How We Got Here – The Process of Securitization

 It helps to have some background into how Mortgages used to work (like for the last two hundred years).

1)      A Bank would loan a homeowner money.

2)      The homeowner would sign a  promissory note (note or IOU) promising to pay the money back and pledge or secure the note with real property (usually his home).

3)      The bank would take the original documents to the land registrar (County Recording Office) and they would make a copy of the Note and the Mortgage, and place it in the Official Records of the County, and note the Book and Page numbers of the documents.  This was done so is someone was to buy the home from the homeowner, they would know that there was a lien against the property which would have to be paid off before the buyer could get a “clear title” to the property.

4)      Now, suppose the bank for any reason wanted to transfer that Mortgage and Note to someone else?  What they would do is prepare an “Assignment of Mortgage” in essence transferring or assigning the mortgage to Bank #2, so that the Mortgage payments from the homeowner would now go to bank #2 instead of Bank #1.  They would record that Assignment of Mortgage with the County Recording Office so that the world would know that Bank #2 was the entity to deal with regarding that mortgage.

5)      Now these recordings of the Mortgages and Assignments cost money.  The county Recording Offices would usually charge anywhere from $10 to the hundreds of dollars for each recording, so it wasn’t a cheap process.  But it allowed everyone to know which parcels of land were free and clear, and which had Mortgages against them, and who owned that Mortgage.

But that all changed in the last ten years.

During that period hundreds of thousands of residential mortgages were bundled together (often in groups of about 5,000 mortgages and investors were offered the opportunity to buy shares (or a part) of each bundle.  This was called Securitization.

In essence, Wall Street figured out a way to turn a 30 year mortgage, with small monthly payments, into instant, large sums of cash.  Sometimes these were sold even before the homeowner’s signed the notes and Mortgages, and they were then sold many times over.

Now each “Bundle” of Mortgages had to be given a name like “XYZ Home Loan Trust 2007 OPT-1” The name of the bundle gives the investor certain information about the bundle.  The year usually tells us when the bundle was created.  The OPT-2 would mean that the mortgages were originally made by Option One Mortgage and the -2 would the second bundle that year.

Each bundle is strictly controlled by a Pooling and Servicing Agreement.  This is a crucial document for the bundle as it lays out the rules that the Trustee needs to live by to administer the bundle.  It must have a Cut0ff Date, which is the last date that Mortgages can be added to the bundle.  That’s the day that the Trustee has to identify all of the Mortgages that are contained in the bundle.  So how do they get there?

The bundle custodian, or the Trustee must certify that for each and every Mortgage in his bundle as of the cutoff date, he has a Note (and actual piece of paper, which is signed IOU, from the homeowner) which is endorsed in blank.  He also must have proof that the ownership of the Note has been transferred, which most often takes the form of an Assignment of Mortgage.  The Pooling and Servicing Agreements say that these Assignment of Mortgages don’t have to be in the name of the bundle custodian, but specifically state that:

“Assignments of the Mortgage Loans to the Trustee (or its nominee) will not be recorded in any jurisdiction, but will be delivered to the Trustee in recordable form, so that they can be recorded in the event recordation is necessary in connection with the servicing of a Mortgage Loan.”

Now that sort of destroys the way we kept track of these Mortgages for the last few hundreds of years, so to create some sense of normalcy, the Mortgage Companies created MERS.

MERS – Mortgage Electronic Registration Inc. – holds approximately 66 million American mortgages and is a Delaware corporation.  The way MersCorp works, is that its specified members have agreed to include the MERS corporate name on any mortgage that was executed in conjunction with any mortgage loan made by any member of MersCorp.  The members trust MERS to keep track of the Mortgages they place in MERS’ name.  Since the members make the entries into the MERS database themselves, then the process should work, right? 

What they do, instead of the original lender being named as the Mortgagee, MERS is named as the “nominee” for the lender who actually loaned the money to the borrower. In other words MERS just acts as a document custodian.

As we pointed out earlier, MERS was created solely to simplify the process of transferring mortgages by avoiding the need to re-record liens – and pay county recorder filing fees – each time a loan is assigned. Instead, the servicer records these loans only once, and MERS’ electronic system monitors transfers and facilitates the trading of notes. It has very conservatively estimated that as of February, 2010, over half of all new residential mortgage loans in the United States are registered with MERS and recorded in county recording offices in MERS’ name.

More to come on this subject….


History - Or how we got here, MERS, The Players

Are Lenders Attorneys Calendar Challenged?

