FROM FAQ: New Entry – UNAUTHORIZED ASSIGNMENT

QUESTION:

I have an interesting problem with a foreclosure action that was just brought to my attention. The borrower went into default in August of 2007. The “lender” on the note and mortgage was Countrywide Home Loans, Inc. The mortgage had the usual MERS language. Countrywide was kept on as servicer. The borrower went into default in August 2007. On January, 30, 2008, “Carrie A Hoover-1st vice president” signed an assignment on behalf of MERS, assigning the mortgage and note to Bof NY trustee for CWALT 2005-41. (Carrie Hoover is actually a VP for Countrywide) This was prepared by the Attorney in Miami and executed in Texas.
Bof NY filed a foreclosure action a few weeks later. It claimed they owned and held the note and there was no claim for lost note. The borrower hired local counsel who filed an answer and affirmative defenses. He admitted that the Borrower executed the note and not much else.
The affirmative defenses are notice related as well as one alleging the note is “unintelligible, unconscionable and unenforceable”
My usual first line of attack revolves around standing. (they are not the holder or have not established their right to pursue the action) This is done by way of a Motion to dismiss.
My question is because this was not raised initially is it now waived? (I have been retained by the client)
Also what types of claims have you seen used against the alleged “assignment” when it would appear that the signatory does not have apparent authority?
Your wisdom and guidance is always appreciated

Answer:
1. The borrower went into default in August of 2007: You don’t actually know that. I’m sure he stopped paying, but in the scheme of securitization, the payment might have been made by any number of co-obligors that attached to the transaction on the way up the securitization chain. For example, AIG, AMBAC are insurers, credit default swaps might have protected the payment as well, and there was a reserve in the SPV to make the payments even if the borrower didn’t. In addition, depending upon which tranche in the SPV the loan was “assigned” to, the lower tranches might have made the necessary payments. Also the notice of default might have come from a party without any authority to do so and without any knowledge as to whether the holder in due course had been paid despite the lack of payment from the “borrower.” Lastly, how can there be a default on a note that was paid in full? The mortgage aggregator paid 102.5% of the note principal to the “lender” under a Pooling and service agreement” or under the Assignment and Assumption Agreement” that usually predates the date of the loan closing and certainly predates the date of “default.Find out who the mortgage aggregator was.
2. The “lender” on the note and mortgage was Countrywide Home Loans, Inc.: You are quite right to put that in quotes. If you look at http://www.sec.gov and examine the 10k and 8k reports you will find that pools of assets (notes either signed by borrowers were set up with trustees (who may be the successors to any other Trustee or “lender.”). Countrywide was paid off by the mortgage aggregator (which could actually be FNMA or Freddie Mac).
3. The mortgage had the usual MERS language: Actually the language varies. Some states allow MERS to act on behalf of mortgagee or even successors. Florida seems to be split between decisions in the 4th DCA and 2 DCA. I would attack that in all cases because the Fla S. Ct will in my opinion go with NOT letting MERS do what it is set up for. The main focus of the attack is that the parties are trying to make it more difficult for the Borrower to rescind (they didn’t disclose the REAL lender), more difficult to assert valid affirmative defenses and counterclaims and attempts to put the burden on the borrower to bring in the necessary and indispensable parties, when it is MERS or CW that has the access to that information and not the borrower. In a Judicial state like Florida that would be a particularly powerful argument (I think).
4. On January, 30, 2008, “Carrie A Hoover-1st vice president” signed an assignment on behalf of MERS, assigning the mortgage and note to Bof NY trustee for CWALT 2005-41. (Carrie Hoover is actually a VP for Countrywide) This was prepared by the Attorney in Miami and executed in Texas. This sounds like one of Shack’s cases in Kings County, New York. See http://www.livinglies.wordpress.com. Motion to Strike based on fraud on the Court.
5. Bof NY filed a foreclosure action a few weeks later. This is a lot like a case in GA. BONY settled with wiping out the mortgage and note and giving her a reverse mortgage. Not a great settlement but she was happy.
6. It claimed they owned and held the note and there was no claim for lost note. Motion to dismiss. How did they get the note? Request to Produce the Note. Holding the note creates a presummption that they are holder in due course, but they are probably not the a holder in due course, so you need to rebut the preumption. Demand assignments and information concerning who assigned and what their authority was. Look at note carefully. It might have been signed with “squiggle” — i.e., it could be a forgery even though there is an actual note signed by borrower. They did that for “convenience.”
7. The borrower hired local counsel who filed an answer and affirmative defenses. He admitted that the Borrower executed the note and not much else. Motion to amend affirmative defenses based upon new facts elicited from filings by parties with SEC. Too late to file Motion to DIsmiss and too much work to fight over it. Just file the same grounds under the Affirmative Defenses and then file affidavit from borrower along with copies of SEC documentation as attachments for Motion for Partial Summary Judgment.
8. The affirmative defenses are notice related as well as one alleging the note is “unintelligible, unconscionable and unenforceable” – Keep the notice arguments and expand upon them. Borrower was not given notice at closing as to who the real lender was and was therefor deprived of his right to rescission because the “lender” was merely a conduit and protective layer for the real lender who was not registered or chartered to do business in the State of Florida as lender or bank. You STILL want to exercise the right of rescission (the three day rescission) as soon as they will tell you who the real lender was. By covering up the real nature of the transaction, they deprived the borrower of sufficient knowledge about the transaction to properly consider whether to go through it and now he wants to rescind — which should be stated in the affirmative defenses. Your position is that the time for three day rescission never began to run because of all the non-dislcosures of all the parties that were not revealed and all the fees that were paid to all the parties that were not revealed.  Stay away from unconscionability as this is like the insanity defense. It exiss but rarely granted. If you want to keep it then go with the inflated appraisal, and the the payment of the lender and that the equities here do not allow the “lender” to get paid and get the house too. BONY will say they didn’t get paid and they probably didn’t. But they didn’t loan the money either so they are not a holder in due course. The real holder in due course are the investors who now hold the certificates of mortgage backed securities to whom the mortgage and note were pledged in tinny shares along with shares in hundrds of other mortgages and notes.
9. My question is because this was not raised initially is it now waived? (I have been retained by the client) – Being new counsel the court will usually allow some lee-way to create your own pleadings. Waiver of affirmative defenses can only be plead after judgment. Any time up to that you can amend your pleadings liberally in Florida and most states. You can even amend your pleadings at trial to conform to the evidence. If there is any prejudice the trial is continued so that the other side can conduct discovery. Of couse, no guarantees here on this or anything else. Judge could say no to everything.
10. Also what types of claims have you seen used against the alleged “assignment” when it would appear that the signatory does not have apparent authority? —This is basic law. Competency of witness: Oath, Perception, Memory and Communication. If the party signing a document has no knowledge about the “facts” asserted then they are incompetent to sign the affidavit and incompetent to testify.

