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  • William Chhun et al. : v. : Mortgage Electronic Registration Systems - The Court's Opinion - Fri, Feb 21 2014 William Chhun et al. : v. : Mortgage Electronic Registration Systems

    Please click here to read the full decision.
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • William Chhun et al. : v. : Mortgage Electronic Registration Systems - A Victory - Fri, Feb 21 2014
    On February 4, 2014, the Rhode Island Supreme Court issued a decision that gave homeowners hope that the Court is sympathetic to their fight against the banks and servicers. In William Chhun et al. : v. : Mortgage Electronic Registration Systems, : Inc., et al. , the suit survived a motion to dismiss and the court found that the homeowners’ allegations were probable.  Specifically, Justice Golberg wrote:  “homeowners in Rhode Island have standing to challenge the assignment of mortgages on their homes to the extent necessary to contest the foreclosing entity’s authority to foreclose.” The homeowners are left to prove their allegations in discovery and at trial.

     This can be seen as a major victory in the State of Rhode Island that will allow the majority of homeowners to hold the banks and servicers accountable for practicing illegal foreclosure activities. This ruling provides hope and demonstrates that the Rhode Island Supreme Court is on the side of the homeowners when combatting illegal home foreclosure.  The public should be reminded that each ruling issued changes the landscape of foreclosure law and should be looked to nationally as an example. In each decision, the Rhode Island Supreme Court is redefining Rhode Island mortgage and foreclosure law.  All of the professionals who have tackled this issue should be seen as crusaders for the homeowner’s rights.
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • OCWEN LOAN SERVICING ADMITS IN WRITING: WE DO NOT KNOW WHO OWNS YOUR LOAN - Sun, Feb 16 2014

    OCWEN LOAN SERVICING ADMITS IN WRITING: WE DO NOT KNOW WHO OWNS YOUR LOAN


    Several of our clients have recently received letters from Ocwen Loan Servicing in response to inquiries as to who owns the homeowner’s loan. The response from Ocwen is a form letter, which states: “There is no single investor of the loan. The loan is one of many in a securitized investment trust (with name of the trust). Ocwen is the servicer of the loan, and not necessarily the owner of the loan. Although the ownership of the loan may change, the ownership has no bearing on the servicing of the loan.”
    Look at that series of admissions very carefully. We know that Ocwen is a servicer, and is never an “owner” of a loan. A servicer is (allegedly) working to service the loan on behalf of some owner. Who is that owner? Ocwen does not know, and admits that the ownership may change.
    Servicing rights are conveyed by a servicing contract. Who is Ocwen working for? It does not say. What rights have been conferred upon Ocwen by whoever owns the loan? Ocwen does not say. What amount is the owner claiming is owed and under what facts? Ocwen does not say.
    Ocwen does admit that the loan was securitized. This admission implicates all of the securitization issues, including authority of the servicer, whether the loan was properly transferred to the trust, whether there were any paydowns or payoffs of the note through insurances, credit default swaps, reserve pools, etc. depending on the current state of the law in whatever jurisdiction a foreclosure is pending. As you know, some states have case law which permits inquiry into the issues; some do not; and some are undecided.
    This letter alone warrants intensive discovery in any foreclosure case in view of the admissions of Ocwen, which admissions generate a wealth of issues of fact for discovery and trial as well.

    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • US BANK ADMITS, IN WRITING FROM THEIR CORPORATE OFFICE, THAT THE BORROWER IS A PARTY TO AN MBS TRANSACTION; THAT SECURITIZATION TRUSTEES ARE NOT INVOLVED IN THE FORECLOSURE PROCESS; HAVE NO ADVANCE KNOWLEDGE OF WHEN A LOAN HAS DEFAULTED; THAT THE “TRUE BENEFICIAL OWNERS” OF A SECURITIZED MORTGAGE ARE THE INVESTORS IN THE MBS; AND THAT THE GOAL OF A SERVICER IS TO “MAXIMIZE THE RETURN TO INVESTORS” - Sun, Feb 16 2014

    US BANK ADMITS, IN WRITING FROM THEIR CORPORATE OFFICE, THAT THE BORROWER IS A PARTY TO AN MBS TRANSACTION; THAT SECURITIZATION TRUSTEES ARE NOT INVOLVED IN THE FORECLOSURE PROCESS; THAT THE “TRUE BENEFICIAL OWNERS” OF A SECURITIZED MORTGAGE ARE THE INVESTORS IN THE MBS