On March 9, 2011, the Second District Court of Appeals rendered its decision in Sandoro v HSBC Bank in favor of the Homeowner.

Their decision is not the end of the case; they sent it back to the Trial Court for further proceedings in accordance with their decision.  The Trial Court originally granted Summary Judgment in favor the Bank, meaning that there were no facts in dispute, and that the Bank was entitled to foreclose as a matter of law.

The Second DCA had two problems with the Trial Court’s decision.  First was the issue of a Notice of Acceleration.  The Homeowner’s Mortgage required the Bank (or the Servicer) to provide a Notice that the Homeowner is in Default of the terms of his Mortgage, and that it specifically state:

  1. what the default is,
  2. the action that is required to cure the default
  3. a date, not less than 30 days from the date the notice is given to the borrower, which has to be at least 30 prior to the “cure date”
  4. And that Failure to Cure may result in the acceleration of the Note and a Foreclosure may be commenced, and the property sold.

All well and good, as long as you can read a letter and a calendar.  In this case, the Bank’s Attorneys initially forgot (or just neglected) to mention that the Notice was sent.  Then they claimed it was sent on November 17, 2006, but didn’t provide any proof that it was mailed.  Then, Wells Fargo said that the acceleration was mailed on “September November 11, 2006”.  Is there really such a date?  Then they provided a copy of this notice, but it was dated February 5, 2007.

So let’s just assume that this Mortgage Servicer and the Law Firm glanced at a calendar and the letter side by side, and what, just made up the date of November 17, 2006?  I mean which is it, September, or November 2006 or February 5, 2007?

They are trying to take away someone’s home here.  This is important stuff; you just don’t make it up as you go along.

The second problem the Second DCA had with the Trial Court’s decision was with the Assignment of Mortgage.  In this case, the Foreclosure was originally filed by Wells Fargo, and in the middle of the suit Wells Fargo asked the Trial Court to substitute HSBC Bank as the Plaintiff mortgage holder.  HSBC said that they were the proper party to bring suit based upon an Assignment of Mortgage which “reflected that the mortgage was transferred to HSBC Bank “on or before” April 3, 2007.  Here’s the problem.  That Assignment is dated October 9, 2008, and was notarized on October 10, 2008.

Last time I looked, April 3, 2007 came way before October 9, 2008.

So here we have bankers, and Mortgage Servicers, and attorneys who just can’t seem to get their dates right.  Why didn’t they just read the Notice of Acceleration, and allege in the lawsuit that it was sent on February 5, 2007, the day it was dated?  Why didn’t they date the Assignment of Mortgage to be effective on October 9, 2007, when it was dated?  Now there may be answers to these questions that lie in the original filings with the Trial and Appellate Courts which I have not been privy to.  But let’s get real here folks.  Grab a calendar and read a letter.  It’s not that hard, unless there’s something else going on.  More to come, for sure.


Foreclosure Fraud, Foreclosure Stories, Homeowner Wins Foreclosure Case, Mortgage Servicers

What to expect from a law firm defending your case.

If you decide to hire a law firm to defend your Mortgage Foreclosure, what should you expect?

The primary goal of the defense should be:

  1. Get an agreement with the lender not to pursue a deficiency judgment
  2. Or if you are upside-down in the property,
    1. Cancel the Promissory Note and have them take back the property or
    2. Cancel the Promissory Note and have them accept a short Sale

A secondary benefit to a Mortgage Foreclosure defense is time.  Right now, in Florida at least, it takes approximately 18 months from the filing of a foreclosure action to its final resolution.  However, that time period is starting to increase, and time is your friend when you are in this situation.  The longer the foreclosure suit drags on, the more pain both the law firm and the lender feels.  The law firm feels pain, because many times their fees are tied to how quickly they can bring the action to a close.  The longer it takes, the more likely it is that the lender will make a deal.

It’s also taking longer for lenders to agree to short sales.  This is because the lender apparently believes that they can get more for the property by taking it back, then selling it themselves, rather than accept what a short sale buyer is willing to pay, which many times is the most accurate measure of the true current value of the property.

Another reason these cases are taking longer is the disintegration of several law firms that represent the lenders.  First David Stern’s Office, and now the firm of Ben-Ezra & Katz have come under investigation by the Florida Attorney General’s Office, and have been removed from the list of approved law firms for Fannie Mae.  This means that each one of the loan servicers must find a new law firm to handle thousands of cases.  There have been numerous reports of attorneys not appearing for hearings, and lenders who cannot be contacted.  It takes time for a law firm to receive the file from the old firm, familiarize themselves with the case, and hire new staff and attorneys to handle these cases.  This means that foreclosures will take longer to complete, and may be dismissed entirely.

