Maine Moving toward the Truth About the Mortgages, MERS and Foreclosures

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The Maine Supreme Court has been active in the last few months – issuing several decisions that will likely impact foreclosure actions in that state. The decisions covered a full range of foreclosure issues, from whether a lender can establish standing when it holds an assignment of the mortgage from Mortgage Electronic Registration Systems, Inc. (“MERS”) to the amount a borrower must pay to cure a default. If you originate and/or service RESIDENTIAL MORTGAGE LOANS in this state, you may want to review these recent cases. This alert focuses on the court’s holdings in one of these cases, Bank of America, N.A. v. Greenleaf, — A.3d —-, 2014 WL 2988236 (Me., July 3, 2014) (Review the Maine Supreme Court Opinion.)

Assignment from MERS May Only Transfer Right to Record Mortgage

The Maine Supreme Court’s decision in Greenleaf may require lenders to make some changes before they initiate FORECLOSURE actions in this state in which the mortgage identifies MERS as the nominee for the lender. This case presented some simple basic facts, but the court’s holdings may raise concerns. In 2006, Scott Greenleaf executed a promissory note for $385,000 to RESIDENTIAL MORTGAGE Services, Inc. (“RMS”) and signed a mortgage securing the debt. The note was endorsed in blank. The mortgage listed RMS as the lender and MERS as the nominee for the lender.
In 2011, Bank of America, N.A. (“BofA”) initiated FORECLOSURE proceedings against Greenleaf. It was undisputed that Greenleaf had failed to make payments on the loan since 2008. Although some interim drama played out in the FORECLOSURE proceeding, a trial was held in 2013. BofA presented the following documents to the court: the original note, the mortgage, and a document recorded in 2011 reflecting the assignment of the mortgage from MERS to BAC Home Loans Servicing, LP (“BAC”), an entity that subsequently merged with BofA. The court entered a judgment of FORECLOSURE IN favor of BofA and Greenleaf appealed.
Greenleaf alleged, among other things, that BofA lacked standing to seek foreclosure of the property since BofA did not have an interest in both the promissory note and the mortgage securing that note. Since the note was endorsed in blank and BofA had possession of the note, the Maine Supreme Court held that BofA met the first prong of the standing test. However, the court found that BofA failed to establish the second prong of the test, ownership of the mortgage.
The court struggled with the 2011 assignment of the mortgage by MERS to BAC. The court focused on one sentence in the 2006 mortgage that specifically provided that MERS was the mortgagee of record for purposes of recording the mortgage. The court held that this provision of the mortgage only granted MERS the right to record the mortgage as the lender’s nominee. When MERS then assigned its interest to BAC, the court held that it granted BAC only the right that it possessed, the right to record the mortgage as nominee for the lender. When BAC then merged with BofA, BofA only obtained the right that BAC had possessed, the right to record the mortgage as nominee. The court also noted that there was no separate and independent assignment of the mortgage from RMS to MERS, BAC, or BofA. As such, the court held that the record only demonstrated a series of assignments of the right to record the mortgage as nominee. In the absence of evidence that BofA owned the Greenleaf mortgage, the Maine Supreme Court held that BofA lacked standing to seek foreclosure and vacated the lower court’s judgment of foreclosure.
Since similar “right to record” language is included in many mortgage forms, lenders and servicers should pay particular attention to whether they are relying on assignments from MERS before initiating a foreclosure action in this state. Unless a lender holds or can obtain an assignment of the mortgage from the originating lender (and many of this lenders may no longer be in business), a lender may need to explore other options for establishing the second prong of the standing test in Maine. A mortgage assignment by MERS, standing alone, may not be sufficient to prove an assignment of a mortgage.
In response to the Greenleaf decision, many of the title insurers in the state have issued guidance regarding title issues under various scenarios in which MERS had assigned the mortgages. At least one title insurer has indicated that if MERS assigned the mortgage in a pending foreclosure action, an assignment from the original lender to the FORECLOSING mortgagee will be required in order for title to be insured without exception.

