We have pointed out several times that banks were being awfully optimistic in assuming that they could simply replace improper “robo signed” affidavits with ones that were done correctly. The submission of a phony affidavit is a fraud on the court. The lawyers involved are subject to sanctions and judges could reject the filing, forcing banks to restart foreclosures from scratch.
The Ohio attorney general is using the leverage this situation presents to turn the table on banks. From the Wall Street Journal:
In two letters released Friday, Attorney General Richard Cordray criticized a number of banks and loan-servicing companies, including Wells Fargo & Co.; Ally Financial Inc.’s GMAC Mortgage; Bank of America Corp.; and J.P. Morgan Chase & Co. Mr. Cordray said the banks are trying to paper over fraud committed in foreclosures with temporary fixes that don’t address underlying problems in the banks’ practices.
“It is not acceptable for a party who believes they submitted false court documents to merely replace those documents. Wells Fargo and any other banks are not simply allowed a ‘do-over,'” he wrote in the letter to Wells. The other letter was sent to Ohio judges, who were asked to notify Mr. Cordray when banks file substitute affidavits….
“The banks are committing fraud on the court, essentially perjury, and then saying ‘Whoops! You caught me! Here’s some different evidence and use that instead,’ ” Mr. Cordray said in an interview Friday. “I know a lot of judges are not going to take kindly to that.”
Amusingly, Wells Fargo, the most self-righteous of the big banks (it went from claiming its practices were fine and falsely claiming it had no robo signers to suddenly deciding it had to resubmit 55,000 affidavits), does not get it:
A Wells Fargo spokeswoman said Friday the company intends to cooperate with Mr. Cordray’s inquiries and doesn’t “believe that any of these instances led to foreclosures which should not have otherwise occurred.” She added that Wells Fargo has “chosen to submit supplemental affidavits out of an abundance of caution.”
It’s going to be even more fun if more state AGs decide to put banks through the unfamiliar process of respecting the law.
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Here’s one point that’s still not clear to me. Aren’t re-submitted affidavits still going to be fraudulent? After all, if they really had the proper notes in the first place, why would they need affidavits at all, except for the very rare exceptions where a note truly was lost as opposed to “lost”, i.e. never conveyed?
So aren’t resubmitted affidavits just going to be better-prepared forgeries?
The affidavits weren’t necessarily lost note affidavits. And they may even have the note. The were just using robo-signers because it was faster and cheaper. The fraud was in the way the affidavits were created, not due to their content.
Banksters committing fraud and then trying to gloss over it? Say it isn’t so!
Notes from The Firey Pit
I’m a bit embarrased that I still have a checking account at Citibank. Usually it has about $1000 in it. That’s all. I’ve had it for about 15 years and I want to close it, but I’m too overworked and too lazy to find the time.
The other thing is the lobby staff and the tellers. They are so friendly. Full of greetings and smiles. Yeah, I know they’re trained that way and I’m just a “customer”. Anyway, it’s still nice.
There’s this one dude, a teller, who I took one first look at and I heard the word, in the quiet of my mind, “musician”. I knew. So I asked him when I got to the window, “Are you a musician?” And he looked at me, without any surpise, and he said “Yes, I am.” There’s another. A young woman. A real beauty from Staten Island. Recently a mom. She has an angelic vibe and a celestially warm smile, like she could be a saint in some paiting by Raphael.
Funny, how you just know things sometimes. So when I think of the sick bankster liars at the tops of these firms I also think of the lobby staff and the tellers. What do they know? Probably not much, probably nothing. But they get drug along as crew on the big slave ship. And then, because they know nothing except for important things — like music and being a mom — they naturally assume the best about their ship and its captains.
So after a while the tribal bond winds through consciousness like a weed. And the attacks on the ship beget defenses and indignation and the musician and the mom get pulled in to the fiery pit, defending the ship because its their ship and the captains give pep talks, and they want to believe or they have no ship at all.
