosigning was exposing the backdating of mortgage endorsement. And that they did–the notaries’ whose seals were on the documents didn’t have their commissions when the assignments supposedly took place.

But why would anyone bother backdating mortgage assignments? …


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Fortune Confirms Pervasive Defects in Bank of America Mortgage Documents

Fortune Confirms Pervasive Defects in Bank of America Mortgage Documents


Naked Capitalism-

Do you remember the brouhaha over testimony by a senior executive in Countrywide’s mortgage servicing unit last year? It called into question whether mortgages had been conveyed properly to securitizations, which in turn would impair Bank of America’s ability to foreclose.

Let me refresh your memory. As we wrote last year:

Testimony in a New Jersey bankruptcy court case provides proof of the scenario we’ve depicted on this blog since September, namely, that subprime originators, starting sometime in the 2004-2005 timeframe, if not earlier, stopped conveying note (the borrower IOU) to mortgage securitization trust as stipulated in the pooling and servicing agreement….

As we indicated back in September, it appeared that Countrywide, and likely many other subprime orignators quit conveying the notes to the securitization trusts sometime in the 2004-2005 time frame. Yet bizarrely, they did not change the pooling and servicing agreements to reflect what appears to be a change in industry practice. Our evidence of this change was strictly anecdotal; this bankruptcy court filing, posted at StopForeclosureFraud provides the first bit of concrete proof. The key section:

As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide’s foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affIXed to the note. She testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents.

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At Bank of America, more incomplete mortgage docs raise more questions

At Bank of America, more incomplete mortgage docs raise more questions


Abigail Field-

Fortune examined hundreds of foreclosure documents to determine the validity of mortgage securitizations after Bank of America debunked testimony about them last fall. The results raise more questions than they answer.

Are Countrywide mortgage-backed securities really mortgage-backed? Do banks even have the legal right to foreclose on certain homes?


Check out the related posts below …

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Rule of Law: Banker Criminality Demands Prosecution – Barry Ritholtz

Rule of Law: Banker Criminality Demands Prosecution – Barry Ritholtz


The Big Picture-

This is not a glamorous approach to law enforcement, It is a slow laborious grind. As I presented to the National Association of Attorneys General, there are 10 major areas of bank and mortgage fraud:

1. MERS
2. Mortgage Pools (Warranties & Reps)
3. Bad Securitization (Quality)
4. “Misplaced” Mortgage Notes
5. Force-Placed Insurance
6. Illegal “Pyramid” Servicing Fees
7. Document Fraud for Sale
8. False Affidavits, Perjury (Robo-Signing)
9. Foreclosure Mills, Process servers exasperate problem
10. Active Servicemen losing homes while on tour of duty

Of this list, five issues are prosecution-ready, where individual states have jurisdiction. These include: 1) Force-Placed Insurance; 2) Illegal “Pyramid” Servicing Fees; 3) Fraud Documents for Sale; 4) False Affidavits, Perjury (Robo-Signing) and 5) Foreclosure Mills, Process servers.

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As We Were Saying, eMortgage Coming To Your Town?

As We Were Saying, eMortgage Coming To Your Town?


Come hungry…close a loan electronically within 15 minutes and with doughnuts. Not like it took any longer the paper route!

Providing all the ‘errors’ and ‘mistakes’ currently happening in foreclosure land, just hope your eNote/eMortgage doesn’t get deleted by accident.

via Housing Wire:

Harry Gardner, president of SigniaDocs, said the perfect infrastructure is one that manages all mortgage documents electronically, but the number of loans in the Mortgage Electronic Registration Systems’ eRegistry is about 200,000, or “a small fraction of mortgages written in the last 10 years.”

“And by eMortgage, we mean truly paperless not some hybrid of some paper and some electronic documentation,” Gardener said. “Ten years ago, we were saying mainstream eMortgage documentation was three to five years away, and I’m happy to say that mainstream eMortgage documentation is now three to five years away.”

continue reading….  Housing Wire

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eMortgages, eNotes …Get Ready For The No-DOC Zone

eMortgages, eNotes …Get Ready For The No-DOC Zone


For you to understand the plan the financial institutions have you need to grasp the following. Will MERS patterns continue? Imagine the price you will pay when these files are hacked or manipulated.

Everyone knows by now that MERS was ‘invented’ to keep costs low for the banks, reduce the risk of record-keeping errors and make it easier to keep track of loans for the banks not the borrowers. By these actions, not only has MERS eliminated crucial chain in title documents, has proven in many court cases to assign absolutely nothing because it had no power to negotiate the note but also eliminated an enormous amount of county revenues.