No Adjustments to Disclosed Payoff Amount Permitted During Cure Period

The Greenleaf court also defined the amount a borrower can be required to pay to cure a default. The notice of default and right to cure sent to Greenleaf included an itemization of all past due amounts and identified the total amount required to be paid by Greenleaf to cure the default. This total amount included a footnote reference that Greenleaf should “[c]ontact the servicer to obtain an up to date figure for outstanding attorney fees, unpaid taxes and costs before sending payment” and the notice also separately provided that Greenleaf should contact BAC at a prescribed telephone number “to obtain an up to date figure before sending payment.” Similar disclosures are generally included in the right to cure notices provided by many lenders and servicers.
Me. Rev. Stat. Ann. tit. 14, § 6111 provides that the contents of the notice of default and right to cure must include, among other things, an itemization of all past due amounts causing the loan to be in default and an itemization of any other charges that must be paid in order to cure the default. Greenleaf argued that the addition of the “call for updated information” references did not meet the statutory requirement that the notice itself must provide an itemization of other charges that must be paid in order to cure the default. The Maine Supreme Court agreed with Greenleaf and held that state law effectively freezes additions to the payoff amount during the cure period.
As such, the amount stated in the notice of default and right to cure is the only amount the borrower can be required to pay to cure the default during the 35 day cure period. Any attorneys’ fees incurred in continuing efforts to recover on the loan and advances made for property taxes or insurance during the cure period – none of these amounts can be added to the amount a borrower may be required to pay to cure the default. The court noted that the incorrect “call for updated information” references in the cure notice were an independent basis on which they could have vacated the lower court’s foreclosure judgment.

Changing Landscape?

Lenders and servicers should work closely with their foreclosure counsel to ensure they can establish standing before initiating a foreclose action in Maine. Lenders and servicers may also want to work with the title insurers to address any title issues that may arise in connection with MERS assignments. With certain changes in their foreclosure practices, lenders and servicers should still be able to prove up ownership of each mortgage sufficient to pass the Greenleaf court’s standing scrutiny. In addition, lenders and servicers should review their cure notice form templates used in this state and any corresponding policies and procedures to ensure that a borrower is never advised or required to pay more than the total amount due as disclosed in the cure notice. The Greenleaf court may have stirred the lobster pot – but lenders and services have options to adapt to the court’s recipes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Pensioners Will Feel the Pinch from Illegal Mortgages and Foreclosures

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Editor’s Comment:

There are many people whose opinion produces the resistance of government to rip up the banks that got us into this economic mess. They all say government is too big, that we already have too much regulation and that Obama is the cause of the recession. Their opinions are based largely on the fact that they perceive the borrowers as deadbeats and government assistance as another “handout.” 

But when it comes down to it, it’s easy to make a decision based upn ideology if the consequences are not falling on you. Read any news source and you will see that the pension funds are taking a huge hit as a rsult of illegal bank activities and fraudulent practices leaving the victims and our economy in a lurch.

The article below is about public pensions where the pension funds and the governmental units took a monumental hit when the banks sucked the life out of our economy. TRANSLATION: IF YOU DEPEND UPON PENSION INCOME YOU ARE LIKELY TO FIND OUT YOU ARE SCREWED. And even if you don’t depend upon pension income, you are likely to be taxed for the shortfall that is now sitting in the pockets of Wall Street Bankers.

Think about it. If the Banks were hit hard like they were in Iceland andother places (and where by the way they still exist and make money) then your pension fund would not have the loss that requires either more taxes or less benefits. And going after the banks doesn’t take a dime out of pulic funds which should (but doesn’t) make responsible people advocating austerity measures rejoice. They still say they don’t like the obvious plan of getting restitution from thieves because the theives are paying them and feeding them talking points. And some of us are listening. Are you?

Public Pensions Faulted for Bets on Rosy Returns

By: Mary Williams Walsh and Danny Hakim

Few investors are more bullish these days than public pension funds. While Americans are typically earning less than 1 percent interest on their savings accounts and watching their 401(k) balances yo-yo along with the stock market, most public pension funds are still betting they will earn annual returns of 7 to 8 percent over the long haul, a practice that Mayor Michael R. Bloomberg recently called “indefensible.”

Now public pension funds across the country are facing a painful reckoning. Their projections look increasingly out of touch in today’s low-interest environment, and pressure is mounting to be more realistic. But lowering their investment assumptions, even slightly, means turning for more cash to local taxpayers — who pay part of the cost of public pensions through property and other taxes.

In New York, the city’s chief actuary, Robert North, has proposed lowering the assumed rate of return for the city’s five pension funds to 7 percent from 8 percent, which would be one of the sharpest reductions by a public pension fund in the United States. But that change would mean finding an additional $1.9 billion for the pension system every year, a huge amount for a city already depositing more than a tenth of its budget — $7.3 billion a year — into the funds.

