WEISBAND Case No. 4:09-bk-05175-EWH. BKR Tucson Judge HOLLOWELL Denies MLS for Lack of Standing

GMAC has failed to demonstrate that it is the holder of the Note because, while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC

Once the securities have been sold, the SPV is not actively involved.

IN RE WEISBAND

In re: BARRY WEISBAND, Chapter 13, Debtor.

Case No. 4:09-bk-05175-EWH.

United States Bankruptcy Court, D. Arizona.

March 29, 2010.

Barry Weisband, Tucson, AZ, Ronald Ryan, Ronald Ryan, P.C., Tucson, AZ, Attorney for Debtor.

MEMORANDUM DECISION

EILEEN W. HOLLOWELL, Bankruptcy Judge

I. INTRODUCTION

The debtor, Barry Weisband (“Debtor”), has challenged the standing of creditor, GMAC Mortgage, LLC (“GMAC”), to seek stay relief on his residence. After reviewing the documents provided by GMAC and conducting an evidentiary hearing, the court concludes that GMAC, the alleged servicer of the Debtor’s home loan, lacks standing to seek stay relief. The reasons for this conclusion are explained in the balance of this decision.

II. FACTUAL AND PROCEDURAL HISTORY

A. Creation of Debtor’s Note And Asserted Subsequent Transfers

On or about October 6, 2006, the Debtor executed and delivered to GreenPoint Mortgage Funding, Inc. (“GreenPoint”) an adjustable rate promissory note in the principal sum of $540,000 (“Note”) secured by a Deed of Trust (“DOT”) on real property located at 5424 East Placita Apan, Tucson, Arizona 85718 (“Property”).

On a separate piece of paper, GreenPoint endorsed the Note to GMAC (“Endorsement”). The Endorsement is undated. The DOT was signed by the Debtor on October 9, 2006, and recorded on October 13, 2006. The DOT lists GreenPoint as the lender, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary of the DOT “solely as nominee for [GreenPoint], its successors and assigns.”

Approximately five months before the creation of the Note and DOT, on April 10, 2006, GreenPoint entered into a Flow Interim Servicing Agreement (“FISA”) (Exhibit D)[ 1 ] with Lehman Capital, a division of Lehman Brothers Holdings, Inc. (collectively “Lehman”), pursuant to which Lehman agreed to purchase conventional, residential, fixed and adjustable rate first and second lien mortgage loans from GreenPoint. Under the FISA, GreenPoint agreed to service the mortgage loans it sold to Lehman. According to GMAC, GreenPoint transferred the Note and DOT to Lehman under the FISA.

On November 1, 2006, Lehman entered into a Mortgage Loan Sale and Assignment Agreement (“MLSAA”) with Structured Asset Securities Corporation (“SASC”) (Exhibit E). Under that agreement, Lehman transferred a number of the mortgage loans it acquired under the FISA to SASC. GMAC claims that the Note was one of the mortgage loans transferred to SASC. SASC created a trust to hold the transferred mortgages — GreenPoint Mortgage Funding Trust (“Trust”). The MLSAA also transferred the right to receive principal and interest payments under the transferred mortgage loans from Lehman to the Trust.

Also, on November 1, 2006, SASC entered into a Trust Agreement (Exhibit F) with Aurora Loan Services (“Aurora”) as the master servicer, and U.S. Bank National Association (“U.S. Bank”) as the trustee. A Reconstituted Servicing Agreement (Exhibit G) was executed the same day, which provided that GreenPoint would continue to service the mortgages transferred to the Trust under the MLSAA, but that the Trust could change servicers at any time. Also, according to GMAC, on November 1, 2006, GMAC, Lehman, and Aurora entered into a Securitization Servicing Agreement (“SSA”) (Exhibit H), pursuant to which GMAC would service the loans transferred to the Trust. GMAC claims that under the SSA it is the current servicer of the Note and DOT.

Thus, according to GMAC, as of November 1, 2006, the Note and DOT had been transferred to the Trust, with SASC as the Trustor, U.S. Bank as the Trustee, Aurora as the master servicer, and GMAC as the sub-servicer. GreenPoint went out of business in 2007. According to GMAC, it remains the sub-servicer of the Note, and that is its only financial interest in the Note and DOT. (Transcript Nov. 10, 2009, pp. 44, 47, 75.)

B. Bankruptcy Events

As of March 1, 2009, the Debtor was in default of his obligations under the Note. Debtor filed his petition for relief under Chapter 13 of the Bankruptcy Code on March 19, 2009. On May 16, 2009, GMAC filed a proof of claim (“POC”), which attached the Note and DOT. The Endorsement from GreenPoint to GMAC was not attached to GMAC’s proof of claim. On May 12, 2009, MERS, as nominee for GreenPoint, assigned its interest in the DOT to GMAC (“MERS Assignment”). The MERS Assignment was recorded on July 16, 2009.