So look for an aggressive law firm, who’s willing to fight for you to stay in your home as long as possible.  One that’s on the forefront of the fight.


General Advice

“Destroy the loan docs!” Judges asked to approve mass shredding

It’s bad enough to lose loan paperwork worth a quarter-million dollars (or more!) Now some trustees for bankrupt lenders are asking federal judges to approve a massive, intentional destruction of the original loan papers.

Why? Because it’s apparently just too expensive to keep track of these six-figure loans:

In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.

Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

What will this mean for those who borrowed money from these companies? It may mean that the original note—a document essential to a proper foreclosure in judicial states—may be heading for the paper shredder. Without these documents, it becomes difficult, if not impossible, for many lenders to prove who owns, and therefore has the right to enforce, these loans.

The trustees, of course, claim that there are no longer any essential documents in the records they’re trying to destroy. But people who have actually spent time in these boxes have a different story:

…people involved in winding down AHM’s affairs say that neither the contents of the boxes or the database have been audited, and that it’s possible the boxes still contain crucial documents such a promissory notes. Investors must have the original promissory notes, not copies, to be able to foreclose.

Imagine getting a free house because someone didn’t want to pay for document storage.  I mean, who needs these documents anyway?  Why the banks do, it’s their job and duty to preserve, maintain, and secure these documents if they want to base a foreclosure action on them.  But then, the homeowner has got to defend the case.  Just cutting, running and doing nothing, only invites more of this behavior.

Moral of the story?  Defend your home, hire a good foreclosure defense lawyer, you might have defenses you never knew you had.

Foreclosure Stories, Overview

How Mortgages are supposed to be Transferred to a Securitization Trust

There is a growing amount of discussion these days about possible defects in foreclosure proceedings commenced by loan servicers.  A lot of this discussion concerns procedural matters, such as whether the correct steps are being taken to verify the accuracy of statements made in affidavits executed in connection with these proceedings.

However, more fundamental issues have been raised challenging both the validity of the procedures used to convey mortgage loans into securitization trusts and the qualification of the securitization trusts as a real estate mortgage investment conduit (“REMIC”) at the time those trusts were formed.

The reasoning here is: 

  1. in order to satisfy procedural requirements in connection with foreclosure, certain steps must be taken in order to document the ownership of a mortgage loan by the securitization trust, and
  2. if not all of these steps were taken at the time of the securitization, the securitization trust may not own the mortgage loan.  Some say this reasoning is faulty, because some of the steps that may be required under certain state laws in order to bring a foreclosure action are not required to transfer ownership of the mortgage loan.

The mortgage industry says that the industry standard procedures used for decades in transferring mortgage loans to securitization vehicles comply with the well-settled principles of law governing the transfer of mortgage loans, and therefore are effective to transfer ownership of the mortgage loans.  And they are correct when these procedures are followed, and notes actually get transferred when they are supposed to be transferred.  When Affidavits are actually made upon PERSONAL KNOWLEDGE, and the Affiants have actually reviewed the documents with a critical eye.

There are a set of standard procedures for transferring a mortgage loan.  A mortgage loan can be thought of as a bundle of rights, including

  1. a borrower’s obligation to repay debt, which is evidenced by a note, and
  2. a lien on real property which is the collateral securing this obligation to repay the debt.  This security is created by a mortgage or a deed of trust.  (We will use the term, “mortgage” to include a deed of trust.)  Please remember these are two separate items or documents, with different rules applying to each.
  3. Transfers of notes are governed by state contract laws including the Uniform Commercial Code (UCC).
  4. Transferring a mortgage or deed of trust is generally governed by state real property law.  While these laws do not conflict, they do result in transfers of mortgage loans being legally complex.  There is no single legally prescribed format for transferring a mortgage loan in the United States.  In addition, in some states the ownership of a mortgage loan does not require the owner to have recorded an assignment of the mortgage in the real property records.

For decades there has been a custom and practice in the transfer of mortgage loans as between the originator and successive purchasers or into a securitization. And for decades, members of the banking and mortgage industry, complied with these customs and practices, laws and regulations.

When done legally, the practices used in conveying mortgage loans to private label securitization trusts are consistent with the practices used in transferring mortgage loans to Fannie and Freddie. 

