I agree, everyone who owns a home needs to find out just exactally who owns their home, not just where they make the payments to. We found out several years ago when we got a second, we made a very unwise decision to accept one of those offers that came in the mail. Took longer than they promised, they made several major mistates writing the contract, lied on the documents that we had signed in front of a notery, and then kept selling the loan so we could not keep it on automatic repay as we were traveling. They even sold it to one company who specialized in bad credit loans, and one company just added fees and refused to remove them until I threated to contact the Attorney General of CA and of the state they were in. Finally we had to refinace the whole thing with the bank we were dealing with, which cost us big bucks.
again, contact your mortage company and find out where they are and who they are.--and if they are even here in the USA as most of the property are owned by out of country groups.

Oh brother. I've been meaning to make a post about this issue for about a month & it just seemed so complicated that I didn't try.

Here's what's happening. Hopefully, I'll write so it's understandable...(I'm going to put important terms in caps so they stand out.) I'm not very good at written explanations but here's my attempt...

Many, many lenders have failed to properly ASSIGN the mortgages they are selling. For instance, whenever I sold a mortgage I would place a huge stamp on the back with all of the legalize & sign it. Then, the ASSIGNMENT would be recorded. This ASSIGNMENT creates a paper trail of ownership.

Now, jumping backwards a bit...

Many lenders have been treating these mortgages like NEGOTIABLE INSTRUMENTS. And, in some states, a Deed of Trust WILL follow the Note. Now, in reality, many lenders will ASSIGN a Note but technically they don't have to. However, most states are mortgage states & in those...the mortgage must be ASSIGNED because the Note follows the mortgage. Are we confused yet? lol

So, what's been happening is that the assignments haven't been done or if they were they were not recorded. So, there's a flaw in the chain of title & these lenders are now having problems proving to a judge (and rightly so) that they are, in fact, the owner not of the property itself but of the Note & Mortgage.

In many cases, lenders seem to have gone ahead with foreclosures even though no ASSIGNMENT existed. It's possible, all of those foreclosures 'could' be challenged in Court?

It's a true mess & the talk of the lending community right now. DH is relaying me new stories a couple times/day.

/tricia

tricia, thanks for the clarification.

SoÂÂam I correct in assuming that the reason why many mortgages have not been assigned and/or recorded is that it was a purposeful act in order for the lenders to have the ability to treat the mortgages as negotiable instruments?

In the states where they must be assignedÂ...is there any penalty for not assigning them?

Last but not least, is the absence of assignment or recorded assignment a criteria for the mortgage to be treated as a negotiable instrument?

If the lack of assignment can't be challenged in court on previous foreclosures, wouldn't that make the act of assignment superfluous?

Hi logic,

Was it purposeful? Who knows? Assignments are a very basic tenet of lending practices so it's very unlikely that all of these lenders were clueless along with their counsels. But WHY would they not do the assignments? It's a simple thing. The borrower doesn't have to sign anything. It's between the current lender & whoever is buying the Note/Mortgage. Personally, I think it was laziness and a few cluessless sorts combined for a perfect storm sorta thing?

Well, if they were thinking the lack of assignment would miraculously turn a mortgage into a negotiable instrument somebody should go back to school?

Or, the whole thing might have started in CA which is a Deed of Trust state. A Deed of Trust does follow the Note which IS A NEGOTIABLE INSTRUMENT. So, maybe?!, these fools thought that if it worked in CA it would work everywhere? Even in CA when I worked there, I was told to always prepare Assignments & I did. So, I just don't know the answer to "why"?

Yes, there's a penalty for not doing an Assignment of Mortgage. The penalty is you don't own the mortgage! It's the same thing basically as transferring title. No title...hard to prove ownership.

The Note is the Negotiable Instrument not the Mortgage.

In Deed of Trust states, the Trust document does follow the negotiable Note which is why you might get away in such a state w/o an Assignment although, in practice, a good lender will issue an Assignment even for a Deed of Trust.

But...not so a Mortgage. Most states use Mortgages. A Mortgage DOES NOT follow the negotiable Note. It MUST BE ASSIGNED. This is basic Banking 101 and is covered in the American Bankers Association Banking I class that most all junior bank employees (including tellers) take. So, why senior management failed to notice the lack of Assignments is just mindboggling.