GMAC filed a Motion for Relief from Stay (“Motion”) on May 29, 2009, on the grounds that the Debtor had no equity in the Property and the Property was not necessary for an effective reorganization. The Motion also requested adequate protection payments to protect GMAC’s alleged interest in the Property. GMAC attached the Note with the Endorsement and DOT as exhibits to the Motion.

The Debtor filed a response challenging GMAC’s standing to seek relief from stay. After various discovery disputes, GMAC sent a letter dated September 17, 2009, to the Debtor which purported to explain the various transfers of the Note and the DOT. (Docket #90). The letter explained that GreenPoint transferred the “subject loan” to Lehman under the FISA, that Lehman sold the “subject loan” to SASC under the MLSAA, that SASC, Aurora Loan Services, and U.S. National Bank entered into a trust agreement, which created the Trust and made Aurora the master servicer for the “subject loan,” and, that GMAC was the servicer of the “subject loan” under the SSA. According to GMAC, its status as servicer, along with the Endorsement of the Note to GMAC and the assignment of the DOT from MERS to GMAC, demonstrated that it had standing to bring the Motion.

On November 10, 2009, the Court conducted an evidentiary hearing on the Motion. GMAC offered the original Note at the hearing and admitted into evidence a copy of the Note, DOT, copies of the FISA, MLSAA, Trust Agreement, the Reconstituted Servicing Agreement and the SSA. However, GMAC did not offer any documents demonstrating how the Note and DOT were conveyed by GreenPoint to the FISA. No document was offered demonstrating how the Note and DOT were conveyed from the FISA to the MLSAA or from the MLSAA into the Trust. Schedule A-1 of the MLSAA, where the transferred mortgages presumably would have been listed, only has the words “Intentionally Omitted” on it, and Schedule A-2 has the word “None.” (Exhibit F, pp. 19-20). Similarly, there is no evidence that the Note and DOT are subject to the SSA. Exhibit A to the SSA, titled “Mortgage Loan Schedule,” is blank. At the conclusion of the hearing, this Court ordered the Debtor to begin making adequate protection payments commencing on December 1, 2009 to the Chapter 13 Trustee. The Court further ordered GMAC and the Debtor to negotiate the amount of the adequate protection payments. When the parties were unable to reach agreement, the Court set the amount of the monthly payments at $1,000.

III. ISSUE

Does GMAC have standing to bring the Motion?

IV. JURISDICTIONAL STATEMENT

Jurisdiction is proper under 28 U.S.C. §§ 1334(a) and 157(b)(2)(G).

V. DISCUSSION

A. Introduction

Section 362(a) of the Bankruptcy Code provides that the filing of a bankruptcy petition operates as a stay of collection and enforcement actions. 11 U.S.C. § 362(a). The purpose of the automatic stay is to provide debtors with “protection against hungry creditors” and to assure creditors that the debtor’s other creditors are not “racing to various courthouses to pursue independent remedies to drain the debtor’s assets.” In re Tippett,Dean v. Trans World Airlines, Inc., 72 F.3d 754, 755-56 (9th Cir. 1995)); see also In re Johnston, 321 B.R. 262, 2737-4 (D. Ariz. 2005). Despite the broad protection the stay affords, it is not without limits. 542 F.3d 684, 689-90 (9th Cir. 2008) (citing Section 362(d) allows the court, upon request of a “party in interest,” to grant relief from the stay, “such as terminating, annulling, modifying, or conditioning such stay.” 11 U.S.C. § 362(d)(1). The court may grant relief “for cause, including the lack of adequate protection.” Id. The court may also grant relief from the stay with respect to specific property of the estate if the debtor lacks equity in the property and the property is not necessary to an effective reorganization. 11 U.S.C. § 362(d)(2).

Any party affected by the stay should be entitled to seek relief. 3 COLLIER’S ON BANKRUPTCY ¶ 362.07[2] (Henry Somers & Alan Resnick, eds. 15th ed., rev. 2009); Matter of Brown Transp. Truckload, Inc., 118 B.R. 889, 893 (Bankr. N.D. Ga. 1990); In re Vieland, 41 B.R. 134, 138 (Bankr. N.D. Ohio 1984)). Relief from stay hearings are limited in scope — the validity of underlying claims is not litigated. In re Johnson, 756 F.2d 738, 740 (9th Cir. 1985). As one court has noted, “[s]tay relief hearings do not involve a full adjudication on the merits of claims, defenses or counterclaims, but simply a determination as to whether a creditor has a colorable claim.” In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009).

Nevertheless, in order to establish a colorable claim, a movant for relief from stay bears the burden of proof that it has standing to bring the motion. In re Wilhelm, 407 B.R. 392, 400 (Bankr. D. Idaho 2009). The issue of standing involves both “constitutional limitations on federal court jurisdiction and prudential limitations on its exercise.” Warth v. Seldin, 422 U.S. 490, 498 (1975). Constitutional standing concerns whether the plaintiff’s personal stake in the lawsuit is sufficient to have a “case or controversy” to which the federal judicial power may extend under Article III. Id.; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992); Pershing Park Villas Homeowners Ass’n v. United Pac. Ins. Co., 219 F.3d 895, 899 (9th Cir. 2000).

