Bell, C.J., Harrell Battaglia Greene *Murphy Adkins Barbera, JJ. Opinion by Harrell, J.
Filed: December 20, 2011
EXCERPT:
A nonholder in possession, however, cannot rely on possession of the instrument alone as a basis to enforce it. The transferee’s right to enforce the instrument derives from the transferor (because by the terms of the instrument, it is not payable to the transferee) and therefore those rights must be proved. Com. Law § 3-203 cmt. 2; accord Leavings v. Mills 175 S.W.3d 301 (Tex. Ct. App. 2004 ) (“A person not identified in a note who is seeking to enforce it as the owner or holder must prove the transfer by which he acquired the note.”) The transferee does not enjoy the statutorily provided assumption of the right to enforce the instrument that accompanies a negotiated instrument, and so the transferee “must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired it.” Com. Law § 3-203 cmt. 2. If there are multiple prior transfers, the transferee must prove each prior transfer. U.S. Bank Nat’l Assoc. v. Ibanez, 941 N.E.2d 40, 53 (Mass. 2011) (citing In re Parrish, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005)). Once the transferee establishes a successful transfer from a holder, he or she acquires the enforcement rights of that holder. See Com. Law § 3-203 cmt. 2. A transferee’s rights, however, can be no greater than his or her transferor’s because those rights are “purely derivative.” Lawrence, supra, § 3-203:15R. Thus, the Substitute Trustees here, who possess an unindorsed note and wish to enforce it, had the burden of proving their status as nonholder in possession.
WASHINGTON (Reuters) – Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes or original loan documents.
The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost.
A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.
In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records “threatens to impair federal law enforcement efforts.”
The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.
Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.
In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company’s former headquarters in Melville, Long Island.
Jeffrey Smiles was the personal representative for his Grandmother’s estate and he inherited her home in August 2008. The home had been in their family since 1947. There were no other assets and Jeffrey spent nearly $8,000 in this process, $4,500 in legal fees alone. All taxes were paid in full by Jeffrey.
The place was transitioned to Jeffrey as he worked to fix it up so he could rent it out. More taxes came due, but since he was spending so much money fixing up things, he approached the Baltimore County Tax Office to make a partial payment of $500. He personally took a Certified check of the $500 to them in early April 2010.
Jeffrey states he received one tax bill (others were not received) and he explained to the tax office that he was in the middle of remodeling work and couldn’t afford to pay in full right then but wanted to pay in 3 installments. This was all up front in good faith. He was told that they weren’t accepting partial payments but he had until December 2010 to pay and the figure of the tax bill wouldn’t increase much. So, that is what Jeffrey planned to do since they wouldn’t accept a partial payment plan.
Then Jeffrey got a letter from Baltimore County dated August 1, 2010 saying a tax lien had been issued. He shared with me how stunned he was and that he called the number listed and was quoted a figure more than double the amount listed. When he dared to question this new, engorged figure, even quoting the representative on the phone the law, he was hung up on. Jeffrey immediately called back and no one would answer. He left a message and the phone call was not returned.
A Baltimore judge summoned attorneys from a large foreclosure law firm Monday to explain whether signatures on key documents were genuine, part of the fallout from revelations last year that foreclosures nationwide were being processed based on deficient — or fraudulent — paperwork.
Freddie Mac has instructed its mortgage servicers to stop referring foreclosure cases to Shapiro & Burson, the Virginia law firm accused of improper handling of more than 1,000 deeds for Maryland homes in foreclosure, the mortgage giant reported this week.
Prosecutors inPrince George’s County began investigating the firm in March after a paralegal formerly employed there filed a complaint alleging that deeds and foreclosure paperwork contained fraudulent signatures.
As if the country needed more proof of the outlaw behaviors of banks and their agents, The Baltimore Sun‘s Jamie Smith Hopkins reports that 1,000 or more Maryland deeds are likely forgeries, created by a foreclosure mill. A former notary from law firm Shapiro & Burson filed an affidavit with law enforcement and regulators charging that the attorneys’ signatures on the deeds and other important documents were forgeries signed at the express direction of management. The affidavit attached sample signatures.
If the forgery claims are true — and that’s not much of an “if” — the false deeds cloud the properties’ titles, creating a nightmare for the innocent people who bought the homes after they were foreclosed upon.
Among the many legal problems now being discovered with the foreclosure documents that banks have been using are false notarizations. The most typical variety of this problem occurs when a notary certifies that the person whose signature appears on a document really did sign it, even though the notary didn’t witness the signing.
While such false notarizing is criminal, I’ve not yet heard of any notaries being charged. However, in Maryland, Steve Lash of The Daily Record reports that18 current and former notaries have invoked their Fifth Amendmentright against self-incrimination in a foreclosure case.
The notaries were brought before the court in proceedings involving a lawyer who didn’t actually sign numerous foreclosure documents that were nonetheless notarized saying he did. The judge excused the notaries from the proceedings after they took the Fifth, and apparently, they aren’t facing prosecution.
* Two defunct lenders seeking to destroy boxes of records
* One judge temporarily blocks document destruction
* In separate hearing, destruction partially allowed
* Rulings come amid wide concerns of missing loan docs
By Scot J. Paltrow
WILMINGTON, Del., Jan 24 (Reuters) – A U.S. bankruptcy judge temporarily blocked bankrupt subprime lender Mortgage Lenders Network USA from destroying 18,000 boxes of original loan files after federal prosecutors said documents in them may be needed as evidence in more than 50 criminal investigations.
In a hearing Monday before U.S. Bankruptcy Judge Peter J. Walsh, a representative from the Delaware U.S. Attorneys’ Office said she did not know details of any of the investigations.
