Maine Case Affirms Judgment for Homeowner — even with admission that she signed note and mortgage and stopped paying

While this case turned upon an  inadequate foundation for introduction of “business records” into evidence, I think the real problem here for Keystone National Association was that they did not and never did own the loan — something revealed by the usual game of musical chairs that the banks use to confuse and obscure the identity of the real creditor.

When you read the case it demonstrates that the Maine Supreme Judicial Court was not at all sympathetic with Keystone’s “plight.” Without saying so directly the court’s opinion clearly reveals its doubt as to whether Keystone had any plight or injury.

Refer to this case and others like it where the banks treated the alleged note and mortgage as being the object of a parlor game. The attention paid to the paperwork is designed by the banks to distract from the real issue — the debt and who owns it. Without that knowledge you don’t know the principal and therefore you can’t establish authority by a “servicer.”

The error in courts across the country has been that the testimony and records of the servicer are admissible into evidence even if the authority to act as servicer did not emanate from the real party in interest — the debt holder (the party to whom the MONEY is due.

Note that this ended in judgment for the homeowner and not an involuntary dismissal without prejudice.

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Hat Tip to Bill Paatalo

Keybank – maine supreme court

Here are some meaningful quotes from the Court’s opinion:

KeyBank did not lay a proper foundation for admitting the loan servicing records pursuant to the business records exception to the hearsay rule. See M.R. Evid. 803(6).

KeyBank’s only other witness was a “complex liaison” from PHH Mortgage Services, which, he testified, is the current loan servicer for KeyBank and handles the day-to-day operations of managing and servicing loan accounts.

The complex liaison testified that he has training on and personal knowledge of the “boarding process” for loans being transferred from prior loan servicers to PHH and of PHH’s procedures for integrating those records. He explained that transferred loans are put through a series of tests to check the accuracy of any amounts due on the loan, such as the principal balance, interest, escrow advances, property tax, hazard insurance, and mortgage insurance premiums. He further explained that if an error appears on the test report for a loan, that loan will receive “special attention” to identify the issue, and, “[i]f it ultimately is something that is not working properly, then that loan will not . . . transfer.” Loans that survive the testing process are transferred to PHH’s system and are used in PHH’s daily operations.

The court admitted in evidence, without objection, KeyBank’s exhibits one through six, which included a copy of the original promissory note dated April 29, 2002;3 a copy of the recorded mortgage; the purported assignment of the mortgage by Mortgage Electronic Registration Systems, Inc., from KeyBank to Bank of America recorded on January9, 2012; the ratification of the January 2012 assignment recorded on March 6, 2015; the recorded assignment of the mortgage from Bank of America to KeyBank dated October 10, 2012; and the notice of default and right to cure issued to Kilton and Quint by KeyBank in August 2015. The complex liaison testified that an allonge affixed to the promissory note transferred the note to “Bank of America, N.A. as Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP,” but was later voided.

Pursuant to the business records exception to the hearsay rule, M.R. Evid. 803(6), KeyBank moved to admit exhibit seven, which consisted of screenshots from PHH’s computer system purporting to show the amounts owed, the costs incurred, and the outstanding principal balance on Kilton and Quint’s loan. Kilton objected, arguing that PHH’s records were based on the records of prior servicers and that KeyBank had not established that the witness had knowledge of the record-keeping practices of either Bank of America or Countrywide. The court determined that the complex liaison’s testimony was insufficient to admit exhibit seven pursuant to the business records exception.

KeyBank conceded that, without exhibit seven, it would not be able to prove the amount owed on the loan, which KeyBank correctly acknowledged was an essential element of its foreclosure action. [e.s.] [Editor’s Note: This admission that they could not prove the debt any other way means that their witness had no personal knowledge of the amount due. If the debt was in fact due to Keystone, they could have easily produced a  witness and a copy of the canceled check or wire transfer receipt wherein Keystone could have proven the debt. Keystone could have also produced a witness as to the amount due if any such debt was in fact due to Keystone. But Keystone never showed up. It was the servicer who showed up — the very party that could have information and exhibits to show that the amount due is correctly proffered because they confirmed the record keeping of “Countrywide” (whose presence indicates that the loan was subject to claims of securitization). But they didn’t because they could not. The debt never was owned by Keystone and neither Countrywide nor PHH ever had authority to “service” the loan on behalf of the party who owns the debt.]

the business records will be admissible “if the foundational evidence from the receiving entity’s employee is adequate to demonstrate that the employee had sufficient knowledge of both businesses’ regular practices to demonstrate the reliability and trustworthiness of the information.” Id. (emphasis added).


