Synovus Ousts Senior V.P. of Asset Management; Shady Foreclosure Deals to Blame?


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Synovus Ousts Senior V.P. of Asset Management; Shady Foreclosure Deals to Blame?

by Mark Stopa

Have you ever wondered what happens to houses when the banks foreclose? The Fort Myers News Press recently wondered just that, and its findings may have prompted the termination of a high-ranking bank officer.

To those in the foreclosure industry in the Tampa area, Michael E. Johnson was fairly well-known. He was the Senior Vice President of Asset Management for Synovus Bank. This was no phony title, like the “Assistant Secretary” designations we see given to robo-signers; Mike Johnson was the decision-maker on foreclosure cases for Synovus in the Tampa area. To illustrate, here was the signature on his emails (copied and pasted from an email he sent me):

Michael E. Johnson

Senior Vice President

Asset Management

12450 Roosevelt Boulevard

St. Petersburg, FL 33716

727.568.6521 – Direct

727.568.6532 – Fax

I personally dealt with Mike Johnson on several occasions in recent years, and it was clear to me that if a settlement agreement was going to be reached in a case involving Synovus, he would be the one approving it. This dynamic was both good and bad. It was good because, unlike many foreclosure cases, at least there was a person at the bank with settlement authority with whom communication was possible. It was bad because, frankly, he and I butted heads frequently and, in my view, he was rather stubborn in negotiating. (Of course, I’m confident he thought the same things about me.) That was his reputation, at least as I knew it – difficult to deal with, but Synovus liked him because he got a lot of deals done for the bank.

Anyway, with that backdrop in place, I find this article from the Fort Myers News Press particularly interesting. Essentially, this journalist studied the Public Records in Lee County to investigate what happened to properties after being foreclosed, or after they went to the bank. According to the article, there was a disturbing trend of properties being sold by Synovus to third-party investment companies, then flipped soon thereafter for a significant profit.

In my view, the information contained in the article forces some tough questions:

1. Why would Synovus sell a house for $53,000 to an investment company when said company was able to sell the house two months later for $78,000? Or a duplex in Lehigh Acres for $30,000 that was re-sold 15 days later for $79,000? Seriously, think about those numbers for a minute. More than doubling the sale price? Merely by doing a flip? 15 days later? For a bank that was so stubborn in negotiating with homeowners, why not insist on a higher sale price (to the investor)?

I suppose it’s possible the investment company did significant repairs to improve the value of the property. However, as the article notes, how much work can really be done when no building permits were obtained?

2. Doesn’t this have the feel of a shady, back-room deal? After all, why would a bank sell a house for $30,000 if it was possible to sell it 15 days later for $79,000? We may never know for sure, but it sure is interesting that Synovus had numerous deals like this with the same investor, and Mike Johnson was the one approving most of these deals.

Think about that for a minute. One man approving multiple sales of properties to the same investor, which investor was flipping those properties for a profit.

When you put it like that, it’s not hard to wonder whether this banker had a had a personal stake in these transactions. To be clear, I don’t know this to be the case, and I’m not saying that was the case, but when the same bank is selling multiple properties to the same investor, at prices like this, it’s not hard to wonder whether that banker was getting a kickback on the re-sale. It sure wouldn’t have been difficult – investor simply tells banker “sell this to me for $30,000, and I’ll give you $5,000 on the re-sale.”

You may think I’m reaching or just plain wrong, and maybe so. However, it sure is interesting that Mike Johnson no longer works for Synovus, having been let go (after what had apparently been a distinguished career with the bank) shortly after this article came out. In fact, according to my sources, he now works with investment companies who buy houses from banks!

The point here isn’t to talk about this one banker, of course. My point is that it’s terribly, indescribably sad to know that Florida homeowners are being foreclosed and this is what’s happening with their homes. Even if there was nothing shady going on with Synovus, it’s awful to know that banks are so willing to foreclose on homeowners yet so willing to sell properties for a fraction of their actual value. Anything shady, of course, only increases the level of misery.

3. I’m also troubled at what may be attempts to increase the extent of the homeowner’s liability. Using the example from the article, should the prior homeowner be liable to Synovus for $275,000, i.e. $328,000 (the judgment amount) minus $53,000 (the alleged value of the house)? Apparently, by my read of the article, that’s what the court ruled, as that $53,000 sale price is how the fair market value was determined. The fact that the house sold for $78,000 sale price two months later (and that the deficiency amount probably should have been $23,000 lower? The court may not even have known about that re-sale. Heck, the homeowner may not even have known.

This prompts a serious question … Are banks selling properties at reduced values to increase the amounts of their deficiency judgments against homeowners?

You might think that makes no sense. After all, why would a bank sell a house for less than its maximum sale price? That said, do we really know what, if any, back-room deals are going on here? For instance, is this deal an arms-length transaction when Synovus is selling many such properties to the same investor? Who’s to say there weren’t other, under-the table monies changing hands?

It’s not hard to envision ways Synovus could artificially increase the liability of homeowners … ”you give me a better deal on this one; I’ll give you a better deal on that one,” or “give me a deal for $30,000 on this one, and I’ll give you half of the profits on the resale.”

I don’t think I’m the type of person who espouses conspiracy theories. However, I just can’t help but wonder, given what I’ve read, seen, and know, if homeowners are getting screwed on a routine and systematic basis by bankers who aren’t looking out for anyone except themselves. And when a high-ranking banker is suddenly ousted after an article like this, it really raises some difficult questions.
Mark Stopa



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EDITOR’S NOTE: Schack doesn’t say the pleadings were false but the inference is obvious. The documents submitted were fabricated, forged and false. US Bank couldn’t come up with something better. And the lawyers for US Bank balked at signing an affirmation of the pleadings and exhibits, as required under New York State law.

From my seat it looks like this: if it is US Bank, the pleadings and representations are most likely living lies.

The implications are obvious. Homeowners who were “foreclosed” and/or evicted by US Bank probably have a right to go back into court and make their case for damages and recovery of the property, clearing title by a lawsuit for quiet title.

NYSC Judge Schack Slams Foreclosure Firm Rosicki, Rosicki & Associates, P.C. “Conflicted Robosigner Kim Stewart”


NYSC Judge Schack Slams Foreclosure Firm Rosicki, Rosicki & Associates, P.C. “Conflicted Robosigner Kim Stewart”

Decided on December 12, 2011

Supreme Court, Kings County

U.S. Bank, N.A., Plaintiff,


Wayne Ramjit et al., Defendants.

17027/08 Plaintiff Rosicki Rosicki and Associates

Batavia NY

Arthur M. Schack, J.

In this foreclosure action, plaintiff, U.S. BANK N.A. (U.S. BANK), moved for an order of reference and related relief for the premises located at 1485 Sutter Avenue, Brooklyn, New York (Block 4259, Lot 22, County of Kings). For the Court to consider the motion for an order of reference, I ordered plaintiff’s counsel, Rosicki, Rosicki & Associates, P.C., on July 29, 2011, to comply with the October 20, 2010 Administrative Order of then Chief Administrative Judge Ann T. Pfau, as revised on March 2, 2011, and concluded that:

Accordingly, it is

ORDERED, that plaintiff U.S. BANK N. A.’s motion for an

order of reference and related relief for the premises located at 1485

Sutter Avenue, Brooklyn, New York (Block 4259, Lot 22, County of

Kings) and the instant foreclosure action will be dismissed with

prejudice, unless, within sixty (60) days from this decision and order,

counsel for plaintiff, U.S. BANK N.A., complies with the new Rule,

promulgated by the Chief Administrative Judge Ann T. Pfau on

October 20, 2010, as revised on March 2, 2011, by submitting an

affirmation, to my Chambers (not the Foreclosure Department), [*2]

360 Adams Street, Room 478, Brooklyn, NY 11201, using the new

standard Court form, pursuant to CPLR Rule 2106 and under the

penalties of perjury, that counsel for plaintiff, U.S. BANK N.A., has

“based upon my communications [with named representative or

representatives of plaintiff], as well as upon my own inspection and

reasonable inquiry under the circumstances . . . that to the best of

my knowledge, information and belief, the Summons, Complaint and

other papers filed or submitted to the Court in this matter contain no

false statements of fact or law”, and is “aware of my obligations under

New York Rules of Professional Conduct (22 NYCRR Part 1200) and

22 NYCRR Part 130.”

On September 23, 2011, plaintiff’s counsel, Rosicki, Rosicki & Associates, P.C., filed with the Court the instant motion, requesting an extension of thirty (30) days, up to and including October 26, 2011, to submit the required attorney’s affirmation.

