In the news today it was reported that the stock market fell below 12,000 today partly on news that China's economy isn't growing, and partly due to news that initial unemployment claims increased by 26,000 to 397,000 in the week ended March 5. Bankruptcy filings nationwide reached 1.53 million last year making it the largest number of cases filed nationally in a year since 2005.
The good news is there were only 225,101 new foreclosure cases filed in February this year (still a lot, but the lowest in one month in a long time).
One would think that was a great thing - foreclosures are dropping. But given all the news about foreclosure fraud over the last few months, and MERS instructing their members that their name could no longer be used on a foreclosure pleading, it would appear that the dip is due in part to the mortgage companies fear of filing, and not a sign that things are improving.
Oh, don't get me wrong. I'll be glad to see that the number of foreclosures nationwide is dropping if the trend continues for several months. But I don't expect it. I believe what is happening is that the lenders are taking time to cover their collective butts.
You see there has been much to-do about fraudulent documents, robo-signing, and lack of a valid paper trail. I believe during this time of slowdown in filings that the lenders are taking the time to create that missing paper trail, and create documents that were not robo-signed. Sadly, while this will probably work for them in the long run, I believe it's just wrong. I think if there is currently no paper trail, they should not be allowed to go and create the evidence to support their allegations. Just my opinion, but then I'm probably in the minority on this, even though my profession (law) requires those that practice in my state have at least one hour of continuing legal education in ethics every year.
I know that someone is owed the debts that people incurred when they signed their note and mortgage, but I'm looking at it from an ethics perspective. If you claim to hold a note and or mortgage, but have no paper trail to prove ownership of it, I believe you should not be allowed to go out and create that trail. It's like creating evidence for a court case - if it doesn't exist, creating it is fraudulent.
In some cases my belief would lead to a bad result: homeowners getting a free home when they legitimately owe money. But I see no way to get around the problem without someone losing out, and I for one would rather have the lender have to prove there is a good chain of ownership of the paper involved in these debts than to allow them to make one up.
I do have an open mind, and am willing to be re-educated, so if your opinion differs, feel free to give me a well reasoned argument as to why the homeowners should take the hit rather than the lenders.
Thursday, March 10, 2011
Sunday, February 27, 2011
Don't ever do this.
I read a case today about a bankruptcy attorney who totally missed it, and was sanctioned by a bankruptcy court.
His practice was to have his client come in when the paperwork was first prepared, have them read and mark up the document with all required changes, and then sign it. They then signed another document saying they had made corrections to the draft, and that the attorney had permission to make the corrections and file the docs for them.
Of course that required him to put their electronic signature on their documents, thus saying they had read and signed the document that was filed.
AND they would have to say to the Trustee that they had read and signed the documents too.
Apparently his district requires that the actual signed pages are filed with the court after the electronic filing takes place, so when the court issued a show cause as to why he hadn't done so in several cases, he went and got signatures from his clients to file (of course signatures that occurred POST filing).
And apparently in some cases he obtained telephone permission to file electronic signatures for some clients.
I think every attorney should know that IF a document says their client read and signed it UNDER PENALTY OF PERJURY that they actually did that.
At least the attorney admitted the things he did to the court.
His practice was to have his client come in when the paperwork was first prepared, have them read and mark up the document with all required changes, and then sign it. They then signed another document saying they had made corrections to the draft, and that the attorney had permission to make the corrections and file the docs for them.
Of course that required him to put their electronic signature on their documents, thus saying they had read and signed the document that was filed.
AND they would have to say to the Trustee that they had read and signed the documents too.
Apparently his district requires that the actual signed pages are filed with the court after the electronic filing takes place, so when the court issued a show cause as to why he hadn't done so in several cases, he went and got signatures from his clients to file (of course signatures that occurred POST filing).
And apparently in some cases he obtained telephone permission to file electronic signatures for some clients.
I think every attorney should know that IF a document says their client read and signed it UNDER PENALTY OF PERJURY that they actually did that.
At least the attorney admitted the things he did to the court.
Wednesday, February 23, 2011
This time MERS has totally stepped in it.
MERS (Mortgage Electronic Registration Systems) has really got themselves in a major jam in Massachusetts. Based upon recent court rulings, the Essex County Clerk began looking at mortgages registered in that county by MERS. Upon a detailed look at only a few mortgages, the clerk realized that MERS had transferred each mortgage several times, but had failed to pay the required filing fee for each.