With business records there are three essential points of reference when several entities are involved as “lenders,” “successors”, or “servicers”, to wit:

  1. The records and record keeping practices of the initial “lender.” [If there are none then that would point to the fact that the “lender” was not the lender.] Here you are looking for the first entries on a valid set of business records in which the loan and fees and costs were posted. Generally speaking this does not exist in most loans because the money came a third party source who knows nothing of the transaction.
  2. The records and record keeping practices of any “successors.” Note that this is a second point where the debt is separated from the paper. If a successor is involved there would correspondence and agreements for the purchase and sale of the debt. What you fill find, though, is that there is only a naked endorsement, assignment or both without any correspondence or agreements. This indicates that the paper transfer of any rights to the “loan” was strictly for the purpose of foreclosing and bore new relationship to reality — i.e., ownership of the debt.
  3. The records and record keeping practices of any “servicers.” In order for the servicer to be authorized, the party owning the debt must have directly or indirectly given authorization and come to an agreement on fees, as well as given instructions as to what functions the servicer was to perform. What you will find is that there is no valid document from an owner of the debt appointing the servicer or giving any instructions, like what to do with the money after it is collected from homeowners. Instead you find tenuous documentation, with no correspondence or agreements, that make assertions for foreclosure. The game of musical chairs has bothered judges for a decade: “Why do the servicers keep changing” is a question I have heard from many judges. The typical claims of authorization are derived from Powers of Attorney or a Pooling and Servicing agreement for an entity that neither e exists nor does it have any operating history.

Maine Supreme Court Invalidates MERS Standing


MERS v Saunders Law Court decision[1]

Decision: Docket: Argued: Decided:
2010 ME 79 Cum-09-640 June 15, 2010 August 12, 2010

The good news is that we have yet another state Supreme Court invalidating the legal standing of MERS. But there are many other lessons to be learned from this decision. The main lesson for litigants without legal representation is that the sophistication of legal and procedural arguments has reached a point beyond the capabilities of virtually any layman.

In this case MERS filed a foreclosure action against Saunders. In a late attempt to avoid a decision that would clearly undermine MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, Deutsche Bank National Trust Company attempted to correct the record by substituting itself in the motion for summary judgment after the trial court had already granted the motion for summary judgment in favor of MERS. It is the intricacies of legal procedure that must be observed here.

The court agreed that MERS did not have a stake in the proceedings and therefore had no standing. The court also agreed that a substitution of parties could not be used to cure a jurisdictional defect of lack of standing and was therefore an improper. (The importance of this part of the decision can only be apparent to seasoned litigators. Nearly all foreclosure cases involve late filings of papers intended to cure a jurisdictional defect or other defect).

Finally, and equally as important, the court concluded that “there are genuine issues of material fact.”

This Court made the assumption that the real party in interest was the bank but that the bank was not entitled to summary judgment as a matter of law because they were genuine issues of material fact. The assumption that the bank was a real party in interest is troublesome. It does not appear that there was any evidence in the record to support that assumption.

Before the bank had become a party to the action, it filed a motion to reconsider or amend the order denying the previous motion for summary judgment. The court noted that the bank filed an undated two-page allonge indicating that the originating lender transferred the note to the bank and also filed an assignment indicating that MERS had transferred any rights it had in the note or mortgage to the Bank.

The court also noted that the transfers occurred during the course of litigation. Of course we all know by now that MERS doesn’t have any interest or right in any note or mortgage.

The court stated “a party’s personal stake in the litigation is evidenced by a particularized injury to the party’s property, pecuniary or personal rights.” This wording is congruent with the wording of many other decisions in state and federal courts

The court specifically rejected the argument that a nominee could for any purposes be considered the mortgagee of record and therefore the party with a right to initiate foreclosure proceedings. MERS only right was the right to record the mortgage. The fact that the security instrument identified it as “the mortgagee of record does not change or expand that right.”

An interesting discussion on page 11 of the decision makes a distinction between judicial and nonjudicial states. “These cases are inapposite because nonjudicial foreclosures do not invoke the jurisdiction of the courts. Nonjudicial foreclosures proceed wholly outside of the judiciary, typically utilizing local law enforcement to affect a mortgage or and gain possession of the mortgaged property.”

The interesting procedural point was a finding by the court that Deutschbank, as a non-party had no standing to file any motion in the current proceeding. The implications of this reasoning are very interesting. Because the nominee had no jurisdictional standing, it had no right to bring the foreclosure in the first instance. Because the bank was not a party to the action filed by the nominee, it had no right to bring any motions in the foreclosure initiated by the nominee.

I think this last point is very important from both a tactical and legal perspective. The pretender lenders are using any pretense available in order to initiate a foreclosure and a judicial or nonjudicial state. Only after they are challenged do they attempt to correct obvious deficiencies and defects in the title chain relating to the original obligation between the borrower and the originating lender. Their strategy is clearly to finesse the basic requirements of due process, substantive law and the Rules of Civil Procedure. Arguing this position successfully obviously will take considerable knowledge, memorandums of law, and the ability to argue the point succinctly.

The court obviously recognized this strategy. “After substitution, the bank should have filed its own independent motion for summary judgment with a statement of material facts and supporting affidavits. The Saunders would then have had the opportunity to respond to the new motion and appropriately defend the foreclosure action against the real party in interest.”

On page 19 the court corroborates our arguments regarding evidence citing other cases in Maine. At a minimum a party attempting to foreclose a mortgage must provide proof of the existence of a mortgage and its claim on the real estate supported by evidence of a quality that could be admissible at trial. These facts must be included in the mortgage holder’s statement of facts.

In my opinion this position supports both arguments made on these pages regarding judicial and nonjudicial foreclosures, sales and evictions. None of them are valid and all of them are void unless supported by evidence of the truth of the chain of title. And non-judicial states that require minimal proffers by counsel instead of proof are committing legal error and applying nonjudicial statutes in a manner that is inconsistent with the due process requirements of the United States Constitution.

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