MERS takes a hit in New York

In a Bankruptcy case handed down 6 days ago, MERS took a big hit.  Even though the Bankruptcy Court upheld the foreclosure, they said it wouldn’t be business as usual for MERS there anymore.

Before anyone jumps for joy about this, consider the following.  This was a case decided by a Federal Bankruptcy Judge, so New York State Courts do not have to follow it, let alone Courts in other States.  Even other Bankruptcy Judges in the same Federal District in New York don’t have to follow it.  So what makes it so special?

It’s the legal reasoning.  And although the case is complicated, Bankruptcy Judge, Robert E. Grossman takes the MERS bull by the horns and finds that MERS just doesn’t work, either legally or logically and says that in the future, in his Court, MERS cases will be treated differently.

And don’t think that this was just a (pro se) homeowner representing herself and a country lawyer doing his first foreclosure.  The Homeowner had a lawyer in Bankruptcy Court, and the Banks were represented by one of the largest Foreclosure Law Mills in the State of New York.  Stephen J. Baum, PC, initially represented the banks.   His law firm filed 12,551 foreclosure actions in the New York area last year.  That averages out to 48 per day.  However, when the Banks saw this thing starting to go nuclear, MERS itself intervened, and the Banks brought in top New York City Law Firms.  MERS Vice-President, William C. Hultman submitted a written declaration, and it was all out war.

It also wasn’t a case where the bank couldn’t come up with the right documents, the Foreclosing bank had the Original Promissory Note and Mortgage when they foreclosed, unlike many of the other cases we have talked about here.  What the Judge keyed on, was the business model of MERS, how it is supposed to work, and whether or not it is legally sufficient to allow a bank to Foreclose using it.

It clearly appears that although the Banks and MERS won this battle, (at least in terms of the outcome) it may well spell the beginning of the end for MERS.  Judge Grossman’s opinion was harsh.  He said that “Aside from the inappropriate reliance upon the statutory definition of ‘mortgagee,’ MERS’s position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best.”

That’s tough language from a Judge who’s talking about an entity that holds about 50% of the country’s mortgages.  This position that MERS is both the actual Mortgagee and the Agent of the Mortgagee is at the heart of the MERS business model.  And although he upheld the foreclosure (on procedural grounds) he stated in summary:


For all of the foregoing reasons, the Court finds that the Motion in this case should be granted. However, in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing before this Court.

A close reading of Judge Grossman’s opinion will, I suspect, make that a very difficult thing to do, at least in Judge Grossman’s Bankruptcy Court.  The real question here, is are other State Judges, and Bankruptcy Judges going to adopt Judge Grossman’s reasoning, or will they just take the position that these banks and institutions involved are just too big to fail?

Foreclosure Defenses, Foreclosure Stories, MERS, The Players

Non-Judicial Foreclosures by BOA halted in Nevada

 A unit of Bank of America Corp. unit, named ReconTrust Co. N.A., was ordered by a Nevada judge to temporarily stop foreclosures in the state that aren’t approved by a court order.

Nevada is a State which allows both Judicial and Non-Judicial foreclosures.  By far, non-judicial foreclosures are more numerous, since they are easier and quicker for the banks to complete.

In the case of North v. Bank of America Corp., CV31506, Fifth Judicial District, Nevada, Nye County Judge Robert W. Lane issued a preliminary ruling that blocks ReconTrust from conducting any more non-judicial foreclosures until he holds a hearing Feb. 28 on whether to make the ban permanent, according to a Jan. 20 order provided by the court. The injunction was sought in a Nevada homeowner’s lawsuit against Bank of America and ReconTrust.

The Judge held that “irreparable injury” that would result from the “unlawful” seizure of the plaintiff’s home by ReconTrust Co..

In non-judicial foreclosures, lenders can seize property without a court order. See our main web site for further details.  Some states require a court order, others don’t, and in some, including Nevada, both are used.

In this case, the homeowner received a default notice after seeking a loan modification from Bank of America and going through a trial period. It’s interesting that she received the default notice before the bank informed her that she did not qualify for their modification program.

Bank of American apparently faced this same situation in Utah, and moved the case to Federal Court where Bank of America says they prevailed.

Foreclosure Stories, Homeowner Wins Foreclosure Case

Request for original mortgage note and additional information

From [edit] John Doe
Address 1
Address 2
City, WY 12345
To [edit] (Name of Bank)
Subject [edit] Request for original mortgage note and additional information
Message [edit] To whom it may concern:  This is a qualified written request under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I own the property at the address listed above, and your organization services my mortgage.

