Chase-WAMU Letter Reveals”Expungement” and “Assignments” of Alleged Mortgages ” Not on the Books and Records of WAMU”

There is an old saying on Wall Street that “Bulls make money, Bears make money but Pigs never do.” The obvious circumstances of Chase claiming ownership to nonexistent loan portfolios contained within WAMU coupled with the admission in this letter to the FDIC, shows just how arrogant Chase felt when they informed the FDIC that they wanted to get paid by the FDIC for expunging documents and fabricating other instruments for “loans” that were not on the books and records of WAMU at the time of their purchase and sale agreement wherein Chase acquired the WAMU estate.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see Letter from Chase to FDIC: chase-letter-to-fdic-2014
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Hat tip to Bill Paatalo who reminded me of this letter that surfaced in the dispute over FDIC indemnification of Chase for the takeover of WAMU operations. Chase expressly admits to defects in the chain of title and erroneous mortgage documentation.
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It has been central to the defense of foreclosures based upon alleged “loans” originated by Washington Mutual (WAMU) that Chase never acquired any loans. It is obvious from the the transaction where Chase agreed to pay around $2 Billion to the estate but received more than that in a tax refund due to the WAMU estate. So the consideration was zero.
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Yet Chase has persistently asserted claims of ownership and direct or indirect authority to foreclose on loans that were not in the books and records of WAMU at the time of the FDIC sale to Chase.
Along with several others, I have stated the fact that Chase (1) acquired no loans (2) because they were not in the WAMU portfolio and that (3) a check of the WAMU books and records in the bankruptcy court will not show the loans that Chase says it acquired from WAMU. If WAMU didn’t own them then Chase could not have acquired them from WAMU.
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In order to perpetuate this farce we have alleged that Chase was directly involved in the fabrication and forgery of documents to create the illusion of loans that didn’t exist on WAMU books and records and schedules in the receivership and schedules in bankruptcy.
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Even a non-lawyer can see the problem for Chase. The letter in the link below clearly shows the lawyers asserting a claim for expenses in expunging records (i.e., destroying them) and fabricating other records which obviously leads to the issue of forging since the document itself was knowingly fabricated at the expense of Chase.
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Somehow Chase came to the conclusion that having paid for the destruction of documents and having paid for fabricating documents, they were now entitled to call themselves owner of the “Loan portfolio” which according to the schedules never existed.
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They admit to fabricating documents to create the illusion of a chain of title. Now they want payment from the FDIC to cover the expense of fabrication and forgery. Perhaps more importantly they admit “errors in mortgage documentation occurring prior to September 25,2008.”
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Email from Bill Paatalo:
Neil,
Have you seen this letter? The collusion between JPMC and the FDIC could not be any more transparent.
Excerpts from letter in italics:

The additional matters giving rise to JPMC’s indemnity rights relate to costs incurred in connection with mortgages held by WMB prior to September 25,2008. These costs have resulted from aspects of-and circumstances related to- WMB mortgages that were not reflected on the books and records of WMB as of September 25, 2008, and include:

[HERE IS A DIRECT ADMISSION THAT THERE IS A SCHEDULE OF LOANS “NOT REFLECTED ON THE BOOKS AND RECORDS OF WMB.” IF NO SCHEDULE EXISTS SHOWING WHAT WAS “ON THE BOOKS AND RECORDS,” THEN WE SHOULD NOW INQUIRE AS TO THE SCHEDULE SHOWING THOSE LOANS NOT REFLECTED ON THE BOOKS AND RECORDS.]

(a) Costs incurred by JPMC associated with individual assignments of WMB mortgages. Where JPMC has initiated foreclosures on properties associated with mortgages that were held by WMB prior to its Receivership, JPMC has performed individual assignments of the associated mortgages/deeds of trust and allonges to comply with a recent appellate-level court decision in Michigan so as avoid potential additional expense and/or liability. In so doing, JPMC has incurred additional recording and legal fees, Limited Power of Attorney costs, as well as quantifiable costs associated with increased staffing to address these issues.

