He finally came to me just before the hearing and I was scrambling to put together my defense when local Foreclosure Fraud Fighter Mark Stopa sent me an email reminding me that these foreclosure mills cannot rely upon affidavits of attorneys fees to establish those fees, the expert testifying to those fees must be in court in person.  I attach the case law on both that issue and the other issues I was prepared to argue below:

Attorney’s Fees

Thankfully we didn’t even get that far in this hearing because in this circuit, the judges are very serious about devoting adequate time to argue summary judment when the issues are contested.  I hear these horror stories about Rocket Dockets elsewhere and it just blows my mind because I have only had one Summary Judgment hearing where I felt like I was not being given adequate time or my arguments not being seriously considered.  I reported that defeat, but I am most pleased to report that I had that reversed on rehearing.  The care taken by the judges in this circuit shows that highest level of judicial discretion that we should expect in every hearing, in every courtroom across the state.

Anyway, much thanks to Mark Stopa for sharing his good work.  Mark is a tenacious and very good attorney who is not at all willing to back down from a big fight...I encourage you to visit his website here.

Finally, let me again encourage each of you to visit Dan Gelber’s campaign page, and particularly look here at his issues section for detailed information about mortgage fraud and fights.

We can make a difference in this race, but every single one of you needs to sign up, sign on and make your voice heard in this campaign.  When you are frustrated, overwhelmed and feel helpless, channel that energy into something that might actually be useful, like volunteering for his campaign or at least sharing your concerns on his Facebook page here.

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Scridb filter]]> http://mattweidnerlaw.com/blog/2010/09/case-law-update-another-sure-fire-way-to-defeat-summary-judgment/feed/ 0 http://mattweidnerlaw.com/blog/2010/07/the-banks-win-we-all-give-up-you-can-have-the-keys-to-the-courthouse/?utm_source=rss&utm_medium=rss&utm_campaign=the-banks-win-we-all-give-up-you-can-have-the-keys-to-the-courthouse http://mattweidnerlaw.com/blog/2010/07/the-banks-win-we-all-give-up-you-can-have-the-keys-to-the-courthouse/#comments Fri, 23 Jul 2010 01:55:08 +0000 Matthew D. Weidner, Esq. http://mattweidnerlaw.com/blog/?p=2607 We’re all acutely aware that there is a foreclosure crisis across this country and in the State of Florida in particular.  It has been widely reported that there are 33,000 active foreclosure cases pending in Pinellas County, Florida.  I actually think the number of foreclosures that could be filed would be closer to double or triple that number if the banks and lenders filed foreclosures on all the homes in Pinellas County that were sixty or ninety days behind in payment…but suffice it to say the 33,000 number far understates the magnitude of the economic troubles in Pinellas County alone…and the troubles are even greater elsewhere.

So what if every lawyer and homeowner and advocate that was fighting cases in Pinellas County just gave up.  Threw in the towel and said to the banks….YOU CAN HAVE THIS STINKING HOME.  I can’t afford the insurance, taxes, repairs.  I’ve lost my job so I couldn’t even really pay half the mortgage that currently exists on the property.  If the AC goes or the roof blows off, I don’t have the money to pay it, so I tell you what…I can rent a comparable house or apartment for much less that the best and most unheard of modification would ever provide.

Forget about who really owns the mortgage or who has a right to foreclose or who is owed the debt or what non-registered trust or foreign corporation claims the right to own the home….anyone come and get it…What would become of the 33,000 homes that have now reverted back to the shadowy entities that are now trying to take the homes?  Who would purchase them?  Who could qualify for the mortgage?  Who would move in and take care of the grass and fix the problems?

The answer to the question is, there are not 33,000 people in Pinellas County that could step in and purchase these properties….there’s probably not even half that.  It will be very interesting to see what becomes of all the properties that are reverting back to banks in the new  Rocket Docket procedures that have now been implemented.  If there are 300 summary judgment hearings held a week in Pinellas County….well even if every one of them isn’t granted that’s still hundreds of homes reverting back to the lenders when the foreclosure sales start happening 30-90 days from now.

Forget about the abuse of court process, the fraud, the mistakes the faulty titles that this mess of a foreclosure crisis has dumped in our courtrooms….just think about the very real and practical impact of all this faulty inventory flooding the real estate marketplace….

WHAT’S THE POINT OF ALL THIS FAST FOOD FORECLOSURE ANYWAY?

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I’m particularly offended by the “signatures” that are found on the legal documents submitted by the Law Offices of David J. Stern.  When an attorney signs a document, it’s supposed to be an affirmation and an oath and a professional responsibility.  But take a look at the arrogant, sloppy mess of a mark that appear on Stern pleadings.  Those non-signature sloppy marks are an offense to me and to the court.  I don’t think they should qualify as a signature under the rules of civil procedure and even if they might meet the technical definition, if I were a judge, I would strike the pleading just because I find them so arrogant and offensive….I would also be questioning the lawyer who supposedly signed the pleading to determine if that lawyer that allegedly signed them wants to take credit for the “signature”

And now comes the revelations contained within the prospectus filed with the Securities and Exchange Commission for an entity known as  DJSP Enterprises….read on…

DJSP Enterprises, Inc. (“DJSP”, “we,” “us” or “our”) is a holding company whose primary business operations are
conducted through three wholly owned subsidiaries, DJS Processing, LLC (“DJS LLC”), Professional Title and Abstract Company of
Florida, LLC (“PTA LLC”), and Default Servicing, LLC (“DSI LLC”) of DAL Group LLC (“DAL”), a company in which DJSP holds
a controlling interest. DAL, through its operating subsidiaries, provides non-legal services supporting residential real estate foreclosure, other related legal actions and lender owned real estate (“REO”) services, primarily in Florida.

Now what exactly are those “non-legal services supporting residential real estate foreclosure”?  Is this the legal pleadings and real work involved in a Stern foreclosure case?  Where is the line between the legal work and non-legal services?

What role does the “Chardan 2008 China Acquisition Corp.”, the “blank check company which has its principal business and/or material operations in China.” have in the prosecution of foreclosure cases in front of Circuit Court Judges throughout Florida?

