FREE HOUSE MYTH DEBUNKED BY PORTER AND LEVITIN

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The Free House Myth
posted by Katie Porter
As challenges to whether a “bank” (usually actually a securitized
trust) has the right to foreclose because it owns the note and
mortgage become more common, rumors swirl about the ability to use
such tactics to get a “free house.” There are a few instances of
consumer getting a free house, see here and here, for examples, but
these are extreme situations not premised on ownership, but on a more
fundamental flaw with the mortgage. In general, the idea that even a
successful ownership challenge will create a free house to the
borrower is an urban myth. I’ll explain why below, but there is a
policy point here. The myth of the free house drives policymakers to
complain about the moral hazard risks of holding mortgage companies to
the law and tries to set up homeowners who are paying their mortgages
against those who are not. It serves the banks’ political agenda to be
able to point to the “free house” as an obviously unacceptable
alternative of consumers winning legal challenges. It’s key then to
understand that the “free house” is largely a creature of consumers’
and banks’ over-active imaginations.

In sorting out why even a successful ownership challenge does not give
homeowners a free house, it is helpful to parse some key concepts. The
first one is standing, which is the right of a party to ask a court
for the relief it seeks. This comes in different flavors, including
constitutional standing, but in the foreclosure context, usually boils
down to whether the moving party is the “real party in interest.” In
re Veal, the recent decision from the 9th Circuit BAP authored by
Judge Bruce Markell, mentioned previously on Credit Slips , contains a
discussion of standing in the foreclosure context. At least in part,
the concern of the real party in interest doctrine is to make sure
that the plaintiff is the right person to get legal relief in order to
protect the defendant from a later action by the person truly entitled
to relief. Note that standing is a concept that only applies in court;
here that means in judicial foreclosures. In states that allow
non-judicial foreclosure, the issue is slightly different. Does the
party initiating the non-judicial foreclosure have the authority to do
so under the state statute authorizing the sale? For example, cases
such as In re Salazar discuss whether a recorded assignment of the
mortgage is needed, as opposed to an unrecorded assignment, to
initiate a foreclosure. Under either standing or statutory authority,
a “win” by the homeowner leads to the same result. The foreclosure
cannot proceed.

But this win is not the same as a free house. Just because a party
lacked standing or statutory authority does not mean that there is not
some party out there that does have the authority to foreclosure. Nor
does a win on standing mean that there cannot be action taken to give
the initial foreclosing party the authority that they need, which
might occur by transferring possession of the note or by executing a
series of assignments, to foreclose at a later date. Unless other
problems exist, there is still a valid note that obligates the
homeowner to pay money due and there is still a mortgage encumbering
the house. The homeowner does not get a free house. Rather, the
homeowner just doesn’t lose her house today to foreclosure. These are
pretty different outcomes!

This doesn’t mean that I think the standing/ownership issue is
inconsequential. For homeowners, a successful challenge that results
in the dismissal of a foreclosure can lead to a loan modification or
the delay itself can give the homeowner the time to find another
solution. For investors in mortgage-backed securities, the problems
with paperwork likely increase their loss severities in foreclosure,
both because of increased litigation costs and because of delay in
correcting problems. (And there may be even more serious problems for
investors relating to whether the transfers even succeeded in putting
the homes in the trust.) But we shouldn’t confuse these issues with
the idea that what is at stake in sorting out this mess is giving a
“free house” to some Americans, despite the lamentations of this
LaSalle Bank lawyer after a judge ruled that LaSalle as trustee lacked
standing to foreclose. A fruitful discussion of these issues needs to
begin with a clear understanding of the consequences of the problem,
as well as empirical evidence on how widespread these problems are.
The free house is political handwringing, not legal reality.