    We have been provided with a copy of U.S. Bank Global Corporate Trust Services’ “Role of the Corporate Trustee” brochure which makes certain incredible admissions, several of which squarely disprove and nullify the holdings of various courts around the country which have taken the position that the borrower “is not a party to” the securitization and is thus not entitled to discovery or challenges to the mortgage loan transfer process. The brochure accompanied a letter from US Bank to one of our clients which states: “Your account is governed by your loan documents and the Trust’s governing documents”, which admission clearly demonstrates that the borrower’s loan is directly related to documents governing whatever securitized mortgage loan trust the loan has allegedly been transferred to. This brochure proves that Courts which have held to the contrary are wrong on the facts.
    The first heading of the brochure is styled “Distinct Party Roles”. The first sentence of this heading states: “Parties involved in a MBS transaction include the borrower, the originator, the servicer and the trustee, each with their own distinct roles, responsibilities and limitations.” MBS is defined at the beginning of the brochure as the sale of “Mortgage Backed Securities in the capital markets”. The fourth page of the brochure also identifies the “Parties to a Mortgage Backed Securities Transaction”, with the first being the “Borrower”, followed by the Investment Bank/Sponsor, the Investor, the Originator, the Servicer, the Trust (referred to “generally as a special purpose entity, such as a Real Estate Mortgage Investment Conduit (REMIC)”), and the Trustee (stating that “the trustee does not have an economic or beneficial interest in the loans”).
    The second page sets forth that U.S. Bank, as Trustee, “does not have any discretion or authority in the foreclosure process.” If this is true, how can U.S. Bank as Trustee be the Plaintiff in judicial foreclosures or the foreclosing party in non-judicial foreclosures if it has “no authority in the foreclosure process”?
    The second page also states: “All trustees for MBS transactions, including U.S. Bank, have no advance knowledge of when a mortgage loan has defaulted.” Really? So when, for example, MERS assigns, in 2011, a loan to a 2004 Trust where the loan has been in default since 2008, no MBS “trustee” bank (and note that it says “All” trustees) do not know that a loan coming into the trust is in default? The trust just blindly accepts loans which may or may not be in default without any advanced due diligence? Right. Sure. Of course. LOL.
    However, that may be true, because the trustee banks do not want to know, for then they can take advantage of the numerous insurances, credit default swaps, reserve pools, etc. set up to pay the trust when loans are in default, as discussed below.
    The same page states that “Any action taken by the servicer must maximize the return on the investment made by the ‘beneficial owners of the trust’ — the investors.” The fourth page of the brochure states that the investors are “the true beneficial owners of the mortgages”, and the third page of the brochure states “Whether the servicer pursues a foreclosure or considers a modification of the loan, the goal is still to maximize the return to investors” (who, again, are the true beneficial owners of the mortgage loans).
    This is a critical admission in terms of what happens when a loan is securitized. The borrower initiated a mortgage loan with a regulated mortgage banking institution, which is subject to mortgage banking rules, regulations, and conditions, with the obligation evidenced by the loan documents being one of simple loaning of money and repayment, period. Once a loan is sold off into a securitization, the homeowner is no longer dealing with a regulated mortgage banking institution, but with an unregulated private equity investor which is under no obligation to act in the best interest to maintain the loan relationship, but to “maximize the return”. This, as we know, almost always involves foreclosure and denial of a loan mod, as a foreclosure (a) results in the acquisition of a tangible asset (the property); and (b) permits the trust to take advantage of reserve pools, credit default swaps, first loss reserves, and other insurances to reap even more monies in connection with the claimed “default” (with no right of setoff as to the value of the property against any such insurance claims), and in a situation where the same risk was permitted to be underwritten many times over, as there was no corresponding legislation or regulation which precluded a MBS insurer (such as AIG, MGIC, etc.) from writing a policy on the same risk more than once.
    As those of you know who have had Bloomberg reports done on securitized loans, the screens show loans which have been placed into many tranches (we saw one where the same loan was collateralized in 41 separate tranches, each of which corresponded to a different class of MBS), and with each class of MBS having its own insurance, the “trust” could make 41 separate insurance claims AND foreclose on the house as well! Talk about “maximizing return for the investor”! What has happened is that the securitization parties have unilaterally changed the entire nature of the mortgage loan contract without any prior notice to or approval from the borrower.
    There is no language in any Note or Mortgage document (DOT, Security Deed, or Mortgage) by which the borrower is put on notice that the entire nature of the mortgage loan contract and the other contracting party may be unilaterally changed from a loan with a regulated mortgage lender to an “investment” contract with a private equity investor. This, in our business, is called “fraud by omission” for purposes of inducing someone to sign a contract, with material nondisclosure of matters which the borrower had to have to make the proper decision as to whether to sign the contract or not.
    U.S. Bank has now confirmed, in writing from its own corporate offices in St. Paul, Minnesota, so much of what we have been arguing for years. This brochure should be filed in every securitization case for discovery purposes and opposing summary judgments or motions to dismiss where the securitized trustee “bank” takes the position that “the borrower is not part of the securitization and thus has no standing to question it.” U. S. Bank has confirmed that the borrower is in fact a party to an MBS transaction, period, and that the mortgage loan is in fact governed, in part, by “the Trust’s governing documents”, which are thus absolutely relevant for discovery purposes.
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • FEDERAL COURT HOLDS THAT HOMEOWNER CAN ATTACK POST-TRUST CLOSING ASSIGNMENT; REJECTS “LACK OF STANDING TO CHALLENGE AN ASSIGNMENT YOU ARE NOT A PARTY TO” ARGUMENT - Sun, Feb 16 2014