Last week SFF wrote about the latest invention planned to coexist with MERS called SmartSAFE, which will be used for creating, signing, storing, accessing and managing the lifecycle of electronic mortgage documents. According to Wave’s eSignSystems Executive VP Kelly Purcell, “Mortgages are sold several times throughout the life of a loan, and electronic mortgages address the problem of the ‘lost note,’ while improving efficiency in the process.”

This goes a step forward of what MERS can do today.

Will this process eliminate recording paper mortgages/deeds from county records? Eliminate fees that counties in trouble desperately need? THIS IS VERY DANGEROUS.

Still with me? Finally, according to CUinsight, a sample eNote in the form of a MRG Category 1 classified SMARTDoc, was successfully delivered to Xerox’s BlitzDocs eVault, a virtual repository that connects directly to the MERS® eRegistry and eDelivery systems, where it was electronically signed and registered.

Adding the finishing touches to permit MERS access to future eNotes? I say this is the master plan.

Looking forward to what MA John O’Brien, the Essex County register of deeds, NC Register of deeds Jeff Thigpen and NY Suffolk County, former county clerk Ed Romaine’s approach is after they read what they plan on doing to land records. If they thought it was limited to the elimination of recording fees for assignments of mortgage, they are mistaken.

Questions remain as to why replace something that has been working for so long? Why continue with MERS, a system which has failed in many ways? MERS is under investigation for fraud is it not? Why in a time where mortgage fraud is wide spread, will anyone even trust using electronic devices to manage possibly future trillions of dollars worth?

Say farewell to a tradition that has been here for well over 300 years. Eliminating ‘paper’ will put promissory notes and  mortgage related documents in great jeopardy. No computer system in the world is secure [PERIOD].

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LQQK ‘MOM’, No paper, Lost Paper, Detroyed and Misfiled Paper…The Next Wave

LQQK ‘MOM’, No paper, Lost Paper, Detroyed and Misfiled Paper…The Next Wave


Before you go down to the “New Device” take a look back when THE FLORIDA BANKER’S ASSOCIATION ADMITTED THAT NOTES ARE DESTROYED:

This is a direct quote from the Florida Banker’s Association Comments to the Supreme Court of Florida files September 30, 2009:

“It is a reality of commerce that virtually all paper documents related to a note and mortgage are converted to electronic files almost immediately after the loan is closed. Individual loans, as electronic data, are compiled into portfolios which are transferred to the secondary market, frequently as mortgage-backed securities.

The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.”

Now if there is no issues surrounding what everyone is shouting from their roof tops, then why integrate a new software that was suppose to have been implemented already to “Improves Efficiency & Transparency of Electronic Mortgage Transactions” within MERS itself?

THEY KNOW THEY HAVE A PROBLEM!

Now from SYS-CON on SmartSAFE

“During the foreclosure crisis of the last few years we saw many instances where the original and subsequent paperwork was lost, destroyed or misfiled when loans were bought and sold,” commented Kelly Purcell, Executive Vice President for Wave’s eSignSystems division. “Mortgages are sold several times throughout the life of a loan, and electronic mortgages address the problem of the ‘lost note,’ while improving efficiency in the process.”

This will debut during next week’s MBA National Technology in Mortgage Banking Conference and Expo 2011 (at the Westin Diplomat Resort & Spa in Ft. Lauderdale, Fla.).

Will this be the new system that will eventually take over MERS as MOM?

This one is both “Smart & Safe” <wink>


 

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Why Mortgage-Backed Securities Aren’t (Backed by Securities): How MERS Toasted the Banks

Why Mortgage-Backed Securities Aren’t (Backed by Securities): How MERS Toasted the Banks


L. Randall Wray

Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City
Posted: December 30, 2010 08:35 AM

In a series of pieces I have argued that MERS, a creation of the mortgage banking industry, has effectively destroyed the institution of private property in America. Ironically, MERS was created to facilitate quick and easy and cheap securitization of mortgages — what are called mortgage-backed securities. In fact, what it did was to eliminate any backing of the securities by mortgages. Of the total securitized asset universe, something like $7 trillion are (supposedly) backed by residential mortgages. However, MERS helped to delink the securities from the mortgages. At best, they are unsecured debt — there is no property backing the securities. What this means is that foreclosure is not permitted. As I have said before, it is likely that most or even all foreclosures occurring in the US are illegal seizures of property — home thefts. We are talking about 100,000 completed home thefts per month, with another 250,000 new foreclosures started to steal homes every month. Projections are that 13 million homes will have been “foreclosed” (read: stolen) by 2012.

Worse, from the perspective of the banks, they’ve got to take back all the fraudulent MBSs, most of which are toxic.