[THIS IS A DIRECT ADMISSION THAT ASSIGNMENTS AND ALLONGES ARE BEING EXECUTED BY JPMC (AS BENEFICIARIES AND MORTGAGEES) FOR WMB LOANS THAT WERE “NOT REFLECTED ON THE BOOKS AND RECORDS OF WMB.”]

(c) Costs incurred by JPMC to expunge records associated with WMB mortgages as a result of errors in mortgage documentation occurring prior to September 25,2008, including erroneously recorded satisfactions of mortgages and associated legal fees and disbursements.

[“EXPUNGING RECORDS ASSOCIATED WITH WMB MORTGAGES AS A RESULT OF ERRORS IN MORTGAGE DOCUMENTATION?” THIS IS A DIRECT ADMISSION THE JPMC HAS DESTROYED RECORDS RELATED TO WMB MORTGAGE FILES.]

(d) Costs incurred by JPMC to correct various defects in the chains of title for WMB mortgages occurring prior to September 25, 2008, including recording and legal services fees.

[WHAT “CHAINS OF TITLE?” JPMC TAKES THE POSITION THAT THESE LOANS WERE NEVER SOLD BY WMB. THIS IS A DIRECT ADMISSION THAT JPMC IS ATTEMPTING TO CORRECT DEFECTS IN THE CHAINS OF TITLE FOR WMB LOANS THAT WERE NOT REFLECTED ON THE BOOKS AND RECORDS OF WMB. THESE “CORRECTIONS” UNIVERSALLY INVOLVE ASSIGNMENTS OF BENEFICIAL INTERESTS FROM THE FDIC, AND/OR BY VIRTUE OF THE PAA.]

At the time of WMB’ s closure, the above liabilities were not reflected on its books and records.

Bill Paatalo
Oregon Private Investigator – PSID#49411

BP Investigative Agency, LLC
P.O. Box 838
Absarokee, MT 59001
Office: (406) 328-4075

Quiet Title “Packages”

The promise by some title search vendors of a cheap lawsuit that will get rid of your mortgage is generally not based in reality. You might be able to beat a foreclosure with title issues but you probably won’t get rid of the mortgage or deed of trust without pleading and proving that the mortgage or deed of trust is completely void — like it never should have existed or doesn’t exist now by operation of law.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 ===========================

There are many people out there who are pursuing a business model of offering a quiet title package, sometimes using the word “Turnkey.” Most of these people are well-meaning but not lawyers and they are lacking basic legal knowledge. While the title work by people like BPInvestigations is excellent, the promise by some title search vendors of a cheap lawsuit that will get rid of your mortgage is generally not based in reality. You might be able to beat a foreclosure with title issues but you probably won’t get rid of the mortgage or deed of trust without pleading and proving that the mortgage or deed of trust is completely void — like it never should have existed or doesn’t exist now by operation of law.

Personally I think that condition is satisfied by TILA rescission, but the courts are still rebelling against the idea of giving that much power to borrowers. So while I am certain it is correct, I am equally certain that the defense shield raised by the banks is working even though it does not pass muster legally and will probably be struck down again by the US Supreme Court.

While these offers may sound attractive there are many pitfalls and trap doors that will prevent a homeowner from actually achieving anything by focusing on a strategy that is dependent upon a court issuing a declaration quieting title. The very word “quiet” should give you a hint. There must be an actual controversy or dispute involving a present situation requiring the court to decide the rights of the parties. Courts are NOT in the business of issuing advisory opinions.

The Marketing title says it all — it is a “turnkey” “quiet title” package suing for damages. There is no such thing as turnkey title — they don’t know all the possibilities of defects in title. And they won’t know it even after they produce a title report either, although they will have a pretty good list of possibilities of title defects.
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Without a title expert (usually an attorney) analyzing the title going back to the last time that a real title examiner looked carefully at title to the subject property, nobody knows what is a defect, what can be corrected by affidavit, and what prevents the grantee of an instrument from doing anything with it. This might mean going back 30 years or more.

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Quiet title is an action in equity that is a complaint for declaratory relief wherein the court says “here are the names of the stakeholders and here is the stake of each holder.” But no court is going to allow the lawsuit for that without pleading a present controversy — because that would be the Court giving legal advice.

