Katherine Porter to Senate: No Non-Judicial Sales While System Is In Doubt

10.27.2010 KATHERINE PORTER SENATE testimony-102710-porter

see also 10.27.10 OHIO AG ROBO AMICUS BRIEF ParmaForeclosureBrief

Katherine Porter is a visiting law professor at Harvard. Her 2007 study was the seminal work on mortgage and foreclosure irregularities. She found that 40% of the notes had been “lost” or destroyed. The following is an excerpt from her testimony today before a Senate Committee. The entire transcript is in the link above.

Due process does not disappear merely upon the assertion by one party that the other is clearly liable. The allegations of problems in mortgage servicing should, if anything, only heighten the due process requirements on consumers. For example, in light of the lack of verification procedures for affidavits to support requests for judgments in judicial foreclosures, it may be reasonable to be concerned that there is absolutely no verification of the facts in the non-judicial foreclosure context.

Thus, we might argue that states or the federal government ought to increase the legal requirements for foreclosures across the board, at least for loans initiated in the last five to ten years when widespread allegations of paperwork and procedural problems have existed. The banks’ arguments that we can ignore possible systemic wrongdoing by the banks because as a systemic matter, homeowners are in default on their loans, is unpersuasive. Indeed, it seems to reflect a fundamental misunderstanding of the obligations of any party wishing to invoke the aid of the law in enforcing its rights.

The most pressing issue is to assess the extent of the wrongful or problematic foreclosures. This assessment needs to have two fundamental parts. First, how many loans or foreclosures have any defect? Second, what kinds of defects do the troubled loans or foreclosures have? Without an answer to these questions, it is nearly impossible for anyone to do more than speculate about the key questions before this panel about the impact of these troubled loans or foreclosures on the government’s foreclosure mitigation efforts and the well-being of financial institutions.

The immediate need is to know the extent to which the problems in mortgage servicing occur sporadically or are endemic. As a preliminary matter, I note that it is simply not credible to believe that the lenders have made no errors in their foreclosure procedure. Because they are being allowed to control the definition of error and are being allowed to audit themselves, we cannot have confidence in such reports. The question is then is whether the rate of troubled loans is nearly 100% as some have alleged, or rather is a smaller fraction of loans, such as 5%.

24 Responses

  1. We never had a legal contract because we never received copies of our closing documents and note until 4 1/2 yrs after we closed. The bank knew we were calling weekly to get them and they refused a payment 18 days late in March 2008 and forclosed. We got the forclosure stopped but then they sold our home illegally on 10/20/08 to a subsidiary of the bank. There was no one else there because the bank never notified us nor did they advertise it in the paper. We had a ton of equity and they sold it for 18,000 more than the principal balance listed. The principal never went down because no money was applied after we made over $150,000 in payments and paid extra every month to be applied to our principal. It was not registed to the Registry of Deeds for almost 2 months and they lied on the date it differed from theaffidavit that was signed under oath. Please help me

  2. frankielee

    Think Katherine Porter is trying to use every avenue to get this administration to DO SOMETHING. This, however, still seems unlikely – given Obama’s comments as late as Wednesday.

    Quote from Obama – “Obama opted not to address the foreclosure fraud scandal that has forced banks to temporarily halt home repossessions across the country. Instead, he claimed that the government’s efforts had stabilized the housing market, and argued that the “biggest challenge” was to make sure speculators and deadbeats didn’t take advantage of the government’s help.”

