The Real Assault on the Legal System

Nick Timiraos has a great piece in the WSJ about the state of play on foreclosure defense litigation. It quotes Larry Platt, a bank-industry lawyer at K&L Gates (which lost Ibanez). It's worth pausing for a second to consider what Platt said.  Although Platt

concedes that banks may have been sloppy... [he claims that]... "the real assault on the legal system" are efforts by judges and local officials to strip lenders of their rightful ownership and make foreclosures impossible.

Platt's view, it seems, is that everyone understood the mortgage deal and that the paperwork doesn't really matter. That's a very problematic view for any attorney to take, much less one with a background in real estate, secured lending, and securitization. (A less charitable interpretation of Platt's comments is that the proper outcomes has nothing to do with law.  Instead, it's paperwork and intent be damned, we're the banks so we should win by right.)

One of the things any first year law student learns is that real estate is different. Different contract remedies apply, there are different formalities required by law for real estate contracts to be effective (the lineage of this principle goes back to the 1677 Statute of Frauds) as between the parties to the contract, and a separate recording system to make realty contracts good against third parties. While the law has dispensed with formalities in many other areas, that just isn't the case with real estate, not least because of the recognition (ala De Soto) that clear title to real property is so fundamental to economic activity. 

Anyone with a background in secured lending also knows that paperwork matters. Misspell the name of the debtor so that it doesn't show up in a UCC search, and you're unperfected. Check the box for a termination, rather than a continuation of a security interest (ala BoA with Heller Ehrman), and you're unperfected sol. Dotting "i"s and crossing "t"s matters.  

To raise the "it's just paperwork" argument in the context of securitization, however, is unreal. Securitization is all about legal fictions and paperwork. Why on earth would anyone every bother with the complex legal structures of securitization (typically involving two shell entities) other than to take advantage of legal fictions?

As I've noted in other venues, securitization is the legal apotheosis of form over substance, and the basis on which this is legally tolerated is the punctilious observance of formalities. Failure to do so can result in a securitization failing to be bankruptcy remote or to lose its off-balance sheet accounting status or lose its pass-thru tax status, any of which are disasterous. Securitization deals were so heavily lawyered precisely because the paperwork matters. They aren't like a sale of a used sofa over Craigslist. 

The "it's just paperwork" argument quickly proves too much. Is the borrower's signature on the loan "just paperwork"? How about a co-signor's? If it's just paperwork, why bother to have the borrower or co-signor sign, especially as it can create federal Equal Credit Opportunity Act issues when a spouse is involved. 

This is not to say that a lender whose paperwork is fubar is sol.  The lender can always petition the court for an equitable mortgage. But I sure wouldn't want to be in that position, especially if there was anything fishy about the circumstances of the loan (unclean hands and all that). 

Bottom line is that to claim that the courts following legal rules that have been firmly established for centuries is the "real assault on the legal system" is simply preposterous. The only thing it is an assault on is the sense of seigneurial right exuded by parts of the financial sector. (The kid gloves approach thus far of DOJ and the SEC vis-a-vis the financial services sector in terms of the financial crisis only enhances this sense of entitlement. Compare the Manhattan DA's treatment of Dominique Strauss-Kahn with the federal non-treatment of the individuals responsible for the financial crsis. The French are apparently shocked that a member of their ruling elite would be subjected to a common criminal prosecution. Apparently when it comes to the US financial system, the same rules apply--charges simply aren't brought against the seigneurial elite.) The gall of those homeowners to challenge the system. It's a regular Jacquerie. 

But maybe a white knight will ride to the aide of the banks. There's a plan B in the works to "clarify" the state of law. I'm not sure it will help a whit with backdated assignments, etc., but the bank lawyers seem to think that it will make life easier for them. More on this in a future blog. 

Comments

[John]

I am not a defender of the Banks--MERS was beyond stupid, for example---but Platt is correct: the real assault on the legal system are efforts by judges and local officials to strip lenders of their rightful ownership and make foreclosures impossible.

