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Wells Fargo CEO says California in 'financial ruin'

Thursday, May 28, 2009, 1:09pm PDT

Wells Fargo CEO says California in 'financial ruin'

Sacramento Business Journal - by Mark Calvey San Francisco Business Times

Wells Fargo CEO John Stumpf said Thursday that California’s large budget deficit means state services will have to be cut.

“The state of California is in financial ruin,” Stumpf told those attending a statewide microfinance lenders’ conference at Stanford University. “The budget deficit in California is staggering.”

Stumpf said the recession is taking a toll on some of the loans made to creditworthy borrowers who lost their jobs and fell behind on payments.

“Today we’re charging off loans to people we should have made loans to,” said Stumpf, reiterating that the bank avoided many of the exotic mortgages offered by rivals.

Stumpf’s comments were not intended as guidance on how the San Francisco bank is faring in the second quarter, a bank spokesman said.

The state of California is struggling with a growing budget deficit after tax and financial measures failed at the ballot box this month. Earlier this year, the state delayed tax refunds and other payments due to what State Controller John Chiang called a “cash crisis not seen since the Great Depression.”

The state recently asked the federal government for assistance in guaranteeing California’s short-term borrowings, fearing that it could not raise the money standing on its own credit.

On the national economy, Stumpf said this is his “third rodeo” or downturn. He pointed to the deep recession of the early 1980s when the prime rate hit 21 percent and the struggling economy of the late 1980s that counted most the nation’s largest thrifts and major banks in Texas among its casualties. He says the economic fallout from the dot-com bust and Sept. 11 terrorist attacks was significant but not as harsh as the earlier recessions.

“This one feels different,” Stumpf said. “It feels different in the respect that the whole world is in recession.”

Stumpf said microfinance — typically small loans to individuals to start or grow businesses — could be one tool to help the economy recover. He noted that recent jobs at Bay Area companies with 19 employees or fewer have grown 14 percent while larger companies shed workers.

Wells Fargo has been active in supporting the region’s microfinance lenders and related organizations.

“It doesn’t take a lot of money to help these individuals achieve their dreams,” Stumpf said.

Devil in the Details: Void, Voidable and Invalid

Devil in the Details: Void, Voidable and Invalid

Posted on May 28, 2009 by livinglies

EDITOR’S NOTE ON SAL D’ANNA CONTRIBUTION: Excellent submission Sal. I have a few thoughts in addition to what you have stated in your post. You make a great point about the distinction between void, voidable and invalid. They are three different things. In the context of a securitized mortgage and note, there are additional factors that should be kept in mind. First, the NOD is VOID if it didn’t come from someone who has authority to issue it. If you give a written instrument to a courier and he stops off at the courthouse or the post office and issues an NOD as the HOLDER or on behalf of the HOLDER as himself, he is probably performing a criminal act. It might be that any Trustee or pretender lender is performing a criminal act in attempting a non-judicial sale within the context of a securitized mortgage simply because they have ACTUAL KNOWLEDGE AND INTENT that the certificate of title is not going to be issued to the HOLDER or HOLDER in due course of the note — i.e., the bondholders who have OWNERSHIP or papers declaring ownership of the note and mortgage. They also have actual knowledge of credit enhancements (insurance, hedge products, federal bailouts) that may have resulted in the investor bondholder being satisfied in whole or i part in which case there is either no obligation at all, the note is paid, and the mortgage is extinguished as an incident to the note OR if the insurer, counterparty or Federal government has subrogation rights, they would be the party to foreclose or make a claim on the obligation. Whether it is criminal or not, the attempted transaction is as void as if I signed a deed to your house without having any title interest. I can’t convey what I don’t have. Therefore I have conveyed nothing. You would be entitled to have that removed from the title record because it was a meaningless cloud on title — in other words VOID.

—– FROM SAL ——

Even though non compliance with Civil Code 2923.5 makes the foreclosure sale void from the start because the NOD can not be filed until compliance with 2923.5 has occurred, the court may try to claim that the defect is voidable rather than void.  The effect of declaring the sale voidable is that you must offer to tender full payment of the debt before the sale will be set aside.

Offer To Tender Full Payment of Indebtedness Not Required for Non-Compliance with Civil Code 2923.5 Because Foreclosure Sale was VOID, not simply Voidable.

Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, 577 [205 Cal.Rptr. 15], held that “before a junior lienor may set aside a nonjudicial foreclosure of real property under a deed of trust because of irregularities in the sale, the junior lienor must first tender the full amount owing on the senior obligation.” In Arnolds, plaintiffs filed an action to set aside a foreclosure sale and for damages for wrongful foreclosure based upon an alleged defect in the notice concerning the date of sale which prevented their attendance or participation. They also demanded damages for fraud and negligence premised upon the trustee’s misrepresentations of the actual date of sale.

The court noted in Arnolds that generally “an action to set aside a trustee’s sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security.” ( Arnolds Management Corp. v. Eischen, supra, 158 Cal.App.3d at p. 578; Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117 [92 Cal.Rptr. 851].) This rule, traditionally applied to trustors, is based upon the equitable maxim that a court of equity will not order a useless act performed. ( Arnolds, supra, at pp. 578-579.) “A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust.” ( Karlsen, supra at p. 117.)

“The word ‘void,’ in its strictest sense, means that which has no force and effect, is without legal efficacy, is incapable of being enforced by law, or has no legal or binding force, but frequently the word is used [***5] and construed as having the more liberal meaning of ‘voidable.’” (Black’s Law Dict. (5th ed. 1979) p. 1411, col. 2.) “Voidable” is defined as “[that] which may be avoided, or declared void; not absolutely void, or void in itself . . . .” (Ibid.)

Another term frequently used in cases dealing with sales under trust deeds is ” invalid,” which is defined in Black’s as “Vain; inadequate to its purpose; not of binding force or legal efficacy; lacking in authority or obligation.” (Id., at p. 739, col. 2.)

In many of the cases, void, voidable, and invalid appear to be used interchangeably. Examples of cases in which the terminology is difficult to understand are Seccombe v. [**925] Roe (1913) 22 Cal.App. 139 [133 P. 507] and Mack v. Golino (1950) 95 Cal.App.2d 731 [213 P.2d 760].

The general rule in the United States on voidness or voidability of sale is set out in 55 American Jurisprudence Second: “[Defects] and irregularities in a sale under a power render it merely voidable and not void . . . . However, substantially defective sales have been held void where the defect lay in a particular as to which the statutory provision was regarded [***6] as mandatory . . . .” (55 Am.Jur.2d, Mortgages, § 746, p. 673.) “A sale under a power in a mortgage without reasonable notice will be set aside.” (Id., § 775, p. 691.)

In our research as to the circumstances in which California courts have determined sales under a deed of trust to be either void or voidable for notice defects, we have found no case which presents our precise factual pattern. No case draws a bright line between a major and a minor notice defect so as to dictate a certain result. A full range of notice defects is alleged in both [*1359] lines of cases, from no notice of any kind of the ultimate sale date ( Pierson v. Fischer (1955) 131 Cal.App.2d 208 [280 P.2d 491], “voidable”; Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d 570 [143 P.2d 493], “void”) to inadequate posting on the property to be sold ( Leonard v. Bank of America etc. Assn. (1936) 16 Cal.App.2d 341 [60 P.2d 325], “voidable”; United Bank & Trust Co. v. Brown (1928) 203 Cal. 359 [264 P. 482], “void”).

Although the extent of the defect is not determinative, what seems to be determinative is the existence and effect of a conclusive presumption of regularity of the sale. A deed of trust, which binds the trustor, may direct the trustee to include in the deed to the property recitals that notice was given as required under the deed of trust and state that such recitals shall be conclusive proof of the truthfulness and regularity thereof.

Where there has been a notice defect and no conclusive presumption language in the deed, the sale has been held void. ( Scott v. Security Title Ins. & Guar. Co. (1937) 9 Cal.2d 606 [72 P.2d 143]; United Bank & Trust Co. v. Brown, supra, 203 Cal. 359; Standley v. Knapp (1931) 113 Cal.App. 91 [298 P. 109]; Seccombe v. Roe, supra, 22 Cal.App. 139.)

Where there has been a notice defect and conclusive presumption language in a deed along with recitals as to the various postponements of a sale, the court has held the sale void on the basis that the deed showed that proper notice could not have been given. It has been held that the recitals of the postponement dates were controlling rather than the recitals as to the regularity of the notice. ( Holland v. Pendleton Mtge. Co., supra, 61 Cal.App.2d 570, 576-577.)

