Tonight! Two Big Topics on the Neil Garfield Show

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Today’s Show involves two important topics:

1. First Circuit US Court of Appeals case, Thompson v. Chase, in which the appellate court reversed the lower district court, essentially strictly construing the Mass. judicial foreclosure statutory framework.

2. Real Estate brokers are being used as institutional stand-ins for certain evidentiary purposes, particularly in non-judicial foreclosure states like California. Bill Paatalo has a great blog item about this issue, on his blog, from May 17, 2019. Gives the appearance of real estate brokers paying illegal referral fees to sub-servicers, in violation of the Real Estate Settlement & Procedures Act (RESPA). Details to follow on today’s Show.

EDITOR’S NOTE: I have it on good authority that both real estate brokers and especially mortgage brokers executed indorsements of the note shortly after loan closings. Isn’t that interesting? It explains a lot about the illegal bonuses and compensation that was not disclosed to borrowers.

See MA Appeal Win – Chase foreclosure invalidated

This is an interesting case. In my mind this decision harkens back to the day when all elements of a claim in foreclosure were strictly construed — as a matter of public policy. The  conesus of everyone including the judiciary was that if someone is going to lose their homestead, that is a draconian remedy that is the judicial civil equivalent of capital punishment in criminal law.

I did hundreds of foreclosures when I was younger and I occasionally got sloppy. Even if the motion for default or for judgment on default was unopposed, the Judge would carefully review the paperwork. If the Judge found anything amiss, I would lose my motion and be required to come back and refile it with corrected documents. I know of situations where after a few tried the judge dismissed the case with prejudice without any filing or appearance of the homeowner in person or through counsel.
This case seems to stem from the same line of thinking, veering away from the the paradigm shift in judicial consensus that all foreclosures are probably valid. Defensive claims from the bank against the borrower’s defenses and claims cannot be based upon a showing or absence of an allegation of harm. In order to force title to be taken away from the homeowner, any claimant must be in strict compliance with the documentary provisions AND statutory provisions  governing foreclosures. I would add that the implied covenant of good faith is part of any agreement and that would include loan agreements.
The only problem I noticed was the court’s assumption that Chase became the mortgagee, which is a major victory for Chase considering the fact that Chase did not become  the mortgagee in fact or in law. It was presumed that Chase was the mortgagee because it was presumed that WAMU owned the subject loan at the time of the Purchase And Assumption Agreement on 9/25/08.
There is no evidence that WAMU owned any such loans and in fact all evidence points to the fact that virtually all loans in WAMU was the proxy of an investment bank or the “originator” of the loan were either presold before the loan closing (into the secondary market) (i.e., they were funding by third party lender) or contemporaneously sold to an investment bank acting through conduits, in this case probably Credit Suisse. By the time Chase took over WAMU it was acquiring — at best —servicing rights. There was no mortgage loan schedule nor any assignments of mortgage.
The importance of this error should not be overlooked. The reason is that while strict compliance helps homeowners it does not remove the bias of the judges who believe that the claimant is attempting to recover losses on a debt which it owns.
Unless Credit Suisse (or whoever was the investment bank) (a) establishes privity with WAMU and (b) establishes it still has a financial interest in the debt, the judicial bias is misplaced.
But the bias still exists; and as long as judges believe that the defense did not reveal an inherent flaw, indeed fraud, judges will continue to believe that all defenses are an attempt to get free from an perfectly valid debt. Like all judges, if they perceive a party who SHOULD win, in their estimation, they will make rulings to support a final decision in favor of the party who they think should prevail.

One Response

  1. Good info. Now — how many loans were accelerated, and “reinstated”, without any notice to the borrower? Borrower never knew — they thought they were getting refinance. Had no idea default reported, and acceleration even occurred.

    The brokers? Yes, they got paid lots of fees. Know some who became multi-millionaires. But WHO was their client??

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