We pointed last week to an analysis by Lynn Syzmoniak that showed that foreclosures across a number of different servicers were way down in January 2011 versus the same period in January 2010. This was admittedly a tally in only two Florida counties, but she indicated that a quick look at other counties in Florida showed a similar pattern.
So the question then becomes: is this a Florida only development, due perhaps in part the fact that all the big foreclosure mills in the state are under investigation by the state AG and are imploding (as in losing clients and shedding staff)? Or is this a broader trend due to the robo signing scandal leading judges being more receptive to arguments about chain of title and validity of transfers? Before, the assumption was “bank right, borrower trying to abuse the law to stay in house”. Now more judges, seeing that banks have run roughshod over legal requirements, are prepared to give borrower arguments a hearing. That forces banks to up their game, which in turn may be the real driver for this apparent slowdown in foreclosure actions. If that was the main driver in Florida, we’d expect to see similar patterns in other states.
We are seeing analogous developments, but the drivers appear to be state specific, as judges give adverse rulings on common practices in foreclosure land. Reader wc4d pointed to a report in the Portland Oregonian, that lenders are withdrawing cases because five court decisions have found that lenders that used MERS violated state recording laws.
This is a vivid illustration of a point made in an article on MERS yesterday by Gretchen Morgenson:
MERS was flawed at conception, those critics say. The bankers who midwifed its birth hired Covington & Burling, a prominent Washington law firm, to research their proposal. Covington produced a memo that offered assurances that MERS could operate legally nationwide. No one, however, conducted a state-by-state study of real estate laws.
“They didn’t do the deep homework,” said an official involved in those discussions who spoke on condition of anonymity because he has clients involved with MERS. “So as far as anyone can tell their real theory was: ‘If we can get everyone on board, no judge will want to upend something that is reasonable and sensible and would screw up 70 percent of loans.’ ”
As we’ve also noted, recording clerks in single counties in Massachusetts and North Carolina are looking into how to recover recording fees from MERS, but the cost of litigation means they’d need other counties in the same states to join or the state attorney general to take up the matter. By contrast, the Oregon decisions don’t hit small fry MERS; they are a big problem for the banks themselves. As the Oregonian reports:
Sales of hundreds of foreclosed homes in Oregon have been halted or withdrawn in recent weeks after federal judges repeatedly questioned their legality, according to a number of real estate attorneys in the state.
Lenders have withdrawn more than 300 foreclosure sales since February in Deschutes County alone, one of the Oregon area’s hardest hit by the housing collapse. About 130 of those notices were filed in the past week, attorneys say.
Dozens of foreclosure listings by ReconTrust Co., the foreclosure arm of Bank of America Corp., have disappeared from its website, attorneys say…
Since October, federal judges in five separate Oregon cases have halted foreclosures involving MERS, saying its participation caused lenders to violate the state’s recording law. Three of those decisions came last month, the key one in U.S. Bankruptcy Court in Eugene.
Attorneys say it’s not clear whether lenders in Oregon will simply start over or head to court to foreclose, steps that could prolong the crisis for months and drive up costs, attorneys say. Some suggest lenders might not have access to the documents they need to comply with state law.
“A lot of us are questioning whether there is a solution,” said David Ambrose, a Portland attorney who represents lenders in mortgage transactions. “It’s pretty amazing. There are a lot of unanswered questions.” ….
In Oregon, lenders can foreclose without going to court. But state law also requires that the loan’s ownership history, or assignments, be recorded with local county governments before proceeding with a nonjudicial foreclosure.
In the Eugene court case, Donald E. McCoy III filed for bankruptcy protection in part to block U.S. Bank from foreclosing on his Central Point home. He then sued the bank and MERS, along with his original lender BNC Mortgage Inc., claiming they had not properly recorded BNC’s subsequent sale of the loan to investors.
Chief Bankruptcy Judge Frank R. Alley III found McCoy’s allegation persuasive and refused to grant the bank’s request for a dismissal.
“Oregon law permits foreclosure without the benefit of judicial proceeding only when the interest of the beneficiary (lender) is clearly documented in a public record,” Alley wrote. “When the public record is lacking, the foreclosing beneficiary must prove its interest in a judicial proceeding.”
This looks like an epic fail for the banks, at least in Oregon. To save maybe $50 on recording fees, they are now going to have to go to court to foreclose. And worse for them will be cases where the records don’t pass muster. Recall that servicers advance principal and interest to investors when borrowers become delinquent. They then reimburse themselves out of the foreclosure proceeds. No foreclosure and they are out a lot of dough.