According to ¶ 15 of the affirmation in support of the motion, by Timothy Menasco, Esq., of Rosicki, Rosicki & Associates, P.C., “plaintiff and plaintiff’s counsel has been actively reviewing the file in order to properly abide by said Administrative Order creating the delay in submission of the affirmation.” Mr. Menasco then states, in ¶ 16 of his affirmation, “[i]t is unduly harsh and inappropriate to dismiss this action, on the basis of a delay in submitting an affirmation to the court.”

Plaintiff’s counsel, Rosicki, Rosicki & Associates, P.C., continued, for reasons unknown and not satisfactorily explained to the Court, to not comply with the Administrative Order of the Chief Administrative Judge and my July 28, 2011 order. I have not received the affirmation from plaintiff’s counsel, as ordered by the Chief Administrative Judge’s Administrative Order and my previous order.

Today, plaintiff U.S. BANK’S instant motion to extend the time to file the required attorney’s affirmation, appeared on my motion calendar. It is one hundred thirty-seven (137) days since I issued my July 28, 2011 order and four hundred eighteen (418) days since the Chief Administrative Judge issued her Administrative Order. Therefore, for violation of these orders, the instant foreclosure action is dismissed with prejudice and the notice of pendency is cancelled and discharged.


The Office of Court Administration issued a press release on October 20, 2010 explaining the reasons for the Administrative Ordered issued that day by Chief Administrative Judge Pfau. It stated:

The New York State court system has instituted a new filing

requirement in residential foreclosure cases to protect the integrity

of the foreclosure process and prevent wrongful foreclosures. Chief

Judge Jonathan Lippman today announced that plaintiff’s counsel in

foreclosure actions will be required to file an affirmation certifying

that counsel has taken reasonable steps — including inquiry to banks

and lenders and careful review of the papers filed in the case — to

verify the accuracy of documents filed in support of residential [*3]

foreclosures. The new filing requirement was introduced by the

Chief Judge in response to recent disclosures by major mortgage

lenders of significant insufficiencies — including widespread deficiencies

in notarization and “robosigning” of supporting documents — in

residential foreclosure filings in courts nationwide. The new requirement

is effective immediately and was created with the approval of the

Presiding Justices of all four Judicial Departments.

Chief Judge Lippman said, “We cannot allow the courts in

New York State to stand by idly and be party to what we now know

is a deeply flawed process, especially when that process involves

basic human needs — such as a family home — during this period of

economic crisis. This new filing requirement will play a vital role in

ensuring that the documents judges rely on will be thoroughly examined,

accurate, and error-free before any judge is asked to take the drastic step

of foreclosure.” [Emphasis added]

(See Gretchen Morgenson and Andrew Martin, Big Legal Clash on Foreclosure is Taking Shape, New York Times, Oct. 21, 2010; Andrew Keshner, New Court Rules Says Attorneys Must Verify Foreclosure Papers, NYLJ, Oct. 21, 2010).

The failure of plaintiff’s counsel, Rosicki, Rosicki & Associates, P.C., to comply with two court orders, my July 28, 2011 and Chief Administrative Judge Pfau’s October 20, 2010 order, as revised on March 2, 2011, demonstrates delinquent conduct by Rosicki, Rosicki & Associates, P.C. This mandates the dismissal with prejudice of the instant action. Failure to comply with court-ordered time frames must be taken seriously. It cannot be ignored. There are consequences for ignoring court orders. Recently, on December 16, 2010, the Court of Appeals, in Gibbs v St. Barnabas Hosp., 16 NY3d 74, 81 [2010], instructed:

As this Court has repeatedly emphasized, our court system is

dependent on all parties engaged in litigation abiding by the rules of

proper practice (see e.g. Brill v City of New York, 2 NY3d 748 [2004];

Kihl v Pfeffer, 94 NY2d 118 [1999]). The failure to comply with

deadlines not only impairs the efficient functioning of the courts and

the adjudication of claims, but it places jurists unnecessarily in the

position of having to order enforcement remedies to respond to the

delinquent conduct of members of the bar, often to the detriment of

the litigants they represent. Chronic noncompliance with deadlines

breeds disrespect for the dictates of the Civil Practice Law and Rules

and a culture in which cases can linger for years without resolution.

Furthermore, those lawyers who engage their best efforts to comply

with practice rules are also effectively penalized because they must

somehow explain to their clients why they cannot secure timely [*4]

responses from recalcitrant adversaries, which leads to the erosion

of their attorney-client relationships as well. For these reasons, it

is important to adhere to the position we declared a decade ago that

[i]f the credibility of court orders and the integrity of our judicial

system are to be maintained, a litigant cannot ignore court orders

with impunity [Emphasis added].” (Kihl, 94 NY2d at 123).

Despite Mr. Menasco’s assertion, it is not unduly harsh and inappropriate to

dismiss the instant action because of the delay by plaintiff’s counsel, Rosicki, Rosicki & Associates, P.C. to submit the required affirmation. “Litigation cannot be conducted efficiently if deadlines are not taken seriously, and we make clear again, as we have several times before, that disregard of deadlines should not and will not be tolerated (see Miceli v State Farm Mut. Auto Ins. Co., 3 NY3d 725 [2004]; Brill v City of New York, 2 NY3d 748 [2004]; Kihl v Pfeffer, 94 NY2d 118 [1999]) [Emphasis added].” (Andrea v Arnone, Hedin, Casker, Kennedy and Drake, Architects and Landscape Architects, P.C., 5 NY3d 514, 521 [2005]).As we made clear in Brill, and underscore here, statutory time frames —like court-order time frames (see Kihl v Pfeffer, 94 NY2d 118 [1999]) — are not options, they are requirements, to be taken seriously by the parties. Too many pages of the Reports, and hours of the courts, are taken up with deadlines that are simply ignored [Emphasis added].” (Miceli, 3 NY3d at 726-726). The Court cannot wait for plaintiff’s counsel, Rosicki, Rosicki & Associates, P.C., to take its time in complying with court mandates.

Moreover, even if plaintiff U.S. BANK’s counsel complied in a timely manner

with my July 28, 2011 order and the order of the Chief Administrative Judge, plaintiff U.S. BANK would have to address its use, in the instant action, of conflicted robosigner Kim Stewart. The instant mortgage and note, were executed on October 11, 2007 and recorded on December 10, 2007, by MORTGAGE ELECTRONIC REGISTRATIONS SYSTEM, INC. (MERS), “acting solely as a nominee for Lender [U.S. BANK]” and “FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD,” in the Office of the City Register of the City of New York, at City Register File Number (CRFN) 2007000605594. Then on May 23, 2008, MERS assigned the instant mortgage and note back to U.S. BANK. This was recorded on July 24, 2008. in the Office of the City Register of the City of New York, at CRFN 2008000294495.

The assignment was executed for MERS, in Owensboro, Kentucky, by Kim Stewart, Assistant Secretary of MERS, as assignor. The very same Kim Stewart, as Assistant Vice President of assignee U.S. BANK, on April 13, 2009, also in Owensboro, Kentucky, executed the affidavit of merit for an order of reference in the instant action.She signed the affidavit of merit as Assistant Vice President of plaintiff U.S. BANK. However, in ¶ 1 of her affidavit of merit, Ms. Stewart alleges to “a Vice President of U.S. BANK, N.A., the plaintiff.”

Perhaps, plaintiff U.S. BANK and its counsel, Rosicki, Rosicki & Associates, P.C., do not want the Court to confront the conflicted Ms. Stewart? This would certainly contradict the disingenuous opening statement by Richard K. Davis, Chairman, President and Chief Executive [*5]Officer of U.S. BANCORP, (U.S. BANK’s parent corporation), in his cover letter to the 2010 Annual Report of U.S. BANCORP, sent to U.S BANCORP’s shareholders. Mr. Davis stated that “[t]hroughout its history, U.S. Bancorp has operated with a tradition of uncompromising honesty and integrity.”