Within sixty days, I would like to know the name, address, and phone number of the bank or investor that owns my mortgage.

Furthermore, in light of the recent allegations of foreclosure fraud, I demand to inspect the original mortgage note proving ownership over my home loan. If you fail to allow me to inspect my mortgage note proving that you have a right to collect my mortgage payments, I will be forced to consider all options available to me to ensure that my family and my home are protected.

I ask that I receive my response in writing. I understand that under Section 6 of RESPA you are legally required to acknowledge my request within twenty business days and must try to resolve the issue within sixty days.

Finally, and most importantly, you are NOT to interpret this request as a dispute regarding my account.  Should you place my account in a disputed status at this point, and report that dispute to any Credit Reporting Agencies, I will consider that a Violation of the Fair Credit Reporting Act (FCRA), and a copy of this letter will be submitted as evidence.

Thank you for your attention to this matter.

General Advice

More thoughts about Ibanez and Massachusetts

Why is the Ibanez case so important?

First, to recap, the Ibanez case was handed down by the Massachusetts Supreme Court, the highest Court in Massachusetts.  It is the Law in that state.  The case was actually very simple.

The issue before the court was whether the two securitization trusts could prove that they owned the mortgages they were attempting to foreclose on.

The result was they couldn’t.  This wasn’t the result of sloppy lawyering, or the homeowner hanging his hat on some obscure technicality.  This was all out, full blown trench warfare, with two of the largest banks in the Country, who knew that a loss here in Massachusetts could be devastating.  Were the banks rushed, and just unable to come up with the documentation in time?  No, not even close.  The Court actually gave them additional time, and told them exactly what the Court needed to see, in order for the Banks to win.  Did they provide that to the Court?  No.

Well, why didn’t they?  I mean they are banks, and banks are supposed to keep good records right?  You trust them with your checking account.  You go on-line and check your balance to see how much you have, right?  This is what banks do, keep track of things.  So why couldn’t they keep track of these two mortgages?

Basically it was because they (banks and Wall Street in general) broke the system themselves.  Why would they do that?  To save money, which in turn allowed them to make a great deal of money in the short term, leaving the long term consequences to someone else.

We’ll explain what happened, in everyday terms, in our next article.

Foreclosure Defenses, History - Or how we got here, Homeowner Wins Foreclosure Case

What is a Qualified Written Request?

What is a Qualified Written Request?

A “Qualified Written Request” is made pursuant to the Real Estate Settlement Procedures Act (12 U.S.C. § 2601-2617) and its implementing Regulation X (24 C.F.R. § 3500.21) and is an important communication tool by which the consumer can put the servicer on noticed that there is a problem.

If the borrower believes there is an error in the mortgage account, he or she can make a “qualified written request” to the loan servicer. The request must be in writing, identify the borrower by name and account, and include a statement of reasons why the borrower believes the account is in error. The request should include the words “qualified written request”. It cannot be written on the payment coupon, but must be on a separate piece of paper. The Department of Housing and Urban Development provides a sample letter.

The servicer must acknowledge receipt of the request within 20 days. The servicer then has 60 days (from the request) to take action on the request. The servicer has to either provide a written notification that the error has been corrected, or provide a written explanation as to why the servicer believes the account is correct. Either way, the servicer has to provide the name and telephone number of a person with whom the borrower can discuss the matter. The servicer cannot provide information to any credit agency regarding any overdue payment during the 60 day period.

If the servicer fails to comply with the “qualified written request”, the borrower is entitled to actual damages, up to $1000 of additional damages if there is a pattern of noncompliance, costs and attorneys fees.

General Advice

Florida Bar says foreclosure lawyers must report fraud to court

By Christine Stapleton and Kimberly Miller

Palm Beach Post Staff Writer

In an opinion that could have unfathomable consequences in countless foreclosure cases, The Florida Bar says attorneys must notify a judge about potential fraud — including robo-signed affidavits and forged notary stamps — even if a foreclosure case is closed and the home has been sold at auction.

The direction was published in an article in today’s issue of The Florida Bar Journal as part of an outline in a new free online foreclosure class offered by The Bar. The class is in response to problems that led several major lenders to temporarily freeze foreclosures last fall.