So you would have to say “A is the owner of the property but B (or B, C and D) is/are saying it is the owner of the property (or B is saying that it has a valid encumbrance upon the land. I am trying to sell, refinance the land and I can’t complete the transaction because of B’S claim, which I think is bogus because [fill in the blank, e.g., the mortgage is a void or wild instrument because …]. So in order to complete my pending transaction I need a declaration from the court as to whether B is a stakeholder, like they say or B is not a stakeholder like I say.” If you don’t have those elements present the court will dismiss the lawsuit 99 times out of 100.

The promise of damages is bogus. That is an action at law that could be derived from any number of breaches or torts by the defendant(s). It could never derive from a turnkey quiet title package even if there was one. It would be a different lawsuit saying B had this duty, they breached it, or committed an intentional tort, and that was the proximate cause of actual damages to me that include x, y and z.

 

And as many people have found out when they sued for quiet title and had their suit dismissed or judgment entered against them there are two main reasons for that. First, they could not properly plead a present controversy or the competing “stakes” in the property. Second, they could not tie in ACTUAL damages to a breach of duty or intentional tort by the defendant. Proximately caused means legally caused.

Most judges view such lawsuits as “”B is bad. Give me title and whatever monetary damages you think will punish them.” The homeowners are skipping the part that where there are no actual damages you don’t get punitive damages. You can’t sue for JUST punitive damages. If you don’t have actual damages you don’t have standing to sue. The Latin for this is damnum absque injuria. Just because somebody was negligent or greedy doesn’t mean you can sue if you are not a party who suffered actual damages from their illegal act.

Title After Wrongful Foreclosure: Martha Coakley Getting to Heart of the Problem of Fraudulent Foreclosures

For further information please call 954-495-9867 or 520-405-1688

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see Massachusetts Settlement: Fine PLUS Curing Title Defects

Martha Coakley gets it. She is the attorney general of Massachusetts. And she alone has enforced the law the way it should be enforced. When a bank or anyone else files a fraudulent foreclosure action they should pay for it AND the title should be corrected. If the foreclosure was false then the title is defective as shown in the county records. All previous national and state settlements were for money only. In this case four banks have agreed that they will pay a fine AND take all necessary steps to cure title. The four banks are the usual suspects — Bank of America (BOA), Chase, Citi, Wells Fargo.

Bank of America, Citi, JPMorgan Chase, and Wells Fargo were accused of violating Massachusetts foreclosure laws and the Massachusetts Consumer Protection Act by foreclosing on properties in the Commonwealth when they did not hold the rights to the mortgages, and therefore did not legally have the right to foreclose….

The Massachusetts AG office alleges in the amended complaint that the four banks ignored a fundamental legal mandate established in the Supreme Judicial Court’s Ibanez decision in January 2011 that mortgagees must strictly comply with the Commonwealth’s foreclosure laws. The Massachusetts foreclosure law states that a mortgage is void if whoever initiates the foreclosure does not hold the mortgage through valid assignment or is not the mortgagee of record at the time the foreclosure notice is published.

The complaint further alleges that the four banks did not obtain a valid assignment of the mortgage prior to publishing foreclosure notices on the properties and therefore the foreclosures should be invalidated. Also according to the complaint, the banks’ actions adversely affected the marketability and insurability of titles to numerous properties in the Commonwealth.

As part of the settlement, the banks will be required to assist consumers who claim the title to his or her residence is void from an unlawful foreclosure. Assistance will likely include conducting a thorough title review, providing curative documents, releasing junior leans held by banks, and paying costs associated with the title cure in cases where consumers do not have title insurance, according to the Massachusetts AG office.

Seminars Corroborate Title Problems and HAMP LItigation

It might seem to many that the industry is blind to title problems caused by false claims of securitization or even real claims based upon securitization. It might also seem that there is nothing about which you can litigate when it comes to HAMP and HARP modifications. The big seminar promoters are offering a gaggle of of short and long seminars on these subjects, indicating that they recognize that litigation and title snarls are getting traction across the country and they admit that the future litigation will include clearing title and litigating over HAMP modifications.

