Continuing Legal Education (CLE): "The effects of the foreclosure crisis on the practice of law: How to avoid the pitfalls"
On March 10, 2011, Hallmark Abstract Service was honored to participate in a CLE program that was produced jointly by the Westchester Women's Bar Association and the Puerto Rican Bar Association.
Attended by approximately 50 attorney's, the event included an introduction by Acting New York Secretary of State Ruth Colon and a discussion of attorney ethics by Maria Matos of the New York State Supreme Court and Andral Brotman, Principal Attorney of the New York State Appellate Division First Department.
I was joined in discussing the foreclosure crisis by Kathleen Daly of Wilson, Elser, Moskowitz Edelman and Dicker LLP, and Dale Robyn Siegel of the Circle Mortgage Group.
The event was organized through the hard work of Stephanie Melowskey of New England Community Bank and Jacqueline Hattar of Wilson, Elser.
In the coming days I am going to provide an overview of the topics that I covered including MERS, securitizations and potential ramifications on the title industry.
Federal mortgage backer Freddie Mac is taking its foreclosure cases from the Fort Lauderdale-based Marshall C. Watson law firm, one of eight Florida firms facing state scrutiny for its handling of home repossessions.
Brad German, a spokesman for Freddie Mac, confirmed the removal of the cases this morning, but did not say why Watson will no longer be used.
“Going forward our servicers will be directing business to other counsel,” German said.
In a statement, the Marshall C. Watson law firm said the parting was a mutual decision made by both sides.
“Freddie Mac and our firm mutually decided to part ways,” that statement said. “The Freddie Mac portfolio was only a small portion of the firm’s business, representing less than ten percent. Our firm will continue to work with Freddie Mac to ensure the transition of files is expedited and smooth. We are operating as normal with respect to all other clients and as always remain focused on providing superior service.”
Freddie Mac’s designated counsel list, which shows which attorneys the group uses in each state, was updated for Florida yesterday to remove Waston’s name.
Marshall C. Watson is just the latest firm to lose its federal foreclosure business. The Law Offices of David J. Stern in Plantation was fired in the fall by both Freddie Mac and Fannie Mae. Stern said last week the office would stop doing all foreclosure work as of March 31, leaving as many as 100,000 cases stranded statewide.
The Fort Lauderdale firm of Ben-Ezra & Katz was fired in February by Fannie Mae and is in the process of transferring about 15,000 cases to new attorneys.
The Law Offices of Marshall C. Watson are still on Fannie Mae’s retained attorney network list.
Of the 27 points presented most are items the servicers should already have been doing, and dealing with MERS which is at the center of the problem, is put off to some future date.
There is no discussion of criminality.
Issues relating to the use and performance of MERS are reserved for further discussion.
Affidavits and sworn statements, including their notarization, shall fully comply with all state law requirements.
Affidavits and sworn statements shall not contain information that is false or unsubstantiated.
Servicer shall have a general duty of good faith and fair dealing in its communication, transactions, and course of dealing with each borrower in connection with the servicing of the borrowers mortgage loan.
(Reuters) - A settlement proposal by state attorneys general with the five biggest U.S. mortgage servicers stands out less for what it contains than for what it omits -- terms for resolving the most difficult issues dividing regulators and the big banks.
The proposal, which calls for a dramatic increase in loan modifications, is intended as the basis for settling allegations of widespread wrongdoing by the big loan servicers in handling millions of foreclosures.
But the sharply conflicting interests of the banks, regulators, homeowners and investors in mortgage securities signal that chances are remote for any "global" settlement with the banks.
Failure to reach a comprehensive settlement would be bad for the housing market, homeowners, investors in mortgage-backed securities, and even the banks themselves.
"There are so many different parties involved that I question the doability of a global settlement," said Bert Ely, an independent banking consultant.
Paul Miller, a bank analyst with FBR Capital Markets, said the banks ultimately might reach a settlement with requirements for loan modifications greatly watered down.
"The banks have a mess on their hands and they know that," Miller said. But he said that because banks fear the costs of the loan modifications the proposal would require, "I just don't see how banks can sign this document."
The AGs' 27-page proposal leaked out last week. Much of it deals with imposing what appear to be strict new standards of conduct for banks and requires far more loan modifications on terms that make it likely that homeowners can keep their homes. The settlement would be with Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup and GMAC/Ally Financial Inc.
Missing from the document, however, are proposals for make-or-break issues such as:
* The dollar amount of penalties the servicers would pay, and where money from the penalties would go. The document lists no amount, but a figure of at least $20 billion has been widely discussed.