No one knows how many cases could be affected or what judges will do when they are notified. About 1.2 million foreclosures have been filed in Florida since January 2007, according to RealtyTrac. Investigators for the Florida Attorney General’s Office have found tens of thousands of forged signatures, backdated documents and other problem paperwork at four law firms, so-called “foreclosure mills” currently under investigation.

“There has never been a problem like this before or this kind of wholesale misrepresentation,” said Margery Golant, a Boca Raton-based attorney who teaches a portion of the Bar’s four-hour online course, which instructs lawyers to report fraud. “No one knows how this is going to turn out or what the right things to do are.”

While attorneys are instructed to report fraud, they should not to do so in a public court hearing without their client’s permission. Instead, the banks’ attorneys should ask for a private hearing with the judge, said Cynthia Booth, an ethics attorney with the Bar.

“You try to cause the least amount of harm as possible to the client,” Booth said. When fraud is suspected, an attorney’s duty to the court supercedes the attorney’s duty to the client, Booth said. Private hearings would allow the attorney to fulfill both duties, she added.

But the thought of private hearings about widespread fraud in foreclosure cases has some lawyers bristling. Robo-signers have admitted in depositions that they signed off on hundreds of thousands of foreclosures and major lenders have already acknowledged that court documents were not properly verified, said foreclosure defense attorney Thomas Ice of Ice Legal in Royal Palm Beach

“This is a very public problem and to try and address it in a private way is not going serve the court in its attempt to assure everyone about the integrity of the court system,” Ice said.

St. Lucie Circuit Judge Burton Conner, another instructor, said he was not aware of the Bar’s recommendation about private hearings. Conner, also a member of the Florida Supreme Court’s Task Force on Residential Mortgage Foreclosures, said private hearings, called in-camera hearings, are appropriate in certain cases but very rare.

“I’m not sure if that’s an appropriate procedure,” Conner said. “This is a civil court, and it is open to the public.”

When an attorney asks for an in-camera hearing, the judge must hold a public hearing to decide if the private hearing is necessary. That means more time and more delays in processing foreclosure cases.

Palm Beach County Chief Judge Peter Blanc said he’s not sure how attorneys will bring problems to the court’s attention in old cases or how many cases could come forward.

“I would like to think if the attorneys knew, they wouldn’t have been doing it in the first place,” Blanc said.

As far as getting guidance from the court, Blanc said a judge has a range of options when a breach of ethics is revealed, including doing nothing to throwing out a judgment. In pending foreclosure cases, the judge could halt the proceedings while the fraud is investigated.

However, the biggest and most troublesome problem is what to do with cases that ended years ago. Can judges undo these foreclosures, and what happens in cases in which the home was sold to new owners without a clear title? As for discipline, the judges must decide what to do with fraud brought to their attention. Should they refer the cases to the Bar for further investigation or to legal authorities for prosecution?

“It’s going to create a huge mess. There’s no other way to describe it,” Conner said. “We just don’t know how bad it really is. I guess you could say we’re just waiting for the shoe to drop.”


Faulty Foreclosure May Mean Massachusetts Buyer Isn’t Owner

In a previous post, we spoke about the rather important decision that the Massachusetts’ highest court rendered, when they ruled on the Ibanez case.  In that case, they said that the bank had to own the note and mortgage at least by the time the Foreclosure becomes final.  Now they have decided to take up another case, from the same Court and Judge again. 

Now, they are going to address the next step in the process.  They will decide whether or not a homeowner, who buys a foreclosed home at an improper foreclosure sale, has legal title, and may remain in possession. 

This case, like the Ibanez case, arose from the same basic set of facts.  A Mortgage Servicer, conducts a foreclosure sale, and obtains the property at the sale.  At some point after they buy the property at the foreclosure sale, they obtain the mortgage, in an effort to make it all legal.  However, in Ibanez, the Court ruled that that they needed to own the mortgage before the foreclosure sale, not after.  Well, what about all those people who bought homes in Massachusetts before that case.  When this case is decided, it should clear up the situation, at least in Massachusetts.  Here’s the full story…

Faulty Foreclosure May Mean Massachusetts Buyer Isn’t Owner

By Thom Weidlich – Jan 21, 2011 12:01 AM ET

Massachusetts’ highest court will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner.

The state’s Supreme Judicial Court, which agreed last month to take the appeal, already ruled Jan. 7 that banks can’t foreclose on a house if they don’t own the mortgage. The lower- court decision now under review said the buyer of residential property in Haverhill, Massachusetts, never really owned it because U.S. Bancorp foreclosed before it got the mortgage.