Where there has been a notice defect and conclusive presumption language in the deed, courts have characterized the sales as “voidable.” ( Lancaster Security Inv. Corp. v. Kessler (1958) 159 Cal.App.2d 649 [324 P.2d 634]; Pierson v. Fischer, supra, 131 Cal.App.2d 208; Mack v. Golino, supra, 95 Cal.App.2d 731; Leonard v. Bank of America etc. Assn., supra, 16 Cal.App.2d 341.) The trustor wishing to set aside a “voidable” sale must prove to the trial court that the conclusive presumption language does not apply to the sale either because there are grounds for equitable relief, such as fraud related to the provision, or because the conclusive presumption does not apply to the buyer, often on the basis that the buyer is not a bona fide purchaser for value. The trustor may then attempt to prove defective notice. ( Wolfe v. Lipsy (1985) 163 Cal.App.3d 633, 639-640 [209 Cal.Rptr. 801]; Lancaster Security Inv. Corp. v. Kessler, supra, 159 Cal.App.2d 649, 655.) ¹

1 Many notice defect cases do not even address the question of whether the sale was void or voidable. In these cases the trustor was precluded from challenging the sale by conclusive presumption language as to the regularity of notice in the executed and delivered deed. ( Sorensen v. Hall (1934) 219 Cal. 680, 682-683 [28 P.2d 667]; Pierson v. Fischer, supra, 131 Cal.App.2d 208, 217; but see Garfinkel v. Superior Court (1978) 21 Cal.3d 268, 279, fn. 16 [146 Cal.Rptr. 208, 578 P.2d 925]; and see also Civ. Code, § 2924, which provides that notice recitals in deeds shall constitute prima facie evidence of compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice.)

THE TRUSTEE DEED UPON SALE IS VOID

In the case at hand, the deed of trust, which binds the trustor, directs the trustee to include in the deed to the property recitals that notice was given as required under the deed of trust and state that such recitals shall be conclusive proof of the truthfulness and regularity thereof. The Trustee Deed upon Sale includes the following recitals:

This conveyance is made pursuant to the powers conferred upon Trustee by that certain Deed of Trust dated 05/05/2005 and executed by FRANK D’ANNA, A MARRIED MAN, as Trustor, and Recorded on 05/09/05 AS DOC#2005-0391304 of official records of San Diego County, California, and after fulfillment of the conditions specified in said Deed of Trust authorizing this conveyance.

Default occurred as set forth in a Notice of Default and Election to Sell which was recorded in the Office of the Recorder of said County, and such default still existed at the time of sale.

All requirements of law regarding the mailing of copies of notices or the publication of a copy of the Notice of Default or the personal delivery of the copy of the Notice of Default and the posting and publication of copies of the Notice of a Sale have been complied with. EMPHASIS ADDED.

The Trustee recital above is not conclusive proof of Compliance with Civil Code Section 2923.5 which is not mentioned in the above recital. The above recital is only conclusive evidence that mailing, posting, and publication of Noticed were done as required by law. It does not state that the Declaration required by Civil Code 2923.5 was attached to the Notice of Sale as required by law and since no such recital was made, the foreclosure is completely void, not voidable which relieves Plaintiff of the requirement to do equity before the Sale will be set aside because no valid sale ever took place to set aside as it was void ab initio.

Mass Court Affirms Notice requirements, Holder in Due Course and raises New Issues on Auction Bids

Mass Court Affirms Notice requirements, Holder in Due Course and raises New Issues on Auction Bids

Posted on May 28, 2009 by livinglies

Massachusetts is a power of sale state (non-judicial, but there is plenty of securitized meat in here for everyone). Good stuff to quote from — with Banks making the arguments that we are promoting on this Blog. The issues include (a) notice (b) unmarketable title and unable to get title title insurance (c) void certificate of title involving improper notice (d) non-competitive bidding resulting from cloud on title (e) redemption rights of borrower (f) securitization of loans (g) ownership of the mortgage (h) authority to pursue foreclosure (standing in non-judicial context) and most importantly identification of the actual holder in due course.

See Massachusetts Land Court Department Ruling by J Long

Some quotes from the Opinion from the Bench:

COMMONWEALTH OF MASSACHUSETTS
THE TRIAL COURT
LAND COURT DEPARTMENT

U.S. BANK NATIONAL ASSOCIATION, as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z

First Issue: whether the published notices, which named the plaintiffs as the foreclosing parties even though they had no record interest in the property at the time of either publication or foreclosure [were sufficient]

According to the plaintiffs, despite their successful bids and their subsequent recording of all the relevant documents, they cannot obtain title insurance for the properties — making them effectively unsaleable — unless and until these issues are resolved in their favor. They have thus brought these actions seeking such relief. In each of these cases, the defendants (the mortgagors/equity holders of the properties at issue) have been served, failed to respond, and have been defaulted. The plaintiffs have moved for entry of default judgment. The issues were clearly identified before those motions were heard and the parties were given full opportunity to submit whatever affidavits or other admissible materials they believed necessary for adjudication of those issues

I find and rule, however, that the other two foreclosures (U.S. Bank’s in Ibanez and Wells Fargo Bank’s in Larace) are invalid because the notices that named those entities failed to name the mortgage holder as of the date of the sale as required by G.L. c. 244, § 14. Neither U.S. Bank nor Wells Fargo Bank had been assigned the mortgages at the time notice was published and sale took place. Neither an intention to do so in the future nor the backdating of a future assignment meets the statute’s strict requirement that the holder of the mortgage at the time notice is published and auction takes place be named in the notice.

Roche v. Farnsworth, 106 Mass. 509, 513 (1871) (”There is the more reason for this [requiring strict adherence to the statute's notice provisions], where the power [of sale] is made to a mortgagee, who is interested merely for himself, and has opportunities for collusion and for taking unfair advantage of the mortgagor.”)

One of those requirements is that the notice identify “the holder of the mortgage.” Id. at 483. Failure to do so renders the “sale void as a matter of law.” Id. at 484. The purpose of this requirement and the need for “strict compliance” is readily discerned. As even a cursory glance at the current caseload of this court reveals, titles arising from mortgage foreclosures can have many problems. These include the most fundamental: Did the party conducting the foreclosure have the authority to do so and, if challenged, can it prove that it had such authority? In short, will a purchaser at the foreclosure sale get good title and will get it in prompt fashion? These are increasingly important questions in the current deteriorating real estate market and are not small concerns. It is increasingly rare for a mortgage to remain with its originating lender. Often, as here, mortgages are assigned to other entities, and then assigned yet again into large securitized pools.( ) Often, as here, the paperwork lags far behind. Sometimes mistakes are made.( ) Mistakes can only be corrected, if at all, through confirmatory documents (which the borrower may not so easily agree to) or litigation. With so many foreclosed properties available for purchase, why bid on a property with even the possibility for such trouble? Why bid on a property when the foreclosing party cannot produce all the documents (including proper mortgage assignments in recordable form) that would give good title? Why take the risk that the foreclosing party will be able to produce the documents promptly after the auction takes place, that those documents will be complete and in proper form, or even (in this era of failed and failing institutions) that the foreclosing party will still be in existence, with intact files and knowledgeable employees able to find those files so that the proper paperwork can be completed? Since these concerns affect the ability to obtain clear, marketable title, why bid a
reasonable market value instead of a discount price to account for that risk?
None of this is the fault of the mortgagor, yet the mortgagor suffers due to fewer (or no) bids in competition with the foreclosing institution. Only the foreclosing party is advantaged by the clouded title at the time of auction. It can bid a lower price, hold the property in inventory, and put together the proper documents at any time it chooses. And who can say that problems won’t be encountered during this process? It is interesting that it took the plaintiff (the foreclosing party and successful bidder) almost fourteen months after the auction to obtain its assignment in Ibanez and ten months after the auction in Larace.( ) Would any reasonable third-party bidder have been willing to wait that long, trusting that no other issues would arise?( ) Only in Rosario was the assignment (showing that the foreclosing party held the mortgage and could convey title as a result of the sale) in hand and ready for recording at the time of the auction sale.

Bottomly v. Kabachnick, which states that the notice in that case “was defective because it failed to identify the holder of the mortgage, thereby rendering the first foreclosure sale void as a matter of law.” 13 Mass. App. Ct. at 483-84 (citing Roche v. Farnsworth, 106 Mass. 509 (1871)) (emphasis added).( ),( )  Second, it ignores the “fundamental precept[]” that “[c]ourts must ascertain the intent of a statute from all its parts and from the subject matter to which it relates . . . .” DeGiacomo v. Metropolitan Property & Casualty Ins. Co., 66 Mass. App. Ct. 343, 346 (2006) (emphasis added). The form of foreclosure notice included in G.L. c. 244, § 14 is a part of that statute, indicative of its intent, and clearly contemplates (as Bottomly holds) that the present holder of the mortgage be identified in the notice. There is nothing to indicate that this aspect of the notice could be “altered.

the language in the body of the statute clearly contemplates that the “holder of the mortgage” is the entity to give notice, as indicated by its reference to notices to be mailed “to the last address of the owner or owners of the equity of redemption appearing on the records of the holder of the mortgage . . . .”

This contention (which places the burden and expense of a lawsuit on the mortgagor and allows a statutory violation with potentially severe adverse consequences to proceed unchecked if a lawsuit is not brought) is contrary to the “consumer protection” nature of the statute. The defaulting mortgagor is often a layperson, unfamiliar with law and legal proceedings, and often financially distressed and thus without resources to hire counsel.( ) Second, the plaintiffs’ argument that the mortgagor already knows the identity of the assignee of his mortgage from his RESPA notices( ) and thus cannot credibly complain, Id., completely misses the point of the publication requirement. As noted above, its purpose is to notify potential bidders who do not have that information and whose bids may be chilled by concerns over the foreclosing party’s inability to show, in recordable form, an assigned interest in the mortgage it purports to foreclose. Based upon the facts of these cases, such chilling is not speculative. In each of the two cases for which market value information was provided (Ibanez and Larace), the plaintiff purchased the property at the foreclosure auction for significantly less than that value (15% and 17%, respectively). See discussion, supra at 3-4.

