Menendez and Booker Take on Zombie Foreclosures

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This is for general information only. Get a lawyer.



It seems ridiculous. Why would a lender reject a workout, reject modification, reject a short sale and insist on a foreclosure — and then walk away from the property? Why has this not been a center of attention as hundreds of communities, cities and states have been decimated by this phenomenon?

The answer turns on the themes of this blog and several other media outlets but nobody in a position to change the conversation wants to face up to the single true statement about this: somehow the banks are making more money going to foreclosure (and walking away from the property) than doing a workout to save the loan as a valuable asset. The foreclosure sale is worth more to them than the property.

The banks are not stupid. They know that destroying neighborhoods and cities results in a precipitous drop in home values (going to zero in many places). They know that this results in a disastrous deterioration of the value of the security for the alleged loans.

So we are faced with a second undeniable truth: the banks are not losing money on foreclosures, they are making money.

So when Senators like Menendez and Booker from New Jersey write a letter to federal regulators asking them to look into the wild phenomenon of Zombie foreclosures, we can only hope that such Senators and the federal regulators will ask themselves some very simple questions. That is the only way this crisis will be averted and it is a vehicle for bringing down the largest banks who are performing illegal acts every day in foreclosures across the country.

If we go beyond the basic questions, then we start to drill down to the real facts — not the ones that practically everyone assumes to be true.

How could the banks not be losing money on Zombie foreclosures? The loss of the loan and the loss of the property securing the loan obviously reduces the value of the alleged loan to zero. In fact, it creates a liability to the bank for walking away after they kicked out the people who own the house. The City can go after them for taxes and the prospect of liability for attractive nuisance and other torts requires them to pay for insurance or brace for impact when the lawsuit happens. Any normal banker will tell you that this is not an acceptable scenario nor is it industry practice amongst banks who make loans.

Hence the conclusion that the parties who invoking the foreclosure procedures did not make loans — nor did anyone else in their alleged chain. The part of the deal where the lender hands over the cash to the closing agent never happened in those loans. If it had happened then the loan and the property would have value to these banks and other entities. Since it was “other people’s money” involved in that “loan” transaction, the banks simply don’t care what happens to the loan or the property except that THEY want the foreclosures to the detriment of the owners of the property, the detriment to the Pension funds whose money was somehow used to make the alleged loans, the detriment of our communities, and the detriment of government which ramped up to handle all the new housing only to find that their tax base vanished.

So if the banks are not losing money on the alleged default of the borrower, it opens the door to understanding that practically anything else they do would result in profits to the banks who are illegally and fraudulently controlling the foreclosure process. When they bring a foreclosure action they use self proclaimed authority that is presumed to be true even though truth is not involved. They have credibility even though they lack the truth.

It’s a perfect world to Wall Street. They use nonexistent entities as claimants in the foreclosure process thus insulating themselves from liability for wrongful foreclosure when those few cases actually get decided on the merits. The money from the pension funds goes into the pocket of the Wall Street banks instead of those empty Trusts.

The pension funds gets a certificate of ownership and debt from the empty trust and they are contractually bound not to ask questions about any specific loan. Ever wonder why that provision is in every Pooling and Service Agreement. So while intermediary parties have a party with pension money, the pension money was used to fund loans that were underwritten for the purpose of loss instead of the usual profit motive. And by knowing that the loans would fail the banks were able to get even more money by betting on loans that they knew would fail. And then they got even more money by betting on the loss of value of the certificates. And they got even more money when they engaged in the Re-REMIC practice of closing out the old trust and starting a new one. And to add insult to injury, the pension fund keeps getting paid by the wrongdoers from a “reserve fund” consisting entirely of pension money. Pouring salt on that wound is the bank’s hubris in claiming the right to recover “servicer advances” made from the reserve pool — only upon foreclosure sale. And the cherry on top is that the “servicers” who are not servicers sell the right to recover servicer advances in additional securitization schemes.

Homeowners take it personally when the servicer tells them  they were rejected by the investor for a modification (false claim). They think it must be personal because no other explanation makes sense to them. But that is because they don’t have the information on “securitization fail.”

The BIG LIE is that lenders are foreclosing. They are not. In fact, there are no lenders in the legal and conventional use of the word. There are only victims of fraud.

Modification Minefields as Foreclosures Resume Upward Volume

For further information please call 954-495-9867 or 520-405-1688

Listen to Neil Garfield Show on Thursday February 26, 2015 at 6pm EDT., and each Thursday



New Jersey now has an upsurge of Foreclosure activity. It is on track to become first in the nation in the number of foreclosures. What is clear is that the level of foreclosure activity is being carefully managed to avoid attention in the media. Right now, foreclosure articles and the infamous acts of the banks in pursuing foreclosures is staying off Page 1 and usually not  anywhere in newspapers and other media outlets online and and in distributed media. The pattern is obvious. After one area becomes saturated with foreclosures, the banks switch off the flow and then move to another geographical area. This effectively manages the news. And it keeps foreclosures from becoming a hot political issue despite the fact that millions of Americans are being displaced by illegal foreclosures based upon invalid mortgage documents and the complete absence of any real creditor in the mix.

As foreclosures rise, the number of attempts at modification also rise. This is a game used by “servicers” to assure what appears to be an inescapable default because their marching orders are to get the foreclosure sales, not to resolve the issue. The investment banks need foreclosures; they don’t need the money and they don’t need the house —- as the hundreds of thousands of zombie foreclosures attest where the bank forecloses and abandons property where the borrower could and would have continued paying.

The problem with modifications is the same as the problem with foreclosures. It constitutes another layer of mortgage fraud perpetrated by the Wall Street banks, who are now facing increasingly successful challenges to their attempts to complete the cycle of fraud with a foreclosure.

The “servicer” whom nearly everyone takes for granted as having some authority to move forward is in actuality just as much a stranger to the transaction as the alleged Trust or “Holder”. The so-called servicer alleged authority depends upon powers conferred on it by the Pooling and Servicing Agreement of an unfunded Trust that never completed its mission to originate or acquire loans. If the REMIC trust doesn’t own the loans, the servicer claiming authority from the PSA is claiming vapor. If the Trust doesn’t own the loan then the PSA is irrelevant and the powers conferred in the PSA are pure vapor.

This brings us full circle to where we were in 2007-2008 when it was the banks themselves that claimed that there were no trusts and that there was no securitization. They were, as it turns out, telling the truth. The Trusts were drafted but never funded, never used as conduits and never engaged in ANY transaction in which the Trust had funded the origination or acquisition of loans. So anyone claiming authority from the trust was claiming authority from a fictional character — like Donald Duck.

Complicating matters further is the issue of who owns the loan when there is a claim by Freddie or Fannie. Both of them say they “have” the mortgage online when they neither “have it” nor “own it.” Fannie and Freddie were one of two things in this mess: (1) guarantors, which means they have no interest until after a creditor liquidates the property and claims an actual money loss and Fannie and Freddie actually pays off the loss or (2) Master trustee (and probably guarantor as well) for a REMIC Trust that probably has no greater value than the unfunded REMIC Trusts that are unused conduits.

Further complicating the issue with the former Government Sponsored Entities (Fannie and Freddie) is the fact that many banks have been forced to buy back or pay damages for violating underwriting standards and other types of fraud.