What exactly were the “non-legal business and assets” that David J. Stern and the Law Offices of David J. Stern (“DJS”) transferred to the DAL Group  for:

“(i) $58,500,080 in cash; (ii) $52,469,000 in a promissory note issued by DAL to DJS (the “Stern Deferral Note”); (iii) 1,200,00 DAL Common Units; (iv) 1,666,667 DAL Series A Preferred Units; (v) 3,133,333 DAL Series B Preferred Units; and (vi) the right to receive $35 million in post-closing cash.”

As a result of the Transaction, DAL acquired membership interests in the three limited liability companies (DJS LLC, PTA
LLC and DSI LLC) that together constitute a provider of non-legal residential mortgage foreclosure processing and other services,
principally in the state of Florida.

During the three months ended March 31, 2010, the Company’s revenues from mortgage foreclosure related services, net of revenue from client reimbursements, decreased by $0.6 million, or 2%, to $27.6 million, compared to $28.1 million for the same period lastyear. (What exactly are the kind of mortgage foreclosure related services that a non-lawyer can provide that would generate $27.6 million dollars in three months?)

Our REO liquidation business has a sole customer
through which we generated $3.3 million in revenue for the first quarter of 2010 compared to $1.9 million in the same period last
year, primarily due to an increase in the number of REO liquidation files which grew to 1,728 files in the first quarter of 2010, an
increase of 56%, from 1,111 files in the first quarter of 2009. (Who exactly is this undisclosed sole customer that made this much money off the backs of consumers and shouldn’t the judges granting foreclosure be concerned about who this is?)

Mr. Stern may encounter
conflicts of interest in the execution of his duties on behalf of us. These conflicts may not be resolved in a manner favorable to us. For
example, he may be precluded by his ethical obligations as an attorney or may otherwise be reluctant to take actions on behalf of us
that are in its best interests but are not in the best interests of DJS, his law firm, or its clients. Further, as a licensed attorney, he may
be obligated to take actions on behalf of DJS or its clients that are not in our best interests.

DJS LLC has one law firm customer in Florida, DJS. Each foreclosure, bankruptcy, eviction, litigation, and other mortgage
default related case file referred to DJS will typically have a fixed fee associated with it that is based on a schedule established by
government sponsored entities, such as Freddie Mac and Fannie Mae. DJS LLC will be paid a fixed fee by DJS for the services it
renders to DJS.

Regulation of the legal profession may constrain DJS LLC’s, PTA LLC’s and DSI LLC’s s operations, and numerous issues
arising out of that regulation, its interpretation or evolution could impair our ability to provide professional services to
customers and reduce revenues and profitability.

Each state has laws, regulations and codes of professional responsibility that govern the conduct and obligations of attorneys
to their clients and the courts. Adherence to those codes of professional responsibility are a requirement to retaining a license to
practice law in the licensing jurisdiction. The boundaries of the “practice of law,” however, can be indistinct, vary from one state to
another and are the product of complex interactions among state law, bar association standards and constitutional law as formulated
by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another
person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. Although we are
not aware of any ruling or interpretation of laws, regulations or other applicable standards that would result in the operations that DJS
LLC will perform being considered the practice of law, we cannot say with certainty that no existing law, regulation or standard will
be interpreted to produce that result, or that a new law, regulation or standard leading to that result will not be adopted in the future.
In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys, so
that if any aspect of our business is deemed to constitute the practice of law, it would not be possible for DJS LLC, PTA LLC or DSI
LLC to perform those services.

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The attached agreement is the Asset Purchase Agreement executed between the FDIC and OneWest Bank.  I’m still mulling over the details, but it this agreement is in fact the binding agreement, I don’t see how Indymac is able to continue with their pursuit of foreclosure cases anywhere across the country.

And yet in my case and in many others, the foreclosure mills just seem to be chugging right keeping Indymac as the Plaintiff instead of substituting OneWest as the Plaintiff, as the agreement apparently requires.

I will certainly update as I find more information, but I’m curious what others have found regarding this very interesting issue.  Read on and please share any info and insights.

IndyMacLoanSaleAgrmt-1

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… Rank: wait… Traffic: wait… Price: wait… CY: wait… I: wait… YCat: wait… C: wait…

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Please read the story here…

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… Rank: wait… Traffic: wait… Price: wait… CY: wait… I: wait… YCat: wait… C: wait…

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The US economy collapsed in 2008 and we would have fallen into an economic and  societal abyss had the federal government not taken massive interventions that we’ll be paying for for decades to come.  As we know from the investigations that are now being made public, and which will continue to develop in the years to come, Wall Street Fat Cats teamed up with shifty players from the mortgage industry to monetize then liquidate the single largest collection of public wealth ever accumulated….the equity Americans held in real estate.  The unchecked, unregulated and unrestrained business practices allowed two entire sectors of the economy- real estate/mortgage and Wall Street/finance to merge together in an orgy of greed, fraud and deceit.  The “screw the rules”, “everyone for themselves” culture eventually led to collapse.

Apparently we didn’t learn our lesson because these same attitudes and business practices have infected our court rooms across the country.  The results will be a new round of financial chaos because the land title industry simply cannot pay the claims that will come when the results of the improper court practices are litigated in the decades to come.

Reuters Article on Bankruptcy of LandAmerican

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One of the many problems those who are fighting foreclosures have to deal with is the fact that some judges and most people on the “outside” of the mortgage meltdown don’t understand that the Fat Cats set the mortgages up to fail from the very beginning–because mortgages that were “bad” paid the Fat Cats much more at the outset.  Now this is wild and insane stuff….how can mortgages given to people that have no hope of ever paying them (even if the economy didn’t crash)?  The answer lies in the lies, greed, fraud and arrogance that dominated Wall Street when these loans were created–a culture that continues to victimize normal Americans today.

If you really want to go insane watch this CBS News report here which details how Goldman Sachs was making millions of dollars by selling “shitty” deals to their institutional investors.  It just makes me furious to hear these guys gloating over making millions while at the same time refusing to admit to even the slightest amount of wrongdoing. The homeowners really were on the lowest end of the “dupes” totem pole, but they were not the only ones taken.

The book Chain of Blame details the unholy alliances that were formed between the subprime lenders and Wall Street and how the subprime lenders and Wall Street kept competing with one another to create “shittier” and “shitter” deals.  The bottom line is in order to keep making more insane profits, the bad actors had to keep making loans that were increasingly less likely to be paid in the long term because loans that performed would not provide the bigger payouts that came from the bets they made on the back end that the portfolio of loans would fail.

The national media is starting to pick up on this.  The quotes below are from a story in today’s St. Petersburg Times.

A central part of Lehman’s business was making and selling “liar’s loans” under its Aurora subsidiary. It was a suicidal enterprise. These kinds of loans, where borrowers have an incentive to inflate income or assets, are set up to fail. Black estimates that every dollar lent on a liar’s loan loses 50 to 85 cents.

In the short term, making these loans produces significant apparent but fictional income — and correspondingly huge bonuses for executives. Only later do the loans create real catastrophic losses for those holding them.

Lehman was the world leader in originating these loans. In the first six months of 2007, Aurora was lending more than $3 billion a month of subprime and liar’s loans. This guaranteed senior management extraordinary paydays. Even as the fall was becoming evident, the firm’s CEO and chairman, Richard Fuld, was awarded $40 million in total compensation for 2007. (Much of it in stock that later became worthless.)

Undoubtedly, the firm’s top executives knew that making fraudulent loans was its primary source of income. But Lehman assiduously attempted to hide that fact, classifying its liar’s loans as “prime” loans in disclosures, Black says. Had Lehman disclosed the true nature of the loans it was selling, no one would buy them and the firm would have been found out as insolvent.

To various degrees this kind of deceit was the business model of every player in the subprime mortgage lending and securities market: every bank that loaned money without documenting a borrower’s credit worthiness, every firm that securitized loans without examining the lender’s loan files, every accounting and law firm that helped fudge disclosures, and every credit rating agency that rated a mortgage-related security as safe without sampling the underlying loans.

So what’s all this got to do with the little ‘ole homeowner sitting in foreclosure today? 

One of the most important things we’ve all got to understand, and a key point we’ve got to make sure our judges start to understand, is that the very same lies, fraud, greed and unethical conduct that is now being exposed on such a massive scale in Wall Street and in Washington has migrated into our courtrooms.

Many judges and attorneys still cling to a naive and antiquated professional worldview wherein attorneys, as officers of the court, remembered that they are officers of the court and do not make false statements or engage in misleading practices before the court.  The problem is the entire foreclosure system is now functioning based on fabricated documents, forged documents, false and misleading statements and gross violations of the most basic ethical standards.  Two documents that are part of nearly every foreclosure file illustrate this point.

1)The affidavits of amounts due and owing that are filed in nearly every case do not meet the most basic evidentiary standards and they cannot be relied upon as evidence to grant foreclosure.

2)The assignments of mortgages or endorsements that are filed in nearly every case are either outright improper on their face (such as when the assignment post-dates filing of the suit) or questionable such as endorsements that “appear” on documents from failed or defunct subprime lenders that ceased functioning years ago.

Advocates and judges have only recently become aware of just how failed this whole system is.  Some judges are just covering their eyes, holding their noses and continuing to grant foreclosures despite the growing body of evidence that the law firms and the clients they represent are engaged in such widespread and systemic improper practices.  This will all come back to haunt every American for decades to come. The biggest problem is this represents a fundamental breakdown in the rule of law.  Courtrooms and judges are no longer owed respect and honor and fear…the pressures placed on our courts have turned them into fast food flop houses operating in servitude to the Millionaire Foreclosure Mills.  The only real objective is to plow through these hundreds of thousands of foreclosures as quickly as possible so that the foreclosure mills and their clients can continue to make millions.

Ignore long established rules of evidence

Ignore new rules of the Supreme Court of Florida

Ignore blatant and not so blatant fraud

Ignore expectations of professionalism and respect for judges and the courts by Millionaire Foreclosure Mills that have decided their profits are more important than treating the courts with respect.

There is one thing missing from this whole calculus and that is the fact that these practices and procedures are producing failed titles to property.  In the rush to plow through all these foreclosures, we’re creating a nightmarish scene of destruction where title to real property will be thrown into chaos for decades to come.  Some judges get it (do a google search for New York Judge Schack) and many, many more will get it in the decades to come when we title lawyers come back before them to vacate judgments of foreclosure that were improperly granted.  That’s enough for this morning, but obviously much more of this to come.

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Scridb filter]]> http://mattweidnerlaw.com/blog/2010/05/foreclosures-the-end-game-of-wall-streets-fraud-lies-and-deceit/feed/ 9 http://mattweidnerlaw.com/blog/2010/04/allonges-should-never-be-used-to-prove-ownership-of-a-mortgage-note-and-yet-another-smack-at-mers/?utm_source=rss&utm_medium=rss&utm_campaign=allonges-should-never-be-used-to-prove-ownership-of-a-mortgage-note-and-yet-another-smack-at-mers http://mattweidnerlaw.com/blog/2010/04/allonges-should-never-be-used-to-prove-ownership-of-a-mortgage-note-and-yet-another-smack-at-mers/#comments Wed, 28 Apr 2010 10:49:46 +0000 Matthew D. Weidner, Esq. http://mattweidnerlaw.com/blog/?p=1522

A few months back I started looking closely at an allonge in on of my cases.  A sloppy, unprofessional, illegible mess that the Plaintiff asserted was all they needed to show ownership of a $500,000 asset.

Come on…all you need to show ownership of something worth $500,000 is some sloppy, squiggly line that is facially questionable?  Reading the deposition of Angela Nolan who describes a process where allonges (including alleged signatures) are computer generated then affixed to the note sometime later.

The fact of the matter is transfer of notes should only be done via endorsement, not allonge.  There are increasingly appellate and bankruptcy court opinions that recognize this, but it’s up to us practicing in the circuit courts to challenge these things every time we come across them.  Use Florida Statutes 673.3081 as the basis for the challenge and I have a great memo posted which details all the reported case law nationwide on allonges.  But here is a fantastic Arizona decision hot off the presses.  Thanks to MortgageFrauds for Sharing With The Class!

In re: BARRY WEISBAND, Chapter 13, Debtor. Case No. 4:09-bk-05175-EWH. United States Bankruptcy Court, D. Arizona. March 29, 2010.

Barry Weisband, Tucson, AZ, Ronald Ryan, Ronald Ryan, P.C., Tucson, AZ, Attorney for Debtor.

MEMORANDUM DECISION

EILEEN W. HOLLOWELL, Bankruptcy Judge

I. INTRODUCTION

The debtor, Barry Weisband (“Debtor”), has challenged the standing of creditor, GMAC Mortgage, LLC (“GMAC”), to seek stay relief on his residence. After reviewing the documents provided by GMAC and conducting an evidentiary hearing, the court concludes that GMAC, the alleged servicer of the Debtor’s home loan, lacks standing to seek stay relief. The reasons for this conclusion are explained in the balance of this decision.

II. FACTUAL AND PROCEDURAL HISTORY

A. Creation of Debtor’s Note And Asserted Subsequent Transfers

On or about October 6, 2006, the Debtor executed and delivered to GreenPoint Mortgage Funding, Inc. (“GreenPoint”) an adjustable rate promissory note in the principal sum of $540,000 (“Note”) secured by a Deed of Trust (“DOT”) on real property located at 5424 East Placita Apan, Tucson, Arizona 85718 (“Property”). On a separate piece of paper, GreenPoint endorsed the Note to GMAC (“Endorsement”). The Endorsement is undated. The DOT was signed by the Debtor on October 9, 2006, and recorded on October 13, 2006. The DOT lists GreenPoint as the lender, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary of the DOT “solely as nominee for [GreenPoint], its successors and assigns.”

Approximately five months before the creation of the Note and DOT, on April 10, 2006, GreenPoint entered into a Flow Interim Servicing Agreement (“FISA”) (Exhibit D)¹ with Lehman Capital, a division of Lehman Brothers Holdings, Inc. (collectively “Lehman”), pursuant to which Lehman agreed to purchase conventional, residential, fixed and adjustable rate first and second lien mortgage loans from GreenPoint. Under the FISA, GreenPoint agreed to service the mortgage loans it sold to Lehman. According to GMAC, GreenPoint transferred the Note and DOT to Lehman under the FISA. On November 1, 2006, Lehman entered into a Mortgage Loan Sale and Assignment Agreement (“MLSAA”) with Structured Asset Securities Corporation (“SASC”) (Exhibit E). Under that agreement, Lehman transferred a number of the mortgage loans it acquired under the FISA to SASC. GMAC claims that the Note was one of the mortgage loans transferred to SASC. SASC created a trust to hold the transferred mortgages — GreenPoint Mortgage Funding Trust (“Trust”). The MLSAAalso transferred the right to receive principal and interest payments under the transferred mortgage loans from Lehman to the Trust. Also, on November 1, 2006, SASC entered into a Trust Agreement (Exhibit F) with Aurora Loan Services (“Aurora”) as the master servicer, and U.S. Bank National Association (“U.S. Bank”) as the trustee. A Reconstituted Servicing Agreement (Exhibit G) was executed the same day, which provided that GreenPoint would continue to service the mortgages transferred to the Trust under the MLSAA, but that the Trust could change servicers at any time. Also, according to GMAC, on November 1, 2006, GMAC, Lehman, and Aurora entered into a Securitization Servicing Agreement (“SSA”) (Exhibit H), pursuant to which GMAC would service the loans transferred to the Trust. GMAC claims that under the SSA it is the current servicer of the Note and DOT.

Thus, according to GMAC, as of November 1, 2006, the Note and DOT had been transferred to the Trust, with SASC as the Trustor, U.S. Bank as the Trustee, Aurora as the master servicer, and GMAC as the sub-servicer. GreenPoint went out of business in 2007. According to GMAC, it remains the sub-servicer of the Note, and that is its only financial interest in the Note and DOT. (Transcript Nov. 10, 2009, pp. 44, 47, 75.)

B. Bankruptcy Events

As of March 1, 2009, the Debtor was in default of his obligations under the Note. Debtor filed his petition for relief under Chapter 13 of the Bankruptcy Code on March 19, 2009. On May 16, 2009, GMAC filed a proof of claim (“POC”), which attached the Note and DOT. The Endorsement from GreenPoint to GMAC was not attached to GMAC’s proof of claim. On May 12, 2009, MERS, as nominee for GreenPoint, assigned its interest in the DOT to GMAC (“MERS Assignment”). The MERS Assignment was recorded on July 16, 2009.  GMAC filed a Motion for Relief from Stay (“Motion”) on May 29, 2009, on the grounds that the Debtor had no equity in the Property and the Property was not necessary for an effective reorganization. The Motion also requested adequate protection payments to protect GMAC’s alleged interest in the Property. GMAC attached the Note with the Endorsement and DOT as exhibits to the Motion. The Debtor filed a response challenging GMAC’s standing to seek relief from stay. After various discovery disputes, GMAC sent a letter dated September 17, 2009, to the Debtor which purported to explain the various transfers of the Note and the DOT. (Docket #90). The letter explained that GreenPoint transferred the “subject loan” to Lehman under the FISA, that Lehman sold the “subject loan” to SASC under the MLSAA, that SASC, Aurora Loan Services, and U.S. National Bank entered into a trust agreement, which created the Trust and made Aurora the master servicer for the “subject loan,” and, that GMAC was the servicer of the “subject loan” under the SSA. According to GMAC, its status as servicer, along with the Endorsement of the Note to GMAC and the assignment of the DOT from MERS to GMAC, demonstrated that it had standing to bring the Motion. On November 10, 2009, the Court conducted an evidentiary hearing on the Motion. GMAC offered the original Note at the hearing and admitted into evidence a copy of the Note, DOT, copies of the FISA, MLSAA, Trust Agreement, the Reconstituted Servicing Agreement and the SSA. However, GMAC did not offer any documents demonstrating how the Note and DOT were conveyed by GreenPoint to the FISA. No document was offered demonstrating how the Note and DOT were conveyed from the FISA to the MLSAA or from the MLSAA into the Trust. Schedule A-1 of the MLSAA, where the transferred mortgages presumably would have been listed, only has the words “Intentionally Omitted” on it, and Schedule A-2 has the word “None.” (Exhibit F, pp. 19-20). Similarly, there is no evidence that the Note and DOT are subject to the SSA. Exhibit A to the SSA, titled “Mortgage Loan Schedule,” is blank. At the conclusion of the hearing, this Court ordered the Debtor to begin making adequate protection payments commencing on December 1, 2009 to the Chapter 13 Trustee. The Court further ordered GMAC and the Debtor to negotiate the amount of the adequate protection payments. When the parties were unable to reach agreement, the Court set the amount of the monthly payments at $1,000.

III. ISSUE

Does GMAC have standing to bring the Motion?

IV. JURISDICTIONAL STATEMENT

Jurisdiction is proper under 28 U.S.C. §§ 1334(a) and 157(b)(2)(G).

V. DISCUSSION

A. Introduction

Section 362(a) of the Bankruptcy Code provides that the filing of a bankruptcy petition operates as a stay of collection and enforcement actions. 11 U.S.C. § 362(a). The purpose of the automatic stay is to provide debtors with “protection against hungry creditors” and to assure creditors that the debtor’s other creditors are not “racing to various courthouses to pursue independent remedies to drain the debtor’s assets.” In re Tippett, 54,2 F.3d 684 (9th Cir. 2008) (citing Dean v. Trans World Airlines,

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Inc., 72 F.3d 754, 755-56 (9th Cir. 1995)); see also In re Johnston, 32,1 B.R. 262 (D. Ariz. 2005). Despite the broad protection the stay affords, it is not without limits. Section 362(d) allows the court, upon request of a “party in interest,” to grant relief from the stay, “such as terminating, annulling, modifying, or conditioning such stay.” 11 U.S.C. § 362(d)(1). The court may grant relief “for cause, including the lack of adequate protection.” Id. The court may also grant relief from the stay with respect to specific property of the estate if the debtor lacks equity in the property and the property is not necessary to an effective reorganization. 11 U.S.C. § 362(d)(2).

Any party affected by the stay should be entitled to seek relief. 3 COLLIER’S ON BANKRUPTCY ¶ 362.07[2] (Henry Somers & Alan Resnick, eds. 15th ed., rev. 2009); Matter of Brown Transp. Truckload, Inc., 118 B.R. 889, 893 (Bankr. N.D. Ga. 1990); In re Vieland, 4,1 B.R. 134 (Bankr. N.D. Ohio 1984)). Relief from stay hearings are limited in scope — the validity of underlying claims is not litigated. In re Johnson, 75,6 F.2d 738 (9th Cir. 1985). As one court has noted, “[s]tay relief hearings do not involve a full adjudication on the merits of claims, defenses or counterclaims, but simply a determination as to whether a creditor has a colorable claim.” In re Emrich, 200,9 WL 3816174, at *1 (Bankr. N.D. Cal. 2009).

Nevertheless, in order to establish a colorable claim, a movant for relief from stay bears the burden of proof that it has standing to bring the motion. In re Wilhelm, 40,7 B.R. 392 (Bankr. D. Idaho 2009). The issue of standing involves both “constitutional limitations on federal court jurisdiction and prudential limitations on its exercise.” Warth v. Seldin, 422 U.S. 490, 498 (1975). Constitutional standing concerns whether the plaintiff’s personal stake in the lawsuit is sufficient to have a “case or

controversy” to which the federal judicial power may extend under Article III. Id.; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992); Pershing Park Villas Homeowners Ass’n v. United Pac. Ins. Co., 219 F.3d 895, 899 (9th Cir. 2000).

Additionally, the “prudential doctrine of standing has come to encompass several judicially self-imposed limits on the exercise of federal jurisdiction.’” Pershing Park Villas, 219 F.3d at 899. Such limits are the prohibition on third-party standing and the requirement that suits be maintained by the real party in interest. See Warth v. Seldin, 422 U.S. at 498-99; Gilmartin v. City of Tucson, 2006 WL 5917165, at *4 (D. Ariz. 2006). Thus, prudential standing requires the plaintiff to assert its own claims rather than the claims of another. The requirements of Fed. R. Civ. P. 17, made applicable in stay relief motions by Rule 9014, “generally falls within the prudential standing doctrine.” In re Wilhelm, 40,7 B.R. at 398.

B. GMAC’s Standing

GMAC advances three different arguments in support of its claim to be a “party in interest” with standing to seek relief from stay. First, GMAC asserts it has standing because the Note was endorsed to GMAC and GMAC has physical possession of the Note. Second, GMAC asserts that by virtue of the MERS Assignment, it is a beneficiary of the DOT and entitled to enforce and foreclose the DOT under Arizona law. Third, GMAC asserts it has standing because it is the servicer of theNote. The court addresses each of GMAC’s claims in turn.

1. GMAC Has Not Demonstrated That It Is A Holder Of The Note

If GMAC is the holder of the Note, GMAC would be a party injured by the Debtor’s failure to pay it, thereby satisfying the constitutional standing requirement. GMAC would also be the real party in interest under Fed. R. Civ. P. 17 because under ARIZ. REV. STAT. (“A.R.S.’) § 47-3301, the holder of a note has the right to enforce it.² However, as discussed below, GMAC did not prove it is the holder of the Note.

Under Arizona law, a holder is defined as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” A.R.S. § 47-1201(B)(21)(a).³ GMAC has failed to demonstrate that it is the holder of the Note because, while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC. A special endorsement to GMAC was admitted into evidence with the Note. However, for the Endorsement to constitute part of the Note, it must be on “a paper affixed to the instrument.” A.R.S. § 47-3204; see also In re Nash, 4,9 B.R. 254 (Bankr. D. Ariz. 1985). Here, the evidence did not demonstrate that the Endorsement was affixed to the Note. The Endorsement is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note. Furthermore, when GMAC filed its proof of claim, the Endorsement was not included, which is a further indication that the allonge containing the Endorsement was not affixed to the Note.⁴ In Adams v. Madison Realty & Dev., Inc., 853 F.2d 163 (3d Cir. 1988), the plaintiffs executed promissory notes which, after a series of transfers, came into the defendant’s possession. At issue was whether the defendant was the rightful owner of the notes. The court held that the defendant was not entitled to holder in due course status because the endorsements failed to meet the UCC’s fixation requirement. Id. at 168-69. The court relied on UCC section 3-202(2) [A.R.S. § 47-3204]: “An indorsement must be written by or on behalf of the holder and on the instrument or on a paper so firmly affixed thereto as to become a part thereof.” Id. at 165. Since the endorsement page, indicating that the defendant was the holder of the note, was not attached to the note, the court found that the note had not been properly negotiated. Id. at 166-67. Thus, ownership of the note never transferred to the defendant. Applying that principle to the facts here, GMAC did not become a holder of the Note due to the improperly affixed special endorsement.

While the bankruptcy court in In re Nash, 4,9 B.R. 254 (Bankr. D. Ariz. 1985) found that holder in due course status existed even though an allonge was not properly affixed to an instrument, the court based its determination on the clear intention that the

note assignment be physically attached because: (1) the assignment was signed and notarized the same day as the trust deed; (2) the assignment specifically referenced the escrow number; (3) the assignment identified the original note holder; and (4) the assignment recited that the note was to be attached to the assignment. Id. at 261. In this case, however, there is no proof that the allonge containing the special endorsement from GreenPoint to GMAC was executed at or near the time the Notewas executed. Furthermore, the Endorsement does not have any identifying numbers on it, such as an account number or an escrow number, nor does it reference theNote in any way. There is simply no indication that the allonge was appropriately affixed to the Note, in contradiction with the mandates of A.R.S. § 47-3204. Thus, there is no basis in this case to depart from the general rule that an endorsement on an allonge must be affixed to the instrument to be valid.

GMAC cannot overcome the problems with the unaffixed Endorsement by its physical possession of the Note because the Note was not endorsed in blank and, even if it was, the problem of the unaffixed endorsement would remain.⁵ As a result, because GMAC failed to meet its burden of demonstrating that the Endorsement was proper, it has failed to demonstrate that it is the holder of the Note.

2. The MERS Assignment Of The DOT Did Not Provide GMAC With Standing

GMAC argues that it has standing to bring the Motion as the assignee of MERS.⁶ In this case, MERS is named in the DOT as a beneficiary, solely as the “nominee” of GreenPoint, holding only “legal title” to the interests granted to GreenPoint under the DOT. A number of cases have held that such language confers no economic benefit on MERS. See, e.g., In re Sheridan, 200,9 WL 631355, *4 (Bankr. D. Idaho 2009); In re Mitchell, 200,9 WL 1044368, *3-4 (Bankr. D. Nev. 2009); In re Jacobson, 40,2 B.R. 359 (Bankr. W.D. Wash. 2009). As noted by the Sheridan court, MERS “collect[s] no money from [d]ebtors under the [n]ote, nor will it realize the value of the [p]roperty through foreclosure of the [d]eed of [t]rust in the event the [n]ote is not paid.” 2009 WL 631355 at *4. Because MERS has no financial interest in the Note, it will suffer no injury if the Note is not paid and will realize no benefit if the DOT is foreclosed. Accordingly, MERS cannot satisfy the requirements of constitutional standing. GMAC, as MERS’ assignee of the DOT, “stands in the shoes” of the assignor, taking only those rights and remedies the assignor would have had. Hunnicutt Constr., Inc. v. Stewart Title & Trust of Tucson, Trust No. 3496, 187 Ariz. 301, 304 (Ct. App. 1996) citingVan Waters & Rogers v. Interchange Res., Inc., 14 Ariz. App. 414, 417 (1971); In re Boyajian, 36,7 B.R. 138(9th Cir. BAP 2007). Because GMAC is MERS’ assignee, it cannot satisfy the requirements of constitutional standing either.⁷

3. GMAC Does Not Have Standing As The Servicer Of The Note

(a) Servicer’s Right To Collect Fees For Securitized Mortgages

Securitization of residential mortgages is “the process of aggregating a large number of notes secured by deeds of trust in what is called a mortgage pool, and then selling security interests in that pool of mortgages.” Kurt Eggert, Held Up In Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 CREIGHTON L. REV. 503, 536 (2002). The process begins with a borrower negotiating with a mortgage broker for the terms of the loan. Then, the mortgage broker either originates the loan in its own name or in the name of another entity, which presumably provides the money for the loan. Almost immediately, the broker transfers the loan to the funding entit y. “This lender quickly sells the loan to a different financial entity, which pools the loan together with a host of other loans in a mortgage pool.” Id. at 538. The assignee then transfers the mortgages in the pool to another entity, which in turn transfers the loans to a special purpose vehicle (“SPV”,) whose sole role is to hold the pool of mortgages. Id. at 539. “The transfer to the special purpose trust must constitute a true sale, so that the party transferring the assets reduces its potential liability on the loans and exchanges the fairly illiquid loans for much more liquid cash.” Id. at 542. Next, the SPV issues securities which the assignee sells to investors. Id. at 539. Once the securities have been sold, the SPV is not actively involved. It “does not directly collect payments from the homeowners whose notes and deeds of trust are held by the SPV.” Id. at 544. Rather, servicers collect the principal and interest payments on behalf of the SPV. Id. Fees are associated with the servicing of loans in the pool. Therefore, GMAC would have constitutional standing if it is the servicer for the Note and DOT because it would suffer concrete injury by not being able to collect its servicing fees.⁸ In re O’Kelley, 420 B.R. 18, 23 (D. Haw. 2009). In this case, however, the evidence does not demonstrate that the Note and DOT were transferred to the Trust, and, without that evidence, there is no demonstration that GMAC is the servicer of the Note.

(b) There Is Insufficient Evidence That The Note Was Sold To Lehman And Became Part Of The Trust

When the Debtor executed the Note and DOT, GreenPoint was the original holder of the Note and the economic beneficiary of the DOT. GreenPoint, allegedly, transferred the Note to Lehman pursuant to the FISA. However, the term “mortgage loans” is not defined in the FISA and GMAC’s documents regarding the securitization of the Note and DOT provide no evidence of actual transfers of the Note and DOT to either the FISA or the Trust. Because such transfers must be “true sales,” they must be properly documented to be effective. Thus, to use an overused term, GMAC has failed “to connect the dots” to demonstrate that the Note and DOT were securitized. Accordingly, it is immaterial that GMAC is the servicer for the Trust.

C. Debtor’s Other Arguments

1. Securities Investors Are Not The Only Individuals Who Can Satisfy Standing Requirements When Dealing With A 362 Motion on a “Securitized” Mortgage

The Debtor argues that, in an asset securitization scheme, only the securities investors have standing to seek stay relief because they are the only parties with a financial interest in the securitized notes. However, because the Debtor executed the Note and received consideration (which he used to purchase the house), the contract is enforceable regardless of who provided the funding. In other words, the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan. A number of cases and treatises recognize that consideration for a contract, including a promissory note, can be provided by a third party. See, e.g.,

DCM Ltd. P’ship v. Wang, 555 F. Supp. 2d 808, 817 (E.D. Mich. 2008); Buffalo County v. Richards, 212 Neb. 826, 828-29 (Neb. 1982); 3 WILLISTON ON CONTRACTS § 7:20 (Richard A. Lord, 4th ed. 2009); RESTATEMENT (SECOND) OF CONTRACTS § 71(4) (2009).

Notes are regularly assigned and the assignment does not change the nature of the contract. The assignee merely steps into the shoes of the assignor. In re Boyajian, 36,7 B.R. 138 (9th Cir. BAP 2007); In re Trejos, 37,4 B.R. 210 (9th Cir. BAP 2007). No additional consideration is required, as opposed to a novation which creates a new obligation. Id. at 216-17 citing RESTATEMENT (SECOND) OF CONTRACTS § 280, cmt. e. Therefore, the Debtor’s argument that the Note is unenforceable because the funder of the Note was not the payee fails. The Note is still valid and can be enforced by the party who has the right to enforce it under applicable Arizona law.

2. Proof Of A Note’s Entire Chain Of Ownership Is Not Necessary For Stay Relief

A movant for stay relief need only present evidence sufficient to present a colorable claim — not every piece of evidence that would be required to prove the right to foreclose under a state law judicial foreclosure proceeding is necessary. In re Emrich, 200,9 WL 3816174, at *1 (Bankr. N.D. Cal. 2009). Accordingly, not every movant for relief from stay has to provide a complete chain of a note’s assignment to obtain relief.

Arizona’s deed of trust statute does not require a beneficiary of a deed of trust to produce the underlying note (or its chain of assignment) in order to conduct a Trustee’s Sale. Blau v. Am.’s Serv. Co., 2009 WL 3174823, at *6 (D. Ariz. 2009);

Mansour v. Cal-W. Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009); Diessner v. Mortg. Elec. Registration Sys., 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009). It would make no sense to require a creditor to demonstrate more to obtain stay relief than it needs to demonstrate under state law to conduct a judicial or non-judicial foreclosure. Moreover, if a note is endorsed in blank, it is enforceable as a bearer instrument. See In re Hill, 200,9 WL 1956174, at *2 (Bankr. D. Ariz. 2009). Therefore, this Court declines to impose a blanket requirement that all movants must offer proof of a note’s entire chain of assignments to have standing to seek relief although there may be circumstances where, in order to establish standing, the movant will have to do so.

3. The Movant Has Not Violated Rule 9011

The Debtor argues that GMAC “violated Rule 7011″ by presenting insufficient and misleading evidence. Given that there is no Rule 7011, the Court assumes that the Debtor was actually referring to Bankruptcy Rule 9011. Rule 9011 allows a court to impose sanctions for filing a frivolous suit. FED. R. BANKR. P. 9011(c); see also FED. R. CIV. P. 11(c). As noted at the evidentiary hearing, the Court did not find that GMAC filed its motion for relief stay in bad faith, nor does this Court believe GMAC filed its motion thinking it did not have proper evidentiary support. There are numerous, often conflicting, decisions on the issues of “real party in interest” and constitutional standing, and what evidence must be presented by a servicer seeking stay relief. The record in this case does not support imposition of 9011 sanctions.

VI. CONCLUSION

GMAC has not demonstrated that it has constitutional or prudential standing or is the real party in interest entitled to prosecute a motion for relief from stay.

Accordingly, its motion is DENIED without prejudice.

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Notes:

1. Exhibits refer to the exhibits admitted into evidence at a November 10, 2009 evidentiary hearing.

2. Because there is no federal commercial law which defines who is a note holder, the court must look to Arizona law to determine if GMAC is a holder. In re Montagne, 42,1 B.R. 65 (Bankr. D. Vt. 2009)(“Bankruptcy law does not generally provide for the enforcement of promissory notes. As a result, the legal obligations of the parties are determined by applicable non-bankruptcy law, which is usually state law.”).

3. Arizona substantially adopted the 1972 revised version of the Uniform Commercial Code (“UCC”) in 1975. See Fin. Mgmt. Servs., Inc. v. Familian Corp., 183 Ariz. 497, 499 n.1 (Ct. App. 1995);Wollenberg v. Phoenix Leasing Inc., 182 Ariz. 4, 7 n. 2 (Ct. App. 1994). In 1993, Arizona adopted the 1990 revision of UCC Article 3. Fin. Mgmt. Servs., Inc., 183 Ariz. at 502 n.2.

4. The special endorsement to GMAC is also completely inconsistent with the securitization of the note into the Trust which GMAC asserts occurred shortly after it was executed by the Debtor. According to GMAC, the Note and DOT were conveyed by GreenPoint to Lehman and ultimately to a Trust. But if the Note was endorsed to GMAC, GreenPoint would not have been able to convey theNote — only GMAC as the holder of the note could have conveyed it.

5. If the Note was endorsed in blank (and the Endorsement was properly affixed to the Note), it would be a bearer instrument and, therefore, enforceable by the party in physical possession. See In re Hill, 200,9 WL 1956174, *2 (Bankr. D. Ariz. 2009).

6. MERS’ primary function is to act as a document custodian. Major players in the mortgage lending industry created MERS to simplify the process of transferring mortgages by avoiding the need to re-record liens — and pay court recorder filing fees — each time it is assigned. Christopher L. Peterson, Predatory Structured Finance, 28 CARDOZO L. REV. 2185, 2266-67 (2007).

7. The Arizona District Court has recently held that MERS, as a named beneficiary under a deed of trust, could appoint a trustee under Arizona’s non-judicial foreclosure statute to conduct a foreclosure sale. Contreras v. U.S. Bank as Trustee for CSMC Mortg. Backed Pass-Through Certificates, Series 2006-5, 2009 WL 4827016 (D. Ariz. 2009); Blau v. Am.’s Serv. Co., 2009 WL 3174823 (D. Ariz. 2009). Those cases, however, focused on whether a non-judicial foreclosure sale can be conducted under Arizona’s non-judicial foreclosure statute without presentation of the original note. This court agrees that non-judicial foreclosures may be conducted under Arizona’s deed of trust statute without presentation of the original note; however, that does not resolve the issue of standing in a motion for relief from stay. Furthermore, while Arizona’s non-judicial foreclosure statute does not require presentation of the note, a deed of trust secures the performance of a contract under A.R.S. § 33-801(8). Therefore, a non-judicial foreclosure is conducted to enforce the rights of the contract holder and, the party conducting such a sale is presumably either the holder of the contract or the holder’s agent.

8. Even if a servicer has constitutional standing, it may still not be the “real party in interest” under Fed. R. Civ. P. 17 and may not, therefore, be able to satisfy the requirements for prudential standing. See, e.g., In re Jacobson, 40,2 B.R. 359 (Bankr. W.D. Wash. 2009); In re Hwang, 39,6 B.R. 757 (Bankr. C.D. Cal. 2008).

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They were betting hard against the American people, they knew they were peddling products that would fail and they engaged in fraud and deceit even among themselves….they held the American people in contempt…read on for more….

“The whole (subprime) building is about to collapse any time now,”

“Only potential survivor, the fabulous Fab…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”

“Anyway, not feeling too guilty about this.”

“According to Sparks, that business is totally dead, and the poor little subprime borrowers will not last so long!!!”

Going to “sell a few abacus bonds to widows and orphans that I ran into at the airport.”

Full text of article here.

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Some reasonable people, including judges, legislators and other advocates have questioned our claims of rampant foreclosure fraud.  Now, straight from the front page of the Money section of today’s Wall Street Journal comes this headline:

U.S. Probes Foreclosure-Data Provider

Lender Processing Services Unit Draws Inquiry Over the Steps That Led to Faulty Bank Paperwork

The full article can be found here. and the full text of the article is found below.  The most interesting thing from my perspective and for readers of this blog to note is that I have been reporting on the allegations reported in the Wall Street Journal article for months.  Note also that the Sylvia Nuer case that I reported on last week is cited in the article.

WITH ALL THE CREDIBLE INFORMATION AVAILABLE ABOUT FORECLOSURE FRAUD, HOW CAN ANY JUDGE GRANT FORECLOSURE AND HAVE ANYCONFIDENCE IN THE VERACITY OF THAT JUDGMENT?

BASED ON THE THE WELL-DOCUMENTED EVIDENCE OF FORECLOSURE FRAUD AND THE VERY REAL POTENTIAL THAT FORECLOSURE JUDGMENTS GRANTED BASED ON FRAUD ARE SUBJECT TO CHALLENGE…

ISN’T IT TIME FOR A MORATORIUM ON FORECLOSURES?

WHILE LENDERS AND THEIR AGENTS OF FRAUD ARE LOSING IN COURT,

ISN’T IT TIME THAT LEGISLATORS NOT CONSIDER ANY LEGISLATION THAT WOULD TAKE FORECLOSURE OUTSIDE THE SUPERVISION OF JUDGES AND THE COURTS?

By AMIR EFRATI and CARRICK MOLLENKAMP

A subsidiary of a company that is a top provider of the documentation used by banks in the foreclosure process is under investigation by federal prosecutors.

The prosecutors are “reviewing the business processes” of the subsidiary of Lender Processing Services Inc., based in Jacksonville, Fla., according to the company’s annual securities filing released in February. People familiar with the matter say the probe is criminal in nature.

Michelle Kersch, an LPS spokeswoman, said the subsidiary being investigated is Docx LLC. Docx processes and sometimes produces documents needed by banks to prove they own the mortgages. LPS’s annual report said that the processes under review have been “terminated,” and that the company has expressed its willingness to cooperate. Ms. Kersch declined to comment further on the probe.

A spokesman for the U.S. attorney’s office for the middle district of Florida, which the annual report says is handling the matter, declined to comment.

The case follows on the dismissal of numerous foreclosure cases in which judges across the U.S. have found that the materials banks had submitted to support their claims were wrong. Faulty bank paperwork has been an issue in foreclosure proceedings since the housing crisis took hold a few years ago. It is often difficult to pin down who the real owner of a mortgage is, thanks to the complexity of the mortgage market.

During the housing boom, mortgages were originated by lenders, quickly sold to Wall Street firms that bundled them into debt pools and then sold to investors as securities. The loans were supposed to change hands but the documents and contracts between borrowers and lenders often weren’t altered to show changes in ownership, judges have ruled.

That has made it hard for banks, which act on behalf of mortgage-securities investors in most foreclosure cases, to prove they own the loans in some instances.

LPS has said its software is used by banks to track the majority of U.S. residential mortgages from the time they are originated until the debt is satisfied or a borrower defaults. When a borrower defaults and a bank needs to foreclose, LPS helps process paperwork the bank uses in court.

LPS was recently referenced in a bankruptcy case involving Sylvia Nuer, a Bronx, N.Y., homeowner who had filed for protection from creditors in 2008.

Diana Adams, a U.S. government lawyer who monitors bankruptcy courts, argued in a brief filed earlier this year in the Nuer case that an LPS employee signed a document that wrongly said J.P. Morgan Chase & Co. had owned Ms. Nuer’s loan.

Documents related to the loan were “patently false or misleading,” according to Ms. Adams’s court papers. J.P. Morgan Chase, which has withdrawn its request to foreclose, declined to comment.

Linda Tirelli, a lawyer for Ms. Nuer, declined to comment directly on the case.

Ms. Kersch said LPS didn’t actually create the document and that the company’s “sole connection to this case is that our technology and services were utilized by J.P. Morgan Chase and its counsel.”

While the majority of foreclosures go unchallenged, some homeowners have won the right to keep their homes by proving the bank couldn’t show, on paper, that it owned the mortgage.

Some lawyers representing homeowners have claimed that banks routinely file erroneous paperwork showing they have a right to foreclose when they don’t.

Firms that process the paperwork are either “producing so many documents per day that nobody is reviewing anything, even to make sure they have the names right, or you’ve got some massive software problem,” said O. Max Gardner, a consumer-bankruptcy attorney in Shelby N.C., who has defended clients against foreclosure actions.

The wave of foreclosures and housing crisis appears to have helped LPS. According to the annual securities filing, foreclosure-related revenue was $1.1 billion last year compared with $473 million in 2007.

LPS has acknowledged problems in its paperwork. In its annual securities filing, in which it disclosed the federal probe, the company said it had found “an error” in how Docx handled notarization of some documents. Docx also has processed documents used in courts that incorrectly claimed an entity called “Bogus Assignee” was the owner of the loan, according to documents reviewed by The Wall Street Journal.

Ms. Kersch said the “bogus” phrase was used as a placeholder. “Unfortunately, on a few occasions, the document was inadvertently recorded before the field was updated,” she said.

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