“Phantom” Trustees: Tools of Wall Street

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EDITOR’S ANALYSIS: There are so many “Trustees” running around these days, it is impossible to figure out what they do and if they even really exist. In the article below, Streitfield points out that the “Trustees” on deeds of trust “in those states where foreclosures are not governed by the courts” are essentially phantom entities. The original trustee on teh deed fo trust is usually a genuine entity qualified to act in good faith on behalf of the beneficiary.

There are three phantom deals running parallel in each “securitized” loan situation: (1) the actual transaction which involves money exchanging hands and where there is no trustee at all named on the deed of trust for the investor-lender (2) the fictitious securitization infrastructure under which the investor believes the receivables are being carved up into pieces that reduce risk to nearly zero in which there is no trustee named on the deed of trust for investor-lender or anyone else and (3) the fictitious transaction described in the closing documents in which a trustee is named on the deed of trust for a false beneficiary.

The current practice is driven by the fact that the original “trustee” on the deed of trust is unwilling to perform tasks that are at best dubious as to their authenticity or compliance with legal requirements. Thus when the “loan” is declared in default (but is not necessarily in default) by some remote entity taking instructions from another remote entity, a “substitution of trustee” is executed and filed. This is of course years after the deal was done usually and is signed by people without authority — like from MERS or some other robo-signing forgery and fabrication mill. The new “Trustee” is completely controlled by Wall Street and simply has a name that is used to initiate foreclosures, whether it even knows that the notice went out or not.

This practice is mirrored by the now multitudinous so-called foreclosure mills that were bankrolled by Wall Street, who staffed the offices, supplied the money, and and personnel, and leased the license of an attorney who had few scruples in connection with the use of his name or law license. If you get a look at the daily calendar of David Stern or any of the other foreclosure mill moguls you’ll see they didn’t have much to do. Neither do the trustees. BILLIONS of dollars were paid out to such mills, trustees, and remote vehicles for them to keep their mouths shut and do what they were told to do.

As the article below points out, people like Adam Levitin are highly critical of the deals that are being made with the remote vehicles and servicers, inasmuch as the real players who too the money from the investors, intentionally lost it as part of a scheme whereby they turn the investors’ loss into a profit worth multiples of the loss, and are now seeking to take homes in foreclosures using appearances instead of reality.

Levitin says, and I agree, that these deals are worse than no deal at all because they provide political cover to Wall Street. We can expect to see more of them until Wall Street has its way and the matter is “settled” with entities that have no assets, no authority, and whose mere presence causes defective and chaotic title problems for generations to come.

New Rules for Mortgage Servicers Face Early Criticism


Federal banking regulators have not officially imposed their new rules for the top mortgage servicers, but criticism is already being heard. A wide coalition of consumer and housing groups is denouncing the legal agreements, which are likely to be published within a few days.

The new rules require the servicers to improve their processing systems, to stop foreclosing while negotiating to modify the loan and to give borrowers a single direct means of contact.

Servicers will be required to bring in a consultant to investigate complaints by homeowners who lost money because of foreclosure processing errors in 2009 and 2010. In some cases the homeowners could be compensated.

The problem, said Alys Cohen of the National Consumer Law Center, is the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”

At the heart of the complaints by Ms. Cohen and others is whether the servicers, which are arms of the biggest banks, may be compelled to give households fighting foreclosure a better shot at renegotiating their loans and staying in their properties.

The servicers argue that whatever mistakes they made in handling foreclosures — errors that will be amply on view in a regulatory report accompanying the agreements — they never foreclosed on anyone not in severe default. They are strongly resisting proposals to cut the debt of homeowners in default to help them stay put.

The issue has wide repercussions for an ailing housing market. About four million people are either in foreclosure or near it. Some housing analysts argue that adding those houses to the abundant inventory already on the market will further reduce values for all owners and prolong the downturn.

To some critics, the pending fixes are all but useless. Adam Levitin, an associate professor of law at Georgetown University who has closely monitored efforts to more tightly regulate foreclosure practices, calls it “a sham settlement” that is worse than none at all.

“It gives the banks political cover, undermines attempts at a real and just resolution, and could be the basis for the regulators to claim that state actions are pre-empted,” Mr. Levitin said. Allowing federal regulators to pre-empt or elbow aside potentially stronger state actions during the housing boom has been widely seen as contributing to the collapse.

Representatives of the regulators, including the Office of the Comptroller of the Currency and the Federal Reserve, declined to comment.

The legal agreements, which take the form of consent orders, will be signed by the 14 largest servicers, including Bank of America, Wells Fargo and JPMorgan Chase. They are being published on the heels of new evidence that foreclosures are still being conducted improperly.

The Washington attorney general, Rob McKenna, sent a letter last week to a group of trustees. The trustees work with the servicers in states like Washington where the courts do not oversee foreclosures.