The principal problem that homeowners and their lawyers are missing is that the duty to consider the modification does not require the the acceptance of a homeowner for modification. Some servicers are getting more lenient than others, including, from what I hear, Ocwen. But the litigation that is being filed and which the pretender lenders are losing is on the precise question of whether the actual creditor was given notice of the offer of modification and whether the servicer did anything to apply any formula to the the almost inevitable denial of modification.

What we have started doing at my firm is (a) supplying the required material, return receipt requested, together with (b) a specific offer of modification on which an expert (real estate broker, mortgage broker or other professional in the real estate industry) gives an opinion that is worded something like the auditors do when they complete an audit, to wit:

“Based upon industry standards and conditions, the enclosed offer of modification reflects actual current conditions in the relevant real estate market and provides the creditor with two benefits that are not present in the event of foreclosure. The first is that the question of the perfection of the mortgage lien and enforcement of the lien is completely resolved, thus clearing title and the second, is that the net proceeds from the enclosed proposal for modification results in a far higher benefit to the actual creditor than the proceeds from foreclosure, which is a fraction of the offer. There is no known criteria in the industry under which this proposal would be rejected under normal circumstances unless the parties rejecting the modification had some risk of loss unrelated to the loan itself.”

When the denial comes back, you have a basis for alleging that they are lying to the court, that the modification was never considered, that inappropriate criteria was used to guarantee denial and that the creditor was never notified. The anecdotal reports I am receiving strongly suggests that this strategy is getting a lot of traction and is resulting in very favorable settlements within hours after the Judge enters an order requiring the servicer and pretender lender to show cause why they should not be ordered to provide a evidence of the “consideration” and the reasons why the proposal or request was denied.

The National Business Institute is offering three seminars that will be the subject of the member teleconferences (become a member of this blog now to get into the discussion: Become a member, for discounts, online teleconferences etc.). I strongly recommend that these short seminars be attended and that you even order the recordings as well.

Go to http://www.nbi-sems.com (livinglies is not paid for this endorsement directly or indirectly). I would suggest ordering the following seminars:

  1. HAMP litigation: breach of contract and related claims, June 21, 2013 2 p.m. to 3:30 p.m.

  2. Resolving complex commercial title defects June 11 2013 11:00 a.m. to 12:30 p.m.

  3. Handling short sales and deed in lieu of foreclosure 2 p.m. to 3:30 p.m. July 11 2013

  4. The Role of MERS in Mortgage Origination and Foreclosure June 3 2013 1PM-2:30PM

Borrower Beware: Don’t Payoff Without Tender of REAL Original Note

The Perils of Payoff

On the road again: I met a fellow on the Red Coach from Tallahassee to Fort Lauderdale who is pursuing a case that proves the central point of this blog: Whether you are selling, refinancing, Short-Selling, or otherwise paying off your supposed loan balance, the institution that receives the payoff (a) has no right to the money and (b) has no authority to execute a satisfaction of the note and mortgage even upon receipt of the money. And the reason is that in most cases they don’t have the note, which means it is still in circulation somewhere supporting as much as 42 times the face value of the note in hedges and derivatives. When confronted with a payoff of the loan, the institution is more than happy to take your money but will lie and cheat to avoid providing you with a real non-photo-shopped original note.

Unfortunately, most people are still taking it on FAITH that the note is indeed satisfied and that the mortgage is released and satisfied at the time of the payoff but they are very wrong if they don’t get the original note at closing, since THAT is what is presumptively the cash equivalent instrument that is traded in the secondary market, and since the mortgage usually is presumed to follow the note, that gives the actual owner of the note the opportunity to make a claim — something that is already happening and will occur with increasing frequency.