Bottomly is the most recent case construing the notice provisions of the statute and is the starting point for the proper interpretation of the earlier cases and proper title practice. As noted above, Bottomly unequivocally holds that a notice that fails to identify the holder of the mortgage is defective, thereby rendering the “foreclosure sale void as a matter of law.”

Montague v. Dawes, 12 Allen (94 Mass.) 397 (1866). Montague predates the publication provisions: title derived from a foreclosure sale by an assignee of a mortgage in possession of that assignment at the time of the auction is not defeated by the fact that the assignment was not recorded until after the foreclosure took place, so long as the mortgagor is aware of the assignment and it is “unaccompanied with the suggestion that it was not recorded from improper motives, or that in some way the circumstance actually affected the sale by misleading purchasers or otherwise . . . .”( ) Id. at 400

LaSalle Bank’s foreclosure in Rosario was not rendered invalid by its failure to record the assignment reflecting its status as holder of the mortgage prior to the foreclosure since it was, in fact, the holder by assignment at the time of the foreclosure, it truthfully claimed that status in the notice, and it could have produced proof of that status (the unrecorded assignment) if asked. The other two foreclosures (U.S. Bank’s in Ibanez and Wells Fargo Bank’s in Larace) are invalid because the notices (which named those entities) failed to name the mortgage holder as required by G.L. c. 244, § 14. Judgment shall enter accordingly.
Footnotes:
None of these banks hold the mortgages in question for themselves. Instead, they are the servicing trustees of the securitized mortgage pools identified in the case captions, which are the actual beneficial owners of the mortgages. Neither the details of the pools nor the particulars of the trust agreements are relevant for purposes of this Memorandum and Order, which assumes that the pools were duly and properly formed and compliant with all applicable laws, that the mortgages in question were properly included in those pools, and that the banks, as trustees, had full authority to act as they did.

One can become the “holder of the mortgage” (an interest in land) only by a writing satisfying the statute of frauds, G.L. c. 259, § 1, in recordable form. Thus, the plaintiffs’ contention at oral argument that G.L. c. 244, § 14’s requirement of “holder” status was satisfied by the assignment of the promissory notes secured by the mortgages to the securitized pools (apparently done by contract documents referencing them generally, along with hundreds or thousands of other such notes) fails. In any event, no such documents were included in the record, so any arguments based upon them are unsupported and waived. Moreover, there is nothing in the record to indicate when the promissory notes were assigned and the record is unambiguously clear that the mortgages were assigned on the dates referenced herein.

Former Countrywide CEO Angelo Mozilo faces trial

Friday, May 1, 2009

Former Countrywide CEO Angelo Mozilo faces trial

San Francisco Business Times

A federal judge has ruled that Angelo Mozilo, former chairman and chief executive of Countrywide Financial Corp., should be tried in Florida in a civil case targeting deceptive trade practices.

Florida Attorney General Bill McCollum, who filed the civil complaint in June, says in a news release that he plans to aggressively pursue the case.

The lawsuit was filed in Broward County Circuit Court. It addressed Countrywide’s alleged practice of placing consumers in loans they could not afford or with rates that were false or misleading. Countrywide and Mozilo sought to move the case to federal court in Florida, and it subsequently was consolidated in the Southern District of California.

McCollum argued the case should be remanded to state court, so Mozilo would be tried in Florida under the state’s Deceptive and Unfair Trade Practices Act.

On Tuesday, U.S. District Judge Dana Sabraw of the Southern District of California agreed. Sabraw cited McCollum’s position that Mozilo should be held liable for alleged practices associated with the sale and marketing of mortgages and mortgage-backed securities. The judge agreed that Mozilo’s management of the daily activities of Countrywide was sufficient grounds for him to stand trial in Florida.

Related litigation against Countrywide was resolved with a settlement. Litigation against Mozilo will continue in Broward County Court, the attorney general’s office says.

Bank of America Corp. (NYSE:BAC) bought Calabasas-based Countrywide last year for $2.5 billion.

Charlotte Business Journal

Marquette law school to run foreclosure mediation program

Wednesday, May 27, 2009, 5:09pm CDT  |  Modified: Thursday, May 28, 2009, 8:03am

Marquette law school to run foreclosure mediation program

The Marquette University Law School will provide mediation between lenders and residential borrowers facing foreclosure under a program funded with proceeds from a successful lawsuit against mortgage lender Countrywide Financial Corp.

Wisconsin Attorney General J.B. Van Hollen and Marquette Law School dean Joseph Kearney announced Wednesday $310,000 in funding for the school to implement the Milwaukee Foreclosure Mediation Program. Milwaukee Mayor Tom Barrett said the city of Milwaukee is also providing $100,000 for the program.

The Milwaukee Foreclosure Mediation program will be a voluntary, court-based independent mediation option for lenders and borrowers. The program, located at the Milwaukee County Courthouse, will seek to alleviate the current backlog of foreclosure cases in the county court system by offering the option of mediation to residential homeowners who reside in owner-occupied properties.

According to the Law School, in most cases, successful mediation will serve as a venue to work out new loan terms, a short sale or other solution that is mutually agreeable, and execute a final agreement between the parties.

The funding includes proceeds from a settlement with Countrywide, which was accused of misrepresenting the quality and benefits of its products. Under the settlement, announced in February, Countrywide agreed to pay $1.6 million for foreclosure relief benefits. The mortgage lending giant also agreed to waive various loan fees and modify loans for customers that could result in a total settlement value of $41.1 million, according to the Attorney General's office.

Beginning May 28, an informational phone line will be operational for those interested in learning more about the program. Interested parties may call 414-288-4040. Mediation activities will begin after July 1.

REFORMS FOR AMERICAN HOMEOWNERS AND CONSUMERS President Obama Signs the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act

THE WHITE HOUSE

Office of the Press Secretary
_________________________________________________________
FOR IMMEDIATE RELEASE                       May 20, 2009

REFORMS FOR AMERICAN HOMEOWNERS AND CONSUMERS
President Obama Signs the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act

WASHINGTON – Today, President Obama will sign the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act into law.

"These landmark pieces of legislation will protect hardworking Americans, crack down on those who seek to take advantage of them, and ensure that the problems that led us into this crisis never happen again," said President Obama.

The Helping Families Save Their Homes Act is an important step towards stabilizing and reforming our nation’s financial and housing markets – helping American homeowners and increasing the flow of credit during these difficult economic times.  This legislation will strengthen our nation's housing sector and facilitate the goals of the Administration's Making Home Affordable Program by helping millions of American homeowners stay in their homes. 

The Fraud Enforcement and Recovery Act will protect the American people by giving the federal government new tools and resources to prevent fraud.  This reform bill will help the federal government keep markets free and fair, so that American consumers can thrive.

Fact sheets on both pieces of legislation are below.

 

The Helping Families Save Their Homes Act

Expanding Reach of Making Home Affordable to Help More Homeowners
The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.  Since January, the Administration has made significant progress in developing and implementing a comprehensive plan for stabilizing our housing market, the centerpiece of which is the Making Home Affordable Program (MHA). By reducing foreclosures around the country, the average homeowner could see their house price bolstered by as much as $6,000 as a result of this plan, and as many as 9 million homeowners may increase the affordability of their mortgages and avoid preventable foreclosures.

Our progress in implementing MHA to date has been substantial. We have introduced detailed guidelines for loan modifications which will establish a new standard practice for affordable modifications in the industry.  Servicers covering more than 75 percent of loans in the country have now begun modifications and refinancings under the Administration’s MHA Program. We have also launched MakingHomeAffordable.gov, a consumer website for the program, which has had more than 17 million page views in less than 2 months, announced details of our Second Lien Program, Home Price Decline Protection Incentives and Foreclosure Alternatives Program, strengthened Hope for Homeowners as a part of the MHA program, and expanded the efforts of the federal government to combat mortgage rescue fraud.
 

• Improvements to Hope for Homeowners The legislative improvements to Hope for Homeowners included in S.896 should significantly improve the ability of borrowers to benefit from the opportunities provided by Hope for Homeowners in the context of the Administration’s housing plan.  On April 28th we announced new details describing how Hope for Homeowners will be strengthened as a part of the Administration’s Making Home Affordable Program.  Incentive payments will be available for successful Hope for Homeowners refinances and servicers will be required to evaluate all applicants for eligibility for Hope for Homeowners as well as the Home Affordable Modification Program.
  
  Hope for Homeowners targets help to underwater borrowers, who often face heightened risks of foreclosure, by requiring principal writedowns to help homeowners increase the equity they own in their homes.  The legislative modifications to the Hope for Homeowners program included in S.896 will ease restrictions on eligibility and enable refinancing of underwater mortgages for a greater number of borrowers. 
  
   
• Modifications to FHA and federally guaranteed farm loans Legislative changes to FHA and federally guaranteed farm loans will facilitate cost-neutral loan modifications for federally guaranteed rural housing loans and FHA loans.  These changes will improve the Administration’s ability to provide assistance to responsible borrowers with federally guaranteed rural housing loans and FHA loans as part of the Making Home Affordable Program. 

