Mark Stopa: Preparing for Trial In a Foreclosure Case

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EDITOR’S NOTE: Stopa makes some very good points for lawyers to consider, the main one being that you should make it as hard as possible for the would-be forecloser to prove their case. If they really have the goods, they will prove it; but as we have seen time after time, the documents are fabricated, even forged and they have no witnesses to authenticate the documents. The mistake made by lawyers and pro se litigants alike is that they know they signed a note and they assume the note was valid. So they shy away from denying the authenticity of the documents or the validity of the documents. That is a mistake.

Start at the beginning. Look carefully at the documents and see if they actually describe the transaction as you NOW understand it given the claims of securitization and transfers. Look even more carefully — the so-called original note might be mechanically fabricated indicating that they did not proffer the original note into evidence — which means that the original note is still out there, somewhere, in the hands of someone else. Of course it also means that the attorney and his/her client are attempting to perpetrate a fraud upon the court, especially if the attorney’s office had anything to do with fabricating or signing the documents offered at a hearing or at trial.

If you start from the premise that the documents are invalid, not the originals, and do not describe the transaction that actually occurred — as to parties or terms — then you are on the right track. To assume otherwise, is to give up most of your ground before you even begin. And of course that means a gift to the pretender lender who is now attempting to foreclose on a home using a loan that it did not fund or purchase.

Preparing for Trial In a Foreclosure Case by Mark Stopa

Posted on May 11, 2011 by Mark Stopa http://www.stayinmyhome.com
I have a trial tomorrow in a foreclosure case. It’s in Lee County, of course – the county where the judges prosecute cases by setting trials sua sponte. Right now, I’m earnestly preparing for trial, but I thought I’d take a break to discuss the two issues are paramount in virtually every foreclosure case/trial. Depending on the facts of a particular case, there may be other issues, of course, but these two issues are critical to a Plaintiff’s ability to win at trial and should, in my view, be vigorously defended in virtually every case:

1. Introducing the Note into evidence.

2. Proving the homeowner’s default in payments and the amount owed.

Re. the former, we all know the Plaintiff must introduce the original Note into evidence, failing which a foreclosure judgment cannot lawfully be entered. The fact that a Note is “self-authenticating” makes this seem like a low hurdle – the Plaintiff’s attorney simply needs to hand the original Note to the judge and it will be admitted into evidence. Fortunately for homeowners, it’s not that simple.

Under Fla. Stat. 673.3081, if a homeowner denies the authenticity of a Note or the signatures thereon in the pleadings, the Plaintiff must authenticate the Note, and its signatures, at trial. There is still a presumption the Note and all signatures are authentic, but by contesting authentication, a homeowner can force the bank to authenticate the Note at trial. This may be harder than you think. For instance, if I challenge the authenticity of a blank indorsement, the Plaintiff must put on testimony from someone who can swear, under oath, that he/she saw the indorsement executed or that he/she recognizes the signature and it is authentic. Similarly, if I challenge the authenticity of the Note, the Plaintiff must present a witness who can testify he/she saw the homeowner sign the Note or who recognizes the homeowner’s signature based on other documents. The way that Notes change hands between banks, neither of these things would be very easy, and I doubt the Plaintiffs’ lawyers will be prepared to deal with these evidentiary issues. In other words, it’s quite possible that if the homeowner preserves these evidentiary objections at trial, the Plaintiff’s lawyers won’t be prepared for them and won’t even have the requisite witness(es) at trial to testify.

Re. the second issue, testimony at trial must generally be based on personal knowledge. That means the Plaintiff must testify to events he/she has seen with his/her eyes or heard with his/her ears. This is virtually impossible to do with regard to proving a homeowner did not pay a mortgage payment or proving the amount owed, so the Plaintiff invariably must rely on documents to prove these facts. This is permissible, but only if the Plaintiff can introduce these documents under the business records exception to the hearsay rule.

Again, this is harder than you think. The Plaintiff must show: (1) the documents are a memorandum, report, record, or data compilation; (2) made at or near the time of the event; (3) by or from information transmitted by a person with knowledge; (4) kept in the course of regularly conducted business activity; and (5) that it was the regular practice of that business to make such a record. All five elements must be satisfied or the documents cannot be used as evidence at trial.

I’m not trying to teach anyone how to practice law. Rather, my point is that there are virtually always things that can be done to make it difficult for a bank to prevail in a foreclosure case; these are just two examples. So don’t give up – keep fighting foreclosure!