Washington law requires trustees to have a local office so borrowers in default can submit documentation or last-minute payments. In a continuing foreclosure investigation, Mr. McKenna found that many trustees were effectively invisible. In his letter, Mr. McKenna called their absence “widespread, illegal and contrary to an effective and just foreclosure process.”

Among the groups protesting the consent orders are the Center for Responsible Lending, the Consumer Federation of America and dozens of local and regional housing groups. In a letter to the regulators, the groups are asking for the withdrawal of the agreements in favor of “specific and protective measures regarding loss mitigation, account management and documentation.”

Efforts to get the servicers to change their practices have a long and not particularly successful track record. During the boom the servicers needed to do little more than deposit the checks of borrowers. That changed when defaults began to swell and borrowers called to try to work out new loan arrangements.

Servicers were ill-equipped to deal with something so complicated. Nor did they have much incentive, because in most cases the loans had long ago been sold to investors. Borrowers complained that servicers were sloppy, that they lost paperwork and then lost it again, that they reshuffled borrowers among endless personnel to no effect and that they foreclosed on the property even while supposedly negotiating to save it.

These assertions were brought into sharp focus last fall after revelations by servicers that in their haste and sloppiness they had broken local laws and regulations. They imposed moratoriums while saying they were clearing up the problem, but by then a range of federal and state investigations were under way.

A coalition of all 50 state attorneys general joined by the Obama administration set out to change the process of foreclosure so more borrowers could remain in their homes. The goal of the regulators was more limited.

The efforts by the attorneys general to impose a broader settlement with a multibillion-dollar penalty and some provision to restructure mortgages by cutting debt are continuing, however slowly.

Attorney General Tom Miller of Iowa, who is leading the effort, said a settlement with regulators “neither pre-empts nor impacts our efforts.” The attorneys general are striving to pursue their negotiations out of the public eye so every incremental step is not open to commentary and criticism.

11 Responses

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  2. new york trust laws

  3. Brian,

    Would the trust laws in question be the laws of the state where the trust was incorporated ,,, your state or both?

  4. I would like to see the personal bank account (s)
    of these ” trustees” and who paid them

  5. Mr. Garfield, I would guess that you have better resources at your disposal than the rest of us. It would be grand to see your expose on the legislation of the deed of trust – the document which introduced America to the now infamous
    “trustee” and the non-judicial foreclosure.
    Just a thought, respectfully submitted, of course.

  6. I’m thrilled to see attention going to the matter of trustees, because what’s going on with these ‘agents’ (they’re not Trustees) of the banksters is legally and morally reprehensible. These rip-off artist-banksters are the ones actually getting the “free homes”.
    The other day, someone was looking for a cite from MERS disclaiming interest in notes.
    Back in 2004, the Nebraska Department of Banking and Finance wanted MERS licensed. MERS fought like he–. Here is a direct quote from the Nebraska Supreme Court, case No. S-04-786 on October 21, 2005:

    “Further, MERS argues that it does not own the promissory notes secured by the mortgages and has no right to payments made on the notes. “ 

    This was the statement made by MERS on p. 12 of its appeal brief.
    This was a big case and very significant. How quickly we forget! In our rush to come up with new information to damn MERS to the hell it deserves, we tend to forget what already exists.
    MERS, the gloves are off. We the citizenry haven’t had the resources in dollars or manpower or organization you and your stinking network have had, (think your equally stinking,manipulative “white paper”, for example), but we’re getting there. Any lawmaker who participates in glossing over or legitimizing this bs does so at his or her own peril.
    If organizations like “Move-on” (this is NOT a plug)can impact elections, than so can a whole lot of angry “former” homeowners.
    Which reminds me, Obama has or should have a sign on his desk which says, “The buck stops here”. If he and his administration are too stinking lame to figure out how to make a program like HAMP actually work for its alleged intendeds, he’s not even going to be able to ‘talk to the hand’ because there won’t be any around.

  7. If your state requires the trustee to be a person or corporation, and it is not, the deed of trust may be void by your state law. Check with the government to be sure the corporation exists, and see if your state requires the trustee to be real. Like Neil says, the parties to the transaction might not be identified where required to be so by laws regarding origination.

