Invalid Assignment defense

[justbroke]

I think that he other problem that most people, who challenge foreclosure, forget is that there is a mortgage recorded which evidences that the property was pledged. It is not the Promissory Note that is recorded, it is the security instrument (mortgage / deed of trust).

I liked how my Bankruptcy judge have put it in a case where the Trustee was trying to use this same line of argument (the line in this thread) to declare a mortgage null and void. Summarizing, the judge said that the fact that there is a recorded mortgage and no satisfaction of the same, then SOME entity is OWED money. Proof of who is entitled to collect that money is the only thing that the court needs to know. The Trustee lost the Motion to Sell Free and Clear.

[newhope2011]

I believe it's when the mortgage gets separated from the note, through bad or invalid assignments, is when standing is denied on a foreclosure. So it's more than the UCC to make this all happen, JMO

[justbroke]

You can't bifurcate a security instrument (mortgage) from the note (promissory note) by assigning the security instrument (mortgage). All courts have ruled that such an assignment is a nullity because the security follows the note!

A bifurcation happens when you can prove that the instrument was separated at the beginning of the transaction... giving the security to one party and the note (debt) to another party. That is not done by assignment (and is why the UCC is so complex). In other words, the only time it could have been separated is at the time that the debt was created.

The real argument in bifurcation cases is what it bifurcated when it was created. Assignment has nothing to do with that, since at the creation of the debt and the security, there is no assignment. Most of the arguments in MOST foreclosure cases is SOLELY around who has the right to foreclose. Not that no party can foreclose.

[davetedge]

From my armchair perspective on NY foreclosures, the courts are really making strong efforts to get a positive outcome for homeowners. The judges are willing to take on all of the issues that are being discussed, including the PSA. In almost all the decisions where they dismiss or deny the motions to foreclose, the homeowner is clearly making good faith efforts to keep the home by continually applying for modifications and even putting money in escrow.

At the risk of reading too much into these decisions, I get the sense that the judges are willing to go out on a limb to take on issues like robosigning, conflicts of interest, mysterious allonges, and even PSAs, but they won't take go there if the defendant doesn't seem serious about a modification and is throwing around whatever defense that could possibly get them a free house. The judges take bad faith and fraud on the court seriously and will slam the banks hard for wasting their time and effort and, in balance, they generally deny the defendants' cross motions to dismiss with prejudice.

Also, these cases take years to reach conclusion. A lot of the 2012 decisions are for 2009 and 2010 cases.

[HHM]

Davetedge, but really, what do the numbers look like, for every 1 case that makes it past an MSJ on these issues, how many get foreclosed? As aggressive as the NY judges "may" be, there are still FAR MORE successful foreclosures than there are defended foreclosure. And no one has yet to cite these alleged 8 cases of free houses.

[davetedge]

HHM, that's a really good question that no one seems to be publicly tracking. To your point, the chances are very slim, my best guess is a 2.5% success rate. So you're right that foreclosures, once past the MSJ, succeed the vast majority of the time.

If the bank files the MSJ, that means they've also filed an affidavit verifying the documents and are ready to proceed. It might sound like that affidavit is a no-brainer, but RJI foreclosure filings (Request for Judicial Intervention, a NY quirk basically asking the court to get involved) dropped from 46,000/year down to 16,000 the following year after the requirement. There was no correlated drop in serious delinquencies for homeowners.

The relevant numbers I've been able to get by skimming my notes are that in NY 1,600 homes were sold in foreclosure in the first half of 2012, meaning that either the homeowner didn't show up to defend or the bank won the right to foreclose after filing the MSJ. In NY, if the homeowner doesn't show up, the foreclosure skips the MSJ and moves straight to an Order of Reference to sell the property.

In the same time period, NYSC judges ruled in favor of the defendant in only 20 cases that I've found (mostly dismissed without prejudice). So I can't figure a percentage since I don't know how many of the foreclosure sales involved a trial versus how many went straight to the sale, but it's between a 1% and 5% success rate at getting a motion dismissed. I chose 2.5% assuming half of them go to trial. The free house scenario drops to between .05% to .5%.

Like I said earlier, the real interesting problem are those foreclosures that are stalled and the bank isn't moving them forward, the so-called "shadow docket." Those number also aren't clear but they're probably well north of 100,000 in NY. It may be a paperwork problem, but it's one heckuva paperwork problem. And they don't seem to be negotiating with banks like they are in Florida. The NY courts and legislature are working on a "come to Jesus" order where the bank either has to proceed or withdraw the case within a certain time frame.