So how do you get or sign a modification with a servicer that has no authority and represents a Trust that has no interest in the loan? The answer is that there is no legal way to do it — BUT there is a way that would allow a legal fiction to be created if a Court issued an order approving the modification and declaring the rights of the parties. The order would say that XYZ is the servicer and ABC is the creditor or owner of the loan and that the homeowner is the borrower and that the modification agreement is approved. If proper notice (including publication) is given it would have the same effect as a foreclosure and would eliminate all questions of title. Without that, you will have continuing title problems. You should also request that the “Servicer” or “Trustee” arrange for a “Guarantee of Title” from a title company.

For the tricks and craziness of what is happening in modifications and the issues presented in New Jersey and other states click the link above.

“FREE HOUSE” in NJ Bankruptcy Court

For further information and assistance please call 954-495-9867 and 520-405-1688. We will be covering this decision on the Neil Garfield show tonight.


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also see Senator Elizabeth Warren Ramping Up Attack: When Will “Principal reduction” become a reality?

This case is notable for several reasons:

  1. The Judge expresses outright that it is general judicial bias that homeowner should not prevail in foreclosure litigation.
  2. Nevertheless this Judge trashes the the claim of SPS (Specialized Loan Services) and BONY (Bank of New York) Mellon leaving the homeowner with what the Judge calls a free house.
  3. The Judge concludes that the mortgage was unenforceable and that the note was unenforceable after a careful examination of the statute of limitations under New Jersey law.
  4. The Judge concludes that the mortgage is void, not just unenforceable, thus clearing title.

While we can be pleased with the result, some of the reasoning might not withstand an appeal, if the foreclosers take the risk of filing one.

Here are some interesting excerpts:

“No one gets a free house.” This Court and others have uttered that admonition since the early days of the mortgage crisis, where homeowners have sought relief under a myriad of state and federal consumer protection statutes and the Bankruptcy Code. Yet, with a proper measure of disquiet and chagrin, the Court now must retreat from this position, as Gordon A. Washington (“the Debtor”) has presented a convincing argument for entitlement to such relief. So, with figurative hand holding the nose, the Court, for the reasons set forth below, will grant Debtor’s motion for summary judgment.
The Defendants accelerated the maturity date of the loan to the June 1, 2007 default date, as acknowledged in the Assignment (dkt. 7, Exhibit L).[10] Moreover, neither the Debtor nor the Defendants have taken any measures under the note or mortgage, or under the Fair Foreclosure Act, to de-accelerate the debt, and the Defendants have further failed to file a foreclosure complaint within 6 years of the accelerated maturity date as required by N.J.S.A. § 2A:50-56.1(a). Accordingly, the Defendants are now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure.

11 U.S.C. § 502(b)(1) (emphasis added). 11 U.S.C. § 506 controls the allowance of secured claims and provides that, if the claim underlying the lien is disallowed, then the lien is void:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless [conditions not relevant here exist].
As explained above, by application of N.J.S.A. § 2A:50-56.1(a) and (c), the Defendants are time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Defendants’ proof of claim 7 must be disallowed under 11 U.S.C. § 502(b)(1) as unenforceable against the Debtor or against Debtor’s property under applicable state law. Having determined that Defendants do not have an allowed secured claim, the underlying lien is deemed void pursuant to 11 U.S.C. §§ 506(a)(1) and (d).[11]
In light of Defendants’ acceleration of the maturity date of the underlying debt as of June 1, 2007, and because neither Debtor nor Defendants took any action under either the mortgage instruments, or the Fair Foreclosure Act, to de-accelerate the maturity date, Defendants’ right to file a foreclosure complaint expired 6 years after the June 1, 2007 acceleration date under N.J.S.A. § 2A:50-56.1(a). Given that Defendants’ putative secured claim is unenforceable under 11 U.S.C. § 502(b)(1), by applicable New Jersey statute, their mortgage lien is void under 11 U.S.C. § 506(d), and the Debtor retains the property, free of any claim of the Defendants. Debtor is to submit a form of judgment. The Court will proceed to gargle in an effort to remove the lingering bad taste.
11] In as much as the Court finds that the Defendants are time-barred from enforcing the note or the mortgage, it is not necessary to address Debtor’s arguments that Defendants lack standing to enforce the note and mortgage based on alleged defects in the Assignment or the alleged impact of a Settlement Agreement.

New Jersey Clears Docket: Dismisses 80,000+ cases

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One might ask why a lender would delay the prosecution of their claim. The answer is that they wouldn’t delay if they thought they had a solid claim. I know. I have represented banks on loans, foreclosures, associations in foreclosures etc. And I have proposed that if the Courts were to order the alleged ‘holders” to show the actual money trail so we would all know what transactions actually took place, their dockets would be clear, because most of the transactions described on assignments and indorsements never took place.

We have seen cases dating back to the 1990’s that have not been prosecuted and judges in all states are dismissing for failure to prosecute, which in turn brings up the statute of limitations, which I warn you is applied very differently from state to state. But in many cases they cannot refile because the statute of limitations has run and they are out of luck. So why would a bank (who is representing to the court that it the loser in a transaction with the borrower ) allow so many cases to be dismissed? Is there reason for this madness?

I believe there is. But the reason probably varies from case to case. Suffice it to say that we will see what plays out in New Jersey. My guess is that many of the documents used by foreclosers represent transactions that were fictitious or duplications of other transactions and now they are picking which story to go with in court but he courts are getting annoyed with the actual complexity of what seems to be a “simple” claim. The borrower didn’t pay, isn’t that enough? Actually no.

The essential problem that is now bubbling to the surface after years of suppression is this: the lender is receiving payments based upon a different deal and computation than the deal and computation the borrower is required to pay. The lender’s right to repayment comes from the bond indenture on the mortgage bond issued by a REMIC trust that never had any money, assets, income or expenses.

That indenture doesn’t say the investor will be paid according to the homeowner notes on loans originated or acquired by the trust or with the money from the trust beneficiaries. It provides for a specific yield of interest and principal regardless of what the notes say and even regardless (many times) of whether the borrower pays or not. Those terms are different than the terms signed by the homeowner. And the note and mortgage, were mostly executed in favor of parties who did not make any loan, never received the delivery of the note and never had any interest in the transaction. So what good are assignments from parties with zero ownership interest to convey?

We have reached a turning point where courts and others are saying to the banks, “if your claims are real, why didn’t you prosecute them for years?”