Never have I seen so much bad law. For example, the S/F, has nothing to do with the rights of the lender against the borrower---the borrower has signed.

The cases, including Ibanez, wholly disregard the fact that thirds parties cannot assert rights under contracts to which they are not parties and which are not intended for their benefit. Further, by course of conduct parties to contracts can waive, abandon or modify their contract, or its terms and may do things like appointing the seller as agent of the buyer.

For courts to rule, for example, that securitizations were not completed without having the holders as parties was a denial of due process.

[Richarfd Davet]

It is the GSE Business Model that is "fatally flawed" for a million reasons if you can get past the first reason "goverment guarantee".

What is so difficult to understand about fatal.....it simply does not work. The courts are forced to make sense out of nonsense. Sheer folly.

Judge Long's lament in Ibanez, the loss of the foreclosure tool good for 150 years in real property law. "How can we sell these house with clouds on the title?".

[Knute Rife]

No, Platt is spinning. Yes, the debtors owe somebody, but for too long, and still in the overwhelming majority of cases, creditors have received a free pass creditors have been given a free pass on proving their contracts and standing. This is even more the case in regular collection cases than it is in the mortgage area. Collection attorneys spend a great deal of time complaining about the pointlessness of sending out reams of credit card statements in response to "prove the debt" letters, and they're right about that. But that's a red herring. What they aren't sending are the documents that actually allow them to be in court, namely the credit agreement, any modifications, and the assignment to collection (The attorneys complain that it takes too much time to round these up, but if they're going to court without them, I don't see how they're complying with Rule 11. But I digress.). And the problem, the assault on the system, is that the judges let the creditors get away with it, entering judgments without evidence, because it clears their dockets. Given that those judgments quickly turn into supplemental proceedings, garnishments to poverty level, and bench warrants creating a new debtors' prison system, it's easy to see why debtors don't treat this sausage machine with much respect. If judges don't care about the rule of law, why should they?

[Russ]

I have no love for the Too Big Too Fail Banks even though my profession is mortgage origination. However, this foreclosure debacle is not good and in the long run is just going to make it more expensive and difficult for the vast majority of people to get home financing.

Yes, the banks did not follow proper procedures in assignments, recording, etc. NO ONE is denying corners were cut. However, much of that was driven by the desire to lower costs and streamline the process of getting financing to consumers. I don't think there was any malicious intent. At the end of the day, people are either paying their mortgage as agreed or they are not.

Nevertheless, the end result of this legal gotcha is solely motivated to keep people in homes they clearly can no longer afford will do nothing get us out of economic malaise the housing market is facing and will absolutely cost each and every home owner going forward thousands of dollars in hidden costs associated with ensuring that all legal loopholes, compliance, and other non-productive uses of time are paid for.

Yes, your Honor, I know I haven't made a mortgage payment in one year, but the bank didn't date line X of paragraph Y on page 400 of the tranche Z of securitization pool known as Abacus. Therefore, I should get my house free and clear.

Real estate closings are already a case study in fusterclucks due to the over regulation, legalese, CYA, etc. Anyone who has bought a house or refinanced knows how jacked up the system is. It will only get worse because every time there is a lawsuit over some technicality, it only adds to the mounds of paperwork designed SOLELY FOR CYA of the banks that consumers don't read nor understand.

[Oscar]

Would be interested to hear your thoughts on the "it's just paperwork" argument with regard to the following decision

http://www.paeb.uscourts.gov/pages/pubopins/pdf/Alcide_Bk10_15489_Mem_%20Order_%2052711.pdf

[Adam Levitin]

Russ: Three points in response.

1. I don't think there was malicious intent, either, but there was cavalier negligence that has hurt people and society. It's fine to streamline the process and add efficiencies, but those have to be done within the law. In some cases, those cutting corners were very aware that it wasn't legal, but they didn't care.

2. Yes mortgages will cost more going forward. But that's going to be the case regardless. I'm all for making the process more efficient, but efficiency and low cost isn't a justification for doing whatever one wants.