“It appears to be the next step in the conversation,” Paul R. Collier III, who represented the borrower in the earlier case, U.S. Bank v. Ibanez, said in a phone interview.

Like the Ibanez case, the court’s decision may resonate with other states as they grapple with the rights of new homebuyers who may be hesitant to complete a purchase for fear of uncertain title, and with how such a trend may hobble the broader housing market.

Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether thousands of U.S. foreclosures were properly documented during the housing collapse. Last year, completed foreclosures in Massachusetts rose 32 percent to 12,233 from 9,269 in 2009, according to Boston-based Warren Group, which tracks local real estate.

Bundled Mortgages

The latest case, Bevilacqua v. Rodriguez, could affect trusts that bundled mortgages and sold securities to investors. Questions about lending practices, including alleged overstatements of borrowers’ income and inflated appraisals, have pitted mortgage-bond investors against banks. Also, loan originators or trust sponsors may be forced to buy back mortgages wrongly transferred into loan pools.

The Ibanez and Bevilacqua cases both originated before Massachusetts Land Court Judge Keith C. Long in Boston.

Francis J. Bevilacqua III went to Long’s court to force the original owner to say whether he had a claim on the property in Haverhill, about 36 miles (58 kilometers) north of Boston. A city assessment website lists four condominiums at the location with a total value of $600,300.

Bevilacqua asked Long whether he could try to find the original owner through newspaper notices, said his lawyer Jeffrey B. Loeb, of Rich May PC in Boston, in a phone interview.

In August, Long ruled that Bevilacqua wasn’t the property’s owner and didn’t have standing to inquire about claims. U.S. Bancorp, which sold Bevilacqua the property in 2006, conducted an invalid foreclosure because it didn’t properly own the mortgage at the time, Long said.

The mortgage transfer to U.S. Bancorp, which oversees the mortgage-backed trust containing the loan, happened after the foreclosure, Long said. All Bevilacqua had was a deed from an invalid foreclosure sale, the judge said.

‘Great Sympathy’

“I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.

The servicer of the mortgage-backed trust the loan was in would have handled the foreclosure and sale, not U.S. Bancorp, Teri Charest, a spokeswoman for the Minneapolis-based bank, said in an e-mail. U.S. Bancorp isn’t a party to the Bevilacqua case.

Bevilacqua’s lawyers never found the original owner, Pablo Rodriguez. The city property-assessment site lists the four condos under different owners. Bevilacqua didn’t return a message seeking comment left with Loeb.

‘Broad Implications’

The Supreme Judicial Court agreed to take the appeal directly, bypassing an intermediate panel. The court may do that when a case has “broad implications,” Kevin Costello, a lawyer at Roddy Klein & Ryan in Boston, said in a phone interview. Costello represents borrowers in a statewide class action accusing banks of conducting faulty foreclosures.

Both Costello and Collier, the lawyer for Ibanez, said Bevilacqua is the first so-called third-party buyer case to come before the high court since the Ibanez decision.

“The third-party buyers obviously have claims against the selling entity, the servicing entity and any title insurer and any attorney that was engaged,” Collier said.

The court has tentatively set oral argument for April, according to Susan Mellen, the court clerk.

“This ruling, in conjunction with Ibanez, may allow a wrongfully foreclosed-upon borrower to retrieve their property,” Glenn F. Russell Jr., a Fall River, Massachusetts- based lawyer for the other borrowers in the Ibanez case, said in an e-mail.

Try-Title Statute

In their appeal brief, Bevilacqua’s lawyers argue that Long confused requirements for the law used to prove one’s title to a property with those for the law their client sued under, the so- called try-title statute, through which one party seeks to force another to assert or waive a potential claim on the property.

“The Land Court made this finding despite the existence of a recorded deed conveying the property to Bevilacqua,” they wrote. The lawyers said that even if the Ibanez ruling means Bevilacqua doesn’t have “legal title,” he has “record title” because of the deed.

“Anyone conducting a title search would be led to believe that Bevilacqua is the record owner of the property,” they wrote. “Bevilacqua recognizes, without conceding, that Rodriguez may have a claim to the property.”

Edward M. Bloom, president of the Real Estate Bar Association for Massachusetts, said the group may file a friend- of-the-court brief in the case. It may be possible under Massachusetts law that Bevilacqua could keep the property by having possession of it for three years, Bloom said.