* The extent of loan modifications required, particularly principal reductions cutting the basic amounts owed.
* Whether the banks and their personnel may get immunity from potential state and federal criminal prosecution for filing forged or fraudulent documents in foreclosure cases.
* A seemingly obscure but vital question -- what would happen with mortgages held in the name of the Mortgage Electronic Registration Service, a company established by the big loan servicers. MERS claims to hold the title to about half of all home mortgages, and vast numbers of foreclosure actions have been filed in MERS' name. But in recent months courts around the country have ruled that MERS lacks legal standing to foreclose. (A few courts, however, have ruled that it does.)
* A factor that has led to a sharp reduction in recent months in the number of foreclosures -- court rulings around the country holding that banks cannot foreclose when they are missing crucial, authentic documents proving ownership of the mortgages.
Foreclosure tracker RealtyTrac reported Thursday that foreclosures in February 2011 were down 27 percent from the same month last year. The report attributed nearly all of the decline to the court rulings, which have led banks to hold back on filing foreclosure cases.
BREEDING MORAL HAZARD?
In a press conference earlier this week, Iowa Attorney General Tom Miller, who led an investigation on behalf of the 50 states' attorneys general, predicted that a broad settlement could be reached within about two months.
Staff members of several AGs, who asked not to be identified, said that crucial issues were left out because differences among state and federal regulators remain so strong that they haven't been able to agree on proposals. The Office of the Comptroller of the Currency and the Fed didn't participate.
Miller said the agreement was worked out jointly with federal agencies including the Federal Deposit Insurance Corp, the newly created Consumer Financial Protection Bureau and Justice Department.
Bank opposition to the proposal emerged quickly. On Tuesday, Brian Moynihan, chief executive of Bank of America, the largest U.S. servicer, said at a meeting with analysts and investors that he opposes widespread principal reductions for homeowners in default.
Moynihan, executives at other banks and OCC officials contend that such modifications could be unfair to homeowners who have kept current with their payments. They also say it might induce some who can afford current payments to default in expectation that they would be able to negotiate a better deal.
MISSING DOCUMENTS STILL A PROBLEM
It is also unclear how any settlement between regulators and the banks could undo recent court decisions banning banks from foreclosing when they lack vital documents proving ownership of the mortgages.
In the chaos of the housing boom, many loan originators never bothered to pass on those documents to investor trusts that bought securitized mortgages.
Before the rulings the banks had tried to get around the problem by filing fake mortgage assignments, often drawn up just before or after a foreclosure proceeding began.
Joe Klein, an attorney with Legal Aid of Collier County, Florida, who represents large numbers of low-income homeowners, contends that almost without exception the mortgage assignments banks filed in his cases weren't authentic.
The court ruling could leave the status of hundreds of thousands of homes and mortgages in limbo indefinitely.
Legal experts say they doubt that a settlement between regulators and the banks could overcome the obstacles posed by the court decisions. Only an act of Congress could do that, they say. But there has been no sign of interest by lawmakers in taking on the issue.
This short clip provided and narrated by stopforeclosurefraud.com goes through one particularly egregious example shoddy/bogus/fraudulent documentation. This is just the tip of the iceberg that caused a bank the size of HSBC to freeze foreclosures.
“Inside Job,” a searing piece of muckraking on the causes of the financial crisis, took home the Oscar for Best Documentary.
Charles Ferguson, the film’s outspoken director, stayed in character when he bounded up on the stage and opened up his remarks by lambasting the Wall Street crowd.
“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong,” Mr. Ferguson said, as the Hollywood crowd erupted in applause.
Examining why the government wasn’t bringing criminal charges against Angelo Mozilo, the chief executive of mortgage lender Countrywide Financial, Mr. Nocera observed that through the crisis and up until today, Mr. Mozilo praised subprime loans as a way to help lower-income individuals buy into the American dream. For every email in which Mr. Mozilo acknowledged the dangers of subprime lending, there was other evidence that he thought Countrywide’s mortgage business was strong. Mr. Nocera points to recently released government testimony in which Mr. Mozilo calls Countrywide “was one of the greatest companies in the world.”
“Mr. Mozilo would have been difficult to prosecute,” Mr. Nocera concludes. “Delusion is an iron-clad defense.”
If the video isn't loading please click here to view it.
SERS not MERS!
If you have been a reader of The Hallmark Abstract Sentinel then by now you are aware of MERS and the controversy that surrounds it. The Mortgage Electronic Recording System has been at the heart of questionable foreclosures due to standing issues, as well as for having aided in the avoidance of untold millions in recording fees not paid to counties.