Further, the dismissal of the instant foreclosure action requires the cancellation of the notice of pendency. CPLR § 6501 provides that the filing of a notice of pendency against a property is to give constructive notice to any purchaser of real property or encumbrancer against real property of an action that “would affect the title to, or the possession, use or enjoyment of real property, except in a summary proceeding brought to recover the possession of real property.” The Court of Appeals, in 5308 Realty Corp. v O & Y Equity Corp. (64 NY2d 313, 319 [1984]), commented that “[t]he purpose of the doctrine was to assure that a court retained its ability to effect justice by preserving its power over the property, regardless of whether a purchaser had any notice of the pending suit,” and, at 320, that “the statutory scheme permits a party to effectively retard the alienability of real property without any prior judicial review.”

CPLR § 6514 (a) provides for the mandatory cancellation of a notice of pendency by:

The Court,upon motion of any person aggrieved and upon such

notice as it may require, shall direct any county clerk to cancel

a notice of pendency, if service of a summons has not been completed

within the time limited by section 6512; or if the action has been

settled, discontinued or abated; or if the time to appeal from a final

judgment against the plaintiff has expired; or if enforcement of a

final judgment against the plaintiff has not been stayed pursuant

to section 551. [emphasis added]

The plain meaning of the word “abated,” as used in CPLR § 6514 (a) is the ending of an action. “Abatement” is defined as “the act of eliminating or nullifying.” (Black’s Law Dictionary 3 [7th ed 1999]). “An action which has been abated is dead, and any further enforcement of the cause of action requires the bringing of a new action, provided that a cause of action remains (2A Carmody-Wait 2d § 11.1).” (Nastasi v Nastasi, 26 AD3d 32, 40 [2d Dept 2005]). Further, Nastasi at 36, held that the “[c]ancellation of a notice of pendency can be granted in the exercise of the inherent power of the court where its filing fails to comply with CPLR § 6501 (see 5303 Realty Corp. v O & Y Equity Corp., supra at 320-321; Rose v Montt Assets, 250 AD2d 451, 451-452 [1d Dept 1998]; Siegel, NY Prac § 336 [4th ed]).” Thus, the dismissal of the instant complaint must result in the mandatory cancellation of plaintiff U.S. BANK’s notice of pendency against the subject property “in the exercise of the inherent power of the court.”


Accordingly, it is

ORDERED, that the instant action, Index Number 17027/08, is dismissed with

prejudice; and it is further

ORDERED that the Notice of Pendency in this action, filed with the Kings

County Clerk on June 16, 2008, by plaintiff, U.S. BANK, N.A., to foreclose on a mortgage for real property located at 1485 Sutter Avenue, Brooklyn, New York (Block 4259, Lot 22, County [*6]of Kings), is cancelled and discharged.

This constitutes the Decision and Order of the Court.


________________________________HON. ARTHUR M. SCHACK



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EDITOR’S NOTE: Whether it’s from natural causes, suicide, accident, or murder, the death of anyone is a tragedy for their family and those in their circle. Our condolences to the family and friends of Tracy Lawrence. Her death is not alone. Many people have turned to suicide, taking their families with them into whatever lies beyond this mortal coil. What I personally hope for, is that at the end of the day we have a new structure in place, governed by true morality as its first precept. Meanwhile, the system, the society, and the components of economics, politics and social services continue to decline into irrelevance as people suffer through the pains of the change that is coming.

Tracy Lawrence, Notary Public Who Blew The Whistle On Massive Foreclosure Fraud, Found Dead

Notary Public Who Blew Whistle On Massive Foreclos

The Huffington Post  

Tracy Lawrence, the notary public who blew the whistle on a massive foreclosure fraud scheme, was found dead in her Las Vegas home on Nov. 28, MSNBC reported.

Cause of death has not yet been determined, but Officer Jacinto Rivera, a Las Vegas Metropolitan Police Department spokesman, said the case was not being investigated as homicide. She was 43.

Earlier this month, Lawrence came forward and admitted to the Nevada Attorney General’s Office that she notarized 25,000 fraudulent documents for Lender Processing Services, a Florida company used by most major banks to process home repossessions. The documents were filed with the Clark County Recorder’s Office between 2005 and 2008, The Los Angeles Times reported.

Lawrence also accused two loan officers of allegedly running the massive robo-signing scheme, saying they forged signatures on tens of thousands of default notices. Nevada now alleges that Gary Trafford, 49, of Irvine, Calif., and Gerri Sheppard, 62, of Santa Ana, Calif., directed their employees to forge foreclosure documents, notarize the signatures on the documents they had forged and file the fraudulent paperwork in order to begin foreclosures on homes throughout the county.

Trafford and Sheppard have been indicted on more than 600 counts of offering false instruments for recording, false certification on certain instruments and notarization of the signature of a person not in the presence of a notary public. Authorities are currently negotiating the terms of their surrender, KSNV MyNews 3 reported.

Earlier this month, Lawrence pleaded guilty to one count of notarizing the signature of a person not in her presence, The Associated Press reported. Had Lawrence shown up at her sentencing hearing on Monday, she could have faced a potential sentence of up to one year in jail and a fine of up to $2,000.

On Nov. 17, Lender Processing Services issued a statement acknowledging that the signing procedures on some of documents were flawed. The company also agreed to fully cooperate with the attorney general’s investigation.

“I am deeply committed to ensuring that LPS meets rigorous standards of professional conduct and operating excellence,” newly appointed LPS President and CEO Hugh Harris stated. “I have full confidence in the ability of our leadership team and over 8,000 dedicated employees to deliver on that commitment.”

According to RealtyTrac, Nevada has had the highest foreclosure rate in the nation for 56 straight months.E


After The Storm – Foreclosure Fraud & Robo-Signing Continues by Nye Lavalle


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I also contest the issue of whether the banks were ever intending to do things right. I know from interviews I conducted that several lawyers who were assigned the task of drafting papers and procedures for securitization simply quit, citing illegality and even criminality of these acts. I believe the intention was always to defraud the investors, defraud the borrowers and take the principal as fees. This diverges from past corruption where fees were excessive or where the investment was bad. Here, the intent, in my opinion, was to create a bad investment and use leverage on the banks name and reputation to sell something that didn’t exist.

The proof is in the pudding. Analyzing these pols and the securitization scheme set forth in the PSAs, it is quite clear that the worse the loan, the worse the mortgage bond, the more Wall Street made. The higher the certainty of a loss to the investor, the higher the probability of the borrower being defaulted, the higher the profits and fees. Just do the math. If the investors wanted a 5% return, they wanted $50,000 per year as interest on their money if they invested $1 million. Wall Street delivered the $50,000 by making high risk loans averaging 10% instead of 5%. The result was that they could take $500,000 and fund a 10% loan, and take $500,000 and put it in their own pockets.

The Banks are still leveraging on their prior reputation for risk aversion and sticking by the rules of underwriting. And people are still buying the myth that the banks were just out to make loans. They were not. They were out to make profits, stealing the investors money, stealing the borrowers down payment and other money, stealing the houses and leaving both sides with nothing. Why won’t people use the age-old instruction: “look to the result to determine the intent?”

SEE NYE LAVALLE 62650988-After-the-Storm-Final

“In the best-­‐case scenario, concerns about mortgage documentation irregularities may prove overblown. In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-­related affidavits, but the facts underlying the affidavits are demonstrably accurate.

Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork.

The worst-­‐case scenario is considerably grimmer.

In this view, which has been articulated by academics and homeowner advocates, the ‘robosigning’ of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

The risk stems from the possibility that the rapid growth of mortgage securitization outpaced the ability of the legal and financial system to track mortgage loan ownership.”