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FULL DEPOSITION TRANSCRIPT OF ALDEN BERNER WELLS FARGO LEGAL PROCESS SPECIALIST

FULL DEPOSITION TRANSCRIPT OF ALDEN BERNER WELLS FARGO LEGAL PROCESS SPECIALIST


Alden Berner, Legal Process Specialist Wells Fargo Home Mortgage. Signed verifications of complaints.

Courtesy of IceLegal.com

Excerpts:

8 Q. Did you do anything to attempt to
9 verify whether or not the original note and mortgage
10 were actually in the custody of the trustee by the
11 time the closing date for the trust occurred?
12 MR. WINSTON: Object to form.
13 THE WITNESS: No.
14 BY MR. FLANAGAN: (resumed)
15 Q. Do you even get involved in that at
16 all?
17 A. No.
18 Q. Have you seen any documents that
19 establish what the relationship is between HSBC Bank
20 and Wells Fargo Home Mortgage?
21 MR. WINSTON: Object to form.
22 THE WITNESS: No.
23 BY MR. FLANAGAN: (resumed)
24 Q. Do you know how it is that Wells Fargo
25 Home Mortgage came to be selected to do the
1 verification for HSBC Bank in this particular case,
2 the case?
3 MR. WINSTON: Object to form.
4 THE WITNESS: No.
5 BY MR. FLANAGAN: (resumed)
6 Q. Do you know if there is some document
7 that designates you to be the person to verify on
8 behalf of HSBC Bank.
9 MR. WINSTON: Object to form.
10 THE WITNESS: Me personally?
11 MR. FLANAGAN: Yes, sir.
12 THE WITNESS: No.
13 BY MR. FLANAGAN: (resumed)
14 Q. How about for Wells Fargo Bank, NA, is
15 there any document that you’re aware of that
16 designates you to have the authority to sign these
17 verifications on behalf of Wells Fargo Bank, NA?
18 MR. WINSTON: Object to form.
19 THE WITNESS: No, but I don’t need to,
20 because I’m an employee of Wells Fargo Home
21 Mortgage, which is owned by Wells Fargo Bank, N A.
22 BY MR. FLANAGAN: (resumed)
23 Q. Are they a subsidiary, as far as you
24 know?
25 A. Yes.

Continue below…

[ipaper docId=45818189 access_key=key-27d0mo8r5osojg9fqc85 height=600 width=600 /]

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Countrywide, Bank Of America Agreement and Plan Merger 2008

Countrywide, Bank Of America Agreement and Plan Merger 2008


Note this is incomplete but the basics:

Table Of Contents:

  • Pg. 2. 2nd Supp. Note Deed Poll, Dated 11/072008, To The Note Deed Poll Dated 4/29/05
  • Pg. 10. Bank of America Corporation on 1st July 2008 – Effective date of merger
  • Pg. 15. Countrywide and Bank Of America Agreement And Plan Of Merger
  • Pg. 116. Bank of America Corporation on 7th November 2008 – Debt Assumption
  • Pg. 127. 6th Supp Trust Deed Dated 11/07/08, 11/07/08, Modifying The Prov. Of Trust Deed 5/01/98
  • Pg. 138 3rd Supp. Trust Deed 11/07/08, To The Trust Deed Dated 8/15/05
  • Pg. 148 UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
  • Pg. 163. Countrywide Financial Corporation on 30th June 2008 – Consolidated Balance Sheet for
  • Pg. 282. First Supplemental Deed Poll Guarantee and Indemnity

[ipaper docId=44612785 access_key=key-1r5gobfvmuza3pv9k102 height=600 width=600 /]

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FULL DEPOSITION TRANSCRIPT OF COUNTRYWIDE BOfA LINDA DiMARTINI

FULL DEPOSITION TRANSCRIPT OF COUNTRYWIDE BOfA LINDA DiMARTINI


EXCERPTS:

Q So the original —
5 A — and I’ve been to her office.
6 Q — the original was located in your office?
7 A Yes.
8 Q Where’s your office located?
9 A Simi Valley, California.
10 Q And has the original of this allonge remained in your
11 office until you appeared here today?
12 A We had sent it on to — to our attorneys. They were in
13 possession of it.
14 Q And again, who do you believe is the holder of the note
15 and mortgage here?
16 A Well, Countrywide — Bank of America — whatever we’re
17 calling ourselves these days, we are Bank of America now — we
18 originated this loan. It was originated via a broker and it’s
19 really always been a Countrywide loan. The investor is Bank
20 of New York. We are the servicer of the loan.
21 Q Now, when you say it’s really a Countrywide loan, wasn’t
22 it sold? Wasn’t this loan securitized and ultimately sold —
23 sold to this trust?
24 A Right, it would have been securitized and sold. They are
25 the investors of the loan. But we are the ones that would

<SNIP>

9 A Who is in possession of the note? We have the note in our
10 origination file.
11 Q So — so Bank of New York as trustee does not hold the
12 note, is that correct, or is not in possession of the note?
13 A The original note to my knowledge is in the origination
14 file.
15 Q Where is the — do you have it here today?
16 A No, I don’t have it with me here today.
17 Q So you don’t have the note?
18 A It’s in our office.
19 Q So it’s in your office, it’s not with this trust that owns
20 the — that’s supposedly holds the — or is the owner of this
21 note, is that correct?
22 A That’s correct.
23 Q And your testimony is that this allonge was never
24 submitted to — it was never in the possession of Bank of New
25 York as trustee for the certificate holder, is that correct?