But to many observers, even 7 percent is too high in today’s market conditions.

“The actuary is supposedly going to lower the assumed reinvestment rate from an absolutely hysterical, laughable 8 percent to a totally indefensible 7 or 7.5 percent,” Mr. Bloomberg said during a trip to Albany in late February. “If I can give you one piece of financial advice: If somebody offers you a guaranteed 7 percent on your money for the rest of your life, you take it and just make sure the guy’s name is not Madoff.” Public retirement systems from Alaska to Maine are running into the same dilemma as they struggle to lower their assumed rates of return in light of very low interest rates and unpredictable stock prices.

They are facing opposition from public-sector unions, which fear that increased pension costs to taxpayers will further feed the push to cut retirement benefits for public workers. In New York, the Legislature this year cut pensions for public workers who are hired in the future, and around the country governors and mayors are citing high pension costs as a reason for requiring workers to contribute more, or work longer, to earn retirement benefits.

In addition to lowering the projected rate of return, Mr. North has also recommended that the New York City trustees acknowledge that city workers are living longer and reporting more disabilities — changes that would cost the city an additional $2.8 billion in pension contributions this year. Mr. North has called for the city to soften the blow to the budget by pushing much of the increased pension cost into the future, by spreading the increased liability out over 22 years. Ailing pension systems have been among the factors that have recently driven struggling cities into Chapter 9 bankruptcy. Such bankruptcies are rare, but economists warn that more are likely in the coming years. Faulty assumptions can mask problems, and municipal pension funds are often so big that if they run into a crisis their home cities cannot afford to bail them out. The typical public pension plan assumes its investments will earn average annual returns of 8 percent over the long term, according to the Center for Retirement Research at Boston College. Actual experience since 2000 has been much less, 5.7 percent over the last 10 years, according to the National Association of State Retirement Administrators. (New York State announced last week that it had earned 5.96 percent last year, compared with the 7.5 percent it had projected.)

Worse, many economists say, is that states and cities have special accounting rules that have been criticized for greatly understating pension costs. Governments do not just use their investment assumptions to project future asset growth. They also use them to measure what they will owe retirees in the future in today’s dollars, something companies have not been permitted to do since 1993.

As a result, companies now use an average interest rate of 4.8 percent to calculate their pension costs in today’s dollars, according to Milliman, an actuarial firm.

In New York City, the proposed 7 percent rate faces resistance from union trustees who sit on the funds’ boards. The trustees have the power to make the change; their decision must also be approved by the State Legislature.

“The continued risk here is that even 7 is too high,” said Edmund J. McMahon, a senior fellow at the Empire Center for New York State Policy, a research group for fiscal issues.

And Jeremy Gold, an actuary and economist who has been an outspoken critic of public pension disclosures, said, “If you’re using 7 percent in a 3 percent world, then you’re still continuing to borrow from the pension fund.” The city’s union leaders disagree. Harry Nespoli, the chairman of the Municipal Labor Committee, the umbrella group for the city’s public employee unions, said that lowering the rate to 7 percent was unnecessary.

“They don’t have to turn around and lower it a whole point,” he said.

When asked if his union was more bullish on the markets than the city’s actuary, Mr. Nespoli said, “All we can do is what the actuary is doing. He’s guessing. We’re guessing.”

Vermont has lowered its rate by 2 percentage points, but for only one year. The state recently adopted an unusual new approach calling for a sharp initial reduction in its investment assumptions, followed by gradual yearly increases. Vermont has also required public workers to pay more into the pension system.

Union leaders see hidden agendas behind the rising calls for lower pension assumptions. When Rhode Island’s state treasurer, Gina M. Raimondo, persuaded her state’s pension board to lower its rate to 7.5 percent last year, from 8.25 percent, the president of a firemen’s union accused her of “cooking the books.”

Lowering the rate to 7.5 percent meant Rhode Island’s taxpayers would have to contribute an additional $300 million to the fund in the first year, and more after that. Lawmakers were convinced that the state could not afford that, and instead reduced public pension benefits, including the yearly cost-of-living adjustments that retirees now receive. State officials expect the unions to sue over the benefits cuts.