As Morgenson’s source indicated, the banks brazenly assumed that the courts would simply roll over rather than block the extra-legal imposition of a new system. But there is enough of a semblance of rule of law in the US to undermine all the cost savings and corners-cutting they engaged in. Recall this recent New York decision:
This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.
The courts are delivering the banks an unrelenting series of deserved unkind cuts. This is getting to be interesting, and for a change, in a good way.
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Even if this doesn’t bode well for banksters, what does it mean for the health of banks and the overall economy? It may actually help as the economy continues to deteriorate that banks aren’t able to evict people from their homes, but it also means these homes are now unable to be sold, except under a clouded title.
There will need to be a national consensus about how to resolve title, and I’m sure the banks are lobbying the states Attorneys General hard to preserve title as security. As I understand the problem with MERS is the note was transferred, while the collateral interest was not. Does this mean that the loan underwriter owns title?
Also, Fannie Mae and Freddy Mac guarantee 97% of these loans, who would be able to make a claim in the event of a default?
If the dollar collapses, the promissory notes don’t disappear, they would be converted into whatever replaces the dollar, and the debt is still owed. Even in the event of a societal collapse, and we return to a standard of living that resembles the 19th century more than the 20th, there is still a County Register where these notes are recorded. Clearing title is going to be an issue, almost any way you look at it.
• “Even if this doesn’t bode well for banksters, what does it mean for the health of…the overall economy?”
I’m always suspicious of these appeals to collective utility, because all sorts of evil are justified in its name. If we scratch below the surface just a tad, what we often find lurking there is an advocacy for some sort of social Darwinism or totalitarian monopolistic capitalism:
Spencer is sometimes credited for the Social Darwinist model that applied the law of the survival of the fittest to society. Humanitarian impulses had to be resisted as nothing should be allowed to interfere with nature’s laws, including the social struggle for existence.
[….]
Whereas in biology the competition of various organisms can result in the death of a species or organism, the kind of competition Spencer advocated is closer to the one used by economists, where competing individuals or firms improve the well being of the rest of society.
—Herbert Spencer, Wikipedia
• “It may actually help as the economy continues to deteriorate that banks aren’t able to evict people from their homes, but it also means these homes are now unable to be sold, except under a clouded title.”
Is this true? Could these title problems not be worked out if all three parties involved—-the services, the trusts and the borrowers—-sit down at the bargaining table and come to a mutually satisfactory agreement?
• “There will need to be a national consensus about how to resolve title…”
Why?
Why the rush to replace the particular, the local and the timely with the universal, the general and the timeless? Each one of these cases is unique. Each requires a hearing to sort out the facts and the relative bargaining positions of the parties involved. Why the obsession with theoretical questions about law-in-general and not practical problems of jurisprudence relevant to particular current cases?
• “Fannie Mae and Freddy Mac guarantee 97% of these loans…”
What are you really trying to say, that the taxpayers are the ones ultimately on the hook? What if fraud can be demonstrated? Are taxpayers still on the hook?
• “If the dollar collapses…”
“Even in the event of a societal collapse, and we return to a standard of living that resembles the 19th century more than the 20th…”
Pure “shock doctrine.” If we don’t do something to indemnify the bankers for their stupidity or criminality “IMMEDIATELY!” the sky will fall.
The rule of law is what allows for a stable social system and a stable economy.
If the rich and powerful can ignore the laws while the poor and powerless are thrown in prison for the slightest infraction…. there goes the economy, there goes the social system, here comes either revolution of dictatorship.
The health of the economy is dependent on courts demanding that the powerful follow the law.
Somebody did this wrong.
First step: find a way to circumvent the law or change the law to benefit you and your particular scam.
Evidently the banks skipped that one and went directly to step two, “collect the fees and get the collateral”.
Any chance the more corrupt states will do as Oregon has done?
Yves, can you point the community to a copy of the Judge’s Opinion.
BNC Mortgage Inc. was a subsidiary of Lehman Brothers and was shuttered in August 2007. Did the Judge deal with those two issues (i.e. (1) how did a company which has not existed since at least 2008 properly convey the commercial paper in 2010 and (2) if the commercial paper was conveyed by BNC during the course of Lehman’s bankruptcy did the current owner obtain the necessary relief from the automatic stay in the Lehman Bankruptcy)
When the state/county judges draw their eye toward MERS and the securitization process, specifically the PSA, they will revert to NY law under which most MBS were formed and still controlled. We all now know where NY court stand on MERS.
Therefore, the violations of the PSA by the Trustees’ and Servicers is their Achilles Heel.