These standard transfer procedures are essentially designed to meet three objectives:

  1. document the parties’ intent to effect a sale of the mortgage loans and write down and document all terms and conditions of that sale,
  2. evidence the transfer of ownership by delivering the physical notes with endorsements consistent with UCC provisions, (read state laws) which protects the purchaser from being subject to adverse third party claims in the mortgage loans, and
  3. enable the purchaser to become the mortgagee of record as needed for foreclosure proceedings or other purposes including discharging the Note and Mortgage when paid in full.

So what are these general customs and practices to sell a Mortgage.  The generally involve three steps:

  1. There should be a contract.   In mortgage loan sale transactions, there is almost always a contractual agreement as between seller and purchaser which:
    1. clearly establishes and identifies the parties intent to sell the mortgage loans to the purchaser;
    2. it also identifies the specific mortgage loans being sold by use of a loan level schedule;
    3. contains granting language which states that it conveys ownership of the mortgage loans;
    4. identifies the time of sale;
    5. and specifies the governing law for the sale transaction (frequently, the laws of the State of New York are designated by the parties as the governing law).
    6. These contractual agreements typically also contain representations and warranties made by the seller.  The usual contractual agreement for these transfers is typically a pooling and servicing agreement.  This contract conveys the mortgage loans from the depositor to the trustee on behalf of the securitization trust.  These documents are supposed to contain clear language that conveys ownership of all of the seller’s “right, title and interest in and to” the mortgage loans to the trustee on behalf of the securitization trust.  There should be a schedule or exhibit to these documents that specifically identifies each loan sold under the agreement.
      1. It has been said that the major problem for banks is mounting evidence is that originating lenders never transferred a vast number of loans into the securitized trusts in the first place. Josh Rosner, a well respected financial analyst, issued a client advisory in October 2010, advising of widespread violations of pooling and servicing agreements on mortgages. Mr. Rosner counseled that although PSA’s require transfer of the promissory notes into the securitized trusts, which hardly ever occurred in the white hot run-up of securitized loans in the last decade. He also says that the mortgage assignments which must accompany each note are routinely ignored or left blank. (This was the major problem in the Ibanez case)
      2. As we have seen in many recent cases, the Trustee who is foreclosing on these mortgages, many times cannot or will not produce this schedule or exhibit.  This is so crucial to the process, that it cannot be ignored.  If the Trustee says he owns the Mortgage being foreclosed upon, he should have at his fingertips the schedule of all the Mortgages that are contained in the “Pool” that he is overseeing.  To be unable to produce this crucial document is absurd.
  2. The Mortgage Industry has said that the Notes may be delivered to the purchaser with an endorsement in blank.  It is common for a mortgage note for a mortgage loan that has been sold to have stamped on it an endorsement to the effect of “Pay to the order of_____________, without recourse”, and signed by the originator or a subsequent purchaser.  That means the real owner of the note at that time.  Not some fictional “agent” of the owner, who has prepared the document well after the transfer.

A correct and legally binding endorsement, has the effect that any subsequent transfer of the note presumptively only requires physical delivery (i.e., with no additional endorsement).  Therefore, when the same note is sold time and time again, the endorsement in blank by any prior holder is a sufficient endorsement for purposes of the most recent purchaser.  For this reason, a mortgage note that has been transferred numerous times many times will only show one endorsement, which remains in blank, providing the original note is delivered to the owner.

Under the UCC in almost all states, and in almost all Pooling and Service Agreements, physical delivery of the Note to the purchaser or its agent, (together with a specific endorsement or an endorsement in blank) is an essential requirement for the Trustee of the Pooling and Service Agreement to sell the notes in a bundle with other notes.  They need to have a list of the notes in the bundle (usually an exhibit to the Pooling and Service Agreement) and physical possession of the Note.  Clearly possession of the mortgage note may be needed for enforcement of the note in the event of default, including by foreclosure.

3.   Assignment of Mortgage. The final key step in transferring ownership of a mortgage loan is to provide an assignment of mortgage in recordable form to the purchaser. Typically, the assignment is in blank so the name of the assignee can be filled in later prior to recordation.  As we previously mentioned, in Massachusetts, for example, the Ibanez Case held that an Assignment of Mortgage, since it conveys an interest in Real Property, cannot be an assignment in blank.  It must have the new owners name noted on the assignment.

Before Ibanez, many mortgage industry pundits, took the position that because the mortgage “follows the note”, it secures the debt for the benefit of the note holder.  They told their clients, the Trustees of these Pooling and Service agreements, that as between seller and purchaser it is not necessary to record the assignment in the name of the purchaser in order to convey rights under the mortgage to the purchaser.   Now this avoided a lot of recording fees that would have normally been collected by the County Recording Office.  In light of Ibanez, Essex County in Massachusetts is now seeking 22 Million Dollars in back recording fees from MERS.  (See John L. O’Brian, Jr.’s press release dated February 22, 2011.)