Mark Stopa

39 Responses

  1. […] Mark Stopa: Preparing for Trial In a Foreclosure Case « Livinglies’s …Preparing for Trial In a Foreclosure Case by Mark Stopa. Posted on May 11, 2011 by Mark Stopa http://www.stayinmyhome.com. I have a trial tomorrow in a … […]

  2. @david , I here ya: my case is extreme

  3. copied cite to author LEVITAN

    It is long but interesting in extreme
    The Servicing Fraud Settlement: the Real Game
    posted by Adam Levitin
    Warning: This is a long blog post. But if you follow mortgage servicing, I think you’ll find it worth reading. Despite lots and lots of media coverage of the servicing fraud settlement, nobody seems to understand the real story that’s going on. I think that this post will explain a lot.

    Let’s start by recapping what we know. Back in March we started hearing media reports of a proposed penalty for servicers in the $20-$30B range. Then the American Banker published a 27-page term sheet from the AGs for servicing standards. Next, Huffington Post published a 7-page CFPB powerpoint presentation. Then came the draft C&D orders and then in April, the final C&D orders (which eliminated the ridiculous “single point of contact which need not be a single person” and replaced it with “single point of contact as hereinafter defined” and then failed—quite deliberately—to define it anywhere in the document).

    Now there’s another round of activity and conflicting reporting. The American Banker reported that there was a new AG term sheet proposed and that principal reductions were off the table. That turns out to be incorrect, as Shahien Nasiripour reported in the Huffington Post. The new AG term sheet that the American Banker referenced deals only with servicing standards. The American Banker assumed that this mean that principal reductions were off the table because they weren’t referenced in the term sheet. In fact they are still very much in play. They’re just in a second, separate term sheet. So now there are two separate term sheets–one covering servicing standard and another covering monetary issues/principal reductions. (Recall that the original AG term sheet did not cover the monetary issues—that was clearly for a separate document.) We are also hearing news reports that the banks are offering to settle for $5B and won’t go above $10B.

    So how do we make sense out of all of this?

    The short answer is that the fight is not over a piddling $5B or $10B or even $20B. The banks would buy peace in a second for $20B and servicing reform. So what does that tell us? It indicates that the negotiations are over a substantially bigger figure than $20B. And this explains everything about the banks’ negotiating strategy including the recent attacks on Elizabeth Warren by the Wall Street Journal’s editorial page and by Congressional Republicans on the CFPB.

    Now this isn’t just my theory from reading between the lines. Instead, its exactly what follows from a careful reading of the documents and the rhetoric. The key, our Rosetta Stone, as it were is the CFPB powerpoint. It hasn’t gotten a lot of analysis, but careful analysis of it explains everything that’s going on.

    There are two important things to note in the CFPB powerpoint.

    1.The CFPB powerpoint contains an analysis of how much money servicers’ saved by failing to comply with the law. It concludes that they saved at least $25B, based on an assumption that it would cost 75bps more per year to service each of these loans. (One can argue about that assumption, but that’s neither here nor there.) So if servicers were simply fined $24B, it wouldn’t include any actual penalty. It would only be disgorgement of wrongful profits.

    I don’t think anyone has really understood the significance of this number. It means that the CFPB’s (frankly rather conservative) estimate is that the banks made $24B from servicing fraud. That’s the largest consumer fraud in history. This isn’t just some chump game with cutting corners on affidavits. It’s that doing that (and lots of other bad stuff) has saved the banks $24B in costs.

    2. The CFPB powerpoint contained an analysis of the cost of various levels and numbers of principal reduction modifications. This is critical–the principal reduction modifications are separate from the $24B penalty. In other words, the total cost to the banks of a settlement would not be $24B. It would be $24B in disgorgement + the principal reductions.

    The grid on the CFPB powerpoint shows the costs of a range of principal reduction modifications to be done over 6 months. The axes on the grid are the number of modifications and the depth of the modifiations. There’s an enormous range of costs on the grid–from $7B to $135B. In other words, the total settlement cost (putting aside the cost of implementing improved servicing standards) would be between $32B and $160B depending on the number and level of principal reduction modifications. I want to underscore, however, that the powerpoint does not indicate what the CFPB thinks is an appropriate number–and clearly that would be a negotiated issue.

    Whatever that number, it’s also important to recognize that not all of the cost of principal reductions would be borne by the banks. In the powerpoint, at least, the MBS investors would bear the costs of the principal reductions if NPV positive, but 2d liens (big 4 bank balance sheets) would be reduced too. But it means that the price tag for settlement being offered to the banks isn’t $24B. It’s substantially higher. We don’t know how much higher–the powerpoint was simply showing a range of options and their costs, not recommending any particular option–but even at the low end of $7B that’s a sizeable increase on top of $24B.

    Recognizing the full potential cost of a settlement to the banks and how most of it could be in the form of principal reductions rather than a fine explains everything that’s been happening with the negotiations and the Congressional Republicans’ witchhunt against Elizabeth Warren.