<SNIP>

9 Q And this allonge, it’s a stand-alone document, correct?
10 It’s not attached to anything, is that correct?
11 A I’m not sure I’m understanding your question.
12 Q Was there anything — when you brought the original that’s
13 in front of you, did you remove it? Was it stapled to
14 something else?
15 A No, it wouldn’t have necessarily been stapled to something
16 else. There would have probably been other documents showing
17 the — you know, we would have shown her the note. We would
18 have reviewed all of that before.

Continue Below…

Down Load PDF of This Case

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BLOOMBERG: BofA Mortgage Morass Deepens After Employee Says Trustee Didn’t Get Notes

BLOOMBERG: BofA Mortgage Morass Deepens After Employee Says Trustee Didn’t Get Notes


Testimony by a Bank of America Corp. employee in a New Jersey personal bankruptcy case may give more ammunition to homeowners and investors in their legal battles over defaulted mortgages.

Linda DeMartini, a team leader in the company’s mortgage- litigation management division, said during a U.S. Bankruptcy Court hearing in Camden last year that it was routine for the lender to keep mortgage promissory notes even after loans were bundled by the thousands into bonds and sold to investors, according to a transcript. Contracts for such securitizations usually require the documents to be transferred to the trustee for mortgage bondholders.

In the case, U.S. Bankruptcy Judge Judith H. Wizmur on Nov. 16 rejected a claim on the home of John T. Kemp, ruling his mortgage company, now owned by Bank of America, had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.

Following the decision, the bank disavowed the statements by DeMartini, whom it had flown in from California to testify. It was the policy of Countrywide Financial Corp., acquired by Bank of America in July 2008, to deliver notes as called for in its securitization contracts, according to Larry Platt, an attorney at K&L Gates LLP in Washington designated by the bank to answer questions about the case.

“This particular employee was mistaken in what she said,” Platt said in a telephone interview.

Attorney Analysis

Wizmur’s ruling is being scrutinized by lawyers for borrowers seeking to stall repossessions as a way to press lenders to modify their debt. Attorneys for homeowners have already won cases by calling into doubt the legitimacy of affidavits used to take back properties.

“If this is correct, many, many, many foreclosures already occurred in which this plaintiff didn’t have the note,” said Bruce Levitt, the South Orange, New Jersey, attorney representing Kemp. “This could affect thousands or hundreds of thousands of loans.”

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[MUST READ] FULL TRANSCRIPT OF KEMP v. COUNTRYWIDE

[MUST READ] FULL TRANSCRIPT OF KEMP v. COUNTRYWIDE


EXCERPT:

THE COURT: All right. I have the supplemental and
12 second supplemental submissions of Countrywide and the reply.
13 Mr. Kaplan, I look to you first. I am, frankly, appalled at
14 the confusion and lack of credibility of Countrywide’s
15 response to the issue of the note — the possession of the
16 note.
17 We started out with Ms. DeMartini’s testimony that
18 the note never leaves the servicer. She says that she saw a
19 Federal Express receipt whereby the actual note, the physical,
20 original note was transferred to the Foreclosure Department
21 internally in the same building, but that the note had not yet
22 been located. That’s where we stood at that point.
23 Then we had a submission, the supplemental
24 submission saying the original note has been found and can be
25 available for inspection. It doesn’t say where it was found,

1 who had possession or the like, but it was found and is
2 available for inspection.
3 And then without any explanation, there is a lost
4 note affidavit presented dated February of 2007 indicating
5 that the note cannot be found. No explanation provided. What
6 do I do with that, Mr. Kaplan?

<SNIP>

THE COURT: It’s amazing how sloppy this
2 presentation was, and I’m very disappointed about that.
3 Anyway — all right. Well, thank you, Mr. Kaplan. Do you
4 want to present testimony? Does it matter, you know, because
5 there is no testimony regarding possession by Bank of New York
6 as Trustee, correct?

7 MR. KAPLAN: That’s correct, Your Honor. I’m not
8 disputing that. That’s what Ms. DeMartini testified to, that
9 the note — she had no record of this note leaving and going
10 across country, across wherever, to Bank of New York.