  3. […] 10.27.2010 KATHERINE PORTER SENATE testimony-102710-porter see also 10.27.10 OHIO AG ROBO AMICUS BRIEF ParmaForeclosureBrief Katherine Porter is a visiting law professor at Harvard. Her 2007 study was the seminal work on mortgage and foreclosure irregularities. She found that 40% of the notes had been "lost" or destroyed. The following is an excerpt from her testimony today before a Senate Committee. The entire transcript is in the link above. Du … Read More […]

  4. I have 2 properties under water. BOA( countrywide)sent us a letter of default and trusty sale scheduled this month. we need a referral, we have tried lawyers and broker who charge us a lot and did not do anything.The lawyer is suppose to file a lawsuit on our behalf just waiting for the foreclosure to happen.Its due soon we were given 30 days after reviewing our
    documents to determine if we are eligible for modification.we waited 8 months still pending. Our second property is current but not affordable mortgage,we are still surviving but,our lost is $6000.00 a month due to low census We need a lawyer that we can trust we don’t know what to do.
    Benedicto/estrellita Balan

  5. @ Dying Truth

    What I meant to say is that 3/4’s of the way into her very astute testimony, she suddenly seemed to be weighing concerns about the cost of litigation en masse.

    As a victim of their fraud, I’m not the least bit concerned with the cost burden of litigation on the bankers side. The banks who set up this fraud should have been a little bit more concerned at the onset, instead of trusting that we’d allow them leeway to pillage at will. The very act of creating MERS without asking ANYONE if it was a good idea shows their boundless avarice and hubris. And for Jamie Dimon to threaten, even if veiled, that to come after the bankers would spell doom for the economy shows that the gallows need a good dusting off and some oil applied posthaste.

    The concern over litigation is tantamount to saying…the immensity of the crime is such that the burden of litigation is too great. To me that’s an oxymoronic phrase, and to consider the ill effects of such litigation on the banks, if I read her testimony correctly, is something that I for one will not lose any sleep over. Let the bankers swing in the wind, that’s a fate that clearly fits the magnitude of their crimes against humanity.


    Good find Deontos.

    I want everyone to be aware, including ALL JUDGES mark my words when the Judiciary as a whole steps up to intervene and hold the “banks” liable for their crimes (future that is, just wait you’ll see), the “banks” will try to pull the threat of or just outright disclosing to the public Judges’ known undislosed financial interest that they had invested in the MBS market on the advice given them from their finacial advisors from their pension funds. They will try to use this as their “Wild” card or their ace in the hole, be expecting this if I am unable to get the word out on this and out in the open, BUT DON’T REACT THE WAY THAT THEY WOULD EXPECT YOU TO if they get to it before I do(or someone without a hidden agenda does).

  7. frankielee,
    Your absolutely sick with it (don’t worry where I’m from that’s a comment), you make me laugh with joy (something I haven’t been able to do in a long long time). I actually have a friend named Frank Lee, he lives around the corner from where I stay now. But what did you mean when you said “3/4′s of the way in to her testimony I hit a brick wall” ?

  8. Wednesday, October 27, 2010


    by Christopher Peterson

    On monday the American Banker ran a well written story by Jeff Horwitz on the document problems slowing down foreclosures. It focuses on whether document custodians actually have the possession of key documents, including especially promissory notes. The article (subscription requried; 2010 WLNR 21191843) quotes document custodians insisting that they have all the documents they need, but it also includes some scepticism from Diane Thompson, April Charney, and Max Gardner. It is good to see financial journalists paying more carefull attention to consumer rights advocates.

    This being said, I think the story is still missing some important points. Because I have a million other things to do today, I’ll limit myself to three thoughts that jump to mind. First, one reason some originators may have been lax in sending proper documentation on to the depositor (and in turn the document custodian or trustee) is a false belief that designating MERS as the mortgagee or deed of trust beneficiary would facilitate quick foreclosures without all the proper documentation. MERS is an important partial driver of the affidavit problems. Some financial institutions convinced themselves that MERS would be a cradle-to-grave proxy eliminating the need for them to keep the collateral jackets with blue ink documents that old-fashion lenders once maintained. Why keep track of paperwork if MERS is just going to do your foreclosures for you? This is an easy thing to believe when (1) they really wanted to believe it and (2) the motto of company is “process loans, not paperwork.” Should we be surprised that the paper might not have actually changed hands?

