Didyouweekend is a website about weekend travel and fun, so I had to think long and hard about starting a money column. But I am. We can thank a lot of people for this: My friends Mark, Perla, Donovan, Bill and several others. They knew me way back when, the old Richard, the one who was going to take on the world and set it straight. And then, puff, like blowing out a match, Richard, now the cancer survivor, went away just when the world is a mess and the mortgage debacle blows up in the face of millions. I was the quintessential expert on mortgage fraud long before there was mortgage fraud.
I called this ten years ago in my book, “Collection Agency Harassment”. I called it again 8 years ago when I penned—but didn’t publish–”Mortgage Fraud”. And I restated my position for a third time six years ago when I wrote The New York Posts John Crudele—one of the few business columnists I have great respect for—and told him, “You are about to witness the greatest illegal transfer of wealth in American history.”
That transfer of wealth, of course, is from you to them. I am not exactly who “them” is yet. But we will find out—as soon as we learn the mysteries of the dollar bill.
I cannot cover a decade of mortgage fraud in one column, so where do I start?
How about at the end. That’s right, the end. Today. Right now. We are going to work backward on this one, and it’s going to be about loan modifications. Banks are scrambling to modify mortgages right now, but should you? Is their intent downright fraudulent?
Four years ago I was begging people to modify. That’s really all we had, and all this new litigation about securitization was just coming out.
By “modifying”, however, are you actually giving the banks a valid lien in your home, that they didn’t have? Is modifying finally giving the bank what it didn’t have before you modified: The right to foreclose? Could they foreclose in the absence of modification?
Possibly not, because they don’t have the right to sue you, called “standing”. By modifying, they are covering up their tracks, and you are now giving them standing in the form of a new and valid lien on your home, since the old one may have been invalid.
I would have thought these concepts were ridiculous, but then, in 2011, a series of fascinating cases started to work their way through the court system. One is called Silverberg, and I’m giving the cites below. But let’s go back to, say, 2004, during the real estate gold rush, to see what happened.
Banks were giving mortgages to everyone. Everyone. They didn’t care if you qualified for a mortgage or not, because all these mortgages were getting bundled together and sold on Wall Street as investment devices. Then, investors from all over the world could buy them as investment vehicles, just like they could stocks and bonds. The process of taking the documents you signed at the closing table and the journey to Wall Street is called securitization.
The Notes with the lenders were signed later on with something called an “Alonge” and stamped “Pay to the Order Of, and worked their way to Wall St.
The mortgages, on the other hand, the other document you signed, usually got assigned to an entity known as MERS, which was a shell of a corporation owned by banks.
POINT I: The Note went one way, the mortgage went the other, to MERS.
When a loan went into default, MERS then “assigned” the mortgage to a trust somewhere for the purposes of foreclosure.
Confused? Gets better.
MERS “assigned” the Notes using robosignors. One robosignor worked for the law firm of Stephen Baum, now shut down, one of the biggest foreclosure mills in New York State. The “assignor” was a lawyer who worked for him. That’s right, the robosignor was his employee, who made sworn affidavits that she was an agent for MERS, not disclosing her agency status with Baum, and then assigning from MERS to the trust foreclosing, as the trust now had the Mortgage.
Still with me?
There’s three issues here: Was the robosignor proper, what authority did MERS have, and what exactly did MERS assign?
The robosigning is the easy one. Walk into any bank, and try and get something notarized, and you need to remove a kidney for blood typing to id you. These rules didn’t apply to robosignors.
The harder part of the question is MERS.
Here’s the bottom line: MERS got the mortgage, some Wall St firm got the Note. WHEN THE NOTE AND MORTGAGE GOT SEPARATED, THE RIGHT TO FORECLOSE GOT LOST.
Yes. You heard me. There are several cases reporting this: 1) all transfers from MERS are wrong, because MERS never had authority to transfer ANYTHING, it was a shell of a company.
- Even if MERS did have anything, it had the Mortgage, not the Note. So they can’t foreclose.
To have standing to foreclose, the party suing you needs both the Note and Mortgage. But these all got separated during the securitization process. Most mortgages were separated from the Note, whether in default or not.
The question remains whether anyone has the proper standing to sue anyone in foreclosure, since Note and Mortgage were separated.
BY MODIFYING NOW, YOU ARE REINDORSING THE NOTE AND THE MORTGAGE, SO THE BANK WILL NOW HAVE THE TWO TOGETHER TO FORECLOSE.
