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What the Foreclosure Fiasco Means for People in Foreclosure

posted by Nathalie Martin

It’s hard to keep up with all the foreclosure news or to make heads or tails of it, but two articles strike me as critical reading for foreclosure defense attorneys and people in foreclosure, the first quoting our own Adam Levitin, as well as one on the MERS debacle quoting both Adam and Professor Chris Petersen of the University of Utah. Both explain why robo-signing is not about formalities but real, substantive defenses to foreclosure. The latter article also explains why questions about MERS’ standing are not frivolous. There also is a fabulous series of PBS videos those in foreclosure might want to watch.

So what should a lawyer do in defending a foreclosure now that we know what we know? Do some basic chain-of-title interrogatories and other discovery, to start. Today I was chatting with my colleague Professor Jim Butler, who is supervising the UNM Business and Tax Clinic this semester.  Jim warns us to make our discovery requests narrow and to the point, so as not to run up lender attorney fees that borrowers could end up liable for.  He also mentioned a couple of baseline discovery requests that might help consumers. 

First, find out if the lender has a right to sue. Does it own this loan? Start by asking for copies of all assignments of the note and mortgage from the loan origination to today. Check out the whole chain. Consider asking for production of the original note and mortgage for inspection (but balance the potential benefit of finding out that the bank does not have them, with the detriment of alerting the bank to the missing originals months before trial). 

Then ask for a copy of any pooling or servicing agreement or trust agreement (if not available directly on the SEC Edgar site) to see what the servicer’s obligations are and whether they were fulfilled.  If not, then that defense can also be raised. Other tips anyone?

Comments

Once copies of the assignments are obtained, check all signatures for authenticity. An internet search may speed that process and, if not, Registries of Deeds accessible on-line may be. Miami-Dade County, FL and Massachusetts are fairly user friendly and actual docs can be viewed.

Compare notary signatures with original notary cards whenever possible as well. Check the time line to make sure that the assignment COULD have been notarized when it claims to have been.

If at ALL possible, obtain copies of any and all "en blanc" assignments for comparison to versions ultimately recorded.

Check backgrounds on all individuals and entities involved with assignments from doc preparers on down. Oftentimes, the assignment has been prepared and notarized by the same entity that purports to represent both the assignor and the assignee.

Check Secretary of State Corporate filings for evidence that the servicer, foreclosure mill, auction house, title company and any other other entities involved in the process are owned by the same entity.

"Consider asking for production of the original note..."

You are aware of course that could discharge the Note? That's basic -- see UCC 3-604(a)(i)

Try to follow the money in addition trying to track the assignments.

Ask for proof of payment by buyers and sellers of the notes and deeds of trust from the original closing on the loan to trust.

Check if the money flow matches the assignment flow or were short-cuts taken.

I get the same sinking feeling when I hear the administration say that they want to look forward with compliance, as opposed to investigating what has happened in the past, as I do when I hear perpetrators of domestic violence. To wit, "just because I knocked your teeth down your throat, it will never happen again, let's move on, tomorrow is a new day".

Regardless, while this will not unravel what has happened in the past, California requires all notaries obtain a fingerprint of a signatory unless the person signing a document is known to the notary. It's probably time to require everyone sign in a notary book and provide a fingerprint regardless of the relationship with the notary.

In addition, it is time to take a cue from medmal attorneys and haul in a few notaries, i.e, name them in lawsuits just as many medmal attorneys name nurses, etc. They will tell you anything you want to know just to be dropped from the suit.

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