3. I gotcha game is more complex than you represent. For individual homeowners, it's about trying to keep their house. There are undoubtedly some opportunists around, but for many homeowners, the paperwork defense is what they have to resort to because they can't get a reasonable modification offer. If we want to get the economy moving again, we need to get the housing market stabilized and it won't until the foreclosure situation stabilizes. There are only two ways that will happen--mods or time.

[AMC]

"However, much of that was driven by the desire to lower costs and streamline the process of getting financing to consumers."

Really?

That's what was going on with the investment banks packaging mortgage back securities? Shelling out warehouse lines of credit to 'mortgage brokers' (titled without portfolio) who didn't care if people could pay because they wouldn't have any skin in the game once the mortgage was mooshed into a tranche, sliced, diced and sold?

That was what caused the housing bubble, the derivatives freeze up that brought our economic system to the brink of collapse, and the foreclosure crisis - a sincere desire to help the consumer?

Who knew?

And here I thought the investment banks and the other MBSers did it all for the obscene profits they made while leaving others holding the bag and the country a smoking economic wreck.

Thanks for setting me straight.

[Russ]

Adam:

I don't disagree that the rule of law is important.

My point is just that no one has demonstrated that there are significant numbers of homeowners losing their homes unjustly. By unjustly, I mean the bank is taking their home even though they were paying their mortgage on time. I am sure someone can find some one off case given the millions upon millions of mortgages, but there is no epidemic of people being foreclosed on without reason.

The epidemic is that it has been discovered that banks have skirted the PROCESS of foreclosure which has nothing to do with whether the home owner should be foreclosed on. Even if banks are found guilty, the homeowner still needs to lose their house. One does not cancel out the other.

So again, we are using legalese to try to keep homeowners who under no circumstances can afford to pay their mortgages in homes they cannot afford. You may consider it a "defense" but I see it as gaming the system. It is no different than trying to get a murderer caught on video tape in the act and in front of a dozen witnesses out of jail because some rookie cop didn't follow a procedure. The cops actions shouldn't negate the murder.

The end result for the 95% of the population who can and do pay their mortgages as agreed, is that it is now going to be substantially more expensive than it needs to be.

[John S]

I am struck by the silliness and lack of depth of the "they want a free house" narrative.

I hear it here on this forum, I have heard it from RE agents who decry the "stupid" homeowner who overspent, over leveraged (RE agents of course were silent in the boom years making 3% on these transactions), I hear it from pundits, republicans, democrats. In Oregon, we just narrowly defeated an amendment that would have wiped away the current law (which existed when the banks went about securitizing mortgages) with this language:

"An instrument that a beneficiary executes is prima facie evidence in any court that the beneficiary has authorization to execute the instrument from the person that owns or holds the debt or other obligation that the trust deed secures, but the instrument is conclusive in favor of a purchaser for value in good faith that relies on the instrument.”

In essence, they walk into court with ANYTHING and it must, by law, be acknowledged as fact.

It's not about a free house. It is about the law. Either we are a nation of laws, laws that protect private property, including the chain of title for land property - or we are not. It is really that simple.

If the banks, in an effort to make loans more affordable for the common man, skirted the laws - this is bad.

If the banks, in an effort to make billions of dollars in transaction fees, CDO's, CDS's, MBS's, and a host of other TLA's, skirted the laws - this is bad.

They are equally bad. Neither motivation or intent changes the fact that they broke the law. They broke it when they failed to properly manage the note under the UCC (see ASF's white paper, they are exceptionally clear that possession and assignment/endorsement make for good transfer - which conversely means lack of possession and failure to assign/endorse make for a bad transfer). They broke REMIC laws when they failed to transfer notes as per the PSA. They broke laws (in some states) when the proceeded with foreclosures that were not in compliance with the state law (like Oregon, who simply asks that every intervening assignment be recorded - NOT as they happen - but once, at the time for foreclosure - and how hard is that!?). And they broke the law when they brought fraudulent documents to courts (robo-signing).