    Second, the representations the document custodians are making in Mr. Horowitz’s article are inconsistent with what some mortgage bankers themselves have admitted. A brief (Download Here)the Florida Bankers Association submitted to the Florida Supreme Court takes the totally opposite view on whether the promissory notes are lost. It states, “The reason ‘many firms file lost note counts as a standard alternative pleading in the complaint’ is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file.” Yikes! Memo to all bankers: destroying promissory notes is a bad idea. But don’t trust me. Instead very carefully read this next sentence recently written by two Judges on the American Bankruptcy Institute’s Uniform Commercial Code Committee: “for the note to be enforced, the person who asserts the status of the holder must be in possession of the instrument.”

    But wait, there’s more…

    Third, the lost note problem is not the financial institutions’ only legal problem. The security agreements used in MERS registered loans state: “MERS is the mortgagee.” Three state supreme courts have now held that MERS is not a mortgagee. The ultimate outcome of this basic legal discrepancy is not yet known and has the potential to be different in various states. Just focusing on one potential implication from this very basic discrepancy, it is legally unclear that recording a mortgage with MERS listed as a mortgagee is sufficient to create a perfected security interest. A basic objective in recording mortgages is to establish priority vis-à-vis other lenders, lienors, and buyers. With the exception of Minnesota, every state land title act—the statutes that set out the rules granting priority through recording—was written before MERS came into being. The legislatures that drafted these statutes did not contemplate the possibility that every lender in the country would record their loans in the name of one shell company owned by banks. Any state supreme court (except for Minnesota) is currently free to decide that recording in the name of this proxy-mortgagee-shell-company does not perfect the mortgage. Will any state supreme court have the guts to insist on transparent real-party-in-interest recording? Unfortunately, there is no crystal ball on my desk. Before the financial crisis and all of the documentation problems I probably would have guessed that the industry would get away with this power grab that privatizes the record keeping system. But now….? I’m not so sure.

    The MERS folks and their lawyers will continue to point to the occasional case from our history where one court or another has allowed some form of recording where there was some unusual agency relationship involved. They will say that these occasional cases prove their concept is “legal.” But just step back and think about it for a minute. Is there really a case that proves that their concept is legal? No. Obviously there is not because their concept was totally new in the history of the country. So many people I talk to seem to think that hidden in the bowels of our country’s case law there is some nexus of complicated cases that must—surely must—make this quirky idea perfectly OK. However, every case the MERS folks cite to will have the potential to be distinguished by a state Supreme court that believes its legislature did not authorize this type of change to the system. And those courts will be on solid ground because—let’s be honest—state legislatures simply did not willfully grant permission for this radical change in recording. The land title statutes contemplate recording by many different actual mortgagee’s and deed of trust beneficiaries, not by one single a shell company that stands in the place of the entire industry. They will not find a case that binds a state supreme court to hold otherwise.

    This is, of course, not to say that the MERS folks cannot win on this question. Many judges will be willing to look at the occasional case MERS’ lawyers drag up and hold that: “yes, behold, the land title laws DO allow one shell company to be the national mortgage proxy.” My own impulse is that a judge that takes this route is either clueless or a wee-bit intellectually dishonest. But maybe that’s too harsh. I suppose I could understand a judge saying to herself, “Well, … I’m going to let them interpret the statute this way because I don’t want to cause a crisis—and let the legislature’s original meaning of the land title act be damned.” I suppose there is something of a cynical virtue in this position. The thing I don’t like about that is that Supreme Courts ought not to get in too far into the business of macro economics. Their job is to enforce transparent rule of law. We are counting on them to do that. Plus, they are lousy economists. The truly conservative position on these cases will be to insist that radical changes to the legislatures’ land title acts be made by legislatures, not by bank sponsored financial snake oil salesmen. I actually think that the greatest exposure of the industry on this question could be in republican, civic virtue oriented courts that are not particularly impressed by Fannie Mae or Goldman Sachs bling-bling. There are smart judges in Wyoming, in Kansas, in Oregon, in Ohio, in Florida that will resent turning over the county recorders democratically maintained recording system enshrined in law by the democratically elected legislature to this bank owned short cut made for the convenience of the Wall Street investment banks out of control GSEs that trashed our economy.

