Not So Innocent: Transfer of Servicing Rights

Fundamental questions:

  • How can a “trust” change trustees without consent of the Trustor and/or beneficiaries? Is this statement true: The position of being a Trustee for a REMIC Trust is a salable, transferrable commodity that can take place without the knowledge or consent of the Trustor or the Beneficiaries? Hence were all those changes in Trustees void or invalid and who has standing to complain about it? If there is no Trustor and there are no beneficiaries it isn’t a Trust so no consent from the trust is required. That still leaves open the question “if not the trust, then who?”
  • How can a “trust” change servicers without the consent of the Trustor and/or beneficiaries? Is this statement true: Servicers can decide amongst themselves as to who will be designated the “servicer” on performing and non-performing loans without the consent and knowledge of the creditor. The corollary is that homeowners are bound to  make payments to whoever declares themselves to be an intermediary for an undisclosed creditor.
  • It all boils down to whether the existence and identity of the creditor matters. If not, anyone with a computer and printer can collect money or even foreclose on a homeowner. That in turn raises an interesting specter: homeowners forming their own servicing companies and challenging the other self-proclaimed servicers for the rights to service or enforce the loan. It seems to me that the only way the homeowner servicing company can lose is if an actual creditor steps forward and says that they want the “other guy.” Otherwise the new servicing company can do everything that the tricksters do until they too have a chain of title. Am I wrong? Comments appreciated.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Each “notice” that is sent under the letterhead of a self-proclaimed servicer is actually trojan horse designed to provoke no response. Later they will use that notice as “proof of the matter asserted” and get it admitted under the business records exception. Failure to respond to notices is in effect digging your own grave. The most typical example is when the homeowner receives a notice of transfer of servicing. It doesn’t come from the creditor. It comes from one of the self-proclaimed servicers who do not and will not disclose the name(s) of the creditor.

This isn’t just a notice of transfer of loan servicing. The actual outsource vendor “servicing” the account probably doesn’t include either one of the old or new companies claiming they were or are servicers.

The notice is sent to add cement the illusion of chain of title and to invoke “account stated”. (look it up). Most such notices of a change in servicers are for purposes other than those stated in the notice. They are leveraging the law requiring such notices to be sent in the event that a new servicer has been appointed. The change in servicers is actually a fabrication or farce as some judges have described it. No “boarding” occurs. In fact, the only reason they sent this notice was to produce evidence of your acceptance of the terms of the loan and evidence that both the old and new servicers were authorized. Doing nothing is tacit acceptance of everything written on that notice. And it will be used against you.

The hidden agenda is to put another layer between you and the actual creditor. Such a notice, to be valid, must be executed or acknowledged by the creditor to whom the debt is owed. That would require disclosure of the identity of the creditor — something your opposition will never do even under court order.
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So to summarize the real purpose of this notice is to serve as the grease on the rails that lead to the abyss of foreclosure or justification for a past foreclosure.
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Think about it. You owe money. You’ve been paying a company that claims to be an authorized bookkeeper or servicer. They have never identified a creditor — much less an acknowledgement or direction from the creditor as to where to send your payments.  But they do say that the are acting on behalf of a jumble of words that implies that either a big name bank is involved or a REMIC Trust or both.
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They never say that the “Trust” is the owner of the debt. They only say that enforcement of the note and mortgage is legal because they have “possession of the “original” note and/or an assignment of the mortgage. They don’t say that the Trust owns the debt because the assertion would (a) be lying and (b) would need to be proved by the attorneys who represent the servicer who proclaims authority to enforce on behalf of the trust. Using the words “on  behalf of” or “as trustee for” implies that the named entity exists and owns the loan. But it doesn’t say it outright.
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So now the place that had been doing the bookkeeping tells you to now send you the payments to a new bookkeeper. Why would you accept directions from them? Wouldn’t you want to know that the creditor authorized the old servicing and the new servicing?
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The strategy and tactics of the banks are ALWAYS about strengthening the illusion that they are authorized intermediaries for the creditors. The more paper they fabricate, the more “transfers” they “disclose” the easier it is to get a judge to treat the homeowner as a conspiracy theorist.

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This would be an excellent time to fashion a new QWR and DVL and complaints to AG and CFPB. Anyone can do it using the information from this email. But if you want us to do it for you here are the links (the generic one might be helpful but won’t really get to the essential point in this post):
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QUALIFIED WRITTEN REQUEST challenging the notice.
DEBT VALIDATION LETTER challenging the notice.
AG and CFPB COMPLAINTS citing lack of authority from an undisclosed creditor.