It was only a matter of time before someone came up with a way to digitize marriage recordings in a system known as SERS, the Spouse Electronic Recording System (H/T 4closure Fraud).
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SERS | SPOUSE ELECTRONIC RECORDING SYSTEM
Mike, on February 21, 2011 at 7:01 am said:
I have finally come to one conclusion: if you can’t beat ‘em, join ‘em!
My proposal is quite simple–a paperless marriage recording system, called SERS, (Spouse Electronic Recording System) for the electronic recording of marriages. To avoid the high costs of (not to mention the hassle of) the filing of marriage certificates, a SERS member would be able to simply record himself or herself as a “nominee” for A marriage to A spouse. The SERS system will record that A marriage has taken place, but the person to whom the SERS member becomes married does not have to be specified until just prior to the termination of the marriage–via divorce or death.
In this manner, one is able to “leave one’s options open.” It is a perfect system for those who would like the stability of the institution of marriage, yet, at the same time, yearn for the flexibility of non-commitment. It announces to the world, “I’m married–I’m just not saying to whom it is that I am married.”
Mind you–the flexibility provided by SERS would have its limits. For example, a SERS marriage could only be assigned to a SERS member, and the marriage would have to be “officiated” by a SERS authorized officer. Nevertheless, virtually anyone with a pulse, $25 for an official SERS certifying officer stamp, an ink jet printer, and access to a SERS terminal could become a certifying officer of SERS. (And then there is Provision K, the “Kunkle Provision,” which provides for dead certifying officers, as well.)
At the “consecration” of the relationship–which is technically an “agency relationship,” the marriage will be given a SIN number, or Spouse Identification Number. In this manner, through the SIN number, any married person can track who their actual spouse is–except in the case of most situations–where the SERS member prefers to keep that information private. Rest assured, however, if you die or if you cause a divorce, a spouse will be assigned to you at least 30 days prior to such death or divorce, except in the case of most situations, where the spousal nominator doesn’t know what the heck is going on—wherein an assignment will be backdated to reflect that the spousal assignment transpired 30 days prior to said death or divorce.
Due to the high-tech nature of the proprietary data tracking software used by SERS, only one employee of SERSCORP will be necessary, and the cost of her salary and generous bonus structure will be virtually unnoticeable as it is skimmed off one marriage transaction fee at a time as SERS marital swaps are traded seamlessly Over The Counter through Cayman Island accounts. Due to the swapping functionality enabled by their individual (original) SINs, SERS marriages will facilitate the marital churning process without the pain, humiliation, or cost of conventional marital swapping. The cost of SERS transaction fees will be recouped in the sheer volume of marital business as marriage certificates are securitized into MBS (Marriage-Backed Securities.)
Keep in mind that many marital swaps can be transacted over the life of a SERS marriage, and the nominee spouse will be unaware of such arrangements. However, therein lies the genuine excitement that only fraud-ridden obfuscation could ever bring to a marriage. (Will my nominee spouse be long? Will my nominee spouse be short? Will my nominee spouse be naked? Will my nominee spouse purchase enhancements? Will my nominee spouse be synthetic? Will my nominee spouse be square?)
At SERSCORP…we’ll put the SERS in Sersprise!
This is of course a fiction...For now!
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MERS (Mortgage Electronic Registration System) and the avoidance of mortgage recording fees
Currently MERS is dealing with a storm in the foreclosure arena over whether or not a lender was legally able to foreclose on a mortgage in MERS name. This has led the firm to issue an announcement instructing all of its members to cease this practice immediately ("Is MERS attempting to put the genie back into the bottle with yesterdays announcement")
Remember that MERS was established for the purpose of creating an electronic system that was able to easily assign mortgages from one entity to another. This became critical in the age of securitizations when this paper would change hands quickly and often.
As part of this business model, members were able also to bypass the recording of mortgages in county clerks offices with a resulting savings of money by avoiding recording fees. Suits by counties to recoup these recording fees may be the next landmine that MERS will face!
This from Salem, Massachusetts yesterday (H/T Naked Capitalism):
O’BRIEN CALLS ON MERS TO COME CLEAN AND PAY UP: SAYS ESSEX COUNTY OWED $22 MILLION DOLLARS
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.
Think MERS facing counties nationwide
Now imagine that what this county is attempting to do is done by every county in the nation. Pretty soon it becomes real money! Stay tuned.