July 18, 2011 at 4:22 AM in Mortgage Debt & Home Equity
Comments
It’s certainly not a “free” house. I think it’ll be a nightmare for
homeowners who prevail in one of these actions to try and sell their
homes. Just because party X can’t foreclose doesn’t mean that there
isn’t a valid mortgage still on the property. No buyer is going to
want to buy (and no title insurer will want to insure) unless that
mortgage is paid off. And that means determining who is the mortgagee.
Adverse possession and/or quiet title actions might help solve some of
this, but they are not self-executing solutions. Homeowners will have
to go to court and litigate. That’s expensive and it takes time. So,
at best, these homeowners are getting not “free” houses but houses
with a severely depressed value.

Posted by: Adam Levitin | July 18, 2011 at 06:46 AM

The author skims the surface of the latte and finds after skimming the
surface there is no more cream. Duh.
The Banks are often appearing as trustees on behalf of NY Trusts most
of which died on or about 2008. If the trusts are dead than who has
the right to appear in court? Nemo est hires viventis. No one is the
heir of a living person and I would suggest, no one is the a trustee
able to act on behalf of a dead trust. If the paper was successfully
transferred to the trust, then perhaps the thousands of suckers who
bought a RMBS are the owners. But if the paper was never successfully
transferred, then the trusts and the trustees are certainly not the
owners with standing. The original lenders might be but after phony
documents have been created assigning the note and the mortgage to
dead trusts, how could they possibly have the right of ownership?
The “myth” of the free houses was created not by consumers “oy!!” but
by the very Banks who are picking up “free” houses every day by
pretending to be trustees acting on behalf of dead trusts or trusts
that never properly held the mortgages and notes. It is very much like
Ronald Reagan calling a nuclear submarine the Corpus Christie or
calling armed combatants “peacekeepers.” The “free house” was the
Orwellian double speak created by Bankers for Bankers and their
judicial minions and hand maidens have adopted their language very
well.

30 Responses

  1. Is this
    http://waltertkeane.com/DeathofQuietTitle.aspx
    the end of the Quiet Title defense in Utah?

  2. to WD –

    Put your name in so I know who is making such false and foolish statements.

    I have lots of knowledge put I am not part of the network of corrupt foreclosure attorneys, and corrupt title attorneys (ie Thomas P Malone of Fidelity National Title and David K Fiveson of a phantom title company called Coronet Title) that paid off Judge Alice Schlesinger of NYSC to rule against athe US Supreme Court Case of Elliot v. Piersol and pretend that forged deeds carry any rights.

    I do not need a nanny.

    I in fact wrote a simple letter to William P Foley CEO of Fidelity National Title”what went wrong thaqt your New York Attorney Thomas P Malone finds himself fighting for a forged deed?”

    Fidelity’s answer to me was “…It is proper..” What other answer would you expect from Foley, former chair of Lendeer Process Services.

    If you have noticed these racketeers have infiltrated the land records all over this country.

    We don’t need nannys, we need the truth to be exposed.

  3. ‘Further, anyone who was concerned about understanding what is said ”
    in the DOT they were about to sign, unless they were a trust or securities lawyer, would most likely have had to put the signing for a few days while they visited their local law library. Of course, that’s assuming you could get a copy of documents from the bank without first signing them – if you asked to see them ahead of time, they had excuses that involved such things as the necessity of having them bought to you by the notary – but they were totally supportive of your desire to know what you were going to be signing, “you can take all the time you need to go over them when the notary brings them to you.”

    NO KIDDING HERE—–understatement———how about”they did not start faxing docs until 2 minutes ago—–still hot coming off the machine and hundreds of pages for a one hour apptmt

    now that you realize its far more complex than any financing youv ever seen this side of a north sea LIBOR non-recouse platform loan–you are simply trusting the local guys youv dealt with for years —not knowing the game had changed

  4. marilyn lane,
    because it’s not the job of the registrar to police your paperwork, only to see that it APPEARS to have all of the necessary details required by statute to qualify for recording. Of course, those who prefer the concept of ‘nanny’ state, would like to think the gov. is responsible for protecting them from their own lack of knowledge or understanding in these matters, but that is obviously not the case.