9 Responses

  1. Reblogged this on Deadly Clear and commented:
    When we receive the “new servicer” letter maybe in our QWR we should request the name of the loan boarding person (it should be readily available on the software platform) for our records. It could prove invaluable at some later date.

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  2. @ Iam Lazarus

    If I recall correctly, you too are in Kalifornia, to wit:

    A promissory note is personal property,[9] and the deed of trust or mortgage securing a note is a mere incident of the debt it secures with no separable, ascertainable value,[10] and cannot be separately transferred without the note.[11] An assignment of the trust deed without a transfer of the obligation (e.g., the promissory note) is completely ineffective.[12]

    Comment:
    A purported assignment of the security is void and ineffective unless accompanied by an assignment of the note, and the purported assignment or delivery of possession of the mortgage or deed of trust without a transfer of the obligation secured is either completely ineffective and a legal nullity,[13] or else operates to extinguish the security interest, rendering the note unsecured.[14]

    [FN9] Civ. Code, §§ 657, 663; Kirby v. Palos Verdes Escrow Co., 183 Cal. App. 3d57, 62, 227 Cal. Rptr. 785 (1st Dist. 1986) (disapproved of on other grounds by, Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co., 27 Cal. 4th 705, 27 Cal. 4th 1160a, 117 Cal. Rptr. 2d 541, 41 P.3d 548 (2002)).
    [FN10] Kirby v. Palos Verdes Escrow Co., 183 Cal. App. 3d 57, 62, 227 Cal. Rptr. 785 (1st Dist. 1986) (disapproved of on other grounds by, Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co., 27 Cal. 4th 705, 27 Cal. 4th 1160a, 117 Cal. Rptr. 2d 541, 41 P.3d 548 (2002)).
    [FN11] Nagle v. Macy, 9 Cal. 426, 428, 1858 WL 818 (1858).
    [FN12] Kelley v. Upshaw, 39 Cal. 2d 179, 192, 246 P.2d 23 (1952); Johnson v. Razey, 181 Cal. 342, 344, 184 P. 657 (1919); Adler v. Newell, 109 Cal. 42, 46-49, 41 P. 799 (1895); Polhemus v. Trainer, 30 Cal. 685, 1866 WL 831 (1866); Ord v. McKee, 5 Cal. 515, 516, 1855 WL 843 (1855); Domarad v. Fisher & Burke, Inc., 270 Cal. App. 2d 543, 553-554, 76 Cal. Rptr. 529 (1st Dist. 1969); Santens v. Los Angeles Finance Co., 91 Cal. App. 2d 197, 202, 204 P.2d 619 (4th Dist. 1949).
    [FN13] Kelley v. Upshaw, 39 Cal. 2d 179, 192, 246 P.2d 23 (1952) (mortgage); Hyde v. Mangan, 88 Cal. 319, 327, 26 P. 180 (1891); Polhemus v. Trainer, 30 Cal. 685, 688, 1866 WL 831 (1866). See Johnson v. Razey, 181 Cal. 342, 344, 184 P. 657 (1919). See also Domarad v. Fisher & Burke, Inc., 270 Cal. App. 2d 543, 553, 76 Cal. Rptr. 529 (1st Dist. 1969). This decision reviews the authorities and concludes that a deed of trust, like a mortgage, “is a mere incident of the debt it secures and that an assignment of the debt ‘carries with it the security’ (Civ. Code, § 2936 [other citations omitted]); that a deed of trust is inseparable from the debt and always abides with the debt …;
    and that a deed of trust has no assignable quality independent of the debt, it may not be assigned or transferred apart from the debt, and an attempt to assign the deed of trust without a transfer of the debt is without effect [citations omitted].”
    [FN14] Restatement Third, Property: Mortgages § 5:4 cmt.e (1997) states: “In general a mortgage is unenforceable if it is held by one who has no right to enforce the secured obligation.” Accordingly, “[w]hen a note is split from a deed of trust, ‘the note becomes as a practical matter unsecured.’” In re Veal, 450 B.R. 897, 915-916 (B.A.P. 9th
    Cir. 2011). See also Civ. Code, § 2936; Cal. Com. Code, § 9607, subd. (b).

    Cal. Mortgages and Deeds of Trust Practice §1.39-1.43 (3rd ed., 2008) which states: “the beneficiary of a deed of trust must be the obligee of the debt or the deed in its favor is meaningless.”

