If the ASF keeps this sort of nonsense up, it’s soon going to have the status of Pravda in the later stages of the Soviet Union, a mouthpiece of falsehoods that the officialdom is particularly eager to promote.
Immediately after the Ibanez ruling, in which two foreclosure actions were voided due to the failure of the servicers to prove that the trusts who allegedly owned the mortgages had standing, the American Securitization Forum issued a press release that said:
The ASF is pleased the Court validated the use of the conveyance language in securitization documents as being sufficient to prove transfers of mortgages under the unique aspects of Massachusetts law. Importantly, unlike the lower court, the Court also said assignments of mortgage can be executed in blank, as long as a complete chain of transfers can be shown through the applicable deal documents.
Even odder, people who ought to know better, ranging from Amherst Securities to FT Alphaville, are uncritically parroting the ASF party line.
Let’s look at what the decision actually says.
Where a pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder.
First, note the use of the word “may”. This is hardly definitive, it can be read in isolation as the the SJC saying this was arguable (as in “may” = “does”) or that they had considered the argument but were not reaching a firm conclusion.
But you can’t even make the more aggressive reading of that sentence, since the next one states:
However, there must be proof that the assignment was made by a party that itself held the mortgage.
And later, the ruling states:
Even if there were an executed trust agreement with the required schedule, US Bank failed to furnish any evidence that the entity assigning the mortgage – Structured Asset Securities Corporation — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale
This certainly seems to say the chain of title represented in the PSA must be followed by the actual mortgage documents if you want to use the PSA as evidence of standing. Since this appears almost never happened, it will prove quite difficult to cure. For the depositor to record the assignment into the trust to “cure” the standing, the depositor must show how he got title, and so on.
So we are back to square zero, which is needing to look at the chain of assignment and whether the parties that made the assignment were “holders” which generally requires both physical possession and valid ownership.
This decision in NO way supports the securitization industry argument that the PSA itself is evidence of assignment and transfer. And we are far from the only ones to read the decision this way. Kate Berry from the far from bank unfriendly American Banker noted this AM (boldface ours):
The ruling is an effective rejection of the industry’s fallback defense on botched securitization procedures. The American Securitization Forum and numerous securitization attorneys working for the industry have argued that evidence of intended transfers of a mortgage are sufficient to demonstrate legal standing. The Massachusetts high court disagreed….
“There must be proof that the assignment was made by a party that itself held the mortgage,” Justice Ralph D. Gants wrote. “The plaintiffs were not the original mortgagees to whom the power of sale was granted; rather, they claim the authority to foreclose as the eventual assignees of the original mortgagees.”
Grants also wrote “that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title.”
Perplexingly, the American Securitization Forum issued a press release hailing the court’s ruling as upholding the validity of assignments in blank. A spokesman for the organization could not be reached to explain its interpretation.
In other words, the judge writing the decision SPECIFICALLY says it nixed the idea of assignment in blank, yet the ASF is asserting the exact opposite!
Also note this section of a concurring opinion by Judge Cordy:
Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it….The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments.
That does not seem terribly supportive of the “PSA constitutes transfer” argument, since both servicers presented the PSAs, yet the judge also expects to see “underlying assignments (note plural) now does it?
But the securitization industry is clearly desperate to keep its fantasy going, presumably to deter investors, who have deep pockets and are being badly damaged by this colossal negligence, from suing trustees (who repeatedly certified that all the paperwork was in order) and servicers.
18 comments
Comments are closed.
Yves,
As you know, I’m the last one on this planet who could make any claim to the title of Legal Eagle.
Hence, I’m wondering how “investors with deep pockets” can most easily roast the REMFs of the securitization industry? What kind of strategy could they use? RICO? False representation? Securities Laws?
And more importantly: How bad could they damage the bandits? Could they REALLY make them suffer hell on earth, as they so richly deserve?
1. Contract breach. It’s pretty simple. The parties to the securitization said they’d do certain things and didn’t. The New York trust law theory is pretty simple to prove compared to other theories
2. Securities law violations. Normally a three year statute of limitations BUT trustees are providing ONGOING annual certifications that everything is hunky dory with the trusts.
Note to self: don’t ever hire one of the securitization attys. They’re only going to tell me what they think that I want to hear. Scary.