    FEDERAL COURT HOLDS THAT HOMEOWNER CAN ATTACK POST-TRUST CLOSING ASSIGNMENT; REJECTS “LACK OF STANDING TO CHALLENGE AN ASSIGNMENT YOU ARE NOT A PARTY TO” ARGUMENT


    The United States District Court for the District of Rhode Island released its opinion last month in the matter of Cosajay v. Mortgage Electronic Registration Systems, Inc., 2013 WL 5912569 (D. Rhode Island, Nov. 5, 2013) which permits a homeowner to challenge a post-trust closing assignment in defending a foreclosure action. The Defendants’ “lack of standing because you are not a party to the assignment” argument was soundly rejected as an “absurd position” which would “unduly insulate assignments” and deprive homeowners of their legally protected right to have a foreclosure proceed legally and correctly.
    The homeowner challenged a MERS assignment to a securitized mortgage loan trust which had occurred outside of the time specified by the securitized trust for such an assignment. The challenged MERS assignment was on March 12, 2008; however, the trust had closed on April 30, 2007, and thus no 2008 assignment was possible. The homeowner sought a declaration that the assignment was invalid, that the Defendants did not hold her mortgage and note, and that the Defendants lacked standing to foreclose or to enforce the note.
    The Magistrate recommended that the case be dismissed because the homeowner lacked standing as she was not a party to the challenged assignments. The court rejected the Magistrate’s Report and Recommendation, and thoroughly and repeatedly rejected the Defendants’ “lack of standing to challenge the assignment” argument citing to holdings from the United States Court of Appeals for the First Circuit which held that there is “no principled basis for employing standing doctrine as a sword to deprive mortgagors of legal protection conferred upon them under state law”, and that the Defendants’ argument as to an alleged lack of standing by the homeowner to challenge the assignment was “extreme and incongruous”.
    Bravo to the Hon. John J. McConnell, Jr. for this opinion, which is another in the recent line of cases permitting such challenges including the Glaski decision from California; the Erobobo decision from New York; and the In Re Saldivar decision from the Texas Bankruptcy Court, which follow the reasoning of the earlier Horace decision from Alabama and the Hendricks decision from Michigan (where Mr. Barnes represented the homeowner (Hendricks) with the court granting summary judgment to the homeowner when it was shown that there was no compliance with the mortgage loan transfer provisions of the PSA). A Federal court has cited Hendricks in another case, stating that its logic is plausible.
    It has taken six long years of work across the US, but the courts are finally coming to the realization that the one-theme mantra of the banks and servicers of “we have the note, thus we win” no longer carries the day, and that the banks and servicers now have a lot more to allege and prove before they can be permitted to seek the drastic remedy of foreclosure.
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • NEW LEGAL ISSUES COMING UP IN TRIAL AND APPELLATE COURTS - Sun, Feb 16 2014