Increasing Flow of Credit by Expanding FDIC and NCUA Capabilities
The Helping Families Save Their Homes Act of 2009 contains provisions that will help to restore and support the flow of credit in the US economy.  The act authorizes new important tools to assist in stabilizing the financial system during the current economic downturn.  Together these provisions, described below, should provide additional support for increasing the flow of credit in the US economy.
 

• Extension of temporary increase in deposit insurance Extending the temporary increase in deposit insurance will provide added confidence to depositors.  This will provide depository institutions with a more stable source of funding and enhanced ability to continue making credit available across our economy.
  
   
• Increase in borrowing authority of the FDIC
  Increasing the borrowing authority for the Federal Deposit Insurance Corporation (FDIC) to $100 billion will allow the FDIC to spread out premium increases over time.  This will reduce near-term costs for banks and thrifts, which will enhance their ability to continue making credit available.   As a further tool to protect the financial system, the legislation also includes a process to allow the FDIC to borrow additional amounts through December 31, 2010. 
  
   
• Increase in NCUA borrowing authority and creation of a stabilization fund The legislation will increase the borrowing authority for the National Credit Union Administration (NCUA) to $6 billion and create a Stabilization Fund to address problems in the corporate credit union sector.  This will reduce near-term costs for credit unions, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the NCUA to borrow additional amounts through December 31, 2010. 

Increasing Consumer Protections Related to Housing
 

• Establishes protections for renters living in foreclosed homes One of the often overlooked problems in the foreclosure crisis has been the eviction of renters in good standing, through no fault of their own, from properties in foreclosure.  To address the problem of these tenants being forced out of their homes with little or no notice, this legislation will require that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing in which cases a minimum of 90 days notice will be required.  Parallel protections are put in place for Section 8 tenants.
  
   
• Establishes right of a homeowner to know who owns their mortgage
  Often mortgage loans are sold and transferred a number of times.  Borrowers often have difficulty determining who owns their loan, and who to contact with questions, problems or complaints about their loan.  This legislation requires that borrowers be informed whenever their loan is sold or transferred, so that they will always know who owns their loan.

Provides Comprehensive New Resources for Homeless Americans
This legislation significantly increases aid to homeless Americans, appropriating $2.2 billion dollars to help solve the crisis of homelessness, and address the enormous costs homelessness can impose on individuals, families, neighborhoods and communities.  In addition, the legislation consolidates homelessness programs to improve effectiveness and streamline administration, and targets assistance to families with children – the fastest growing segment of the homeless population.

 

The Fraud Enforcement and Recovery Act

Strengthening the Capacity to Fight, Prevent, and Deter Fraud
The legislation strengthens the capacity of federal prosecutors and regulators to hold accountable those who have committed fraud.  The amendments expand the Department of Justice’s authority to prosecute crimes involving mortgage fraud, commodities fraud, and fraud involving U.S. government assistance provided during the recent economic crisis. 
 

• Covering private mortgage brokers and other companies Over 50% of sub-prime mortgages issued as recently as 2005 involved private mortgage institutions and similar entities not currently covered under federal bank fraud criminal statutes.  FERA amends the definition of a "financial institution" in the criminal code (18 U.S.C. § 20).  This will extend Federal laws to private mortgage brokers and companies that are not directly regulated or insured by the Federal Government. 
  
  
  • This law will expand the Department of Justice’s authority to prosecute mortgage fraud involving private mortgage institutions under a variety of statutes, including 18 U.S.C. § 215 (financial institution bribery); 18 U.S.C. § 225 (continuing financial crimes enterprise); 18 U.S.C. § 1005 (false statement/entry/record for financial institution); and 18 U.S.C. § 1344 (bank/financial institution fraud).
  • The bill changes the definition of "financial institution" to include private mortgage brokers and other non-bank lenders will enhance our ability to prosecute criminals under the bank fraud statute who commit fraud involving loans from those companies.  
• Prohibiting manipulation of the mortgage lending business
  The new law changes the mortgage applications statute (18 U.S.C. § 1014) to make it a crime to make a materially false statement or to willfully overvalue a property in order to influence any action by a mortgage lending business.  Currently, the offense only applies to federally-regulated institutions.
  
   
• Protecting the Integrity of TARP and the Recovery Act
  The legislation amends the major fraud statute (18 U.S.C. § 1031) to protect funds expended under TARP and the Recovery Act. 
  
   
• Covering commodity futures and options in anti-fraud statutes
  This law amends the Federal securities statute (18 U.S.C. § 1348) to cover fraud schemes involving commodity futures and options.  Currently, the statute does not reach frauds involving options or futures, which include some of the derivatives and other financial products that were part of the financial collapse.
  
   
• Broadening the False Claims Act
  FERA modifies the False Claims Act (FCA) to eliminate the requirement that a false claim be presented to a federal official, or that it directly involve federal funds.  It also amends the FCA reverse false claims provision to ensure that the knowing retention of an overpayment is a violation.     
   

Providing the Resources to Keep Markets Free and Fair
There is no shortcut to effective fraud enforcement and prevention.  FERA will also provide needed resources to help the Department investigate and prosecute those who engage in fraudulent schemes.

 

• Investing in fraud prevention and enforcement
  The legislation authorizes up to $165 million in new resources for FY 2010 and 2011 to hire fraud prosecutors and investigators.
  
   
• Strengthening the federal government’s full regulatory and enforcement capacity
  The legislation authorizes $140 million for the FBI, $50 million for U.S. Attorney’s Offices; $20 million for the Criminal Division, $15 million for the Civil Division, $5 million for the Tax Division, $30 million for the US Postal Inspection Service, $30 million for the Inspector General at the Department of Housing and Urban Development, $20 million for the Secret Service, and $21 million for the Securities and Exchange Commission. 

Addressing the Causes and Consequences of the Crisis
This legislation creates a bipartisan Financial Crisis Inquiry Commission to investigate the financial practices that brought us to this point, so that we make sure it never happens again.

Renewed HOPE for Homeowners

Renewed HOPE for Homeowners

Congress passed a bill amending HOPE for Homeowners that may make the program more useful.

By Les Christie, CNNMoney.com staff writer

Last Updated: May 20, 2009: 5:06 PM ET

NEW YORK (CNNMoney.com) -- One of the biggest disappointments of the foreclosure prevention fight has been HOPE for Homeowners, a plan Congress passed in an attempt to help as many as 400,000 underwater, delinquent borrowers from going into foreclosure.

In its first five months, HOPE for Homeowners helped one family stay in its home.

Congress and the Obama administration are hoping to do a lot better than that.

On Wednesday, President Obama signed into law a bill that attempts to correct the program's problems. The president said the program had many provisions that discouraged servicers from using it.

"This bill removes those hurdles," Obama said.

The original bill, which took effect Oct. 1, was intended to help defaulting homeowners by having banks voluntarily reduce mortgage balances to 90% of a home's current market value. The loan would then be refinanced into a mortgage insured by the Federal Housing Administration (FHA).

The idea was that the lenders take "haircuts" and the government would then bail them out of any future losses by insuring the new loan.

As a result, most of the big lenders didn't offer the program, which was strictly voluntary though heavily encouraged by the Bush and Obama administrations. "The lender basically short-sells the mortgage into the plan, and there's no more chance for upside," said Tom Kelly, a spokesman for JP Morgan Chase (JPM, Fortune 500).

The new version of HOPE sweetens the FHA-refinance option - for lenders. It only requires servicers to reduce balances to 93% of market values instead of 90%. It also pays servicers $1,000 for every Hope-refinanced loan.

For example, borrowers who owed $220,000 on a house valued at $200,000 would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That's a $40,000 writeoff. Under the new plan, lenders would have to forgive $34,000.

But the biggest change is that it authorizes FHA's parent agency, the Department of Housing and Urban Development (HUD), to share future home-price appreciation with investors, up to the appraised value of the property when the existing loan was first issued.

The original bill gave HUD the right to share potential profits 50/50 with homeowners, but now some of HUD's share would go to the original investors.

Also certain to increase servicer utilization of HOPE for Homeowners is a change in Treasury Department policy announced late last month. Treasury will require any servicer that signs up to participate in the Making Home Affordable program, the administration's mortgage modification plan, to evaluate borrower eligibility for Hope for Homeowners as well.

If borrowers don't fit into the Making Home Affordable program but are viable for HOPE, the servicers must offer them this option.

Industry insiders say they hope the changes will spur more lenders to use the plan.

"It's very important that it becomes a better program," said Faith Schwartz, director of Hope Now, a coalition of lenders, servicers, mortgage investors and community advocates. "We need the FHA to provide another outlet for refinancing these problem loans."

The final bill removed a provision that would have authorized bankruptcy court judges to lower mortgage balances to reflect current market values. Supporters of this "cramdown" believed it would pressure lenders into making more affordable modifications for at-risk borrowers. But the Senate removed that from their version of the bill and the House followed suit. 

SEC may charge Countrywide's Mozilo

SEC may charge Countrywide's Mozilo

Agency staff to recommend civil fraud charges against mortgage firm's founder, according to report.

By Tami Luhby, CNNMoney.com senior writer

Last Updated: May 13, 2009: 7:06 PM ET

Countrywide founder Angelo Mozilo

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NEW YORK (CNNMoney.com) -- Staffers at the Securities and Exchange Commission are recommending that the agency file civil fraud charges against Countrywide co-founder Angelo Mozilo, according to a published report.

