MOTIONS TO DISQUALIFY COUNSEL

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EDITOR’S COMMENT: This is more important than you might think. First of all, it puts the other side on the defensive and the outcome is not nearly as inevitable as you might otherwise think. Second, counsel often represents facts that are not admitted in evidence, so you want to cast doubt on the credibility of counsel. At the very least you want to be able to say that the representations of counsel should not be given any more weight than your representations — those things are for determination at a hearing where evidence is either admitted or excluded.

And thirdly, the fact is that the lawyer standing there usually has no idea who hired him or his firm. It is all distributed electronically and the lawyer has not confirmed that a retainer agreement is in place, nor has he had direct contact with the supposed “client.” So not only are his representations suspect, but his first statement “Good Morning, Your Honor, my name is John Smith and I represent the lender,” is subject to attack. First, there is no evidence in the record that he represents anyone, much less the lender. Second, the client that he supposedly represents might or might not be the lender. That is a factual issue to be determined, So the appropriate objection and motion to strike should be made.

The long and short of it, as Stopa points out below, is that these cases are frequently won and lost on civil procedure rather than what laymen perceive as right and wrong.

Taylor Bean & Whitaker – Proof of a Legitimate Transfer?

Posted on December 5, 2011 by Mark Stopa

Those of you who have followed my blog from the beginning will recall the Motions to Disqualify Counsel that I had been filing on a somewhat regular basis, where appropriate. I blogged about one such motion here. http://www.stayinmyhome.com/blog/2010/06/conflict-of-interest-fraud-on-the-court-motion-to-dq-counsel/
My argument, essentially, was that the bank’s lawyers had a conflict of interest where they had drafted an Assignment of Mortgage with the intent that their own client execute that AOM so as to convey standing.

The bank’s argument in opposition was, essentially, two-fold. First, they argued that the assignment of mortgage was irrelevant because the bank’s standing was predicated on an indorsement on the Note, not an AOM. Second, they argued that the AOM was executed properly because MERS authorized that bank representative to sign it, even though that person was also an agent/employee of the bank which was receiving the Note/Mortgage.

Personally, I’ve always disagreed with the bank’s arguments. After all, how can self-dealing of this nature be blessed by our courts? “I’m representing MERS for purposes of this AOM, even though I work for Citimortgage, the assignee of this AOM” Seriously? Unfortunately, various judges disagreed with me on this issue, so I largely stopped pushing these motions. That said, where the facts really bothered me, I’ve kept pursuing them. In one case, for instance, MERS purportedly assigned a mortgage as nominee for Taylor Bean & Whitaker purported assigned a mortgage to a securitized trust in March of 2010. However, TBW had filed bankruptcy in August, 2009, so, absent some sort of explicit consent from a bankruptcy trustee, it seemed clear to me that, under federal law, TBW could not assign the mortgage to anyone because, once it filed bankruptcy, it did not even own the Note/Mortgage. In other words, TBW may have executed an AOM, but the Note/Mortgage wasn’t its to assign! As a result, and because the lawyers participated in this AOM, I filed this Motion to Disqualify Counsel.
http://www.stayinmyhome.com/blog/wp-content/uploads/2011/12/DQ-Motion.pdf

I had a hearing on this motion a few months ago in Tampa, and the judge agreed with my concern about how TBW could have assigned a mortgage when it was in bankruptcy. The judge also seemed to agree with my belief that this issue was not mooted by any indorsement, particularly since the plaintiff had attached the AOM to its Complaint and was expressly relying upon it for standing. As such, the judge ordered the opposing side to produce evidence showing the authority of TBW to convey this Note/Mortgage to the securitized trust as of the date in question.

Despite many weeks to do so, the bank produced nothing. As a result, the judge just issued an Order granting my Motion to Disqualify Counsel. As such, the case is still pending, but the bank must hire a new lawyer.

Whether that particular law firm or some other firm represents the bank may not seem like that big of a deal. In my view, the issue is much bigger. If the securitized trust or its attorneys were not able to produce evidence showing TBW was authorized to convey the Note/Mortgage, even when ordered to do so, then that’s a HUGE deal. After all, in how many other cases might the plaintiff be unable to show that an assignor like TBW lacked the authority to convey a Note/Mortgage due to a pending bankruptcy?

