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Posted on 04/18/2011 3:40:01 AM PDT by Neidermeyer
On March 30, an Alabama judge issued a short, conclusory order that stopped foreclosure on the home of a beleaguered family, and also prevents the same bank in the case from trying to foreclose against that couple, ever again. This may not seem like big news -- but upon review of the underlying documents, the extraordinarily important nature of the decision and the case becomes obvious.
No Securitization, No Foreclosure
The couple involved, the Horaces, took out a predatory mortgage with Encore Credit Corp in November, 2005. Apparently Encore sold their loan to EMC Mortgage Corp, who then tried to securitize it in a Bear Stearns deal. If the securitization had been done properly, in February 2006 the trust created to hold the loans would have acquired the Horace loan. Once the Horaces defaulted, as they did in 2007, the trustee would have been able to foreclose on the Horaces.
And that's why this case is so big: the judge found the securitization of the Horace loan wasn't done properly, so the trustee -- LaSalle National Bank Association, now part of Bank of America (BAC) -- couldn't foreclose. In making that decision, the judge is the first to really address the issue, head-on: If a screwed-up securitization process meant a loan never got securitized, can a bank foreclose under the state versions of the Uniform Commercial Code anyway? This judge says no, finding that since the securitization was busted, the trust didn't have the right to foreclose, period.
EDITORIAL COMMENT: The fact that this case came from Alabama makes it all the more important to be watched and noted. Despite the reluctance of many Judges to give a free house to homeowners, this Judge picked up on the fact that the homeowner wasn’t getting a free house and that if he allowed the foreclosure it would have been the pretender lender getting the free house.
When it comes down to it, this really is simple: the trustee never got the loan. The asset-backed pool didn’t have it despite their claim to the contrary. Saying it doesn’t make so.
http://livinglies.wordpress.com/2011/04/18/alabama-court-busted-securitization-prevents-foreclosure/
WOW! The courts are finally applying black letter law !!! If you’re not REALLY SHORT on BAC , WF and the rest DO IT NOW!!! It’s too late to short DJSP ..
It is nice to see that judges are expecting banks to obey the law as well.
I’ve paid off my house and now I’m debt free. Now It’s time to buy a second house. The catch is I’ll be buying it for someone else to live in. Boy do I feel like a sucker.
The banks took the investors money and never gave them the correct paperwork transferring the note to the investors trust/pool ,,, it’s the wall street banks that have been getting the free houses for the last 4 years or so ,, houses that they never put up even a single dollar for ,, it’s time for the wall street banks to pay off the investors for their failure to comply with the contracts they had and to which the homeowner was never a part.
No, the lender will appeal and the people sill owe on the note. In the end the judge will be reversed.
You’ve been paying off wall streets malfeasance through the 4 trillion in debt we’ve piled on and through your taxes which are due today ,, this family did nothing wrong. Are you a sucker ,, you betcha , we all are thanks to OBOZO and Bush#2 . You want to get mad? get mad at Paulsen , Geitner , Bernanke and the rest of the scum that have sunk the USA... notably those that got rid of all oversight on banking over the last 15 years or so.
WRONG , The homeowner still owes on the note (although it is unenforceable) , that is not in dispute ,,, the lender wasn’t even a part of the trial , just the bank that was pretending to be the lender .. THIS WILL STAND!
This family did nothing wrong. Bullcrap. They took out a loan and didn’t pay it.
I’m going to sell my house, invest the cash, take out a new loan and then default.
This is complete horsebleep. Endorsed in blank ? No standing ? Ipso facto predatory ?
Whoever the mortgage broker was - he got paid to replenish his warehouse line for this loan. Then the bank got paid by EMC. And then EMC got paid by Bear. Is the Alabama couple going to sue now to get the payments they made, if any, back now too ? A fictitious tax SPV is to be relied upon to prove no standing ? Something the govt. can annul willy nilly or retroactively?
The only sane remedy here gives the couple 6 more free months in the home while the SPV does some paperwork. The rest of the world has had to catch up to the internet and electronic documentation. Real property law must now do the same. At bottom this is no different than the ATM adding a zero and giving you 2000 instead of 200. No one says that hey - I get to keep the extra 1800. Keep real property because of an endorsement in blank ? The world is turned upside down.
“It is nice to see that judges are expecting banks to obey the law as well.”
Expect to see “something bad” happen to them in the near future.
I’m going to sell my house, invest the cash, take out a new loan and then default.
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Sorry , you’re too late , Wall Street is actually following the NY State Trust Laws now.