The agency sent a notice to Mozilo telling him of the potential charges, which include violations of insider-trading laws and failing to disclose information to shareholders, according to the Wall Street Journal, which cited people familiar with the investigation. The agency may ultimately decide not to file charges.

Mozilo's attorney, David Siegel, declined to comment, but told CNNMoney.com that the "persistent innuendo" that Mozilo sold Countrywide shares because he knew of problems within the mortgage lender is "scandalous" and "inconsistent" with the facts.

"We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," Siegel said in an e-mail. "All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time."

An SEC spokesman declined to comment.

Mozilo, who founded the company in a New York apartment, built Countrywide into the nation's largest mortage lender. But Countrywide buckled during the housing meltdown and was acquired last year by Bank of America (BAC, Fortune 500).

Mozilo became a poster boy for the subprime crisis. He reportedly stood to collect a windfall of $115 million dollars in the $4 billion sale to Bank of America. But after facing heavy criticism from lawmakers, Mozilo said he would forfeit $37.5 million in payments tied to the deal.  

First Published: May 13, 2009: 6:47 PM ET

9th-circuit-invalidates-mortgage-for-failure-to-properly-acknowledge-and-notary-misconduct

9th-circuit-invalidates-mortgage-for-failure-to-properly-acknowledge-and-notary-misconduct

Posted on February 9, 2009 by livinglies

9th-circuit-invalidates-mortgage-for-failure-to-properly-acknowledge-and-notary-misconduct

In considering the actions of the Federal District Court Judge and Trustee below, the 9th Circuit Federal Court of appeals made short shrift of the shell game of the players in the securitization game. In a word, they declared the mortgage invalid. While the facts are different than the home mortgage foreclosure the legal theory is the same. Some excerpts:

Aerocolor, Inc., was in bankruptcy in the United States District Court for the Southern District of California. The appellee herein, Crocker-Citizens National Bank, applied to the referee in bankruptcy for leave to exercise the bank’s power of sale under a chattel mortgage which the bank claimed to have received from Aerocolor before Aerocolor became bankrupt. The referee in bankruptcy denied the bank’s application, stating several reasons for the denial. We shall discuss only one of those reasons, the failure of the officers of Aerocolor to acknowledge, in the presence of the notary public who attached his certificate to the document, their signatures to the chattel mortgage.

Our problem, then, is to determine whether, under California law, the bank’s chattel mortgage was valid as against Aerocolor’s creditors. California Civil Code 2957 provides:

6
A mortgage of personal property or crops is void as against creditors of the mortgagor and subsequent purchasers and encumbrancers of the property in good faith and for value, unless:

7
1. It is acknowledged, or proved and certified, in like manner as grants of real property;

8
4. The mortgage * * * is recorded in the office of the recorder * * *.

9
California Civil Code 1185 provides that the acknowledgment of an instrument must not be taken unless the officer taking it knows, or is furnished evidence, that the person making the acknowledgment is the person described in the instrument. Sections 1188 and 1190 provide a form of words which the officer must indorse on or attach to the instrument acknowledged. That form states that the person making the acknowledgment personally appeared before the officer who took the acknowledgment. California Government Code 6203 provides:

10
Every officer authorized by law to make or give any certificate or other writing is guilty of a misdemeanor if he makes and delivers as true any certificate or writing containing statements which he knows to be false * * *.

11
California Government Code 8214 makes a notary public and his sureties liable to any person injured by the notary’s official misconduct or neglect.

12
In the instant case the chattel mortgage was not acknowledged. The California statute says that such a mortgage shall be void as against creditors of the mortgagor. At least as to existing creditors of the mortgagor, the purpose of the legislature in requiring acknowledgment, and recordation, to which acknowledgment is a prerequisite, could not have been the giving of notice, since such a creditor would have already parted with his money or his goods or his labor, and the only benefit which would accrue to him from a recordation which might come to his notice would be the warning that he had better not part with any more of his money or his goods or his labor on the assumption that because his debtor was in possession of many chattels he would probably pay his debts. The legislators’ view may well have been that if a person had many chattels in his possession, and many debts, some one of his many creditors ought not to be allowed the advantage of a secret, non-possessory lien upon the debtor’s apparent chattel riches, which advantage the favored creditor would disclose when the debtor’s financial structure was about to collapse. The legislature may well have thought that if one creditor is to be permitted to gain such an advantage over others, he should at least take certain prescribed steps in order to accomplish that purpose. As we have said, the notice given by recordation would have come too late to be of use to existing creditors.

13
We think, then, that at least as to existing creditors, the requirement of Civil Code 2957 that chattel mortgages be acknowledged in order to be valid prescribes a necessary step in the creation of the lien of the chattel mortgage itself, and not a method of giving constructive notice of an otherwise valid lien.

14
In the instant case, although the chattel mortgage was not acknowledged, the notary public certified that it had been acknowledged. On its face, then, when it was presented by the bank to the recorder there was no reason why the recorder should not record it, and he did record it. In such a situation, there are obvious possibilities of great inequities. If someone had bought Aerocolor’s note from the bank and had sought to enforce the chattel mortgage against Aerocolor, which for the purpose of the illustration we will assume was still in business, it would be difficult to see any equity in a defense by Aerocolor that its officers had not acknowledged the chattel mortgage.

17
We suggest, with deference, that the patent-latent dichotomy has no application to the instant case. It is for the protection of persons who rely upon what appears fair on the record, and as to whom it would be inequitable to assert defects in the acknowledgment which they had no reason to suspect. In the instant case the defect was created by the chattel mortgagee itself, the bank. On its premises, and under the supervision of its agents, the officers of the mortgagor signed the mortgage, and were allowed to depart without having acknowledged their signatures. Under the supervision of the bank’s agents, a notary later made a false certification that the mortgagor’s officers had acknowledged their execution of the instrument. If such a complete disregard of the provisions of the California statutes is to be treated as irrelevant, not for the protection of an innocent third person but for the benefit of the party who so disregarded the statutes, it should be the California courts, not a court of another sovereign, which should announce that doctrine.

18
In view of our conclusion that the acknowledgment of the chattel mortgage was invalid and the mortgage was therefore invalid as against the trustee in bankruptcy, we have not considered the other asserted grounds of invalidity of the chattel mortgage.

19
The judgment of the District Court is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion.

6 Responses to “9th-circuit-invalidates-mortgage-for-failure-to-properly-acknowledge-and-notary-misconduct”

1. 

   Cindy, on April 13th, 2009 at 4:32 am Said:

   Any direction on where to find this information would really be of immediate benefit.

   1. I need a quick detailed brain wash on the “strict” requirements of the foreclosure process in California.
   Meaning, every single step in the process from the ordering of the foreclosure, each persons role in the process in the sequence requirement, the step-by-step process of the title company and all the personnel involved and their statutory legal actions (i.e., order warranty, record the something, notify the stakeholders… (who are the stake holders).

   I don’t have the time to read all the laws and the laws don’t necessarily define every single step by each of the parties involved, every signature and it’s corresponding date requirement, and the coordination of parties, etc………..

   2. Can you also point me to a quick and comprehensive reading to understand the lien priorities and how they work in a foreclosure.

   Thank you so much.
2. 

   Cindy, on April 13th, 2009 at 4:28 am Said:

   Wamu sent me a assignment with a out of state notary with an in state (calif) signature. Is this wrong?

   I’ve listed the multiple entities involved in my foreclosure. I was not notified of these parties.

   - Wamu serviced my home loan for 10 years
   - Wamu hired Quality Loan Services to handle my foreclosure.
   - Wamu hired Fidelity Title for the title workup/foreclosure tasks (?).
   - JPMorgan Chase sent me a letter, extending an offer to help me and a notice of the merge of Chase/Wamu.
   - Fidelity Title hired First American Title to do the title work.
   - The foreclosure auctioner is the owner of a Real Estate Publication of Deeds Company. (she is not an employee of First American or Fidelity or the bank)

   Who signs the Trustee’s Deed?
   Is each entity required to have a notorized signature on a form disclosing their responsibility?

   I look urgently forward to clarity. Thank you.
3. 

   K. Moore, on April 10th, 2009 at 9:29 pm Said:

   Sir: what is the citation for this case?
4. 

   K. Moore, on April 10th, 2009 at 9:25 pm Said:

   When an attorney tells a plaintiff: “I will take your case…” he is thinking in his head: “I will take your case-full of money and keep you stuck like an addict who thinks I am his only way to …”

   When an attorney tells a defendant the same he is thinking: “You can’t imagine how I can lie to a court to get you out of this trouble. I can buy the judge, fool the jury, by any witness to perjury declarations, it all depends on how much you can pay me in advance, and NON-REFUNDABLE even if you’re off the hook tomorrow for no reason at all…”
5. 

   Bob, on February 10th, 2009 at 4:43 pm Said:

   Neil
   Thank You
   Till this day I have not located an attorney that is well prepared to take my case. I have email many asking them if they are familiar or deal with TILA and have not received a response. I don’t know if my asking is to direct and offensive. But I would hate to walk into an Attorneys office sign a check or contract for that matter and watch them sit back. I know that attorneys are suppose to work in representing you but now a days it’s hard to know who to trust. I feel butter taking in your feedback being that you are providing my self and others a service yet you are not asking me for money upfront.

