Invalid Assignment defense

[davetedge]

From my armchair perspective on NY foreclosures, the courts are really making strong efforts to get a positive outcome for homeowners. The judges are willing to take on all of the issues that are being discussed, including the PSA. In almost all the decisions where they dismiss or deny the motions to foreclose, the homeowner is clearly making good faith efforts to keep the home by continually applying for modifications and even putting money in escrow.

At the risk of reading too much into these decisions, I get the sense that the judges are willing to go out on a limb to take on issues like robosigning, conflicts of interest, mysterious allonges, and even PSAs, but they won't take go there if the defendant doesn't seem serious about a modification and is throwing around whatever defense that could possibly get them a free house. The judges take bad faith and fraud on the court seriously and will slam the banks hard for wasting their time and effort and, in balance, they generally deny the defendants' cross motions to dismiss with prejudice.

Also, these cases take years to reach conclusion. A lot of the 2012 decisions are for 2009 and 2010 cases.

[justbroke]

You can't bifurcate a security instrument (mortgage) from the note (promissory note) by assigning the security instrument (mortgage). All courts have ruled that such an assignment is a nullity because the security follows the note!

A bifurcation happens when you can prove that the instrument was separated at the beginning of the transaction... giving the security to one party and the note (debt) to another party. That is not done by assignment (and is why the UCC is so complex). In other words, the only time it could have been separated is at the time that the debt was created.

The real argument in bifurcation cases is what it bifurcated when it was created. Assignment has nothing to do with that, since at the creation of the debt and the security, there is no assignment. Most of the arguments in MOST foreclosure cases is SOLELY around who has the right to foreclose. Not that no party can foreclose.

[newhope2011]

I believe it's when the mortgage gets separated from the note, through bad or invalid assignments, is when standing is denied on a foreclosure. So it's more than the UCC to make this all happen, JMO

[justbroke]

I think that he other problem that most people, who challenge foreclosure, forget is that there is a mortgage recorded which evidences that the property was pledged. It is not the Promissory Note that is recorded, it is the security instrument (mortgage / deed of trust).

I liked how my Bankruptcy judge have put it in a case where the Trustee was trying to use this same line of argument (the line in this thread) to declare a mortgage null and void. Summarizing, the judge said that the fact that there is a recorded mortgage and no satisfaction of the same, then SOME entity is OWED money. Proof of who is entitled to collect that money is the only thing that the court needs to know. The Trustee lost the Motion to Sell Free and Clear.

[HHM]

What foreclosure mess...the foreclosure mess is a result of "so many" foreclosures, more than the system can handle.

Don't confuse the issues. The federal government and federal reserve are involved because of bank liquidity issues. The state's attorney generals are involved because the endorsement/assignments cheated various counties out of recording fees. Robo signing is more of a side show related to the issue of "integrity" of the pleadings filed in foreclosure cases, but that is really an issue between foreclosure law firms and the court. But the fundamental issue of whether a lien/note can be "enforced" against a debtor in default has not changed, the answer is, YES it can, and whoever can prove to the satisfaction of the court (in judicial foreclosure states), can do it. In non-judicial foreclosure states, it is even easier.

The lien is recorded. IN EVERY case, there is a mortgage recorded. The issue is what happens when the underlying note gets transferred. The UCC actually contemplates this issue, but the breakdown is that some of the rules weren't followed. The problem most courts have is that there is no real remedy for the borrower because at the end of the day, a "defaulted" borrower is not harmed by a foreclosure. The only argument that has been presented is "duplicitous" actions against the borrower, but so far, that hasn't actually materialized. I have yet to hear of someone being foreclosed upon twice by different lenders after the first foreclosing party actually foreclosed.

[newhope2011]

Think of a Note like a check.

Let's say I trimmed your trees and you paid me $1,000 by check. Instead of cashing that check, I endorse it (by signing my name on the back) and give it to my fertilizer supplier for payment of a debt. However, the suppliers A/P clerk is a thief and decides to steal the check (now note, I didn't use a restrictive endorsement, From HHM to Fert Supplier), I just signed it in blank. The Thief takes the check to a check cashing place, and cashes it. The check cashing place then deposits the check in their bank, and the check CLEARS.

Fert supplier then comes back to me and says I never paid? Who do I have recourse against. At best, only the thief. Everyone along the chain was able to "enforce" the check (legitimately, even those that came after the thief). The check still got cashed, but I am out $1000. That situation is not much different than what is happening in the mortgage arena. Hence, even if the transfer of the check from Theif to Check Cashing place is "improper", under UCC-3, it is a valid "negotiation" of the instrument, that is why Check Cashing place gets to "enforce" the check. (granted, I might have a negligence claim against the Fert Supplier, but as far as the check goes, unless I can track down the thief, I am toast).

