Countrywide Decision: Investor is owner of loan
BofA’s Countrywide loses court ruling on mortgages — Modifications Not Authorized By Investor May be Invalid
There is lots of significance about this decision. First it shows that if the investor is going to sue it is going to be against the intermediary pretender lenders and not the borrower — because they don’t want to expose themselves to liability for predatory loan tactics, usury, securities violations, TILA, RESPA and HOEPA violations. Second it shows that as we have said all along here, the servicers don’t have the right or authority to actually negotiate and execute a loan modification. And third it shows that the investor who bought bonds that were mortgage backed securities are the OWNERS OF THE LOAN.
This decision is essentially fatal to ALL foreclosure actions based upon securitized loans. It identifies the investors as the owners of the loan and negates the alleged authority of intermediary pretender lenders to do ANYTHING in the way of enforcement, modification, collection through legal means etc. because they simply have no standing (because the alleged debt is not owed to anyone other than the investor). The foundation is crumbling. These decisions are coming out one after the other because of a simple fact — the tacit deal between Wall Street and loan servicers and loan data administrators (MERS) may exist, but it has no legal effect without the investor and the borrower signing on to these new terms with extra conditions and co-obligors.
August 20, 2009, 7:42 am NEW YORK (Reuters) – A federal judge has ruled that Bank of America Corp (NYSE:BAC – News) cannot have a lawsuit by investors seeking to force it to buy back mortgages heard in federal court, saying he lacks jurisdiction to decide the case. Tuesday’s ruling by Judge Richard Holwell of the U.S. District Court in Manhattan means the case will move to state court. Holwell did not decide the merits of the case. “Congress passed two statutes within a year of each other to address the mortgage crisis,” the judge wrote. “In neither of these statutes did Congress federalize the case.”
The ruling is a win for investors, to the extent that Holwell rejected a claim by the bank’s Countrywide Financial Corp unit that new federal laws to encourage loan modifications to help struggling borrowers stay in their homes govern this case. Countrywide had argued that the laws negated obligations it might have had to buy back modified loans. In 2008, Countrywide agreed with some 11 state attorneys general to modify $8.4 billion of loans made to roughly 400,000 borrowers.Investors who own mortgage securities typically receive interest and principal payments. If servicers modified the underlying loans to reduce borrower obligations, investors would be harmed because they would receive lower payments.
Holwell did rule that investors bear the burden of showing that pooling and servicing agreements for their loans, taken “as a whole,” require Countrywide to buy back the loans.Bank of America could not immediately be reached for comment. A published report said a spokeswoman agreed that the court did not rule on the merits of the plaintiffs’ claims.The current case was brought by two investment funds holding Countrywide mortgages, Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC. These investors complained they would be harmed if Countrywide shifted the burdens of loan modifications to 374 trusts into which loans had been repackaged and securitized.
These investors would rather Countrywide repurchase modified loans for the full unpaid amounts. Countrywide had been the largest U.S. mortgage lender before Bank of America acquired it last July for $2.5 billion. The case is Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC v. Countrywide Financial Corp, U.S. District Court, Southern District of New York (Manhattan), No. 08-11343. rule that investors bear the burden of showing that pooling and servicing agreements for their loans, taken “as a whole,” require Countrywide to buy back the loans.Bank of America could not immediately be reached for comment. A published report said a spokeswoman agreed that the court did not rule on the merits of the plaintiffs’ claims.The current case was brought by two investment funds holding Countrywide mortgages, Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC. These investors complained they would be harmed if Countrywide shifted the burdens of loan modifications to 374 trusts into which loans had been repackaged and securitized.These investors would rather Countrywide repurchase modified loans for the full unpaid amounts. Countrywide had been the largest U.S. mortgage lender before Bank of America acquired it last July for $2.5 billion. The case is Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC v. Countrywide Financial Corp, U.S. District Court, Southern District of New York (Manhattan), No. 08-11343.
Alina
re your question on why clersk accept assignments…because, if like on my recorded assignment, the pretender lender signed it over to
U.S. Bank, N.A (so it just appears to be a bank)…it was not until very, very recently that I finally understood that U.S. Bank, N.A. was the ’securitization trustee’..only discovered because I got a copy of the Mortgage Loan Sale and Servicing Agreement and then that led me to the PSA (found on the SEC website). The PSA was made between two Chase entities….so that is where they set up the ’securitization trust’ and named U.S. Bank, N.A. as securitization trustee.