Legislative Solutions

“Maybe the court will throw up its hands and say the legislature must come up with a solution,” said Bloom, a partner at Sherin & Lodgen LLP in Boston.

The third-party issue has become a major one for title insurers in the state, said Richard D. Vetstein, a real-estate lawyer in Framingham, Massachusetts.

“What’s going to happen to all these people?” Vetstein said. “The people who don’t have title insurance are really in big trouble.”

The court may have left the issue of third-party buyers unaddressed in Ibanez anticipating a ruling in the Bevilacqua case, said Thomas Adams, a partner at New York law firm Paykin Krieg & Adams LLP.

“That’s a big issue to leave outstanding,” said Adams, a former analyst at bond insurer Ambac Financial Group Inc. “If Judge Long’s decision holds, then that’s a big deal.”

The case is Bevilacqua v. Rodriguez, 10880, Supreme Judicial Court of Massachusetts (Boston).

To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at

To contact the editor responsible for this story: David E. Rovella at

Foreclosure Stories

Banks Dismissing Foreclosure Suits in SW Florida

Friday, 21 January 2011

Banks in recent weeks have been dropping hundreds of their Southwest Florida foreclosure lawsuits instead of facing defendants at trial, according to local attorneys and court records.

Opinions varied sharply on whether that means banks are just taking a breather before refiling with stronger evidence – or giving up for good on hopelessly flawed cases. Some foreclosures at large law firms were never actually read by the attorneys who filed them here and elsewhere, and some of the mortgages that ended up in mortgage-backed securities sold to investors were never legally transferred by the banks, defense attorneys have alleged.

We think they’re going to come back and refile,” Lee County Clerk of Court Charlie Green said.

That’s an expensive proposition, he said, noting foreclosure suits carry a hefty filing fee: about $1,900 for a $250,000 house, for example.

What happens is lawyers for the banks are asking judges to dismiss their cases, which is “very much out of the ordinary,” Green said. “You don’t see cases dismissed without prejudice that often.”

Foreclosures were rare in Southwest Florida until the housing market crashed at the end of 2005, bringing on waves of mortgage defaults by investors and homeowners.

 Green said he hasn’t calculated exactly how many foreclosures are being dismissed.  But eight voluntary dismissals were filed Tuesday alone by seven different banks including Bank of America, one of the largest filers of foreclosures in this area. Bank of America did not reply to a request for comment Tuesday.

At one court hearing alone, attorney Kevin Jursinski said, one of his associates watched as “50 in a row” were withdrawn.

“Can they re-litigate?” Fort Myers-based attorney Carmen Dellutri asked. “I don’t think so.”

Most of the mortgages in dispute were sold to Wall Street and sold in bundles to investors as mortgage-backed securities, he said. But so many mistakes were made in the process it’s unlikely the banks can win those cases.

Foreclosure Stories

Foreclosure Defense: Basic Rules, Discovery, Affirmative Defenses and Audits

Affirmative Defenses and Procedure
You Can Stop Foreclosure and Put the Lender on the Defense.
Does the Lender have the “Original” Note in Hand?

Step One: Answer the Foreclosure Lawsuit

            We will posts the basics of preparing an Answer in a later post.

Step Two: The Lender Must Prove Existence of the Note.

To recover on a promissory note, the plaintiff (the Lender in the case of foreclosure) must prove 4 basic things.

(1) The existence of the note in question;

(2) That the party sued signed the note;

(3) That the plaintiff is the owner or holder of the note in due course; and

(4) That a certain balance is due and owing on the note.

We’ll discuss and explain each one of these things in detail.  In your Answer and Affirmative Defenses, you want to consider pleading these defenses:

(1) The actual note in question does not exist – Your possible Defenses are:

It is true, in mortgage foreclosures, that the Plaintiff, in order prove up their claim the law requires presentment of the “ORIGINAL” promissory note.   A copy of it should be attached to the Foreclosure Complaint, and you must demand to see the Original.  If the existence of the note is in question, you’ve got defenses.  You will know this if the Complaint has a Count, or Request in it to reestablish a lost, misplaced or destroyed promissory note.  If the “ORIGINAL” note you signed in ink that contains your signature is claimed to be lost, stolen, missing and/or destroyed, then you may have the following defenses.  Affirmative Defenses, (which is what these are) usually must be plead or listed in your “Answer” to the complaint.