The lack of Assignment CAN BE CHALLENGED IN COURT...probably. That's what all the hubbub is about now due to the recent Court decision. For instance, if Bank "A" foreclosed on my house without an Assignment of the Mortgage I signed giving Bank "B" a security interest in the house...I can challenge the foreclosure.

Well, with these loans being sliced/diced through half a dozen investors...it's a mess bordering on a potential disaster. Tracking ownership is nearly impossible because of the traunch process of Wall Street. It's very hard to ascertain who actually needs the Assignment. So, the originating Bank "B" has been foreclosing even though they have sold the Note/Mortgage. Under a normal servicing contract you would expect the originating lender to handle the foreclosure process itself but not actually take title. Title would be in the name of the purchasing entity.

I'm pretty sure I've done a horrible job of trying to explain this mess. I'm sure we're going to be hearing more about it. The NYTimes ran an article a couple weeks back. Probably won't make the news though because...

Is this going to affect those people who want to modify their ARMs? I thought I read an article that said the servicing companies that collect the mortgage payments cannot approve loan modification and that finding someone who can approve the modification may be difficult.

What a mess!

"In many cases, lenders seem to have gone ahead with foreclosures even though no ASSIGNMENT existed. It's possible, all of those foreclosures 'could' be challenged in Court?"

I sure hope so. If a lender is that negligent, then there should be a price to pay.

Yes, it could & it is affecting people who want to renegotiate their note's terms/conditions. The owner of the Note & security document usually has to approve the changes. Apparently, what's been happening is the servicing agent, i.e. Countrywide, has been forging ahead & restructuring loans w/o approval of whatever entity actually owns the security interest in the property...could be some investor in Hong Kong...who knows?...apparently, not even the originating lender.

Once Wall Street got their hands on these loans they seeem to have divided them up with no regard to legal proceedings in the event of default. They just handled them as if they were negotiable instruments. How could this have happened? These people are not stupid. They are intelligent, knowlegeable, bankers/investors/attorneys. The sheer numbers involved make this an absolutely unbelievable problem. I'm imaging being told by my boss to, "Fix this problem NOW!" I'd not know where to start?

I don't think we've seen the end of the loan loss reserves....??

/tricia

It is actually worse than you have described in some cases.
The debt instruments have an owner (assignment errors or not) and have been pledged as collateral for various bond instruments, issued by the (supposed) owner of the debt,
The holder of the bonds DO NOT own the underlying debts individually.
The issuer of the bonds remains the owner of the underlying debt. These should have been set up as shell companies if the debt was going to 'travel' with the bonds.
This is going to turn into a huge mess.

As usual, when I read this stuff, I go find my husband and ask questions. He was among the most active Managing Agents in FL during the last mess. Unfortunately, as the last banking crisis was winding down, he found himself setting in the Washington D.C. area at a crashed and burned S&L that had massive amounts of loan servicing. Hubs managed a large team that was responsible for eliminating imperfections in loan documentation for thousands of loans. I.e., FHA loans that never became perfected FHA loans. Had to be done before the FDIC could sell the loans.

I digress. Husband knows about this stuff. When I asked, he basically said what Brickeyee said. A bank sells the loans to Yahoo #1 who then immediately securitizes the loans but who retains ownership of said loans even those securities are sold throughout the world as asset-grade securities. My first thought was--oh my, there are hundreds of huge warehouses in New Jersey filled with loan documents that will NEVER be found. Better yet, bet those documents were scanned and then destroyed and the NJ warehouses are only filled with a bizillion unindexed optical disks that are filled with home loan documents that will NEVER be found.

What a certifiable, flipping mess!!

Wow!

Here's a link to another even more interesting article from the NY Times about this decision and what might fall out from it.

The article ends with this:

"April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, who has been practicing foreclosure law since the late 1980s, said she rarely sees proof of ownership in cases involving securitization trusts. Her group has 30 to 50 such cases and not one of the lenders representatives has produced proof of ownership predating the foreclosure action.

"We see a trend toward judges having enough of this trampling of the rules and procedure and care and reverence with which lawyers and litigants and participants in the judicial process should comply," Ms. Charney said. "Hopefully this will convince everybody that the time to work out these home loans is now."

So I would guess that if the government needs a stick to beat the lenders into freezing rates or renegotiating mortgage loans, they just might have one.