   In all my questions or posting I take from your response a bit here and there. With that knowing it comes handy in trying to build a case for myself. If by Wednesday I have not received a response from any of the attorneys I have tried making contact with I may have to file quiet title lawsuit my sell and put Pro Se to the test. I know that giving me direct advice may or may not cause a direct problem as you are retired. But I have to say thank you for your work and the interpretation to the posting listed above. Although I have to search you blog in the many pages that exist I have been able to find some answers.

   Thank You Again,
   Bob
6. 

   JOSE FIGHTER, on February 9th, 2009 at 5:47 pm Said:

   I have been asking the local lawyers about this issue for some time. In the 15 years I worked as a Principal Real Estate Broker, I never saw a single settlement where there was a Notary present, most documents were and I witnessed this, notarized after the fact. The seller,purchaser and agents never saw the notary witness the act of signing.

   The same is happening now with all the power of attorneys being shipped all over the country and all the lost note, and note ownership affidavits. They are allegedly signed in one state and then notarized 2,000 miles away.

   This details are relevant. We have case in which the secretary of th foreclosure attorneys signed as the vice president of MERS, and the document was notarized 500 miles away.

   Thanks for this info.

LIVINGLIES: Lawyers, in rush to regain properties, can exploit judges’ workload

LIVINGLIES: Lawyers, in rush to regain properties, can exploit judges’ workload

Posted on May 11, 2009 by livinglies

Lies a new tool in foreclosure
Lawyers, in rush to regain properties, can exploit judges’ workload

By Todd Ruger

Published: Sunday, May 10, 2009 at 1:00 a.m.
Foreclosure lawyers want to take back property as fast as possible, and sometimes they do not let the facts slow them down. In case after case, lawyers representing banks are giving false statements in court about who owns mortgages, or whether the homeowner is willing to negotiate, or whether they have completed all the legal steps to put a foreclosed house back on the market.

The errors and fabrications in the court files are seldom caught by judges with hundreds of foreclosure cases before them. The judges say they can only hope to catch a few of the offending lawyers in hopes of keeping the rest honest. The courts usually rely on defendants to point out problems in the cases against them. But in foreclosure court, many homeowners make no attempt to defend themselves. Judges cannot step into that role.

“Even the IRS can’t audit every return,” said 12th Circuit Chief Judge Lee Haworth. “We’re an impartial party. You don’t ask the referee at a baseball game to tell whether the people coming in the game are on drugs.”

Since the real estate market in Florida began to slide in 2006, the number of foreclosure cases has gone up 600 percent. In the first quarter of this year, 4,991 foreclosures were filed in the Sarasota-Bradenton-Venice market, which remains among the top 25 for
foreclosures in the nation. At the same time, judges handling the cases have seen their budgets fall 13 percent.

Most of the foreclosures are filed by out-of-town attorneys from a handful of firms who rarely appear in court in person. Minutes after a foreclosure attorney told her everything was in order in a recent case, Circuit Judge Donna Berlin was ready to sign off. Then she happened to glance at the file, and realized that the two properties were in Miami, a few hundred miles outside her jurisdiction.

“I didn’t have time to go through and read it,” Berlin told a group of attorneys at a meeting last weekend. “And it was not something that I normally look at.”

Foreclosure defense attorneys say that even homeowners who plan to walk away from a property should be checking the court file and making sure the lenders’ attorneys are sticking to the truth.

“It’s all across the country, it’s not just here,” said April Charney, a Jacksonville attorney who is a nationally recognized expert in foreclosure defense. “It’s whatever’s expedient.”
Troubling findings Nobody knows how common it is for foreclosure cases to be based on untrue statements or incomplete proof.
More than half of all foreclosure defendants simply walk away, and never show up in court to defend themselves. A Sarasota attorney, Richard Kessler, enlisted a few friends to go through 180 foreclosure cases in Sarasota County looking for errors. They found three out of four cases proceeded with incomplete or improper documentation.

For instance, the survey found that only one in 12 cases had the documents to prove the company foreclosing on the property was also the company holding the mortgage note. In half of the cases reviewed, the plaintiff said the mortgage note had been lost.

Kessler contacted Haworth and offered to have his business double check the paperwork for the courts, proposing that his fee could be charged to the company filing the case. Haworth declined, saying he cannot add such a filing fee, and the courts have no money to pay for the service. Instead, Haworth is recruiting volunteer law students to review all the cases for foreclosure judges this summer to verify documents. “We think having cops on the beat will help,” Haworth said.

‘Any old pleading’ Haworth changed court rules earlier this year to address some of the problems with the out-of-town firms that handle most of the foreclosures in Manatee and Sarasota counties. He required them to meet with homeowners and try to settle the case.

Lenders widely ignored the rule, and the number of foreclosures being resolved went from 400 a month to just over 100. Lenders also must file complete paperwork, including proof that they met or tried to meet with the homeowner. Otherwise, their hearings get canceled, costing them money.

But some foreclosure attorneys have simply filed paperwork saying the homeowners declined to have the meeting, whether that was true or not. Ronald and Sandra Smith requested the mediation meeting with their lender in January. Then they sent financial documents in preparation for the meeting.

A few weeks later, the attorney for the lender, HSBC Bank, filed court papers saying the Smiths had “no interest in the program or declined.” There is no way to know whether it was a mistake or deliberate, said the Smiths’ attorney, David Morrill of Legal Aid of Manasota. But he is asking for the case to be dismissed because of it.

“I don’t believe an attorney would deliberately do that,” Morrill said. “I just don’t know what happens to all this paperwork we send them.” Other false statements provided to the courts are more suspect, like the attorney for Deutsche Bank who, to avoid having to refile a case, claimed the international financial giant had changed its name to Aurora
Loan Services. [Editor's Note: Aurora is a Lehman company not a Deutsch company]

A judge in Miami fined Wells Fargo bank $95,000 late last year because of sloppy paperwork filed by Florida Default Law Group, one of a handful of companies that handle the majority of foreclosures in the state.

Judge John K. Olson blasted Florida Default, saying the firm seemed to believe that “filing any old pleading without undertaking any investigation into its accuracy is perfectly acceptable practice.” Wells Fargo and the Florida Default Law Group told the judge that the mistakes were employee errors, and that staff at all levels were warned to be more careful.

Phone and e-mail messages left by a reporter for lender attorneys involved in those cases, including Florida Default Law Group vice-president Ronald Wolfe, were not returned.

The notorious Kellogg case The most notorious case in Sarasota County is that of Betty Kellogg, a 71-year-old disabled widow who twice had her villa put up for foreclosure sale, even though she worked out a settlement with her lender. Kellogg bought the villa in 2000 after her husband and other relatives died. To pay her medical bills and consolidate her debt, she took a $180,000 loan against her home.

The mortgage broker had inflated her income on the application — she makes $380 a month working part-time; the mortgage broker said she made $2,300 a month. Kellogg could not afford the loan payments.

“I asked them, ‘Why would you accept me, I don’t really have enough money to qualify for this. They said, ‘Just pay for a couple months and we’ll refinance again,’” Kellogg said. So when she fell behind and the foreclosure lawsuit was filed last year, she begged with the bank to help her.

“I am just lost. I don’t know what to do,” Kellogg wrote to the lender, Washington Mutual. “Please help me.” The bank told her it would not proceed with the foreclosure case while they negotiated. But at the same time, the bank’s lawyers were telling Judge Berlin that Kellogg was not defending herself, and were granted a default judgment.
They put Kellogg’s home up for sale.

Kellogg went to an attorney. Berlin cancelled the sale when she found out what happened. Less than a month later, the bank filed another motion, saying that the
first sale had been canceled because it was not advertised. Berlin signed the order, and the bank scheduled another sale. Kellogg, who got a lawyer through Legal Aid of Manasota, went back to the judge again, and the sale was canceled. Again. “I got so afraid, and I have no money to pay attorneys to fight for me,” Kellogg said. “It’s very confusing. I am not talking to anybody on the phone anymore.”

Filed under: CDO, CORRUPTION, Eviction, Investor, MODIFICATION, Mortgage, Servicer, foreclosure, securities fraud | Tagged: foreclosure defense, foreclosure offense, fraud, Lender Liability, predatory lending, securitization

One Response to “LIVINGLIES: Lawyers, in rush to regain properties, can exploit judges’ workload”

ny, on May 12th, 2009 at 1:39 pm Said:

Here’s the order from the court, it was directed to judicial officers and it’s a TRO

Ex Parte Federal National Mortgage Association, Petitioner.

In Re Federal National Mortgage Association (“Fannie Mae”) Loans Subject to Foreclosure Sale.

ORDER

Petitioner asks this Court to issue an ex parte temporary injunction1 or restraining order “enjoining all judicial officials in South Carolina conducting foreclosure sales on May 4, 2009 (or the next judicial sales dated) from dismissing all eligible one- to four-unit owner occupied properties securing Fannie Mae portfolio mortgage loans and MBS pool mortgage loans guaranteed by Fannie Mae for which there is a foreclosure judgment.” It asserts that this injunction is necessary to avoid undue costs if these foreclosure actions are dismissed rather than stayed or postponed based on the fact that the underlying loans may be subject to modification under the Homeowner Affordability and Stability Plan, the Home Affordable Modification Program (HMP), and the United States Treasury Supplemental Directive 09-01. It also states that, “absent injunction, mortgagors eligible for relief under the HMP program could be denied their right to participate because their property was sold at the foreclosure sale. This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction.”