[davetedge]

And the most recent "dismissed with prejudice" case was "US Bank v Wayne Ramjit" (17027/08 Kings County, Judge Schack) in December 2011 (http://bit.ly/SAD7yt). It looks like an appeal was filed but hasn't been heard.

Judge Schack threatened to dismiss the case with prejudice if the bank's counsel asked for yet another delay to verify the documents. They asked, and he made good on his threat. The dismissal was not based on the facts of the case as much as the behavior of the bank's lawyers.

[newhope2011]

Self dealing is not exactly the issue. Notes are assignable and there is nothing inherently wrong with simultaneous assignment so long as there is proper endorsement.

Here is the rub, at the end of the day, presumably, you stopped paying the mortgage and are in default, sooner or later, a court is going to allow someone to foreclose.

Re reading your response, so an assignment in your thinking doesn't have to be even valid?To give standing? If you read my question, it states that the consecutive assignments were from two different entities, Mers and One West, yet signed by the same person as VP. That passes the smell test for you? For me, it's clearly not kosher.

[davetedge]

newhope, if you slog through the "US Bank v Wayne Ramjit" case, Judge Schack has a small rant about the "conflicted robosigner Kim Stewart."

It's important to note that the case was not dismissed on that basis. Rather, he seems a little upset that he wasn't able to rule on that issue since the bank's lawyers were stonewalling.

[HHM]

Re reading your response, so an assignment in your thinking doesn't have to be even valid?To give standing? If you read my question, it states that the consecutive assignments were from two different entities, Mers and One West, yet signed by the same person as VP. That passes the smell test for you? For me, it's clearly not kosher.

It is not great, but who is actually harmed by it. In principal, there is nothing wrong with the same person being an agent of 2 different entities. A bank (like Wells Fargo) is an agent of every depositor who has an account there. The issue is not simply, that the same person is an agent of different entities. Then you go to the next step, is there any conflict of interest? Well, is there? Is there really any conflict if the same person signs for both MERS and Option One? Not really. It is "possible", but is there really any conflict if Kim assigns from Mers to Option One, and then again from Option One to Trust XYZ. She is merely an agent of different entities. Finally, even if there is a conflict, the principals (the companies) can ratify it by not objecting. That agency relationship is between the Agent and the Principal, between Kim and Mers, and between Option One and Kim. But if both MERS and Option One don't object, then they are ratifying (agreeing with) the conduct, which they can do. In all of this, how is the homeowner even an issue or have any interest in the matter. I think the "same person" 2 assignments issue is a red herring.

Let's say I hire you to take my car, fill it with gas and then go to the post office. That is all I instructed you to do. (fill the tank and go to post office and mail some letters). While gassing the car, you notice that it is very dirty, so YOU decide to get it washed, you complete your other errand and return. You tell me that you got my car washed and ask for additional money to cover the cost. Strictly speaking, I could say no because you exceeded the scope of your authority, you were given specific instructions and you did something that was not instructed. However, being practical I say, you are right, the car was dirty, here is the money. Thank you. I have "ratified" the wrong you committed. So even though I could have denied you the payment, I approved it after the fact.

[newhope2011]

It is not great, but who is actually harmed by it. In principal, there is nothing wrong with the same person being an agent of 2 different entities. A bank (like Wells Fargo) is an agent of every depositor who has an account there. The issue is not simply, that the same person is an agent of different entities. Then you go to the next step, is there any conflict of interest? Well, is there? Is there really any conflict if the same person signs for both MERS and Option One? Not really. It is "possible", but is there really any conflict if Kim assigns from Mers to Option One, and then again from Option One to Trust XYZ. She is merely an agent of different entities. Finally, even if there is a conflict, the principals (the companies) can ratify it by not objecting. That agency relationship is between the Agent and the Principal, between Kim and Mers, and between Option One and Kim. But if both MERS and Option One don't object, then they are ratifying (agreeing with) the conduct, which they can do. In all of this, how is the homeowner even an issue or have any interest in the matter. I think the "same person" 2 assignments issue is a red herring.

Let's say I hire you to take my car, fill it with gas and then go to the post office. That is all I instructed you to do. (fill the tank and go to post office and mail some letters). While gassing the car, you notice that it is very dirty, so YOU decide to get it washed, you complete your other errand and return. You tell me that you got my car washed and ask for additional money to cover the cost. Strictly speaking, I could say no because you exceeded the scope of your authority, you were given specific instructions and you did something that was not instructed. However, being practical I say, you are right, the car was dirty, here is the money. Thank you. I have "ratified" the wrong you committed. So even though I could have denied you the payment, I approved it after the fact.