  8. I think the phantoms are the trustees. A trust denotes something held for the benefit of others. Who is the beneficiary? Burmese8@yahoo.com

  9. It’s not so much the trustees being “unwilling” to follow through. The servicers don’t always use that same attorney for the foreclosure process that they use for the origination of the loan. This idea that they are “unwilling” to participate in the conspiracy is simply not borne out by the facts. And frankly, the title of this piece really didn’t seem to match up with the body of the article. Not sure it it was a deliberate obfuscation or a mistake…

  10. I agree, but the bankstefs own Washington.

  11. Washington’s attorney General is going after robo or phantom trustees:
    Rob McKenna
    1125 Washington Street SE · PO Box 40100 · Olympia WA 98504-0100
    For Immediate Release
    April 6, 2011
    Washington Attorney General’s investigation turns up additional foreclosure process problems
    Attorney General steps in to ensure homeowners can contact foreclosure trustees
    SEATTLE – Six months into its investigation into unlawful business practices by foreclosure trustees, the Washington Attorney General’s Office announced that it has uncovered an additional widespread problem that jeopardizes homeowners’ chances of stopping a foreclosure.
    “Foreclosures run on strict timelines and homeowners need a human who they can talk with face to face when there’s a problem,” Attorney General Rob McKenna said. “They need an office where they can make last-minute payments or show documents that may prove reasons for stopping forced sales.”
    “Washington law requires that foreclosure trustees maintain actual offices in our state and local phone numbers for this reason,” he continued. “But our investigation shows that some of the largest trustees are not in compliance and borrowers who have a legitimate reason to stop a foreclosure are having trouble reaching trustees.”
    McKenna said his office’s Consumer Protection Division is contacting a handful of trustees believed to be violating the law. The office isn’t naming those trustees at this time, but said they are processing large volumes of foreclosures in Washington. In addition, the office sent a letter today to all trustees operating in the state that notifies them of their obligations.
    The state’s Deed of Trust statute was amended in 2008 to ensure that trustees are knowledgeable about Washington law and that they are available for last-minute payoffs when homeowners are trying to catch up on their mortgages or have a legitimate reason to stop a sale. Having an agent in Washington State isn’t sufficient; the law also requires that the trustee itself maintain an office with a phone where homeowners can go to resolve their foreclosure issues.
    The investigation is being conducted solely by the Washington Attorney General’s Office, which is also a participant in the multistate investigation by attorneys general into abuses in the mortgage servicing industry.
    McKenna sent a letter to trustees in October 2010, announcing its concerns about inaccurate documents, conflicts-of-interest, faulty chains of title and failure to provide disclosures and conduct mediations. The letter called on trustees to suspend any questionable foreclosures.
    Since then, the office has requested and received documents from several trustees. Attorneys are reviewing the information they have received so far and are waiting for documents from other companies.
    McKenna said homeowners who believe they have a legitimate reason to stop a foreclosure should contact their trustee immediately, preferably with the advice of a housing counselor or an attorney. Foreclosure trustees have the power to postpone a foreclosure sale whenever they think it is advantageous. Some possible reasons for stopping a foreclosure include: a mortgage servicer failed to credit payments, the homeowner never received notice of the foreclosure, one division of the mortgage servicer promised a loan modification while the other started the foreclosure process, the homeowner has a genuine contract to sell his home but the servicer will not respond to the sales offer.
    A homeowner who is unable to find a local address or phone number for their trustee should file a complaint with the Attorney General’s Office online at http://atg.wa.gov/FileAComplaint.aspx.
    However, this will not stop a foreclosure sale. Homeowners should also contact a housing counselor or an attorney.
    Washington is a “non-judicial foreclosure” state, which means that a lender can proceed directly to selling a home at public auction without first filing a lawsuit. This process was created by the state Legislature. Although lenders may foreclose in court in Washington, they almost always choose non-judicial foreclosures.
    If a trustee is unwilling to stop a foreclosure, then the homeowner must file a lawsuit under the Deed of Trust Act and obtain a court order before the sale. Bankruptcy may stop or delay a foreclosure but it may also put the homeowner in a worse position. Legal representation is essential to a successful case, McKenna said.
    · If you believe unlawful activity has occurred in regard to your mortgage, you should speak with an attorney. A homeowner may file a suit to challenge a foreclosure, but they must do so prior to the foreclosure sale.
    · If you are unable to afford a lawyer, you should contact the Washington State Homeownership Information Hotline at 1-877-894-4663 (HOME) for referral to the Home Foreclosure Legal Aid Project. The hotline can also refer to you to a free, state-approved housing counselor.
    · The Attorney General’s Office cannot stop a foreclosure or provide individuals with legal advice, as the office is barred by law from representing private citizens.
    · Homeowners should read the Washington Foreclosure Prevention Resources Guide, provided by the Seattle-King County Asset Building Collaborative Foreclosure Prevention Team and recommended by the Attorney General’s Office and the Washington State Department of Financial Institutions.
    · Additional resources can be found at http://www.atg.wa.gov/foreclosure.aspx.
    – 30 –
    Media Contact: Kristin Alexander, Media Relations Manager, (206) 464-6432, kalexander@atg.wa.gov
    Subscribe to Attorney General’s Office news releases via our listserv or RSS. You can also follow us on
    Twitter, YouTube, Facebook, the All Consuming blog, Unredacted and In General.

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