11 THE COURT: And you do understand as well that the
12 Pooling and Servicing Agreement requires that transfer, that
13 physical transfer of the note in accordance with — and
14 endorsement — in accordance with UCC requirements?
15 MR. KAPLAN: I understand that, Your Honor. I’ll
16 simply say for the sake of edification, but this is — and I
17 was told it was all e-filed — this is apparently the index to
18 this Master Servicing Agreement showing all the loans and it
19 does reference the Kemp loan. It’s a double-side document,
20 includes all the loans.
21 And I can say that, although Your Honor is right and
22 the UCC and the Master Servicing Agreement apparently requires
23 that, procedure seems to indicate that they don’t physically
24 move documents from place to place because of the fear of loss
25 and the trouble involved and the people handling them. They

basically execute the necessary documents and retain them as
2 long as servicing’s retained. The documents only leave when
3 servicing is released.
4 THE COURT: They take their chances.
5 MR. KAPLAN: I understand, Your Honor.
6 THE COURT: Understood. Thank you.
7 Counsel, the proof of claim was filed — let’s see
8 — it was filed by Countrywide Home Loans, Inc., servicer for
9 Bank of New York — now, that’s wrong. We understand that.
10 Can the — can these problems be corrected post-petition? In
11 other words, we know that claims can be transferred post12
petition.
13 What about if the note, the original note now that
14 has seemingly appeared, is now transferred to the Bank of New
15 York as Trustee and amended, it wouldn’t have to — well, it
16 would be amended to reflect that Countrywide Home Loans, Inc.,
17 is not the right party, but Countrywide Home Loans, Master
18 Servicing or servicing whatever that name is, as servicer for
19 Bank of New York, Trustee, is filing this proof of claim,
20 what’s wrong with that?

FULL DEPOSITION TRANSCRIPT OF KEMP v. COUNTRYWIDE

[ipaper docId=43766376 access_key=key-ihmrb27iwescbiprqux height=600 width=600 /]

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The Big Fail by Adam Levitin

The Big Fail by Adam Levitin


posted by Adam Levitin
.

Last week the US Bankruptcy Court for the District of New Jersey issued an opinion in a case captioned Kemp v. Countrywide Home Loans, Inc. This case looks like the first piece of evidence in what might turn out to be the Securitization Fail or, in homage to Michael Lewis, The Big Fail.

Briefly, Countrywide as servicer filed a proof of claim for a mortgage in a bankruptcy case on behalf of Bank of New York as trustee for a securitization trust.  The bankruptcy court denied the claim because there was no evidence that Bank of New York ever owned the mortgage. The mortgage note had never been negotiated or delivered to Bank of New York, despite the requirement to do so in the Pooling and Servicing Agreement (PSA) that governed the securitization of the loan.  That meant that Bank of New York as trustee had no interest in the loan, so the proof of claim filed on its behalf was disallowed.

This opinion could turn out to be incredibly important.  It provides a critical evidence for the argument that many securitization transactions simply failed to be effective because non-compliance with the terms of the transaction:  failure to properly transfer the mortgage meant that the mortgages were never actually securitized.  The rest of this post explains the chain of title issue in mortgage securitizations and how Kemp fits into the issue.

Note and Mortgage Transfers in Securitizations

A residential mortgage securitization is a transaction that involves a series of transfers of two types of documents:  mortgage notes (the IOUs made by mortgage borrowers) and mortgages (the security instrument that says the lender may foreclose on the house if the borrower defaults on the note).   Ultimately, both the notes and mortgages need to be properly transferred to a trust that will pay for them by issuing securities (backed by the mortgages and notes, hence residential mortgage-backed securities or RMBS). If the notes and mortgages aren’t properly transferred to the trust, then the securities that the trust issues aren’t mortgage-backed and are worthless.

So the critical issue here is whether the notes and mortgages were properly transferred to the securitization trusts.  To determine this, we need to figure out two things.  First, what is the proper method for transferring the notes and mortgages, and second, whether that method was followed. For this post, I’m going to focus solely on the notes. There are issues with the mortgages too, but that gets much, more complicated and doesn’t directly connect with Kemp.

1.  How Do You Transfer a Note?


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EXPLOSIVE |CASE FILE New Jersey Admissions In Testimony NOTES NEVER SENT to Trusts KEMP v. Countrywide

EXPLOSIVE |CASE FILE New Jersey Admissions In Testimony NOTES NEVER SENT to Trusts KEMP v. Countrywide


Mark my words …this is one you’re going to hear of over and over again. It’s beginning to appear … what we’ve been trying hard to break is cracking before our eyes and ears. This should raise concerns about the MERS System as well since the assignments clause states “together with the note(s) and documents therein described”.