After The Storm – Foreclosure Fraud & Robo-Signing Continues by Nye Lavalle


A Year Ago, A Storm of Allegations And Reports Highlighting Robo-­Signing And Foreclosure Fraud Swept Across America Causing Major Banks To Halt Foreclosures Nationwide While Congressional, State, And Federal Investigations Were Launched. A Year Later, While Investigations Are Still Ongoing, Regulators Have Failed To Correct The Underlying Issues Behind Foreclosure Fraud And Robo-­Signing. The Overwhelming Evidence Presented In This Paper Is That Not Only Were American Homeowners And Borrowers Defrauded In The World’s Greatest Financial Scam, But American’s Wealth And Security Were Placed At Risk. To Date, There Has Been Only One Criminal Conviction Of An Executive Of A Major Mortgage Company And Other Criminal Convictions Have Been Halted. Still, As Shown In This Paper, Foreclosure Fraud And Robo-­Signing Continue While Some Courts Address The Issue And Others Ignore The Ramifications Of This Massive Fraud. What Is Now Known Is That These Scams Were Not Unique, But Industry-­Wide. The Mortgage-­Backed Securities Turned Out To Be Non-­Mortgage & Note Backed Empty Trusts. To Conceal This Massive Ponzi Scheme Perpetuated Against Americans, The Nation’s Mortgage Industry Continues To Manufacture, Fabricate, & Destroy Evidence, Despite The Inherent Risks And Ramifications Since Over 90% of Borrowers Don’t Challenge Their Foreclosures.



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New York AG Schneiderman Comes out Swinging at BofA, BoNY
Posted By igradman On August 5, 2011 (4:28 pm) In Attorneys General

This is big.  Though we’ve seen leading indicators over the last few weeks that New York Attorney General Eric Schneiderman might get involved in the proposed Bank of America settlement over Countrywide bonds, few expected a response that might dynamite the entire deal.  But that’s exactly what yesterday’s filing before Judge Kapnick could do.

Stating that he has both a common law and a statutory interest “in protecting the economic health and well-being of all investors who reside or transact business within the State of New York,” Schneiderman’s petition to intervene takes a stance that’s more aggressive than that of any of the other investor groups asking for a seat at the table.

Rather than simply requesting a chance to conduct discovery or questioning the methodology that was used to arrive at the settlement, the AG’s petition seeks to intervene to assert counterclaims against Bank of New York Mellon for persistent fraud, securities fraud and breach of fiduciary duty.

Did you say F-f-f-fraud?  That’s right.  The elephant in the room during the putback debates of the last three years has been the specter of fraud.  Sure, mortgage bonds are performing abysmally and the underlying loans appears largely defective when investors are able to peek under the hood, but did the banks really knowingly mislead investors or willfully obstruct their efforts to remedy these problems?  Schneiderman thinks so.  He accuses BoNY of violating:

Executive Law § 63(12)’s prohibition on persistent fraud or illegality in the conduct of business: the Trustee failed to safeguard the mortgage files entrusted to its care under the Governing Agreements, failed to take any steps to notify affected parties despite its knowledge of violations of representations and warranties, and did so repeatedly across 530 Trusts. (Petition to Intervene at 9)

By calling out BoNY for failing to enforce investors’ repurchase rights or help investors enforce those rights themselves, the AG has turned a spotlight on the most notoriously uncooperative of the four major RMBS Trustees.  Of course, all of the Trustees have engaged in this type of heel-dragging obstructionism to some degree, but many have softened their stance.

since investors started getting more aggressive in threatening legal action against them.  BoNY, in addition to remaining resolute in refusing to aid investors, has now gone further in trying to negotiate a sweetheart deal for Bank of America without allowing all affected investors a chance to participate.  This has drawn the ire of the nation’s most outspoken financial cop.

And lest you think that the NYAG focuses all of his vitriol on BoNY, Schneiderman says that BofA may also be on the hook for its conduct, both before and after the issuance of the relevant securities.  The Petition to Intervene states that:

Countrywide and BoA face liability for persistent illegality in:
(1) repeatedly breaching representations and warranties concerning loan quality;
(2) repeatedly failing to provide complete mortgage files as it was required to do under the Governing Agreements; and
(3) repeatedly acting pursuant to self-interest, rather than
investors’ interests, in servicing, in violation of the Governing Agreements. (Petition to Intervene at 9)

Though Countrywide may have been the culprit for breaching reps and warranties in originating these loans, the failure to provide loan files and the failure to service properly post-origination almost certainly implicates the nation’s largest bank.  And lest any doubts remain in that regard, the AG’s Petition also provides, “given that BoA negotiated the settlement with BNYM despite BNYM’s obvious conflicts of interest, BoA may be liable for aiding and abetting BNYM’s breach of fiduciary duty.” (Petition at 7) So much for Bank of America’s characterization of these problems as simply “pay[ing] for the things that Countrywide did.

As they say on late night infomercials, “but wait, there’s more!”  In a step that is perhaps even more controversial than accusing Countrywide’s favorite Trustee of fraud, the AG has blown the cover off of the issue of improper transfer of mortgage loans into RMBS Trusts.  This has truly been the third rail of RMBS problems, which few plaintiffs have dared touch, and yet the AG has now seized it with a vice grip.

In the AG’s Verified Pleading in Intervention (hereinafter referred to as the “Pleading,” and well worth reading), Schneiderman pulls no punches in calling the participating banks to task over improper mortgage transfers.  First, he notes that the Trustee had a duty to ensure proper transfer of loans from Countrywide to the Trust.  (Pleading ¶23).  Next, he states that, “the ultimate failure of Countrywide to transfer complete mortgage loan documentation to the Trusts hampered the Trusts’ ability to foreclose on delinquent mortgages, thereby impairing the value of the notes secured by those mortgages. These circumstances apparently triggered widespread fraud, including BoA’s fabrication of missing documentation.”  (Id.)  Now that’s calling a spade a spade, in probably the most concise summary of the robosigning crisis that I’ve seen.

The AG goes on to note that, since BoNY issued numerous “exception reports” detailing loan documentation deficiencies, it knew of these problems and yet failed to notify investors that the loans underlying their investments and their rights to foreclose were impaired.  In so doing, the Trustee failed to comply with the “prudent man” standard to which it is subject under New York law.  (Pleading ¶¶28-29)

The AG raises all of this in an effort to show that BoNY was operating under serious conflicts of interest, calling into question the fairness of the proposed settlement.  Namely, while the Trustee had a duty to negotiate the settlement in the best interests of investors, it could not do so because it stood to receive “direct financial benefits” from the deal in the form of indemnification against claims of misconduct.  (Petition ¶¶15-16) And though Countrywide had already agreed to indemnify the Trustee against many such claims, Schneiderman states that, “Countrywide has inadequate resources” to provide such indemnification, leading BoNY to seek and obtain a side-letter agreement from BofA expressly guaranteeing the indemnification obligations of Countrywide and expanding that indemnity to cover BoNY’s conduct in negotiating and implementing the settlement.  (Petition ¶16)  That can’t be good for BofA’s arguments that it is not Countrywide’s successor-in-interest.

I applaud the NYAG for having the courage to call this conflict as he sees it, and not allowing this deal to derail his separate investigations or succumbing to the political pressure to water down his allegations or bypass “third rail” issues.  Whether Judge Kapnick will ultimately permit the AG to intervene is another question, but at the very least, this filing raises some uncomfortable issues for the banks involved and provides the investors seeking to challenge the deal with some much-needed backup.  In addition, Schneiderman has taken pressure off of the investors who have not yet opted to challenge the accord, by purporting to represent their interests and speak on their behalf.  In that regard, he notes that, “[m]any of these investors have not intervened in this litigation and, indeed, may not even be aware of it.” (Pleading ¶12).

As for the investors who are speaking up, many could take a lesson from the no-nonsense language Schneiderman uses in challenging the settlement.  Rather than dancing around the issue of the fairness of the deal and politely asking for more information, the AG has reached a firm conclusion based on the information the Trustee has already made available: “THE PROPOSED SETTLEMENT IS UNFAIR AND INADEQUATE.” (Pleading at II.A)  Tell us how you really feel.

[Author’s Note: Though the proposed BofA settlement is certainly a landmark legal proceeding, there is plenty going on in the world of RMBS litigation aside from this case. While I have been repeatedly waylaid in my efforts to turn to these issues by successive major developments in the BofA case, I promise a roundup of recent RMBS legal action in the near future.  Stay tuned…]

Article taken from The Subprime Shakeout –



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Chicago — Attorney General Lisa Madigan today expanded her investigation into “robosigning” practices, issuing subpoenas against two national mortgage servicing support providers. The subpoenas are the latest effort in Madigan’s ongoing probe into the fraudulent practices used by banks and other mortgage institutions that contributed to the collapse of the U.S. housing market and the subsequent global financial crisis.

