Foreclosure Defense Training Conference

In Valparaiso, Indiana, the Valparaiso University School of Law recently announced their Defending Foreclosures, Saving Homes law conference to be held on March 28, 2008.

• Conference participants will learn about the latest developments in foreclosure and bankruptcy, loss mitigation and mortgage servicer practices. Attorneys interested in representing homeowners will learn the nuts and bolts of the Indiana foreclosure process, explore effective claims and defenses available to homeowners, and learn how to present workout and loan modification proposals to mortgage servicers. Housing counselors will learn more about judicial foreclosure in Indiana and options available to homeowners at each stage of the process. Architects of the Indiana Foreclosure Prevention Network will be on hand to explain the IFPN initiatives—including the recently established hotline and referral network.

Among the topics to be covered, according to the conference brochure, are:

• Defending Foreclosures in State Court: Defenses and Counterclaims,
• Defending Foreclosures in Chapter 13, and
• Attorney Fee Claims and Handling Foreclosure Cases as a Private Attorney, which may be of interest to those civic minded attorneys interested both in representing homeowners facing foreclosure and picking up a few bucks in legal fees in the process (probably payable by the foreclosing mortgage lender and/or mortgage servicer who either broke the rules or otherwise screwed up).

For more, including a link to the conference brochure and schedule, see Defending Foreclosures, Saving Homes.

More On The Screw-Ups In Producing Proper Paperwork When Filing Foreclosure Actions

In the February, 2008 Bloomberg News article (referenced earlier in this blog) on the problems foreclosing mortgage lenders are facing resulting from their inability to physically produce the actual promissory notes signed by the homeowners when they (the homeowners) originally borrowed the money, as well as other required paperwork, when initaiting foreclosure actions. Below are a few choice excerpts reflecting how big the problem may be:

• Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages.

***

• "I think it's going to become pretty hairy,'' said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. "Regulators appear to have ignored this, given the size and scope of the problem.''

***

• Each time the mortgages change hands, the sellers are required to sign over the mortgage notes to the buyers. In the rush to originate more loans during the U.S. mortgage boom, from 2003 to 2006, that assignment of ownership wasn't always properly completed, said Alan White, assistant professor at Valparaiso University School of Law in Valparaiso, Indiana. "Loans were mass produced and short cuts were taken,'' White said. "A lot of the paperwork is done in the name of the original lender and a lot of the original lenders aren't around anymore.'' More than 100 mortgage companies stopped making loans, closed or were sold last year, according to Bloomberg data.

***

• "All these loan documents are being sent to the inside of a mountain in the middle of America and not being checked very carefully,'' [real estate lawyer Stuart] Saft said. "The lenders can't find the paper. We're dealing with a lot of paper produced in a mortgage closing.''

***

• Judges are becoming increasingly impatient with plaintiffs who produce no more proof of ownership than a lost-note affidavit or a copy of the note, said Michael Doan, an attorney at Doan Law Firm LLP in Carlsbad, California.

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• U.S. District Judge David D. Dowd Jr. in Ohio's northern district chastised Deutsche Bank National Trust Co. and Argent Mortgage Securities Inc. in October for what he called their "cavalier approach'' and "take my word for it'' attitude toward proving ownership of the mortgage note in a foreclosure case.

***

• Federal District Judge Christopher Boyko dismissed 14 foreclosure cases in Cleveland in November due to the inability of the trustee and the servicer to prove ownership of the mortgages. Similar cases were dismissed during the past year by judges in California, Massachusetts, Kansas and New York.

• "Judges are human beings,'' said Kenneth M. Lapine, a partner at the Cleveland law firm Roetzel & Andress LPA. "They no doubt feel the little guy needs all the help he can get against the impersonal, out of town, mega-investment banking company.''

• U.S. Bankruptcy Judge Samuel L. Bufford in Los Angeles issued a notice last month warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. "This requirement will apply because developments in the secondary market for mortgages and other security interests cause the court to lack confidence that presenting a copy of a promissory note is sufficient to show that movant has a right to enforce the note or that it qualifies as a real party in interest,'' the notice said.

***

• "I can't believe the handling of notes is worse than it was five years ago,'' said Guy Cecala, publisher of Inside Mortgage Finance. "What we didn't have back then were armies of attorneys out there looking for loopholes. People are challenging foreclosures and courts are paying a lot more attention to foreclosures than they ever did before.''

For the article, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Lost Note Affidavits: Are Foreclosing Lenders Really Losing All These Homeowner Promissory Notes?