    If the cost of peace with the AGs and Feds was a mere $24B, the banks would settle. Remember, that’s $24B for all the banks, not $24B for any one bank. The mortgage servicing issues are an enormous drag on BoA generally, Wells knows that it is a huge litigation target in every state, Citi just wants to keep its head down, and Ally wants a clean bill of health for its IPO. The banks really want to put these issues behind them.

    $5B a piece for each of the big servicers isn’t a ridiculous price for putting the issue to rest. Indeed, news reports that the banks will consider $5B-10B show that this is only a matter of haggling about price, not principle (no pun intended).

    That’s why I don’t think the hold up is over the $24B. Instead, the sticking point in the negotiations has got to be the additional cost of the principal reduction mods, whatever that might be. At the extreme level, if the settlement would cost a total of $160B, that would be about a third of the equity of the four biggest banks. (Compare that with the $750B in negative equity that exists.)

    If I’m right about this, then everything about the banks’ negotiating strategy makes sense. If the banks are willing to pay $24B, but not the additional cost of principal reduction mods, it makes sense for them to run the clock, to focus on principal reductions in their PR, and to do everything possible to minimize the role of the CFPB.

    First, inflation alone will help reduce negative equity and thus the cost of principal reduction mods (unless we continue to see a double dip…which is likely, but why not take a gamble on it?).

    Second, the AGs’ main leverage here is the threat of litigation. But litigation would be incredibly slow, especially if the OCC has the banks’ backs and raises preemption challenges at every step (as it might do in light of the consent orders). It might take 3-4 years to get to a judgment, by which time housing prices might have rebounded and lots of foreclosures would have been processed, so there wouldn’t be that much negative equity outstanding to reduce through principal mods. Delay lets the banks avoid principal reduction mods.

    Moreover, the banks know that the AGs can’t be too serious because they haven’t done any investigation. I’m just baffled how the AGs are conducting settlement negotiations without having done any investigation. It’s a serious problem. How can the AGs know the proper price for the settlement (high or low) without knowing what cards they hold?

    Third, the one agency that could really speed along litigation is the CFPB. The part of the litigation that will take up the time would be discovery, but the CFPB could speed that up significantly through its examination power. But the CFPB can only be effective with this if it has a Director. And that explains why the banks (and the OCC) brought out the Wall Street Journal editorial page and Congressional Republicans to wage war on Elizabeth Warren, the frontrunner to be appointed CFPB Director. Make Elizabeth Warren politically toxic on whatever trumped up charges can be found (she said “advised” when she in fact recommended! She was in the room during negotiations! Gasp!). The goal is to keep the Director position vacant, so the CFPB can’t move along litigation.

    There was a lot of justified pushback (including from yours truly) against the attacks on Elizabeth Warren. So rather than beat up on Professor Warren, the bank strategy changed to attacking the CFPB itself under the guise of regulatory “improvement.” First, the GOP pushed several bills in the House Financial Services Committee meant to smother the CFPB in its crib. Then the GOP in the Senate said that they wouldn’t confirm any CFPB Director unless the House reforms were made, and then they started making unpleasant noises at the suggestion that there could be a recess appointment. (News flash: winning 1 house of Congress in a mid-term election ain’t an electoral mandate to do anything. You need the hat trick for that.)

    Every week that is spent on negotiations that get nowhere lets the banks run the clock a little further. So the banks will try to stay at the negotiating table as long as possible without every actually conceding anything. But that’s the strategy here–run the clock to avoid principal reductions. What terrible is that this strategy seems to be working–the CFPB has been shut out of negotiations because the Wall Street Journal and Congressional Republicans have made such an issue over the CFPB. (This might turn out to be short-sited, but that’s another story.)

    And this ties in perfectly with the PR spin: the line coming out of the banks hasn’t been an objection to $25B in fines. It’s been an objection to principal reductions. The hackneyed moral hazard objection has been trotted out (despite the banks’ doing some principal reduction mods already) and we’ve had Moynihan (BoA), Stumpf (Wells), and Jaime Dimon (JPM) saying that principal reduction mods are “off the table.”

    Listen to the banks. Their rhetoric says it all–the game here is about the principal reduction mods, not about the servicing standards or the $24B fine. It’s about the cost of the principal reduction mods. (There might be some ancillary issues like the number of mods, but it’s really gotta be about cost.)