Additionally, the “prudential doctrine of standing has come to encompass several judicially self-imposed limits on the exercise of federal jurisdiction.'” Pershing Park Villas, 219 F.3d at 899. Such limits are the prohibition on third-party standing and the requirement that suits be maintained by the real party in interest. See Warth v. Seldin, 422 U.S. at 498-99; Gilmartin v. City of Tucson, 2006 WL 5917165, at *4 (D. Ariz. 2006). Thus, prudential standing requires the plaintiff to assert its own claims rather than the claims of another. The requirements of Fed. R. Civ. P. 17, made applicable in stay relief motions by Rule 9014, “generally falls within the prudential standing doctrine.” In re Wilhelm, 407 B.R. at 398.

B. GMAC’s Standing

GMAC advances three different arguments in support of its claim to be a “party in interest” with standing to seek relief from stay. First, GMAC asserts it has standing because the Note was endorsed to GMAC and GMAC has physical possession of the Note. Second, GMAC asserts that by virtue of the MERS Assignment, it is a beneficiary of the DOT and entitled to enforce and foreclose the DOT under Arizona law. Third, GMAC asserts it has standing because it is the servicer of the Note. The court addresses each of GMAC’s claims in turn.

1. GMAC Has Not Demonstrated That It Is A Holder Of The Note

If GMAC is the holder of the Note, GMAC would be a party injured by the Debtor’s failure to pay it, thereby satisfying the constitutional standing requirement. GMAC would also be the real party in interest under Fed. R. Civ. P. 17 because under ARIZ. REV. STAT. (“A.R.S.’) § 47-3301, the holder of a note has the right to enforce it.[ 2 ] However, as discussed below, GMAC did not prove it is the holder of the Note.

Under Arizona law, a holder is defined as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” A.R.S. § 47-1201(B)(21)(a).[ 3 ] GMAC has failed to demonstrate that it is the holder of the Note because, while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC. A special endorsement to GMAC was admitted into evidence with the Note. However, for the Endorsement to constitute part of the Note, it must be on “a paper affixed to the instrument.” A.R.S. § 47-3204; see also In re Nash, 49 B.R. 254, 261 (Bankr. D. Ariz. 1985). Here, the evidence did not demonstrate that the Endorsement was affixed to the Note. The Endorsement is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note. Furthermore, when GMAC filed its proof of claim, the Endorsement was not included, which is a further indication that the allonge containing the Endorsement was not affixed to the Note.[ 4 ]

In Adams v. Madison Realty & Dev., Inc., 853 F.2d 163 (3d Cir. 1988), the plaintiffs executed promissory notes which, after a series of transfers, came into the defendant’s possession. At issue was whether the defendant was the rightful owner of the notes. The court held that the defendant was not entitled to holder in due course status because the endorsements failed to meet the UCC’s fixation requirement. Id. at 168-69. The court relied on UCC section 3-202(2) [A.R.S. § 47-3204]: “An indorsement must be written by or on behalf of the holder and on the instrument or on a paper so firmly affixed thereto as to become a part thereof.” Id. at 165. Since the endorsement page, indicating that the defendant was the holder of the note, was not attached to the note, the court found that the note had not been properly negotiated. Id. at 166-67. Thus, ownership of the note never transferred to the defendant. Applying that principle to the facts here, GMAC did not become a holder of the Note due to the improperly affixed special endorsement.

While the bankruptcy court in In re Nash, 49 B.R. 254 (Bankr. D. Ariz. 1985) found that holder in due course status existed even though an allonge was not properly affixed to an instrument, the court based its determination on the clear intention that the note assignment be physically attached because: (1) the assignment was signed and notarized the same day as the trust deed; (2) the assignment specifically referenced the escrow number; (3) the assignment identified the original note holder; and (4) the assignment recited that the note was to be attached to the assignment. Id. at 261.

In this case, however, there is no proof that the allonge containing the special endorsement from GreenPoint to GMAC was executed at or near the time the Note was executed. Furthermore, the Endorsement does not have any identifying numbers on it, such as an account number or an escrow number, nor does it reference the Note in any way. There is simply no indication that the allonge was appropriately affixed to the Note, in contradiction with the mandates of A.R.S. § 47-3204. Thus, there is no basis in this case to depart from the general rule that an endorsement on an allonge must be affixed to the instrument to be valid.

GMAC cannot overcome the problems with the unaffixed Endorsement by its physical possession of the Note because the Note was not endorsed in blank and, even if it was, the problem of the unaffixed endorsement would remain.[ 5 ] As a result, because GMAC failed to meet its burden of demonstrating that the Endorsement was proper, it has failed to demonstrate that it is the holder of the Note.

