When Should County Recorders Refuse to Record Documents?

This question cuts both ways since homeowners have filed or tried to file various documents that cloud the title until a dispute is resolved. But the focus of today’s conference is on the filings by “new” beneficiaries and “new”substituted trustees” and deeds on foreclosures executed by “authorized signors” for the “Substituted trustees.”

County Recorders are clearly upset about the status of title chains in their records as a result of the dubious documents filed by banks, servicers and their attorneys and trustees.

Those include people like Helen Purcel, County recorder for Maricopa County in Arizona who stated publicly and directly that the MERS documentation alone raises serious questions about the clarity of title in hundreds of thousands of title chains. She says she doesn’t have the resources from the state to do a proper investigation and offers by private groups to fund or actually perform the investigation have been rebuffed. But she stands by her comments that title is in doubt, which creates uncertainty in the marketplace for anyone purchasing or refinancing a home.

The real question is whether the documents electronically filed in Maricopa county from “trusted sources” can be trusted at all. Many documents have been robo-signed, surrogate signed or signed without any apparent authorization. An “authorized signor” is a term used in banking to allow other people to sign checks and perform other functions on bank accounts but does not convey ownership of the account. Similarly “authorized signors” therefore by definition do not have ownership or authority to sign for an owner unless there is proper paperwork to back it up or it is specifically allowed by statutes.

The authorized paperwork that SHOULD accompany a valid document for recording should meet the same standards that the banks apply when accepting documents from consumers or borrowers. If you are signing on behalf of a corporate entity, it should show that the proper corporate resolution has been been passed by the proper people specifically allowing the signor to execute the document on behalf of the entity — whether it is a corporate entity, trust or anything else.

Many of the assignments or substitutions of trustee come to the recorder without any evidence of the actual authority to execute such a document. They  specifically refer to powers of attorney or authorizations or prior assignments that are not in the title record and not offered with the document offered to be recorded.

So for example if the substitution of trustee is signed by John Jones, authorized signor for ABC Corp., as attorney in fact for DEF Corp, as assignor from GHI Corp., as trustee for the the holders of mortgage backed securities, there are several open questions raised by the document itself.

A Bank would require that John Jones produce signed resolutions from the ABC Corp and probably require the presence of the the signers and proof that the ABC Corp exists and that the those who executed the resolution had the power to do so. Yet the Banks turn around and submit such documents without the authority being recited or shown or attached to the “Substitution of trustee” and without any affidavit from anyone saying that the resolution is correct.

A Bank would require that that if ABC Corp not only authorized John Jones to sign but would demand that the power of attorney from DEF Corp be produced and verified. And the Bank would most likely have the signatures on file of those people who maintain accounts as “owners” so they could be sure that they were getting the right instructions from the right person. And they still might demand, despite the presence of a notary stamp, that the persons produce identification of some sort. But this doesn’t stop them from recording documents without any of those assurances when it suits them.

A Bank would require that an assignment be recorded and that it be verified and authorized just as stated above along with an affidavit from appropriate people that the assignment took place and might even require proof of money exchanging hands. Otherwise they are just taking a piece of paper that is supported by consideration. But banks record such documents as “trusted sources” all the time.

All that said, the county recorder is put on the spot. If you go to the extreme, which is what the banks are saying, then even if the recorder was told directly by the person filing the bogus document that there was no authority, there were no resolutions, there was no power of attorney executed or authorized by whoever executed one, and that there was no trust that was funded or owned anything, the county recorder has no powers to reject the document for recording. But the same recorders are rejecting similar documents under one theory or another sent down from the County Attorney office — if they come from borrowers.

The County recorder is administrative agency and as such should provide some administrative remedies to at least hear the issues that might be presented by the borrower when challenging the previous recording or the attempted recording of a bogus or dubious document. The recorder is bound by statute by obviously there is lots of room for interpretation when it comes to filings by borrowers rather than the alleged “pretender lenders.”