MERS and the robosignors went the way of the dinosaurs. So how can banks now recoup the trillions of dollars they wrongfully sold to Wall Street? By separating Note and Mortgage, they lost control of it and no longer own anything. So hey, let’s have the consumer modify, and this time, we won’t be stupid! This time f the consumer defaults, we really can take his house, because this time, we’re keeping the Note and Mortgage together!!
I am seeing some banks suddenly say they have “the Note, too”. It’ll be interesting to see how these cases play out, when our financial system is already under such scrutiny.
The backlash, of course, noted by one judge, is: ”I know what this does to the banking system.”
Too bad. I know what it does to consumers, too.
Baum, by the way, with his robosignor, and the thousands of homes he foreclosed on? The US Attorney fined him 2 million dollars—and kept the money.
The Attorney General of New York fined him 4 million, and he kept the money, too.
New Yorkers who lost their home to the robosignors? Still waiting.
When Baum’s office had its Halloween party, the employees dressed up as homeless people. Funny, huh? He lost a few big accounts, and closed down.
Photo from the NY Times. To see others, see:
HOW can these people live with themselves? Employees of a foreclosure mill dressing up like homeless people?
I am not giving legal advice in this column. It is for entertainment purposes only. I am not telling you to ignore court orders and decisions. I am telling you to investigate when a modification offer is made to you. You may be walking into quicksand. You may be perfecting a new lien on your house when none existed.
Remember, this column is for entertainment purposes only.
Just like a Halloween party.
“The principal issue ripe for determination by this Court, and which was left unaddressed by the majority in Matter of MERSCORP(id.), is whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS’s right to, or possession of, the actual underlying promissory note. …Therefore, assuming that the consolidation agreement transformed MERS into a mortgagee for the [***15] purpose of recording–even though it never loaned any money, never had a right to receive payment of the loan, and never had a right to foreclose on the property upon a default in payment–the consolidation agreement did not give MERS title to the note, nor does the record show that the note was physically delivered to MERS….in sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign [***18] the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose.” Id.
See also, following Silverberg: ONEWEST BANK, FSB, as successor in interest to INDYMAC BANK, FSB, v. JOHN A. GALLI, GEORGANN GALLI, 2012 N.Y. Misc. LEXIS 1377; 2012 NY Slip Op 30762U (N.Y. S. Ct., Richmond County) “In a mortgage foreclosure action, a plaintiff must be both the holder or assignee of the mortgage and the underlying note at the time the action is commenced.3 Here, as was the case in Silverberg, MERS purportedly transferred the WMC mortgage to Washington Mutual Bank, FA in connection with a consolidation as nominee. In turn, MERS as the nominee of Washington Mutual Bank, FA assigned the mortgage to Washington Mutual Bank. Subsequently, Washington Mutual Bank assigned the mortgages, prior assignments and CEMAs to MERS as nominee of IndyMac Bank, FSB. The Appellate Division, Second Department found in [**6] Silverberg that “. . . as ‘nominee,’ MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the lender.” Here, as was the case in Silverberg, [*8] MERS lacked the authority to assign the underlying notes. Consequently, how the plaintiff came into possession of the mortgages and notes in this case is suspect.”
Followed by WELLS FARGO BANK, NATIONAL ASSOCIATION AS TRUSTEE FOR WATER FALL VICTORIA GRANTOR TRUST, JEMCAP SERIES C, v. SIDDIQUI GROUP OF COMPANIES, LLC, MOHAMMAD J. SIDDIQUI,2012 N.Y. Misc. LEXIS 2448; 2012 NY Slip Op 31376U (N.Y. Sup. Ct. 2012) “In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced. U.S. Bank National Assn. v. Dellarmo, 942 NYS2d 122, 2012 N.Y. App. Div. LEXIS 2437, * 4 (2d Dept. 2012), quoting Bank of N. Y. v. Silverberg, 86 A.D.3d 274, 279, 926 N.Y.S.2d 532 (2d Dept. 2011). “Where a defendant raises the issue of standing, the plaintiff must prove its standing to be entitled to relief. Id., citing, inter alia, CitiMortgage, Inc. v. Rosenthal, 88 A.D.3d 759, 931 N.Y.S.2d 638 (2d Dept. 2011). Moreover, while assignment of a promissory note also effectuates assignment of the mortgage, the converse is not true; as a mortgage is merely security for a debt, it cannot exist independently of the debt and, thus, a transfer or assignment of only the mortgage without the debt is a nullity and no interest is acquired by it. Id.”