New Jersey Now Moves Into the Lead in the Race to Didsaster

New Jersey moves into the lead. We have been comparing this to a ball game to make the point that we are only in the 5th inning of a very long game. We have many years to go before this spreading contagion of fake foreclosures is over. It might better be analogized to a horse race where one state leads in Foreclosures and then another takes the lead with the “leader” is a mess of cracking bones and split hoofs while the states “behind” it are in even worse shape.
Economic recovery cannot be real until we cure the housing crisis. Housing drives our economy. The real solution to housing is to simply apply the law and concede that in most, if not all states the mortgage lien was never valid and neither was the note. For that to happen, the banks must be thrown from government power. Yes, there will be some collateral damage — but nothing close to the continuing damage caused by this race to the edge.
Applying basic legal and long-standing principles of equity and law, the documents upon which the foreclosers are relying are invalid, void, and not even competent evidence of the monetary transaction that took place with the borrower, whose obligation is largely undocumented and certainly not secured nor securitized. Improper closing documents can not be laid at the doorsteps or the courts. This was the fault of the banks who transformed their role as intermediaries into being the principal on both sides of the transaction through identity theft and deceit.
The solution lies not in the forgiveness of debt but the elimination of the debt as being secured by perfected mortgage liens. This is all too complex for John Q Public but not for the government that is still getting it’s guidance from Wall Street. The intentional failure of revealing the real lender and the real terms of repayment enabled the banks to intervene, grab the gains and pitch the losses back at the real lenders and borrowers and eventually the government. If we elect a government where fewer people are beholden to the banks, we will have the opportunity to solve this crisis over much fewer years than otherwise.
Homeowners would be left in their homes not because the debt was forgiven, but because the noose around their neck had been given some slack. The obligation would still be owed as a demand loan giving the investors at least some clout and the homeowners would be more than happy to grant a real mortgage lien on a real note for a real obligation based upon fair market values and reasonable rates of return.
Some would be discharged in bankruptcy but the homestead exemption only goes so far in bankruptcy so the homeowner would still be left with an existing unsecured debt.
Not everyone can declare bankruptcy just because their house is in trouble. Most obligations could and should be resolved with the removal of the banks as intermediaries and a platform or marketplace where investor-lenders and homeowners can meet for the first time since the money hit the closing table.
If the false securitization structure is made real by pooling loans into those structures and doing it in a fair and equitable manner, the investors would minimize their losses, while retaining litigation rights against the banks for fraud and breach of contract. Who knows? Maybe the investors could be made whole!
The benefit to the investors would be the best possible recovery of money for the pension funds that we often forget ARE the investors.
The benefit to the homeowners would be that they would stay in their homes with a large income tax bill that could be laid over years in monthly installments but amounting to far less than the payments on the old fake mortgage, note and obligation.
The government and the economy would be infused with operating capital and wealth respectively, as the middle class suddenly reappears. The banks are removed from power simply by forcing them to recognize the losses on their books that are now reported as assets. Their collapse would mean the end of the banking oligopoly.

Thus I say again, dig deeper and you will often find your representatives I state and federal government in bed with the bankers blocking common sense solutions. Vote them out and start a new day!

New Jersey Housing Suffers as Defaults Exceed Nevada: Mortgages


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM




YES — at least that’s my opinion and the the opinion of a growing body of legal experts. Any property lawyer will tell you that you can fix any chain of title using the proper methods — getting a signature to correct something that was wrong, getting a court order or affidavit from a competent witness, etc. The idea is to make it as easy as possible to correct improperly written or improperly executed documents to reflect the real deal that constituted the transaction.

So why would the mega banks start their own document fabrication and forgery operations when there is a perfectly legal way to correct “paperwork” problems? If there was a real transaction in which money changed hands, it is easy, especially in today;s digital world, to establish the trail of money, put the transaction in context and then either solicit the appropriate parties to sign corrective instruments or force them to do so by court order.

And sure enough there was a real transaction in which money changed hands. No borrower denies it. So why the fabricated and forged documents? ANSWER: BECAUSE NO THE INVESTOR-LENDER WHO ADVANCED THE FUNDS NOR THE BORROWER WILL SIGN ANY CORRECTIVE INSTRUMENTS. WHY YOU ASK? BECAUSE THE CORRECTIVE INSTRUMENTS DO NOT DESCRIBE THE TRANSACTION BETWEEN THE HOMEOWNER AND THE INVESTOR. In order to force the homeowner and the investor to take the deal and lose money on it, the securitizer pretenders would need to show that the transaction they are seeking to “correct” actually existed. But it didn’t.

The investors and borrowers are not suing because the deal didn’t turn out the way  they wanted. They are suing because the real deal was not disclosed to them and they never would have signed papers on either end of the deal.

Start with the “mortgage originator” who in the world of the illusory infrastructure of securitization is distinguished from lender, beneficiary or mortgagee. Here is an entity that has no money, lends no money, and in substance never even handled the money for the funding of the transaction except possibly through their wire transfer department if they were an actual bank. The so-called trusts, were not formed under New York law and the Trustees took great pains NOT to include these trusts within their “Trust Department” that they use ordinarily for the administration of trusts.

Move on to the inflation of the appraisal, the borrower’s income — often without knowledge or consent of the borrower, and you have a deal that nobody would do if they knew what was going on — which is why the securitizer pretenders CAN’T go to the investors and CAN’T go the homeowner and ask or demand that they sign corrective instruments.

AND THAT LEADS TO DEFECTIVE TITLE WHICH WILL HAUNT US FOR DECADES. Wall Street’s efforts to buy or start title companies is only another part of the cover-up. The inescapable conclusion when you look at the money trail and compare it to the documents, is that they don’t match. The unavoidable conclusion is that they were not intended to match — meaning there was fraud in the inducement and fraud in the execution of documents.

LOGIC and common sense bring us to this: the money trail is NOT reflected by any existing document. It never was and it can’t be now. The document trail, pretends to follow an illusory transaction trail in which no money changed hands — hence it is a bunch of documents in support of non-existent monetary transactions. The mega banks can’t correct it without admitting they lied to the investors and lied to the borrowers — because out of necessity, any corrective documents would change the deal completely. So ordinary forms of correcting legal instruments and recorded instruments are simply not available. They have no choice but to keep lying and fabricating and forging.

It won’t be long now before Judges and lawyers and homeowners realize the truth about their so-called mortgage loans. They are a fiction. The money trail leads to a single transaction between the investor-lender and the homeowner without any documents. The government’s attempt to use servicers to modify the mortgages failed because they were asking the fox to negotiate over who would get the eggs — and the chickens for that matter. WRONG WAY AND WRONG PARTIES.

It may therefore be fairly stated that ALL of the more than 80 million “mortgage” transactions that were documented at “closings” were fatally defective, unsecured and involved parties who were not involved in the actual transaction. $13 trillion in transactions went south because the investors were tricked by deception and because the homeowners were tricked by deception. Following the money trial will reveal that much of the money advanced never went to fund mortgages but was shunted off-shore as fees in “off-balance sheet” transactions amounting a yield spread premium that could only be described as fraudulent, inasmuch as the word “excessive” is inadequate to describe it.


It may therefore fairly accurately be described as an economy that appears to be flipped but actually is not. Since none of the actual transactions were liens or encumbrances upon the real property, the original owners still own them. If the investors want to “settle” their claims with the investment bankers, that is fine. But if they want to recover more of the money that was stolen from them, they should probably work out a deal wherein homeowners are allowed to keep or re-take their homes under normal and reasonable terms. If investors want to maximize their recovery and minimize their damages, they need to exercise their right to fire the servicers, trustees, and others who are feeding off of their money.


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary


EDITOR’S NOTE: With heads stuck in the sand, avoiding the “third rail” of acknowledgment that tens of trillions of dollars of mortgage transactions are fatally defective, which would save or partially save the budgets of most states, counties and cities, New Jersey took it on the chin with a downgrade in the announced quality of their bonds. This from the rating agencies that told the states,, counties, cities and investors that CDOs were AAA rated (virtually risk free).

Meanwhile the spin machine is running full time reminding readers and listeners that bankruptcy is not an option under current law for government entities. Of course they avoid the obvious — the legal remedy of bankruptcy has nothing to do with the factual reality of BEING bankrupt.