So, they are too big to fail? That means that instead of holding them accountable, we will do a 50 state AG driven "mulligan" agreement? After all, the only real issue is that dead beats want a free house, right?

Now I ask you this - is this not a slippery slope? If we allow the "too big to fail" enterprise to overtly break the law, make billions MORE than they would have because they did, and then get a pass - what exactly do we expect from business and government moving forward? What rights are your elected officials (who get loan modifications like in AZ or who take campaign money from banks) - what rights of yours will they give away because some entity is "too big to fail".

Wake up folks. This is not about over leveraged borrowers who want free houses. It's about rights that all of us should hold dear, and our relentless path to a banana republic.

[Alfreda Weiss]

Russ, you are ignoring the 29% of Americans, like my son, who are paying their mortgages even though their home is now 50% underwater. His salary, due to our horrible housing market, is also reduced.
I sold real estate 35 years and if I had, for example, used credit ratings that were obviously false or put borrowers in loans that were obviously too high for their income or fraudulent, I would be in jail today. All loans processed in my deals were complete with title insurance and recorded in our assessors' records. Slow, costly, but conforming with California laws.
I say there was enough arrogance, ignorance and greed to be prosecuted. Now the poor homeowners are left to fend for themselves. What are the courts to do? Sometimes they toss out the case in frustration.
It is not true that 95% of homeowners escaped this crime spree.

[John S]

AMC - to be clear, my argument is not that anyone gets a pass.

If a person stops paying their mortgage, no paper work mess is going to stop the foreclosure. It doesn't work that way. Banks, note holders can correct all paper work errors.

The issue is the cost to the banks. If a bank fails to keep possession and proper assignments of a wet ink note, UCC provides a path to fix that (i.e. within the law). It simply costs money.

If the bank fails to properly assign notes to MBS's, they can fix that too. That can call the note "not transferred" and pay the costs to properly credit all past payments to the correct note holder, they can pay the MBS the value of the note (essentially a do-over). They may also subject to MBS to taxation if it is determined that they violated REMIC rules. But they can legally fix it, it is simply expensive.

In states where they did not follow the law on a foreclosure (I don't mean wrongfully foreclosed, I mean didn't follow proper procedure), they can legally fix that too. The law will allow the whole process to be fixed, it simply will cost money (could be payments to the new owners, could be payments to the foreclosed party, could be fixes above).

Banks can even fix the fraud they have knowingly or unknowingly committed upon the court system. They can take the fines, punish the employees, sever contracts (like with Doc-X). While potentially expensive, the law allows for banks to fix the fraud.

Almost no home is foreclosure proof, despite the wishful thinking of the internet bloggers (I say almost simply because there could be some exception out there). All the banks have to do to foreclose is "do the work" to make it legal.

BTW - the law also allows for a homeowner to stop paying their mortgage. There is a consequence, but it is understood by law.

So the question then is this - should banks have to pay the costs to fix their mistakes?

And, as a business discussion - shouldn't we assess the costs of fixing it all (real costs as in the banks do not get a mulligan) against the cost to simply write down principal balances on underwater mortgages? If the bank came to me (I am 170% LTV) and said - we will trade you a principal reduction for new paper that fixes the past errors - I'd jump on it. And so would most homeowners.

[mt]

I agree with John S's perspective. This is about the rule of law, fundamentally, and everything else has to be subordinated to that. The laws have to be complied with, whether you are borrower or lender. The social engineering perspective -- "society would be better off if we didn't" -- is not a sufficient justification or excuse for trampling people's pre-ordained rights in any context and certainly not when you are throwing people out of their homes. When you make a loan contract, there are certain rules and rights; some benefit the lender and some the borrower. If the borrower fully enforces its rights, and puts the opposing party to its proof, the lender has no basis to complain. And any rational lender should expect that that is a plausible risk when it seeks to throw someone out of a home. I've always supported strategic defaults, and bankruptcy filings to cleanse the homeowner of the lingering debt, because those are options available to the borrower and the start of the transaction and every lender should know that. I wish more citizens would avail themselves of that remedy. Also because of the primacy I accord the rule of law, I've always opposed mortgage cramdowns, fwiw. If this all means it takes time for the market to restabilize, that is the price of a civilized society that governs itself by the rule of law.