That may not seem to be a big deal. After all, it's only one county in Massachusetts that is in the news now for having reviewed to see if MERS was in fact failing to pay a state mandated filing fee. So why say anything at all?
Seriously, how many counties are there? And how many mortgages could we be talking about?
Well here's why it's a big deal. In that one county in Massachusetts, the clerk estimated that MERS failed to pay over $22 MILLION in filing fees. Yes, you read that correctly - MERS may owe over twenty-two million dollars in filing fees to only one county. And it's not even the county with the Metro Boston area in it!
A bit of online research shows that the population of Essex County is around 742,582. The population of the entire US is 310,876,112. According to Wikipedia, there are 3140 counties in the United States. You can see the average county only has a population of just over 99,000 people (total pop divided by total counties). This means that the population of Essex county is 7 1/2 times the average population of each county. If you divide $22million by 7.5, then multiply by the number of counties in the entire country, wouldn't that give you a ballpark idea of what MERS avoided paying in filing fees nationwide? It's a huge number. {well over $9.2 trillion}
My guess is that MERS will fight having to pay anyone any filing fees tooth and nail, and if ordered to pay, will likely first try to pass the filing fees on to their members, and/or the individual homeowners. And I bet if it is rolled (or should I say when) over to the homeowners, it will be just added to the amount they owe with no notice to anyone.
Or maybe the court will so hammer MERS they file bankruptcy and the system crashes.
That may not seem to be a big deal. After all, it's only one county in Massachusetts that is in the news now for having reviewed to see if MERS was in fact failing to pay a state mandated filing fee. So why say anything at all?
Seriously, how many counties are there? And how many mortgages could we be talking about?
Well here's why it's a big deal. In that one county in Massachusetts, the clerk estimated that MERS failed to pay over $22 MILLION in filing fees. Yes, you read that correctly - MERS may owe over twenty-two million dollars in filing fees to only one county. And it's not even the county with the Metro Boston area in it!
A bit of online research shows that the population of Essex County is around 742,582. The population of the entire US is 310,876,112. According to Wikipedia, there are 3140 counties in the United States. You can see the average county only has a population of just over 99,000 people (total pop divided by total counties). This means that the population of Essex county is 7 1/2 times the average population of each county. If you divide $22million by 7.5, then multiply by the number of counties in the entire country, wouldn't that give you a ballpark idea of what MERS avoided paying in filing fees nationwide? It's a huge number. {well over $9.2 trillion}
My guess is that MERS will fight having to pay anyone any filing fees tooth and nail, and if ordered to pay, will likely first try to pass the filing fees on to their members, and/or the individual homeowners. And I bet if it is rolled (or should I say when) over to the homeowners, it will be just added to the amount they owe with no notice to anyone.
Or maybe the court will so hammer MERS they file bankruptcy and the system crashes.
Saturday, February 19, 2011
MERS again, but this time it's from them.
MERS (Mortgage Electronic Registration System) has made an announcement once again (since my last post). This time they have contacted all their members and advised them NOT to commence any foreclosure in the name of MERS. No matter that they believe they are the holder of the mortgage, and therefore have the right to foreclose. Two courts now have recently ruled MERS has no such right (add Kansas to the list).
As I said before, the issue with MERS is going to get very messy. MERS by their own estimate may have some sort of interest in 60% of all mortgages in this entire country. Or more, but who's keeping track?
While this issue is discussed in closed conference rooms of all the MERS members, the real issues will be worked out by courts nationwide. Of course this could eventually end up with the Supreme Court, as it is likely not every states' high courts will agree, and it will have to be sorted out.
So what happens when MERS goes to the Supremes?
As I said before, the issue with MERS is going to get very messy. MERS by their own estimate may have some sort of interest in 60% of all mortgages in this entire country. Or more, but who's keeping track?
While this issue is discussed in closed conference rooms of all the MERS members, the real issues will be worked out by courts nationwide. Of course this could eventually end up with the Supreme Court, as it is likely not every states' high courts will agree, and it will have to be sorted out.
So what happens when MERS goes to the Supremes?
Thursday, February 17, 2011
MERS is back in the news - this time a NY bankruptcy judge says no...and maybe not in the future.
