Oregon judges have delivered a series of setbacks to servicers and securitization trusts. A recent decision, Hooker v. Northwest Trustee Services, ruled that assignments of the beneficial interest (as in, transfers of the note) needed to be recorded. That makes any foreclosure in the name of the mortgage registry MERS a non-starter, since MERS was never and could never be the holder of the beneficial interest. This will have little impact going forward, since MERS has instructed servicers to stop foreclosing in its name, but there are plenty of foreclosures in the pipeline that were initiated in the name of MERS.
The latest move is that Judge Grand reversed a foreclosure sale due to the failure of the parties representing the lender to satisfy the requirements of Oregon’s recording statute. To put it mildly, foreclosure actions are seldom reversed. The decision is terse but it has wideranging ramifications. The Oregonian provided a good write-up of the case. Key extracts:
A Columbia County judge has blocked U.S. Bank from evicting a Vernonia woman whose home it purchased in foreclosure, concluding in a case with far-reaching implications that her lenders had not properly recorded mortgage documents.
Last week’s action appears to be the first in which an Oregon judge has halted an eviction and declared a foreclosure sale void after the fact. The ruling, if it stands, raises questions about the validity of other recent foreclosures in the state and could create serious problems for lenders and title companies, as well as for buyers of such properties…
A U.S. Bank spokeswoman said the bank would cease further eviction action and assess its “appropriate next steps.”
Nearly all foreclosures in the state occur without a judge’s involvement under so-called nonjudicial proceedings. But this ruling, legal observers say, could potentially divert more foreclosure actions into courtrooms, a more time-consuming and costly proposition that could exacerbate the state’s housing slump.
“This will certainly be problematic for lenders,” said David Ambrose, a Portland real-estate attorney.
It also casts doubt on the validity of already completed foreclosure sales in which lenders resold mortgages without recording the sales in county recorder offices. Many of those questionable transactions, including Flynn’s, involve the Mortgage Electronic Recording System….
The path will remain muddled for the mortgage industry until a definitive case reaches the Oregon Supreme Court or lenders decide to take a different strategy and negotiate settlements with distressed homeowners, real estate attorneys say.
The article has the background of the case and makes clear that this is a qualified win for the borrower, since it is unclear who has title to her condo. She bought it 20 years ago (and therefore has equity in the property) but fell behind on payments after she quit her job and her new business proceeds plus other sources of income weren’t enough for her to stay current.
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Yves: looks like something went wrong editing the end of the article.
Oops, thanks. Fixing.
Stray text that wasn’t visible in my compose screen.
The problem is that many states have either a pro forma foreclosure process or one in which the courts are involved but the homeowners have no way to demand justice.
Wrong.
On the contrary, Fred, absolutely right. The states with nonjudicial foreclosures often have essentially a pro forma process, and among the states with judicial foreclosures, Florida infamously has rubberstamping courts in several districts.
A general rule in personal finance
is that retaining, requesting
and/or recording documentation, if only
contemporaneous notes,
always works in favor of the borrower/debtor.
I had a decent sized hospital bill that I was
intending to pay in full. Kept asking for copies
of my lab reports and told them I wouldn’t pay
until I received them. Out of blue the billing
office called me and offered me a 25% discount.
OK, I’ll take that. They sent the reports and I paid
Saving documentation in the cloud is a cloud fantasy.
A good old fashioned filing cabinet obtained for freee
on Craigslist is your best backstop.
When my brother got married last year, he didn’t have to go through religion classes because my dad had filed his baptismal certificate in 1985.
This is of course true. I keep copious file-cabinet records.
Doesn’t do you much good in a case like the infamous foreclosures against people who never had mortgages.
“….the plans of Boosh and Obama – It was all a ploy to make it look like the government was doing something for the housing demise as they forked over $150 billion+ to Fannie and Freddie, 28 Billion to Bear-Stearns (Chase bought Bear for $287 million)… “
Let us say I am a holder of a CDO from a trust that includes that note. I am losing money because the note is not performing and the servicer is collecting fees from the trust to cover the cost of foreclosure, including court costs. Could I sue the trust for violating the PSA? I know absolutely nothing of securities law, but it is pretty clear to me that whoever invested in such trusts were royally screwed. This is just the beginning of the legal mess.
Yes, you could, however IIRC most of the PSAs prevent you from suing the trustee unless you have a “critical mass” of investors, some percentage. There’s a law firm in Texas which has been trying to assemble such numbers of investors for particular MBS, Yves may have mentioned it.
If the notes were never properly transferred and the trust never formed, you’re better off suing the *promoter* of the MBS for advertising a fraudulent trust. There’s no limitation on that.
If only the California legislature would require what this judge requires. Standing to assign beneficial interest and start a non-judicial foreclosure. California’s volume and value of its mortgage market that is already delinquent or in foreclosure means that the mess must be addressed legislatively rather than winding its way through courts that are mostly on the sides of banks. The Gomes’s decision suggests that judges in California feel that standing by banks is always assumed to exist, in spite of the widespread evidence that notes were separated from security instruments.
I thought Fannie Mae told the gang to hide/obscure MERS, a ‘don’t commit acts of terror in my name’ sorta thing:
“Many of those questionable transactions, including Flynn’s, involve the Mortgage Electronic Recording System….”