Madigan issued subpoenas against Lender Processing Services Inc. and Nationwide Title Clearing Inc., two Florida-based corporations that provide “document preparation services” and other loan management services to mortgage lenders for use against borrowers who are in default, foreclosure or bankruptcy.

“Foreclosure became a rubber-stamping operation that robbed many homeowners of the American Dream without a fair and accurate process,” Attorney General Madigan said. “I will not relent in my investigation into the fraudulent practices by lenders and others that caused and exacerbated the mortgage crisis and the resulting massive foreclosure crisis.”

Lender Processing Services (LPS) provides loan servicing support for more than 50 percent of all U.S. mortgages. More than 80 financial institutions use LPS to service more than 30 million loans. These loans have an outstanding principal balance exceeding $4.5 trillion.

Nationwide Title Clearing (NTC) provides a range of mortgage loan services to eight of the top 10 lenders and mortgage servicers in the country. NTC specializes in creating, processing and recording mortgage assignments, which are often needed for a lender to foreclose on a borrower.

Madigan will investigate reported allegations that LPS and NTC engaged in the practice of “robosigning” legal documents filed with the court to foreclose on borrowers. Robosigning occurs when an individual has no knowledge of the information contained in the document and often doesn’t even read or understand the document that he or she is signing. The use of robosigned documents was pervasive as lenders foreclosed on borrowers’ homes. The probe will also include a complete review of the accuracy of the systems and services that LPS and NTC provide to the large lenders including servicing platforms, foreclosure attorney interaction with these platforms and the assignment of mortgage process.

Attorney General Madigan said former employees of LPS, NTC, or former employees of any residential mortgage servicer or bank who have knowledge of any unlawful practices relating to mortgage servicing or the execution of documents should call her Homeowner Helpline at 1-866-544-7151 to aid in the investigation.

INTIMIDATION: Deutsche Bank Sues Foreclosure Fraud Expert’s Son

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EDITOR’S NOTE: They are getting desperate, but the question is who is “they?” Does Deutsch know that a suit was brought in its name? Deutsch’s actual trust department has nothing to do with these fictitious “Trusts.” Now, just as Colonial sued Reagan in Arizona for just asking a question, Deutsch is suing the son of a foreclosure expert while he is minding his own business studying poetry.

Deutsche Bank Sues Foreclosure Fraud Expert’s Son With No Financial Interest In Her Case

Deutsche Bank Sues Foreclosure Fraud Expert’s Son With No Financial Interest In Her Case



But Deutsche Bank wasn’t just going after her. The bank was also attempting to sue her son, Mark Cullen, who is currently pursuing a graduate degree in poetry at the New School in New York. Cullen hasn’t lived in Szymoniak’s house for seven years and is not a party to any aspect of her mortgagehe has no interest in either the property or the loan, and never has had any such interest, according to Szymoniak.


And other Florida foreclosure experts say it’s difficult to interpret Deutsche Bank’s move as anything other than retaliation for Szymoniak’s media presence. If it is not, in fact, retaliation, they argue, then Deutsche Bank’s lawyers have demonstrated rank incompetence.


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ANOTHER CASE TO WATCH: When this class action is filed, it will contain allegations and details you probably didn’t know. Like the other class actions and AG actions across the country, make the effort to follow what is in the record. The position of the pretender lenders and documents fabricators changes depending upon who is suing them and what causes of action are in the lawsuit.

By watching the court file and the pleadings and responses and memorandums of law from BOTH sides, you will find material you can use in your own case. This is especially true if the class action is against a defendant that is the same entity that claims to have standing in your case. Any action or allegation or representation by counsel may be used as an admission against interest in your own case, which, if accepted by the Court, is presumptively true.

Lender Processing Services, Inc.

  • Issue: Securities fraud


Lieff Cabraser Heimann & Bernstein, LLP is investigating potential illegal conduct as alleged in a class action lawsuit brought on behalf of all persons who purchased or acquired the common stock of Lender Processing Services, Inc. (“Lender Processing” or the “Company”) (NYSE: LPS) between July 29, 2009 and October 4, 2010, inclusive (the “Class Period”).

Background on Lender Processing Services, Inc. Securities Class Litigation

The action, pending in the United States District Court for the Middle District of Florida, was brought against Lender Processing and certain of its officers and directors for violations of the Securities Exchange Act of 1934. Lender Processing, headquartered in Jacksonville, Florida, describes itself as the mortgage industry’s number one provider of mortgage processing services, settlement services and default solutions, and the nation’s leading provider of integrated data, servicing and technology solutions for mortgage lenders.

The action alleges that during the Class Period, defendants made material misrepresentations and omissions regarding Lender Processing’s business practices, financial condition, and prospects. Specifically, the complaint alleges that defendants failed to disclose: (i) that the Company engaged in improper and deceptive business practices; (ii) that the Company’s subsidiary, Docx, falsified documents through the use of “robo signers”; (iii) that the Company engaged in improper fee sharing arrangements with attorneys and/or law firms; (iv) as a result of the its deceptive business practices, the Company’s reported financial results and financial outlook lacked any reasonable basis in fact and were materially false and misleading.

On October 4, 2010, in response to negative media reports and government investigations of the Company relating to possible forged foreclosure documents it provided to mortgage lenders, Lender Processing issued a press release commenting on purported “mischaracterizations of its services.” As a result, the market learned that Lender Processing’s business practices were potentially deceptive and fraudulent, causing its stock price, which had already declined significantly from its Class Period high of $43.99 in October 2009, to fall an additional $2.72 per share, or 8.6 percent, on October 4, 2010 to close at $28.76 per share. On the following day, the price of Lender Processing stock fell another $1.45 per share, or 5 percent, to close at $27.31 per share, on unusually heavy trading volume.

Contact Lieff Cabraser

If you purchased Lender Processing securities during the Class Period, you may move the Court for appointment as lead plaintiff by no later than January 24, 2011. A lead plaintiff is a representative party who acts on behalf of other class members in directing the litigation. Your share of any recovery in this action will not be affected by your decision of whether to seek appointment as lead plaintiff. You may retain Lieff Cabraser, or other attorneys, as your counsel in this action.

If you are a Lender Processing shareholder and you would like Lieff Cabraser to review your claim, please click here to contact a securities attorney at Lieff Cabraser or contact securities attorney Sharon M. Lee by telephone toll-free at (800) 541-7358.

About Lieff Cabraser

Lieff Cabraser Heimann & Bernstein, LLP, with offices in San Francisco, New York and Nashville, is a nationally recognized law firm committed to advancing the rights of investors and promoting corporate responsibility.

Since 2003, the National Law Journal has selected Lieff Cabraser as one of the top plaintiffs’ law firms in the nation. In compiling the list, the National Law Journal examined recent verdicts and settlements in addition to overall track records. Lieff Cabraser is one of only two plaintiffs’ law firms in the United States to receive this honor for the last eight consecutive years.

Michael H. Simmons


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Editor’s Note: I usually advise lawyers that from the very first word that opposing counsel utters, an objection ought to be raised, because it is all a lie. A “living lie.” From the moment he states his name and then says whom he represents, you ought to have something on hand that questions the validity of whether he actually represents the party upon whose behalf he says he is making his appearance. It is usually in the rules that you can demand proof of authority to represent. I know of a few cases that ended up dismissed on those grounds alone because the attorney never came back, never called back and never filed anything.

The way you win these cases is by forming the intent to win it. You can’t form that intent unless you believe it. Believe it! These are all impostors, pretenders and people out to make a buck at the expense of the Court and your client. Don’t get lost in their narrative.

Remember that besides the monthly payment issue, you have a right to seek modification or settlement or to ask for an evidentiary hearing on the amount required for redemption — that requires an accounting from the creditor. How are you going to do that with the wrong party standing in the courtroom and a lawyer who does not even represent anyone? Judges are  latching on to this argument, because it makes sense to them. They are not absolving your client of liability but they will force the issue, and make sure the real deciders are present IF YOU AGGRESSIVELY PURSUE IT.