As the stimulus money runs out, the downgrading will reach a roar, and while the SEC searches around for alternatives to the current rating agencies, we will still be marching to the tune of S&P, Moody’s, and Fitch. Defaults seem inevitable but anyone who says so is verbally beaten to death. We like to wait for our disasters to strike before we do anything about them.

The facts are simple: government is running out of money and prospects. People don’t have enough money as it is, so raising taxes is not going to produce more revenue. We’re not training our workers to function in the modern economy, so the prospect of greater commerce or revenues to tax are also pretty dim. Past commitments for pensions and other forms of safety nets are getting expensive because the governments are not producing the tax revenue that was projected when those commitments were made.

The ONE place where the money can be located, the one source of tax revenue that is owed but both unpaid and unreported (Wall Street) is off limits. The simple admission of the scheme — that the mortgages, notes, loans, obligations and receivables generated by the holographic image of a financial structure that was never intended to be real — would produce substantial revenue, and allow for substantial recovery of losses taken by governments when they too bought mortgage backed securities that did not exist in form or substance.

It isn’t a magic bullet. But it would make the crisis aspect of our situation go away and return wealth to where it was stolen from — the middle class and poor. It isn’t the whole solution. But reality has a way of coming around to bite you. China is now positioning itself to have its own currency creep into the world markets as the world’s reserve currency. I don’t know if they will be successful (the idea that China is infallible has been bandied about without merit), but I DO know that central bankers, and commercial bankers around the world do not trust Wall Street, do not trust the the American government to do anything except protect Wall Street and do not trust the U.S. dollar.

If we lose our position in the world currency market, people should take notice. we will have a shellacking that will dwarf the 2010 elections. Financially, we are on the precipice of a looming crisis that far exceeds the scope of the Great Recession and thus threatens to compete with the Great Depression. While the White House and Congress continue to take their regulatory advice from the people who created this mess, the Court systems are getting the hang of it, and the remedy is coming faster and faster for most people, if they can hang on. The fraud might be addressed in large scope, but through the Court system, it may come too late to help us retain our market position in the world.

Costs Soaring, New Jersey Bond Rating Is Lowered


NY Times

A top credit-rating firm lowered New Jersey’s bond rating on Wednesday, citing ballooning pension and other costs, and Gov. Chris Christie and Democrats in the Legislature wasted no time in blaming each other.

The firm, Standard & Poor’s, downgraded New Jersey’s general-obligation rating to AA-, from AA, and dropped the ratings on some other state debts even lower. The changes will increase the interest rates that the state must pay when it borrows money.

Standard & Poor’s has given lower ratings to just two states, California and Illinois; four others stand with New Jersey at AA-, which is the fourth-highest rating. The firm rates New York and Connecticut a notch higher, at AA.

A Standard & Poor’s credit analyst, Jeffrey Panger, cited New Jersey’s underfinanced pension and employee benefit funds, and his firm’s shift to putting more emphasis on such obligations.

The state reported last year that its pension system had $54 billion less than it needed to meet future obligations, one of the biggest such deficits in the country, and experts have said the state could run out of money within a decade. The fund for retiree health care is even further behind.

Year after year, lawmakers have failed to contribute what actuarial rules said was required to make the systems whole, increasing the size of the payment that the rules required the following year. In 2010, Mr. Christie’s first year as governor, the state was supposed to put $3 billion into the pension system, but in grappling with a large budget deficit, it contributed nothing.

The governor, a Republican, has said the state needs to curb government employee pensions and benefits to remain solvent, and at a public forum in Union City on Wednesday, he said the Democrats, who control the Legislature, had compared him to Chicken Little. “The sky started to fall in today,” he said, referring to the Standard & Poor’s action.

Such talk brought the governor criticism last month, when he mused publicly about the prospect, however distant, of a state bankruptcy — at a time when the state was marketing a new bond issue. Some bankers said he had spooked the market and possibly raised the state’s cost of borrowing by saying what chief executives usually refused to acknowledge.

Democrats said Wednesday that the governor was responsible for the downgrade, for failing to put money into pensions last year. They noted that last year they agreed to pension and benefit reductions for newly hired employees.

“It’s time the governor took responsibility for his own actions and stopped trying to blame others,” said Assemblyman Louis D. Greenwald, chairman of the budget committee.









This appeal presents significant issues regarding the evidence required (E.S.) to establish the standing of an alleged assignee of a mortgage and negotiable note to maintain a foreclosure action.

Wells Fargo claims that it acquired the status of a holder in due course as a result of this assignment and therefore is not subject to any of the defenses defendant may have been able to assert against Argent.

Wells Fargo asserted that Argent had assigned the mortgage and note to Wells Fargo but that the assignment had not yet been recorded.

Wells Fargo subsequently filed a motion for summary judgment. This motion was supported by a certification of Josh Baxley, who identified himself as “Supervisor of Fidelity National as an attorney in fact for HomEq Servicing Corporation as attorney in fact for [Wells Fargo].”

Baxley’s certification stated: “I have knowledge of the amount due Plaintiff for principal, interest and/or other charges pursuant to the mortgage due upon the mortgage made by Sandra A. Ford dated March 6, 2005, given to Argent Mortgage Company, LLC, to secure the sum of $403,750.00.” Baxley did not indicate the source of this purported knowledge. Baxley’s certification also alleged that Wells Fargo is “the holder and owner of the said Note/Bond and Mortgage”

The documents defendant alleged were forgeries included a purported handwritten note by her stating that she was employed by Bergen Medical Center at a monthly salary of $9500, even though her actual income was only approximately $10,000 per year.
Defendant also alleged that “[t]he estimate for closing fees that was given to me prior to closing was around $13,000.00 and the Good Faith Estimate of Closing Costs was for $13,673.90 but on the closing statement they were $36,259.06.”

On appeal, defendant argues that (1) Wells Fargo failed to establish that it is the holder of the negotiable note she gave to Argent and therefore lacks standing to pursue this foreclosure action; (2) even if Wells Fargo is the holder of the note, it failed to establish that it is a holder in due course and therefore, the trial court erred in concluding that Wells Fargo is not subject to the defenses asserted by defendant based on Argent’s alleged predatory and fraudulent acts in connection with execution of the mortgage and note; and (3) even if Wells Fargo is a holder in due course, it still would be subject to certain defenses and statutory claims defendant asserted in her answer and counterclaim.

We conclude that Wells Fargo failed to establish its standing to pursue this foreclosure action. Therefore, the summary judgment in Wells Fargo’s favor must be reversed and the case remanded to the trial court. This conclusion makes it unnecessary to address defendant’s other arguments.

we note that Wells Fargo argues in its answering brief that “[defendant] is estopped to contest Wells Fargo’s standing”; “defendant’s brief exceeds the scope of this appeal,” and “[defendant’s] arguments are counterintuitive.” These arguments are clearly without merit and do not warrant discussion. R. 2:11-3(e)(1)(E).
“As a general proposition, a party seeking to foreclose a mortgage must own or control the underlying debt.” Bank of N.Y. v. Raftogianis, ___ N.J. Super. ___, ___ (Ch. Div. 2010) (slip op. at 3). In the absence of a showing of such ownership or control, the plaintiff lacks standing to proceed with the foreclosure action and the complaint must be dismissed. See id. at ___ (slip op. at 35-36).1

If a debt is evidenced by a negotiable instrument, such as the note executed by defendant, the answer to this question is governed by Article III of the Uniform Commercial Code (UCC), N.J.S.A. 12A:3-101 to -605, in particular N.J.S.A. 12A:3-301. See generally Raftogianis, supra, ___ N.J. Super. at ___ (slip op. at 3-8). N.J.S.A. 12A:3-301 states in pertinent part:

N.J.S.A. 12A:3-201(b) provides in pertinent part that “if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder.”