1)      there may be fraud upon the court in that the named Plaintiff may not have ANY interest to the note which is supposedly lost note is not lost, but may have been intentionally destroyed due to missing assignments on the note which may have made it void and a legal nullity;

2)      there is no proof that the named Plaintiff ever held the note or took possession of the note and thus has no claim or right to bringing about the foreclosure;

3)      the mortgage industry, investors, and GSE’s, or government-sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress such as Fannie Mae, Freddie Mac, and FHLBs etc. have a requirement that the last endorsement to them be undated and “blank” leaving the payee line blank and making the negotiable instrument a sort of “bearer bond” and instrument. As such, any party finding or stealing the note can place their name on the payee line, claim ownership of the note, and sell the note to others who may make a demand upon you in the future. Because of this, you want to require money to be deposited in an escrow account or with the court in an amount equal to the amount claimed owed on the note, until such missing note is found or upon your death. Notes have a life of their own…

4)      If the note was destroyed or lost intentionally (the industry will do this as a matter of course) then they may be trying to hide the beneficial owners and shield them from any assignee liability arising from the actions of the servicer who they hire, supervise and most importantly authorize to foreclose upon you. Without the note, since subsequent endorsements are not recorded to avoid payment of taxes and hide true and real beneficial interests, there is no possible way to determine who ever held a rightful interest in the note and who you may have claims or counter claims against those unknown parties and who should be presently before the court as a real party in interest.

5)      Federal Circuit Courts have ruled that the only way to prove the perfection of any security [including promissory note] is by actual possession of the security. Current or prior possession must be proved up.

In an electronic age, it is a simple matter to photoshop someone’s signature or image upon a document and that it is very difficult to imagine such a valuable negotiable instrument being lost or missing without a ulterior motive.

(2) That the party sued never signed the note involved in this Foreclosure – Your possible Defenses are;

1)      that the party sued never signed the note

2)      the note in question is not the note you signed and executed in ink and only the one you signed in ink that presumably contains your fingerprints can be relied upon by your handwriting analysis expert; 

i)  We want to eliminate the possibility that the Plaintiff has “photo-shopped” your signature onto a fictitious document.

(3) That the plaintiff is not the owner or holder of the note in due course – Your possible Defenses are;

1)      the “named” Plaintiff is not the ‘holder in due course” of the note and only an agent or nominee for the true beneficial owners and holders in due course has the right to sue;

2)      there is no proof, without the note, that a proper chain of assignments took place and that the lien positions were properly perfected;

i)  Furthermore, if there are missing assignments of the original note and the assignment went from Lender A to Lender B to Lender D without an intervening assignment from Lender B to Lender C and From Lender C to Lender D, then the note may be void and a legal nullity in your state.

3)      other unnamed and disclosed real parties in interest may have a claim to the note and be the rightful beneficial owners to the note and must be identified and brought before the court; 

4)      there may be several unnamed and disclosed real parties in interest may have a claim to the note and be the rightful beneficial owners of the noted and consequently you could be sued later on the same note by different parties;

5)       It is industry practice to not name the GSE, investor, or real party in interest in foreclosure and to use the Servicer as a front for the real or true Plaintiff: 

i)  The original lender who may or may not even be in business any more or sold their interest in the note long ago, only to have a claim made upon them for repurchase;

ii) A Servicer of even “special servicer” who is acting as an agent for the investors, GSE’s or real party in interest, but has no beneficial ownership in the note since they are only being paid to collect and foreclosure by the real parties in interest;

iii)  A “nominee” such as MERS who has no legal authority to foreclose upon you and do business in your state and who according to their own written documents and verbal assurances never hold the note or own “any” beneficial interest in the note.

6)      Notes are pledged, sold, bifurcated, consolidated and traded in various derivative transactions like bubblegum baseball cards and their transfers, sales, pledges etc.  are not publicly recorded. As such, only possession of the actual original note can prove the actual owner and holder in due course of the note and who you can make an offer of payment to for purchase of the note by yourself, another family member or partner. You have a right to know the rightful owner of the note so an offer for payment of the note at a discount and at fair market value can be made. If the note has been pledged and encumbered, then that party must be made aware of the foreclosure and your right to negotiate with them a payment and release of the note by you, other lien holders or private parties;

(4) The Plaintiff must be able to prove that a certain balance is due and owing on the note – Your possible Defenses are:

1)      Proof of the balance due and owing on the note requires a general account and ledger statement. Claims of damages, to be admissible as evidence, must incorporate records such as a general ledger and accounting of an alleged unpaid promissory note, the person responsible for preparing and maintaining the account general ledger must provide a complete accounting which must be sworn to and dated by the person who maintained the ledger.