From The Hallmark Abstract Sentinel (http://hallmarkabstractllc.blogspot.com)
MERS - The Mortgage Electronic Registration System issues an Announcement that appears to be an attempt to put the genie back into the bottleSummary: MERS has told its members not to foreclose in its name on home loans, effective immediately.
As a recap for those not closely following the issues surrounding MERS and foreclosures, this is hopefully a clear summary of an extremely complicated situation:
The MERS-Mortgage Foreclosure story
In the old days a potential borrower would go to their local bank, apply for a mortgage, qualify for the mortgage (or not) and then enter into an agreement with the bank. The transaction consisted of a note or an IOU representing a promise to repay the bank and the mortgage that pledged the property as collateral. After the closing the mortgage would be recorded in the county records. The bank would then typically "portfolio" the loan or keep it on its books until it was paid off.
Then came the age of easy money with no- income check loans, no-income no-asset check loans and other creative financing techniques where if you had a pulse you had yourself a loan. Whether you could actually afford it or not did not really come into play. This worked for a while because home prices were going up fast and the borrower who couldn't afford the home in the first place would flip it and make some cash along with the mortgage broker and everyone else up and down the real estate food chain.
Wall Street investment banks had developed REMICS or collateralized mortgage obligations (CMO's) as a conduit for making money, a lot of money. Loans were made, quickly resold by the bank originating it, then maybe resold five more times until it was packaged along with thousands of other similar loans and resold to investors all over the world often with AAA ratings (a story for another time).
All of this worked just fine until prices stopped going up and then started to actually decline. As the influx of foreclosures grew, along with them came serious questions about the process and paperwork involved in all of these mortgage transfers. These questions would most likely never have come up if those damn real estate prices just kept going up like they were supposed to do and foreclosures were few and far between.
Questions surrounded MERS, the electronic database that served to take the place of recording mortgages in the county records (along with a lot of saved filing fees). Could MERS be the foreclosing entity? Were assignments of mortgages actually done in MERS and were they done correctly? Issues surrounding robo-signers and fraudulent notarizations of documents. Questions over whether the entity initiating the foreclosure actually had the standing to foreclose and if the chain of title was intact and provable? Who actually had the original note or IOU?
From this came a variety of other legal issues such as completed foreclosures getting reversed, a moratorium on foreclosures, attorney's being required to sign affirmations that all of the paperwork was done correctly and demands by some underwriters of title insurance that in a foreclosure sale the seller indemnify the title insurer against the foreclosure being reversed due to incorrect paperwork.
At the heart of the matter is MERS, a database put into place to help streamline the process of mortgage assignments and to save filing costs in the securitization age.
This brings us back to the Announcement MERS issued to its Members yesterday. A short summary below followed by the Announcement in full:
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"... In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties’ right to foreclose.MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges…
During this period we request that Members do not commence foreclosures in MERS’ name.If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure.No foreclosure may be processed in MERS’ name without first obtaining this verification.We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee…”
The steps discussed in the announcement do not seem to address the majority of the issues swirling around MERS and foreclosures. This is the complete announcement:
Announcement
Number 2011-01
Page 1 of 2
To: All MERS Members February 16, 2011
Re: Foreclosure Processing and CRMS Scheduling
MERS is providing the following guidance to all Members to strengthen business practices, and minimize
reputation, legal and compliance risk to MERS and its Members. In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties’ right to foreclose. MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges. Consistent with this approach we have enhanced the Corporate Resolution Management System (CRMS) and instituted related policies and procedures designed to strengthen MERS’ business practices and limit compliance risks. To comply with this guidance, MERS Members should implement the following practices, effective immediately.
1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed
amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name. If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.
2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute
assignments out of MERS’ name before initiating foreclosure proceedings. Assignments out of MERS’ name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8).