Therefore, even if Wells Fargo had presented satisfactory evidence that it was in “possession” of the note executed by defendant (which is discussed later in this opinion), Wells Fargo admittedly presented no evidence of “its indorsement by [Argent].” Therefore, Wells Fargo was not a “holder” of the note within the first category of “person entitled to enforce” an instrument under N.J.S.A. 12A:3-301. See Raftogianis, ___ N.J. Super. at ___ (slip op. at 6).

the question is whether Wells Fargo presented adequate evidence that it fell within the second category of “person entitled to enforce” an instrument under N.J.S.A. 12A:3-A-3627-06T1 301; that is, “a nonholder in possession of the instrument who has the rights of a holder.”

Transfer of an instrument occurs “when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.”

the documents that Wells Fargo relied upon in support of its motion for summary judgment to establish its status as a holder were not properly authenticated. A certification will support the grant of summary judgment only if the material facts alleged therein are based, as required by Rule 1:6-6, on “personal knowledge.” See Claypotch v. Heller, Inc., 360 N.J. Super. 472, 489 (App. Div. 2003). Baxley’s certification does not allege that he has personal knowledge that Wells Fargo is the holder and owner of the note. In fact, the certification does not give any indication how Baxley obtained this alleged knowledge. The certification also does not indicate the source of Baxley’s alleged knowledge that the attached mortgage and note are “true copies.”

Furthermore, the purported assignment of the mortgage, which an assignee must produce to maintain a foreclosure action, see N.J.S.A. 46:9-9, was not authenticated in any manner; it was simply attached to a reply brief. The trial court should not have considered this document unless it was authenticated by an affidavit or certification based on personal knowledge. See Celino v. Gen. Accident Ins., 211 N.J. Super. 538, 544 (App. Div. 1986).

On the remand, defendant may conduct appropriate discovery, (e.s.) including taking the deposition of Baxley and the person who purported to assign the mortgage and note to Wells Fargo on behalf of Argent.

for the guidance of the trial court in the event Wells Fargo is able to establish its standing on remand, we note that even though Wells Fargo could become a “holder” of the note under N.J.S.A. 12A:3-201(b) if Argent indorsed the note to Wells Fargo even at this late date, see UCC Comment 3 to A-3627-06T1 N.J.S.A. 12A:3-203, Wells Fargo would not thereby become a “holder in due course” that could avoid whatever defenses defendant would have to a claim by Argent because Wells Fargo is now aware of those defenses. See N.J.S.A. 12A:3-203(c); UCC Comment 4 to N.J.S.A. 12A:3-203; see generally 6 William D. Hawkland & Larry Lawrence, Hawkland and Lawrence UCC Series [Rev.] § 3-203:7 (2010); 6B Anderson on the Uniform Commercial Code, supra, § 3-203:14R. Consequently, if Wells Fargo produces an indorsed copy of the note on the remand, the date of that indorsement would be a critical factual issue in determining whether Wells Fargo is a holder in due course.

NJ Court Considers Statewide Foreclosure Suspension Jan 19

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

EDITOR’S COMMENT: As concern mounts that the entire title infrastructure has been put at risk by shoddy practices in lending, recording, transferring and foreclosing mortgages, a New Jersey Judge has set a hearing to consider suspension of ALL foreclosures by the megabanks pending further investigation. What was once considered “fringe” analysis is now mainstream as courts all the way up to State Supreme Court take a closer look at securitization.

It’s not difficult to imagine how challenging it has been for Judges and their law clerks. Millions of foreclosures already “completed” (and perhaps waiting to be undone), millions more in the pipeline, and still millions more likely. What was once perceived as just another foreclosure has become a battleground for wielding political power. The banks are running out of time and out of arguments as to why the recording statutes and all the basic tenets of property law should be put on hold while they take away the homes of people who committed no act other than putting their signature on a pile of documents that even Alan Greenspan has admitted he didn’t understand in the context of securitization.

I believe the law is very clear and has been clear for hundreds of years. The pretender lenders made up their own rules and didn’t even obey those. Their actions violated existing statutory law, their own securitization structure, and any inference of fair play or equity. Their hubris in not only lying to get an undeserved bailout and now needing another one, while at the same time asserting the obligations are still due from the borrowers goes beyond the bounds of any ethical or moral standards.

What they seek is no less than a change in the law and to have it applied retroactively. This change would put all real property transactions in a state of uncertainty. Instead of molding their methods to the requirements of an orderly society they seek to mold the law to their past conduct. The likelihood of their success is minimal. But they have already had a maximum effect on the lives of tens of millions of Americans whose lives and prospects have been turned upside down.

TRUST — both the use of the word as in “trustee” and the actual confidence that banks would act with caution to protect the deposits of their customers and to provide the needed capital for innovation, business start-ups and business expansion (the engine of jobs in America) —- has been misused and abused by institutions who violated their charter and all applicable laws in a financial coup d’etat whose effects will be rippling through the rest of our lives, the lives of our children and grandchildren.

The net effect of what the pretenders seek to accomplish is to make America an unsafe place to do business. Instead of being the venue that governs international trade and domestic commerce, businesses and people will be required to revert to an extreme version of caveat emptor. So far from being the shining light on the hill, we have become the scoundrel of the world economy. We have everything to lose and nothing to gain from giving the pretenders what they want.

They may not care about the collateral damage they have caused in their financial holocaust. We don’t care about the collateral benefit that results from beating them back into their cages.


JPMorgan, GMAC Urge New Jersey Court Not to Suspend Home Foreclosures

By David McLaughlin – Jan 6, 2011 1:30 PM MT Thu Jan 06 20:30:56 GMT 2011

Bank of America Corp., JPMorgan Chase & Co. and other U.S. banks told a New Jersey court that defects in their processes for seizing homes in the state can be remedied without halting foreclosures.

The banks have taken steps to improve their procedures, making a suspension unnecessary, they said in documents filed yesterday in state court in Trenton, New Jersey, and made public today. The filings came in response to a proposal to freeze foreclosures in the state by six U.S. banks while their procedures are reviewed.

The banks’ practices came under scrutiny after bank employees signed court documents in foreclosure cases without reviewing their accuracy, according to court papers.

“Bank of America fully appreciates the court’s concerns and looks forward to working with the court to address them,” the Charlotte, North Carolina-based company said. “The court should not take the steps outlined in the order because they are unnecessary and will cause a wholesale delay in administering foreclosure cases that is not in the public interest.”

Judge Mary Jacobson scheduled a Jan. 19 hearing to consider suspending uncontested foreclosure cases and foreclosure sales by the banks: Ally Financial Inc., Bank of America, JP Morgan, Wells Fargo & Co., Citigroup Inc. and OneWest Bank, according to a Dec. 20 order.