For some reason I think of the musician and the mom, and not the ship, and so I’ve been too lazy to move my one thousand dollars to some credit union. Who knows? Maybe the credit union is run by a guy who beats his wife and daughter? And then what will I have accomplished? LOL
Anyway, there’s a point when the ship gets bigger, too bit to ignore, and the angels get smaller. And then it’s just massacre of the innocents, another death by banksters.
“an abundance of caution”
Goodness, what must my neighbors think?
QUESTION: Is there any movement on the other side of the fraud, i.e., the MBS investors v. the packagers (Goldman, JPM, Merril, etc.) Maiden Lane III, for example sitting in the Fed – there is a Congressionally mandated audit at the Fed under way, is there not? Anyone have any informmation or links to reports that the GS or others are being pressured to “produce the note” that is supposed already to sitting with the trusts? While it is admirable that the states are doing what the Justice Dept. won’t – and are likely in better position to deal with real properties’ chain of title, it would seem to me that the MBS packagers, whetherr they retain any interest, are nonetheless liable for their representations to the investors as being fraudulent primma facie if the promised transfers either did not occur, or the trusts were given falsified documments??
Very good lawyerly post on the UCC and evidence issues, especially on the lost note affidavit issues.
The argument that possession of the note is archaic shows that Professor Whitman is a RE guy and not a note guy. There is a very good and still very current reason that physical possession of the note remains important — you don’t want the note sold twice.
Given the velocity and numbers of note transfers along with the exotic way IBs repackaged the notes, lots of notes may have been sold twice, maybe thrice. There have been some posts on this point on this earlier this week.
Judicial foreclosures in most cases are what are known as “paper cases.” That is, all or almost all of the evidence submitted are documents and the court makes its decision based upon the contents of those documents and what is asked for in the complaint.
Affidavits serve three distinct functions in these cases and most reporting fails to account for the differences. While practice varies from state to state, or even law firm to law firm, the concepts are the same regardless of jurisdiction.
First, in a document case, while copies and/or originals may be submitted as evidence (either at the pleading stage or in support of a motion – usually summary judgment), all evidence requires a “foundation” to establish its relevance and its materiality. The purpose of foundation requirement is to tie the submitted evidence to the particular case, as well as establish that there is someone standing behind the evidence with relevant personal knowledge who could testify in court to those same facts to prove the case pleaded, if necessary (that is, if there were an objection). This requirement cuts across many of the rules of evidence: relevance, materiality, authenticity, admissible hearsay, etc. In my small-time practice, I would never submit a document which either I had not authenticated or my client had not. This is where the nuances come in. Frequently, I submit copies of documents I know also to be copies, but they are official copies as they appear in public records. There is statutory authorization to do this – to submit an official certified copy as an original. The other variety of this is where a client gives me a document: if it is an original, I include it in my own affidavit. If it is a copy, I have them sign an affidavit stating that it is a copy of the original.
Second, judicial foreclosures require a statement of default. This is a hearsay statement that is difficult to unpack as to what actually constitutes “personal knowledge.” Generally, it either a statement that upon review of a “business record,” a default has occurred (double hearsay – the statement itself is hearsay and the business record is hearsay), or that the “business record” itself establishes default, and it is being submitted with a foundational affidavit attesting to its relevance, materiality, authenticity, etc. IMO, lenders have a lot of leeway on this.
Third, if the original note is not submitted, a “lost note affidavit” is required both under the rules of evidence (the “best evidence rule”), and (sort of) under the UCC (assuming that the UCC is applicable, or if not, under state law governing non-negotiable notes). Essentially, both the rules of evidence and the UCC require that the purported note-holder establish that not only is the note unavailable as an original, but a sufficient reason why it is not. For example, “we don’t budget for digging these out of archived files” is not (should not be) sufficient. Disclaimer: I am in a jurisdiction where producing the note is virtually never required, so my knowledge of this area is very limited. That said, I received a very interesting listserv post yesterday by Prof. Dale Whitman (“Nelson & Whitman, Real Estate Transfer, Finance & Development”):
“3. There’s an exception to the possession requirement if the putative holder of the note provides a lost note affidavit. Unfortunately, most lost note affidavits are simply lies; the note was not really lost by the putative holder at all, because it was never transferred to him (or it) in the first place. The version of Article 3 in force in most states does not allow the putative holder to use a lost note affidavit unless he’s the one who lost the note. To the extent that courts actually scrutinize these affidavits, many of them are going to be kicked out.