[Virginia]

It galls me to hear the pompous attitudes that assert "keeping people in homes they can't afford." If you'd do some research you'd find that these "people" - which are American families, were making payments and keeping their credit scores intact and more closely guarded than the average individual...because they were told not to worry when the teaser rate detonated, if they kept their credit intact they could refinance. For 2, 3, 5 years - payments were made on time and almost manic to maintain credit.

To say "they can't afford" the home in this market is absurd. The banks are buying back the foreclosures at less than half (in many cases) of the original loan value and that's because they inflated the appraisals in the first place. If you want to stabilize and maintain the market it doesn't take a rocket scientist to realize that you strip the home to today's current and reconstruct the mortgage with the homeowner at 2% for 30 years in lieu of litigation. I'm willing to bet 95% of homeowners can make those payments, and taxes, HOA fees and insurance that are not being paid now - and that's a lot better revenue than empty REOs.

Real estate is more valuable resided in than empty. The tulip bubble is here folks - it's time to call a halt to the foreclosure madness and stabilize the economy. Stop dissing the borrowers, realize the banks have $140 trillion+ worth of debt that is not fueled by the foreclosure debacle - just disguised.

[Jason Anderson]

I disagree with Mr. Platt. With the exception of one or two outliers, most judges are pretty clear that they are not giving a debtor a free house.

Real property is supposed to be harder to seize than personal property. Most state laws intend that a secured lender jump through several hoops before these take ownership of the property. These requirements are not new. The bank's sloppiness has effectively allowed debtors and their attorneys to delay foreclosures by requiring banks to start over and jump through those hoops.

The real world effect of these delays has been a hidden stimulus from the banks to delinquent homeowners. Every month a homeowner remains in the home without paying a mortgage they are dumping that additional money into the economy.

A real modification program would be better than this "extend and delay" program, but until/if that ever happens, it is entirely proper for attorneys to keep taking the banks to task when they fail to comply with state law.

Occasionally we can still force the banks to work with a homeowner. Just a couple months ago a bank entered into a final modification with a client. It took four bankruptcies, three rounds of modification negotiations and a lawsuit to get there, but we got there.

[Tom Cox]

Responding to Adam's comment at 10:36 AM today.

Adam, your comment "I don't think that there was malicious intent, either, but there was cavalier negligence . . ." could only come from someone who is not in the trenches working these cases every single day. To an absolute certainty, the servicer's misconduct is intentional. GMAC got caught in Florida in 2006 for doing exactly what I exposed for Stephan's conduct in 2011. The GMAC affiant who was caught in Florida in 2006 was promoted in GMAC to be Stephan's boss by 2009. GMAC intentionally decided for economic reasons to be dishonest in its affidavit signing practices for the purpose of making more money at less expense. That is not negligence.

Similarly, JPMorgan Chase and the other servicers who wrongfully foreclosed on military personal had to have intentionally lied in affidavit statements under the Servicemembers Civil Relief Act. That was a knowing choice that they made---to have their employees make the sworn statements that the homeowners were not on military duty without having any knowledge of the truth of those statements. Not negligence--but intentional fraud upon the courts and the homeowners.

In the criminal system our society has made the decision that we would prefer to have a few guilty people escape conviction in order to preserve constitutional due process rights. The comments here talk about how most homeowners are in default. Why do I not see here acceptance of our rule of law--that a homeowner has a right in a civil case to require that the plaintiff prove its claim by competent and admissible evidence. Why do I not see in the comments here a recognition that it is only by the preservation of this right, that indeed does result an a few windfalls for a few homeowners, that we can minimize wrongful foreclosures against homeowners who are truly not in default---and indeed there are some.