    Ultimately, these problems, and the present uncertainty they are creating, will not be resolved quickly.

  9. Frankielee

    Wallstreet’s destruction will be the world’s gain,
    Die Wall street! Die!
    I could not agree more.

  10. I read with great interest Katherine Porter’s testimony. I felt she accurately portrayed a very difficult problem, from both the investor’s side, as well as the borrower’s angle.

    Having said that, 3/4’s of the way in to her testimony I hit a brick wall:

    “….homeowners can contest the right of a plaintiff to foreclose. The homeowner may allege that the foreclosure paperwork is incorrect (e.g., invalid affidavit), or that the foreclosing party is not entitled to enforce the mortgage or note (e.g., they lack title to the mortgage or are neither the holder nor bearer of the note), or that the servicer has bloated its fees and charges beyond what is legally permitted (e.g., force-placed insurance applied inappropriately.) Each of these lawsuits would require a certain amount of discovery, such as depositions or document production, to resolve. In addition, absent settlement by the bank, the court would have to hold an evidentiary hearing to determine whether the homeowners’ challenge to the foreclosure should prevail. Each of these processes will take time, increasing the loss severities on the foreclosure. FBR Capital Markets estimated that direct litigation costs for cases filed by homeowners could reach $4 billion, while the delay in foreclosure in such contested cases could add an additional $6 billion in costs.”

    Yes, and your point is? Why should I be concerned about these high dollar marks on a swimming pool that is already empty? Exactly how does this dollar amount equate to my due process? A guarantee to each and every one of us under the constitution?

    Should I, as a citizen, who feels I’ve been raped and pillaged by Wall street, be concerned by the eventual or ongoing dollar amounts racked up by these fraudulent acts perped upon American citizens? I really don’t think so, and I would add that I truly couldn’t care less how many dollars are lost by Wall street in the process. Their destruction will be the world’s gain, of that there’s no doubt.

    This will be my most favorite and lasting schadenfreude moment. I only hope I can see and hear the death gurgle. Die Wall street! Die!

  11. Bert Thomson:

    I thought Carrington Mortgage bought all of New Century’s servicing platform, you might want to check into that

  12. Is there an expert in document forgeries?

    We have a case where we believe the note was recently printed the ink looks funny and there are no indentations on the page. This is a Deutcshe Bank Trust case. They initially alleged the note was missing, when pressed they have come up with two different versions, both look newly reproduced.

    All these papers are bogus, but we will need and expert look at them and testify.

    We also need information on First Magnus Financial Securitization practices, their aggregators, their master servicers and their pools for 2007 before their BK.

    We tried locating several loans made from December 2006 to April 2007 in EDGAR but nothing came out under First Magnus Financial Corporation as the origininator. They used MERS in all their deeds of Trust

    email your contact info to pelucheven@hotmail.com

    we are going after these crooks.

    We were able to deny a lift of stay in Virginia against deutsche bank and the foreclosure mill felons in BK court Eastern District of VA.

  13. Chris Whalen Welcomes Our New Tyrannical Overlords, Prepares For The Taxpayer Funded Mortgage Insurer Bailout
    Tyler Durden’s picture
    Submitted by Tyler Durden on 10/27/2010 11:26 -0500

    * AIG
    * American International Group
    * Chris Whalen
    * Credit Default Swaps
    * Federal Reserve
    * Goldman Sachs
    * High LTV
    * High LTV loans
    * Institutional Risk Analytics
    * Mark To Market
    * Mutual Assured Destruction
    * Risk Management
    * White House