2. The MERS Assignment Of The DOT Did Not Provide GMAC With Standing

GMAC argues that it has standing to bring the Motion as the assignee of MERS.[ 6 ] In this case, MERS is named in the DOT as a beneficiary, solely as the “nominee” of GreenPoint, holding only “legal title” to the interests granted to GreenPoint under the DOT. A number of cases have held that such language confers no economic benefit on MERS. See, e.g., In re Sheridan, 2009 WL 631355, *4 (Bankr. D. Idaho 2009); In re Mitchell, 2009 WL 1044368, *3-4 (Bankr. D. Nev. 2009); In re Jacobson, 402 B.R. 359, 367 (Bankr. W.D. Wash. 2009). As noted by the Sheridan court, MERS “collect[s] no money from [d]ebtors under the [n]ote, nor will it realize the value of the [p]roperty through foreclosure of the [d]eed of [t]rust in the event the [n]ote is not paid.” 2009 WL 631355 at *4.

Because MERS has no financial interest in the Note, it will suffer no injury if the Note is not paid and will realize no benefit if the DOT is foreclosed. Accordingly, MERS cannot satisfy the requirements of constitutional standing. GMAC, as MERS’ assignee of the DOT, “stands in the shoes” of the assignor, taking only those rights and remedies the assignor would have had. Hunnicutt Constr., Inc. v. Stewart Title & Trust of Tucson, Trust No. 3496, 187 Ariz. 301, 304 (Ct. App. 1996) citing Van Waters & Rogers v. Interchange Res., Inc., 14 Ariz. App. 414, 417 (1971); In re Boyajian, 367 B.R. 138, 145 (9th Cir. BAP 2007). Because GMAC is MERS’ assignee, it cannot satisfy the requirements of constitutional standing either.[ 7 ]

3. GMAC Does Not Have Standing As The Servicer Of The Note

(a) Servicer’s Right To Collect Fees For Securitized Mortgages

Securitization of residential mortgages is “the process of aggregating a large number of notes secured by deeds of trust in what is called a mortgage pool, and then selling security interests in that pool of mortgages.” Kurt Eggert, Held Up In Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 CREIGHTON L. REV. 503, 536 (2002). The process begins with a borrower negotiating with a mortgage broker for the terms of the loan. Then, the mortgage broker either originates the loan in its own name or in the name of another entity, which presumably provides the money for the loan. Almost immediately, the broker transfers the loan to the funding entity. “This lender quickly sells the loan to a different financial entity, which pools the loan together with a host of other loans in a mortgage pool.” Id. at 538.

The assignee then transfers the mortgages in the pool to another entity, which in turn transfers the loans to a special purpose vehicle (“SPV”,) whose sole role is to hold the pool of mortgages. Id. at 539. “The transfer to the special purpose trust must constitute a true sale, so that the party transferring the assets reduces its potential liability on the loans and exchanges the fairly illiquid loans for much more liquid cash.” Id. at 542. Next, the SPV issues securities which the assignee sells to investors. Id. at 539.

Once the securities have been sold, the SPV is not actively involved. It “does not directly collect payments from the homeowners whose notes and deeds of trust are held by the SPV.” Id. at 544. Rather, servicers collect the principal and interest payments on behalf of the SPV. Id. Fees are associated with the servicing of loans in the pool. Therefore, GMAC would have constitutional standing if it is the servicer for the Note and DOT because it would suffer concrete injury by not being able to collect its servicing fees.[ 8 ]In re O’Kelley, 420 B.R. 18, 23 (D. Haw. 2009) . In this case, however, the evidence does not demonstrate that the Note and DOT were transferred to the Trust, and, without that evidence, there is no demonstration that GMAC is the servicer of the Note.

(b) There Is Insufficient Evidence That The Note Was Sold To Lehman And Became Part Of The Trust

When the Debtor executed the Note and DOT, GreenPoint was the original holder of the Note and the economic beneficiary of the DOT. GreenPoint, allegedly, transferred the Note to Lehman pursuant to the FISA. However, the term “mortgage loans” is not defined in the FISA and GMAC’s documents regarding the securitization of the Note and DOT provide no evidence of actual transfers of the Note and DOT to either the FISA or the Trust. Because such transfers must be “true sales,” they must be properly documented to be effective. Thus, to use an overused term, GMAC has failed “to connect the dots” to demonstrate that the Note and DOT were securitized. Accordingly, it is immaterial that GMAC is the servicer for the Trust.

C. Debtor’s Other Arguments

1. Securities Investors Are Not The Only Individuals Who Can Satisfy Standing Requirements When Dealing With A 362 Motion on a “Securitized” Mortgage

The Debtor argues that, in an asset securitization scheme, only the securities investors have standing to seek stay relief because they are the only parties with a financial interest in the securitized notes. However, because the Debtor executed the Note and received consideration (which he used to purchase the house), the contract is enforceable regardless of who provided the funding. In other words, the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan. A number of cases and treatises recognize that consideration for a contract, including a promissory note, can be provided by a third party. See, e.g., DCM Ltd. P’ship v. Wang, 555 F. Supp. 2d 808, 817 (E.D. Mich. 2008); Buffalo County v. Richards, 212 Neb. 826, 828-29 (Neb. 1982); 3 WILLISTON ON CONTRACTS § 7:20 (Richard A. Lord, 4th ed. 2009); RESTATEMENT (SECOND) OF CONTRACTS § 71(4) (2009).