It astonishes me that so few in the legal profession assert outrage about how our legal system has been abused by the servicers, and it astonishes me that virtually no members of our legal profession are being sanctioned or rebuked for their complicity in this scandal.

[Transor Z]

Tom Cox, here's something that might do your heart good:

http://www.scribd.com/doc/52226585/Florida-Judge-Sanctions-Bank-for-Noncompliance-by-Canceling-Mortgage

[dudeman]

i don't see a reason to get worked up or take what this guy has to say particularly seriously. this is just advocacy 101. if the merits of a specific case are on your side but your paperwork is eff'd, then of course you make the moral argument. and, when the circumstances are flipped, you then make the opposite case.

it has been my (unfortunate) experience that righteous folks who are also meticulous with their documentation don't really have much use for lawyers or courts. in my law school PR class years ago, a student remarked that she could not bring herself to represent a person accused of murder. the teacher, a federal judge, looked at her for a second and said "angels don't need lawyers, you know." the implication, of course, is that a lawyer who will only represent righteous clients will starve; sometimes we all have to say crap like this. it comes with the job and, as such, literally anything that an involved lawyer has to say to the media is circumspect and should be discounted appropriately.

[Mike Dillon]

I believe that Russ and I have butted heads in the past so I'm going to leave things at an agreement to disagree with him.

Professor, I think that this may be the first time that one of your statements has truly disappointed and at least somewhat shocked me. How you can say that there was/is "no malicious intent" in servicer actions is, to be frank, rather astounding especially after having seen/heard your various testimony over the years.

I've been watching this debacle from the "inside", if you will, for a decade now. I've been attempting to bring attention to the various acts of Mortgage Servicing Fraud for at least six years. In that time, I've watched USA/Curry v. Fairbanks, FTC v. EMC/Bear and FTC v. C-Wide/BACHLS settle out for literally pennies on the dollar.

I've also watched, read, and heard of literally thousands of cases involving virtually identical acts of Mortgage Servicing Fraud. And I've probably spoken to several thousand MSF victims at this point.

An explanation of "cavalier negligence" could be an acceptable explanation for servicers' actions IF - and ONLY if - it was an occasional act and/or one committed by only a "rogue" servicer. When you get to a level of malfeasance such that if affects national housing markets and the global economy it becomes INDUSTRY PATTERN AND PRACTICE.

When you repeatedly started seeing the top 10 or 15 servicers involved in virtually identical litigation across the country, beginning circa 2002, someone really needed to throw a big red flag on the industry and call a 30 yard penalty and forfeiture of the ball. That flag was SUPPOSEDLY USA/Curry v. Fairbanks. But nothing ever came of it. It was NEVER enforced and, actually, was re-negotiated with the FTC to the benefit of Fairbanks/SPS in 2007 thanks, in part, to the efforts of, among others, Ms. Debra Valentine, former general counsel to the FTC, then of O'Melveny and Myers, beginning in 2005.

Mortgage Servicing Fraud, robo-signing, the "re-creation of original documents", kickbacks for things like force placed insurance and "quick collect" wire payments have been going on since at least 1999 and most likely much, much earlier than that. The servicer "loss mitigation conferences" and foreclosure mill "getaways" that take place several times a year are perfect opportunities for industry participants to share what's working for them and what isn't. The open and apparently willing participation of regulatory entities, such as the FTC, in these events has always disturbed me, btw.

Iowa AG Tom Miller is, and has been, fully aware of Mortgage Servicing Fraud because his office was receiving constituent complaints about Fairbanks/SPS as early as 2002. I say this with 1000% certainty because I have copies of at least some of those complaints.

Senators Schumer, Clinton and McCain, are/were among MANY legislators receiving complaints about Mortgage Servicing Fraud going back 5,6,7 years now. I've got complaints to various agencies in Minnesota going back as far as 2000. Complaints in Congressman McHenry's state of North Carolina beginning in 2002. Only one in Congresswoman Capito's state of West Virginia in my possession but the entire state had a TRO issued against then Fairbanks halting all foreclosures for, I believe two years if memory serves. And yes, there were even complaints filed in Illinois.