So whether you are buying property, selling property or paying off the “old” mortgage for any reason you are not only creating a title mess, you have no proof that the original note has been canceled. Which led me to suggest in a few articles that for those able to do it, call the bluff of the pretender lender. And for those investors looking to make an infinite return on their money, they should be helping homeowners do this in or out of court: OFFER TO PAY THE BALANCE IN FULL AS DEMANDED BY THE PRETENDER LENDER ON THREE CONDITIONS: (A) PRODUCTION OF THE ORIGINAL NOTE AND THE RIGHT TO INSPECT IT FOR AUTHENTICITY (B) PRODUCTION OF PROOF OF PAYMENT AT ORIGINATION AND ALL TRANSFERS UPON WHICH THE PRETENDER LENDER RELIES FOR ITS AUTHORITY TO COLLECT THE MONEY AND (C) PROOF OF LOSS BY ACCESS TO THOSE PEOPLE WHO MIGHT HAVE RECEIVED AN ASSIGNMENT OF THE LOAN OR WHO HAVE A BACK-DOOR OWNERSHIP INTEREST IN THE LOAN THROUGH OWNERSHIP OF A DERIVATIVE OR CREDIT DEFAULT SWAP.

This is not for the feint of heart nor the people who don’t have access to actual funds that can be tendered in full payment. It is possible for the occasional real note to pop up and perhaps even sufficient proof that the Judge would rule it is sufficient to close the deal in which case you will have paid 100 cents on the dollars demanded in exchange for a loan valued at perhaps half that amount. But most of the time it will look like the following case described to me last night. I’ve changed facts (identities and figures) to protect the privacy of the individuals involved. But the foundation of the case is accurately described.

Owner Schwartenheimer has a mortgage claimed by Bank of America. It is for $3 million on a private residence in the State of Florida. He has a buyer at $2 million which leaves him $1 million short of the amount demanded by the “bank” claiming to own and service his mortgage. An estoppel letter is issued by BofA indicating the payoff amount and the dates that the estoppel letters is effective and may be relied upon.

The closing is in 5 weeks. And the Owner has elected to payoff the extra $1 million rather than attempt a short-sale. So the Bank is going to get full payment at closing — $2 million from the buyer and $1 million from the seller.

But the Owner’s daughter, an astute business woman who happens to be an avid reader of this blog intervenes with the demand that the original note be produced at closing. BofA assures her that the original note will be produced. At closing without the daughter in attendance, the father, as instructed by his daughter, demands to see a copy of the original note before he turns over the money to BofA. His buyer is there with the money and he has a bank check ready and payable to BofA for $1 million.

The curious answer from BofA is that they have the note but were unable to get it to the closing agent in time for the morning closing, but that it would be available for delivery at 4PM that afternoon. The proper thing would have been to wait until they produce the note. The Owner asks his lawyer, who is also a title agent, for advice on what to do. The lawyer thinks that the daughter is nuts and so is Neil Garfield with his livinglies conspiracy blog.

The lawyer advises the client to proceed with the closing under the belief that BofA obviously MUST have the original note or else they would not have issued an estoppel letter and signed the papers to satisfy and discharge the mortgage in recordable form. Whether that advice will further be the subject of a malpractice case against the lawyer is another matter to consider at a later time. And the repercussions of that could extend to all sorts of situations where a “mortgage” and “note” are involved —even to the far reaches of family law.

As you have no doubt guessed, at 4pm the Owner and his daughter show up at 4pm to get the original note and of course it is not there, despite having been informed that it WAS there. The daughter although not a lawyer, is far from amused. She writes a bristling letter to BofA demanding that either they produce the original note or give the money back — and she demands not only the $3 million paid at “closing” but all the interest and principal paid before that for a total demand of $5 million.

BofA immediately responds with apologies and assures her and her father that the note will be provided.

[A word of context here: if BofA wanted to take the position that the note was lost or destroyed they could have filed an appropriate action to reconstitute the note and mortgage. But they didn’t do that, for good reason — the mortgage loan was supporting $60 million in credit derivatives, insurance and credit default swaps upon which BofA had already been paid. If they admit they don’t have the note and they can’t account for where it was last seen, and when it disappeared in the manner required to re-establish the note with assurance to the court that the real original won’t show up at a later time in the hands of a different claimant, in that event they might be subject to claims from insurance companies and counter-parties of credit default swaps for repayment of $60 million they paid and which was received by BofA. [considerable over-simplification is being used here, but the point remains true].