When the mayor of San Jose, Calif., Chuck Reed, warned that the city’s reliance on 7.5 percent returns was too risky, three public employees’ unions filed a complaint against him and the city with the Securities and Exchange Commission. They told the regulators that San Jose had not included such warnings in its bond prospectus, and asked the regulators to look into whether the omission amounted to securities fraud. A spokesman for the mayor said the complaint was without merit. In Sacramento this year, Alan Milligan, the actuary for the California Public Employees’ Retirement System, or Calpers, recommended that the trustees lower their assumption to 7.25 percent from 7.75 percent. Last year, the trustees rejected Mr. Milligan’s previous proposal, to lower the rate to 7.5 percent.

This time, one trustee, Dan Dunmoyer, asked the actuary if he had calculated the probability that the pension fund could even hit those targets.

Yes, Mr. Milligan said: There was a 50-50 chance of getting 7.5 percent returns, on average, over the next two decades. The odds of hitting a 7.25 percent target were a little better, he added, 54 to 46.

Mr. Dunmoyer, who represents the insurance industry on the board, sounded shocked. “To me, as a fiduciary, you want to have more than a 50 percent chance of success.”

If Calpers kept setting high targets and missing them, “the impact on the counties won’t be bigger numbers,” he said. “It will be bankruptcy.”

In the end, a majority decided it was worth the risk, and voted against Mr. Dunmoyer, lowering the rate to 7.5 percent.


MAINE HIGH COURT FINDS GMAC CONDUCT DISTURBING AND REPREHENSIBLE BUT REFUSES TO HOLD GMAC IN CONTEMPT

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EDITOR’S COMMENT: While finding that the affidavits were false and agreeing the conduct was disturbing and reprehensible the Court held that GMAC should not be held in contempt. What? The dissenting opinion is correct. Neither the trial Judge nor the Supreme Court should have even considered the question without a hearing in which evidence was submitted.

Nevertheless the Court’s opinion is further ratification of what we have been saying on these pages. The fraudulent foreclosures (26,000 of them in Essex County, Mass alone) are a cancer growing on our society. The corruption of title registries is already taking its toll, but we have only seen the tip of the iceberg.

The interesting thing about this case is off the record. GMAC dropped the foreclosure and the homeowner is still in her home. It goes without saying that her title is corrupted by the fraudulent foreclosure. Perhaps she has a cause of action for slander of title, quiet title and other claims? The point is that by paying attention to details it was obvious that the papers being used to foreclose were false and GMAC couldn’t fix it because they were simply not true.

Third party reports and analyses will help you get your point across. That is why I created the COMBO TITLE and SECURITIZATION REPORT. (see above for link)

Maine high court declines to hold GMAC in contempt over ‘robo-signing’ of foreclosure records

  • THE ASSOCIATED PRESS

PORTLAND, Maine — Maine’s highest court has declined to find GMAC Mortgage in contempt for signing off on home foreclosures without first verifying documents — a practice referred to as “robo-signing.”

In a 5-1 decision, the Supreme Judicial Court upheld a decision by a lower court last year. A district judge stopped short in that ruling of finding GMAC in contempt, though he did find that the company submitted a foreclosure affidavit on behalf of Fannie Mae in bad faith.

The case involved a Maine woman who fell behind on mortgage payments after losing her job.

During the lawsuit, her attorneys deposed a GMAC employee in Florida who testified that he signed 8,000 documents a month without personally verifying the mortgage information.

The deposition helped to spur investigations by all 50 states into allegations that mortgage companies mishandled documents and broke laws in thousands of foreclosures.

Writing for the majority, Justice Ellen Gorman didn’t mince words in her criticism, but she noted that there’s no precedent for a contempt finding under the circumstances.

“The affidavit in this case is a disturbing example of a reprehensible practice. That such fraudulent evidentiary filings are being submitted to courts is both violative of the rules of court and ethically indefensible,” she wrote in Tuesday’s ruling. The conduct, she added, “displays a serious and alarming lack of respect for the nation’s judiciaries.”

One of the justices, Jon Levy, issued a dissenting opinion, writing that the district judge should have conducted a full hearing into the contempt issue before rendering his decision.

Thomas Cox, who represented the woman who nearly lost her home, said it was satisfying to shed light on GMAC’s practices but disappointing that the court didn’t require a fuller inquiry and whether those practices were egregious enough to warrant a contempt finding.

“The issue has been exposed and it’s out in the open but to have the supreme court not act more strongly is a disappointment,” Cox said Wednesday.

As for the plaintiff, GMAC ultimately dropped its foreclosure action against Nicolle Bradbury, who remains in her Denmark, Maine, home, Cox said.