NEGATIVE , You can’t “FIX” outright fraud with NEW FRAUDULENT POSTDATED DOCUMENTS!!! and go against the contract (the PSA) that created and governs the trust ,, this is a complete FUBAR created by Wall Street and it is NOT FIXABLE ...
The culpability is not primarily from the last fifteen years.
This was able to happen because real estate appraisals ceased to factor in the population density, median income, and housing supply.
That change (which allowed a value to be detirmined strictly indexing recent home sales) happened under Carter.
Nobody gets to live anywhere "forever". As far as "without payment", they're still responsible for the property taxes.
It appears that all these properties will end up belonging to the government, at some level. At the rate it's going, I expect to see some kind of mechanism set up that lets the federal government take ownership so it can be made immune to local property taxes, and then handed out to Acorn (or whatever they call themselves today) political operatives.
Do they pay the property taxes? The tax bill usually goes to the mortgage holder, so if the occupants are in default and not paying the mortgage, they likely aren’t paying the property taxes either.
Real estate changes hands slowly enough that current law works just fine. The problem we have with mortgages is that properties are treated like commodities, not individual unique entities.
With the backlog they now have, I could live for free for at least 10 years before they actually managed to foreclose. If ever.
Horse-puckies.
It would be fraud if some bank created documents to indicate a debt where none was entered into, but despite your sophistry, THERE IS A DEBT HERE.
The couple who bought the house, of their own free will took out a mortgage for the purchase of the house. That is a fact not under dispute. They ceased to make timely payments. That is another fact not under dispute.
The rational response is for the court to appoint a trustee for the lender (at whatever point the "true" lender is sorted out), foreclose, throw the deadbeats out, and sort out who the "legitimate" owner of the note is at leisure. To do otherwise creates a windfall to the occupiers of the house.
If they got a mortgage, they'll be on record at the courthouse as being the current owner.
Property taxes are assesed to whoever holds the title to the property. The mortgage holders have a claim to the title, but have to foreclose to get it.
If they can't foreclose, the residents are left with title, but the record of the unpaid mortgage will probably be enough to prevent anyone wanting to buy it from ever getting title insurance. The current owners can still live there, but they're still responsible for the property taxes, and they'll never be able to sell it in the open market.
It’s their house, with a unclear liens upon it, which they may over time and the courts, have removed if any of the claimants can’t prove they have a claim to the house.
What the judge is saying is that the bank doesn't own the mortgage, so it has no legal standing to foreclose on the property. I'm sure someone has legal standing to foreclose on the property, but it's not the responsibility of the people occupying the home -- or even the judge in the foreclosure case -- to figure out who that is.
There is going to be a separate long, costly accounting and legal process undertaken to figure all that out. The irony is that these people may very well end up living in this home for a long time without ever making another mortgage payment -- because the cost of figuring out who owns the mortgage may exceed the outstanding balance on the mortgage itself.
Wrong, it only takes a trip to the local court house to see who has current legal standing, foreclosure will take 30 to 45 days.
Correct. There is still an underlying debt, whether it is collateralized by the home or not is the question. Even an unsecured loan will result in action - it's just a longer road to get to the underlying assets (ie house). If the foreclosure is stopped, the lender can sue for default on an unsecured loan and obtain a judgement against the homeowner. If the homeowner fails to satisfy the judgement, then the lender can seek to garnish wages and or take possession of assets to satisfy the judgement. If the home is not considered security or a lienhold, then it is an asset - it is one of the two. In the end the deadbeat borrower will need to satisfy the obligation of the loan. It is just a matter of how to go about obtaining remedy.
Part of me is glad to see the institutions getting railroaded for creating complex financial instruments which could never receive oversight. At the same time, I cannot stand the thought of someone defaulting on their obligation and receiving a benefit for being irresponsible. MERS is a joke, as is fractional banking - a quick return to basics is sorely needed.
If it was that easy this never would have come to trial. There is a good chance that the company listed in the courthouse documents are not longer in business, or have merged and had their assets sold off to someone who never received the proper records. There were so many shady deals back then with mortgages sold several times within weeks between companies the records are a shambles for millions of loans.
My mortgage has been sold since I refinanced through Countrywide for a lower interest rate. If I was losing my house I sure as hell would want BOA to be able to produce my signature on my mortgage they were foreclosing on and prove that they are the ones who deserve to take my home. I'm not saying I don't deserve to lose it either, but I sure as hell would want records showing why they are the ones that deserve it legally.
But to throw the occupiers out prior to proving ownership is a presumption of legal fact.
The court has no authority to take anything or appoint anyone until a petitioner can prove legal standing (snicker)to have brought suit in the first place.