MERS (Mortgage Electronic Registration Systems) was set up by several major lenders to make the transfer of documents easier (and allegedly to bypass the slow system of filing docs in appropriate county records). Under the agreements with members, MERS allegedly is their nominee (read as agent) and as such has the right to assign any mortgage of or to any of its members.
In the Eastern District of NY case In re: Ferrel L. Agard, Case No. 810-77338-reg, the court just granted a motion to MERS, but only on the basis that there was a prior foreclosure judgment that had not been challenged, and they could not review a state court's final judgment. In their discussion, the Court determined MERS did not show it had the ability to assign a note or a mortgage, and that MERS had problems.
The court said that under NY state law, an agency relationship regarding real property cannot be created without an express writing. It said the burden of proving an agency relationship exists is on MERS. It further stated that although a Note and Mortgage normally run together, they may be separated - as they are by MERS own admission. MERS admits that it is allegedly empowered to assign the mortgage, and the Note is transferred by the holders/members directly, thus separating the track of the documents. To complicate things, MERS assigned the mortgage from the original lender to the final holder of the Note, thereby bypassing all the other holders of the Note in the chain of title. This appeared to the court to be an invalid assignment, as the original lender had no interest in the note/mortgage at the time of the assignment. The court's findings state that MERS did not have the right to assign a mortgage absent a written instruction to do so from the principal.
The court held that in every further case involving MERS the moving party must show they validly hold the note and the mortgage in order to have standing before the court.
MERS could be in big trouble. It seems to me that every state's laws will include a provision that transfers of property MUST be in writing. It also seems like most state's laws recognize that a note and mortgage run together, however creative attorneys in both bankruptcy and foreclosure will now be attacking MERS for their admitted separation of the documents. I am also sure a lot of assignments will now be closely looked at by attorneys around the nation.
All I can say is that there could be rough times ahead for MERS who may hold a huge percentage of mortgages nationwide.
In the Eastern District of NY case In re: Ferrel L. Agard, Case No. 810-77338-reg, the court just granted a motion to MERS, but only on the basis that there was a prior foreclosure judgment that had not been challenged, and they could not review a state court's final judgment. In their discussion, the Court determined MERS did not show it had the ability to assign a note or a mortgage, and that MERS had problems.
The court said that under NY state law, an agency relationship regarding real property cannot be created without an express writing. It said the burden of proving an agency relationship exists is on MERS. It further stated that although a Note and Mortgage normally run together, they may be separated - as they are by MERS own admission. MERS admits that it is allegedly empowered to assign the mortgage, and the Note is transferred by the holders/members directly, thus separating the track of the documents. To complicate things, MERS assigned the mortgage from the original lender to the final holder of the Note, thereby bypassing all the other holders of the Note in the chain of title. This appeared to the court to be an invalid assignment, as the original lender had no interest in the note/mortgage at the time of the assignment. The court's findings state that MERS did not have the right to assign a mortgage absent a written instruction to do so from the principal.
The court held that in every further case involving MERS the moving party must show they validly hold the note and the mortgage in order to have standing before the court.
MERS could be in big trouble. It seems to me that every state's laws will include a provision that transfers of property MUST be in writing. It also seems like most state's laws recognize that a note and mortgage run together, however creative attorneys in both bankruptcy and foreclosure will now be attacking MERS for their admitted separation of the documents. I am also sure a lot of assignments will now be closely looked at by attorneys around the nation.
All I can say is that there could be rough times ahead for MERS who may hold a huge percentage of mortgages nationwide.
Wednesday, February 16, 2011
What about the attorney's requirements under their code of conduct?
In Oklahoma Professional Conduct Rule 3.3(a) requires the lawyer in dealing with a tribunal to (1) not make a knowingly false statement; (2) not fail to disclose a fact to avoid a criminal or fraudulent act of a client; and (3) not offer knowingly false evidence.
If an attorney presents a Note and Mortgage to the Court, and there is no endorsement on the document, and later the attorney CREATES an endorsement for his client and presents THAT to the Court, hasn't the attorney knowingly offered false evidence? After all, he did create the endorsement.
Can an attorney rely upon his client's statement about an endorsement in order to prepare one for the client?