However, in order to bring a foreclosure action under the mortgage against the borrower following default, it may be necessary, under certain states’ law, that the purchaser becomes the mortgagee of record.  Delivery of an assignment of mortgage in recordable form in blank is intended to enable the purchaser to become the mortgagee of record by completing the assignment in its name and submitting it for recording.  Because every recording of an assignment of mortgage involves a filing fee and other expenses, it is not unusual for these assignments to remain unrecorded until such time as is needed in connection with a foreclosure of a specific defaulted loan. 

In some cases, at the time of the securitization it is known that the seller will be unable to produce the physical note because it had been previously lost or destroyed.   [These are some of the ones that pose the thorniest issues at foreclosure].  This fact alone should place the Trustee of the Pooling and Servicing Agreement on notice that there is a problem.

In these cases, a lost note affidavit should be executed by the seller would be delivered to the trustee which affidavit would confirm that the seller (i) had owned the loan, (ii) had possession of the original note, and (iii) had attached a true and complete copy of the original note to the affidavit, and also that the original note had been lost or destroyed at the time that they were to deliver the original note.  The securitization governing documents by their terms would still nevertheless convey ownership of those mortgage loans to the trustee.  This does not address the additional issues that the Trustee might face when foreclosing these mortgages in some states. With respect to mortgage loans where, as of the time of the securitization, the mortgage was held through the MERS system, instead of delivering an assignment of mortgage, the seller would transfer its beneficial interest in the mortgage to the trustee through MERS.  In jurisdictions where the noteholder must be named as the mortgagee of record in order to complete a foreclosure, relatively simple steps can be taken to accomplish this, thereby permitting foreclosure if necessary.  Severe problems may arise when an intervening Mortgage Holder no longer exists, perhaps having gone bankrupt.

Validity of original transfer procedures.   For the reasons described above, these standard procedures, when properly followed, are sufficient to validly transfer ownership of the mortgage loans to the securitization trusts, consistent with the clear and unambiguous intent of all parties to the transactions (including the investors) at the time.  The use of an endorsement in blank on the mortgage note is fully consistent with a sale in some states. 

But what happens when document preparation companies simply make up intervening assignments of the Note and Mortgage?  This is the typical “Robo-Signer” scenario. 

Recordation of an assignment of mortgage to the securitization trust is not necessary to evidence ownership of the mortgage loan by the trust.  However, courts are becoming much more vigilant when looking at the chain of title in foreclosure cases.

This may require additional steps at the time of foreclosure in order to comply with those pesky procedural or documentary requirements.  For example, an assignment of the mortgage may need to be recorded to the securitization trust.  Any such additional steps would not convey any new or additional ownership rights to the securitization trust and would not negate the sufficiency of the transfer procedures described above to convey ownership of the mortgage loans to the securitization trust at the time of issuance.  In many states, this must be done before the Foreclosure Action can be filed.  Other states seem to hold that if it is completed before the Foreclosure Sale, that is sufficient.  Still others haven’t addressed the issue. 

The Supreme Court in Massachusetts has held that an “assignment in blank” of a Mortgage is void.  As stated in U.S. Bank National Association vs. Ibanez, the Court said “We have long held 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 in land to the bearer of the assignment. See Flavin v. Morrissey, 327 Mass. 217, 219 (1951); Macurda v. Fuller, 225 Mass. 341, 344 (1916). See also G.L. c. 183, § 3. 

As we noted above, there is a difference between the assignment of the Note and the assignment of the Mortgage.  A note is generally a negotiable instrument and controlled by the UCC as adopted in each state.  A Mortgage is a transfer of interest in Real Property, and thus controlled by the Real Property laws of each state which might be, and usually are very different from the UCC. 

It should not be surprising that additional steps may be needed at the time of foreclosure.  It’s one thing to sell commercial paper, it’s quite another to take someone’s real property from them. 

The standard transfer procedures described above are used in the context of transactions between sophisticated financial institutions and institutional investors, who clearly mutually intend for the transactions to be sales. 

As commercial transactions, the steps taken are certainly sufficient to legally convey ownership and protect the rights of the purchaser, but do not include additional steps not required to convey ownership of the Real Property, which certainly involves additional time or expense. 

Remember as well, that the foreclosure process is adversarial and in that context it is understandable that extra requirements could be imposed over and above those necessary to convey ownership of the loan itself. 