    Further, anyone who was concerned about understanding what is said in the DOT they were about to sign, unless they were a trust or securities lawyer, would most likely have had to put the signing for a few days while they visited their local law library. Of course, that’s assuming you could get a copy of documents from the bank without first signing them – if you asked to see them ahead of time, they had excuses that involved such things as the necessity of having them bought to you by the notary – but they were totally supportive of your desire to know what you were going to be signing, “you can take all the time you need to go over them when the notary brings them to you.”

  5. […] 22 Jul MOST POPULAR ARTICLES GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE The Free House Myth posted by Katie Porter As challenges to whether a "bank" (usually actually a securitized trust) has the right to foreclose because it owns the note and mortgage become more common, rumors swirl about the ability to use such tactics to get a "free house." There are a few instances of consumer getting a free house, see here and here, for examples, but … Read More […]

  6. “The “free house” was the
    Orwellian double speak created by Bankers for Bankers and their
    judicial minions and hand maidens have adopted their language very
    well.”

    If there is a situation where the servicers had so little success demonstrating real nexus with the chain of title–the servicer probably is attempting some act prohibited by FDCPA. The homeowner may have a default judgment—which is how 95% or more of the servicers obtain their possession. With no review.

    Any homeowner who survives the abuses —runs the gantlet is a survivor –not a winner. If the servicer has screwed up so badly that there is a default then the homeowner has had to have gone through months if not years of unmitigated hell —looked the Devil in the face and suffered for it. If the servicer cannot convince a court of its claim—-then any homeowner knows far better the range and depth of the abusive conduct perpetrated by the servicers. These “rats” could teach Murdoch’s reporters where to look for the bottom of the “sewer”–to borrow a bit from the Brit Prime Minister this week. So a default is theoretical–and if it happens it certainly is at great cost in time, mental anguish and physical wear–upon individuals and entire families. The alternative, a servicer “win” may not always be in the public interest either—in fact it may result in the wasteful destruction of a home –a neighborhood by negligence or worse.

    I would wager there are a thousand homes destroyed by servicer and preserver negligence–than there are “free homes” surrendered into the hands of families that fought to save their homes from the wanton destruction that is wrought upon those whom the servicers designate as hard cases.

  7. Exactly Marie. Most do not know, and therefore don’t care. To mount a personal campaign against the fraud is akin to what one poster made note of this week, it’s like climbing over the hill and throwing yourself infront of the machine gun nests. Gallipoli comes to mind, and I hate how that turned out.

  8. Anonymous

    I admire your passion about the need for each to do something. But…

    And this has been said before, but its unfortunately all too true: The dire truth about middle America is that we can’t fight without the resources AND understanding of the issues. Finances are in disarray for most; forget about hiring an attorney IF you can find one. I couldn’t in the good ole boy state I’m in.

    As to understanding, I hate to say it but most of the “little” people can’t wrap their brains around this fraud. I can’t find ONE person in my sphere who saw the 60 min piece on the robos. They’re not interested.

    This is not a world of farmers where people could mobilize and then return to their farms. Were stuck in a highly structured day to day struggle where the banks already own us because to get to the job you need a car, clothes, insurances, a roof and so on. To fight means courts, procedure, law libraries, a mighty paper chase most people can’t address The banks count on that: and how do you fight when you’re homeless?

    I acknowledge your urgings, bur the day to day challenges as far as I’m concerned are all but insurmountable for many, if not most.

  9. Anonymous, Levitin didn’t say that. That’s what I tried to point out in my post. That remark was made by another poster at credit slips. The way Neil posted that article makes it look like levitin said more than he did. It also makes him look a little flippant towards Katie Porter, which I know he wouldn’t be.