In a Bloomberg News article last month featuring Boca Raton, Florida resident Joe Lents, who reportedly hasn't made a payment on his $1.5 million mortgage since 2002 because the lender's inability to produce Mr. Lents' promissory note has precluded a foreclosure of Lents' home, the apparently common (and possibly illegal and/or unethical) practice by foreclosing lenders and their attorneys of submitting "lost note affidavits" in foreclosure actions as a substitute for a promissory note that can't be produced was raised in these excerpts:

• When the mortgage servicers and securitizing banks that act as trustees of the securities fail to present proof that they own a mortgage, they sometimes file what's called a lost-note affidavit, said April Charney, a lawyer at Jacksonville Area Legal Aid in Florida. Nobody knows how widespread the use of lost-note affidavits are, Charney said. She's had foreclosure proceedings for 300 clients dismissed or postponed in the past year, with about 80 percent of them involving lost-note affidavits, she said. "They raise the issue of whether the trusts own the loans at all,'' Charney said. "Lost-note affidavits are pattern and practice in the industry. They are not exceptions. They are the rule.''

***

• "If the homeowner doesn't object to the lost-note affidavit, the judge rubber-stamps it,'' Lents said. "Is it oversight, or are they trying to get around the law?''

***

• [Mortgage Electronic Registration Systems] rules don't allow [its] members to submit lost-note affidavits in place of mortgage notes, [MERS CEO R.K.] Arnold said. "A lot of companies say the note is lost when it's highly unlikely the note is lost,'' Arnold said. "Saying a note is lost when it's not really lost is wrong.''

• Lents's attorney, Jane Raskin of Raskin & Raskin in Miami, said she has no idea who owns Lents's mortgage note. "Something is wrong if you start from what I think is the reasonable assumption that these banks are not losing all of these notes,'' Raskin said. "As an officer of the court, I find it troubling that they've been going in and saying we lost the note, and because nobody is challenging it, the foreclosures are pushed through the system.''

For the story, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Editor's Note:

I have yet to find any published reports on class action lawsuits or administrative disciplinary actions by state bar associations being brought against mortgage companies' attorneys who are filing lost note affidavits in foreclosure actions as a matter of practice and without regard to whether the promissory note has actually been lost or not. If anyone comes across a story about such a class action or state bar association disciplinary action, please forward me the story or a link - HomeEquityTheft@yahoo.com.

Requiring The Proper Paperwork To Initiate Foreclosure "A Nuisance ... A Gigantic Waste Of Time," Says Attorney

Bloomberg News ran a story last month on the difficulties foreclosing mortgage companies are facing by their inability to produce the mandatory paperwork in court when initiating a foreclosure action. The following excerpt caught my eye:

• Requiring banks to produce the paperwork at a foreclosure hearing is a nuisance, said Jeffrey Naimon, a partner in the Washington office of Buckley Kolar LLP. "It's a gigantic waste of time,'' Naimon said. "The mortgage may have transferred five, six, eight times. It's possible that you don't have all the pieces of paper, but it was enough to convince the next guy in the chain. There's no true controversy over whether the owner owns the loan.''

What needs to be pointed out to anyone harboring this belief is that the promissory notes being used in connection with institutional home mortgages are generally considered to be what the law refers to as "negotiable instruments." When the debtor on the negotiable instrument (known as the "maker" of the note) pays the loan off in full, the debtor is entitled to physically receive his note back from the creditor (known as the "holder" of the note), and the note is to be marked "canceled" by the creditor (Note: Simply receiving a satisfaction of mortgage, while enough to clear the lien from the title to the home, is not enough to actually cancel the debt evidenced by the note).

The reason that the actual note is to be returned to the debtor/maker is because if it isn't, the note remains out in the stream of commerce and if someone else gets their hands on the actual note, that person will be able to come forward and present it for payment, leaving the debtor/maker in a position of possibly having to pay twice on the same note (and having to go back and sue the first guy that he paid for a return of the money that was paid to him).

The point here is that how any attorney handling foreclosures on behalf of mortgage lenders can possibly believe that physically presenting the actual note for payment when initiating a foreclosure action to enforce payment is "a nuisance ... a gigantic waste of time" is beyond belief.

I suspect that in attorney Naimon's case, above, he was either misquoted or had his words taken out of context. I say this only because any attorney handling foreclosures for lenders who actually asserts the position expressed in the above excerpt is either clueless, willfully ignorant, or being intentionally deceptive as to what the requirements of law are in a mortgage foreclosure action.

For the article, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.