General Advice, History - Or how we got here, MERS, Mortgage Servicers, Overview, The Players

Massachusetts’ demand for Recording Fees and MERS’ Response

Commonwealth of Massachusetts

 Southern Essex District Registry of Deeds
Shetland Park
45 Congress Street
Suite 4100
Salem, Massachusetts 01970

Register of Deeds
Phone: 978-542-1704
Fax: 978-542-1706




February 22, 2011


Kevin Harvey, 1st Assistant Register 978-542-1724


Essex South Register of Deeds John O’Brien announced today that he will be seeking over $22 million dollars from the Mortgage Electronic Registration System, “MERS” which represents several major banking conglomerates. O’Brien bases the $22M number on the fact that the Salem registry has recorded over 148,663 MERS mortgages since 1998. After a careful review of a number of these mortgages O’Brien said it became very clear to him that MERS had assigned mortgages to other entities at least twice without paying a recording fee. Based on this information the taxpayers have been defrauded out of $22,299,450 in Southern Essex County alone. It is quite possible that in some cases they may have assigned the notes more than twice resulting in even greater loss of revenue. O’Brien called MERS “one of the greediest schemes ever perpetrated on the American people. They have compromised the integrity of the public land recordation system and in doing so, have wreaked havoc on our economy”.

Last week MERS announced a major policy change conceding that assignments should be recorded in the various Registries across the country and “assignments out of MERS’s name should be recorded in the county land records, even if the state law does not require such a recording.” In addition MERS instructed its members to “not foreclose in MERS name”. O’Brien further states “MERS has now finally acknowledged that their business model was flawed, and they didn’t adhere to the legal requirement that all assignments of a mortgage must be recorded at the local Registry of Deeds.” “If they had followed the law the public would know who was buying and selling their mortgage, and it would have been an open, honest and transparent process. The fact that they deliberately chose to create a for-profit private cyber Registry of Deeds whose only purpose was to avoid paying the same fees as everyone else and keeping the public in the dark as to who was the rightful owner of the mortgage clearly demonstrates to me that this was a scheme of epic proportions.” “When Wall Street and these major lenders joined together in creating MERS, they plunged us into a housing nightmare with little or no regard for their actions. It’s obvious that their only motivation was to manufacture huge profits off the backs of homeowners and taxpayers. They should all be ashamed of themselves and step up to the plate and do the honorable thing and make the taxpayers’ whole,” O’Brien said.

The Essex South Registry of Deeds is one of 21 Registries in Massachusetts which have recorded MERS mortgages .O’Brien estimates that based on his conservative estimate of two assignments per mortgage the Commonwealth may be owed statewide upwards of $200 million dollars in lost recording fees. Nationwide, the amount of revenue lost could be in the billions. O’Brien is calling on MERS to come clean and inform the registers of deeds across the country as to the number of times they assigned mortgages to other entities. Only then will we get a true picture of the economic impact that this fraud has had on our country.

O’Brien, who in November, 2010, notified Massachusetts Attorney General Martha Coakley about MERS, will now be forwarding to her this additional information. “We need to act quickly to recover these funds,” O’Brien said.