    NEW LEGAL ISSUES COMING UP IN TRIAL AND APPELLATE COURTS


    With the release of the US Bank admissions per our post of November 6, 2013; the issuance of the opinions from the Supreme Courts of Oregon and Montana holding that MERS is not the “beneficiary”; and recent opinions from various jurisdictions which are now, finally, holding that securitization-related issues are relevant in a foreclosure, a host of new legal issues are about to be litigated in the trial and appellate courts throughout the country. It has taken six (6) years and coast-to-coast work to get courts to realize that securitization of a mortgage loan raises issues as to standing, real party in interest, and the alleged authority to foreclose, and that the simplistic mantra of the “banks” and servicers of “we have the note, thus we win” is no longer to be blindly accepted.
    One issue which we and others are litigating relates to mortgage loans originated by Option One, which changed its name to Sand Canyon Corporation and thereafter ceased all mortgage loan operations. Pursuant to the sworn testimony of the former President of Sand Canyon, it stopped owning mortgage loans as of 2008. However, even after this cessation of any involvement with servicing or ownership of mortgage loans, we see “Assignments” from Option One or Sand Canyon to a securitization trustee bank or other third party long after 2008.
    The United States District Court for the District of New Hampshire concluded, with the admission of the President of Sand Canyon, that the homeowner’s challenge to the foreclosure based on a 2011 alleged transfer from Sand Canyon to Wells Fargo was not an “attack on the assignment” which certain jurisdictions have precluded on the alleged basis that the borrower is not a party to the assignment, but is a situation where no assignment occurred because it could not have as a matter of admitted fact, as Sand Canyon could not assign something it did not have. The case is Drouin v. American Home Mortgage Servicing, Inc. and Wells Fargo, etc., No. 11-cv-596-JL.
    The Option One/Sand Canyon situation is not unique: there are many originating “lenders” which allegedly “assigned” mortgages or Deeds of Trust long after they went out of business or filed for Bankruptcy, with no evidence of post-closing assignment authority or that the Bankruptcy court having jurisdiction over a bankrupt lender ever granted permission for the alleged transfer of the loan (which is an asset of the Bankruptcy estate) out of the estate. Such a transfer without proof of authority to do so implicates bankruptcy fraud (which is a serious crime punishable under United States criminal statutes), and fraud on the court in a foreclosure case where such an alleged assignment is relied upon by the foreclosing party.
    As we stated in our post of November 6, the admission of US Bank that a borrower is a party to any MBS transaction and that the loan is governed by the trust documents means that the borrower is, in fact, a party to any assignment of that borrower’s loan, and should thus be permitted to seek discovery as to any alleged assignment and all issues related to the securitization of the loan. We have put this issue out in many of our cases, and will be arguing this position at both the trial and appellate levels beginning early 2014.
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • Rhode Island foreclosure cases - Sun, Feb 16 2014 Rhode Island foreclosure cases face additional uncertainty after the U.S. Court of Appeals for the First Circuit overturned a trial judge’s decision halting foreclosures while the parties attempted to find a resolution through mediation.  The appellate court, with retired U.S. Supreme Court Justice David Souter writing the decision, concluded that banks should have been given a hearing on the likelihood of success before the court effectively granted an injunction and that the amount of time and money spent on mediation should have been capped.  
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • - Thu, Oct 10 2013 Happy Birthday Shawna - please stay 17 forever. 🙂
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • Banks stick to short sales in $25B settlement relief - Sun, Mar 3 2013

    Banks stick to short sales in $25B settlement relief


    When 49 state attorneys and the five banks -- JP Morgan Chase, Bank of America, Ally/GMAC, Wells Fargo and Citibank -- settled their dispute in February of 2012, the banks agreed to stop improper foreclosure practices and provide $25 billion in relief for homeowners in the form of principal reductions, refinances and short sales (where a lender agrees to accept a purchase offer for less than is owed on the mortgage, releasing the homeowner from the loan).  According to the terms of the settlement, at least 60 percent of the borrower relief is to be spent on principal reductions.
    Nearly $10.6 billion in mortgage relief has made its way to homeowners as part of the $25 billion national settlement reached earlier this year, according to a progress report from the Office of Mortgage Settlement Oversight.
    So what is the problem? So far, the bulk of that money -- more than 85 percent -- has gone to pre-foreclosure (short) sales, which the banks were already doing before the settlement. In fact, according to data firm RealtyTrac, short sales were already on the rise before the settlement took effect in March. In the first quarter of 2012, short sales were up 25 percent year-over-year.
    Of the $10.6 billion paid out so far, about $8.7 billion has gone to short sales. Only about $1 billion combined has gone toward mortgage modifications that reduce loan balances and refinances.
    Of the five banks, JPMorgan Chase has spent the most money on first-mortgage principal reduction at $367 million, followed by Wells Fargo with $216.9 million, Ally at $111.3 million and Citibank with $54.3 million.
    As for Bank of America: The company hasn't spent a dime on first-mortgage modifications that reduce loan balances for borrowers or on refinancing mortgages. Instead, they have spent $4.8 billion -- the most of the five banks -- on short sales.
    According to the report, Bank of America has made nearly $2 billion in trial offers for first-mortgage modifications, but we'll have to wait for the follow-up report to come out next year to see where those numbers finally land.
    In California, one of the hardest-hit states during the foreclosure crisis, the banks promised to spend $12 billion alone on principal reduction by 2015, but so far have spent only $335 million -- just 2.7 percent of the relief promised.
    On the other hand, short sales completed in California total $3.9 billion of relief.
    "The California piece of the settlement emphasized principal reduction because that is what is needed to stabilize families and neighborhoods in California, and yet the banks initial performance shows that meeting Californians' needs is not their priority," said Kevin Stein of the California Reinvestment Coalition.
    The banks have spent nearly $10.6 billion in just a few months, but largely on relief efforts that further their own interests. By focusing their efforts on short sales, the banks skip the arduous foreclosure process -- they no longer have to manage, maintain and market a home -- and instead make their money right away.
    While more short sales mean fewer foreclosures dragging down the real estate market, the focus on pre-foreclosure sales also means more homeowners are losing their homes and damaging their credit -- not exactly the intent of the settlement.