Jacobson said in the order that the move “is necessary to protect the integrity of the judicial foreclosure process in New Jersey and to assure the public that the process going forward will be reliable.”

The case is In the Matter of Residential Mortgage Foreclosure Pleading and Document Irregularities Superior Court of New Jersey, Chancery Division-General Equity Part, No. F- 59553-10, Mercer County (Trenton)

To contact the reporter on this story: David McLaughlin in New York at

Bank of New York Slammed for Misrepresenting Standing


Judge Todd also stated that additional discovery is to be produced when the foreclosure involves a securitization, lost note claims, or a holder in due course challenge (which may arise in the context of the purported assignment of a toxic loan to a securitized trust prior to the trustee of that trust instituting a foreclosure action, as well as any predatory loan claims against the original lender). Judge Todd recognized that there are dozens of legal issues and inquiries where a foreclosure involves a securitization, and that a borrower has both the right to know who owns the mortgage loan and whether a foreclosing party has the legal right to foreclose.


Posted on July 6, 2010 by Foreclosureblues

Editor’s Note….This case and outcome in favor of the homeowner was a direct result of obtaining an accurate title and securitization report from a qualified expert that contradicted the “alleged” evidence of the foreclosing plaintiff and provided substance that enabled the judge to rule in favor of the homeowner.


Today, July 06, 2010, 30 minutes ago

Jeff Barnes Esq.

July 6, 2010

In an extremely well-reasoned and detailed written opinion, New Jersey trial court Judge William C. Todd has issued a 53-page (yes, fifty-three page) Order dismissing a foreclosure action filed by Bank of New York as Trustee for Home Mortgage Investment Trust 2004-4 Mortgage-Backed Notes Series 2004-4, Docket No. F-7356-09, Atlantic County, New Jersey. The matter was decided on June 29, 2010 and the formal opinion was approved for publication this week after the matter was tried at the end of June, 2010.

The opinion sets forth an incredible analysis of a host of issues involving foreclosure in securitization contexts and highlights why a foreclosing plaintiff must comply with its obligations to prove standing in order to be able to pursue a foreclosure action. While we do not summarize the entire holding here, we do want to point out some of the significant findings.

The court found that there was no meaningful attempt by Bank of New York (hereafter “BONY”) to comply with applicable New Jersey procedural rules requiring a recitation of all assigments in the chain of title. BONY simple alleged that it had acquired possession of the note prior to the litigation being filed. However, the evidence at trial failed to establish this allegation, with the Court noting that there were missing documents incident to the securitization of the loan including the mortgage loan schedule that should have been attached to the mortgage loan purchase agreement. The Court also found that the “MERS assignment was potentially misleading”.

The Court found that there was a failure of proof as to BONY’s legal standing, warranting dismissal of the action and conditioning any refiling on a certification that the plaintiff is in possession of the original note at the time of filing. This is in line with the recent action of the Supreme Court of Florida which, as of February 11, 2010 by Administrative Order, requires all residential mortgage foreclosure complaints to be verified. It is no secret that Florida trial courts have and continue to dismiss foreclosure actions which do not comply with the verification requirement. It is hoped that the courts of New Jersey will adopt Judge Todd’s well-reasoned analysis and dismiss foreclosure complaints which do not comply with the New Jersey procedural rules requiring proof of legal standing to foreclose at inception and time of filing a Complaint for foreclosure.

Judge Todd also stated that additional discovery is to be produced when the foreclosure involves a securitization, lost note claims, or a holder in due course challenge (which may arise in the context of the purported assignment of a toxic loan to a securitized trust prior to the trustee of that trust instituting a foreclosure action, as well as any predatory loan claims against the original lender). Judge Todd recognized that there are dozens of legal issues and inquiries where a foreclosure involves a securitization, and that a borrower has both the right to know who owns the mortgage loan and whether a foreclosing party has the legal right to foreclose.

This incredibly significant decision will hopefully become the law in the state of New Jersey, and it is hoped that the Rules Committee for the New Jersey courts will soon adopt court rules requiring that all residential foreclosure complaints filed in New Jersey be accompanied by the filing of an appropriate Certification, and further requiring that all securitization discovery be produced in all foreclosure cases involving a securitized loan. We applaud and salute Judge Todd for his amazing effort to not only streamline foreclosure litigation in New Jersey, but also insuring that borrowers’ legal rights are protected as well.

Jeff Barnes, Esq.,

States Ignore Obvious Remedy to Fiscal Meltdown

without raising taxes one cent, many states could recover much or all of their deficit and perhaps some states could be looking at a surplus.
The money is sitting on Wall Street waiting to be claimed through existing tax laws, regulatory fees, and even damage claims much like the Tobacco litigation.
Editor’s Note: Bob Herbert of the New York Times correctly depicts the tragedy of the cuts to education, health care for children, and other essential services that we expect from government. And any economist would agree with him that budget cuts are the last thing a state or any government ought to do in a recession. But his story, and that of dozens of other reporters and opinion writers misses the simple fact that this crash, which is depression (not a recession) for many states need not be so painful.

The money is sitting on Wall Street waiting to be claimed through existing tax laws, regulatory fees, and even damage claims much like the Tobacco litigation. As I have repeatedly stated to Arizona’s Republican State Treasurer Dean Martin and Andre Cherney, the Democrat who wants to replace him, along with legislative committees and other government departments of many states, including Florida, they are owed taxes, fees, penalties and damages from the investment bankers who brought us the great financial meltdown.

It’s really simple, but the bank lobby is so strong and the misconceptions are so great, that they just don’t want to get it. In the securitization of mortgages, there were numerous transfers on and off record (mostly off-record).

Each of those transfers resulted in fees or profits made by the parties involved. All of that was ordinary income, taxable transfers, subject to recording and registration fees,and regulation by state agencies with whom the parties never bothered to register.

Each transaction that should have been recorded would produce revenue for counties in their recording offices if they simply enforced it. Each profit or fee earned was related to a transfer of real property interests in the state that were NOT subject to any exemption. The income tax applies. Arizona calculated what the income would be if they enforced tax collection against these fees and came up with $3 billion. I think it is three times that, but even accepting their estimate, that would completely eliminate their deficit and allow them to continue covering the 47,000  children they just cut from health care.

So without raising taxes one cent, many states could recover much or all of their deficit and perhaps some states could be looking at a surplus.
There are many ways to actually collect this money as I have explained to legislators, agency heads and aides. The ONLY reason communities are closing down police and fire departments, closing schools and cutting medical care for children is because the people in power are too beholden to the banking lobby and too fearful of angering the real powers on both the national and state levels — Wall Street.
March 20, 2010
Op-Ed Columnist, NY Times

A Ruinous Meltdown

A story that is not getting nearly enough attention is the ruinous fiscal meltdown occurring in state after state, all across the country.

Taxes are being raised. Draconian cuts in services are being made. Public employees are being fired. The tissue-thin national economic recovery is being undermined. And in many cases, the most vulnerable populations — the sick, the elderly, the young and the poor — are getting badly hurt.

Arizona, struggling with a projected $2.6 billion budget shortfall, took the drastic step of scrapping its Children’s Health Insurance Program. That left nearly 47,000 low-income children with no coverage at all. Gov. Jan Brewer is also calling for an increase in the sales tax. She said, “Arizona is navigating its way through the largest state budget deficit in its long history.”