Exactly …
Thank you for pointing out use of the word “may”” language – “dicta”.
And, sorry to repeat my other posting, but in the Ibanez mortgage, an entity in the middle of the assignment chain is Lehman, now in Chapter 11!!!
So, has the Trustee authorized robo-signing???
Call Max Gardner atty in NC- he knows his stuff,and can overturn any foreclosure(securitized)as he knows that the paperwork is all forged,fabricated,backdated,and improperly (illegally) notarized. Throw in a few robosigners for good measure and you are good to go.
Yves, thanks for keeping the heat on the Mortgage servicing industry. Here in NC, if the foreclosure doesn’t satisfy the mortgage, then the mortgagee still has to make up the difference, setting up a domino effect.
Foreclosures are up 7% in NC, and there’s no sign of abatement and no reduction in unemployment figures.
Wall Street and European Union banks were bailed out be the Fed, and thus far, Main Street has been left holding the bag by inflation and falling home prices.
We haven’t seen the bottom, yet.
This is clumsier and less honest than what the NAR spouts and is an extremely bad move by the ASF. They could not do a better job of destroying trust in the securitization process. The ramifications of Ibanez will be long lasting and serious. Among other consequences they just killed private label RMBS which will make $ for home loans a lot tighter.
Is it really surprising that they’ll start moving on to flat out lying about an adverse decision? It’s clear that no one in government expects the banks to adhere to any laws whatsoever anyway, and the last place which hasn’t been fully subject to Gleichschaltung (“coordination”, in totalitarian jargon) is the courts. So I suppose other courts are supposed to pretend this one said the exact opposite of what it actually said. These communiques are meant to be indoctrinatory, just like those law-and-economics seminars.
(And just in case that’s not sufficient, they keep repeating how Massachusetts law is “unique”, i.e. a freak to which no one else should pay any attention.)
I’m thinking that there might be an opening for brokered non-bank mortgages, which is how it was done in France and much of the rest of continental Europe before the nineteenth century. Essentially, if you wanted to lend at 5 percent (the usual interest rate, you went to a notary, whose clients were looking for a loan. The notary had all the relevant documents bearing on his clients wealth, income, and liabilities (marriage settlements, etc.), so the risk factor was reduced ex ante by acquiring information, rather than ex post by pooling. This was relatively costly, and the loans could not be readily securitized, but it provided a stable income for the rentier.
In my case, the bonds in my retirement account are earning about one and a half percent, or $1500 per $100,000, which means stocks have to rise a lot to produce an average six percent return. If I were to direct my account to a mortgage brokered by a notary — in my case I actually know my prospective borrower — I could raise that return to 5 percent with no additional risk. This is a bit like buying your food local. It is sometimes more costly, but can often be a lot safer for you.
The ASF held a conference call to discuss the decision. While I agree that the published statement is easily caricatured as spin, it was clear on the call that PSA’s are ONLY acceptable when they contain the full schedule of mortgage assignments with both parties named. An attorney on the call said that with that document they have achieved multiple summary judgments in the MA bankruptcy court. They further asserted that these documents are readily available, no one could explain why they were not presented in this case. The key is that the SJC confirmed that this MAY be acceptable (the MAY meaning if correct and complet) whereas the Land Court did not accept even that.
Even this reading is a stretch. The MOST you could POSSIBLY rely on the PSA to prove is the transfer from depositor to trust. You STILL have to show how the note got to the depositor, meaning a full chain of assignments. And this case did not raise the New York trust law issues (this might have been one of those exceptions too, one source suggested it might have been a Mass. business trust). The PSA simply does not cut it under NY trust law, the trust can only accept a properly executed note through the full chain of title in the stipulated time frame.
I would not rely on the MA BK experience simply because a lot of people who go through BK don’t hire experts but rely on relatives or referrals to consumer lawyers who don’t have much experience in BK. I’d need to see successes against clients who were competently represented before I took that data point seriously.
ReaderofTeaLeaves has it 100% right above:
Note to self: don’t ever hire one of the securitization attys. They’re only going to tell me what they think that I want to hear. Scary.