    Alternate statutes govern assignment of the debt and security.
    A series of disparate and sometimes inconsistent statutes govern the assignment of the obligation, sometimes with unexpected results for unwary lenders and borrowers. The general provisions of the Civil Code and the common law govern the transfer or assignment of most contract rights that are not “instruments.”[16] Article 3 of the Uniform Commercial Code, as adopted in California, governs the assignment or negotiation of certain negotiable “instruments”[17] but Article 9 of the Code apparently (and obscurely) also governs the transfer of ownership of some promissory notes, whether or not negotiable.[18]

    Comment:
    The manner in which a transfer is effected under each of these statutes has ramifications for the transferee, as in the case of a negotiable instrument where the transferee, if a holder in due course, may not be subject to certain defenses that otherwise could be asserted by the obligor.[19] The mode of transfer also has ramifications for the debtor, who in some cases may be entitled to presentment of the instrument for payment,[20] but in other circumstances may be subjected to foreclosure by a purported transferee without a clear right to confirm that the party demanding payment in fact is the party entitled to payment.[21] However, for certain types of security (particularly residential mortgages or deeds of trust secured by one to four family dwellings), the statutes require notification of the obligor-mortgagor of the fact that the security instrument has been transferred,[22] or at least that the “servicing” of the debt has been transferred.[23]
    [FN16] § 10:43 (assignment of contractual obligations generally).
    [FN17] Cal. Com. Code, § 3102. See 10:45 (transfer of negotiable instrument).
    [FN18] The provisions of Article 9 of the Commercial Code (Cal. Com. Code, §§ 9101 et seq.) govern certain sales of “promissory notes” but not the transfer of rights to enforce notes. See § 10:46 (transfer of notes under Article 9 of the UCC).
    [FN19] § 10:47 (rights of the parties).
    [FN20] Cal. Com. Code, §§ 3501, 3502. See § 10:48 (right to credit for payments made to transferor or transferee).
    [FN21] § 10:49 (transfer of the security; effect of recording).
    [FN22] Civ. Code, § 2932.5. See § 10:49 (transfer of the security; effect of recording).
    [FN23] Civ. Code, § 2937, subd. (b). See § 10:50 (required notifications to the debtor). See also § 36:37 (RESPA; loan servicing regulations).

    BUSINESS AND PROFESSIONS CODE – BPC
    DIVISION 4. REAL ESTATE [10000 – 11506] ( Division 4 added by Stats. 1943, Ch. 127. )
    PART 1. LICENSING OF PERSONS [10000 – 10580] ( Part 1 added by Stats. 1943, Ch. 127. )
    CHAPTER 3. Real Estate Regulations [10130 – 10249.93] ( Chapter 3 added by Stats. 1943, Ch. 127. )

    ARTICLE 5. Transactions in Trust Deeds and Real Property Sales Contracts [10230 – 10236.7] ( Article 5 added by Stats.
    1961, Ch. 886. )

    §10233.2 For the purposes of Division 3 (commencing with Section 3101) and Division 9 (commencing with Section 9101) of the Commercial Code, when a broker, acting within the meaning of subdivision (d) or (e) of Section 10131 or Section 10131.1, has arranged a loan or sold a promissory note or any interest therein, and thereafter undertakes to service the promissory note on behalf of the lender or purchaser in accordance with Section 10233, delivery, transfer, and perfection shall be deemed complete even if the broker retains possession of the note or collateral instruments and documents, provided that the deed of trust or an assignment of the deed of trust or collateral documents in favor of the lender or purchaser is recorded in the office of the county recorder in the county in which the security property is located, and the note is made payable to the lender or is endorsed or assigned to the purchaser.

    (Added by Stats. 1992, Ch. 158, Sec. 1. Effective January 1, 1993.)

    https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=BPC&division=4.&title=&part=1.&chapter=3.&article=5.

    **Pay attention to the legal mandate of “shall” within the context of unity of “and” applied to the “assignment of the [DOT]”…”and the note…is endorsed…to the purchaser.”

    ***This means no blank endorsements allowed!

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  3. Our assignment of mortgage to the trust was defective but the foreclosing bank foreclosed and our protest at the court was lost.

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  4. I agree with you of course, but, what about the [fact] that [most] assignments recorded after a default are to alleged “servicers,” and are not assignments to new “owners of the debt,” at all?!? (ie. new Creditors) How do we use this [fact] against the so-called servicers?