In New Jersey, the newly elected governor, Chris Christie, has proposed a series of budget cuts that, among other things, would result in public schools receiving $820 million less in state aid than they had received in the prior school year. Some well-off districts would have their direct school aid cut off altogether. Poorer districts that rely almost entirely on state aid would absorb the biggest losses in terms of dollars. They’re bracing for a terrible hit.

For all the happy talk about “no child left behind,” the truth is that in Arizona and New Jersey and dozens of other states trying to cope with the fiscal disaster brought on by the Great Recession, millions of children are being left far behind, and many millions of adults as well.

“We’ve talked in the past about revenue declines in a recession,” said Jon Shure of the Center on Budget and Policy Priorities, “but I think you have to call this one a revenue collapse. In proportional terms, there has never been a drop in state revenues like we’re seeing now since people started to keep track of state revenues. We’re in unchartered territory when it comes to the magnitude of the impact.”

Massachusetts, which has made a series of painful cuts over the past two years, is gearing up for more. Michael Widmer, president of the Massachusetts Taxpayers Foundation, told The Boston Globe: “There’s no end to the bad news here. The state fiscal situation is already so dire that any additional bad news is magnified.”

California has cut billions of dollars from its education system, including its renowned network of public colleges and universities. Many thousands of teachers have been let go. Budget officials travel the state with a glazed look in their eyes, having tried everything they can think of to balance the state budget. And still the deficits persist.

In the first two months of this year, state and local governments across the U.S. cut 45,000 jobs. Additional layoffs are expected as states move ahead with their budgets for fiscal 2011. Increasingly these budgets, instead of helping people, are hurting them, undermining the quality of their lives, depriving them of educational opportunities, preventing them from accessing desperately needed medical care, and so on.

The federal government has tried to help, but much more assistance is needed.

These are especially tough times for young people. “What we’re seeing now in Arizona and potentially in New Jersey and other states spells long-term trouble for the nation’s children,” said Dr. Irwin Redlener, a pediatrician who is president of the Children’s Health Fund in New York and a professor at Columbia University’s Mailman School of Public Health.

“We’re looking at all these cuts in human services — in health care, in education, in after-school programs, in juvenile justice. This all points to a very grim future for these children who seem to be taking the brunt of this financial crisis.”

Dr. Redlener issued a warning nearly a year ago about the “frightening” toll the recession was taking on children. He told me last April, “We are seeing the emergence of what amounts to a ‘recession generation.’ ”

The impact of the recession on everyone, of whatever age, is only made worse when states trying to balance their budgets focus too intently on cutting services as opposed to a mix of service cuts and revenue-raising measures.

As Mr. Shure of the Center on Budget noted, “The cruel irony is that in a recession like this, the people’s needs go up at the same time that the states’ ability to meet those needs goes down.”

Budget cuts also tend to weaken rather than strengthen a state’s economy, especially when they entail furloughs or layoffs. Government spending stimulates an economy in recession. And wise spending is an investment in everyone’s quality of life.

All states have been rocked by the Great Recession. And most have tried to cope with a reasonable mix of budget cuts and tax increases, or other revenue-raising measures. Those that rely too heavily on cuts are making guaranteed investments in human misery.

Citi to Try New Version of Cash for Keys

Editor’s Note: The decision about flight or fight is deeply personal and there is no right answer. The decision you make ought not be criticized by anyone. For those with the fight knocked out of them the prospect of taking on the giant banks in court is both daunting and dispiriting. So if that is where you are, and this Citi program comes your way, it might be acceptable to you. AT THE MOMENT, CITI IS SAYING YOU NEED TO BE 90 DAYS BEHIND IN YOUR PAYMENTS AND NOT HAVE A SECOND MORTGAGE. (A quick call to the holder of a second mortgage or the party claiming to be that holder could result in a double settlement since they are going to get wiped out anyway in a foreclosure. You can offer them pennies on the dollar or simply the chance to avoid litigation.)
Citi, faced with the prospects of increasing legal fees even if they were to “win” the foreclosure battle in court, along with the rising prospects of losing, is piloting a program where they will give you $1,000 and six months in your current residence — and then they take over your house by way of a deed in lieu of foreclosure, which you sign as part of a settlement. Make sure all terms of the settlement are actually in writing and signed by someone who is authorized to sign for Citi.
The deed is simply a grant of your ownership interest to Citi and frankly does little to “cure” the title defect caused by securitization. HOPEFULLY THAT WILL NEVER BE A PROBLEM TO YOU, EVEN THOUGH IT PROBABLY WILL BE CAUSE FOR LITIGATION OR OTHER CONFRONTATIONS BETWEEN PARTIES OTHER THAN YOU WHEN ALL OF THIS UNRAVELS.
The possibility remains that you will have deeded your house to Citi when in fact the mortgage loan was owed to another party or group (investors/creditors).
The possibility remains that you could still be pursued for the full amount of the loan by the REAL holder of the loan.
Yet in this topsy turvy world where up is down and left is right, the Citi program might just take you out of the madness and give you the new start. They apparently intend to offer to waive any claim they have for deficiency which in states where deficiency judgments are allowed at least gives you the arguable point that you gave the house to some party with “apparent” authority. And the hit on your FICO score is less than foreclosure or bankruptcy, under the proposed Citi plan.
In the six months, which can probably be extended through negotiation or other legal means, you can accumulate some cash from what otherwise would have been a rental or mortgage payment. Taken as a whole, even though I would say that you are probably dealing with a party who neither owns the loan nor has any REAL authority to offer you this plan, it probably fits the needs of many homeowners who are just one step away from walking away from their home anyway.
As always, at least consult a licensed real estate attorney or an attorney otherwise knowledgeable about securitized loans before you make your final decision or sign any documents. BEWARE OF HUCKSTERS WHO MIGHT SEIZE THIS ANNOUNCEMENT AS A MEANS TO GET YOU TO PART WITH YOUR MONEY. THERE IS NO NEED FOR A MIDDLEMAN IN THIS TYPE OF TRANSACTION.
February 24, 2010

Another Foreclosure Alternative


HOMEOWNERS on the verge of foreclosure will often seek a short sale as a graceful exit from an otherwise calamitous financial situation. Their homes are sold for less than the mortgage amount, and the remaining loan balance is usually forgiven by the lender.

But with short sales beyond the reach of some homeowners — they typically won’t qualify if they have a second mortgage on the home — another foreclosure alternative is emerging: “deeds in lieu of foreclosure.”

In this transaction, a homeowner simply relinquishes the property, turning over the deed to the bank, in exchange for the lender’s promise not to foreclose. In a straight foreclosure, a lender takes legal control of the property and evicts the occupants; in deeds-in-lieu transactions, the homeowner is typically allowed to remain in the home for a short period of time after the agreement.

More borrowers will at least have the chance to consider this strategy in the coming months, as CitiMortgage, one of the nation’s biggest mortgage lenders, tests a new program in New Jersey, Texas, Florida, Illinois, Michigan and Ohio.

Citi recently agreed to give qualified borrowers six months in their homes before it takes them over. It will offer these homeowners $1,000 or more in relocation assistance, provided the property is in good condition. Previously, the bank had no formal process for serving borrowers who failed to qualify for Citi’s other foreclosure-avoidance programs like loan modification.

Citi’s new policy is similar to one announced last fall by Fannie Mae, the government-controlled mortgage company. Fannie is allowing homeowners to return the deed to their properties, then rent them back at market rates.