GMAC’s lawyer, John J. Aromando, had no immediate comment Wednesday. Gina Proia, spokeswoman for GMAC’s parent company, Ally Financial in New York, said the company is pleased with the court ruling but had no further comment. The company remains the target of a separate class-action lawsuit brought on behalf of Maine homeowners.

 

ATTACK ON WORKERS WILL KEEP HOUSING IN A DOWNWARD SPIRAL

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EDITORIAL COMMENT: Maybe it works politically to get elected, but this attack on workers looks like scape-goating to me, and a pretty effective attempt to distract from reality with the myth that workers, homeowners and pensioners caused the historic financial mess that was in fact created, promoted and allowed solely by Wall Street with the blessing of our government.

These events where long-standing historical pictures of workers doing their work are torn down, destroyed and put away, is like the editorial says, shades of measures you see in third world countries with ruthless dictatorships changing “reality” at will. For it isn’t a matter of the extent to which collective bargaining rights should exist or be regulated, it is something entirely different.

This attack to score political points is shooting all of us in the foot. All of us are walking down a dangerous path of economic chaos and destruction — whether we are rich or poor, and whether we wish to acknowledge it or not. The facts are there for anyone to do their own analysis. World events have accumulated to the point where it is absolutely certain that nobody can be certain about how anything is going to turn out. We can only hope or fantasize.

Political expediency always trumps right action. So instead of coming together and finding ways where we have each other’s backs, we are continuing the decades long trend of pulling apart and finger pointing. Here is a fact that is incontrovertible: if workers in the U.S. were fully employed with reasonable compensation and coverage of all the physical needs for themselves and their families, the entire economy would be booming. Here is another one: putting working class people lower on the social scale into near slaves will cause them to do other things — people don’t like to be treated that way, especially Americans.

These attacks are simply impractical regardless of how much you believe workers deserve to be treated this way. without them employed, earning money and leveling out income inequality, there will be nobody to buy anything, make anything or do anything in America except trade paper on Wall Street. “Anything” includes especially homes whose bottom is still not in sight simply because our politicians lack the “vision” to see what is right in front of them.

At this point I don’t care who goes to jail or even who deserves to be blamed. I want out of this mess. The enormous collateral benefits conferred on Wall Street did nothing to increase liquidity or allow an economic recovery that ordinary people can see on their dinner table, if they have one, in their home, if they have one. The table is tilted on an extreme angle away from the ordinary citizen and toward about 400 people who basically have or control most of the wealth in this country. When you are talking 400 versus 300,000,000 citizens, things have gone too far.

Continuation of this scape-goating, and avoiding the realities of our ailing economy will only prolong and deepen the pain. We’ve been attacked by a common enemy — Wall Street. I thought Americans pulled together and responded to such attacks in unity and always won against the aggressor. This time, maybe not.

He Dreamed He Saw Kim Jong-il

As Republican governors vie to become the most anti-union executive in the land, Gov. Paul LePage of Maine has stooped to behavior worthy of the pharaohs’ chiseling historic truth from Egyptian monuments. Mr. LePage has ordered that a 36-foot-wide mural depicting workers’ history in Maine be removed from the lobby of the state’s Labor Department.

The reason? His office cited some complaints from offended business leaders and an anonymous fax declaring that the mural smacked of official brainwashing by North Korea’s dictator.

This is what’s passing for democratic governance in a state with a noble workers’ history. The mural honors such groups as the state’s shoemakers and the women riveters who kept the ironworks going in World War II. Key workplace moments depicted include a paper mill strike against harsh working conditions and a tribute to pioneer lumberjacks.

All too “one-sided,” decreed the governor, who also ordered that the agency’s seven meeting rooms no longer be named after figures from workers’ history. The nation’s first woman cabinet member — Labor Secretary Frances Perkins — is buried in her beloved Maine, but her room name won’t survive. Nor will state residents be reminded of William Looney, a 19th-century Republican legislator who fought for state child labor reforms.

Mr. LePage’s acting labor commissioner suggests replacing the mural with neutral paint and naming the conference rooms after Maine mountains.

To be fair, Mr. LePage does retain a sense of workplace opportunity. After his election last November, he named Lauren, his 22-year-old, fresh-from-college daughter, to what was termed an entry-level job as assistant to the governor’s chief of staff.

At $41,000 a year, the post offers $10,000 more than the pay for workers who pass the teacher and police tests. That’s on top of Ms. LePage’s free room and board at the governor’s mansion.

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