    We know the debt never leaves the REMIC Trust after the closing date (if it made it, in the 1st place), because the loan-contracts are held together (pooled) for 30 years, providing monthly debt payments for investors of the Trust or the certificate holders thereof. The pooled-debt cannot be sold away from the Trust without violating many problematic rules and regulations for doing so. The only “interests” that the Trust can sell are the “rights to service” the pooled loans for said Trust. The “rights” to collect payments on the pooled loans, nothing more, and in fact, the servicer is contractually obligated to make all payments to the Trust regardless whether or not the borrower makes the mortgage payments..

    That means, that [every] assignment of the deed of trust or mortgage after the closing date of the trust, is an assignment of the security instrument separate from the debt it secures, and, is made strictly to a “servicer.” (ie. “Nationstar”) HOWEVER, whenever a so-called-servicer records an assignment of the deed of trust or mortgage, and that servicer is not the owner of the debt or the alleged creditor, [t]hat servicer violates federal law, under 1641f(1,2) of the Consumer Protection Act, which makes clear that a “servicer [shall not] record an assignment of the security just for the convenience of servicing a consumer obligation, unless the servicer owns the debt it’s servicing. (shall not = void ab initio)

    Remember, the SCOTUS (ie. “Carpenter v Longan”) made clear that the debt and its security are inseparable, with the security following the debt automatically, unless the parties decide to separate their rights creating an unsecured debt, like they have whenever an assignment is recorded by a servicer who doesn’t own the debt its servicing.

    If assignments to “servicers” are void ab initio under federal law, why isn’t this argument used? Where is the case law regarding this basic argument and simple reading of federal law?

    It seems clear to me, that this argument should be used with FDCPA complaints whenever a servicer is trying to enforce a security interest without having authority so to do.. (jury trial)

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  5. Q: How can a “trust” change trustees without consent of the Trustor and/or beneficiaries?
    A: It can’t. The way it is properly accomplished with consent, as in our Illinois Land Trust, is that in the original trustee agreement and indenture there is a clause granting the trustee the ability to transfer the full duties of trustee to a successor trustee without advance notice. The grantor, beneficiaries and trust res remain the same. Each transfer to a successor trustee must, however, be recorded on the county land records. (we’ve had 3)

    So if the PSA or other controlling document includes successorship and method of recording the transfer, I do not see any problem.

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  6. Let take Washington Mutual Bank (WaMu) who sold the servicing rights to their WaMu Ginnie Mae pooled loan, however, this is done and remains in effect only as long as WaMu owns the debt. However, does WaMu maintain legal ownership of the debt when not owning the UCC3 blank endorsed Notes and no legal avenue to have the Notes returned?

    So what occurs by having the bank be the custodian of records for the loans pooled and relinquished to Ginnie, hides the fact that physical custodian has been transferred to that consummate the UCC3 procedure. The error was that publicly WaMu transferred to Wells Fargo all 1.3 million Ginnie pooled loan Notes Jul 18, 2006, with an effective date Jul 31, 2006. Wamu has no way of being transferred back these Notes because Ginnie Mae has no power under the blank Notes they did not pay for, so as WaMu was in financial trouble before the transfer, would never again have the ability to pay back the advance draws it received from the Ginnie investors to have Ginnie illegally slide these Notes back as if they were never transferred so that the requirement of UCC9 would not apply because it was the originator of the loans calling the debt due!

    So Wells does the Notices and Assignment of Deed or Mortgage as if they purchased the debt and forecloses under the non-judicial procedure evading their duty to produce proof of purchase to the court. It would not be a big deal to provide proof of purchase if you actually purchased the debt but as with my battle with Wells, they admitted to not owning the debt!

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  7. All homeowners in foreclosure or not should b trained to verify the debt. County recorders may provide warnings on fraudulent recordings by loan mod specialists and investors but should include “lenders”/servicers. My loan included transfer of servicing rights with original purported closing. After qwr raised questions this “forgotten” transfer was used to justify claims of new servicer which contradicted previous claims. Last verification of debt after Chase dumped loan to PennyMac after 7 years resulted in completely different loan documents returned as purported verification of debt.

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  8. Of course you are NOT wrong. If a servicer is nothing but a fraud. Them surely a homeowners servicer can be just as much a fraud.
    Rule of Law. OUT. Law of Rule. IN.

    Moral Hazard is a bitch.

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  9. In Ohio, notice of transfers or transfers of servicing rights also appear to be used in order to find a company that has a witness that is willing to testify at trial. It also appears that servicing rights are transferred to avoid the required minimum reasonable attempt to arrange a face to face meeting under HUD regulations, by transferring to a servicer who does not have an office within 200 miles of the mortgaged property.

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