This is an interesting problem for an attorney in today's climate - after all of the revelations about robo-signing and forgeries that have come to light. Today too many mortgage companies are attempting to foreclose on individuals when they can't even prove they have a legal interest in the entire process.
It is my opinion (for what it's worth) that no attorney should ever take his client's word at face value - especially when a little investigation would reveal the truth of the matter. Of course I'm open to listening to opposing opinions, so long as they are well reasoned and can be legally supported.
Talk to me.
If an attorney presents a Note and Mortgage to the Court, and there is no endorsement on the document, and later the attorney CREATES an endorsement for his client and presents THAT to the Court, hasn't the attorney knowingly offered false evidence? After all, he did create the endorsement.
Can an attorney rely upon his client's statement about an endorsement in order to prepare one for the client?
This is an interesting problem for an attorney in today's climate - after all of the revelations about robo-signing and forgeries that have come to light. Today too many mortgage companies are attempting to foreclose on individuals when they can't even prove they have a legal interest in the entire process.
It is my opinion (for what it's worth) that no attorney should ever take his client's word at face value - especially when a little investigation would reveal the truth of the matter. Of course I'm open to listening to opposing opinions, so long as they are well reasoned and can be legally supported.
Talk to me.
Sunday, February 13, 2011
Will the mess in Florida foreclosures (and other states) spread to a case near you?
In Florida, the state Attorney General's investigations have uncovered more than robo-signing. They have found people working at the law firms who represented the lenders forged documents.
Yup, that's right. In many cases, the pressure from the lenders to produce results led to secretaries signing for the attorneys. Not their own names, mind you. They signed the attorneys' names to documents to be filed in foreclosure cases. Further, the were found to have created assignments after foreclosures were filed.
Now this doesn't seem as big as forgery, however stop and think about what was done. The assignment created after the filing in court is the same as creating evidence to back up your allegations.
If the original Note is never reviewed by the law firm, and they create an assignment, the assignment may never get attached to the original. Further, upon review of the original, the assignment may be found to exist already, thus making the new one redundant (and obviously done to create evidence to support allegations). And the original may contain an assignment that is not on the one created by the firm.
The law firm may, at their client's direction, create a document that is wrong (putting a cloud on the title), or even create an assignment for a bankrupt and closed lender who was in the chain of title (forgery again, if there is no officer available from the defunct firm to sign the assignment).
In Florida and perhaps many other states lawyers careers are coming to an end. Permanently. One Florida firm that once had over 150 attorneys working there has been shut down permanently, the attorneys all under investigation.
I am pretty confident that if investigations were broadened, it would be discovered that lenders nationwide practiced the same as they did in Florida. And I am confident that the investigation would lead to many of the same practices being uncovered in bankruptcy court too.
So what are the odds of it happening where you are? I guess it depends upon the defense bar (bankruptcy as well as foreclosure defense), and how hard they push back, along with that state's Attorney General. In my book, Florida won't be the last state where attorneys loose careers.
So look for fraud investigations to be coming to a court near you.
Yup, that's right. In many cases, the pressure from the lenders to produce results led to secretaries signing for the attorneys. Not their own names, mind you. They signed the attorneys' names to documents to be filed in foreclosure cases. Further, the were found to have created assignments after foreclosures were filed.
Now this doesn't seem as big as forgery, however stop and think about what was done. The assignment created after the filing in court is the same as creating evidence to back up your allegations.
If the original Note is never reviewed by the law firm, and they create an assignment, the assignment may never get attached to the original. Further, upon review of the original, the assignment may be found to exist already, thus making the new one redundant (and obviously done to create evidence to support allegations). And the original may contain an assignment that is not on the one created by the firm.
The law firm may, at their client's direction, create a document that is wrong (putting a cloud on the title), or even create an assignment for a bankrupt and closed lender who was in the chain of title (forgery again, if there is no officer available from the defunct firm to sign the assignment).
In Florida and perhaps many other states lawyers careers are coming to an end. Permanently. One Florida firm that once had over 150 attorneys working there has been shut down permanently, the attorneys all under investigation.
I am pretty confident that if investigations were broadened, it would be discovered that lenders nationwide practiced the same as they did in Florida. And I am confident that the investigation would lead to many of the same practices being uncovered in bankruptcy court too.