Humpty Dumpty does indeed exist!


UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY

In the Matter of John T. Kemp

John T. Kemp
v.

Countrywide Home Loans, Inc.

Case No. 08-18700-JHW

APPEARANCES:

Bruce H. Levitt, Esq.
Levitt & Slafkes, PC
76 South Orange Avenue, Suite 305
South Orange, New Jersey 07079
Counsel for the Debtor

Harold Kaplan, Esq.
Dori 1. Scovish, Esq.
Frenkel, Lambert, Weiss, Weisman & Gordon, LLP
80 Main Street, Suite 460
West Orange, New Jersey 07052
Counsel for the Defendant

EXCERPT:

The new allonge was signed by Sharon Mason,
Vice President of Countrywide Home Loans, Inc., in the Bankruptcy Risk
Litigation Management Department. Linda DeMartini, a supervisor and
operational team leader for the Litigation Management Department for BAC
Home Loans Servicing L.P. (“BAC Servicing”V testified that the new allonge
was prepared in anticipation of this litigation, and that it was signed several
weeks before the trial by Sharon Mason.

As to the location of the note, Ms. DeMartini testified that to her
knowledge, the original note never left the possession of Countrywide, and that
the original note appears to have been transferred to Countrywide’s foreclosure
unit, as evidenced by internal FedEx tracking numbers. She also confirmed
that the new allonge had not been attached or otherwise affIXed to the note.
She testified further that it was customary for Countrywide to maintain possession of
the original note and related loan documents.

In a supplemental submission dated September 9,2009, the defendant
asserted that “the Defendant/Secured Creditor located the original Note. The
original Note with allonge and Pooling and Servicing Agreement are available
for inspection.,,7 When the matter returned to the court on September 24,
2009, counsel for the defendant represented to the court that he had the
original note, with the new allonge now attached, in his possession. No
additional information was presented regarding the chain of possession of the
note from its origination until counsel acquired possession.

Continue reading below…

CASE FILE New Jersey Admissions In Testimony Notes Never Sent to Trusts Kemp v Countrywide

[ipaper docId=43537304 access_key=key-282sqkqnzukrmkam934g height=600 width=600 /]

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Testimony of Diane E. Thompson Before the Senate Banking, Housing Committee

Testimony of Diane E. Thompson Before the Senate Banking, Housing Committee


I was impressed with Mrs. Thompson and her knowledge. Excellent read with Mr. Levitin’s testimony.

Excerpts:

What robo-signing reveals is the contempt that servicers have long exhibited for rules, whether
the rules of court procedure flouted in the robo-signing scandal or the contract rules breached in
the common misapplication of payments or the rules for HAMP modifications, honored more
often in the breach than in reality. Servicers do not believe that the rules that apply to everyone
else apply to them. This lawless attitude, supported by financial incentives and too-often
tolerated by regulators, is the root cause of the robo-signing scandal, the failure of HAMP, and
the wrongful foreclosure of countless American families.

The falsification of judicial foreclosure documents is closely and directly tied to widespread
errors and maladministration of HAMP and non-HAMP modification programs, and the forcedplaced
insurance and escrow issues. Homeowners for decades have complained about servicer
abuses that pushed them into foreclosure without cause, stripped equity, and resulted, all too
often, in wrongful foreclosure. In recent months, investors have come to realize that servicers’
abuses strip wealth from investors as well.3 Unless and until servicers are held to account for
their behavior, we will continue to see fundamental flaws in mortgage servicing, with cascading
costs throughout our society. The lack of restraint on servicer abuses has created a moral hazard
juggernaut that at best prolongs and deepens the current foreclosure crisis and at worst threatens
our global economic security.

The current robo-signing scandal is a symptom of the flagrant disregard adopted by servicers as
to the basic legal and business conventions that govern most transactions. This flagrant
disregard has been carried through every aspect of servicer’s business model. Servicers rely on
extracting payments from borrowers as quickly and cheaply as possible; this model is at odds
with notions of due process, judicial integrity, or transparent financial accounting. The current
foreclosure crisis has exposed these inherent contradictions, but the failures and abuses are
neither new nor isolated. Solutions must include but go beyond addressing the affidavit and
ownership issues raised most recently. Those issues are merely symptoms of the core problem:
servicers’ failure to service loans, account for payments, limit fees to reasonable and necessary
ones, and provide loan modifications where appropriate and necessary to restore loans to
performing status.