    Now lets be clear. Principal reduction mods are not about correcting robosigning. Robosigning is what’s gotten the most media attention, but that’s not the only issue around. There are a host of other flat out legal violations (just consider the $20M jury verdict in the Servicemembers Civil Relief Act cases to get a sense of what these violations cost-1,000 verdicts is $20B). There’s another panoply of questionable, but perhaps not illegal acts (e.g., MERS issues). And if you want a doozy, how about the many loans that are endorsed like simply to Deutsche Bank as trustee, rather than Deutsche Bank as trustee for a particular trust (Deutsche is trustee for over 2,000 RMBS trusts). That didn’t fly in a North Carolina appellate court, and it wasn’t a fluke endorsement (and there are worse problems than that in terms of endorsements).

    And then there’s also lots of good policy reasons for pushing principal reduction modifications. Principal reduction modifications start to address the $750B in negative equity in this country and help the housing market to clear without the inefficiencies and social externalities of foreclosure. And of course principal reduction mods make the banks pay an appropriate price (and in an appropriate form) for the economic and social harms they caused with the housing bubble and foreclosure aftermath, including threatening our fundamental property title systems via corner cutting on paperwork.

    Finally, consider what it means that we’re even seeing an eye-popping figure like $160B. It might be out there just to push the banks toward settling. But the amount of shit that the feds and AGs must think there is to come out with a number like that down on paper (especially for an agency under as much scrutiny for an sign of going off the rails as CFPB) makes my skin crawl. I worry that we don’t have any handle on just how much rot is in the system and that we’ve been papering over it as the stock market rebounds.

    Now the banks have some legitimate concerns about principal reductions. If they are handled incompetently they will undoubtedly lead to a strategic default problem. And the banks know this—Countrywide’s settlement with the AGs’ was a paragon of foolishness. It made modification eligibility depend on delinquency status and applied prospectively. That’s virtually inviting strategic defaults.

    But there are lots of ways to fix this. Here’s a simple one: principal reductions apply only retrospectively. Now there are problems with doing it just retrospectively. But prospectively, it could be applied to mortgages that fit particular criteria irrespective of default status (indeed, for mortgages that are 240 days delinquent, I’m not sure what good principal reduction is likely to do)—the biggest bang in terms of stabilizing the housing market might be to do principal reduction to homeowners who are not yet in default or to those who do strategically default because they’re the ones who are willing to gamble (and walkaway) from their homes.

    Whatever the terms of a settlement, perhaps the most important question is what issues actually get settled. Obviously the AGs can’t settle for consumers or investors, and those issues are going to continue to plague the banks for some time to come. And the AGs can’t bind the CFPB in terms of prospective regulation of the servicing industry. (Fat chance the banks clean up their act by July 21). But the AGs are the biggest dogs in the hunt at this point.

    The banks are, of course, going to want the broadest possible settlement and if the AGs aren’t careful, the banks will pull one over on them like they did on the merchants in the Wal-Mart interchange antitrust litigation settlement, where the wording was vague and then subsequently interpreted in the banks’ favor.

    The CFPB powerpoint also gives us a useful yardstick for measuring a final settlement. Anything less than $24B would let the banks come out ahead. Let me repeat that. Anything short of $24B means that the banks broke the law and got to keep some of the profits. If that’s what the AGs settle for, it’s a disgrace. $24B really has to be the baseline above which there’s a settlement. I don’t think the AGs are going to solve the foreclosure crisis in one fell swoop (they’d need to do some investigation to even have a shot at that), but settling for $5-$10B means that they’d let the banks keep 60%-80% of estimated illegal profits. Just keep that in mind.

    Final thought: If I’m right about this, and that the number being bickered about isn’t $5 vs. $10B but something more like $40B-$60B, I worry that all hell is going to break loose. Progressives that were hating on the AG settlement for being too light on the banks, might rethink that position. And the howl we are going to hear from the right is going to be unparalleled. The idea that businesses could have done multi-billion dollars worth of harm to consumers (or the legal system) simply isn’t within the conceptual grasp of the Wall Street Journal editorial page and its ilk. The only possible explanation they have for this is a shake-down. Oh it’s going to be a fun summer.

    Thanks for bearing through to the end. I hope it was worthwhile.

    May 11, 2011 at 7:35 PM in Consumer Financial Protection Bureau, Mortgage Debt & Home Equity

  4. Boots. Bravo

  5. @TONY—-

    Im not licensed in SC-but Id be willing to help for the experience–wider experience—my guess is that they will try to shove settlement at you instead of jury

    Honestly, your facts are very interesting. I just dont want to get sued.

  6. @TN HARRY:

    Sorry to intrude,
    “Mark, are you suggesting that the homeowner deny their own signatures as a matter of course, or only put into dispute the signatures of endorsers, etc.?”

    May i add .5 cents—I do not belive that very many people absent extraordinary circumstances, can determine if a doc is real or excellent forgery.