So BofA and the owner (with the new owner in the background wringing his hands over whether he really received clear title and whether his title policy excluded claims from securitization) go back and forth until BofA counsel informs the owner he doesn’t need the original note because BofA has already signed the satisfaction.

The owner and daughter, unsatisfied with that response (as well they should be) file a lawsuit against BofA for return of all money ever paid to them, plus statutory interest. BofA defends the action with various motions to dismiss and has now delayed discovery 5 times.

Suddenly the senior partner of the prestigious law firm representing BofA calls the daughter and asks what she wants. She replies that she wants her money back and he says “well, without saying we agree to your demand, for settlement purposes what would you take to satisfy your demand for your money back.” He understands that even if they pay the father $5 million or more, they are still saving the client (a) the $60 million payback to insurers who already paid and (b) the prospect of facing a lot more of these lawsuits from people who have the money and the right fact pattern to prosecute the case.

The daughter wants to dig in her heals knowing she has BofA over a barrel.

The lawyer who represented the owner at closing is still clueless and believes the action filed by the father and daughter is totally without merit. His advice, perhaps self-serving, is that they demand nothing.

The daughter wants it all — if BofA can’t produce any evidence that they ever bought the loan, that they ever knew or anyone ever knew where the note was, then she wants all the payments, monthly or otherwise were made to BofA without BofA having any right or authority or even excuse to collect the money.

The father as previous and perhaps still owner of the property would be satisfied with the money paid at closing to BofA — $3 million. BofA’s attorneys are now in process of suggesting a modification to the claim filed by the father in court upon which they will settle — and from the looks of it, the settlement will be for the full amount paid at closing. Thus if the note is still in circulation, the father will have received the full value of it from BofA who accepted it under false pretenses. The case is not settled yet, but is looming on the horizon.

The moral of the story is that this is all about money. And if you can find a way to come up with actual cash you can make the same offer as the owner did above — and in my opinion achieve the same results. And if people pool their money and make the offer to refinance the property at the full value of the demand made by the pretender lender — whether in foreclosure or not — a bona fide actual offer can be made and cannot be ignored by either the court or the pretender lender.

For those with entrepreneurial spirit  this is a business plan that I wish to raise money for. Write to neilfgarfield@hotmail.com if you are interested in combining resources with other investors to execute this business plan.

In Summary: The refinance package signed by the present owner provides that if the payment is required to be made, they now owe the money to the hedge fund or whatever entity put up the money and provides modification terms acceptable to the owner — which means a net loss to the investor. But, if the usual case prevails, and the pretender lender is forced to back off, a quiet title action, plus refinance of the property at 1/3 of the amount demanded by the pretender lender results in a windfall note and mortgage to the source of refinancing without ever having paid the “prior note”.

These entrepreneurs, if I am right, will rarely have to pay an actual some of money to discharge the old note and mortgage while at the same time the owner gets the property free and clear except for a new mortgage to the investors for 1/3 of the original principal demanded plus a reasonable fixed interest rate with 40 year amortization, all of which can be sold into the secondary market. It is a virtually infinite return without putting very much money at risk and no risk of a total loss.

And for those without money — check the court file to see whether the original note has been tendered because most states, like Florida want the original note filed and out of circulation before they will allow a foreclosure sale even if it is determined that a foreclosure sale is proper in the circumstances. There is only one party that can submit a credit bid at auction — the party with the original note and proof of loss.

BEFORE EXECUTING ANY SUCH PLAN OR TAKING ANY ACTION BASED UPON THE GENERAL INFORMATION PRESENTED IN THIS ARTICLE YOU SHOULD CONSULT WITH LEGAL COUNSEL LICENSED IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED.

