Foreclosure Defense: Module 2

Legal Arguments for Foreclosure Defense

Additional Education

Unbroken Chain of Transfers and Assignments

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1. In the case of a Residential Mortgage-Backed Securitized Trust.

It is always necessary for the Trust to establish an unbroken chain of transfers of the mortgage note from the originator to the trust.

If you have received any communication from your “lender”/servicer that indicates the name of the Trust your Note is supposed to be in, then you will want to look it up to find any breaks in the chain of title from the original lender, and how it ended up in the REMIC TRUST.

More importantly, you will want to find out when the Trust was created and when the loan was transferred into the Trust.   Was it transferred into the Trust within 90 days from the date of creation of the REMIC?  To learn more about REMICs under IRS Tax Code Section 860D.

To find your Pooling and Service Agreement, Click Here.

Look at your local County Recorder’s Office.  Check to see if there’s an Assignment of Mortgage or Assignment of Deed of Trust from your Original Lender to the Trust, or a chain of title somehow going from A to Z.  If not, then this is clearly a break in the chain of title, and you should be able to raise this issue up as evidence in your Quiet Title Action.

In other words, “If you are telling me ABC TRUST owns my loan, how did it get there and why was it not recorded as required by State Law?”

More than likely, if it was securitized, it would have been transferred internally via MERS.  MERS has been invalidated as a method of recording mortgage/Note transfer in almost every State, and there’s been numerous case law to establish this.

Look in the REFERENCE download in Module 1.  Look under the folder called MERS or your State and see if you can find related cases.  Otherwise, use Google.  Look for case laws relating to MERS in your state or similar state.  For example, Oregon and Washington are both Nonjudicial foreclosure States and share similar foreclosure laws.

 

 

Endorsement and Transfer of the Original Note

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2. The original mortgage notes may be endorsed to a named transferee by each necessary party in the chain of transfers but:

a. Generally, endorsements must appear at foot of the note if there is room for such endorsements (some cases have held substantial compliance is sufficient);

b. If there is not sufficient room at foot or end of the note for such endorsements, then they may appear on an allonge, which must be permanently affixed to the note;

c. The endorsements are not required to be notarized;

d. The Endorsements do not have to be dated but must be signed by an authorized agent of transferor;

e. If endorsed by an authorized agent, then some proof of the agency should be referenced and/or attached to the note; and

f. The Trust should have a designated document custodian who holds the original notes for the Trust as well as all of the delivery and receipt certificates regarding the notes.

Servicer Agency Rights

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3. Does the Servicer have proof of Agency?

Just because your servicer says “I am now servicing your loan” does not mean that they can.  Here’s an example, if I were to write to you and say “Hey Bob, you know that loan you have with Bank ABC?  Instead of sending money to XYZ, you should send money to me from now on.”

That’s not going to fly.

Does your servicer have an agreement that they can produce to prove that they actually have the servicing rights and the right to enforce your loan?

Ask them to prove it.

Original Notes Endorsed in Blank But—

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4. Original notes may be endorsed in blank by the originator but:

a. If the first endorsement is in “blank” (no payee is named or designated) then the note becomes a “bearer instrument” by operation of law;

b. There must be both a delivery and an acceptance receipt to document the transfer and delivery of the bearer note from the originator to the sponsor;

c. There must be a delivery and an acceptance receipt to document the transfer and delivery of the bearer note from the sponsor to the depositor;

d. There must be a delivery and an acceptance receipt to document the transfer and delivery of the bearer note from the depositor to the Trust; and

e. The designated document custodian for the Trust should maintain possession of all such documents including the original bearer note. There should only be one original note.

Assignments Strictly Regulated by State Property Law

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5. Assignments are strictly regulated by applicable state law. The following are important concepts as they apply to assignments:

a. Statute of Frauds applies to assignments since these are real property instruments. You cannot assign a mortgage or deed of trust in blank. There is no such thing as a bearer assignment with respect to a mortgage or deed of trust. An “incomplete instrument” is a real estate document that would fail to transfer any statutory rights to the grantee.

b. Assignments in the context of Residential Mortgage-Backed Securitized Trusts apply only to mortgages and deeds of trust. You cannot assign a note, just like you cannot assign a mortgage or deed of trust in blank. There is no such thing as a “bearer” mortgage or a “bearer” deed of trust.

c. The authority of the assignor must be independently established of record for the assignment of a mortgage or deed of trust to be valid. If a party is executing an assignment as an agent for the true assignor of record, then there must be a record documenting this assignment in order for it to be valid.

Holder in Due Course Doctrine

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6. The “Holder in due course” doctrine relates to the notes and has nothing to do with the mortgage or deed of trust.