In the end, the County recorder had best be prepared to be called into court and testify as to the integrity of the county recording system and whether they have an opinion as to whether title has been corrupted in their county and specifically whether a document should have been recorded after it is shown that the proper authority and ownership was not already in the title record and not presented at time of recording of a single document.

Either way they go, they are likely to be presented with a lawsuit from one side or the other. If they start looking at documents from all sources and asking questions about the authority of a person to sign a document, they will face the wrath of banks who are trying to slip by on theories that go against every standard in their own industry.

Some recorders have done the studies and all of them have concluded that large percentages of the filings were bogus or questionable. This will lead to future title litigation that might well be endless considering the number of transactions that supposedly occurred, albeit without any consideration “for value received”.

The deed on foreclosure executed after a supposed auction is often signed and submitted by someone without any knowledge of the transaction at all. The person is frequently a hired contractor who is there to say they have a bid from the “creditor” of X number of dollars, that the bid is accepted and the deed issues without payment of any actual money because it is presumed that the bidder was the authorized creditor, when in fact in most cases they are not.

This not only puts in doubt most of the foreclosure “sales” and future title transfers but also the eviction actions that often follows. The referee in all this is supposedly the county recorders’ offices. But they are genuinely confused about their powers and obligations in this unprecedented situation.

Vacate the Substitution of Trustee

“The Bottom Line is that if the REMIC transactions were real, they would have been named on the note and mortgage. The fact that they never were named or disclosed demonstrates clearly that something else was going on besides funding mortgages with REMIC money from investors. Nobody would loan money without putting their name as payee on the note, their name as lender on the note and mortgage and their name as beneficiary. The Wall Street explanation that MERS and other obscurities were necessary to securitize the loans is in fact directly contrary to the fact that the loans were never securitized, that the mortgage bonds were bogus obligations from empty REMICs with no bank account and no active manager or trustee.” Neil F Garfield, livinglies.me

A recent case I reviewed, resulted in a full analysis, and my suggestions for strategy, tactics, pleading and oral argument. It involved Bank of America,  Recontrust and BONY/Mellon.

What is again so interesting is that we are dealing with BOA in SImi Valley, CA (supposedly) with Reconstrust in in in Richardson, TX. What is interesting is that the response to my letter which was addressed only to Recontrust came from BOA. This is evidence of the fact that Recontrust are one and the same entity. It doesn’t prove it but it is evidence of it. Thus the challenge to the substitution of trustee comes under the heading that a beneficiary cannot name itself as the trustee. The statute says the TRUSTOR names the trustee on the deed of trust not the beneficiary. And while the beneficiary may change the trustee there is nothing in the statute that even suggests that a beneficiary could name itself as the new trustee. The statute says that the trustee is to substitute for a court of law and that it is to exercise (See Hogan decision and others) a fiduciary duty toward both the Trustor and the beneficiary.

In most cases, the appearance of Bank of America as a beneficiary is via “merger with BAC” which was created to take the servicing rights from Countrywide (not the ownership of the loan). Yet the debt validation letter causes a response to show that the creditor is Bank of America while the Notice of Default shows as having a REMIC as the creditor, which would make the REMIC the beneficiary. So we have a conflict of creditors that comes from the same source.

Since the REMIC is required by law and contract to be closed out within 90 days with the loans in it, and since we know they didn’t do that, the money from the investors was beyond any reasonable doubt channeled through  conduits controlled by the investment banker and not the account of the REMIC because there was no trust account, bank account or any account through which the investor money was channeled and then sued to fund or buy loans. This leads to the inevitable conclusion that the entire scheme is a smoke screen for what really occurred.

Based upon what we know, the REMIC structure was actually ignored when it came to the movement of money. Based upon what we know, Quicken Loans and others acted as “originators”, which is a word that is not really defined legally but it would imply that it was the sales entity to reel in borrowers for a deal. While Quicken Loans was shown as payee on the note and lender on the note and mortgage (deed of trust), Quicken had neither loaned any money nor secured the loan through any legal nexus between Quicken and the investors. MERS was inserted as a placeholder for title purposes. Quicken was thus inserted as a placeholder for payment purposes — all without ad  equate disclosure of the compensation received by MERS or QUICKEN in the deal (a clear violation of TILA and RESPA).