3. For all future assignments and the execution of other documents in the name of MERS, Members must use a MERS Certifying Officer who has been appointed under our new certifying officer process, which, after November 1, 2010, uses a new form of corporate resolution. Under our new process, all Certifying Officers are also being tested and appointed under the enhanced CRMS. Only Certifying Officers appointed under the new form of corporate resolution, tested, and transitioned onto CRMS after November 1, 2010 should execute assignments. We are in the process of ensuring that all Members are transitioned onto CRMS in compliance with our new policy, and we will work with all Members to ensure the transitions can be accomplished in an orderly and expeditious way. For those Members who have not undergone this transition onto the CRMS, you will receive login credentials and further instructions from MERS on how to complete this process. It is important that you follow all instructions and that you complete this process as quickly as possible. MERS will be communicating with you to notify you when your Company will be transitioned onto the CRMS under our new policy. Once your Company has access to the CRMS, all of your existing and potential Certifying Officers should work quickly to complete the certification process. Once all of your existing and potential Certifying Officers have successfully completed the certification process, you will need to submit your request to MERS for approval. Submissions from your Company will only be accepted during the phase-in period
assigned to you. Because it will take some time to transition under our new policy, Certifying Officers
can continue to execute documents in MERS’ name under existing resolutions until the new corporate
resolution is issued to your Company. However, if your Company does not submit the request to MERS
through the CRMS in the timeframe assigned to you, you will not be issued a new corporate resolution and any prior corporate resolutions issued to your company will be revoked.
Page 2 of 2
4. MERS Members should ensure the accuracy of the information in the complaint and foreclosure affidavit that addresses, where applicable, the authorization under which a MERS Certifying Officer validly assigned the mortgage to the foreclosing note-holder.
5. Other business practices Members should perform on a periodic basis include:
Conduct a review of employees designated as Certifying Officers and reconcile to the CRMS to ensure MERS has an up-to-date and accurate list of Certifying Officers; Ensure employees designated as Certifying Officers receive appropriate training to carry out their duties and responsibilities as Certifying Officers; and Reconcile with CRMS to update corporate resolutions and signing authority agreements to ensure appropriate Certifying Officers are validly appointed.
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While the title of the the article rhymes, the proposal is far from entertaining
On page 1 of the Fiscal Year 2012 Budget of the U.S. Government you can begin to read The Budget Message of the President. In the preamble he discusses the recession and the fact that due to fiscal realities we face hard choices.
On page 4 the President proposes a 30% cut in itemized deductions for high-income taxpayers to use to pay for a fix to the Alternative Minimum Tax. What this means is that the mortgage interest deduction is being targeted again in the same way that it was in the 2011 Budget when its elimination was defeated.
As has been discussed in many quarters, the real estate market is facing a multitude of headwinds compounded by a recent move up in mortgage rates and the proposal to shrink the role of Fannie Mae and Freddie Mac.
This shrinkage, ala Seinfeld, would force borrowers to rely more heavily on private mortgage lenders who have shown a great reluctance to lend in the past to any but the most stellar of borrowers. This, although they had received 10's of billions of dollars from the federal government for that very purpose.
One of the things that the country needs most to get out of the economic doldrums we find ourselves in is to clear out the buildup of housing inventory and get the real estate market back on its feet.
Slicing the mortgage interest deduction would not accomplish this and would in fact take buyers out of the market. Positioned as a hit to the wealthy, this proposal would in reality impact those up and down the income scale!
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While this decision does not help Ms. Agard (due to Res judicata) it does seriously call into question the validity of MERS assigning mortgages on behalf of its members/lenders.
These are some excerpts from the decision which can be read in its entirety here.
"...The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law...
<
...The Movant’s failure to show that U.S. Bank holds the Note should be fatal to the Movant’s standing. However, even if the Movant could show that U.S. Bank is the holder of the Note, it still would have to establish that it holds the Mortgage in order to prove that it is a secured creditor with standing to bring this Motion before this Court. The Movant urges the Court to adhere to the adage that a mortgage necessarily follows the same path as the note for which it stands as collateral. See Wells Fargo Bank, N.A. v. Perry, 875 N.Y.S.2d 853, 856 (N.Y. Sup. Ct. 2009). In simple terms the Movant relies on the argument that a note and mortgage are inseparable. See Carpenter v. Longan, 83 U.S. 271, 274 (1872). While it is generally true that a mortgage travels a parallel path with its corresponding debt obligation, the parties in this case have adopted a process which by its very terms alters this practice where mortgages are held by MERS as “mortgagee of record.” By MERS’s own account, the Note in this case was transferred among its members, while the Mortgage remained in MERS’s name. MERS admits that the very foundation of its business model as described herein requires that the Note and Mortgage travel on divergent paths. Because the Note and Mortgage did not travel together, Movant must prove not only that it is acting on behalf of a valid assignee of the Note, but also that it is acting on behalf of the valid assignee of the Mortgage..."
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The Hallmark Abstract Sentinel is written for the purpose of keeping our clients and subscribers current on any issues that may have the potential to impact the real estate, mortgage or title insurance markets.
Examples of these issues include the current foreclosure crisis and the potential that foreclosures already completed could be overturned due to a variety of legal issues.
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