In order to assert a “holder in due course” status, the transfer of the note to the Trust via the required chain must occur before the note is in default and the transferee must take the note without knowledge or notice of any claims or defects in the document. If the note is in default during any link in the transfer process, the holder in due course status is lost.

The A to D Invalid Negotiation of the Note

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7. Any transfer of the mortgage note from the originator directly to the Trust would likewise be per se invalid.

This is the case because such a transfer would disregard the “true sale” of the same note from the originator to the sponsor and the subsequent true sale from the sponsor to the depositor.

Any “late” transfer of the note from the originator to the Trust would also be invalid because at that point in time the originator would have no ownership rights in the note. Under the Pooling and Servicing Agreement, the Trust may only purchase the note from the depositor. And, since each transfer must constitute a true and complete sale between the parties, consistent with the Pooling and Servicing Agreement, the Trust must be able to establish an unbroken chain of transfers and deliveries from the originator to the Trust. These rules apply whether or not the notes are endorsed to a named payee in each instance or are endorsed in blank at any process in the chain of transfers.

Affidavits

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8. With respect to affidavits, simply attaching documents without first laying a proper evidentiary foundation for the admission of the documents is simply hearsay.

Statements such a person collects and maintains as records and documents of a third-party do not satisfy the business records exception to the hearsay rule. The affiant must be able to state that the attached documents are created or maintained in the regular course of the affiant’s business, that their creation and maintenance are part of the regular course of the affiant’s business, and that the records were created at or about the time the transaction was recorded.

The mere filing of records or documents maintained by other entities is insufficient to qualify the documents as business records. The need for such authentication applies to the assignments of the mortgages and deeds of trust and to the endorsements transfer and delivery receipts for the mortgage notes.

Destroyed or Lost Notes

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9. The enforcement of lost or destroyed or stolen mortgage notes is another issue that comes up in many of these cases. Under Section 3-309 of the UCC, a person not in possession of a mortgage note is entitled to enforce the instrument if the person seeking to enforce the instrument was in possession of the instrument before it was lost or who has directly or indirectly acquired ownership of the note from a person who was entitled to enforce the note when the loss of possession occurred and:

a. The loss of possession was not the result of a transfer; or

b. The loss of possession was not the result of a lawful seizure of the note; or

c. The person cannot reasonably obtain possession of the note because:

i. It was destroyed;

ii. Its whereabouts cannot be determined;

iii. It is in the wrongful possession of an unknown party;

iv. The unknown party cannot be found;

v. The unknown party is not amenable to service of process;

vi. A reasonable search has been made for the no

Your Initial Letter

Today, all we want to do is to send off our first letter to the lender. I’ve created a more effective and up to date letter for you to copy and send out.
Simply get your bank statement (that you should be receiving every month), and gather the following information:
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The Name of the Bank

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The Loan Number

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The Address for Written Correspondence (you should find this in the back of the statement)

You should find the following document in the document kit:

Edit and modify the letter to fit your needs.

Once done, send it off the bank using certified mail, return receipt requested.

The point of this letter is to get your bank to a) provide you the name of the REMIC in which your loan has been securitized (which you will then use as evidence)

b) Provide you with an admission that they are a servicer and not the lender (which you will then use as evidence).

You should also make a folder for this process. One for each loan. In other words, if you have a first and a second, you should have 2 separate folders as each loan will need it’s own process.

Just wait. The bank will ALWAYS send you back a copy of your note/Deed of Trust. This will save you money and effort (instead of needing to go down to the County Recorder’s Office for this information).

SPECIAL – TIME SENSITIVE FOLKS

If time is of the essence, then you might want to go down to the County Recorder’s Office and get a copy.  In some counties, you can get a copy of your Deed of Trust online.

Congratulations.  You’ve taken your first step.  See?  That wasn’t so hard.

Further Education

Now that you have an understanding of what to look for, read this article.  <— IMPORTANT.  MUST READ.

 

Homework/Action Items

1) If you haven’t done so, please complete the assignment from Module1: 000-Things to Gather.doc

2) Customize the first letter to your “lender“.   001-Initial-letter-to-lender.doc

3) Send this letter out to your lender using the correspondence address as supplied on your monthly statement.  Send it certified mail, return receipt.  Be sure to fill out the greencard properly.

4) While you are at the Post Office, be sure to grab 5 to 10 certified mail/return receipt packets.  This will save you time in the future.

Your next module will be released in 5 days time.  In the mean time, sit tight.  Keep studying and go to the Resources document in Module 1.  Read everything.  Especially the Inre-Weisband decision.

Disclaimer:

This is purely for educational purpose. Nothing on this site can be construed as giving legal advice. You are using this information at your own risk. You are to seek legal counsel in these matters.