Notes are regularly assigned and the assignment does not change the nature of the contract. The assignee merely steps into the shoes of the assignor. In re Boyajian, 367 B.R. 138, 145 (9th Cir. BAP 2007); In re Trejos, 374 B.R. 210, 215 (9th Cir. BAP 2007). No additional consideration is required, as opposed to a novation which creates a new obligation. Id. at 216-17 citing RESTATEMENT (SECOND) OF CONTRACTS § 280, cmt. e. Therefore, the Debtor’s argument that the Note is unenforceable because the funder of the Note was not the payee fails. The Note is still valid and can be enforced by the party who has the right to enforce it under applicable Arizona law.

2. Proof Of A Note’s Entire Chain Of Ownership Is Not Necessary For Stay Relief

A movant for stay relief need only present evidence sufficient to present a colorable claim — not every piece of evidence that would be required to prove the right to foreclose under a state law judicial foreclosure proceeding is necessary. In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009). Accordingly, not every movant for relief from stay has to provide a complete chain of a note’s assignment to obtain relief.

Arizona’s deed of trust statute does not require a beneficiary of a deed of trust to produce the underlying note (or its chain of assignment) in order to conduct a Trustee’s Sale. Blau v. Am.’s Serv. Co., 2009 WL 3174823, at *6 (D. Ariz. 2009); Mansour v. Cal-W. Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009); Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009). It would make no sense to require a creditor to demonstrate more to obtain stay relief than it needs to demonstrate under state law to conduct a judicial or non-judicial foreclosure. Moreover, if a note is endorsed in blank, it is enforceable as a bearer instrument. See In re Hill, 2009 WL 1956174, at *2 (Bankr. D. Ariz. 2009). Therefore, this Court declines to impose a blanket requirement that all movants must offer proof of a note’s entire chain of assignments to have standing to seek relief although there may be circumstances where, in order to establish standing, the movant will have to do so.

3. The Movant Has Not Violated Rule 9011

The Debtor argues that GMAC “violated Rule 7011” by presenting insufficient and misleading evidence. Given that there is no Rule 7011, the Court assumes that the Debtor was actually referring to Bankruptcy Rule 9011. Rule 9011 allows a court to impose sanctions for filing a frivolous suit. FED. R. BANKR. P. 9011(c); see also FED. R. CIV. P. 11(c). As noted at the evidentiary hearing, the Court did not find that GMAC filed its motion for relief stay in bad faith, nor does this Court believe GMAC filed its motion thinking it did not have proper evidentiary support. There are numerous, often conflicting, decisions on the issues of “real party in interest” and constitutional standing, and what evidence must be presented by a servicer seeking stay relief. The record in this case does not support imposition of 9011 sanctions.

VI. CONCLUSION

GMAC has not demonstrated that it has constitutional or prudential standing or is the real party in interest entitled to prosecute a motion for relief from stay.

Accordingly, its motion is DENIED without prejudice.

23 Responses

  1. Was wondering how FISA fits into all of this. Is it a process that is required to go through when transferring docs?

  2. Bob1365@GMAIL.COM

  3. Bob G.,

    The Revorado and Azize cases are from Florida. I have the hearing transcripts from the state court actions as well as MERS appellate brief.

    I also have other MERS appellate briefs including the one from the Nebraska Banking case. This case is not included in that document published by MERS even though MERS won their argument. In the Nebraska Banking case, the Banking Department of Nebraska brought an action against MERS for failure to pay taxes related to mortgages. MERS responded that it is not the lender, did not lend the money, does not collect mortgage payments, etc. and therefore should not pay taxes related to mortgages. The Banking Department saw things differently and decided against MERS. MERS appealed and won.

    If you will send me your email address, I will be happy to forward to you whatever info you need.

  4. According to the following section from the FDCPA, an action by a debt collector to enforce a security interest in real property can ONLY be brought in a judicial district.

    This section, however, conflicts with established case law that states that a foreclosure is not debt collection. Can someone please comment on this?

    If a foreclosure is not debt collection, then why is it that SCOTUS not only granted cert to an FDCPA claim arising from a foreclosure action but ruled in favor of the homeowner? Why is there a mountain of decisions dismissing FDCPA claims based on the premise that a foreclosure is not debt colelction brought by homeowners in similar circumstances?

    FDCPA
    § 1692i. Legal actions by debt collectors

    (a) Venue

    Any debt collector who brings any legal action on a debt against any consumer shall–

    (1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or

    (2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity–

    (A) in which such consumer signed the contract sued upon; or

    (B) in which such consumer resides at the commencement of the action.