LAWYERS TAKING NOTE OF TITLE PROBLEMS AND HOW TO FIX THEM

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What Now? Bevilacqua v. Rodriguez Leaves Toxic Foreclosure Titles Unclear

by Rich Vetstein

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No Easy Fix For Defective Foreclosure Titles After U.S. Bank v. Ibanez Ruling

The Massachusetts Supreme Judicial Court issued its opinion today in the much anticipated Bevilacqua v. Rodriguez case considering property owners’ rights when they are saddled with defective titles stemming from improper foreclosures in the aftermath of the landmark U.S. Bank v. Ibanez ruling last January. (Text of case is embedded below). Where Ibanez consider the validity of foreclosures plagued by late-recorded or missing mortgage assignments, Bevilacqua is the next step, considering what happens when lenders sell defective foreclosure titles to third party purchasers. Previously, I discussed the oral argument in the case here and detailed background of the case here.

The final ruling is mix of bad and good news, with the bad outweighing the good as fixing defective Massachusetts foreclosure titles just got a lot harder and more expensive. But, contrary to some sensationalist headlines, the sky is not falling down as the majority of foreclosures performed in the last several years were legal and conveyed good title. Bevilacqua affects those small percentage of foreclosures where mortgage assignments were not recorded in a timely fashion and were otherwise conducted unlawfully. Bevilacqua does not address the robo-signing controversy.

The Bad News

First the bad news. The Court held that owners cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. This is the headline that the major news outlets have been running with, but it was not a surprise to anyone who has been following the case. Sorry Daily Kos, but the court did not take away a property from a foreclosure sale buyer. The buyer never owned it in the first place. If you don’t own a piece of property (say the Brooklyn Bridge), you cannot come into court and ask a judge to proclaim you the owner of that property, even if the true owner doesn’t show up to defend himself. It’s Property Law 101.

The Good News

Next the good news. The court left open whether owners could attempt to put their chains of title back together (like Humpty-Dumpty) and conduct new foreclosure sales to clear their titles. Unfortunately, the SJC did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.

In the larger scheme, however, we are now seeing full scale real estate nuclear fallout from the banking crisis. As Barry Ritzholz eloquently states, “a deadly combination of MERS, robo-signing, and illegal shortcuts have created a horrific situation. A bedrock of our society — the ability for the owner of a piece of real estate to confidently convey that property, along with all associated property rights — is now in danger.” This problem is not unique to Massachusetts, and in fact, in harder hit states could be significantly worse. So the bigger question remains where do we go from here and what are banking regulators and attorneys general going to do about it?

Background: Developer Buys Defective Foreclosure Title

Frank Bevilacqua purchased property in Haverhill out of foreclosure from U.S. Bank. Apparently, Bevilacqua invested several hundred thousand dollars into the property, converting it into condominiums. The prior foreclosure, however, was bungled by U.S. Bank and rendered void under the Ibanez case. Mr. Bevilacqua (or presumably his title insurance attorney) brought an action to “try title” in the Land Court to clear up his title, arguing that he is the rightful owner of the property, despite the faulty foreclosure, inasmuch as the prior owner, Rodriguez, was nowhere to be found.

Land Court Judge Keith Long (ironically the same judge who originally decided the Ibanez case) closed the door on Mr. Bevilacqua, dismissing his case, but with compassion for his plight.

“I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.

Given the case’s importance, the SJC took the unusual step of hearing it on direct review.

No Standing To “Try Title” Action In Land Court

The SJC agreed with Judge Long that Bevilacqua did not own the property, and therefore, lacked any standing to pursue a “try title” action in the Land Court. The faulty foreclosure was void, thereby voiding the foreclosure deed to Bevilacqua. The Court endorsed Judge Long’s “Brooklyn Bridge” analogy, which posits that if someone records a deed to the Brooklyn Bridge, then brings a lawsuit to uphold such ownership and the “owner” of the bridge doesn’t appear, title to the bridge is not conveyed magically. The claimant in a try title or quiet title case, the court ruled, must have some plausible ownership interest in the property, and Bevilacqua lacked any at this point in time.

The court also held, for many of the same reasons, that Bevilacqua lacked standing as a “bona fide good faith purchaser for value.” The record title left no question that U.S. Bank had conducted an invalid foreclosure sale, the court reasoned.

Door Left Open? Re-Foreclosure In Owner’s Name?