  10. Wake up people — if you crawl in a hole and say — “I give up” — nothing will ever be done. Time for people to realize that even if they cannot personally win — that they should fight for the principal of defending ALL that have been wronged.

    Until that happens, will remain broken and unable to combat continued and compounded fraud upon the American public.

  11. E. Tolle,

    What Mr. Levitin states is — “The “myth” of the free houses was created not by consumers “oy!!” but by the very Banks who are picking up “free” houses every day by pretending to be trustees acting on behalf of dead trusts or trusts.” Mr. Levitin, it appears, is well aware of what is going on.

    Marie,

    If the government does not intervene, the country will remain in dire shape. A domino effect has – and will continue – to severely hamper the US economy — and the fraudulent mortgage fiasco remains the culprit. The stock market rally is fabricated — it will not last.

    There will we no more “tricks” to conceal the fall-out. Get the greedy lobbyists out of Washington. If government does not fix soon — may be too late to ever fix.

    But, of course, many perpetrators are still are fighting for their own agenda — including some who post here. And, Mr. Obama will not recover if he continues to ignore the situation. Over for him.

  12. Here is how-to detect mortgage securitization fraud and determine improper mortgage securitization.

    1. Loan Modification Denied.

    Believe it or not when the mortgage lender denies a loan modification this is usually a sign that something else may be wrong with the mortgage loan. When homeowners are denied a loan modification for whatever reasons they should research information about the mortgage securitization of their loans.

    2. Original Mortgage Note Missing.

    Many times mortgage lenders will seek to supply a COPY of the mortgage note to foreclose. In order to foreclose the mortgage lender must be in possession of the original mortgage note.

    3. Truth and Lending Violations.

    Mortgage lenders who abuse Truth and Lending Act violations are prone to carryout wrongful foreclosures.

    4. No Enforceable Security Interest.

    Whenever requested the mortgage lender is required to proof the right to collect on the debt owed. Generally, producing documents such as the mortgage note, BOGUS assignment transfer, payment history, etc. However, rarely will the mortgage lender provide documentation to show enforceable security interest as a Holder In Due Course.

    Please note the assignment transfer would make the securitization proper if the majority were not bogus documents.

    5. Squiggle Mark and Line Signatures.

    When the mortgage assignment transfer signatures at the bottom appear to be hard to read such as a squiggle mark or line intended to be a signature. In actual the squiggle mark and line is not easily identifiable as the signature name that matches the printed name.

    6. ROBO Signer.

    The reason that most mortgage assignments are bogus is because they contain signatures of Robo Signers. These individuals are typically not real employees of the mortgage lender which makes the assignment transfer fraud. Robo signers do not independently fact check and confirm the information of mortgage assignments as accurate or true which is required to complete an assignment transfer of mortgage.

    You can also Google the name of the person who is allegedly authorized to sign on behalf of the mortgage lender listed at the bottom of your mortgage assignment transfer. Simply conduct a search of the name with the term Robo Signer.

    “Enter Bogus Name Officer, Mortgage Lender Name At Bottom, Robo Signer”

    This is a good starting point for detecting mortgage securitization fraud.

  13. It does not take many words to speak the truth.Why is it”accepted”(?!!) practice to charge that outrageous interest in the first place?

    There i go,thinking…

  14. Here is a great resource that i found that has help me and thousands of other homeowners stay in their homes, check it out…on youtube,

  15. April

    I had a professor once who demanded we read everything on the subject being considered, however distasteful, as he did, because, as he said, you must know the enemy.