Here is a link that might be useful: Foreclosures Hit a Snag for Lenders

My loan is not in foreclosure or anything, but I am wondering, how do you know if your loan was "sold" (assigned?)? My loan and is (or appears to be) with Wells Fargo. I've never been told otherwise. But I know someone who is on the brink of foreclosure and her loan was with WF but there is some other company in the mix now as well. From what she describes, all payments were made to WF but it seems like some other company is making the decisions re: a potential short sale.

It's all so confusing!

You can ask the loan servicer who owns your loan.

So wouldn't this be an issue for people trying to sell their houses and for anybody that is paying off their loan to actually get a clear title to their property?

Is it just me or are the courts swinging just a bit too far in the borrower's favor? I mean, if an example loan was one of these that's sliced and diced, and if that lender can't foreclose, exactly what is preventing deadbeats from getting free housing out of the deal?

mfbenson: "Is it just me or are the courts swinging just a bit too far in the borrower's favor? I mean, if an example loan was one of these that's sliced and diced, and if that lender can't foreclose, exactly what is preventing deadbeats from getting free housing out of the deal? "

Good question. However, here is a thought...if the court allows a lender to foreclose who can't prove they own the property...how do they choose which lender should foreclose? All of the entities that were involved? None?

IMO..this goes way beyond being in the buyers favor...because if it becomes acceptable to allow a foreclosure on property with no proof of ownrship, where exactly does it end???

lyfia makes a good point as well...if no clear title what does happen when one attempts to sell? Who gets the proceeds?

"exactly what is preventing deadbeats from getting free housing out of the deal?"
Just think of it as a variation of the "housing lottery".

I don't understand the concern over selling a house. The owner has a title that's encumbered by a lien -- the mortgage lender's. Otherwise, his title is clear. When he sells, he pays off the mortgage to the servicing company of record. It's up to the mortgage industry how the proceeds are distributed thereafter. The new owner takes a clear title.

There IS a problem on the lending end of who owns the mortgage lien because it appears that the mortgage industry often transfers ownership without a recorded document attesting to the transfer. That lack of recordation is what got the mortgage "holder" into trouble in the Cleveland cases. The law says the mortgage holder must provide proof in writing of its ownership before it can foreclose.

Apparently, it's common practice in the mortgage industry to make the mortgage transfers electronically and without any followup with a written recordation, which satisfies the mortgage industry's internal standards for proof of ownership. The problem is that it doesn't satisfy the legal requirement that the party foreclosing must have written proof before it can foreclose.

It seems that Judge Boyko was quite insulted by the arrogance of Deutche Bank's argument that the lack of a written document didn't matter because the mortgage industry, itself, had worked things out its own satisfaction. Therefore , the legal requirements could simply be brushed aside.

I don't think the homeowners are ultimately going to get away scot free. I suspect their attorneys will use Boyko's decision as a weapon against the foreclosing party to force it to renegotiate the terms of the mortgage into a fixed rate loan.

And I also think the decision will cause the mortgage industry to stop being so cavalier about these transfers of mortgage and start recording them in a written form that can be produced for the court when necessary.

It's ownership of the note & securitizating document (Deed of Trust or Mortgage) that the Court is questioning...not the property.

/tricia

"this goes way beyond being in the buyers favor...because if it becomes acceptable to allow a foreclosure on property with no proof of ownrship, where exactly does it end???"

It ends with borrowers who default on their loan. As long as the loan servicer has an adequate and accurate record of whether the loan is in good standing, borrowers who are in default ought to be at risk of foreclosure at any moment.

Oops missed the other quote I wanted to get:

"However, here is a thought...if the court allows a lender to foreclose who can't prove they own the property...how do they choose which lender should foreclose? All of the entities that were involved? None?"

Wouldn't it be the entity that did the slicing and dicing of the loans in the first place? This type of re-selling is basically re-selling the cash flows, not the legal obligations. The entity that did the re-selling would still be the owner of the original note; they would just be using the future cash receipts as collateral for the bond markets (for example). I don't think Judge Boyko's decision will stand; as the Electronic Records and Signatures Act of 2000 makes electronic records just as legal as paper copies and any Appellate Court worth its salt will know that.

"Wouldn't it be the entity that did the slicing and dicing of the loans in the first place?"