Using MERS, the Trustee and Master Sevicers bifurcated the note from the mortgage and violated the PSA by not properly transferring the note to the security, thus making the MBS an empty bucket. Hello SEC.
The Federal government can say or do what they like to make this go away; however, it will be the state courts that ultimately decides the Trustee’s fate and currently they are waking up to MERS and a lot of lost revenue.
For these Oregon federal court decisions, which raise questions about the legality of hundreds of foreclosures in the state, see
Burgett v. MERS, et al.,
http://media.oregonlive.com/business_impact/other/burgettcase.pdf
Ekerson v. MERS, CitiMortgage Inc., et al.,
http://media.oregonlive.com/business_impact/other/EkersonTRO.pdf
McCoy v. BNC Mortgage Inc., MERS, U.S. Bank, Finance America LLC, et al.,
http://media.oregonlive.com/business_impact/other/McCoy.pdf
Barnett v.BAC Home Loan Servicing LP, Federal National Mortgage Association fka Fannie Mae, ReconTrust Co., http://media.oregonlive.com/business_impact/other/BrownOrder.pdf
Rinegard-Guirma v. Bank of America, et al.
http://media.oregonlive.com/business_impact/other/King_ruling.pdf
The amount of foreclosures is dropping at a fast rate in Miami-Dade County, here are the 2010 statistics from the Clerks office in Miami:
January 4,128
February 4,880
March 3,245
April 3,449
May 2,621
June 2,840
July 2,901
August 3,158
September 3,206
October 1,720
November 1,106
December 1,146
Year-to-date: 34,400
I love the smell of schadenfreude in the morning.
Yves…was grateful to catch you on Harry Shearer’s sunday
show on NPR. Like Harry, I was somewhat overwhelmed by
the info you provided however…because our home and
acreage in southern Oregon was “liquidfied” in 2009,
I am paying much more attention than the average person.
Our mortgage was paid for in full each month and in a timely manner until the money ran out. (savings) Letters dating months prior were sent to who we thought had our papers. No one responded for a long period either by phone or by mail thus keeping us on edge and in the dark. When the foreclosure actually took place (Jan, 2010) it was in the hands of Bank of America. Originially it had been in the banking instition now called Chase. We asked for reductions in payments, continued residence in the home with partial payments, a statement as to who owned the papers, anything to keep the sand out of the bottom of the hourglass.
In retrospect, the turning of the tide for us was necessary
as my partner was diagnosed mid-2010 with pancreatic cancer
and we could not have kept on waging battle. This property was highly valued for its acreage, water rights and location just before values dipped. It was finally sold (2) years after foreclosure for less than one/half it’s reported value. According to your report, the provider and the investors still did fine. Seems very wrong as we went away with nothing but the stigma of failure for our past efforts of twenty-one years. Yes, the milk tastes very
sour but…from what is written in your blog, change may
be afoot. Keep us informed and thank you. MSchwimmer
There is no need to worry, Obama will not leave the banks swinging in the wind.
Sooner or later the Home Purchase Streamlining and Modernization Act (HOP-SMAC) will wave a magic wand and fix everything for the banks.
It will happen faster than Poppy Bush getting young Dubya out of a DUI.
Yves,
The larger factor than MERS are the attorneys!!!
I am willing to bet that the main reasons Florida’s foreclosures are down are:
April Charney
Matt Weidner
Greg Clark
Tom Ice and many other Consumer Advocates and Defenders of the Constitution.
There are well over 2 dozen Great Lawyers that are relentlessly trying to make a difference in Florida.
In contrast, in Nevada there are only 4 Great Lawyers working against the tide.
Behind almost every one of the anti-bankster ruling, there is a Great Lawyer attempting to uphold a rule of law.
This is the MOST IMPORTANT untold story of this Crisis.
There are just a bit over a million lawyers in US. Where is the Million Lawyer March? There is probably less than 300(if that) lawyers working to uphold the law on behalf of our people. This is the true crisis in representation.
There was a great piece “Crisis in Representation” published by Brennan Center for Justice in October 2009 and this issue has been greatly amplified since, due to astronomical rise in defaults tied to negative equity.
On a personal level I am very fortunate as I have ALL 4 of the Nevada’s Great Lawyers working on my case in some capacity. A real Dream Team!
But… there are a millions of families in desperate need across our great country and unless more attorneys join our quest for resolution there will be many more darker years ahead.
I sincerely hope that you and any other person that truly cares will help me to publicize this issue.
History will judge every-one’s actions, it always does.
I welcome all comments at: providencegroup@ymail.com
Relentlessly battling Banksters in Nevada,
Bill Kay