[NYSC] JUDGE SCHACK Tears up WaMU’s Counsel For “Defective Verification, Phony NY House Counsel” WAMU v. PHILLIP

Posted on02 December 2010. Tags: , , , , , , , , , , , , , , , , , ,

[NYSC] JUDGE SCHACK Tears up WaMU’s Counsel For “Defective Verification, Phony NY House Counsel” WAMU v. PHILLIP

Washington Mut. Bank v Phillip
2010 NY Slip Op 52034(U)
Decided on November 29, 2010
Supreme Court, Kings County
Schack, J.


Further, the verification of the complaint was not executed by an officer of WAMU, but by Benita Taylor, a “Research Support Analyst of Washington Mutual Bank, the plaintiff in the within action” a resident of Jacksonville, Florida, on June 4, 2008. This is the same day that Ms. Maio claims to have communicated with “Mark Phelps, Esq., House Counsel.” I checked the Office of Court Administration’s Attorney Registry and found that Mark Phelps is not now nor has been an attorney registered in the State of New York. Moreover, the Court does not know what “House” employs Mr. Phelps. [*5]

Both Mr. Phelps and Ms. Maio should have discovered the defects in Ms. Taylor’s verification of the subject complaint. The jurat states that the verification was executed in the State of New York and the County of Suffolk [the home county of plaintiff’s counsel], but the notary public who took the signature is Deborah Yamaguichi, a Florida notary public, not a New York notary public. Thus, the verification lacks merit and is a nullity. Further, Ms. Yamaguchi’s notarization states that Ms. Taylor’s verification was “Sworn to and subscribed before me this 4th day of June 2008.” Even if the jurat properly stated that it was executed in the State of Florida and the County of Duval, where Jacksonville is located, the oath failed to have a certificate required by CPLR


Ms. Maio should have consulted with a representative or representatives of plaintiff WAMU or is successors subsequent to receiving my November 9, 2010 order, not referring back to an alleged June 4, 2008 communication with “House Counsel.” Affirmations by plaintiff’s counsel in foreclosure actions, pursuant to Chief Administrative Judge Ann t. Pfau’s October 20, 2010 Administrative Order, mandates in foreclosure actions prospective communication by plaintiff’s counsel with plaintiff’s representative or representatives to prevent the widespread insufficiencies now found in foreclosure filings, such as: failure to review files to establish standing; filing of notarized affidavits that falsely attest to such review, and, “robosigning: of documents.


Editor’s Comment: I picked this up from but you can get it directly if want to read it all. There are three points I wish to draw your attention to:

  1. The realization that we have a systemic title problem that is getting worse daily.
  2. Neither the media nor the legislators get it: they say that they don’t want to “de-legitimize MERS”. WARNING: THIS PRESUMES THAT IT IS LEGITIMATE NOW. It isn’t. First of all MERS disclaimed any financial or property interest as a condition to being named on the mortgage or deed of trust so it is not only a nominee, it is nothing. You might just as well have filled in Donald Duck. Second the use of a nominee with undisclosed principals violates truth in lending laws and defeats the purpose of recording interests in real property. BOTH MERS and the LOAN ORIGINATOR were shills, straw-men, for undisclosed people who could be changed at will. Thus anyone examining the title would be required to take the word of a private party with no actual knowledge as to who should be considered the mortgagee at any point of time, which could change from minute to minute. Third not only is it wrong in principle it is wrong in fact: the MERS database is an unsecured database and intentionally designed as such. ANYONE can get a user name and password and change the data and they do. I’ve seen it. One minute the underwriter is listed as the “owner” and the next minute it is the servicer, and the next minute it is the named Trustee of the pool. So the question is really simple: Is it worth creating title chaos for decades to come and maybe forever just to save the skins of some megabanks that are completely unnecessary and whose presence in the marketplace is destroying the American position of world leadership?
  3. The remedy that is being piloted around the country is that they are bringing the foreclosures in the name of the loan originator. They call that a “work-around.” You might call it a shell game. This is what happens when the people with the money control the microphone and the people with the knowledge are sent to Siberia. Let me make it simple: the loan originator either was or was not the lender. They were the lender if the money came from their capital resources available under regulation for lending. If the money was wired in from, say, Wells Fargo with whom the  “loan Originator” had no account, or it was a wired from ANY source other than the “loan originator” then the money used by the closing agent was the money of an undisclosed third party. That is called a table-funded loan. Under Regulation Z, table funded loans as a pattern of practice are presumptively predatory and subject to rescission and other remedies. A table funded loan is a loan in which the real lender is not disclosed depriving the borrower of knowing who  he/she is doing business with amongst other things and its illegal and it should be. By definition it means that the party named on the note and mortgage is NOT the creditor. So if their “work-around” is to sue in the name of the loan originator, then in discovery you find that payments were directed to parties other than the originator. Why would that be if they were the lender?

In short, this dog won’t hunt. There is no way to fix the mortgages, notes and obligations without the investors direct participation and without the borrower’s participation. The banks don’t want to do that because when the investors and borrowers compare notes they are going to find that what they thought was the biggest fraud on earth, is really tens times worse. The test is easy: if the loans were real and everything was legitimate, the  why would you need MERS or a mortgage originator who isn’t the lender? If this is just a technicality, then why can’t they just fix it by bringing everyone into the courtroom or the negotiating table? The answer is they can’t and they don’t want to because they too busy milking this until there is no juice left — then  they might say OK here, take it. It reminds me of an old Buddy Hackett joke about a duck. remind me to tell it to you when nobody else is listening.


If sufficiently widespread, these complications could have a substantial effect on the mortgage market, inasmuch as it would destabilize or delegitimize a system that has been embedded in the mortgage market and used by multiple participants, both government and private. Although it is impossible to say at present what the ultimate result of litigation on MERS will be, holdings adverse to MERS could have significant consequences to the market.

according to a report released by Standard & Poor.s, ¡°most¡± market participants believe that it may be possible to solve any MERS-related problems by taking the mortgage out of MERS and putting it in the mortgage owner’s name prior to initiating a foreclosure proceeding.58 According to one expert, the odds that the status of MERS will be settled quickly are low.59


Posted on16 November 2010. Tags: , , , , , , ,



November 16, 2010
Examining the Consequences of Mortgage
Irregularities for Financial Stability and Foreclosure

*Submitted under Section 125(b)(1) of Title 1 of the Emergency Economic
Stabilization Act of 2008, Pub. L. No. 110-343

Excerpts beginning pg 19:

Various commentators have begun to ask whether the poor recordkeeping and error-filled
work exhibited in foreclosure proceedings, described above, is likely to have marked earlier
stages of the process as well. If so, the effect could be that rights were not properly transferred
during the securitization process such that title to the mortgage and the note might rest with
another party in the process other than the trust.44

iv. MERS

In addition to the concerns with the securitization process described above, a method
adopted by the mortgage securitization industry to track transfers of mortgage servicing rights
has come under question. A mortgage does not need to be recorded to be enforceable as between
the mortgagor and the mortgagee or subsequent transferee, but unless a mortgage is recorded, it
does not provide the mortgagee or its subsequent transferee with priority over subsequent
mortgagees or lien holders.4

During the housing boom, multiple rapid transfers of mortgages to facilitate securitization
made recordation of mortgages a more time-consuming, and expensive process than in the past.46
To alleviate the burden of recording every mortgage assignment, the mortgage securitization
industry created the Mortgage Electronic Registration Systems, Inc. (MERS), a company that
serves as the mortgagee of record in the county land records and runs a database that tracks
ownership and servicing rights of mortgage loans.47 MERS created a proxy or online registry
that would serve as the mortgagee of record, eliminating the need to prepare and record
subsequent transfers of servicing interests when they were transferred from one MERS member
to another.48 In essence, it attempted to create a paperless mortgage recording process overlying
the traditional, paper-intense mortgage tracking system, in which MERS would have standing to
initiate foreclosures.49