I think it's best if we just agree to disagree. Your answer above for sure wouldn't fly on Wall ST, and in many cases including a major assignment issue in the state of MASS. with robosigned docs, wouldn't fly in court. But, they passed Obamacare, so what do I know!! I've enjoyed the debate!

[newhope2011]

And the most recent "dismissed with prejudice" case was "US Bank v Wayne Ramjit" (17027/08 Kings County, Judge Schack) in December 2011 (http://bit.ly/SAD7yt). It looks like an appeal was filed but hasn't been heard.

Judge Schack threatened to dismiss the case with prejudice if the bank's counsel asked for yet another delay to verify the documents. They asked, and he made good on his threat. The dismissal was not based on the facts of the case as much as the behavior of the bank's lawyers.

This is exactly it. It is clear to me, that the conflicted robosigner had acted for two companies, and the Judge needed to be informed as to what took place. My case is even more incredible than that, but only time will tell.

[HHM]

I think it's best if we just agree to disagree. Your answer above for sure wouldn't fly on Wall ST, and in many cases including a major assignment issue in the state of MASS. with robosigned docs, wouldn't fly in court. But, they passed Obamacare, so what do I know!! I've enjoyed the debate!

Most courts aren't having a problem with this. The issue for most judges is not the underlying assignments, it is that they are not disclosed properly to the court. That issue is really more between the attorneys and the judge than it is any underlying problem.
Not sure about the Wall Street comment, after all, THAT IS WHAT THEY DID. The issue with robo-signing is that you have people signing documents in which they don't know the contents and don't know what they are attesting too. Not that the a single person signed a bunch of documents.

What I am trying to help you do, (whether you think so or not) is to drill down your focus and separate out the issues. A few years ago, the debate and some attorneys argued that securitization was illegal...well, its not, and every court agrees. And there are substantial economic benefits to securitization. You have to be careful on what exactly it is you are attacking and ask some of the fundamental questions about who really has standing to raise what issue and who is harmed. And a "handful" of cases from judges that a grinding their axes more at the system than the underlying law, is not really going to change the over all system. And even though you are focused on NY and there have been some bright lights in NY on these issues, the reality is, most courts around the nation are cutting through this issue because as JB pointed out in the earlier thread, the issue of who gets paid from a foreclosure is between the various parties to the Mortgage/Note, that issue doesn't effect the right TO foreclose on the property.

As for debate, not sure there has been much of a debate...neither you nor davetedge have said much of anything to support your positions, answer questions put to you. All you have said is that you disagree.

[newhope2011]

I think that he other problem that most people, who challenge foreclosure, forget is that there is a mortgage recorded which evidences that the property was pledged. It is not the Promissory Note that is recorded, it is the security instrument (mortgage / deed of trust).

I liked how my Bankruptcy judge have put it in a case where the Trustee was trying to use this same line of argument (the line in this thread) to declare a mortgage null and void. Summarizing, the judge said that the fact that there is a recorded mortgage and no satisfaction of the same, then SOME entity is OWED money. Proof of who is entitled to collect that money is the only thing that the court needs to know. The Trustee lost the Motion to Sell Free and Clear.

Exactly. This is the debate. Thanks JB and HHM

[justbroke]

Exactly. This is the debate. Thanks JB and HHM

But in the foreclosure context, given what I wrote, the court doesn't care who gets paid. They really only care about who has standing to commence a foreclosure lawsuit. The original (endorsed) promissory note is proof enough in every case that I know of.

Where I have seen problems, at least in Florida, is with the Lost Note Affidavit where they try to re-establish the Note. The fact is that they need to prove that they lost it once they actually had possession of it! If it was lost before they got it, then it's easier to challenge them, since they literally cannot produce the note. However, I think, at least for Florida, that the creditors affidavit that they lost the note while they were in possession of it, is prima facie evidence and enough to re-establish the Note... even though it's missing!

Really complex. What I was saying by what you highlighted above, that the court wants to know who is entitled to collect, in that it is always a question of standing. The court really doesn't care "who" gets paid. They (should) care about who is entitled to enforce the provisions in the security instrument -- the mortgage.

I look forward to hearing more about your case. I also wish someone could cite the 8 (New York) cases that were mentioned in passing.

(Edited to add) Think of the "did you pay" question. If a mortgagor can answer "yes" and to ABC Bank and prove that... yet XYZ Bank is foreclosing, then you have a real issue of standing and who is entitled to collect on the Note! (This has actually happened before but is extremely rare.) Even better, you answer "no" to that question, but there are TWO foreclosure lawsuits filed! Each by different entities claiming that they are the owner AND holder of the note. Technically impossible for them both to hold it... but there was some "warehouse" fraud a while back (if you read my prior posting on how the actual documents are warehoused).