4. These rules are, in my opinion, obsolete and stupid, but they are still the rules. This means that, unless someone finds the note and transfers it to the investor or the servicer who represents the investor, the foreclosure can’t go forward. Of course, this result bears no resemblance to a rational system of foreclosure moratoria, forbearance, or other sensible consumer relief; its outcome depends purely on luck — in other words, whether a particular borrower was luckly enough to have a stupid or sloppy investor buy his or her loan. I find this odious (unlike April [Charney], who I think finds it deeply satisfying), but whatever one thinks of it, it’s true.
5. The argument that the originator of the loan is holding the note for the benefit of (or as the trustee of, or as the bailee of, or whatever version of that argument you like) the secondary market investor simply won’t fly. There is no trust, bailment, or other agreement between the two parties providing for such holding or possession, and the case law (admittedly not much) is distinctly adverse to such arguments. In any event, the originator probably can’t find the note, and the court in a judicial foreclosure is very likely to insist on seeing it.” (End quote)
So, whether an affidavit serves all three functions, or whether three affidavits are required to make the case, what is really important is what statements are being finessed (legally), fudged or falsified (both illegally).
Two of three by my count.
Dale Whitman is very pro-lender, and the fact that he is saying what he is, is very bad news for lenders. It’s worth pointing out that he is a real estate guy, not a “note” guy, but no one has challenged him on his conclusions. (In a nutshell, he has been arguing for a while that lenders simply did not care what the law of notes was, and consequently didn’t bother to update the law to make it suitable for the originate to distribute/securitize model of lending. And he argues pretty strongly that current note law is a very bad fit for securitization, and thus paragraph 4).
The fraud is not limited to falsified affidavits filed in court in judicial foreclosure states. The same type of fraud occurred with respect to mortgage assignments which were recorded in the local land recording office in non-judicial foreclosure states – i.e, forged signatures and notaries falsely attesting that the signer personally appeared before them (and that’s assuming the notary’s signature wasn’t forged). And even if/when assignments were properly executed, many were done long after the securitization trust’s closing date. A forged assignment does not validly transfer title to a note or mortgage to the assignee. In foreclosure cases where a forged assignment is involved, the foreclosing party does not own the mortgage and lacks standing to foreclose. Yves, if you need some examples of forged mortgage assigments, I’ll be happy to provide them.
Cordray will get my vote on Tuesday, but I’m not sure if he’ll win. The banks haev two major canidates here in OH. Kasich is a former Lehman employee running for governonr and DeWine has taken millions from banks as a US Senator. He’s running to replace Cordray. It’s so obvious they are the cronies of bankers but my friends in OH don’t get it…So all of this with Cordray and the banks could end on Wed. morning.
I said it was fraud. I didn’t say it was the same kind of fraud as a forged affidavit, which is essentially perjury. In the non-judicial foreclosure state where I practice, only the party that owns the mortgage can foreclose (with some minor exceptions). If the foreclosing party acquired the mortgage by assignment and the assignment was forged/not executed with the requisite legal formalities, etc., then the assignment did not transfer title to the mortgage and the foreclosing party has no standing to foreclose. The lack of a valid mortgage assignment is a legitimate foreclosure defense.