"It's ours because we say so" doesn't cut it in a true court of Law.
there was no fraud against the homeowner - the bank that held the note,and was expecting payments, did not get the title rights transferred to it by the letter of the law. That bank tried to foreclose when the payments stopped coming.
There is an entity (not the people living in the house) that will transfer correct title to the note holder, as soon as they straighten out the paperwork.
If the bank cant get the title and the right to foreclose - then they sell the note back to the title holder - and they foreclose. the delinquent homeowner will end up out of the property.
Pretty sad when economics trump the law in court...and are supported in doing so.
Nothing against org.whodat or anyone else who has posted on this thread, but I've got just a bit more insight into this because I've been following several fascinating foreclosure cases that may end up turning the entire banking industry on its head.
One case in particular has been working its way through the Utah court system over the last year or so. In that case, the person who occupies the home that is facing foreclosure has successfully (at least up to now) argued that the mortgage holder has no legal standing to initiate foreclosure proceedings. What makes that case so fascinating to me is that there is no question about who actually holds the mortgage. The mortgage holder is a large institution (an arm of Bank of America, I believe) that has purchased and securitized thousands of mortgages, and the Utah court determined that they could not initiate foreclosure proceedings because the institution did not meet a number of legal requirements under Utah's banking laws.
I saw that case as a sure sign that the entire U.S. mortgage industry was going to go through some serious turbulence and might even unravel completely.
P.S. If it turns out that the entity who currently has legal standing to foreclose on the mortgage (say, a local bank) has already “sold” the mortgage to someone else (i.e., Bank of America or an institution that deals in collateralized debt instruments) and has been paid for that transaction, then that entity has no incentive to initiate foreclosure proceedings against the delinquent borrower and therefore won’t even bother doing so.
Not true at all.
Debts are extinguished all the time in the various bankrupts.
Also, you can ask GM bondholders about the sanctity of obligations.
In America, property rights are ever more clouded, and diminished every year. Nice trend line. Courts are active participants in this clown circus. So, it’s everyone for himself, as you can.
In the Utah case, Bank of America is trying to force the matter into the Federal court system by claiming that it is now a "securities" issue subject to Federal oversight rather than a "real estate" issue subject to provisions of Utah law.
The irony of all this is that it can be traced all the way back to the infancy of mortgage bonds (then called collateralized mortgage obligations, or CMOs) in the 1970s. Most Wall Street investment banks were very reluctant to get into the business (which is why Salomon Brothers dominated the industry through the mid-1980s) because nobody ever really addressed the issue of whether CMOs were subject to real estate law or securities law. I guess they still haven't!
If I wanted to ‘sell’ such a clouded entity, I’d just 100 lease it. As in everything else a market would/is develops and they would like any lower rated product be moved at that price. You could also rent it. ( Off the cuff, I’d say half of Latin and South American land is lived, rented, sold without title, and with out courts.
Further, you have to look into the incentives of the courts, lawyers for and against. None have much interest in clearing this. They made money selling, now filing claims, and their brethren defending. Lawyers and judges have to eat too.
The contractual relationship is established by the secondary market, otherwise there is no insurance. All of those that play the buying selling of notes, play by the same rules, how else would the millions of homes that are sold and paid off annually have their paid notes show up and cancelled in a timely manner.
The couple who bought the house, of their own free will took out a mortgage for the purchase of the house. That is a fact not under dispute. They ceased to make timely payments. That is another fact not under dispute.
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SO WHAT , The mortgage does not name the true parties to the agreement , the real lender is not named , the contract is VOID , not VOIDABLE , but VOID AT INCEPTION ... Wait a few weeks or months when journalists actually start to look in the right places and see how corrupt the creators of thse MBS’s were... How it was commonplace to defraud the actual investors by re-using mortgages in multiple MBS’s whenever they were short 50 or 100 million dollars worth of loans..
............easy fix, you just reverse the transaction and let the proper assignor handle the foreclosure, except now the home owner owes all of the attorney legal fees as well.
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What homeowner , knowing that the banks have absolutely no enforcement authority and that they can live unemcumbered in the house FOREVER , will sign new loan docs to cure the banks fraud and encumber themselves?
An MBS issuer who fraudulently listed the name mortgage in more than one securitized pool needs to go to jail.
This does NOT mean that the home buyers who did not pay their mortgage should get the house.
The Horaces are the homeowners and they own the house. They put it up as collateral.
This is why some banks are not just suing on the debt rather than wasting time with the loan.
It is no longer a SECURED debt.
The real issue is in the article. Does the bank get a free house via fraud and lying to the courts OR do the homeowners get a free house by using the same laws the banks have used to bully individuals.
Also remember the banks recieved tarp money for these loans.
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