    Chris Whalen’s latest Institutional Risk Analytics is a must read letter as it highlights yet another aspect of foreclosure fraud, one which finds various analogues in the way the MBS originating banks took advantage of AIG, knowing full well it was stuffed to the gills with worthless pieces of paper and taking out enough insurance on it to require a federal bailout when mark to fraud failed and mark to market finally worked for a very short period of time. Now, it seems, it is the mortgage insurers turn: “So today the MIs are still operating, though they are not providing insurance because they can’t. Observers in the operational trenches tell The IRA that virtually no MI claims are being paid – even if the claim is legitimate. The MIs are very undercapitalized and still bleeding heavily. But they get continued business because the GSEs demand MI on high LTV loans. Lenders are forced to use the MIs and consumers are made to pay the premium. Thus the auditors of the GSE continue to respect the cover from the MIs, even though the entire industry is arguably insolvent.” The question is how many CDS have Goldman et al purchased in bulk in anticipation of the imminent wholesale MI Event of Default, which will force Geithner to once again use the Mutual Assured Destruction wildcard and force taxpayers to bail out those holding MI insurance, especially if the originators and servicers end up being one and the same…

    From Whalen’s latest:

    Several mortgage market observers describe the current private mortgagre insurance market in the U.S. as a regulatory artifice — or more accurately regulatory arbitrage. MI was re-created expressly for the GSEs to provide cover for loans with an LTV greater than 80%. It was a simple business and, if the management of an MI underwriter was not too stupid, it could make a decent return. The problem is that management of the old line MIs typically did a lot of very stupid things, acts of idiocy that were encouraged by the GSEs and their allies in Congress. A handful of the more egregious lapses in judgment by the MIs and the GSE included risk management changes that come under the familiar story of “innovation,” a familiar ruse that was a key part of the push by both political parties for affordable housing going back decades:

    (1) Eliminating independent risk management departments; line managers in the MIs were allowed to override corporate risk departments, particularly when insuring large bulk deals.

    (2) Signing fraud, and documentation (completion) waivers in order to land large bulk deals from the largest producers.

    (3) Insuring bulk deals without performing random inspections to (a) keep lenders honest and (b) assess underwriting quality.

    (4) Insuring subprime loans (non GSE loans) without proper credit models; and insuring production from lenders with questionable credentials.

    (5) Insuring large quantities mortgage product that was outside the knowledge base of the MIs. Remember that the MIs had almost 40 years of insuring plain vanilla F&F product. Now they were insuring 220’s and every other kind of crappy paper the lenders threw at them. They had no clue how this stuff would perform. No attempt was made to model it properly.

    So what happened? By summer of 2007 most of the bulk GSE pools underwritten by the MIs started to experience extremely high levels of delinquencies. But rather than curtail MI operations and shore up underwriting, the MIs made a big push and increased subprime production insuring large amounts of subprime product (lots of 220s) all the way into first quarter 2008.

    The MIs tripled down and did so in hopes of making enough fee income to (1) meet plan and (2) shore up capital that had started to bleed. This push, which was not always reported honestly to share and bond holders, signed the respective death warrants for Fannie and Freddie. But the zombie dance party rocks on.

    So today the MIs are still operating, though they are not providing insurance because they can’t. Observers in the operational trenches tell The IRA that virtually no MI claims are being paid – even if the claim is legitimate. The MIs are very undercapitalized and still bleeding heavily. But they get continued business because the GSEs demand MI on high LTV loans. Lenders are forced to use the MIs and consumers are made to pay the premium. Thus the auditors of the GSE continue to respect the cover from the MIs, even though the entire industry is arguably insolvent.

    Thus we go back to the low-income borrower, who is forced by the GSEs to pay for private mortgage insurance that will never pay out. The relationship between the GSEs and the MIs is identical to the “side letter” insurance transactions between AIG and Gen Re, and come to think of it, the AIG credit default swaps trades with Goldman Sachs (GS) and various other Wall Street dealers. In each case the substance of the transaction is to falsify the financial statements of the participants. And in each case, the acts are arguably criminal fraud. And in the case of the zombie banks, the GSEs and the MIs, the fraud is being actively concealed by Congress, the White House and agencies of the U.S. government led by the Federal Reserve Board. Is this not tyranny?