So what are the odds of it happening where you are? I guess it depends upon the defense bar (bankruptcy as well as foreclosure defense), and how hard they push back, along with that state's Attorney General. In my book, Florida won't be the last state where attorneys loose careers.
So look for fraud investigations to be coming to a court near you.
Friday, February 11, 2011
Should Lenders Be Allowed to Robo Sign?
For those who don't know, robo signing is a recently uncovered practice in the mortgage servicing industry during foreclosures and bankruptcies.
Here's what happens: an employee of the company wishing to foreclose on a particular piece of real property is tasked with signing affidavits to be attached to documents to be submitted to various courts.
Here's the problem: the employee is given so many documents to sign it would take forever to review and verify the contents of each document.
And here is what robo signing is: the employee, under pressure to produce, just verifies that the correct party names are on the document (perhaps checks the amount due against a computer screen, or the name of the court, case no...other incidentals) and after spending a couple minutes with the document, signs it, puts it into a pile and goes on to the next document. And the next, and the next.
Of course the affidavit says that he has verified the contents thereof, and it is all true and correct, but don't worry about that. We got a lot done. Right?
Oh yes, one more thing. The affidavit has to have a notarized signature. So off the entire pile goes to have another person notarize them. Not in their presence as it says, perhaps not on the same day, or even in the same building (or even in the same state) but it gets notarized. [I believe sometimes the notarization comes first, but can't prove that right now.]
In any event, the mortgage companies, the servicing agents, the trustees for the securitized trusts all agree they should be allowed to robo sign, or at the very minimum, have the robo signed documents replaced with new ones that someone now verifies.
So the question is - should robo signing be allowed? After all, everyone from White House advisers to mortgage industry spokesmen say that it would HURT the housing industry to slow down foreclosures in this country. So what is the big deal if a person didn't verify every detail of each document they signed?
First and foremost, they lied to the court. And that is a huge big deal to me. If you are allowed to lie to the courts, the entire system breaks down.
Isn't that reason enough to make sure that those who are swearing to the court that they verified the issues contained in a document actually did so?
So I say TELL THE TRUTH. If you are going to swear to the court under penalty of perjury that you did in fact do something, be sure you did in fact do that thing first.
Is that so hard?
Here's what happens: an employee of the company wishing to foreclose on a particular piece of real property is tasked with signing affidavits to be attached to documents to be submitted to various courts.
Here's the problem: the employee is given so many documents to sign it would take forever to review and verify the contents of each document.
And here is what robo signing is: the employee, under pressure to produce, just verifies that the correct party names are on the document (perhaps checks the amount due against a computer screen, or the name of the court, case no...other incidentals) and after spending a couple minutes with the document, signs it, puts it into a pile and goes on to the next document. And the next, and the next.
Of course the affidavit says that he has verified the contents thereof, and it is all true and correct, but don't worry about that. We got a lot done. Right?
Oh yes, one more thing. The affidavit has to have a notarized signature. So off the entire pile goes to have another person notarize them. Not in their presence as it says, perhaps not on the same day, or even in the same building (or even in the same state) but it gets notarized. [I believe sometimes the notarization comes first, but can't prove that right now.]
In any event, the mortgage companies, the servicing agents, the trustees for the securitized trusts all agree they should be allowed to robo sign, or at the very minimum, have the robo signed documents replaced with new ones that someone now verifies.
So the question is - should robo signing be allowed? After all, everyone from White House advisers to mortgage industry spokesmen say that it would HURT the housing industry to slow down foreclosures in this country. So what is the big deal if a person didn't verify every detail of each document they signed?
First and foremost, they lied to the court. And that is a huge big deal to me. If you are allowed to lie to the courts, the entire system breaks down.
Isn't that reason enough to make sure that those who are swearing to the court that they verified the issues contained in a document actually did so?
So I say TELL THE TRUTH. If you are going to swear to the court under penalty of perjury that you did in fact do something, be sure you did in fact do that thing first.
Is that so hard?
Thursday, February 10, 2011
Where is the love[hate] for mortgage companies?
I am amazed at the lack of outrage at the alleged problems in the mortgage industry. Or am I just missing it?