Continue to the testimony below…

[ipaper docId=42936886 access_key=key-1uwm2jv8el3gfezslrfk height=600 width=600 /]

Diane E. Thompson, Of Counsel

Diane E. Thompson has represented low-income homeowners since 1994.  She currently works of counsel for the National Consumer Law Center.  From 1994 to 2007, Ms. Thompson represented individual low-income homeowners in East St. Louis at Land of Lincoln Legal Assistance Foundation.  While at Land of Lincoln Legal Assistance, Ms. Thompson served as the Homeownership Specialist, providing assistance to casehandlers representing homeowners in 65 counties in downstate Illinois, and the Supervising Attorney of the Housing and Consumer unit of the East St. Louis office.  She has served on the boards of the National Community Reinvestment Coalition and the Metropolitan St. Louis Equal Housing Opportunity Council.  She was a member of the Consumer Advisory Council of the Federal Reserve Board from 2003-2005.  Between 1995 and 2001, Ms. Thompson served as corporate counsel to the largest private nonprofit affordable housing provider in the East St. Louis metropolitan area. She received her B.A. from Cornell University and her J.D. from New York University.

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Highlights From The Testimony of Adam J. Levitin Before the Senate Banking, Housing Committee

Highlights From The Testimony of Adam J. Levitin Before the Senate Banking, Housing Committee


Watched the hearing yesterday and Mr. Levitin was extremely impressive!

Please watch the video for explosive info regarding securitization, “Nothing-Backed Securities”…transfers are void!

Sorry for the quality but was the best I could do.

.

———————————————————————–

.

Written Testimony of

Adam J. Levitin

Associate Professor of Law

Georgetown University Law Center
Before the
Senate Committee on Banking, Housing, and Urban Affairs

“Problems in Mortgage Servicing from Modification to Foreclosure”
November 16, 2010
2:30 pm

Excerpts:

A number of events over the past several months have roiled the mortgage world, raising
questions about:


(1) Whether there is widespread fraud in the foreclosure process;

(2) Securitization chain of title, namely whether the transfer of mortgages in the
securitization process was defective, rendering mortgage-backed securities into non-mortgagebacked
securities
;

(3) Whether the use of the Mortgage Electronic Registration System (MERS) creates
legal defects in either the secured status of a mortgage loan or in mortgage assignments;

(4) Whether mortgage servicers’ have defaulted on their servicing contracts by charging
predatory fees to borrowers that are ultimately paid by investors;

(5) Whether investors will be able to “putback” to banks securitized mortgages on the
basis of breaches of representations and warranties about the quality of the mortgages.
These issues are seemingly disparate and unconnected, other than that they all involve
mortgages. They are, however, connected by two common threads: the necessity of proving
standing in order to maintain a foreclosure action and the severe conflicts of interests between
mortgage servicers and MBS investors.

It is axiomatic that in order to bring a suit, like a foreclosure action, the plaintiff must
have legal standing, meaning it must have a direct interest in the outcome of the legislation. In
the case of a mortgage foreclosure, only the mortgagee has such an interest and thus standing.
Many of the issues relating to foreclosure fraud by mortgage servicers, ranging from more minor
procedural defects up to outright counterfeiting relate to the need to show standing. Thus
problems like false affidavits of indebtedness, false lost note affidavits, and false lost summons
affidavits, as well as backdated mortgage assignments, and wholly counterfeited notes,
mortgages, and assignments all relate to the evidentiary need to show that the entity bringing the
foreclosure action has standing to foreclose.

Concerns about securitization chain of title also go to the standing question; if the
mortgages were not properly transferred in the securitization process (including through the use
of MERS to record the mortgages), then the party bringing the foreclosure does not in fact own
the mortgage and therefore lacks standing to foreclose. If the mortgage was not properly
transferred, there are profound implications too for investors, as the mortgage-backed securities
they believed they had purchased would, in fact be non-mortgage-backed securities, which
would almost assuredly lead investors to demand that their investment contracts be rescinded,
thereby exacerbating the scale of mortgage putback claims.

[…]

Pay Close Attention To What He Says

[ipaper docId=42884106 access_key=key-4dwbkeca3hxlgeiw15x height=600 width=600 /]

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BLOOMBERG | No Breaks for Robo-signing Computer Stamping Mortgage Documents

BLOOMBERG | No Breaks for Robo-signing Computer Stamping Mortgage Documents


EXCELLENT JOB! Now this is what I am talking about…no affidavits…it’s the “assignments”, the destroyed notes, the Break in Chain, the E-Signatures, no supervision!

Bryan Bly is a pen-wielding “robo- signer” at Nationwide Title Clearing Inc., inking his name on an average 5,000 mortgage documents a day for companies such as Citigroup Inc. and JPMorgan Chase & Co.

Those are just the ones that cross his desk.

Nationwide Title employs a computer system that automatically inserts a copy of Bly’s signature on thousands of digital files that he never sees. The system even affixes an electronic notary seal.