But she said prosecutors and FBI offices around the country had requested time to access to the boxes and assess whether the contents contain needed evidence before the judge permits any destruction.
WASHINGTON (Reuters) – Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes or original loan documents.
The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost.
A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.
In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records “threatens to impair federal law enforcement efforts.”
The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.
Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.
In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company’s former headquarters in Melville, Long Island.
Posts by David Dayen Sunday January 16, 2011 7:00 am
In a major ruling Friday, a coalition of nonprofit defense lawyers and consumer protection advocates in Maryland successfully got over 10,000 foreclosure cases managed by GMAC Mortgage tossed out, because affidavits in the cases were signed by Jeffrey Stephan, the infamous GMAC “robo-signer” who attested to the authenticity of foreclosure documents without any knowledge about them, as well as signing other false statements.
The University of Maryland Consumer Protection Clinic and Civil Justice, Inc., a nonprofit, filed the class action lawsuit, arguing that any case using Jeffrey Stephan as a signer was illegitimate and must be dismissed. In court Friday, GMAC agreed to dismiss every case in Maryland relying on a Stephan affidavit. They can refile foreclosure actions on the close to 10,000 homes, but only at their own expense, and subject to new Maryland regulations which require mandatory mediation between borrower and lender before moving to foreclosure. Civil Justice and the Consumer Protection Clinic also want any cases with affidavits from Xee Moua of Wells Fargo, who has also admitted to robo-signing, thrown out, but that case has not yet been settled.
This was not the plan of GMAC and other banks caught using robo-signers last year. They hoped to undergo a pause in proceedings, run a quick “double-check” and then issue substitute documents in the same cases. That would have been a much more rapid solution for the banks and would have resulted in many more foreclosures. Now GMAC has to go back and basically file the entire case all over again, meaning they have to give notice of foreclosure to the borrower, engage the borrower in modification options, and basically run through the whole process from the beginning. They cannot use the shortcut solution, thanks to the class action suit filed. GMAC’s dismissal of every foreclosure in Maryland shows their doubts they would have won the class action.
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.
“A compensatory fee not only compensates Fannie Mae for damages but also emphasizes the importance placed on a particular aspect of the servicer’s performance,” the GSE stated in its servicing guide.
Fannie also updated the allowable foreclosure time frames for four states: Florida – 185 days; Maryland – 90 days; Nevada – 150 days; New York (upstate) – 300 days; and New York (downstate) – 420 days.
To remediate a specific problem affecting a loan or correct the servicer’s overall performance, Fannie Mae reserves the right to impose a compensatory fee as provided in the Servicing Guide, Part I, Section 207: Imposition of Compensatory Fees.
With this Announcement, Fannie Mae:
has updated the allowable foreclosure time frames for four states;
is monitoring all delinquent loans in Fannie Mae’s portfolio or MBS pools, and will begin notifying servicers of delays in processing delinquent loans;
may begin conducting reviews of servicer loan files, processes, or procedures;
requires accurate and timely reporting on the delinquency status of mortgage loans; and,
will exercise its remedy to assess compensatory fees as deemed necessary.
Effective with the date of this Announcement, any mortgage loan referred to an attorney (or trustee) to initiate foreclosure proceedings with properties located in the States of Florida, Maryland, Nevada, and New York must meet the new foreclosure time frames noted below:
Florida – 185 days
This timeline has an additional 35 days added to allow for a mediation referral prior to a foreclosure suit being commenced.
Maryland – 90 days
This timeline begins when the case is referred to an attorney to file suit together with a Loss Mitigation Affidavit. The servicer must execute a Final Loss Mitigation Affidavit at the commencement of the case, if appropriate. If a Preliminary Loss Mitigation Affidavit is required, then the time frame allowed will be extended to 120 days.
Nevada – 150 days
New York (Upstate) – 300 days
New York (Downstate) – 420 days
In the State of New York, a timeline of 300 days applies to all localities except for New York City and Long Island.
A timeline of 420 days applies for foreclosures conducted in the five boroughs of New York City — Bronx, Brooklyn (Kings County), Manhattan (New York County), Queens, and Staten Island (Richmond County) — and on Long Island (Nassau and Suffolk Counties).
Washington Post Staff Writer
Thursday, May 20, 2010; 4:10 PM
Maryland Gov. Martin O’Malley signed legislation Thursday that creates a foreclosure mediation program designed to help beleaguered homeowners stay in their homes.
The bill gives homeowners the legal right to mediation with their lender during foreclosure proceedings.
“With my signature today, we are empowering our fellow Marylanders, putting them on a more equal footing with mortgage companies that too often can’t be bothered to pick up the phone before beginning a foreclosure proceeding,” O’Malley said in a statement. “This legislation will help keep more Marylanders in the homes they worked hard to purchase.”
Under the bill, the lender is required to send an application for a loan-modification or loss-mitigation program to the homeowner at least 45 days before a foreclosure action is filed in court. It is also mandated that the lender pay a $300 fee for a foreclosure filing.
The homeowner has 15 days after receiving the lender’s final loss-mitigation affidavit, which states reasons for denial of a loan modification, to request a foreclosure mediation. The request must be sent to the Circuit Court, along with a $50 fee.
The program, which is scheduled to be fully implemented by mid-August, will be handled by the Office of Administrative Hearings.
The mediation program is O’Malley’s latest effort to help homeowners stave off foreclosure.
In 2008, O’Malley proposed bills that extended the foreclosure timetable from 15 to 150 days, prohibited prepayment penalties and made egregious mortgage schemes subject to criminal prosecution.
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