While I am very troubled by the ex parte nature of this petition2, I grant a temporary restraining order (TRO) preventing the foreclosure sale of any property arising out of a loan owned or guaranteed by petitioner or Freddie Mac or held by a servicer who has signed an agreement to participate in the HMP3. If a sale has already taken place today prior to issuance of this order, this TRO shall stay the master-in-equity, circuit court judge or special referee from taking any further action to complete the sale including the issuance of a deed to the purchaser.

By May 15, 2009, the plaintiff in every mortgage foreclosure action stayed by this order shall serve on all other parties to the action (including petitioner and/or Freddie Mac as appropriate) an affidavit setting forth its belief whether the loan is subject to modification under the HMP. If the affidavit indicates that the loan is subject to modification under the HMP, the foreclosure shall be stayed pending a determination if the loan will be modified. If the loan is modified, the foreclosure action shall be dismissed. If the loan is not modified, the foreclosure may proceed.

If the affidavit indicates that the loan is not subject to modification under the HMP, the TRO will be lifted unless petitioner, Freddie Mac or another party serves and files a counter affidavit asserting that the loan is subject to modification under the HMP by May 22, 2009. If a counter affidavit is timely filed, the TRO will remain in effect until the master-in-equity or circuit court judge determines if the HMP is applicable to the loan. The lower court shall insure that these determinations are made in an expeditious manner.

If the loan is determined not to be subject to modification under the HMP, the TRO shall be lifted and the foreclosure may continue. If the lower court determines that the loan is subject to modification and the loan is modified, the foreclosure action shall be dismissed. If the lower court determines that the loan is subject to modification but the loan is not subsequently modified, the TRO shall be lifted and the foreclosure may continue.

IT IS SO ORDERED.
s/Jean Hoefer Toal
JEAN H. TOAL
CHIEF JUSTICE

Columbia, South Carolina
May 4, 2009
4:50 p.m.

1 Under Rule 65(a), SCRCP, a temporary injunction cannot be issued without notice to the adverse party.

2 Petitioner has known about the facts supporting its request for injunctive relief for almost a month before filing this petition, and could have provided notice to the opposing parties during that period. If it were not for the interest of mortgagors who may be entitled to a loan modification, I would deny the requested relief based on petitioner’s lack of diligence.

3 While petitioner asks for this relief only as to Fannie Mae owned or guaranteed loans, this TRO applies to all loans that are subject to modification whether owned or guaranteed by Fannie Mae or Freedie Mac, or a servicer who has signed an agreement to participate in the HMP.

DOJ Probing Mortgage Data Processing Firms

DOJ Probing Mortgage Data Processing Firms

Posted on May 12, 2009 by livinglies

DOJ Probing Mortgage Data Processing Firms

By Peg Brickley
Of DOW JONES DAILY BANKRUPTCY REVIEW

The Department of Justice is conducting a nationwide probe of the company whose automated systems handle half the mortgages in the U.S., looking for evidence Lender Processing Services Inc. (LPS) has “improperly directed” the actions of lawyers in bankruptcy court.

The Jacksonville, Fla., company was spun out last year from Fidelity National Information Services Inc. (FIS), a financial technology giant that is also under scrutiny for its role in court actions, according to documents filed with the U.S. Bankruptcy Court in Philadelphia.

Although the companies say they are providers of electronic information services, the U.S. trustee believes LPS and Fidelity play a “much greater” role in court actions where thousands of homes are at risk of foreclosure, according to Bankruptcy Judge Diane Weiss Sigmund.

“The thoughtless mechanical employment of computer-driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system,” Sigmund wrote in a decision released Wednesday, April 15.

A spokeswoman for Fidelity did not respond to requests seeking comment on the investigation by the Office of the U.S. Trustee, an arm of the Department of Justice whose mission includes safeguarding the integrity of the bankruptcy courts.

Michelle Kersch, a spokeswoman for LPS, said the U.S. trustee has “advised outside counsel for LPS that it is seeking to better understand LPS’ role.” In an e-mail, Kersch pointed out that the judge held the lawyers, not LPS, responsible for the problems in the case before her.

The probe of the mortgage technology operation surfaced in a Philadelphia case after Sigmund started asking questions about the source of false court filings that came from HSBC Mortgage Corp. In pursuit of homeowners Niles and Angela Taylor, HSBC filed the wrong mortgage, gave incorrect payment amounts and claimed the Taylors had missed monthly payments. This “was simply not true,” Sigmund wrote in a 58-page decision.

Pressed to produce a loan history for the Taylors, HSBC’s lawyer confessed the system simply wouldn’t give it to him.

HSBC, it turns out, had handed off servicing of the troubled loan to Fidelity, which spun out LPS last year. The processes the company uses to crank out court documents for fast, cheap foreclosures were the culprit, the judge found.

By forcing lawyers to talk to computers rather than to their clients – the lenders – LPS makes it hard for lawyers to do right by the court and discharge their ethical obligations, Sigmund said.

Lawyers at one level spot-check a fraction of the documents that are on their way to foreclosure actions, Sigmund found. But the business is built for profitability rather than reliability, and counts on “lower-cost labor,” according to the judge.

Although LPS’s system “has many features that make a volume business process more efficient, the users may not abandon their responsibility for fairness and accuracy to the seduction of electronic communication,” Sigmund wrote.

She faulted HSBC and some of the lawyers involved in the case for having “sacrificed accuracy and fairness to efficiency and cost-savings,” by relying on LPS’s systems.

Fidelity, later LPS, is the electronic powerhouse behind the foreclosures rolling through much of the country, taking in data and spitting out loan-default notices for 16 of the 20 largest mortgage-loan servicers in the nation. Banks like HSBC and mortgage servicers outsource the handling of their troubled loans to LPS’s default management services business.

Business is booming in the loan default unit, LPS’s financial reports say, with revenue up 68.3% for the fourth quarter of 2008, compared with the same period a year earlier.

Consumer advocates have long complained that Fidelity and LPS are much more than electronic data providers. The companies say which lawyers get the lucrative business of foreclosing on troubled homeowners. Those who move the fastest are rewarded, said O. Max Gardner III, a consumer bankruptcy attorney. Those who pause to ask questions or to investigate whether a loan should be foreclosed, don’t last as LPS network attorneys, Gardner said.

“The Fidelity-LPS system represents a complete outsourcing of the foreclosure and bankruptcy process to a third-party, Fidelity-LPS, who then manages the entire legal process,” Gardner said in an e-mail Thursday, April 16.

Sigmund’s opinion revealed that the Department of Justice is looking at Fidelity, LPS and the law firm that handles HSBC Mortgage Corp.’s troubled loan business nationwide, Moss Codilis LLP.

Moss Codilis did not reply to an e-mail seeking comment on the investigation, which involves a number of bankruptcy cases, according to Philadelphia court documents.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Peg Brickley, Dow Jones Daily Bankruptcy Review; 302-521-2266; peg.brickley@dowjones.com

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The article references an epic in-depth 58 page opinion written by Pennsylvania US Bankruptcy Judge Sigmund in which she enlightens the world to the practices of these third-party lender processing services, and calls the legal profession to adhere to higher standards of professional responsibility when engaging them. It’s a good read and most timely. It’s an opinion that will surely be controlling across this nation.

Allan
BeMoved@AOL.com

Filed under: CDO, CORRUPTION, Eviction, Investor, MODIFICATION, Mortgage, Servicer, foreclosure, securities fraud | Tagged: fraud, Mortgage, lender, mortgage meltdown, foreclosure defense, Lender Liability, borrower, disclosure, trustee, foreclosure offense, TILA audit

In Their Own Words: Why Dem Senators Screwed Homeowners

In Their Own Words: Why Dem Senators Screwed Homeowners

Ryan Grim

ryan@huffingtonpost.com

Only 45 Senate Democrats voted Thursday to oppose the banking industry and pass legislation aimed at stemming foreclosures. The bill would have allowed bankruptcy judges to allow homeowners who met strict conditions to renegotiate mortgages -- a process known as cramdown. It would have only applied to mortgages entered into before 2009.

Earlier in the week, the measure's lead proponent, Sen. Dick Durbin (D-Ill.), concluded that banks "frankly own the place."

Of course, the 12 Democrats who voted "no" have a more charitable view of their own motivations. So we asked them what their reasoning was. In their own words, here is how (those we could find) explained their vote:

Byron Dorgan (D-N.D.): "A number of things. I thought the 31 percent is an arbitrary number. I think there are a whole lot of folks, are likely folks, out there who have little debt outside their home who could -- I just thought it was an arbitrary number and I didn't like the way it was constructed."

Dorgan is referring to the percentage of a person's income that a judge could determine should be dedicated to paying the monthly mortgage. The figure is roughly in line with what financial analysts agree is appropriate.

Is Durbin right? Do banks own the Senate?

"I don't know who he's speaking about," said Dorgan. "He worked on this for a long, long time. And I wish they would have found a way to reach an agreement that would have allowed the legislation to get through...I don't know the context of which he said that."

Is the bill totally finished? "I don't know. I think I wish they had found some middle ground by which they could have moved a piece of legislation. They didn't do that. And you know, this legislation went well beyond subprime, as you know."