“The fraud is not limited to falsified affidavits filed in court in judicial foreclosure states. The same type of fraud occurred with respect to mortgage assignments which were recorded in the local land recording office in non-judicial foreclosure states – i.e, forged signatures and notaries falsely attesting that the signer personally appeared before them (and that’s assuming the notary’s signature wasn’t forged). And even if/when assignments were properly executed, many were done long after the securitization trust’s closing date.”
No, this is not the same kind of fraud, even if it is the same quantitave level of evil. It is far more difficult to prove, assuming the same quantitative level of evil. “Kind” is “qualitative.”
It is not clear at all (to me) why anybody but an assingnee would have standing to allege forgery, and they have every reason in the world not to allege it (publicly).
The qualitative difference is what makes Prof. Whitman’s paragragh 4 so important. If you happen to be an American who suffered evil in a judicial state, today is your lucky day. If you happen to be an American who suffered an equivalent evil in a non-judicial state, no soup for you.
If you are talking about forgeries in the context of the filing in the appropriate office of the county where the property is located it is a forgery with respect to the county and the state. In Ohio filing a document, intentionally and knowingly containing untrue information is a crime. And we aren’t even talking about the affidavit before the court yet.
In many cases (until judges put a stop to it) the affidavit and the county filings would not be in agreement and that was certain to be dismissed without prejudice on its face as the plaintiff was not the proper party at the time of the court filing.
This becomes important in Ohio because on refiling it is a virtual certainty that the motion for summary judgment on behalf of the plaintiff will be denied precisely because a previous entity came to court claiming ownership. This opens the door for further litigation including whether the full and complete chain of ownership including ALL intervening assignments are present. Further this brings the robo signers into the fray – or any signer for the matter as often times they will have signed not only the court documents but the county filings as well under multiple titles and often for both sides of each transfer including back dated transfers. Not to mention back dated assignments from defunct entities.
The big fraud that may be going on in Ohio and other jurisdictions has to do with mortgages that were in at least one prior MBS entity that no longer exists. Those defunct entities cannot transfer after the fact of their extinction nor does the power of attorney they granted survive that extinction. People in foreclosure in Ohio who have mortgages that are older than 10 years may, in fact, not have any party with the power to foreclose. Further under the debt collection laws it may turn out that the true party that owns the note never attempted to collect the debt nor did the borrower ever make a payment for 10 years which would completely void the debt.
Many of the attempts to refile and “correct” their previous affidavits are really an untested end-run where the plaintiffs are attempting to treat mortgages and promissory notes like chattel. A defendant and/or the court should challenge this and put this test on the record.
The simple solution to this problem would have required the entities to do the proper paperwork whenever it was supposed to happen. But instead they wanted to save themselves perhaps $100 on a mortgage and put that in their pocket. They should reap what they sow. What is their excuse? We didn’t know the courts would hold us to the law?
I can’t imagine that the judges can be happy at having their courtrooms splattered in the newspapers as accepting fraudulent documents.
At what point in time do the judges themselves start finding people in contempt of court on this issue, even if AGs don’t push perjury and fraud?
And finally, this was Prof. Patrick Randolph’s (“Pat” – the list admin) question to Dale:
“Pat sez: Dale, in light of your views expressed here, have you given any thought as to whether a delivery of the note outside the 60 day window violates not only REMIC rules (as alleged by others) but also frustrates the assignees ability to foreclose?
Pat is also very pro-lender, FWIW. But the question is the [multi] Trillion Dollar one and the answer is far from obvious. To put it bluntly, does [rampant and wholesale] tax evasion equal invalid conveyances?
I would add: do peculiarities of New York (and Delaware) trust laws make those conveyances invalid?
If so, there are a lot of people who don’t understand WTFTD who charge $650 plus per hour to their clients, and that’s a good story in itself. I remember hearing that Yale grads had the worst top 100 school bar exam pass rates (3rd tier graduate schadenfreude – urban legend?).
“At what point in time do the judges themselves start finding people in contempt of court on this issue, even if AGs don’t push perjury and fraud?”