THAT is the 'owner' of the debt.
NOT the bond holder.
If you purchase a bond issued by company XYZ and backed by the assets of the company (in this case mortgage obligations) XYZ is the owner of record (assuming the have at least a written assignment) and must undertake foreclosure action.
The owner of the bond has NO STANDING since all they own is a debt instrument issued by XYZ.

If you purchased a Freddie bond it is backed by mortgages.
You DO NOT own the debt. YOU own a bond.
Freddie decides how and when to foreclose.

MFBenson: "It ends with borrowers who default on their loan. As long as the loan servicer has an adequate and accurate record of whether the loan is in good standing, borrowers who are in default ought to be at risk of foreclosure at any moment....
...I don't think Judge Boyko's decision will stand; as the Electronic Records and Signatures Act of 2000 makes electronic records just as legal as paper copies and any Appellate Court worth its salt will know that."

ForeclosureÂ..yes...but the jury is apparently still out on which entity actually has the legal right to foreclose.

As far as electronic records go...GIGO (Garbage In, Garbage Out) still pertains....if the originating action upon which those records were created was improperly executed, then the "electronic records" become fruit from the proverbial poisonous tree.

The E-record merely replaces the hardcopy version of proof of ownership......but the same functions must take place that create the record in order for it to be valid.

That said...there was apparently no assignemnt..electronic or otherwise....on an untold number of mortgsages. That said, the Electronic Records and Signatures Act makes the electronic copy just as legal as the hardcopy....however, if someone drops the ball..whether accidentally or on purpose...with either paper record or an electronic record...the result is the same...no proof of ownership.

The fact that the error was made electrocnailly does not change the underlying facts.

"exactly what is preventing deadbeats from getting free housing out of the deal?"
Just think of it as a variation of the "housing lottery".

Na, they'll get it straight. Will just take some time. It' not like you can live there forever, I'll bet there's a small army of laywers getting the paperwork lined up right now.

bentruler: "I'll bet there's a small army of laywers getting the paperwork lined up right now."

You are probably correct. Somehow...once again, the investment world will be exempt from yet another law that applies to the rest of us....which will embolden them to enact even more scams, with minimal if any penalty to pay.

"If you purchased a Freddie bond it is backed by mortgages.
You DO NOT own the debt. YOU own a bond.
Freddie decides how and when to foreclose."

I'm not sure if you are arguing with me or agreeing, but I agree with you.

mfbenson

You said:

"I don't think Judge Boyko's decision will stand; as the Electronic Records and Signatures Act of 2000 makes electronic records just as legal as paper copies and any Appellate Court worth its salt will know that."

Why do you assume Judge Boyko isn't familiar with ERESA? If he wasn't before this case, he certainly would have been thoroughly schooled by Deutche Bank's lawyers. Assuming, that is, that there was any reasonable argument to be made.

Which there almost certainly isn't, considering that Section 301.2 of ERESA pretty obviously excludes documents such deeds of trust and mortgages.

Or maybe you would care to explain why you think it doesn't?

Read up on Section 101.a of ESIGN. To wit: "a contract or signature may not be denied legal effect, validity, or enforceability solely because it is in electronic form"

I don't recognize this "ERESA" acronym. You mean ERISA?

Relating to the topic of this thread, is Section 101.d - "if a law requires that a business retain a record of a transaction, the business satisfies the requirement by retaining an electronic record, as long as the record accurately reflects the substance of the contract and is accessible to people who are entitled to access it in a form that is capable of being accurately reproduced for later reference, whether by transmission, printing or otherwise."

And furthermore, the exceptions to ESIGN are limited to wills, trusts, divorce papers, adoption papers, court notices, *NOTICE OF FORECLOSURE*, cancellation of health benefits, product recalls, and papers accompying hazardous materials.

A Notice of Foreclosure is not the same as proving ownership of a note, which is the step that the Judge is hung up on. As long as the borrowers were sent a paper copy announcing the foreclosure, Deutche Bank did things within the law.

Here is a link that might be useful: Title 15 Chapter 96

If Deutche Bank purchased a corporate bond backed by mortgage debts they do NOT own the debt.
They own the bond, and any remedies of foreclosure rest with the bond issuer, not the bond holder.

See the previous example posted of Freddie.
Duetche Bank's issue is with the bond issuer.

mfbenson: "As long as the borrowers were sent a paper copy announcing the foreclosure, Deutche Bank did things within the law."