It seems like the mortgage industry may be going to sail through and come out the other side of this storm with very little to show in the way of change. The foreclosure and bankruptcy procedures followed (allegedly) by the mortgage companies include forcing lawyers to speed through their filings with little or no time to review anything; insisting on such speed that many law firms are using paralegals or secretarial help to create documents; having people creating assignments to cover the requirements of courts months or years after the fact; creating assignments to back up their allegations in pleadings; creating assignments that don't ever get attached to the original mortgage; not even having the original mortgage and/or note; having employees sign affidavits at the rate of one ever 2 or 3 minutes - with no time to confirm the contents; having affidavits notarized at another time and/or location from when/where they are signed....and on and on.
You would think this would cause an outcry among the attorneys practicing in the fields affected if not among the general public, but there is no real outcry that I am aware of. Oh sure, there are some out there that are posting every news article on the subject on facebook, twitter and linkedin (myself included), but the responses are few and far between.
The government regulators are absent. They even suggest that slowing down foreclosures might be a bad thing. Of course this is the same government that has been giving these major mortgage companies lots of our tax money, but hey - they are impartial, right?
So am I just missing something? I'd sure like to hear from those of you that are being affected by these issues.
It seems like the mortgage industry may be going to sail through and come out the other side of this storm with very little to show in the way of change. The foreclosure and bankruptcy procedures followed (allegedly) by the mortgage companies include forcing lawyers to speed through their filings with little or no time to review anything; insisting on such speed that many law firms are using paralegals or secretarial help to create documents; having people creating assignments to cover the requirements of courts months or years after the fact; creating assignments to back up their allegations in pleadings; creating assignments that don't ever get attached to the original mortgage; not even having the original mortgage and/or note; having employees sign affidavits at the rate of one ever 2 or 3 minutes - with no time to confirm the contents; having affidavits notarized at another time and/or location from when/where they are signed....and on and on.
You would think this would cause an outcry among the attorneys practicing in the fields affected if not among the general public, but there is no real outcry that I am aware of. Oh sure, there are some out there that are posting every news article on the subject on facebook, twitter and linkedin (myself included), but the responses are few and far between.
The government regulators are absent. They even suggest that slowing down foreclosures might be a bad thing. Of course this is the same government that has been giving these major mortgage companies lots of our tax money, but hey - they are impartial, right?
So am I just missing something? I'd sure like to hear from those of you that are being affected by these issues.
Sitting and thinking
It is another cold day in Oklahoma (started out with a record cold below zero temperature), and there is still plenty of snow outside. This gives one lots of time to sit and think. And there is plenty to think about. Unemployment is still high, the housing market is still in crisis, and if our problems aren't enough there is Egypt to ponder.
All that I have learned, all that I have experienced, and all that I have read makes me think that the banking/mortgage/housing crisis hasn't even begun to resolve itself. The whole mess is like an ice berg. We saw the banks being bailed out as housing markets crashed, prices dropped. We watched the news as "robo-signing" came to light (another blog to come). And now there are those who say we may yet have a worse crisis than we believed.
All this because apparently someone somewhere had the bright idea that they could skip steps in the process of transferring mortgages from one service/lender/investor to another. And many of the companies who skipped steps are trying to sweep the whole thing under the rug. After all, it was so common in practice that everyone did it, then it must be okay, right?
I'm all about doing what is best for everyone involved when I'm practicing law, however ONLY when it is done above board and legally. You can't skip all the necessary steps and expect to be excused.
I'll have plenty to say about this in blogs to come. For now, like Pooh, I have to say, "sometimes I sits and thinks, and sometimes I just sits."
All that I have learned, all that I have experienced, and all that I have read makes me think that the banking/mortgage/housing crisis hasn't even begun to resolve itself. The whole mess is like an ice berg. We saw the banks being bailed out as housing markets crashed, prices dropped. We watched the news as "robo-signing" came to light (another blog to come). And now there are those who say we may yet have a worse crisis than we believed.
All this because apparently someone somewhere had the bright idea that they could skip steps in the process of transferring mortgages from one service/lender/investor to another. And many of the companies who skipped steps are trying to sweep the whole thing under the rug. After all, it was so common in practice that everyone did it, then it must be okay, right?
I'm all about doing what is best for everyone involved when I'm practicing law, however ONLY when it is done above board and legally. You can't skip all the necessary steps and expect to be excused.
I'll have plenty to say about this in blogs to come. For now, like Pooh, I have to say, "sometimes I sits and thinks, and sometimes I just sits."
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