Ben Nelson (D-Neb.): "I've not supported the cramdown for a variety of reasons, not the least of which is that I hate to see that authority to determine what the future contract is ceded to the court."

Evan Bayh (D-Ind.), who ultimately voted yes: "My concern about this is that in our appropriate zeal to help the four or five percent of Americans who might be faced with bankruptcy, we don't unduly raise the costs of homeownership on the 95 percent who never will."

Tom Carper (D-Del.): "One of the reasons why usually mortgage rates are cheaper for primary homes is that the markets have the certainty that the judge won't be invited to come in and change the terms of the mortgage."

Of course, the Senate package only included mortgages pre-2009, so interest rates on future mortgages would be unaffected. So what would it take to get Carper's vote?

"We talked earlier about limiting the range of the mortgages that can be modified from those originated, say, in 2003 to maybe through 2007. That would've been very helpful. The other thing is, the House has a provision that says if a mortgage is modified on behalf of a homeowner and later on that homeowner sells the house and realizes the profit--the House has a provision that if the lender participates, the first year [the lender recoups] 90 percent [of that profit], second year is 70 percent, third year is 50 percent, fourth year, 30 percent. I thought that was a better formula for participation. So those two points would have done it for me. Not that that would have made the bill perfect, but it would have done it for me. And it's unfortunate we didn't have a chance, given the nature of the agreement, announced by Senator Reid, that we wouldn't have a chance to offer any amendments."

Is Durbin right about who owns the Senate?

"The banks sure don't think so. My guess is they don't feel like they have much [power] at all. Let me just say, I don't that's true. Not even close. But we could have had this provision--could have passed something close to what was on the floor--could have passed if we'd had, maybe on the floor, a chance to perfect it."

Could it come back again?

"My guess is we're not going to see this again."

Really?

"I don't think we're going to see this again."

Jon Tester (D-Mont.): "I just think a deal's a deal. I have a lot of empathy for folks who tend to get led astray, but I just think it's going to create some problems -- pretty obvious, actually. I don't have to list them. I'm generally opposed. I don't think it works well."

Mary Landrieu (D-La.): "My community bankers are really opposed to it and I think it's important for people to realize there is a big difference right now in the country between the health of these large international financial institutions and our local community banks...I think we gotta be careful about adopting processes and procedures that would really hurt our community banks."

The Huffington Post asked a few Republicans, too, since they still do, after all, vote.

Mel Martinez (R-Fla.): "We're working through this crisis. It's not quite as impending an issue as it may have been four months ago, because I think we're beginning to ease -- the crisis is sort of working its way through."

George Voinovich (R-Ohio): "I evaluated it and it harms more than it helps. It's the precedent that it sets in terms of a lot of people who are out there quite frankly very responsible. Our credit unions were giving money to people who were responsible. You've got some people who were being very responsible and doing their job and come to you and say if this happens we're going to have to change the interest rate, recalculate. I mean, I want to encourage those people. I don't want to discourage them."

Susan Collins (R-Maine), on how her vote will play at home: "I think it'll play just fine, because I view it as increasing the costs for homeowners, so it just wasn't the right approach."

A yes vote, John Kerry (D-Mass.), also weighed in: "They don't own me and I'm in the Senate. I think it's unfortunate. I don't know what the rationale is behind people's votes. I don't know what motivates -- some senators don't like changing of a contract. Some senators don't like to have courts have the power. There are different reasons."

Millions of different reasons, perhaps.

Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America

Are Courts in California Truly Limited by Non-Judicial Foreclosure Statutes?

Are Courts in California Truly Limited by Non-Judicial Foreclosure Statutes?

By Michael Doan on May 2, 2009 in Foreclosure Defense, Foreclosure News

Recently, many California Courts have been dismissing lawsuits filed to stop non-judicial foreclosures, ruling that the non-judicial foreclosure statutes occupy the field and are exclusive as long as they are complied with.  Thus, in the case where a notice of default is recorded and a lawsuit then filed in response to stop the foreclosure since the foreclosing party does not possess the underlying note, all too often the Court will simply dismiss the case and claim “2924 has no requirement to produce the note.”

Thus, these Courts view the statutes that regulate non-judicial foreclosures as all inclusive of all the requirements and remedies in foreclosure proceedings.  Indeed, California Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. This comprehensive statutory scheme has three purposes: ‘“(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” [Citations.]’ [Citation.]” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249–1250 [26 Cal. Rptr. 3d 413].)

Notwithstanding, the foreclosure statutes are not exclusive.  If someone commits murder during an auction taking place under Civil Code 2924, that does not automatically mean they are immune from criminal and civil liability.  Perhaps this is where some of these courts are “missing the boat.”

For example, in Alliance Mortgage Co. v. Rothwell (1995) 10 Cal. 4th 1226, 1231 [44 Cal. Rptr. 2d 352, 900 P.2d 601], the California Supreme Court concluded that a lender who obtained the property with a full credit bid at a foreclosure sale was not precluded from suing a third party who had fraudulently induced it to make the loan. The court concluded that “ ‘the antideficiency laws were not intended to immunize wrongdoers from the consequences of their fraudulent acts’ ” and that, if the court applies a proper measure of damages, “ ‘fraud suits do not frustrate the antideficiency policies because there should be no double recovery for the beneficiary.’ ” (Id. at p. 1238.)

Likewise, in South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. [*1071]  (1999) 72 Cal.App.4th 1111, 1121 [85 Cal. Rptr. 2d 647], the court held that a junior lienor retains the right to recover damages from the trustee and the beneficiary of the foreclosing lien if there have been material irregularities in the conduct of the foreclosure sale. (See also Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at pp. 1257–1258; Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1095 [106 Cal. Rptr. 2d 443] [a trustee's sale tainted by fraud may be set aside].)

In looking past the comprehensive statutory framework,  these other Courts also considered the policies advanced by the statutory scheme, and whether those policies would be frustrated by other laws.  Recently, in the case of California Golf, L.L.C. v. Cooper, 163 Cal. App. 4th 1053, 78 Cal. Rptr. 3d 153, 2008 Cal. App. LEXIS 850 (Cal. App. 2d Dist. 2008), the Appellate Court held that the remedies of 2924h were not exclusive.  Of greater importance is that the Appellate Court reversed the lower court and specifically held that provisions in UCC Article 3 were allowed in the foreclosure context:

Considering the policy interests advanced by the statutory scheme governing nonjudicial foreclosure sales, and the policy interests advanced by Commercial Code section 3312, it is clear that allowing a remedy under the latter does not undermine the former. Indeed, the two remedies are complementary and advance the same goals. The first two goals of the nonjudicial foreclosure statutes: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor and (2) to protect the debtor/trustor from a wrongful loss of the property, are not impacted by the decision that we reach. This case most certainly, however, involves the third policy interest: to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.

This is very significant since it provides further support to lawsuits brought against foreclosing parties lacking the ability to enforce the underlying note, since those laws also arise under Article 3.  Under California Commercial Code 3301, a note may only be enforced if one has actual possession of the note as a holder, or has possession of the note not as a non-holder but with holder rights.  

Just like in California Golf, enforcing 3301 operates to protect the debtor/trustor from a wrongful loss of the property.  To the extent that a foreclosing party might argue that such lawsuits disrupt a quick, inexpensive, and efficient remedy against a defaulting debtor/trustor, the response is that “since there is no enforceable obligation,  the foreclosing entity is not a party/creditor/beneficiary entitled to a quick, inexpensive, and efficient remedy,” but simply a declarant that recorded false documents.

This is primarily because being entitled to foreclose non-judicially under 2924 can only take place “after a breach of the obligation for which that mortgage or transfer is a security.”   Thus, 2924 by its own terms, looks outside of the statute to the actual obligation to see if there was a breach, and if the note is unenforceable under Article 3, there can simply be no breach.  End of story.

Accordingly, if there is no possession of the note or possession was not obtained until after the notice of sale was recorded, it is impossible to trigger 2924, and simple compliance with the notice requirements in 2924 does not suddenly bless the felony of grand theft of the unknown foreclosing entity.  To hold otherwise would create absurd results since it would allow any person or company the right to take another persons’ home by simply recording a false notice of default and notice of sale.  

Indeed, such absurdity would allow you to foreclose on your own home again to get it back should you simply record the same false documents.  Thus it is obvious that these courts improperly assume the allegations contained in the notice of default and notice of sale are truthful.   Perhaps these courts simply can not or choose not to believe such frauds are taking place due to the magnitude and volume of foreclosures in this Country at this time.  One can only image the chaos that would ensue in America if the truth is known that millions of foreclosures took place unlawfully and millions more are now on hold as a result of not having the ability to enforce the underlying obligation pursuant to Article 3.

So if you are in litigation to stop a foreclosure, you can probably expect the Court will want to immediately dismiss your case.  These Courts just can not understand how the law would allow someone to stay in a home without paying.  Notwithstanding, laws can not be broken, and Courts are not allowed to join with the foreclosing parties in breaking laws simply because “not paying doesn’t seem right.”

Accordingly, at least for appeal purposes, be sure to argue that 2924 was never triggered since there was never any “breach of the obligation” and that Appellate Courts throughout California have routinely held that other laws do in fact apply in the non-judicial foreclosure process since the policies advanced by the statutory non-judicial foreclosure scheme are not frustrated by these other laws.

Written by Michael G. Doan