    The only safe course is to deny the note–demand that they prove it is the original by chain of custody-even if you are not hanging on to the hope of dismissal because they did not follow the UCC rules re endorsement–timely or otherwise

    They want everything to hinge on possession of the note——if you admit it case may be closed–most judges seem to feel that for RE deals the UCC endorse is irrelevant. to the obligor homeowner-relevant only as to priority among claimants–iv had em state that in briefing—–

    In response to that assertion I asserted thats why proof of possession and delivery to you of the original note is imperative–if the negotiations are incomplete then a copy of note is useless to defend against future claims by another purported note holder

    if there is no original note coming back to you in connection with any settlement, then you are at risk.

    then the release is only worth anything if signed by a good “credit” in financial circle terms——which means a big bank-not the bank as trustee signed off by the servicer-that is only as good as the servicer–good for life of servicer–which bankrupt on 3-5 year cycles –to avoid audit risk–agencies cant audit more quickly even if that fast

    lots of settlements are basically ——-DIL in exchange for nothing.

  7. Could use some help, my attorney quit back in Dec. He was an accident Attorney and really couldn’t understand about the securities fraud aspect of it.

  8. Do you want help—pro bono?

  9. Mark, are you suggesting that the homeowner deny their own signatures as a matter of course, or only put into dispute the signatures of endorsers, etc.?

  10. The Note is endorsed in Blank from the original lender .I have the PSA , along with an original letter from MERS who stated that I was off the Mers system and the MIn# deactivated in 2002. But Their is an unlawful, and fraudulent assignment filed at the ROD where it says that they are acting on behalf of the original lender , who is defunct after being aquired in 2005 by another company and Shut down by the FDIC in 2007. The fraudulent assignment was signed by LPS (MN) by one Liquenda allotey as Vp of MERS in 2009.I’m being foreclosed upon by the successor trustee for the certificate holders of Bear stearns. I also have a sworn affidavit which the plaintiff filed on record that said( from the seller/servicer ) that an assignment of the Note was never prepared to the trustee, but what they think I’m stupid cause it had to be sold to the depositor and then the depositor to the trust according to the PSA. the affidavit goes on to state that they warrant and represent that they have never sold the note to ANY other entity. the last line of their sworn affidavit said we do hereby sell assign transfer to the successor trustee March 2010 a year after foreclosure started… How’s that for securities fraud!!!!

  11. Besides the unlawful and fraudulent assignment of Mers filed 16 days after the lis,summons and complaint . The plaintiff did produce to me a lost note affidavit which I denied.

  12. yes

  13. @TONY;

    Are you pro-se?

  14. It’s a slam dunker that an assignment of the dot without the note (the debt) is a legal nullity. A deed of trust (assigned or still in the hands of the original lender) without the note/debt is a worthless piece of paper.

    But, what is this about notes being “assigned” to MERS (or anyone) and legally recorded? Notes aren’t assigned, generally, they’re endorsed, and a note may not even be recorded, actually fyi. And btw, every time a servicer filed or submitted an assignment of the deed of trust in MERS’ name which also alleged to assign the note, it was a false instrument if for no other reason than MERS has no interest in the note to assign. There are laws against this both as to recording a false instrument and as to submitting a false instrument / document to a court.

    And dont’ forget, reaylly don’t forget, “MERS v Nebraska Dept of Banking and Finance” wherein MERS stated most emphatically that it has NO interest in notes. Yes, we knew that, but this is MERS’ written admission in a court proceding.

    Many more recent cases support the nullity of an assignment of a dot without an interest in the note, made by anyone with no interest in the note, also.

    Sorry – I can’t let this stand – about recording notes, since notes don’t get and never have gotten recorded. But the rest of the post was informative.

  15. @ANONYMOUS

    “Check out the chain – according to PSA — endorsement in blank is only after all completed endorsements and assignments — including endorsement and assignment to the Depositor. Endorsement cannot go from originator to trustee”

    Can you direct me to where I can find this in the PSA?

  16. SC

  17. @tony–cool———–what state—-?

  18. the plaintiffs attorney khow i have it and they have not denied that it is the original… we are set for trial (jury) in june

  19. tony wow—–they mailed you back something you admit is the note?

    what are you gonna say if they know it——its really unimaginable—-must have been a friday at the firm

    i wonder what the custodian record says about sign outs —you are in a position to identify some really nasty behavior if they try to lie about it in a while but—ethical issues for atty on ur side i would think

    i dont see how you can use it as proof of anything unless they set up a false affidavit of lost note—and you use to prove they lied but you sort of admit the note when you do it–could be a trick-damn they are cunning–do not assume error

  20. @tony— “yes it is the orininal!! ” —–its kind of an interesting thing—–setting aside how they got it—-and negotiation –is it endorsed in blank??

    i suppose they could pop up with a lost note affidavit

    If it meets these conditions ie that it is endosed etc you may be creating evidence for them to use in lost note affidavit —if they keep on—-but one of many

  21. @ David, Blue ink “Wet ” still got a post it covering up the Bar code on the bottom of the first page of the Note which I left there for authenticity purposes in it’s original envelope from about 7 years ago.