3 Responses

  1. I have a forclosure case where the planitiff said the own note and mortgage when star Forclosure but we’ll Fargo who is the servicing for us bank prepared an assignment in 2012 from my first bank aimed lending to us bank I have a finsl judment since 2009 the plaintiff attorney was david stern .now the bank chage attorney and want to put a new sale date I did not know of all of until now an I’m afraid that is to late

  2. In Re: . On January, 30, 2008, “Carrie A Hoover-1st vice president” signed an assignment on behalf of MERS, assigning the mortgage and note to Bof NY trustee for CWALT 2005-41. (Carrie Hoover is actually a VP for Countrywide) This was prepared by the Attorney in Miami and executed in Texas.

    Is the Miami firm’s name Adorno & Yoss? they have an attorney named Isabell V. Colleran purporting to be the Vice President for MERS doing the same thing. If anyone gets this, file a Motion to Strike and schedule a Court hearing. Force person to go to court and explain AOM.

  3. Another simple but important issue to investigate is the Note that the Plaintiff actually attaches (if and when they do attach a copy of the Note) is the endorsements on the Note. Understanding the securitization process is key in what you’re looking for on the Note. The endorsements should absolutely follow the chain of ownership from Originator to Seller to Sponsor/Master Servicer to Depositor to Trustee. If you’re not seeing at least 3 endorsements on the Note then you know that this is NOT an original Note regardless of what’s alleged and/or claimed as to its authenticity.

    You can also then attack this point in the form of misrepresentation by showing the court the SEC filings from the Trust that this loan was deposited into. The Form 424B5 (Prospectus) will clearly disclose the parties involved, the chain of ownership and their roles. This is your evidence that the Note in question is either not an original or there are some serious issues with its authenticity.

    Lastly, my wife is filing Requests for Production of Documents here in FL. We have developed a pretty sophisticated request for production. If they produce what’s requested, the Plaintiff will hang themselves. If they don’t produce, you can file a Motion to Compel Discovery and the lack of disclosure will confirm willful deceit on the part of the Plaintiff. Something most judges don’t act kindly toward.

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