Essex South Registry of Deeds

MERS Mortrgages recorded by community since 1998

                           MERS Mortgage           Lost MERS Revenue Lost MERS Revenue

                            Recordings                 from One missing        from Two missing

                             Since 1998                      Assignment                 Assignments

     City              by Community       by Community                   by Community

AMESBURY                  4,976                       $373,200.00                        $746,400.00

 BEVERLY                    10,351                       $776,325.00                    $1,552,650.00

BRADFORD                      176                         $13,200.00                          $26,400.00

BOXFORD                     2,558                       $191,850.00                        $383,700.00

BYFIELD                           139                         $10,425.00                          $20,850.00

DAN VERS                       7,769                       $582,675.00                    $1,165,350.00

ESSEX                                844                         $63,300.00                        $126,600.00

GEORGETOWN            2,644                       $198,300.00                        $396,600.00

GLOUCESTER               6,138                       $460,350.00                        $920,700.00

GROVELAND                 2,034                       $152,550.00                        $305,100.00

HAMILTON                    2,054                       $154,050.00                        $308,100.00

HAVERH ILL                 17,223                     $1,291,725.00                    $2,583,450.00

IPSWICH                         3,548                       $266,100.00                        $532,200.00

LYNNFIELD                    3,631                       $272,325.00                        $544,650.00

LYNN                             20,752                     $1,556,400.00                    $3,112,800.00

MAGNOLIA                          11                                 $825.00                           $1,650.00

MANCHESTER                 1,317                         $98,775.00                        $197,550.00

MARBLEHEAD                6,207                       $465,525.00                        $931,050.00

MERRIMAC                     1,798                        $134,850.00                        $269,700.00

MIDDLETON                  2,658                       $199,350.00                        $398,700.00

NAHANT                            904                         $67,800.00                        $135,600.00

NEWBURYPORT           5,172                       $387,900.00                        $775,800.00

NEWBURY                      1,731                       $129,825.00                        $259,650.00

PEABODY                     12,924                       $969,300.00                    $1,938,600.00

ROCKPORT                    1,619                       $121,425.00                        $242,850.00

ROWLEY                        1,828                       $137,100.00                        $274,200.00

SALEM                          10,121                       $759,075.00                    $1,518,150.00

SALISBURY                  2,010                       $150,750.00                        $301,500.00

SAUGUS                         7,261                        $544,575.00                    $1,089,150.00

SWAMPSCOTT             4,265                        $319,875.00                        $639,750.00

TOPSFIELD                   1,807                       $135,525.00                        $271,050.00

WENHAM                          956                         $71,700.00                        $143,400.00

WEST NEWBURY          1,237                         $92,775.00                        $185,550.00

Total                             148,663                 $11,149,725.00             $22,299,450.00

Total lost MERS Revenue with one assignment                    $11,149,725.00

Total lost MERS Revenue with two assignments                  $22,299,450.00

And Here is the MERS Response

MERS Responds to Essex Co., Mass. Announcement
Company in compliance with purpose and intent of
state recording acts
Contact: Karmela Lejarde

Reston, Virginia Feb. 25, 2011—MERS has not received any direct legal communication regarding Mr. O’Brien’s February 22, 2011 announcement. The use of MERS is in compliance with the purpose and intent of the state recording acts. MERS intends to fully defend itself against these unfounded allegations.

It is not the case that recording fees are somehow owed or outstanding. All MERS mortgages are recorded in the public land records, and MERS members pay recording fees when the mortgage is recorded. Fees are paid for a service performed, and if a document is eliminated because it is no longer necessary, no fee is due because there is nothing to record. We believe it is wrong and unethical to seek money for services that were never rendered, and in fact, MERS greatly reduces the workload of county recorders, resulting in lower operating expenses for the county recorder’s office. Moreover, it would be the borrower who ultimately pays the costs of recording assignments, either directly or indirectly.

When MERS is the mortgagee, the mortgage is recorded at the county land records, thereby putting the public on notice that there is a lien on the property. The MERS® System also complements the county land records by providing additional information that was never intended to be recorded at the county level, namely the information about the mortgage loan servicer, and now, with the addition of MERS® InvestorID, the name of the investor.


Foreclosure Stories, MERS, The Players

The Problem with Mortgage Assignments

During the roaring 2000’s, banks were in such a hurry to create mortgages and sell them on in the secondary market that they were careless with their paperwork; particularly with mortgage assignments.  When foreclosures started coming in, many of the mortgage assignments could not be found.  Rather than facing the problem, banks hired another company to create new assignments to replace the missing ones and put in new dates.  If a mortgage assignment was dated & filed a year after the trust was sold on the open market, then it was ruled that the assignment was created solely to facilitate a foreclosure, and as such, constituted mortgage assignment fraud.

Foreclosure Defenses, Foreclosure Fraud, General Advice, History - Or how we got here, MERS

What is strategic default?

Not everyone even defines strategic default in the same way, but panelists were generally in agreement that it involves a borrower who has the ability to pay his or her mortgage but chooses not to. Often that decision is tied directly to the property being underwater — when the borrower owes more than what the home is worth.

How many strategic defaults are occurring also is the subject of much debate. Last week, Barclays came out with a report that suggested that strategic default estimates have been largely overestimated.

But Amit Seru, assistant professor of finance at the University of Chicago and a member of the panel, classified it as a growing and significant problem.

About 4% of defaults in 2004 were strategic defaults, and now 25% to 35% are, he said, basing those figures on various academic studies that used both survey-based and data-based methods to assess the problem. House price declines, coupled with higher credit scores and borrower wealth tend to increase the likelihood of strategic defaults, he said.

Seru said if servicers are able to separate out distressed defaulters from strategic defaulters, then they could use different strategies to handle each.