2)      Notes are traded often and you need to inspect the physical note to see who the real prior parties were that held and endorsed your note since you may have counter and cross claims against them and need to bring them before the court for the action, since they may have improperly inflated your principal balance, amount owed or escrow account by not applying your payments correctly; adding fees not legally owed by you to the principal balance;  miscalculating the interest and not properly amortizing your loan; fraudulent selling your loan or misreporting you on your credit report.

3)       You must have the master transaction histories and general ledgers for the account since a “dump,” “summary,” or redacted record cannot be relied upon to determine the rightful amounts owed without having a complete audit of your account. In order to conduct a proper audit, master records and all prior records must be compiled, reviewed, analyzed, and reconciled. It is not your responsibility to prove each payment was made. It is your responsibility to say a payment was made and provide evidence, including your word that it was made. It is the note holder’s duty and responsibility to validate the claims being made on the note and the amount owed. If they have the master records or claim that the records of prior servicers are missing, then there is no rightful way for anyone to prove up the balances and amounts they claim are owed.

Therefore, you must claim:

 a)      That the principal balance claimed owed, is not owed, and is the wrong amount.

 b)      That the loan has not been properly credited and amortized;

 c)      That the current servicer cannot be relied upon to testify and certify that prior amounts, transactions, credits, debits, charges and fees added by prior servicers were indeed proper and correct, and that the account they transferred to the current Servicer, was properly amortized and credited. As such, the person holding the ledgers at the prior servicer must come and testify as to the amounts owed on the note.

 d)      Dumps and summaries of amounts owed cannot be relied upon.  Only original ledgers and master records and the keeper of those records can testify as to the amounts claimed owed and due.


Step Three: Audit Your Closing Documents for TILA Violations, Illegal Kickbacks and Fraud In order to find for consumer protection law violations you will have to gather and assemble your loan and closing documents and put them in order.  This can be the basis for additional defenses:

            We will cover this thoroughly in a later article.

Foreclosure Defenses, General Advice

MERS view of the State of the Law in Georgia

Georgia courts recognize the right of MERS to foreclose, as illustrated by the decision in American Equity Mortgage, Inc. and Mortgage Electronic Registration Systems, Inc. v. Chattahoochee National Bank, # 05-cv-1951 (Forsyth Cty. Sup. Ct., Dec. 29. 2005, J. Dickinson).

This was an action to enjoin an immediate judicial sale due to equitable subrogation in which the court recognized the validity of a lien held by MERS and the authority of MERS to enforce it.

The borrower executed a security deed naming CitiFinancial Services as the grantee in exchange for a loan. The deed was recorded. On June 15, 2004, the borrower re-financed the loan by obtaining a home equity credit line from American Equity Mortgage. The deed to secure the debt named MERS as the grantee in a nominee capacity for American Equity. The deed was recorded on June 24, 2004, and CitiFinancial‟s loan was paid off by the refinance.

Approximately a month prior to the re-finance, Chattahoochee Bank obtained a writ due to a judgment lien obtained against the borrower in the amount of $679,240.01. Chattahoochee provided a Notice of Levy on Land to the borrower, which indicated that it intended to conduct a judicial sale of the property.

American Equity, claiming it had no knowledge of Chattahoochee’s interest in the land when it loaned the money for the refinance, brought suit and obtained a temporary restraining order.

Following the entry of the temporary restraining order, the issue was raised as to which entity should be the plaintiff in an effort to determine whether American Equity/MERS has priority over Chattahoochee Bank.

After briefing and an evidentiary hearing, the Honorable David L. Dickinson determined that “MERS, in its capacity as grantee in the deed to secure debt and as nominee for American, or its successor in interest as the holder of the note, is the entity that would suffer irreparable harm if [Chatahoochee] foreclosed on its judgment lien and is the entity entitled to seek an injunction in this case. MERS is entitled to enforce the American Deed to Secure Debt per its terms.”

The court awarded MERS a permanent injunction precluding Chatahoochee or its successors or assigns from selling or foreclosing on the property so long as the deed held by MERS remains in effect.

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