    (b) Authorization of actions

    Nothing in this subchapter shall be construed to authorize the bringing of legal actions by debt collectors.

  5. what jurisdictions are they in? also, i note that not all states are included in the MERS bravado primer. Food for thought, no?

  6. Bob G.,

    Good idea. I have been following these cases for a while. If you want, I have copies of appellate briefs and hearing transcripts for the Revorado and Azize decisions.

  7. Alina,

    I’ll have to Shepardize the cases. Seems like they’ve established some precedents here, though.

    Bob

  8. Bob G.,

    That is an old MERS document. Check the dates of the decisions – all are prior to 2008 (actually, I believe all are prior to Oct. 2007).

    In my opinion, MERS has not been doing well in the last couple of years, so they are reminiscing.

  9. According to MERS, it is Winning Right to Foreclose Cases Across the U.S.A. They claim that Courts are allowing them to Foreclose simply by being the registered mortgagee and holder of Notes endorsed in Blank. See MERS website and MERS Legal Primer on Foreclosure at: http://www.mersinc.org/files/filedownload.aspx?id=566&table=ProductFile.

    Neil, Can You Comment on This?

  10. I conclude that you folks are missing what is going on here.

    The BK Court is NOT making any kind of Judicial determination as to the validity of any creditor’s claims, nor is the BK Court passing some form of Judgment on what a creditor could or could not do in a State Court. The BK Court is merely refusing to allow a servicer to prosecute a Motion (here, a motion for relief from stay) where the filer of the Motion cannot demonstrate that it has some recognizable Standing. the Court used the test of “being a party injured” to effect that level of interest in the matter.

    Where the BK Court went badly wrong was in the analysis of the Allonge. I remind all that an allonge can only be used where all the blank space on the Note is already taken up underneath the Obligor’s signature AND all the blank space on the back of the Note is also already taken up with Indorsements. At that time a creditor can attach an additional paper, called the allonge, and make the further Indorsements on that. Here the allonge was simply manufactured on a separate sheet and stamped “in blank.” that this is both shoddy and not an “allonge” in any cognizable sense was not remarked on by the Court.

    Just because a creditor fails in the “relief from stay” motion does not mean that the creditor does not have Standing to pursue a claim, either within or without the BK Court. You folks seem to be missing that. However, that said, here the BK Court specifically found that GMAC did not have standing under the “real party in interest” rule to pursue the matter before this specific court.

    This Ruling is nowhere near as broad-brush as you would make it out to be. It is rather mundane. What I find impressive is the amount of work the Judge put into fashioning a reasoning for the Ruling. You do not typically see this. that the Judge was wrong on the matter of the formation of the allonge turns out not to be vital; it gottossed anyway.

  11. Can one of you please explain the significance of this in a way that even someone unsophisticated like me could understand? I’m having troubles following everyone’s argument here. I am but a humble, soon to be homeless, homemaker here.

    I understand that GMAC did not have a standing but what other points am I missing here?

  12. M.Soliman

    With all due respect, I’m sure that you are trying to make important points here for all of us. But for the life of me, I am having the hardest time following your arguments. Like Don Quiote, they appear to be hopping on their horse and riding off in all directions at once. There are too many disjointed, conclusionary statements that are being made without a proper foundation first being laid that would allow us to follow your logic. This is why such arguments made to judges by pro se litigants fail: judges and lawyers are trained to think logically; every step of the argument from the beginning premises to the final conclusions must be tightly and succinctly linked together in a SIMPLE TO FOLLOW logical format. And the format must be robust, in that it can be twisted and pummeled and still yield the result the litigant wants. And bear in mind, that what may be impermissible in a FASB context, may not be so in a legal context.

    Bob G.

  13. MEMORANDUM DECISION
    EILEEN W. HOLLOWELL,
    Bankruptcy Judge

    “…the alleged servicer of the Debtor’s home loan, lacks standing to seek stay relief. The reasons for this conclusion are explained in the balance of this decision.

    “Almost there! Judge missed it though with a wrong decision;

    The servicing agent is an agent for the lender and thus one in the same. Under FAS 140 the judge misses the violation of GAAP and FASB pronouncements. Assets sold into the trust can NEVER be foreclosed upon. MI OC and Recourse of registrant pay the asset down to zero. [Oh I got it. It’s called a CREDIT BID!]
    ——————————————————————-
    FROM A RECENT PLEADING PREPARED FOR COUNSEL –

    10. Pass through Certificates (Shares) are deemed “CHATTEL” Personal property whereby a security interest grants the holder a right to take a remedial action with respect to the property, upon occurrence of certain events, such as the non-payment of a loan.

    11. Omitted here

    12. The holder will sell such property at a public auction or through a private sale, and apply the proceeds to satisfy the underlying obligation. That assumes a liquidation of the entire asset

    13. Security agreements hold the terms for the security interest. The interest is typically granted by a “security agreement”. The security interest is established with respect to the property.