  22. I have the PSA , along with an original letter from MERS who stated that I was off the Mers system and the MIn# deactivated in 2002. But Their is a n unlawful, and fraudulent assignment filed at the ROD where it says that they are acting on behalf of the original lender , who is defunct after being aquired in 2005 by another company and Shut down by the FDIC in 2007. The fraudulent assignment was signed by LPS (MN) by one Liquenda allotey as Vp of MERS in 2009… Can we all say Fraud!!

  23. @david US mail and yes it is the orininal!! I

  24. uprootedone

    Again – thank you for your post. Most informative. Sheila – knows.

  25. tony,

    Check out the chain – according to PSA — endorsement in blank is only after all completed endorsements and assignments — including endorsement and assignment to the Depositor. Endorsement cannot go from originator to trustee.

    Must follow the exact chain — and no possession without conveyance.

  26. TONY: HOW DID YOU GET THAT DOCUMENT?
    HOW DO YOU KNOW ITS THE ORIGINAL?

  27. What if the homeowner has the original note endorsed in blank? I produced the original Note endorsed in Blank in discovery to the successor trustee. I hold the NOTE.

  28. Quote “You will get back a letter ” —-how would you use the letter in motion practice. In a judicial state would the judge be able to take it into account?
    please if anybody has any thoughts on the evidence side Id appreciate. What is context of use of this in proceedings other than bk? i do not know–but I would think it should be a formal certified embossed thing or they will object same as you. Im just guessing??

  29. Using Bankruptcy to Eliminate a Mortgage
    by Mark Stopa Esq.
    This article, out of California, explains how some homeowners have realized that a Chapter 13 bankruptcy proceeding can eliminate a second mortgage if the amount owed on the first mortgage exceeds the value of the home.

    I realize the article is out of California, but we’re talking about federal law, so it applies in Florida just the same.

    So as you’re searching for options to avoid foreclosure, keep this one in mind.

    Here’s the article. …http://www.mercurynews.com/business/ci_18011666?nclick_check=1

    Stung by the crash of the housing market, some struggling homeowners are using a little known but increasingly popular provision of the bankruptcy code to eliminate second mortgages and avoid foreclosure. Statistics are hard to come by, but bankruptcy lawyers say the provision has been used effectively on hundreds, if not thousands, of cases in the Bay Area during the past two years.

    “It’s a big thing in our valley,” said James “Ike” Shulman, a San Jose bankruptcy lawyer. “But it’s not widely known.”

    Shulman, co-founder of the National Association of Consumer Bankruptcy Attorneys, said he has helped a number of clients who have filed for personal bankruptcy use the law to hold on to their houses — including three last week.

    Cathy Moran, a Mountain View bankruptcy lawyer, said one of her clients had a $132,000 second mortgage voided by the court.

    “This is a really big-ticket issue that allows people to keep a home and conform the mortgage to something closer to real value,” Moran said.

    Bankruptcy laws prevent homeowners from eliminating the debt of a first mortgage if they plan to stay in their home. But second mortgages are treated differently. They can be declared unsecured debt when there is no equity to cover them, as is the case for millions of houses that are now worth far less than a few years ago.

    When that happens in a personal bankruptcy proceeding, the second mortgage is put on hold and no payments are required while the homeowner completes a repayment plan for other debts — which typically takes three to five years. At that point, the second mortgage is eliminated.

    Many of these second mortgages were granted during the housing bubble, when home prices were going in one direction only — up, up and up.

    “A lot of these are loans that shouldn’t have been made at all,” said Henry Sommer, editor of Collier on Bankruptcy, a publication on bankruptcy law.

    One of Shulman’s clients, Veronica — who asked that her full name not be used — was struggling to keep the San Jose house she bought in 2005 for $612,000.

    Her home’s value has dropped to about $367,000 — less than her first mortgage of $489,000 — which allowed her to petition the bankruptcy court to set aside her $122,000 second mortgage. The court granted her motion.

    She successfully completed her payment plan for other debts two months ago, and her second mortgage is now eliminated.

    “It’s wonderful,” she said. “After almost six years, I am finally able to see the light at the end of the tunnel and I’m so, so grateful.”

    Mortgage bankers don’t like the practice.