A remedy left open, however, was whether owners could attempt to put their chains of title back together and conduct new foreclosure sales in their name to clear their titles. The legal reasoning behind this remedy is rather complex, but essentially it says that Bevilacqua would be granted the right to foreclosure by virtue of holding an “equitable assignment” of the mortgage foreclosed upon by U.S. Bank. There are some logistical issues with the current owner conducting a new foreclosure sale and it’s expensive, but it could work. That is, of course, if the SJC rules in the upcoming Eaton v. FNMA case that foreclosing parties do not need to hold both the promissory note and the mortgage when they foreclose. An adverse ruling in the Eaton case could throw a monkey wrench into the re-foreclosure remedy.

In Bevilacqua’s case, he did not conduct the new foreclosure sale, so it was premature for the court to rule on that issue. Look for Bevilacqua to conduct the new foreclosure and come back to court again. The SJC left that option open.

Other Remedies & What’s Next?

The other remedy to fix an Ibanez defect, which is always available, is to track down the old owner and obtain a quitclaim deed from him. This eliminates the need for a second foreclosure sale and is often the “cleanest” way to resolve Ibanez titles.

Another option is waiting out the 3 year entry period. Foreclosure can be completed by sale or by entry which is the act of the foreclosure attorney or lender representative physically entering onto the property. Foreclosures by entry are deemed valid after 3 years have expired from the certificate of entry which should be filed with the foreclosure. It’s best to check with a real estate attorney to see if this option is available.

The last resort is to demand that the foreclosing lender re-do its foreclosure sale. The problem is that a new foreclosure could open the door for a competing bid to the property and other logistical issues, not to mention recalcitrant foreclosing lenders and their foreclosure mill attorneys.

Title insurance companies who have insured Ibanez afflicted titles have been steadily resolving these titles since the original Ibanez decision in 2009. I’m not sure how many defective foreclosure titles remain out there right now. There certainly could be a fair amount lurking in titles unknown to those purchasers who bought REO properties from lenders such as U.S. Bank, Deutsche Bank, etc. If you bought such a property, I recommend you have an attorney check the back title and find your owner’s title insurance policy. Those without title insurance, of course, have and will continue to bear the brunt of this mess.

More Coverage:

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Richard D. Vetstein, Esq. is an experienced real estate litigation attorney who’s handled numerous foreclosure title defect matters & cases in Land Court and Superior Court. Please contact him if you are dealing with a Massachusetts foreclosure title dispute.

Bevilacqua v. Rodriguez; Massachusetts Supreme Judicial Court October 18, 2011

BOA Suits Claims Credit Reports Used Instead of Title Searches

BofA Title claims
BofA Wants $535M From Title Insurers
By DAN MCCUE

CHARLOTTE, N.C. (CN) – Bank of America claims mortgage insurers owe it more than $535 million for losses it suffered when the housing bubble burst. BofA, which bought the poster boy of the subprime lending fiasco, Countrywide Financial, 2 years ago, says title insurers unfairly refuse to cover busted mortgage loans that originated before the financial meltdown.
Bank of America, one of America’s largest mortgage lenders and the recipient of more than $45 billion in TARP funds from the federal government, claims that United General Title Insurance and First American Title Insurance, now corporate affiliates, insured mortgages for title defects, undisclosed intervening liens and other problems, and to cover equity loans and lines of credit up to $500,000.
Now the insurers are balking at paying the claims, blaming Bank of America and the firms it acquired prior to the global economic crisis for creating their own problems, BofA says in Mecklenburg County Court.
As of February the two insurers have denied at least 2,200 of Bank of America’s claims, representing more than $235 million in losses, and failed to respond to another 2,300 claims, representing more than $300 million in losses, BofA says.
All of the claims arise from a home equity loan or line of credit that is in default, the bank says.
BofA demands coverage of its losses, plus compensatory and punitive damages for breach of contract and bad faith.
BofA is also a plaintiff in a suit filed in Los Angeles Superior Court by Countrywide Home Loans, demanding $111 million from Triad Guaranty Insurance.
In that complaint, Countrywide and BofA claim Triad is wrongly trying to rescind coverage for high-risk practices that it encouraged.
BofA is represented by Davis Halvreich with Reed Smith in the North Carolina case. 

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