Much, much later (after foreclosure started)…the pretender lender (in my case HOME123 -part of New Century) then did the assignment over to U.S. Bank, N.A. There never was any recording of Chase having any significant role, other than becoming the new loan servicer.
The Clerks don’t have a crystal ball. They only record what is given to them. I bet they do not even have a clue about all the securitization that went on.
I went the last 8 months never being able to figure out how U.S. Bank, N.A. was involved in my foreclosure.
Also, in the case of the MLSA that I have….there were over 4200 loans sold from New Century to Chase.
When Chase did the PSA–they then sold the Certificates (ABS) to investors for 100K per pop!!
That deal between New Century and Chase was close to 1Billion dollars!!
oh yea
those poor investors… let them chase the banksters for the modified difference of the revenue stream.
btw this is why loan modifications is all bullshit..smoke&mirrors while the clock runs out to forclosure.
whooo is this author??
[neil i recognize your usual spot on commentary a [in yellow/shaded "quote"]
but…
a -
what the hell does “cannot have a lawsuit” mean? like no you cannot have a cookie? haha
i can see how [he/she] was attempting to phrase this.. eyes rolling
b- the only statement of fact made was – ” Judge Richard Holwell ” ruling on lack of jurisdiction in fed court by way of the latest statutes .
most of everything else was authors opinion . i luv media hype NOT!
neil. can there be a partial ruling if lack of jurisdiction prevents FDJ Holwell from rendering a conclusive decision?
alina,
it is a very good argument and explanation. but some investors have an PSA agreement that in case the SVP is in default they ( investors) has no legal recourse to go after ( bond sellers) who sold them a junk bonds which in this case is a securities back by mortgages. in other word ,buyer (investors) beware. i have the feelings that those investors who has that provisions in PSA ( Pooling Servicing Agreement) without recourse has probably causes the increase of foreclosure in U.S.A. and the loan servicer could just sell the foreclosed properties which are not subject to investors lawsuit against the bond sellers such as banks, Wall ST. and lenders. so my theory, this is another “FRAUD” initiated by loan servicing and lenders and use others means to intimidate the homeowners to foreclosed. the profits they could get it goes to their wallet and who’s the loser we, the HOMEOWNERS AND THE REAL INVESTORS WHO BOUGHT THE TOILET PAPERS CERTIFICATE. there were so many faces in securities mortgages “FRAUD” this is just one of them, and who knows in the years to come , we could find more “Fraud”.
erlinda,
IMHO, I don’t think the investors have thought it out that far ahead maybe because the investors do not realize the extent of the fraud committed.
Not only that, but it appears they can claim indemnification from the originator, seller, etc. The PSAs have built in protections for the investors against homeowner lawsuits.
Don’t forget, the investors were lied to also by the seller, originator, pretender lender, etc..
the way I look at it, this is the way the lies went:
pretender lender lied to seller and homeowner
seller lied to originator
originator lied to investors
servicers lied to homeowners in order to protect investors bottom line
suppose the investors won in suing bank of america, the investors are also putting themselves into a position that they (investors) are subject to a lawsuit form the homeowners due to TILA and RESPA violations and other violation made by the table funded loans which sold to Wall St. Are they ( willing) to exposed themselves? i think it is cheaper just to accept and allow modification than facing a lawsuit.
Here is a dumb questions:
When I worked briefly in Wills, Trusts, and Estates years ago, I remember that in order for a transfer of anything to be valid it had to be to the “Estate of ____”, “Trust of ____”, etc. I mainly worked with family trusts and at the end of year, the gift transfers of shares would be made. The transfers had to read “Trust of _____). The transfers were not made to a third party as trustee of the “trust of ____”
My question is this: On each and every single one of these foreclosures, the assignments are to the trustee or some other third part such as the servicer. Am I correct in presuming that such assignments would be invalid on their face? And if the answer to this question is yes, then why do the county clerk offices accept these assignments?