However, if they can't prove they own it, proper notice is irrelevant in terms of Deutche Bank's right to foreclose. See my previous post on GIGO.

mfbenson

You're the one who incorrectly identified the law as the Electronic Records and Signatures Act. What you apparently meant was the Electronic Signatures in Global and National Commerce Act, which is ESIGN.

You need to read subsection (e) of the Act:

'(e) Accuracy and ability to retain contracts and other records

Notwithstanding subsection (a) of this section, if a statute, regulation, or other rule of law requires that a contract or other record relating to a transaction in or affecting interstate or foreign commerce be in writing, the legal effect, validity, or enforceability of an electronic record of such contract or other record may be denied if such electronic record is not in a form that is capable of being retained and accurately reproduced for later reference by all parties or persons who are entitled to retain the contract or other record."

You also seem to be confused about what lack of documentation was fatal to Deutsche Bank's claim of standing to foreclose as owner of the mortgage. As logic correctly pointed out, it's not the notice of foreclosure that was faulty, but the absence of any written record (which is required by law) evidencing Deutche Bank's acquisition of ownership of the mortgage. Had the ownership transfer been recorded in "in a form that is capable of being retained and accurately reproduced," then ERISA would have permitted DB to put that into evidence by way of electronic record. But it appears that the mortgage industry doesn't bother putting these ownership transfers in writing and that's what sunk Deutche Bank's case.

You also need to be aware that every state also has legislation drafted pursuant to ESIGN (which is basically an enabling statute which allows the states to do this), and these state statutes all contain their own specific exemptions.

So it's all not so simple as you seem to think.

"If Deutche Bank purchased a corporate bond backed by mortgage debts they do NOT own the debt.
They own the bond, and any remedies of foreclosure rest with the bond issuer, not the bond holder."

Oh heck, I thought Deutche Bank was the bond issuer. Sure enough, the original article spells it out: "Deutsche Bank held debt securities that were linked to the mortgage loans on the properties, not the mortgages themselves. And the judge ruled that a security backed by a mortgage is not the same as a mortgage."

Well in that case it doesn't even matter if the records were electronic or not.

"As logic correctly pointed out, it's not the notice of foreclosure that was faulty, but the absence of any written record (which is required by law) evidencing Deutche Bank's acquisition of ownership of the mortgage."

My argument was premised on the idea that DB was the bond issuer, not purchaser. Not only may I have been wrong, its a moot point in the first place.

"Had the ownership transfer been recorded in "in a form that is capable of being retained and accurately reproduced," then ERISA would have permitted DB to put that into evidence by way of electronic record."

I think you mean ESIGN, but yes. It seemed to me like maybe DB's lawyers didn't know what they were doing (it wouldn't be the first time).

"But it appears that the mortgage industry doesn't bother putting these ownership transfers in writing and that's what sunk Deutche Bank's case."

Actually I am seriously doubting the ownership was ever transferred in the first place. DB needs to get the bond issuers to foreclose, and then go after a slice of the proceeds.

"So it's all not so simple as you seem to think."

Yeah yeah - that's why people hate lawyers, nothing can ever be simple.

Sorry. I did mean ESIGN, not ERESA.

BTW, Deutche Bank is the largest holder of subprime mortgages in Cleveland and also the biggest owner of already-foreclosed properties. You can imagine how hard its lawyers are working on this one. But sometimes, not even the lawyers can salvage the situation.

So we'll see what happens.

So when Bank A buys Bank B - and all of the mortgages that Bank B is holding - does this ruling mean that Bank A must record an assignment for each mortgage that is with Bank B? It can't just simply step into the shoes of Bank B and automatically take ownership of all of Bank B's notes and mortgages without filing assignments?

MP

When Bank A purchases Bank B it becomes a successor, not an assign. A typical wording in the note is "successors or assigns".

If Bank A purchased the note from Bank B they would be an assign.

The assignment is usually just an extra page from Bank B showing they have sold the debt to Bank A.
In many cases they are not actually recorded at the courthouse, just an extra sheet attached to the original of the mortgage or deed of trust retained by the owning bank.
An officer of Bank B is required to sign.

Bank A will need to show that it is the legal successor, but that is usually not hard. (Bank purchases take a lot of paperwork).
If Bank A was an assign, there are other ways that could be used to demonstrate this to the court, but an actual assignment document is the simplest method.
Having the original of the note would be part of the proof.