    It’s “a troublesome phenomenon. It’s one of those things that’s just now developing and bubbling up,” said Dustin Hobbs, spokesman for the California Mortgage Bankers Association. But there is little the mortgage industry can do, aside from seeking to change the law. That could be difficult given the current partisan lineup in Washington.

    And there are no complaints from investors in first mortgages, like the pension and retirement funds represented by the Association of Mortgage Investors. “We think with the right controls, something like this to allow a responsible, distressed homeowner to reorganize their assets, liabilities and cash flows is a very pro-business proposition,” said Chris Katopis, the association’s executive director. “We disagree with what the mortgage bankers associations are saying on this.”

    The law has been like this for years, bankruptcy lawyers say. It’s just never been used as much because in the past there was usually enough equity in a home to cover the second mortgage.

    “We’re having great results” using the rule, said Brette Evans, a San Jose bankruptcy lawyer. In one recent case, a small-business owner was able to hang on to her home by setting aside a $240,000 second mortgage, she said.

    That put the borrower in “a safe zone” where she could work out a modification of her first mortgage, Evans said.

    Mark Stopa

    http://www.stayinmyhome.com

  30. If your original lender (the one on the note and deed/mortgage) was seized by the FDIC, this practice of requesting a Freedom of Information Request “FOIA” to the FDIC to find out what was actaully sold to the acquiring lender will work for other lenders besides Onewest.
    The FDIC gal told me I should be asking the servicer (Onewest) who they make their payments to in regards to my loan. That would be “who” supposedly owns/owned my loan.
    Another item to find is the UCC that secured ALL the assets of the original lender when they borrowed the money to fund your loan from their warehouse lender. It would be public record in the state that the original lender resided.
    Has anyone noticed that on the copy of the promissory note your servicer sends you, it is stamped (often times) on the front page “certified a true copy” or something to that effect? and signed by someone? That certified stamp is put on a COPY of the original note by Escrow or settlement agent when escrow or settlement agent sends the funding package to the lender when your loan was funded into escrow or settlement agents trust account way back when you first got your loan. Funny thing I discovered…….Onewest sent me a copy of the “copy” but it had an endorsement in blank by Indymac on the back page. Why would Indymac be endorsing a copy of the copy and not endorsing the original note? I doubt they would endorse the original and ALSO stamp the copy with a blank endorsement. So something very fishy here. And Onewest only has a copy of the copy of the note, not the original?
    So I suppose you could subpoena the escrow agent to ask them if that is their signature under the “certified a true copy” (which it is) and then ask the “servicer” why a copy would be endorsed.

  31. As far as Onewest is concerned, if they are attempting to foreclose on you, send a FOIA to the FDIC and ask them exactly what was transferred in the sale of Indymac Assets to Onewest when FDIC was conservator for Indymac. You will get back a letter stating that (unless you had a HELOC) only the “servicing rights” were sold, not the loan. They will say that Indymac sold the loan immediately upon funding. Thus, Onewest cannot be the benificiary.

  32. i have to correct the liar judge name GEORGE A. MIRAM.

  33. what if the homeowner has the original note endorsed in blank

  34. sorry some correction i was not in default with the defendants. i did not owed money to the defendants. i did not know how to spell the last name of the judge. i will correct it later if misspelled his last name. i am not really good in typing so when i type i like kind of talking. at the end of the day life must go regardless of how incompetent judges are, it would not eat me emotionally because i prove him wrong and i know he is a crooked judge by the way he made his decision. very unprofessional.