    I understand your outrage only too well, but one must be able to meet the banksters arguments and without confusion or self defeating excesses of emotion

  16. I know everyone will razz me for saying this, but the French word
    “mort gage” comes from mort=death, gager=to wager, a gage is a
    wager. (Black’s law Dictionary 1968).
    “Gager a la roulette” means gambling at roulette. “Mesdames, messieurs, placez les gages”. Gagner in French means to win as in,
    “J’ai gagne dix milles bals a la roulette.”
    “Gage de loi” means “wager of law”. So in a “mort gage” who are
    the gamblers? and what is the prize if either player wins? And how does one win the wager? Think about it.
    There is no such thing as a “free house”, there is only a “house
    that is won or lost”. Either the lender wins it by outlasting the borrower,
    or the borrower wins it by outlasting the lender. Sometimes, the mort-
    gage (death gamble) results in a tie and neither side wins but that is
    rare on a 30 year “mort gage”!

  17. Please remember that Levitin is milquetoast when it comes to analysis. These people are professors, and thus may or may not have investigated the things they speak of. The things they say seem to ignore much recent case law, even when citing Veal. Levitin’s testimony to Congress was weak to those of us that follow this news, or as in many of our cases, have to live it. Then it was a pretend shock to the media, congress and all the participants in the fraud. “We had no idea” was big then. Not any more.
    If these experts have not been to the county, or can not fathom something that is striking them repeatedly in the face, maybe they try to explain it to satisfy their own level of curiousity, or involvement. Due to the constant denial of reality, you have to guess which side they are on. Are they ignorant, or do they have a vested interest? Mr. Levitin and Ms. Porter are supposed to be extremely capable, so ignorance is probably out.
    But as anyone that has been living in the real world knows, they are demonstrating voluntary ignorance that has destroyed their ablilty to see the law for the trees, or speak impartially on the subject. Property law is immutable they once said, now, not so much. I started reading thinking the author was going to refer to the homeowner being the only one with any payment history to the property, and thus the “free house” claim would be disputed. They don’t appear congnizant of this option.
    They appear to be a part of TPTB now, and their mission of truth has been kneecapped. Have they degenerated into spokespersons for the crime itself? Perhaps. They seem to have done a 180. Perhaps they are under political pressure, maybe just paid off like so many politicians.
    Only by reading what they print do we learn how they have changed. Note they never discuss the possiblity that securitization destroyed the obligation. Read it again and count what they ignore, and that we all know.

  18. April,

    MERS did not have to be a party to sell to a Trust. WAMU, Chase, B of A and other banks would execute loans with themselves as beneficiaries, and then securitize without using MERS.

    There is nothing wrong with not using MERS.

    As to your comments about having paid $189k total for a home that you bought for $135k, have you not heard of the concept of paying interest on borrowed money? Typically, on a loan, dependent upon the interest rate, you will pay about 4 times the purchase price due to interest.

    Take a look at your amortization schedule to see how much each monthly payment goes to interest and principal reduction.

    Your comments about the $189k have no validity.

  19. @April – this post and other recent ones make me question if Neil has actually delegated the daily posting to a third party. Some of the content’s propriety for the site has been questionable, and some of the content itself has been fairly incorrect.

  20. Lately I have noticed that instead of running articles that are helpful to those of us that find ourselves unwittingly pulled into the debacle of robo signed assignments and securitization on our mortgages (my DOT did not even have any MERS language and they STILL sold it into a TRUST) that Neil appears to be uploading articles that are in effect discouraging us from even fighting these fraudsters. Yesterday I received one from someone regarding OCC rules that indicated you might as well just give it up if you cannot afford an attorney.

    We are already struggling every day to keep up with the barrage of information and documents and legaleze that we are having to learn on the fly ~ we really do not need to then be further discouraged by
    those that feel we are getting “a free house”. So let me state unequivacally here…….

    Begging your pardon, and I am sure that I am not justt speaking for myself, after putting 10% down and paying on my home for almost 12 years now, plus taxes, insurance, maintenance, Home Owners Dues etc.. I have calculated that to date I have shelled out in excess of $183k and on my home that I purchased for $130k. According to the servicing entity I still owe $119k. After many, many, many attempts to get a proper accounting of my payments and an audited accounting on this account, to date NONE has been given. So now PLEASE explain to me and to all of us that have lived in our homes and maintained them for longer than a year HOW IS THAT FREE?????