MERS experienced rapid growth during the housing boom. Since its inception in 1995,
66 million mortgages have been registered in the MERS system and 33 million MERS-registered
loans remain outstanding.50 During the summer of 2010, one expert estimated that MERS was
involved in 60 percent of mortgage loans originated in the United States.51

Widespread questions about the efficacy of the MERS model did not arise during the
boom, when home prices were escalating and the incidence of foreclosures was minimal.52 But
as foreclosures began to increase, and documentation irregularities surfaced in some cases and
raised questions about a wide range of legal issues, including the legality of foreclosure
proceedings in general,53 some litigants raised questions about the validity of MERS.54 There islimited case law to provide direction, but some state courts have rendered verdicts on the issue.
In Florida, for example, appellate courts have determined that MERS had standing to bring a
foreclosure proceeding.55 On the other hand, in Vermont, a court determined that MERS did not
have standing.56

In the absence of more guidance from state courts, it is difficult to ascertain the impact of
the use of MERS on the foreclosure process. The uncertainty is compounded by the fact that the
issue is rooted in state law and lies in the hands of 50 states. judges and legislatures. If states
adopt the Florida model, then the issue is likely to have a limited effect. However, if more states
adopt the Vermont model, then the issue may complicate the ability of various players in the
securitization process to enforce foreclosure liens.57 If sufficiently widespread, these
complications could have a substantial effect on the mortgage market, inasmuch as it would
destabilize or delegitimize a system that has been embedded in the mortgage market and used by
multiple participants, both government and private. Although it is impossible to say at present
what the ultimate result of litigation on MERS will be, holdings adverse to MERS could have
significant consequences to the market.

If courts do adopt the Vermont view, it is possible that the impact may be mitigated if
market participants devise a viable workaround. For example, according to a report released by
Standard & Poor.s, ¡°most¡± market participants believe that it may be possible to solve any
MERS-related problems by taking the mortgage out of MERS and putting it in the mortgage owner’s name prior to initiating a foreclosure proceeding.58 According to one expert, the odds
that the status of MERS will be settled quickly are low.59

Florida Appellate Courts Are Getting It — and so is everyone else

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EDITOR’S COMMENT: It all comes down to “black letter law.” None of this is new. It’s just that the pretender lenders thought they could side-step the process by making it LOOK like they were complying with the law. The failure to comply is not just indicative that they tried to short-cut the process like many people are saying in the media.

  • That would mean that they actually DO “own and hold and the note,”
  • that they COULD “tender the original promissory note to the trial court,” or
  • that they COULD prove a case to “re-establish the lost note under [Florida] State statute [673.3091].
  • It would also mean that they could show and prove that the original note was payable to the would-be forecloser OR
  • that the note had a special indorsement in favor of the forecloser
  • [OR, if it isn’t subject to the restrictions against blank indorsements in the securitization documents, that they had a blank indorsement.
  • In the securitization environment it would mean that they could show and prove that the would-be forecloser was the assignee of an assignment “from the payee to the plaintiff”
  • OR in a motion for summary judgment that is unopposed (no questions of fact in dispute) that they have an affidavit from a competent witness to prove the would-be forecloser is the owner and holder of the note.

There are several common-sense presumptions behind each one of these black letter law requirements. This isn’t technical stuff. It is substantive. If the party seeking foreclosure is not the creditor and doesn’t lawfully hold and own the note then THEY can’t foreclose no matter when the last payment was received from anyone including but not limited to the borrower, third party co-obligors set up in the securitization documents or government bailouts. If the loan is subject to foreclosure it can ONLY be by a party fitting the above description as stated in the above case in a per curium (unanimous) opinion of the appellate panel. The reason is not just that we have rules and you can’t pick and choose which rules you will follow and which you can’t.

The reason is that in foreclosure there is a change of ownership and title to the property. Any subsequent party, innocent or otherwise, must know with certainty that if they buy that property or lend money using that property as collateral, that the title is clear, marketable and free from any cloud or defect. Without that certainty, commerce comes to a virtual standstill. Not only would real estate transactions be thrown into chaos, but the principles behind the requirements for foreclosure also are applied to any other debt or the transfer of anything else, tangible or intangible. So if ANY court allows for even the possibility that disinterested parties could legally intervene in the chain without proving their right to do so, all of commerce comes to a halt.

Which brings us to my final point in this article: in the context of securitization, there is no such proof. That’s why they are faking it. If they had it, they would show it. The reason they don’t have it is that it never existed. What they want the courts to do NOW is to allow them to substitute fiction for fact. They want courts to allow them to submit either fake documents or documents that have no legal effect. The basic problem they have is that the evidence of transfers and change of ownership of the note does not reflect the original liability of the borrower nor the existence of the original real creditor. The original payee was not the lender. Thus the mortgage or deed of trust secures a note that is invalid. They can’t bring a legal action to modify the note to reflect the real lender because that would be admitting that they ever made the proper disclosures required under federal (TILA) and state lending laws.

The ONLY way they can correct the title problem, the chain of ownership problem (title and obligation) is by getting BOTH real parties in interest to agree and sign something ratifying such an arrangement or by getting a court to issue a judgment cramming such an arrangement down the throats of investors and borrowers alike. Since their problem is that the property was never worth what was represented and the loan terms, now revealed in all their glory, are not viable, it is impossible to imagine that the investors would agree to anything other than getting their money back or that the borrowers would agree to anything other than a correction of the terms and principal of the obligation to reflect the true value of the property and the losses incurred between the time of closing and the present time.

As brilliant as some of the schemers are, they based their entire framework on a completely unworkable presumption and thought they had the “risk” problem solved. Now Wall Street finds itself the cowardly owner of the risk — because they tried to split the obligation, note and mortgage each from the others in such a complex way, with repeated iterations of “assignment” of receivables that it is in reality not possible to correct in the real world. They convinced the government to be the lender of last resort when the crisis started, but now the FED is asking for its money back , as are the investors. The borrowers are filing individual and class action suits, and the opinions from the bench are turning against Wall Street in strong, angry language from the bench.

Every day it gets worse for Wall Street’s prospects. All eyes are on Wall Street and how they could survive. The answer is that Wall Street will survive because there are hundreds of investment banking firms that would be only too happy to fill the void left by the resolution of the megabanks. There are 7,000 community banks and credit unions, many with assets in the tens of billions, that could and would easily fill the retail banking void. The electronic funds transfer backbone already exists and is in use in all of these firms and banks.


“It is the culmination of the worst civil procedure nightmare we’ve ever imagined,” said Anne L. Weintraub, a real estate attorney at Sarasota’s Syprett Meshad law firm, referring to the recent appellate rulings.




Ruling might further complicate loan crisis

Published: Tuesday, November 9, 2010 at 1:00 a.m.
Last Modified: Monday, November 8, 2010 at 10:04 p.m.

( page of 4 )

Appellate courts in Tallahassee and West Palm Beach have admonished lower courts for allowing foreclosures to proceed without the proper paperwork and kicked the cases back to circuit judges in a move some experts say could further complicate the foreclosure crisis.

At issue is the use of sworn affidavits that convinced circuit judges the borrower’s original promissory note had been lost in the shuffle but that the lender still had a right to foreclose. Experts likened it to a used car dealer selling a vehicle using a photocopy of the title.

Circuit court judges have been using such promises to issue summary judgments, which have sped cases along at a time when the courts have been inundated.

Observers say the rulings from the 1st District Court of Appeal in Tallahassee and the 4th District Court of Appeal in West Palm Beach could become templates for more challenges.

It is unclear just how many cases could be affected — the chief judge in this region’s circuit says foreclosure paperwork is carefully scrutinized by teams of case managers — but the rulings come as the system already is dealing with disruptions from self-imposed bank moratoriums to deal with questionable paperwork.

“It is the culmination of the worst civil procedure nightmare we’ve ever imagined,” said Anne L. Weintraub, a real estate attorney at Sarasota’s Syprett Meshad law firm, referring to the recent appellate rulings.

What happens next could have widespread implications for the more than 200,000 Floridians who have lost their homes to foreclosure since January 2007, including the more than 12,000 in Manatee, Sarasota and Charlotte counties.

“Mere” Technicalities? OR Gross Malfeasance

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“… maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications — sensible adjustments that allow deserving families to stay in their homes. And if this happens, we’ll have the lawyers to thank.