  35. mark Stopa,

    thanks for the advised. well, i am in california and i had just a hearing in front of a judge btw i am pro se litigating my own case. this morning, i opposed the tentative ruling on my case in re: to injunction. the judge tentative ruling was in favor of the defendants MERS, EMC, NDEx, Wells fargo. this is so funny, i put the judge on the spot when i asked him
    ” your honor did you read my complaint and my motions? he said yes he read the complaint & my motions. but i told him I don’t think so because based on the tentative ruling you did not read my complaint.
    First, you decided on FDCPA which was moot because it was already dismiss by federal court, this case has been removed from the state to federal and federal moved it back here and dismissed it with prejudice so i could pursue my case in the state and you lack jurisdiction because this FDCPA is federal questions. and he still insist he read my case. i said no your honor. here another one you stated that I did not offer tender , i said there was an offer to tender on my motion to reverse the trustee sale, then your honor you said the fraud claim is time bar, but i object its not a time bar, i filed the case ob September 30, 2010, and i found out the fraud happen on october 22, 2009, when mers assigned the deed to wells fargo as trustee for Bearn Stearn and I was still on BK at that time of transfer. tjhen i opposed the Quite Title claim, the judge said i don’t have a verified complaint i said your wrong your honor because i filed my verified complaint on November 24, 2010. then again i told him that the the defendants were not in compliance of Ca civ. code 2924 et seq. and 2934a (D). The notice of default executed May 24, 2010 recorded May 25, 2010 stated that NDEX was the original trustee and it was not the original trustee on my deed your honor it was only until July 6, 2010 that NDEX becomes the substituted trustee and recorded on 7/20/10 your honor, NDEX becomes the substituted trustee by the time it was recorded and becomes effective on execution date. the judge and the staff gets annoyed by me telling him about perjuring himself. so, the judge asked the defendants attorneys and as usual the attorneys are pulling the legs of the incompetent judge that i was in default and i said i was in default with the defendants . i don’t owed money to them. and also i argue about the robo- signing and i told the judge that i will be again victimized by a robo- judge decision. and again he asked if i have nothing more to say. i said i already said what’s in my complaints.
    and here the ticker, the judge read his rocket docket decision prepared by opposing attorneys while he is reading the judge never looked at me, he put his right hand on top of the table and cover his right eyes with his hand and keep reading his scripted decision with one eye only which is his left eye and alas all my arguments were not consider by this incompetent judge and he denied the reverse the trustee sale because he said i did not show that my cause of action have merits.

    if you are a pro- se in San Mateo county here in Ca. watch out this judge his name is George Mimar.
    now, i am preparing to file my motion for reconsideration. a judge who perjured himself his name George Mimar. i felt sorry for these judges who went so low to tarnish their name in exchanged of their power. these judges thinks that they could get away with the pro-se easily, but they were wrong i am not be intimidated by these scumbag.

  36. This Could Be BIG!!

    The head of the Federal Deposit Insurance Corp. is warning that flaws may have “infected millions of foreclosures” and questioned whether other regulators’ inquiries into problems at the nation’s mortgage-servicing companies have been thorough enough.

    “We do not yet really know the full extent of the problem,” FDIC Chairman Sheila Bair said Thursday in written remarks submitted to a hearing of the Senate Banking Committee. “Flawed mortgage-banking processes have potentially infected millions of foreclosures, and the damages to be assessed against these operations could be significant and take years to materialize.”

    Federal and state officials launched numerous investigations last autumn after revelations that, to process foreclosures, banks used “robo-signers” who didn’t review documents prepared by their colleagues. Banking regulators’ have said their reviews of a sample of 2,800 foreclosure cases have found a small number of improper foreclosures.

    Acting Comptroller of the Currency John Walsh said last month that the problems were limited in scope. They include cases that shouldn’t have gone forward under a law blocking foreclosures on military personnel, ones in which the borrower was in bankruptcy and cases in which borrowers were already on the verge of having their loans modified.

    But Ms. Bair, who is departing her position in July, argued that other regulators likely missed homeowners who should have been provided loan assistance but who were improperly denied such help. The FDIC, she said, has found a “not insignificant” number of such cases. “There needs to be much more aggressive action,” she told lawmakers.

    Under consent orders that 14 banks and thrifts reached with regulators in March, financial institutions are required to hire a consultant to review their foreclosures over the past two years to identify any borrowers who were harmed by foreclosure-processing problems.

    Ms. Bair, however, questioned whether those reviews will truly be independent. Such consultants “may have other business with [banks] or future business they would like to do with them,” Ms. Bair said. “This is a huge issue.”

    Federal Reserve Chairman Ben Bernanke, in response to questions from lawmakers at the hearing, didn’t address this criticism directly, but reiterated that regulators plan to fine banks as a result of the inquiry into foreclosure problems. He noted that the foreclosure crisis is “at some level” a problem of bank regulation, but noted it is “also a macroeconomic problem.”

    Ms. Bair also raised the possibility that banks may be forced by government-controlled mortgage giants Fannie Mae and Freddie Mac to buy back more defaulted loans.

    Fannie and Freddie have been pressing banks to do so, and numerous investors have filed lawsuits with similar demands. “A significant amount of this exposure has yet to be quantified,” she said in her prepared remarks.

  37. In California it’s coming down to one key issue, MERS NOT having an assignment of the Note from the Original Lender to MERS, legally recorded.

    “The assignment of the lien without a transfer of the debt was a nullity in law.”
    “A lien is not assignable unless by the express language of the statute.”
    CALIFORNIA SUPREME COURT, DAVIS, BELAU & CO. V. NATIONAL SUR. CO., 139 CAL 223, 224 (1903)

    “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”
    CARPENTER V. LONGAN, 83 U. S. 271 (1872), U.S. Supreme Court

    More info at https://sites.google.com/site/mersfatalflawsincalifornia/

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