Immediately after the closing of the loan the borrower was informed that the servicing rights had been transferred to Countrywide, and thereafter BAC emerged as the servicer. BAC was formed as a wholly owned subsidiary of bank of America and then merged with Bank of America for unknown reasons, and thus the servicing of the loan was assumed to be the right of Bank of America. But what was there to service?

If Quicken did not advance the funds for the loan nor did Quicken or any of its “successors” advance money for the purchase of a perfectly performing loan, then who did? The answer comes from irrefutable logic. We know the REMIC was ignored so the money didn’t come from the REMIC. If there was an intermediary who was acting as agent for the REMIC it had to be the Trustee for the REMIC who has no trust account or bank account to show for it. Thus the money came from another source and the money taken from investors may or may not have been used to fund the borrower’s loan in this case or more likely, a larger pool of investor funds was used as the source of funding but was NOT documented with the usual promissory note and mortgage (deed of trust) signed by the borrower.

The legal conclusion I reach is that the mountain of paperwork starting with the “origination” of the loan is worthless paper unsupported by either consideration (funding the loan) and whose recitations of facts are at variance with (1) the actual trail of money and (2) the provisions of the documents upon which Bank of America now relies requiring assignment of the loan in recordable form into the REMIC within 90 days while it was still performing. But they couldn’t assign it into the trust because (1) the trust had no money or account with which to pay for the loan and (2) this would have prevented the investment bank from trading the loan and the loan portfolios as if it were the property of the investment bank.

Thus Bank of America is attempting to appear as the new beneficiary based upon a complete lack of any chain of transactions that would make it so. And they are using the cover of BONY as “trustee” as cover for their false and fraudulent representations knowing full well that neither BONY nor the REMIC ever received a dime from investors, borrowers or anyone else and that instead the flow of money was entirely outside the sham paper transactions upon which BOA now relies.

Having covered up an incomplete unexecuted contract without funding the loan, the securitization participants proceeded to act as though the loan transaction with Quicken was real. If they relied upon the original trustee, the original trustee would have required sufficient title and other information from BOA before taking any action against the Trustor borrower.

Thus Bank of America names Reconstrust as the substitute trustee, that will “play ball” with them because Recontrust is owned and controlled by Bank of America. The challenge, as we have said, should be to the substitution of trustee as not having named an objective third party and instead being the equivalent of the beneficiary naming itself as trustee. BY definition, the new trustee is neither likely nor able to exercise due diligence and act in a responsible manner with a  fiduciary duty to the trustor and beneficiary, if they can determine the  identity of the beneficiary.

Thus any TRO or other action should be directed against the substitution of trustee as being outside the intent of the statute and violative of due process since it provides the beneficiary with unfettered ability to sell property merely on a whim.  In order to demonstrate compliance with the requirements of constitutional dude process the legislature had to show that there was a different procedure in place that would allow for the claims of all stakeholders to be heard. Even if the substitution of trustee was valid, the mere denial of the claims of the beneficiary and accusations of fraud, false assignments, and a closing at which the mortgage lien was not perfected, on a note that did not  name the proper payee nor state the same terms of repayment that the investors received when they “bought” the bogus mortgage bonds.

Bottom Line: The Pile of paperwork is worthless and does not create nor provide evidence of an actual transaction that took place wherein the named payee and lender ever fulfilled its part of the bargain — lending money to the borrower. Nor does it present even the possibility of a perfected mortgage lien. Thus foreclosure is impossible. The trustee was and is under an obligation in contested cases to file an interpleader action where the stakeholders’ claims may be heard on the merits. The primary trustee on the deed of trust may have violated its fiduciary duties by allowing the practice that it, of all entities, would or should have known was both illegal and improper. For both procedural and substantive reasons, the notice of default and notice of sale should be vacated and purged from the county records.

%d bloggers like this: