Foreclosure Defense Florida

The Consequences of Foreclosure Fraud– Fundamental Instability in The Real Estate Market For Decades

Since the foreclosure crisis began, myself and a chorus of responsible, ethical attorneys have been screaming at the top of our lungs to judges and anyone else that might listen…




and finally


Our realtor friends are starting to catch on…read the following article which is quite chilling…

-by George Mantor

Agents involved in foreclosures and short sales may need to begin to disclose the possibility of serious defects in title associated with these types of lender controlled sales.

If recent court decisions are any indication, we are headed for an explosion of litigation in this area. And now, Massachusetts Courts have revealed the possibility that unlawful foreclosures, dating back to 1989, might be invalidated and that buyers of foreclosed properties and short sales may have clouded titles. The implications are enormous for title companies, bankruptcy attorneys, real estate agents, those facing foreclosure, and those who have lost their homes. The problem stems from the collision of two worlds.  It illustrates what can happen when the new world fails to acknowledge or understand the old.  It is change that takes place without the cooperation of all affected parties. Real property law has an ancient tradition.  But, its laws and their purpose are not always apparent to those who want to change those traditions to benefit themselves. In the case of maintaining a public chain of title to real property, it was thought to be essential and generally required by the law. For hundreds of years, no one ever thought of any reason to change it.  It was thought to be part of the public good. That is, until Wall Street saw the money making potential in Credit Derivatives.
Credit Derivatives are packages of debts such as car loans, student loans, credit card debts, and mortgage loans to name a few.  These are collected, rated according to their risk, and sold to investors around the world. One small problem; if you are going to bundle mortgages from every county in the country, you would have to physically send someone to every county recorder’s office on multiple occasions and pay multiple recording fees.  It was costly and cumbersome to those responsible for affecting the recordings. Their solution?  Stop recording the assignments in public and track them instead in an electronic data base that the major lenders would operate through a cooperative entity.  Say hello to Mortgage Electronic Registration Systems, affectionately known as MERS.  Not only did it save them a fortune in county fees and manpower, it turned out to be a cash cow.
Well, good for them, right?  They figured out how to bring technology to the process and were handsomely rewarded.  Never mind that the cost of maintaining a county recording system is paid, in part, by the recording revenue. They still have to maintain the apparatus, but now they aren’t receiving the revenue intended to maintain the system.  Of course, this comes at a time when many counties are struggling to provide necessary services to their residents.
But, as with many new ideas, there are unintended consequences that are now coming to light as state after state are enforcing basic property rights.
On October 14, 2009, Judge Keith Long of the Massachusetts Land Court said in his ruling, ” The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature.”
He was referring to the industry practice of trading notes endorsed in blank, in direct violation of securities law.  Here is what he said on that point; ” The blank mortgage assignments they possessed transferred nothing”¦in Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed.  The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form.”
Two years earlier, Judge Rosenthal in re Schwartz, found that there was no evidence that the note itself was assigned and no evidence as to who the current holder might be.
On August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court likened MERS to a ” straw man” and not a party of interest with the right to foreclose.
” Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable.  The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note.  Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of a default. The person holding only the deed of trust will never experience a default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not hold the deed of trust.”
On October 21, 2008, Judge Samuel L. Bufford noted in his ruling that California codified the principal in 1872 in Carpenter v. Longan: ” Given that “˜the debt is the principal thing and the mortgage an accessory,’ the Supreme Court reasoned that as a corollary, “˜the mortgage can have no separate existence.  An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”
On August 19th, 2008, Judge Linda B. Riegle concluded, ” There is no evidence that the named nominee is entitled to enforce the note or that MERS is the agent of the note’s holder.  Indeed, the evidence is to the contrary, the note has been sold, and the named nominee no longer has any interest in the note.”
On March 19, 2009 the Supreme Court of Arkansas found that MERS was not the beneficiary under the deed of trust, although so designated in the deed of trust, because it did not receive the payments on the underlying debt.
On October 31, 2007, U.S. District Judge Christopher Boyko dismissed 14 foreclosure actions and delivered a strong admonishment in a footnote:
” Plaintiff’s “˜Judge, you just don’t understand how things work,’ argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process”¦There is no doubt that every decision made by a financial institution in the foreclosure is driven by money.”
When you consider the origin of this problem, it is hard to disagree.  If the foreclosing entity didn’t loan the money, the original note was sold, the location of the note is unknown, and it isn’t even clear what would happen to the proceeds of the eventual sale of the property to a new owner.
Until recently, MERS had succeeded in most foreclosure actions.  In non judicial foreclosure states like California, there is no judicial review of the elements of a foreclosure.  Unless the borrower files for Bankruptcy or brings a law suit against MERS alleging RESPA or TILA violations, there is no opportunity for the borrower to challenge the foreclosure.
In judicial foreclosure states, there is a law suit brought by the party entitled to payment on the defaulted loan.  Not the trust, but the actual possessor in due course of the original note.  Its part judicial procedure, part uniform commercial code and part ancient property law.
But, the securitization business is so complicated, intentionally so, that defendants, most of their legal representation, and the judges rarely considered the consequences to the real parties in interest.  This will continue until enough people understand the importance of the actual note and its relationship to the property.
Many homes have been unlawfully foreclosed by entities not entitled to anything. The former owners of these homes have rights that will need to be addressed.
People who applied for mortgage modifications and received them may have gotten approval from a bank employee with no authority to change the underlying terms of the securities in the pools.
Many people bought these homes and have potential future claims.  If there is a cloud on title, the new owner is at risk of being unable to sell or encumber the property.  If the foreclosure were unlawful, the borrower is entitled to their property.  And, there is a very real possibility that the true holder of the actual note, once and if ever this mess is sorted out, could come forward with the actual note.

It isn’t important to only those in foreclosure. For those seeking loan modifications, potential buyers of short sales and foreclosures and those acting in a fiduciary capacity on their behalf, you may soon be demanding, ” Show me the note.”


  • Stupendous Man says:

    I’ve had numerous discussions with attorneys, and with real people, that understand the shattering of centuries of property law. This fellow most of the highlighted cases and seems to have drawn the right conclusions (Deutsche v McRae in New York state courts, and Wells v Jordan in Ohio state courts are certainly worthy of mention).

    Yep, decades to come.

  • Alina says:

    Mr. Weidner,

    There is a new certification in town for real estate agents who specialize in “distressed properties” – Certified Distressed Property Expert . Maybe they ought to be aware that any purchaser of a foreclosure or short sale is buying the property without a proper chain of title.

    Interestingly, in an effort to save a bit of my credit, I placed my home on the market. The agent I hired became a CDPE in the middle of the contract term with him. He then tried to talk me into a short sale and/or deed in lieu but told me that I would have to bring at least $10-15k to the table as payment for the closing costs. I then told him that I had rescinded the loan, to which he replied, that was impossible and I could not do that. According to his website, the bank is supposed his fees.

  • Matt says:

    Alina puts it well. I have an agent that (to me) seems pretty legit and she seems to be doing reasonably well, who also just got “certified” as a like I don’t know, “short sale expert” or something like that…maybe it was a CDPE…all by taking a day-long Realtor class (this is in Massachusetts) and getting the certificate.

    What a joke. The whole game has changed, and few know the new rules or are willing to learn them. While I can see sporadic lawsuits being brought down the road when some realize their foreclosure was illegal and shouldn’t have happened, most people rolled over and gave up long ago.

    These FC’s are being rubber-stamped through the recorder’s offices, because it’s easy filing fees for them. No one there wants to try and hash out hundreds, if not thousands of properties in their area to see if things were legit or not.

  • Stop Whining says:

    Let me get this straight, homeowners who rightfully and knowingly have signed a contract and a legal promissory note are now blaming the banks for their unwillingness to pay back the loan. They are scamming banks by saying ” show me the note.” You knowingly under your own content signed a promissory note to pay back the loan. Hence that is a legal contract, a PROMISE. Who cares where the note was sold. I don’t care if a pile of dirt owns the note, you have a legal obligation and contract to pay back the note or you should go through foreclosure. What a scam, you should not have the right to get a loan! You know you owe money on a loan, yet you try and intentionally deceit the lender by saying ” show me the note”. Last time I checked that is fraud: intentional deception made for personal gain!

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