Remember, just because an Assignment of Mortgage shows up in a court file doesn’t mean the assignment was authorized. After all, the bank executing the assignment may not have the authority to do so, as, e.g. with a bankruptcy, it may not even own what it’s trying to assign.

Similarly, just because a Note has an indorsement doesn’t mean the indorsement was furnished by an entity with authority to indorse the Note. If, for example, the entity was in bankruptcy, then it may not have the authority to indorse the Note even if it wanted to do so.

Establishing that the prior owner/holder of a Note/Mortgage actually had the authority to assign or convey those documents is a significant, bona-fide defense in a fair number of foreclosure cases. Make sure you’re not overlooking it!
Mark Stopa Esq.

http://www.stayinmyhome.com

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18 Responses

  1. I think attorney Gregory Bryl stated it appropriately: MERS is a shell business (think that’s how he framed it). My own opinion is that it’s a
    front for organized crime, whether by design or possibility. MS says my claim of RICO violations by these players is errant. No, I don’t think so. State lines are crossed in efforts to steal someone’s property. We have all been reluctant to use the word “steal”, certainly before the judiciary, the same ‘steal’ used to describe the action of a car thief, but that’s the right word when someone tries to take something it has no interest in and or knows a debt it goes after has been paid. Dot (alleged) trustees who do not honor their obligations to the trust are just as guilty.

  2. There is no such thing as “apparent authority” when it comes to real estate. Probably not much else, either. The trouble begins for the homeowner when the dot trustee, who is the trustee of a trust for pete’s sake, does not ascertain that the party telling him to act is the proper party. The dot trustee is not the minion of some alleged beneficiary or servicer, nor of an actual beneficiary. Nor is he the agent of the beneficiary. He is a trustee and he should act like one. He has an obligation to do so. It’s in the job description. First of all, he needs evidence the party claiming ben status is the ben. If anyone other than the beneficiary is telling him to act for the alleged ben, he needs evidence of that authority from the beneficiary. A true agent, one with an expressed agency in writing, for the beneficiary could probably legitimately provide these things to the trustee.
    The banksters’ problems, of course, are that these authorities don’t exist. Their practices were slipshod and now here’s a real “apparently”, their business model was apparently designed to accomodate any manner of ills, such as addressed in this post and in dcb’s comment. There are two things enabling this garbage: MERS and the trustee not meeting his duties to the trust created by the deed of trust.

  3. This piece by Stopa is probably the sinngle most important description of the questionable authority upon which the foreclosure processes rest. It is succinct and clear–but I urge all readers to read it two or three times to make sure it sinks in.

    The big-bank trustees today will often admit that they have lost control of the servicers. Often a servicer operates with little or no contact with the nominal owner of the note–a bank trustee for pensioners basically.

    A banker for a big bank explained to me these facts two days ago:

    Assume a loan amount of 100,000
    Assume the house appraised per county records etc same as “independent” appraisal at $85,000
    Now the documents executed by the lawyers etc for the SERVICER—cause a sale to occur and the SERVICER bids in 66% in the name of the unknowing trustee bigbank. The deed is made in the name of the bank c/o SERVICER—–and added to the SERVICERs REO inventory. Now the SERVICER property magr agrees to sell the property for $30,000 to his best buddy for a pre-agreed kickback. As the big bank rep told me–once it goes to forecosure–the bank trustee no longer expects to see a penny. the Bank trustee—and the pensioners it represents receive NOTHING. All of the $30k goes to the SERVICER.

    To do all this the servicer’s agents are busily executing all sorts of documents AS IF THE SERVICER HAD FULL AUTHORITY FROM THE BANK-trustee. This may not be true–is there a POA on file in the County deed recorder’s office? Typically the servicer that filed the complaint in the name of bigbank-trustee is simply coasting on the apparent authority to which he made a naked claim.

    The servicer will sign the deed out to the next buyer –in the name of the trustee–w/o POA. The deed is probably as meaningful as if i deed out my neighbor’s house. What if you did a DIL in exchange for a release of liability—its a promise to indemnify rather than a release in fact. If the SERVICER has no POA what use is the release to bind the banktrustee?

    Even if the SERVICER gets hold of a note or facsimile thereof and marks it paid or canceled or some such designation——is it really if there is no POA from the bank-trustee?