    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.
  • FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac - Sun, Mar 3 2013
    FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac

    Programs Aligned to Expedite Assistance to Borrowers
    Washington, DC – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac are issuing new, clear guidelines to their mortgage servicers that will align and consolidate existing short sales programs into one standard short sale program. The streamlined program rules will enable lenders and servicers to quickly and easily qualify eligible borrowers for a short sale.
    The new guidelines, which go into effect Nov. 1, 2012, will permit a homeowner with a Fannie Mae or Freddie Mac mortgage to sell their home in a short sale even if they are current on their mortgage if they have an eligible hardship. Servicers will be able to expedite processing a short sale for borrowers with hardships such as death of a borrower or co-borrower, divorce, disability, or relocation for a job without any additional approval from Fannie Mae or Freddie Mac.
    “These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said FHFA Acting Director Edward J. DeMarco. “The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job.”
    The new guidelines:
    • Offer a streamlined short sale approach for borrowers most in need: To move short sales forward expeditiously for those borrowers who have missed several mortgage payments, have low credit scores, and serious financial hardships the documentation required to demonstrate need has been reduced or eliminated.
    • Enable servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales: Common reasons for borrower hardship are death, divorce, disability, and distant employment transfer or relocation. With the program changes, servicers will be permitted to process short sales for borrowers with these hardships without any additional approval from Fannie Mae or Freddie Mac, even if the borrowers are current on their mortgage payments. Borrowers will now qualify for a short sale if they need to relocate more than 50 miles from their home for a job transfer or new employment opportunity.

      Fannie Mae and Freddie Mac will waive the right to pursue deficiency judgments in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissory notes: Servicers will evaluate borrowers for additional capacity to cover the shortfall between the outstanding loan balance and the property sales price as part of approving the short sale.
    • Offer special treatment for military personnel with Permanent Change of Station (PCS) orders: Service members who are being relocated will be automatically eligible for short sales, even if they are current on their existing mortgages, and will be under no obligation to contribute funds to cover the shortfall between the outstanding loan balance and the sales price on their homes.
    • Consolidate existing short sales programs into a single uniform program: Servicers will have more clear and consistent guidelines making it easier to process and execute short sales.
    • Provide servicers and borrowers clarity on processing a short sale when a foreclosure sale is pending: The new guidance will clarify when a borrower must submit their application and a sales offer to be considered for a short sale, so that last- minute communications and negotiations are handled in a uniform and fair manner.
    • Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holders to expedite a short sale. Previously, second lien holders could slow down the short sale process by negotiating for higher amounts.
      This alignment comes as part of a broader FHFA effort, the Servicing Alignment Initiative, to streamline Fannie Mae and Freddie Mac programs for short sales and other foreclosure alternatives to assist struggling homeowners. FHFA announced guidelines in June that establish strict timelines for servicers considering short sales. Servicers are required to review and respond to short sales within 30 days of receipt of a short sale offer; they must provide weekly status updates to the borrower if the offer is still under review after 30 days, and they must make and communicate final decisions to the borrower within 60 days of receipt of the offer and complete borrower response package. These borrowers will not be eligible for a new mortgage backed by Fannie Mae or Freddie Mac for at least two years after a short sale.
      FHFA encourages homeowners to reach out early to their lender or servicer if they face any hardship affecting their ability to pay their mortgage. 
    We provide personalized service and strategies that the bankruptcy mills cannot. Contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.