Yes and no as to the intervening assignments. The decision says that “a foreclosing entity may provide a complete chain of assignments…OR a single assignment from the recordholder”. In Ibanez the latter was provided, but months AFTER the foreclosure sale, which was not acceptable to the court. Also dont forget that the intervening sales were also in many instances pooled sales that could also be covered by a bulk schedule of assignments… As to your point on BKs, I think that is mostly handwaving, you might want to actually talk to some attorneys up there before you jump to that conclusion. But in the spirit of more civil discourse I won’t call you a brazen liar, as you call those legal professionals who don’t see things your way.
This is in reply to rational @ 9:25PM, who wrote:
In Ibanez the latter [a single assignment from the recordholder] was provided, but months AFTER the foreclosure sale, which was not acceptable to the court.
This refers to the 3rd Assignment, executed by Linda Green, as “Vice President” for American Home Mortgage Servicing, Inc. ( “AHMSI”) as successor-in-interest to Option One Mortgage Corporation, and purporting to assign the Ibanez mortgage to U.S. Bank. But AHMSI divested its interest in the Ibanez Mortgage via the 2nd Assignment (in blank) on January 23, 2006 (2 1/2 years before the foreclosure).
Was the Mortgage ever in the Trust?
My understanding is that the 3rd assignment was a so-called “confirmatory assignment” in support of the assignment in blank, which the court said is permissible but again, must be in place PRIOR to the foreclosure.
I’ve spoken to attorneys in other states, not Mass, in particular, who tell me the tricks servicers pull on borrowers who have filed BK and get away with it (several different types of abuse of procedures and/or taking advantage of counsel lack of sophistication). They would not be able to get away with them if they were adequately represented, hence there is evidence that inadequate representation of borrowers in Ch. 13 bankruptcies is not uncommon.
As to the comment on only being able to prove the transfer from depositor to trust via the PSA, that reading comes from Adam Levitin. The decision itself as recounted in the post, specifically calls for the assignments to have been completed so I don’t see how anyone can argue that the case supports the ASF’s claim that it supports the notion that the PSA constitutes a transfer, particularly given the very specific language of the PSA calling for endorsements and multiple certifications by the trustee.
I agree with Yves on this point. Bankruptcy lawyers get small fees, much too small to take on the task of questioning a foreclosure, especially since almost all Debtors just want to get rid of the money drain. Trustees in Chapter 7 don’t have money to chase foreclosures except in very rare cases, and there is little incentive to do so. Chapter 13 Trustees have even less incentive.
Winning with those documents is easy if the matter is uncontested. I note that in the Ibanez case, it appears that the State Court Judge raised the issue sua sponte.
Ibanez merely restates well established law that in order to foreclose, one must prove that one has the right to foreclose. In this case that was not proven.
It may or may not be possible to cure the defect by obtaining the missing completed assignments. As one of the comments indicates, curing might be impossible due to the intervening bankruptcy of Lehman (it depends on whether the entity in the chain of title filed for bankruptcy or not).
As Yves has pointed out, even without a bankruptcy in the chain of title, there may be tax problems with a cure (the REMIC rules may be violated), there may be trust law problems (IMHO this issue is a bit overblown), clearly there are breaches of representations and warranties in the PSA, and there may well be breaches of duties by the banks to the beneficiaries of the trusts under NY trust law. All in all, a mess. The plaintiff’s lawyers should have a field day – unless of course the claims are settled for pennies on the dollar – hold it, isn’t that what Fannie and Freddie are doing?
2 solid articles today, Yves, regarding especially “chain of title”.
I think this is the Achilles’ heel of the ASF! Once ALL BORROWERS OF NOTES/MORTAGES somehow get the MEME:”DO YOU KNOW YOUR CHAIN OF TTLE ON YOUR HOME?”–then we will see how much mass pressure ASF can take. They would simply fold/implode. The question, of course is how can this meme re; CHAIN OF TITLE ON YOUR HOME, be launched on to MAIN STREET/APPLE BOSSOM LANE,etc.?? Dylan Ratigan? Raechel Maddow? Chris Whalen does not have your charisma, Yves, and sounds like a school boy compared to your articulations and vocabulary. I must’ve taken 20 pages of notes when I read and reread ECONNED.
So all everybody has to do is to get you, Yves Smith, on 60 MINUTES as a starter. I am not joking. Millions of Americans are having serious life-threating problems because their sanctuary/dream is being ripped from them by fraudulent miscreants! Go Yves!!!!