From the government-sponsored enterprise standpoint, Fannie Mae uses deficiency judgments as one method to discourage strategic defaults, said Steve Holden, vice president of credit loss mitigation analytics at Fannie Mae. The GSE relies heavily on its servicers to determine if a borrower is a strategic defaulter and then makes a determination whether to seek a deficiency judgment, he said. After the session, he told HousingWire that he was unable to comment on how many deficiency judgments the GSE has pursued.

Davis said he predicts that more and more servicers will begin to pursue judgments against strategic defaulters although Lockett said it still needs to be a case-by-case review on whether to go that route. Davis also said that servicers should sit down and negotiate with borrowers who want to do short sales to potentially collect a deficiency payment at that time.

Foreclosure Defenses, General Advice, Overview

Attorney General opens probe into eighth foreclosure firm

State investigators say Ben-Ezra & Katz presented false and misleading documents to judges

Diane C. Lade, Sun Sentinel

February 23, 2011

The Florida Attorney General has opened an investigation into Ben-Ezra & Katz, a Hollywood law firm that processes thousands of foreclosures for lenders, on allegations of presenting false and misleading documents in court.

Ben-Ezra is the eighth high-volume foreclosure practice targeted by state investigators within the past year regarding similar claims involving paperwork submitted to judges. The firm last week laid off 236 of its 568 employees days after the government-owned mortgage giant Fannie Mae terminated its relationship, citing “document execution” issues.

The Florida Bar also is investigating firm partners Marc Ben-Ezra and Marvin Katz, on one complaint each involving foreclosure fraud. Bar officials would not say when its investigation began.

Ben-Ezra spokesman Ray Casas declined to comment on the state investigation. He did release a statement announcing the law office had retained former federal prosecutor and 10-year state legislator Dan Gelber to “provide support with quality control and to help evaluate policies and procedures.”

Gelber, a Democrat, ran for Florida Attorney General last year, losing to Pam Bondi.

In its investigation filing, the Attorney General’s Office said fabricated or misleading documents had been “presented in court before judges as actual assignments of mortgages and properly prepared affidavits that have later been shown to be inadequate and/or insufficient.”

Miami-Dade Circuit Judge Maxine Cohen Lando this month castigated Marc Ben-Ezra for “wasting the court’s time” by filing “sham foreclosure documents” involving the repossession of a Homestead property. Lando cited him for contempt.

The Attorney General has argued in all eight of its foreclosure investigations that the firms’ business procedures violated the state’s unfair and deceptive trade pratices act.

The seven other law offices being investigated, of which four are based in South Florida, include: David J. Stern, Marshall C. Watson, Shapiro & Fishman, Florida Default Law Group, Kahane & Associates, Daniel C. Consuegra and Albertelli Legal.

Shapiro & Fishman and Stern’s firm are fighting the state’s subpoenas, both claiming only the Florida Bar has the authority to regulate lawyers. A Palm Beach County judge ruled in favor of Shapiro last year, but Stern lost before a Broward County judge.

Both cases now are before the 4th District Court of Appeal in West Palm Beach. Attorneys for Shapiro & Fishman presented their arguments Tuesday.

Watson and Florida Default are cooperating with the Attorney General’s investigation. The other three firms have received letters of inquiry, meaning the state has not opened an official case on them. or 954-356-4295

The Players

Just one Reason Nevada is #1 in Foreclosures

We’ve all read the stories about Nevada having the highest rate of foreclosures in the US.

Here’s one example of why that’s so.

The Nevada legislature passed a law to reduce foreclosures.  They required all foreclosures to go through Mediation before the bank can seize your home.  In this Mediation, they required the Lenders to follow two just rules: Bring all required loan documents to the mediation; have someone available who can approve loan adjustments.

In a recent case in Nevada, before District Judge Donald Mosley, the Lender showed up at the Mediation, and the mediator found that CitiMortgage failed to provide the legally required documentation and ruled the lender was in noncompliance.

The District Judge had several options available to him.  Under the terms of the 2009 state law one option gives judges the authority to modify loans if lenders fail to abide by Nevada Foreclosure Mediation Program guidelines.

He could also order CitiMortgage to produce the documents, and then if they failed to, hold them in Contempt of Court, impose sanctions, and possibly dismiss the case.  CitiMortgage appealed the Mediators finding of noncompliance to the District Judge, who sided with the lender and refused to find CitiMortgage acted in bad faith.

During that October hearing, Mosley also said he would never modify a loan from the bench.

What is most troubling here, is that CitiMortgage failed to supply to documentation that proves that they have a right to foreclose on the property, and the Court doesn’t seemed to be inclined to make them produce it.

Who cares about the rights of property owners?

Foreclosure Stories