What you have been collectively witnessing over the last few years, Professor, is nowhere CLOSE to "gross" or "cavalier" negligence on the part of servicers. Those of us who have been watching, commenting, reporting on and attempting to warn about Mortgage Servicing Fraud for over 10 years now, recognize this as industry pattern and practice.

It is premeditated. It is a system design. It is fraudulent. It is criminal.

Yes, many of the foreclosures taking place today ARE legitimate with regard to lack of payment. Some people should legitimately lose their homes for lack of payment. That is part of the "rule book" by which everyone plays. But if you're going to hold the borrowers to those rules, then you damn well better hold the servicers, note holders and everyone else in the industry to those same rules. Otherwise, you end up with... well... what we have now.

[InkMiser]

I, too, am in the trenches. The conduct of lenders and servicers has been quite intentional. There has been an intent to mislead everyone - borrowers, government agencies, and courts - in order to keep things moving despite the huge lapses in sound business practices and compliance with legal requirements. Too much money was being made in completing each securitization deal. Everyone wanted to get to the next deal. To hell with finishing the deal we just closed. This attitude created hyper-liquidity in the housing market. And now we are paying the piper.

If lenders and servicers can't prove they are entitled to enforce the note and mortgage, whose fault is that? Come on! We're talking about basic evidentiary stuff here. Yes, there is fault to be assigned to all parties involved in bad loans, but the issue is not the entire housing bust, it is the enforcement of individual contracts by one entity against one borrower. These issues are micro-, not macro-.

I just received an affidavit from a major REMIC Trustee. It is Trustee for over 450 REMIC's. We have been going around and around about whether it has the paper and is entitled to enforce it. The affidavit states that the Trustee NEVER gets the paper in these deals. And in fact, the Trustee doesn't know where the paper is. So, the Trustee, which is attempting to foreclose, admits it is not in possession of the tens of thousands notes and mortgages on which it has filed foreclosures around the country. Its defense? Its conduct is in accord with standard industry practice. Its argument is that a mere judge should not question how the mortgage industry does things. It is like the stupid foreclosure told Judge Boyko in the N.D. of Ohio, "Your Honor, you just don't understand how these things work."

If you really think that showing ownership of the note and mortgage are mere technicalities, try going into your bank and asking to see your wife's bank account information. Explain to them that even though she has her own bank account, you handle all of the family finances so they can show you the information. See what kind of response you get.

[Blossom]

Kudos to Maine attorney Thomas A. Cox and Mike Dillon!
Don't think "that there was malicious intent? or want to chalk it up to "cavalier negligence" ?
Reuters recently reports as we have long known that in runup to foreclosure crisis many banks acquired servicing arms "to gain useful information about home loan performance for their mortgage bond trading businesses".

"Useful information" is right! Knowing which tranches of MBS were targeted for servicing fraud was certainly "useful" in placing those credit default swap bets aka subprime shorts that paid off so well for investment banks' proprietary traders and others. With all the insider servicing information flowing freely back and forth between servicers and investment bank trading desks these CDS bets were far more than a sure thing.

Professor Levitin, Just ask yourself one question: WHO owns the mortgage servicers? Then consider Gillian Tett's FT reporting that
"With credit default swaps, banks do better if borrowers fail" and put that in perspective with Wm. K. Black's theory of 'control fraud' .
When you do this, their scheme plan becomes very clear.

This is an unspoken though very much integral part of the battles Attorney Cox and Mike Dillon have been fighting in the trenches. To those of us who have personally experienced these assaults and bravely fought back, "Mods or time" are nowhere near enough to begin to stablize "the foreclosure situation". These are criminal enterprises we are battling and their fraud must be eradicated. If that requires full out criminal prosecution, so be it.