“The problem with the way these documents are created isn’t because a computer is used,” said Gloria Einstein, a legal aid attorney in Green Cove Springs, Florida, who deposed Bly in a case in a which her client faces foreclosure by a unit of Deutsche Bank AG. “It’s because an enterprise has decided to use a computer to create a system where nobody is responsible for the information and the decisions.”

The rush to securitize more than $4 trillion of mortgages as U.S. home sales peaked in 2005 and 2006 inundated loan servicers and contractors like Palm Harbor, Florida-based Nationwide Title that help them handle paperwork. Lawsuits fighting some of the more than 4 million foreclosures since then have exposed sloppy recordkeeping and raised questions about the validity of documents used to seize properties.

Signatures Draw Scrutiny

Bly is just one of more than a dozen robo-signers deposed in the past two years by lawyers for borrowers seeking to block foreclosures. Spurred by descriptions in depositions of employees signing thousands of affidavits a week without checking their accuracy as legally required, the attorneys general in all 50 states last month opened an investigation into whether banks and loan servicers used faulty documents or improper practices to foreclose.

Nationwide Title, which has about 175 employees, provides document imaging, tracking, retrieval, recording and processing on bulk loan transfers for lenders, servicers and investors. It’s the largest third-party processor of mortgage assignments, handling more than 350,000 last year, Senior Vice President Jeremy Pomerantz said in a telephone interview. The company also prepares lien releases, which show that a mortgage has been paid off by the borrower.

Assignments, which are usually recorded with county land record departments, list the buyer and seller of a loan as it’s sold or packaged with other loans into a mortgage-backed security. Lawyers for homeowners are challenging the legitimacy of the documents, which are relied on by lenders to show they have the right to foreclose.

Batches of 30,000

(While closely held Nationwide Title in the past offered a package of foreclosure-specific services, it had just one client, Pomerantz said. The company doesn’t handle foreclosure affidavits — submitted by banks to assert ownership of a loan when they’ve lost the promissory note or to show that borrowers are in default — and often it doesn’t know when clients are requesting documents for defaulted loans, he said.)

Nationwide Title’s proprietary system isn’t entirely automated, said Erika Lance, senior vice president of administration. Employees receive requests from clients for lien releases and mortgage assignments, which are often sent in batches of as many as 30,000. They review the information and images of loan documents sent along with the request, and the information is keyed into the computer system.

The computer system fills in the electronic assignments in the format and wording each county requires, and places a signature and notary seal from a list of employees approved by each bank. Bly and other signers are given a title at the bank requesting the documents, such as “vice president” or “assistant secretary,” depending on what the individual counties require, Lance said.

Laws Catching Up

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LORRAINE v. MARKEL AMERICAN INSURANCE CO. | Electronically Stored Information “ESI”

LORRAINE v. MARKEL AMERICAN INSURANCE CO. | Electronically Stored Information “ESI”


IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

JACK R. LORRAINE AND, :
BEVERLY MACK :

Plaintiffs :
:
v. :        CIVIL ACTION NO. PWG-06-1893
:
MARKEL AMERICAN :
INSURANCE COMPANY :

Defendants

Excerpt:

Thus, when a lawyer analyzes the admissibility of electronic evidence, he or she should
consider whether it would unfairly prejudice the party against whom it is offered, confuse or mislead
the jury, unduly delay the trial of the case, or interject collateral matters into the case . If a lawyer is
offering electronic evidence, particularly computer animations, that may draw a Rule 403 objection,
he or she must be prepared to demonstrate why any prejudice is not unfair, when measured against the
probative value of the evidence. In this case, counsel did not address whether Rule 403 was implicated
with respect to the electronic evidence attached to their summary judgment memoranda.

Conclusion

In this case the failure of counsel collectively to establish the authenticity of their exhibits,
resolve potential hearsay issues, comply with the original writing rule, and demonstrate the absence
of unfair prejudice rendered their exhibits inadmissible, resulting in the dismissal, without prejudice,
of their cross motions for summary judgment. The discussion above highlights the fact that there are
five distinct but interrelated evidentiary issues that govern whether electronic evidence will be
admitted into evidence at trial or accepted as an exhibit in summary judgment practice. Although each
of these rules may not apply to every exhibit offered, as was the case here, each still must be
considered in evaluating how to secure the admissibility of electronic evidence to support claims and
defenses. Because it can be expected that electronic evidence will constitute much, if not most, of the
evidence used in future motions practice or at trial, counsel should know how to get it right on the first
try. The Court hopes that the explanation provided in this memorandum order will assist in that
endeavor.63

May 4, 2007

/S/
PAUL W. GRIMM
CHIEF UNITED STATES MAGISTRATE JUDGE

[ipaper docId=42055149 access_key=key-ny71zs8lak1m06d9kgo height=600 width=600 /]

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