    In the recent case in Texas Federal District Court, one servicer American Home Mortgage Servicing Inc filed a claim with HUD to obtain FHA default insurance. HUD refused. AHMSI sued HUD to recover the FHA default insurance. The district court on July 31, 2011, dismissed AHMSI’s suit stating that as a servicer [only] AHMSI could not meet the requirements of standing to collect on the FHA coverage. Namely AHMSI could not as servicer negotiate the promissory notes over to HUD and could not execute deeds of foreclosed property–assignments whatnot to HUD. One way one might characterize the Order is that AHMSI is essentially a stranger in the eyes of the law. AHMSI could still come into court and refile with a sheaf of POAs in hand presumably–but w/o those it lacked authority. This fact is usually overlooked and both attorneys and laymen alike fall into the trap of relying upon mere apparent authority to allow seizure of homes as well as subsequent resale of them–this is the newest HUGE BREAK in the chain of title to properties.

    Lastly–if you by a car from a thief that made a good facsimile title—-you get stopped for speeding–the police determine the car was stolen using a fake title–you lose the car period. If you got too good a deal on it they might add you to a criminal charge for knowing possession of stolen property.

    What is the diference with a house? The bona fide purchaser rule may come into play–but for the flippers out there—how can you clain BFP status if you paid substantially less than FMV—–and maybe KNEW THE SERVICER REPRESENTATIVE. For you would-be flippers, Id advise a walk through a county jail and ask myself if the discount for dirty dealing is worth it.

  4. btw, last I read, Upke had gotten the case remanded BACK to state court, a feat rarely seen.

  5. @ johngault, I don’t know where you are in your case, but if I’m understanding it correctly, it would appear that due to the non-legal nature of the foreclosing entity, the court would lack subject matter jurisdiction, and as you know if that’s the case, they can’t move forward one step until that issue is decided, putting a halt to the you said/they said crap. No?

  6. Hey, the Upke case is noteworthy for another reason. A TON of discovery was done by Upke, including depositions of a MERS’ real officer and an attorney at what appears to me a f/c mill, got docs like the psa, etc. This shows it CAN be done. I doubt Upke had a higher need to know clearance than the rest of us, so this tells me it’s all about procedure and knowing certain rules.

  7. @E. Tolle – I haven’t read Upke lately, but taking what you said as what’s in the case, yes, I’d say the fact that the AWL which originated the loan was not a MERS’ member should’ve or could’ve been the ticket, at least in that case. And I am getting old because I don’t recall getting that. Good call. Still, they did get an adj about the HAMP private right of action.
    Which reminds me, if anyone got a loan from “Bayrock Mortgage” prior to January of 2007, you might be able to get rid of your loan imo or at least make some serious waves. They were the guys in Walker who apparently were naming MERS on dots prior to that date but were not members.
    And here’s one for you, e.tolle: I asked this the other day and got no responses here. If an entity which does not legally exist is named in the note as the payee, I believe there is NO note as a matter of law. Isnt’ that so?
    In my case, the guys making the loan had had their registration as a foreign corporation permanently revoked by the sos (which also meant they had no lending license here fwiw) prior to the loan. If the point of contact were in my state and the company had no legal existence in my state, I think I appropriately argued the loan was made by one or more individuals, not a business because of lack of corporate structure, but the court blew me off like a lot of things.

  8. @ Johngault, thanks for the case read. Interesting to say the least. Disheveled as hell as well. Your thoughts on the following? Anyone?

    IMO, this case goes off the tracks before it even gets warmed up. All the while they’re pointing towards why they believe on information and belief that AWL is CHL, when in fact, the denial of that is their case. Why? Because AWL was never a MERS member, and as you know, simply naming MERS as the bennie or the nominee does squat if there’s not a member involved.

    Yes, CHL wrote loans in the name of AWL that might qualify as legit, because these were originated as CHL d/b/a AWL, and CHL was a MERS member. However, and it is obviously this way in the case you posted, that AWL was never identified with CHL on the origination docs, which is fatal in more ways than one.

    First off, they’re hiding the true lender. Second, they more than likely didn’t have the legal right to do business under this fake entity as per state license. Third and most important as I mentioned above, AWL not being a MERS member defeats any and all assignments, whether to CHL, PHH, or the trustee in this case.