I can assure you, that some judge will. I would even venture that 10% of judges dealing with these cases will. I would even venture to say that 99% of judges have severe indigestion over this.
Expect stories like this to end after Nov. 2. Here’s hoping a few more AGs feel like getting their names in the headlines of populist-type stories
Interesting dichotomy: populist versus rule of law. Here, I would say that it is the populists who are making the rule of law argument, not the “run-rough-shod-over-it-for-the-sake-of-whatever-result-we-want” argument (which is a good reason to be suspicious and restrained in the face of populist demands, btw). This is pretty basic letter of the law versus spirit of the law, judicial restraint/judicial activist, honesty versus prejury stuff here; in short, why I shit-canned my Federalist Society affiliation long ago. Blantant dishonesty shouldn’t be aided by activism and “judicial stretch.”
I’m just sayin’.
no disrespect turtles: “blantant” is obviously “blatant.”
This is Sad:
However, gird yourselves. The manure has already hit the air circulation device. We just don’t want accept it..:(
“Now I’m not as smart as them lawyer guys….”(Robert Service)
But, it just became stunningly obvious to me from reading what you people (smarter people) have posted:
The current situation has now destroyed debt enforcement and any possibility of claiming ownership of many non pricipal residences.
In simple terms; anyone occuping a home cannot be evicted if they do not confess that they don’t own it. Any vacant home is subject to seizure by ‘squatters’, with the burden of proof resting on the plaintiff.
We are back to a primitive state where “Possesion is nine tenths of the law.” Any law enforcement agencies who physically evict without proper proof of title are infact breaking the laws they swear to uphold.
And all of this has been visited upon us by Greedy Banksters, who ignored the very rule of law they seek remedy from.
Do not for one moment imagine that I advocate “squatting”.
I consider squatting to be a form of theft. However, there are many smarter people than I in this world and many who are always on the outlook to ‘get something for nothing’; the very mindset which has landed us in this stinking mess.
I believe that ownership should only be earned by effort and merit. The difficulty arrises when we try to differentiate between the relative merits of Lenders fraudulent practices and squatters frudulent practices.
As someone who has and does advocate organized mass squatting to put the vagrant land into food production, I’ll try asking this again, because no one answers: from whom is it “theft”?
Not the big banks, not the government; both are criminal organizations which stole the land from the people in the first place. It’s morally and conceptually incoherent to say it’s possible to steal use of land from them.
So from whom?
Didn’t I just see you on the other thread sticking up for anarchism? Property is Theft!
‘Tempter; we agree on most things. But, face it, most residential property is not suitable for “food production”. And most people, (99%) are not capable of growing sustainable crops.
The reason I mention theft is that the first people hit by this ould not be the banks and mortgage companies. They have batallions of lawyers and access to law enforcement mechanisms. The first people hit would be those who through hard work and prudence have earned enough resources to “own” more than one residence, or those who have moved to condos or seniors residences and rented out their spare home. Before this ever impacts the big players, it will destroy many little people.
I support Anarchism because Big government and Big business do not serve our needs. I do not support a lawless society. There is one valid reason for the existence of government; that is to fairly administer constitutional laws.
“Property is Theft!” Be that as it may, and whatever…
The fact is there is no rationale for bailing out “private” entities who did their job so poorly: selling and buying poorly underwritten loans. Simply put: lenders and anybody else in the chain did their job terribly.
That said, I feel a very very large bailout coming within the next 90 days. That would be January 30, 2011 if I’m not mistaken. That’s what Tea Party voters are asking for whether they know it or not (seriously, any Republican excited about Speaker Boehner is AFM, and if they don’t know who he is, RAFP). That’s what Dem partisans are asking for as well.
Is there a line on this?
Once a mortgage is “securitized”, who owns it?
This is one of the most compelling post I ever learned in a long time, I’m speaking about this part of your article “… its practices were fine and falsely claiming it had no robo signers to suddenly deciding it …” it also made me recall about the day I came across my husband.