To qualify for the new program, Citi’s borrowers must be at least 90 days late on their mortgages and must not have a second lien on the home.

That policy may be a significant obstacle for borrowers, since many of the people facing foreclosure originally financed their homes with second mortgages — called “piggyback loans” — or borrowed against the homes’ equity after buying them.

Partly for that reason, Elizabeth Fogarty, a spokeswoman for Citi, said that the bank had only modest expectations for the test. Roughly 20,000 Citi mortgage customers in the pilot states will be eligible for a deed-in-lieu agreement, she said, and of those, about 1,000 will most likely complete the process.

As is often the case with deed-in-lieu settlements, Citi will release the borrower from all legal obligations to repay the loan.

In some states, like New York, New Jersey and Connecticut, banks can legally retain the right to pursue borrowers for the balance of the loan after a foreclosure, a short sale or a deed-in-lieu of foreclosure. That is one reason why housing advocates say borrowers should carefully weigh these transactions with the help of a lawyer or nonprofit housing counselor before proceeding.

Ms. Fogarty said Citi had no specific timetable for rolling out the program nationally.

Among the other major lenders, there is no formalized program for deeds-in-lieu. Bank of America, JPMorgan Chase and Wells Fargo, for instance, generally require borrowers to try a short sale before considering a deed-in-lieu transaction.

A deed-in-lieu is better for banks than a foreclosure because it reduces the company’s legal costs, and it is better for the homeowners because it is less damaging to their credit score.

Banks may also end up with homes in better condition.

J. K. Huey, a senior vice president at Wells Fargo, says her bank usually offers relocation assistance — often $1,000 to $2,500 — as long as the borrower leaves the property in move-in condition after a deed-in-lieu transaction.

“The idea is to help them transition in a way where they can keep their family intact while looking for another place to live,” Ms. Huey said. “This way, they only have to move once, as opposed to getting evicted.”

Foreclosure Defense: The Movement Grows — Borrowers Come out on Top


Lawyers’ tactic slows rate of forfeited houses in New Jersey

Posted by kcocuzzo June 25, 2008 00:05AM

Bill Daddio and Theresa Scilla, who live in Matawan, avoided a sheriff’s sale of their home when their lawyer challenged the bank trustee’s right to foreclose.

Most home foreclosures being processed in New Jersey are illegal, a growing group of attorneys contends, because lending institutions cannot prove they own the debt they are trying to collect.
Judges in at least four New Jersey counties already have halted foreclosures, using a federal court ruling in Ohio as precedent. And with 48,000 foreclosures expected to be filed this year — twice the number filed in 2006 — some attorneys believe challenging foreclosures can become a large and potentially lucrative area of practice.
“This is starting to creep up all over the state and all over the country as people start to realize these banks don’t really know who owns the (promissory) note,” said Peggy Jurow, a senior attorney at Legal Services of New Jersey, which is teaching lawyers how to represent pro bono clients in these cases. “It’s scary to think how many people are losing their homes who shouldn’t be.”
Attorneys for the lending institutions say this wave of challenges is built on nothing more than legal technicalities and banks quickly will regain their footing.
“These lawyers are trying to grasp on the smallest legal issue, and they’re losing sight of the justice involved,” said Ralph Casale, a Denville-based attorney who has represented lenders in foreclosure for more than 30 years. “It comes down to this: Were you given the loan? Have you paid it? If you haven’t paid it, doesn’t the person who loaned you the money have the right to collect?”
There were 34,457 foreclosures filed in New Jersey in 2007. The vast majority, 96 percent, were processed by the State Office of Foreclosure with no answer from the defendants, resulting in the loss of their homes. Lawyers say 75 percent or more of those cases could have been successfully challenged.
“The rules have been there all along,” said Rob Napolitano of Community Financial Services in Keyport, which provides information to attorneys on how to help clients avoid foreclosure. “What’s changed is that people are finally making the banks follow the rules, and they can’t do it.”
The complexity of mortgage funding also has changed.
When home buyers receive a mortgage, they sign a promissory note — a legal IOU — with their lender. In simpler times, the lender remained in possession of that note for the duration of the loan. But that was before the surge in mortgage-backed securities, an investment tool in which loans are bundled into packages with thousands of others, sliced into thousands of pieces, and sold to investors around the globe.
Lawyers say in the midst of all that packaging and slicing, banks got careless with their paperwork.
In some cases, they lost track of who owned the original promissory note or couldn’t prove how they came to possess it. In other cases, lawyers say, the formation of the mortgage-backed security created a situation in which the banks failed to maintain ownership of the promissory notes.
“These transactions have become so complex, the banks can’t even keep track of what they own and don’t own,” said Linda Fisher, director of the Center for Social Justice at Seton Hall Law School, which succeeded in getting a foreclosure dismissed in Essex County last month.
The legal challenges are so new, it is unclear how the banks will ultimately answer them. Most foreclosures in New Jersey are brought by a handful of law firms, which process them by the thousand on behalf of major lending institutions.
Attorneys from those firms — Zucker, Goldberg & Ackerman of Mountainside; Fein, Such, Kahn & Shepard of Parsippany; Phelan, Hallinan & Schmieg of Mount Laurel, and Powers Kirn of Marlton — declined repeated requests for comment.
“The banks can get their i’s dotted and their t’s crossed,” Casale said. “The problem is, they can’t do it when that kind of issue is sprung on them at the last minute. The banks and their attorneys were caught shorthanded.”
The first legal challenge of banks’ ownership of loans came last October in Cleveland, where U.S. District Court Judge Christopher Boyko issued a stinging ruling.
“The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance,” he wrote. “Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”
According to the New Jersey Law Journal, which wrote about the issue last month, the first foreclosure overturned in Jersey on these grounds came in Passaic County. In subsequent months, judges in Essex, Monmouth and Ocean dismissed cases or reversed orders in existing cases.
Neither side argues that borrowers don’t ultimately owe money to someone. But homeowners fighting their foreclosures appear to have bought themselves time.
In the meantime, people like Theresa Scilla exist in a legal limbo, in default of their mortgages but staying in their homes. Scilla, a retired state worker, owns a home in Matawan. When her live-in boyfriend, Bill Daddio, was injured in a car accident and had to go on disability from his job as a carpet installer, they fell behind on her payments. She refinanced, but in filings to Monmouth County Chancery Court, she said she got hoodwinked into a signing for a loan she couldn’t afford.
Her attorney, David Kaplan of Tobias and Kaplan in Perth Amboy, succeeded in getting a sheriff’s sale on her house canceled on the grounds the bank trustee that filed the foreclosure was not the true lender. Kaplan is now moving forward with a civil claim that Scilla was a victim of predatory lending.
Where her case or similar cases go from here is unclear.
The State Office of Foreclosure has attempted to provide some guidance, informing attorneys for lending institutions that as of May 1, it no longer would process foreclosures unless the attorneys could prove their clients were the owners of the loan and had the right to collect on the debt at the time the foreclosure was filed.
Kevin Wolfe, chief attorney at the Office of Foreclosure, said it is too early to tell how the order will affect foreclosure filings. It takes several months for new filings to reach his office.
“A lot of this has yet to be fully tested in court,” Fisher said. “We don’t really know how this is going to turn out.”

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