That is why many of these so called "bogus" assignments don't amount to much a defense for borrower because all the foreclosing entity needs is "proof" of possession, it doesn't really matter how they got it. Granted, there is some contrary case law and other issues...but this why, the GREAT, VAST, Majority of these cases get tossed out and allow a foreclosure to proceed. The borrower, actually, has no standing to object to the improper assignment.

In short, in this area, (UCC-3), possession really is 9/10th's the law.

OK, If this is the case, then why are we in the foreclosure mess in the first place? All the bank has to do is to show up in court with the note, the real note, and what you are saying is ballgame over. I even read the new Feb 18th 2012 updates to the UCC in NY, and it is confusing as heck.
From what I understand, in NY, if I lend you 25,000 and you give my a lien to your house, unless I record it, it is not enforecable for title. Maybe I'm wrong, but that's the information I have.

[HHM]

At the very least, hopefully this thread is giving you a dry run of the issues you are facing.

Most "pro se" debtors in this area lose, because it is, arguably, a complex area of law. When I mention UCC-3 to a would-be "produce the note" pro se defendant, they simply say "huh?" Heck, most foreclosure defense attorneys lose. Granted, there are bright spots, and some cases do settle. But to settle, you have to create a colorable risk for the other side. To do so, you must understand the playground in which you are playing (the UCC adopted in your state). And contrary to most peoples "assumptions" the UCC is very forgiving of the types of issues that are going on.

[justbroke]

How many "corrective" frauds will happen?

Not all Courts allow a second bite at the apple.

IAh, but that's where you must be careful. What if the moving party (plaintiff bank) was NOT the true owner and holder of the Note? Does that make the real owner now out of luck because some other entity, that didn't own the Note and right to collect, tried to? Also, if it was simply the plaintiff's attorney that committed the fraud, should we visit that upon the plaintiff?

Yes, it gets complex. Most judges will say that simply dismissing with prejudice may be an absurd result -- in that the defendant (homeowner) gets a free house.

I'll go one further. Even if the case is dismissed with prejudice, it depends on what the other part of the Judges order reads. If a "foreclosure" case is simply dismissed with prejudice, of course it means that the foreclosure for that specific breach of the contract (Note) can no longer be brought before the court. But, how about a subsequent breach of the contract? Can that then initiate another acceleration of the mortgage?

The question is really in what's in the ruling. Simply having a case dismissed with prejudice does not equal a "free" house.

[jimbo367]

How many "corrective" frauds will happen?

Not all Courts allow a second bite at the apple.

[justbroke]

Just look to Florida for what comes next! The banks have spent the last 9-12 months fixing their paperwork. There was one firm, who I won't mention, that was the poster-child for the robo-signing fraud. The banks all stopped foreclosures in Florida for many months. They have just settled with the DOJ and the Florida AJ, so let the foreclosures begin!

What I have noticed, is that they have issued a bunch of "corrective" assignments and at least Bank of America has set up various "Customer Service Centers" around the state as they begin to pick up the foreclosures again.

As I stated in the beginning... this is really a paperwork issue and eventually, someone will produce the right paper.

[davetedge]

I agree, "with prejudice" doesn't happen often and should be rare.

The more common problem in my neck of the woods is how many foreclosures are now stalled. In 2010, Chief Judge Lippman issued an order requiring attorneys take responsibility for their bank's paperwork and things ground to a halt. In the wake of the order, a lot of foreclosures have been dismissed (without prejudice), denied the ability to proceed, or the plaintiffs simply haven't pursued the next step.

The real puzzle is what comes next?

[justbroke]

I'm not following NYSC decisions as closely but I did enjoy reading this one (HSBC v Sene): http://bit.ly/yt9Anp
The plaintiff's produced two contradictory assignments of the same note. Judge Kramer was not very happy. Didn't dismiss with prejudice, though.

Which was the proper thing to do. The assignment issue just questions standing and if there's a question of standing at the time the foreclosure lawsuit was initiated, then that's a cause for the Judge to dismiss without prejudice.

[davetedge]

I'm not following NYSC decisions as closely but I did enjoy reading this one (HSBC v Sene): http://bit.ly/yt9Anp
The plaintiff's produced two contradictory assignments of the same note. Judge Kramer was not very happy. Didn't dismiss with prejudice, though.

[HHM]

You need to find out (or let us know) "why" they were dismissed with prejudice?

Still, that is only 8 out of 2682 foreclosures in 2011.

[justbroke]

Would you be willing to cite the 8 cases from NY? I do understand that NY is different since it's in the First Appellate Circuit and they tend to be more liberal than Florida (and the Eleventh Circuit). I agree that this is a very strong delay tactic, and in some very fact-specific cases, the cases were dismissed with prejudice. One of them which I did read, it was because of New York's "consolidation" mortgages where the Note may have been bifurcated.

The fact is, if you have an actual bifurcation of the Note from the Security Instrument (mortgage), then you in fact have an unsecured debt and the Judge should grant a dismissal, with prejudice, in any foreclosure action!