    Look for topical comparisons of fraudclosure to the AIG implosion to gain far more prominence as the mortgage fraud topic just refuses to go away, and has the big 3 holders, Paulson, Och Ziff, and Caxton, cowering in semi-lit rooms, thinking of effective exit strategies that, for now, do not involve wholesale middle-class bailouts. Also look for the Treasury to soon disclose just how profitable its imminent bail out of the mortgage insurers will end up being for taxpayers…

  14. Thanks Mr Davie for the info below. So now BoA is pleading standing because they have been injured by not getting servicer fee’s? Will this work?

  15. Thank you Katherine Porter – you have been a long time crusader for consumers and justice.

  16. Just filed my third objection in a series of continued hearing on Motion for Relief from Stay in Bankruptcy Court. I have a good judge that is interested in the issues of standing, real party in interest, and necessary joinder of parties. I made the banker cough up two versions of the note, and I may have them in a squeeze. Its a knock down drag out fight.

    Now is the time file motion objecting to the Proof of Claim, motion for evidentiary hearing, and adversary proceeding.

    Does anyone have examples, samples of any of these three regarding my chapter 13? Send:

    Thanks to all who have assisted so far.

    davidwood100@yahoo.com (pro se.)

  17. Here in California Mers stated they are Nominee for New Century Mortgage in 2008 However new Century Mortgage sold all it loans and then filed BK in 2007. ASC/Wells Fargo stated to the BK court under Penulty of Perjury American Servicing company acquired servicing rights
    to my note and deed of trust 6/30/2006 Lie Lie Lie The house was not completed and my deed of trust was not printed until nov-14-2006. Also 6/30/2006 The house was stix in the builder name. They did not file a notice of completion until oct 2006.2009 Wells Fargo Attorney Foreclosure Mills Pite Duncon LLC in San Diego california submitted a proof of claim to the federal bk court in 2009 a OG copy of a note. The 2009 note was certified and had a bar code and a mers min number. However my original loan number was erased you could see the lines. The 2010 motion for relief from automatic stay The note did not have the Mers Min Number and no bar code not evan certified.We also notice they erase the min number and my OG loan number from my Deed Of Trust. This Is a Clear Case Of Fraud On The Courts.PLEASE CONTACT ME I WOULD LIKE MY

  18. Thanks Katherine…. for giving a dang about right and wrong.





    : Jan 12 2010 11:54:10 AM


    : 15129187602


    : Brian Davies (17609044928)

    “Hi Mr. Davies my name is Michael some with the Mac mortgage services and I’m calling you in response to a corporate complaint that we got through the Deutsche Bank wanted to touch base with you pertaining to your loan modification could you please call me at your earliest convenience. My direct number is 512-918-7602. I’d be more than happy to bring you up to speed on where we’re staying with the loan modification process. Only once again Michael minutes. Contract number is 512-918-7602. This is everyday. I look forward to speaking you soon. bye bye ”

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  21. You see this everyone, this is something like what the opinion of an unbiased officer of the Judicial Branch who had no financial interest riding on the outcome of foreclosures. Which is what makes the conflict of interest so obvious. Because it is this very honor and respect for law and equity found in this article in impartially seeking a fair and just resolution to these problems which is wholeheartedly absent in the court cases and judges’ opinions all accross the United States.

  22. SUPONEA THE RECORDS THAT ARE DISCUSSED IN THE TESTIMONY—LOAN LEVEL FILEShttp://www.scribd.com/doc/40273991/SUPONEA-Deutsche-Bank-National-Trust-Company-as-Trustee-and-Custodian-of-Records


  23. Lynch Mob

    America has a history of Lynching people

    Jews Blacks Latinos and even their own kind

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