“These may be technicalities, but there’s nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can’t be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.

“Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume “robo-signers” submitted affidavits attesting that they reviewed all the loan files personally — when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.

Lawyers got it right on the foreclosure mess

Homeowners facing foreclosure protest outside a J.P. Morgan Chase Bank in Oakland, Calif., in July.

by Eugene Robinson, Washington Post
Homeowners facing foreclosure protest outside a J.P. Morgan Chase Bank in Oakland, Calif., in July. (Paul Sakuma/associated Press)
Don’t blame the lawyers. The crisis over faulty or fraudulent paperwork in mortgage foreclosures — which is either a big deal or a humongous deal, depending on which experts you believe — is the fault of arrogant, greedy lenders who played fast and loose with the basic property rights of homeowners.Banks and other lenders, it seems, made statements in courts of law that turned out not to be true. Because judges have such an underdeveloped sense of humor when it comes to prevarication, this mess may be with us for a while. 

The mortgage industry would love to blame the whole thing on predatory, opportunistic lawyers who are seizing on mere technicalities to forestall untold numbers of foreclosures that should legitimately proceed. The bankers are right when they complain that the delays are gumming up the housing market, as potential buyers for soon-to-be-foreclosed properties are forced to bide their time until all the questions about documentation and proper title are answered.

But it’s the bankers’ fault that there are so many instances of foreclosure documentation with legal loopholes big enough to drive a moving van through. During the years of the real estate boom, lenders cut corners with paperwork to make as many loans — and sell them to other lenders, which often sliced and diced them into securities that were then sold to investors — as quickly as possible. This haste and inattention to detail, now coming to light, are partly responsible for the current crisis.

Laws vary from state to state, but all accept the principle that borrowers who fail to meet the contractual obligation to pay their mortgages can be subject to foreclosure and eviction. The process is devastating for families and for neighborhoods. In many cases, I believe, all parties would be better off if some way could be found to avoid foreclosure — modifying the terms of the loan, say, by lowering the interest rate or even reducing the principal to reflect the fall in housing prices. I recognize, however, that there are many other cases in which foreclosure is the preferable option or perhaps the only option.

But it’s also necessary that the mortgage holder have the legal right to foreclose. Anyone who has ever bought a house is familiar with the inches-thick stack of documents that have to be signed, sealed, initialed and notarized. It turns out that financial institutions often didn’t dot every “i” or cross every “t” — meaning that in some cases, it may not be clear that the nominal mortgage holder has the clear and undisputed right to take possession of the property.

These may be technicalities, but there’s nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can’t be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.

The other big problem is that lenders have been processing foreclosures with assembly-line speed, eliminating delay wherever possible — sometimes substituting electronic signatures for the ink-on-paper kind, for example. In the information age, some of this qualifies as sensible streamlining. But what doesn’t make sense is moving the foreclosure documents along so quickly, and in such overwhelming volume, that the people signing them — whether by computer or quill pen — couldn’t possibly have time to read them. We now know that some individuals, working as processors, have been signing off on up to 10,000 foreclosure documents a month.

In 23 states, every foreclosure must involve a court hearing. Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume “robo-signers” submitted affidavits attesting that they reviewed all the loan files personally — when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.

The Obama administration has declined to call for an official moratorium on foreclosures. This is understandable: In most cases a moratorium would just delay the inevitable, while impeding any momentum the housing market might otherwise be able to build.

But maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications — sensible adjustments that allow deserving families to stay in their homes. And if this happens, we’ll have the lawyers to thank.

Justice Department Probing Foreclosure Processes

Justice Department Probing Foreclosure Processes

Published: Wednesday, 6 Oct 2010 | 6:33 PM ET

The U.S. Justice Department said on Wednesday it was probing reports that the nation’s top mortgage lenders improperly evicted struggling borrowers from their homes as part of the devastating wave of foreclosures unleashed by the financial crisis.

Foreclosed Home
There has been a push by federal and state officials to suspend foreclosures after reports that banks signed large numbers of foreclosure affidavits without conducting a proper review.

Attorney General Eric Holder said the Justice Department would look into media reports that loan servicers improperly have used “robo-signers” to process foreclosure orders, stepping into a controversy that has forced at least three banks to halt eviction proceedings and prompted calls for an industry-wide moratorium on home repossession until the problems are fixed.

The move, coming before November’s congressional elections, takes aim at one of the most visible signs of the U.S. economic crisis, which saw hundreds of thousands of families lose their homes.

But it could risk further slowing the fragile U.S. economic recovery, leaving banks unsure about whether they will ever claw back their losses and the struggling housing market overshadowed by a mounting inventory of homes still likely to face foreclosure in future.


Key Points

Banks’ use of “robo-signers” under scrutiny by Justice Department.Wells Fargo agrees to offer loan modifications.North Carolina joins calls to suspend repossessionsOhio Attorney General sues GMAC, Ally Financial

House Speaker Nancy Pelosi and fellow Democrats wrote to Holder earlier this week asking the Justice Department look into the matter after receiving reports from thousands of homeowners about their foreclosure woes.

Separately on Wednesday, Wells Fargo [WFC  25.685  -0.265  (-1.02%)   ] agreed to pay eight states $24 million after allegations of deceptive marketing practices at its home loan unit. The firm said it would also alter its foreclosure prevention practices that could benefit struggling homeowners by more than $700 million.

The bank’s chief financial officer, Franklin Codel, told Reuters in an interview that Wells Fargo Home Mortgage did not cut corners to speed up the foreclosure process, and said he was “confident that the paperwork is being properly produced.”

In the aftermath of the financial crisis and ensuing recession, banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year and just 100,000 as recently as 2005, according to real estate data company RealtyTrac.

There has been a push by federal and state officials to suspend foreclosures after reports that banks signed large numbers of foreclosure affidavits without conducting a proper review.

Banks and loan servicers, companies that collect monthly mortgage payments, reportedly have used “robo-signers” — middle-ranking executives who signed thousands of affidavits a month claiming they were knowledgeable of the cases.

States Take Action

The issue on improper handling of foreclosures came to the fore last month when Ally Financial, formerly known as GMAC, revealed that officials had signed thousands of affidavits without having personal knowledge of the borrower’s situation.

Ally suspended evictions and post-foreclosure proceedings in 23 states last month. JPMorgan Chase [JPM  39.81  0.50  (+1.27%)   ] and Bank of America [BAC  13.169  -0.011  (-0.08%)   ] later said they were suspending some foreclosures in 23 states while they reviewed their practices.

Lenders are scrambling to defend and improve foreclosure procedures under scrutiny in state courts and from regulators.

The foreclosure issue and the battered state of the U.S. housing market have weighed on the Obama administration ahead of the November congressional elections in which the Democrats already face the possibility of big losses.

The administration has a $50 billion war chest to fight foreclosures, but disbursements have been limited because the program is narrowly tailored to help responsible borrowers.

Any broader push to resolve the crisis, such as the wholesale forgiveness of principal debt of struggling homeowners, is unlikely to find support among lawmakers because of the cost and the potential for political backlash from any move seen as rewarding reckless behavior by banks or borrowers.

The focus on bank procedures has thrown a new twist into the saga.

North Carolina’s attorney general, Roy Cooper, on Wednesday became the latest state official to ask lenders to suspend home repossessions as he expanded a probe into improper foreclosure processes.

Senator Robert Menendez earlier this week raised the idea of a national foreclosure moratorium, saying it was “simply inexcusable” that proper oversight procedures were not in place for actions that deprived families of their homes.

Menendez and Senator Al Franken, a fellow Democrat, also called for congressional investigators to look into reports of misconduct in the foreclosure practices of Ally, JPMorgan and Bank of America.

Ally Financial and its GMAC Mortgage unit also were targeted by Ohio’s attorney general on Wednesday. Attorney General Richard Cordray announced a lawsuit alleging fraud and violations of Ohio’s consumer law.

Cordray also said he has sought meetings with Citibank, Bank of America, JP Morgan Chase and Wells Fargo to try to ascertain whether their foreclosure processes include any of the “mass” signing of official papers that are the subject of the suit against GMAC Mortgage.

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