[Richarfd Davet]

You know what happens when Wal Mart runs into a fatally flawed business model? They throw it out......never to be seen again.

The American mortgage market (Mom's apple pie) was hijacked by the players in the GSE Business Model.

When someone is the beneficiary of a fatally flawed business model, it is criminal..........ask Bernie Madoff.

[Allison]

"It is no different than trying to get a murderer caught on video tape in the act and in front of a dozen witnesses out of jail because some rookie cop didn't follow a procedure. The cops actions shouldn't negate the murder."

Russ it is my opinion that your example is asinine, and runs counter to the reality of due diligence of the law. If a suspect is arrested and not, for example, Mirandized, or otherwise improperly handled like physically abused, etc. then in fact they do, and I stress should, walk. If the prosecuting DA FUBARs the case, like concealing evidence from the defense, they also should walk. There is a very clear reason for this and that is the onus is on those with authority over said matters to follow the rule of law while enforcing it. The fatal flaw in your example is that it presents the idea that an agent of the law can prosecute others for not following the law, while that said agent themselves didn't follow the law either. Thus if your prosecutor is in legal limbo they should not be able to further their claims against you, enjoying a state of being somehow above the law. In the end the cops actions don't negate the murder, it just hinders and/or negates the state's ability to prosecute the accused for the act of murder (for instance the suspect would still be civilly liable).

[Robert Allen Walls]

The GREED factor! The entire system to defraud homwowners is based on the GREED of corrupt businesses to take property away through fraudulent practices.

This is a simple statement however, examine all the fraud and corrrupt practices in play and the obvious is people will lie, cheat, steal, become phony, fakes and frauds, deceive and finally become forces of darkness. The entire world is full of the examples we see in the way BANKSTERS have corrupted the mortgage process.

The only way to stop these conditions is to bring the facts to a court of law and take full advantage of the legal process. Never give up, fight all the way to the end and the truth will prevail.

[VT]

Anyone who argues that people trying to get a free house is the problem is totally ignorant to the facts... attorney or not. It's way too complicated to go over here, but the facts are known. They did this deliberately thinking they would get away with it. But if it's not ok for anyone to get a free house, why is it ok for the banks to get the house for free? They have nothing invested... not a penny! Why is it ok for these entities to receive over 3 trillion dollars of tax payer money for free to pay for their wrong doings? Why is it ok for the executives of these companies to put hundreds of millions of bonus money in their pockets based on the false asset value of the phoney appraisals that all of that real estate represents? I could go on. Too many of you are watching the "spun" version of this on the news and not getting the real facts. Many people have their life savings invested in these homes as well as the investment vehicles that funded them! Neither have any equity at this point? So they worked their entire lifetimes to end up with nothing! House for free? Hardly! The banks and the media are very good at providing the story they want you to believe. The fact is if everyone got their house for free, everyone would now have equity again. The values would be reset to current and more realisitc levels. The economy would be instantly jump started. The only possible ones that would get hurt would be the too big to fail banks. But that is what is suppose to happen in a capitalistic society to businesses who make poor business decisions, let alone those who intentionly act with no regard for the law or anyone else for that matter! Time to wake up everyone!!! Open you r eyse and see what really happened!

[David]

The banks seem to now want an activist judiciary to change the law. It's a simple issue. Does the bank have standing to foreclose under state law? Either they do or they don't.

The responsibility of the courts is not to ensure that the banks get to foreclose. The responsibility of the court is to allow foreclosure only to a party that is legally permitted to foreclose.

A court does not have the authority to set asisde state laws with respect to foreclosure action merely because it would be more convenient and efficient for the lenders. If the law says that the person (including bank)must possess certain papers to commence the foreclosure action, then the person must have those papers. A bank can't legitimately say that geez, it would have cost us another $250 to $500 to make all the proper transfers so we didn't do it but let us foreclose anyway.

I don't think the courts have been stretching the law to deny foreclosures. They are simply enforcing the law as it written. And that is what the court should do.