    14. Where the above points to obvious rights to recovery in a default it also specifies the transactions are “debt” and not pursuant to a bonefide sale. Generally, a hypothecation is a contract which pledges or creates a lien on collateral to secure a debt, where the debtor keeps possession of the collateral.

    ———————————————————————

    The cat is out of the bag and NOONE IS USING THE ARGUMENT. Government will preempt soon…especially with anymore wrong decisions gone right for a borrower. Like they say at the track when there’s a stewards inquiry…Bring it down….bring it down!

    This ruling is coming back and shall be reversed. Decisions like this are citing the debtor and the right to perfect under the security agreement. Hello, the UCC article 9 is specific and the parties obligated and who pledge the security whereby the lender registrant is almost always allowed to recover the assets under the security agreement.

    The BK courts believe market conditions cannot allow blood thirsty investors to force a receivership for any wine before its time. Problem is this is vinegar.

    The willingness to go against the grain here is in reference to single asset that is part of a pooled asset that was locked in the model used to capitalize the investment as a trust under a trustee who manages the indenture.

    [Note- Read the PSA about repo or *** replacement*** *** replacement*** *** replacement*** value of similar and like asset. ] No cigar District courts!

    Here’s the point to be made:

    Basis accounting and GAAP rules compel the court to see the differences in structured finance models. The honorable court fails to differentiate where the right of a registrant to “prefect “ after having pledged assets is subject to debt offerings and not a SALE INTO A TRUST! (Said it 100 times by now).

    The courts rationale is curious to me as it seems to fit in with a mortgage REIT or REMIC offering participations in debt. But remember . . . . This is a sale into a trust and loss on controlling interest without enforcing a recourse provision or under the servicing agent’s contract for which a recourse provision is mandatory for repurchase prior to pulling any assets out to foreclose.

    Debtor here is not a consumer borrower but one in the same with a borrower as in GMAC who leveraged their portfolio of loans. Hey, Boyko missed it too with a wrong decision. The lenders were right. They don’t need NO assignments Randy ….to have standing ….

    With a CDO equity offering (that makes sense CDO and equity) it’s all reported in public filings where the assets were delivered before they funded and many times before the trust were formed using a forward commitment. Want PROOF – Ever see an endorsement or assignment in BLANK!

    It’s all about the Lazarus loan and back from the dead lending phenomena. Need more proof. We got it and so can you …it’s there for the taking!.

    M.Soliman
    Expert.wtness@live.com

  14. We have two realms here. We’ve got Oz on one side and we have Kansas on the other. Oz represents the public side of Debtor/Creditor relationships governed by 1532 pages of nuasiating jibberish found in the UCC. Kansas represents the private side of commerce governed by exciting trust law reading such as the 2d and 3d Restatement of the law on Trust. I find it very interesting that on one hand, we are just these irresponsible debtors who signed the loan docs and “borrowed” money. Yet our signatures are affixed to Trust instruments and conveyed into Trusts as res under Trust Indentures, naming a wide array of Trust characters like Beneficiaries, Trustees and Trustors. We hear words like legal title and equitable title, title this, title that and beneficial interest this and legal interest that. Looks like Debtor/Creditor and Trusts are two sides of the same coin that can accomplish the same purpose through two different mechanisms depending on your intent, purpose and expression. The question we should be asking: Do we even have LAWFUL money with which to complete a legal contract? Is CREDIT, inexpensively created by a highly suspicious organization called the Federal Reserve, really lawful (not legal) consideration with which to complete a true contract? According to Trust Law, a Trust can fill the void and take the place of what we think are contracts. The banks certainly use Trusts so why can’t we? Is Trust a trade secret that is far too sophisticated and complex for the average layman to comprehend? It’s obvious the signature on the promissory note is valuable. I’m even crazy and misguided enough to say that the signature funded the transaction in the first place…but that’s just a bunch of conspiracy theory nonsense that can be easily refuted with good old fashion american plausible deniability. The point is, we are the Trustor/Grantor/Settlors of the Trust Instruments (Deed says “borrower” is Trustor) because we are the creators of the ever-so-precious signatures that the banks can’t wait to cash in at the Federal Reserve Discount Window. Can anyone possibly have a superior claim and interest in your own signature? According to Trust Law, Trust property can be anything, tangible or intangible.

    If you were to drop a cocktail napkin on the ground with a living man’s UNRESTRICTED signature on it, an “authorized” banker could pick it up, add a dollar amount with a bunch of zeros behind it (UCC3-115), call it a collateralized debt obligation, have S&P give it a AAA rating and cash it in at 92 cents on the dollar at the local Federal Reserve Discount Window (slight exaggeration). But he couldn’t do that if next to the signature read the words: By Grantor, Private, Non-Negotiable. Special Deposit Only.

    I wonder what would happen if one were to transfer equitable title to the trustee (often a title company) thereby merging legal and equitable title and terminating the trust?