    BTW, Hultman admits as to America’s Wholesale Lender in his deposition that “the one that was a d/b/a (to CHL) was a member…..which can mean nothing BUT the fact that AWL alone was never a member. Which leads me to believe that they argued the wrong end of this case. Just my opinion.

  9. @Chris

    I sold insurance for awhile and you are right about the purchaser having to have an “insurable interest”. However, Credit default swaps (CDS) should be classified as insurance products but they aren’t.

    This is a big scam. It’s a loop hole that allows the banks to create crap sell it and bet against the crap they made. This is also why they’re unregulated and unrecorded.

  10. carie
    almost all the deeds of trusts in ca are gse form models which state “the chance of that the security or obligation will be sold on the secondary mortgage market.” as 3 ck boxes
    1-definite 2-highly likely 3-will not

  11. Tuesday 7 December 2011

    Thank you, johngault, for the excellent cite you provided. A must
    read for anyone with a MERS-connected foreclosure case, especially
    with a MERS “assignment” of note and mortgage.

    Cheers!

  12. invisible man:

    I understand what you are saying, but I am asking about a forensic analysis of New Century a broker/servicer of loans, who purchased insurance, independently, on loans they were betting would default. There is actually a spread sheet with calculations of “probable” defaults from marginal borrowers, in place and insurance was purchased on these potential losses. This in part, is the way many of these folks were compensated for mortgages that went south. The PSA agreements in place stated “repurchases or buy-backs” were supposed to take place to the investors, not compensation for them, the servicer. My thoughts are they have no legal right to these proceeds, they are in default of their own agreements in the PSA and in buying insurance, knowing the mortgages were suspect, they defrauded the insurer, the pool (if there is one) and the investor.

  13. This has probably been addressed here before, but isn’t the fact that our original “contract” said NOTHING about the fact (although they didn’t really do it), that the “mortgage” was going to be “securitized” enough for proof of fraud to support unilateral rescission? Anybody?

  14. Yes, someone please explain what defenses one has against their servicer with a Taylor, Bean, & Whitaker note endorsed in blank by TBW and transferred to another servicer after they filed bankruptcy with MERS as nominee. There was a post a few months ago about how if you have a Taylor Bean originated mortgage then your defense for foreclose is already laid out for you. What does this mean? Someone please explain how.

  15. What does this mean for those of us not in foreclosure, but had a Taylor&Bean & Whitaker mortgage with MERS as mortgagee, TB&W as lender, a note with TB&W, and when TB&W went bankrupt the paperwork went to CENLAR with no assignment in the county records and no indorsement of the note ??
    All CENLAR has is a copy of the documents as originally signed, not even the recorded copy of the mortgage. Is there a potential liabilty here from an unseen investor or “noteholder” if I sell or refinance?

  16. @Chris The insurance purchased by the lender is built into your rate.

  17. A group of awesome attorneys representing, pro bono I believe, a homeowner in NJ did a bang up job of forcing the banksters to retain separate counsel, citing conflict of interest. Doing so has ups and downs, imo. You will have more than one bankster attorney to contend with, multiple pleadings, etc. On the other hand, at a minimum, it hits them where it hurts: in the checkbook. They dont’ like getting hit in the checkbook one bit because they are on fee schedules. I know there are a lot of links here, but this is truly an informative read. It does not only articulate reasons for separate counsel for, say MERS and bankster 3904, it has other good info:

    This is the Upke case in NJ and I think it was the first in the country wherein it was adjudicated that the homeowner had a private right of action under HAMP. It was also in this case that these attorneys did a great job of the depo of Wm Hultman, a real MERS’ officer who is their go-to-guy in litigation and declarations. While I no longer follow this case, when I was, I was particularly in awe of the Upke attorneys who are dedicated, hard-working, and brilliant.

  18. Mark: Are you here?

    I want to know if the insurance on the defaults is legal to procure for the servicer or broker of the loan. I have worked in insurance and remember very clearly, “one must have an insurable interest in something” to purchase insurance and collect proceeds. You know where I am going with this, I think. My thoughts are: if the defaults are insured by servicers, brokers (banks, etc…) is that legal? If so, how? If not, this is also fraud, theft, etc…Thoughts please?

    Just looking at everything that pops in my head while this case evolves. Everything seems suspect from what I am reading and much of it makes no sense, nor is it consistent.

    Thanks in advance! Chris

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