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MCL 600.3204(3) states:
“If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.”
Editor’s Comment and Analysis: We are getting closer and closer as the Judges are seeing past the veil of fabricated paperwork and looking directly into the transactions checking whether there was offer, acceptance and consideration. All three are arguably not present in any of the so-called securitized mortgages because the offer made to the lender/investor is different from the offer made to the homeowner/borrower and the party seeking to assert ownership on the loan never funded the origination nor the purchase of the loan.
In this case the court in Michigan had a specific statute that merely states the obvious: if you are not the original mortgagee, you must prove up chain of title prior to the date of sale. In other words, without that, the “credit bid” is “voidable” which means that it is void if you challenge it. The court didn’t go all the way to saying the foreclosure sale was void, which I would have preferred.
I have personally spoken with the receiver for WAMU and I have read the Purchase and Assumption agreement between Chase, WAMU, the FDIC and the Trustee and noting could be clearer that their was no assignment of loans in that document. The receiver said he was mistaken when he signed the affidavit that Chase is using to say it acquired the WAMU loans “by operation of law.” Nothing could be further from the truth and the behavior of Chase, selecting loans to foreclose, shows that they themselves do not assert ownership over ALL the loans.
The receiver told me in no uncertain terms that if we were looking for an assignment of loans we would not find one because none exists either individually for each loan nor as a group. The purchase and assumption agreement together with other events (sharing in a tax refund) explains why the agreement says the consideration paid by Chase was zero. They “bid” $1.9 Billion but received more than that as their share of a tax refund due WAMU — a tax refund that had nothing to do with mortgages.
The story in the link below is the tip of the iceberg. The final ruling from the Michigan State Supreme Court rested on the specific statute quoted above. But that statute is inherently included in the recording requirement in all the states. Altogether the total of mortgages affected is, according tot he FDIC receiver is around $700 Billion.
While Chase can try to get or fabricate an assignment, the spotlight is on this transaction and it seems unlikely that anyone is going to sign anything from the U.S. Bankruptcy Court or the FDIC. Of course WAMU, now defunct, is unable to execute anything.
Analysis and Practice Tips: This case should definitely be used. But be careful. If it looks like you are knocking out Chase with no other creditor on the scene judges are going to act to prevent a windfall to homeowners. Somehow they will justify their decision unless, as the case progresses, you are able to show (through Deny and Discover) that the money for funding the purchase of $700 Billion in loans was never paid, which would technically mean that the estate of WAMU would need to be reopened to include the loans — which is impossible because of the claim of securitization in which WAMU reportedly sold all of those loans.
To whom and where were the loans sold and in what transaction? What was the consideration paid to WAMU. Answer: Nothing because they didn’t fund the origination of the loans to begin with. They had neither the capital nor available deposits with which they could make those loans.
So educating the Judge means leaving him/her with the notion that there IS a creditor that Chase tried to cheat — the lender/investors whose rights might be equitable or legal, possibly subject to a receiver being appointed and possibly subject to subrogation to prevent Chase from receiving windfall.
The measure of the right to subrogation is whether the claiming party is asserting rights that diminish the value of other claimants. Chase, who received hundreds of billions from insurance and credit default swaps and trillions in Federal bailout programs has no loss on any loan receivable — which is why an accounting from the MASTER SERVICER, Trustee and the other active participants needs to be produced to follow the money trail from investors to all the different places it went, breaking every rule in the book, to the extreme detriment of investors, the financial system, homeowners, workers, and consumers.
Here the investors put up the money, Chase put up nothing, WAMU probably put up nothing, which means the investors are owed the principal due on the loans — if there is any balance due because of payment of insurance, credit default swaps and federal bailouts.
Since the money trail does not lead to the REMIC, there is a high probability of double taxation against the investors because their agents diverted the money and the documents from the investors and their “REMIC” and did the transaction “off record.” That leaves the investors with a claim but no security since the mortgage is not likely to be considered subject to subrogation in favor of the investors — although that is a possibility.
The main point of this and recent articles published in the latest Florida Bar Journal is that in considering subrogation or any other equitable remedy, the claimant must prove “clean hands,” which is going well nigh impossible for nearly all the claimants on these mortgages. The Court is looking for who is REALLY out of the money and who is really going to lose money and how much that loss is going to be because subrogation will not support enhancing the position of the alleged subrogatee.
AND THAT is why Deny and Discover is such a powerful weapon to use against the banks. By challenging the offer, acceptance and consideration starting with the origination and all the way through the assignments you can force them to either fess up to the fact that no money exchanged hands on ANY of their deals. As the proxy for the borrower the investment banks invited investors to advance the money but the offer to the investors was substantially different than the one offered to the prospective borrower. They then named the payee incorrectly which should have been the investors or the REMIC if the money had actually come from a REMIC trust account designating that particular REMIC as the owner of the bank account.
This was done intentionally, fraudulently and improperly for one simple reason. They were going to claim the obvious impending losses as their own, thus depriving the investor of the protection they were promised through insurance and credit default swaps, and enabling the investment bank to retain the difference as “trading profits.”
When all is said and done, Chase can’t prove up any actual loss on these loans because they don’t have any losses. The Michigan court saw the opportunity for moral hazard in Chase’s argument and rejected it. So should the courts in all 50 states.
It is these facts that make the impending “settlements” so insignificant and hopeless for the millions of people who have been foreclosed and evicted on loans whose balances were either non-existent or a small fraction of what was demanded.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: | Actual Loss, Chase, clean hands, Deny and Discover, equitable remedies, Euihyung Kim v. JPMorgan Chase B (1), Florida Bar Journal, Michigan Supreme Court, receiver, SUBROGATION, WAMU