  15. I was reading a case where the court ruled that a certain CA statute controlled in trust deed sales, and that that statute permitted note copies or affidavits of lost notes. Something to that effect.

    If that’s not the case, then you should appeal the judge’s ruling to the district court.

  16. Bob
    you are correct.
    i was not disagreeing with you as much as questioning where “GMAC can’t foreclose” per se was mentioned or revealed in the post. I do understand –
    if they lack standing for the stay motion they MAY or most likely have that very same problem in a judicial foreclosure forum .But in Ca the very points mentioned re standing with title chain,assignments, dot & notes etc have been routinely ignored [sadly as the rule] , just as in my own case . From the judges own words told to another bk debtor I know a week before my hearing “I will hear no mention of show me the note” Motion to lift stay granted !
    [in his case also].

    btw- i didn’t connect the ” emotion” ref. if it was aimed at something I said or only the comparison used re – facts & emotion.

  17. Dear Angry and Not Taking It:

    You’ve been forced to take it.

    That being said, I can appreciate your situation. But you don’t win legal arguments with emotion. Facts drive legal arguments. Plain and simple.

    Now if you don’t have standing for stay relief, it’s because you don’t have sufficient interest in the controversy to insert yourself. This is a lower standard than having standing to foreclose. So if you can’t get stay relief, you’re never going to get foreclosure standing.

    What say you, Neil?

  18. Bob G
    “GMAC can’t foreclose”?? where did it say that?
    I only read that they lacked standing for the “stay relief”
    quoted from comment – “In this case, however, the evidence does not demonstrate that the Note and DOT were transferred to the Trust, and, without that evidence, there is no demonstration that GMAC is the servicer of the Note.” & ” it failed to demonstrate that the Note is properly payable to GMAC.”
    This is the technicality that the judge could hang here hat on.

    the extra legal blessing “Arizona’s deed of trust statute does not require a beneficiary of a deed of trust to produce the underlying note (or its chain of assignment) in order to conduct a Trustee’s Sale. It would make no sense to require a creditor to demonstrate more to obtain stay relief than it needs to demonstrate under state law to conduct a judicial or non-judicial foreclosure.”
    same as ca . “We dont have to show you any stinking badges ” Fukers

    fwiw
    ” In re Emrich, 2009 WL 3816174, at *1 (Bankr. N.D. Cal. 2009)
    .this is Judge Alan Jaroslovsky
    This was the same judge i had that refused to even look at my response to motion to lift stay because I was pro se, so he tells me get an atty. so i do then he abstains from hearing my case… hahaha joke was on me

  19. Here’s the prob as i see it.

    Court holds that GMAC can’t foreclose because it can’t prove note ownership. Period. Motion for stay relief is denied, without prejudice. Bam! GMAC gets another shot when they can produce ownership. Judge says the pretender lender argument is without merit. Not good.

  20. “the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan.”

    – The judiciary is seeming more and more every day like the fabled ten blind men and the elephant: they each “see” a different creature. In making the above conclusion, the judge makes no mention of TILA. Seems TILA violations were perhaps never raised by defendant or put before this court? Else non-disclosure of the “true lender” (or deliberately misleading disclosure) would be an issue that may even “invalidate the loan?”

  21. Bob G, not a lawyer… and perhaps I am reading this wrong. Appears to be wide open.

    ‘if a note is endorsed in blank, it is enforceable as a bearer instrument. See In re Hill, 2009 WL 1956174, at *2 (Bankr. D. Ariz. 2009). Therefore, this Court declines to impose a blanket requirement that all movants must offer proof of a note’s entire chain of assignments to have standing to seek relief although there may be circumstances where, in order to establish standing, the movant will have to do so.”

    As well all cases prior to the “securitization” and bundling of mortgages the burst housing bubble, and subsequent economic melt down really do not reflect the complexity of issues at hand today. There are plenty of cases in the courts brought on by “investors” that are and will set precedent, when they win the average individual will follow suit and win also.

    This is a whole new world. That’s what I think

  22. Doesn’t bode well for the some of the arguments advanced on this site. Full chain of title assignments is not necessary;

    “the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan. A number of cases and treatises recognize that consideration for a contract, including a promissory note, can be provided by a third party. See, e.g., DCM Ltd. P’ship v. Wang, 555 F. Supp. 2d 808, 817 (E.D. Mich. 2008); Buffalo County v. Richards, 212 Neb. 826, 828-29 (Neb. 1982); 3 WILLISTON ON CONTRACTS § 7:20 (Richard A. Lord, 4th ed. 2009); RESTATEMENT (SECOND) OF CONTRACTS § 71(4) (2009).”

    This appears devastating and fatal to much of legal arguments used to challenge securitized mortgage loans.

    I’d be interested in knowing what others think.

  23. WOW! Nice work! Looking at this you would think the state statutes would hold up in AZ Superior court. So bankruptcy would not be necessary? Any Superior court decisions like this one?????????

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