  21. Anonymous

    No help will come from the government. Thanks.

  22. Neil’s post above is incorrect. The comment by Adam Levitin begins with, “It’s certainly not a “free” house. I think it’ll be a nightmare for….’, and is only that one paragragh. That ends Levitin’s comment.

    There is another comment following that, “The author skims the surface of the latte and finds after skimming the surface there is no more cream. Duh.” This is not written byAdam Levitin, but by a Kelley A. Greene.

    Keep it real.

  23. Marie,

    That is up to the government to finally admit. Without government intervention by TARP, the trusts would have died by natural causes. But, government intervention has kept trusts – or, rather, remnant tranches of trusts, artificially alive. Nevertheless, no mortgage payment cash flows are being transferred to the remnants – because the waterfall structure no longer exists – destroying the very intent of the falsely organized trusts.

  24. Great response by Mr. Levitin.

    What Ms. Porter also misses is that many, many of the these so-called “mortgages” were nothing more than transfer of collection rights — thus, as TARP Inspector General points out in November 2010 report Footnote 35 — “without the mortgage, a note is simply an unsecured debt obligation, no different from credit card debt.” This is likely the case for all subprime, alt-a, and jumbo “obligations.”

    Further, securitization is an assignment of the cash flows – not a sale collection rights. Over and over again — I will state that security investors are not the creditor. And, as Mr. Levitin points these trusts “most
    of which died on or about 2008.”

    Mr. Levitin was an astute proponent of bankruptcy reform — but, despite his testimony, Congress rejected bankruptcy reform — twice.

    As more and more issues come to light, perhaps it is time to revisit bankruptcy reform.

  25. Good Morning To All:

    John, that was a great idea taken your case to small claims. Would you please share some of the key questions you imposed on Bank of America that got you what you wanted.

    Thanks

  26. Keepon

    For me, the more important issue is, how in all this secrecy, can you PROVE the trust “died” in 2008. Millions of foreclosures,, including mine, have been carried out in the name of dead trusts, and, as in my case, where the transfer of the mortgage to the trust allegedly occurred after the 2008 “death” date.

  27. An informed person seeking Quiet Title can force the true owners to come forward or complete a Modification for a reasonable cost. My $20 action was in Small Claims, NY and stimulated an out of court settlement in my favor because BofA didn’t want TO BE IN ANY COURT discussing the real issues. I didn’t win my case and didn’t expect to “win”. I knew that I wasn’t even in the RIGHT COURT! However, I did “get” everything I asked for in the SETTLEMENT: modification back dated to when I applied for modification, fees & charges erased, FICO fixed and a few thousand IN CASH. Statute of limitations in a successful Quiet Title case extends far into the future but what should be the fear? For myself, I’m going back into court for Quiet Title on the basis THAT I WANT TO MAKE SURE I’M PAYING THE RIGHT PERSON and to keep BofA from getting my money that I know (and they know) doesn’t belong to them. If someone appears on the scene who SHOULD BE PAID, no honest person can complain. I don’t believe that is likely to happen but it would be nice if a real resolution to my problem SOMEDAY DID ARISE. A Quiet Title suit is the best step for a poor person to take against the banks during the modification process prior to foreclosure and should be encouraged and I encourage it. I did and within 4 months I was no longer a poor person.

  28. If fraudsters pay other fraudsters for forged titles and then Fidelity National Title, as part of the scam issues title insurance why is the land registrars allowing them to record these forged deeds?

  29. Well i did not expect to get free houses, but to litigate a the matter where both parties are amicable with the solution. We know the banisters will always prevail. but as homeowners we have to get knowledgeable lawyers to litigate these matters

  30. “The Banks are often appearing as trustees on behalf of NY Trusts most of which died on or about 2008.”

    Can someone please explain this briefly and in ‘for dummy’ terms?

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