bubbleinfo.com

This is the first case that I’ve seen of a deed-in-lieu-of-foreclosure.

Hope we see more of them, maybe they are the answer to the robo-MERS-gate problems. The banks could do cash-for-deed-in-lieus, instead of spending big money on attorneys?

Rolling Stone Magazine reporter Matt Taibbi has a detailed story about the Florida foreclosures being tried in front of retired judges.  Click here for full story – an excerpt:

After Soud’s outburst, Cooper quietly leaves the court. Once out of sight of the judge, she shows me her file. It’s not hard to find the fraud in the case.

For starters, the assignment of mortgage is autographed by a notorious robo-signer — John Kennerty, who gave a deposition this summer admitting that he signed as many as 150 documents a day for Wells Fargo. In Cooper’s case, the document with Kennerty’s signature on it places the date on which Wells Fargo obtained the mortgage as May 5th, 2010.

The trouble is, the bank bought the loan from Wachovia — a bank that went out of business in 2008. All of which is interesting, because in her file, it states that Wells Fargo sued Cooper for foreclosure on February 22nd, 2010. In other words, the bank foreclosed on Cooper three months before it obtained her mortgage from a nonexistent company.

From cnbc.com:

Sources on both sides of the 50-state attorney’s general investigation into so-called “robo-signing” foreclosure practices are nearing a settlement. As Bank of America, JP Morgan Chase, and Iowa Attorney General Tom Miller square off today before the Senate Banking Committee, the framework of a deal is taking shape.

While sources say there is no universal solution to shoddy foreclosure practices at some of the nation’s largest mortgage banks/servicers, the three largest, BofA, JPM, and Wells Fargo, may be agreeing to the same solution.

First, banks would pay into a fund used to compensate borrowers who have claims after their home has been sold in foreclosure. The borrowers would have to prove they were wronged in the process, and the attorney’s general would allocate the funds. In other words, the AGs would be the administrators. The amount of said fund is still undetermined, and likely still in negotiation. Each bank could settle on its own amount, or there could be a joint agreement.

Secondly, the banks would do away with the dual track of modifications and foreclosures. That means that only after all options of modification are exhausted can a bank begin foreclosure proceedings. Many borrowers currently complain that they are in the midst of the modification process when they get a notice of foreclosure sale. The drawback to eliminating the dual track is even greater extended timelines to foreclosure for borrowers. As it is, borrowers on average can be in their homes for a year and a half without making mortgage payments before eviction.

Finally, there would be some kind of agreement to third party mediation for review of all the cases in the first part of the agreement where borrowers are seeking compensation from the AG fund.

There has also been talk of principal write down as part of settlements, perhaps with some banks and not others. “It’s been on the table,” says one source.

From Bloomberg:

In 2002, an accountant in Boca Raton, Florida, named Joseph Lents was accused of securities-law violations by the U.S. Securities and Exchange Commission. Lents, who was chief executive officer of a now-defunct voice- recognition software company, had sold shares in the public company without filing the proper forms. Facing a little over $100,000 in fines and fees, and with his assets frozen by the SEC, Lents stopped making payments on his $1.5 million mortgage.

The loan servicer, Washington Mutual Inc., tried to foreclose on his home in 2003 but was never able to produce Lents’s promissory note, so the state circuit court for Palm Beach County dismissed the case. Next, the buyer of the loan, DLJ Mortgage Capital, stepped in with another foreclosure proceeding. DLJ claimed to have lost the promissory note in interoffice mail. Lents was dubious.

“When you say you lose a $1.5 million negotiable instrument — that doesn’t happen,” he said in an interview in Bloomberg Businessweek’s Oct. 25 issue.

DLJ claimed that its word was as good as paper. But at least in Palm Beach County, paper still rules. If his mortgage holder couldn’t prove it held his mortgage, it couldn’t foreclose.

Eight years after defaulting, Lents still hasn’t made a payment or been forced out of his house. DLJ, whose parent, Credit Suisse Group AG, declined to comment for this story, still hasn’t proved its ownership to the satisfaction of the court. Lents’s debt has grown to about $2.5 million, including unpaid taxes, interest and penalties.

The MERS debacle will go on for years, and be full of legal wranglings along the way. 

The biggest issue?  The notes and trust deed have been physically separated by MERS, and according to the U.S. Supreme Court ruling in 1872, a mortgage has no separate existence from the note.  It sounds like the money owed would then convert to being unsecured…or will it extinguish? 

It’ll be a long road, so let’s just digest in smaller pieces – excerpts from this Bloomberg article sent in by SM that also cites several court cases, mostly favoring MERS:

1. About 60 percent of newly originated loans are on the MERS system, Lejarde said. Since its inception in 1995, it has carried 66 million loans and currently has between 23 million and 25 million active loans, she said.

2. A big selling point for the company is its cost savings. It charges $6.95 for every loan registered, Lejarde said. With an average cost of about $40 for filing a mortgage assignment with local counties, MERS has saved the industry about $2.4 billion, Merscorp Chief Executive Officer R.K. Arnold said in a September 2009 deposition in an Alabama suit.

3. The company is accused in two whistleblower suits filed this year of cheating California and Nevada counties out of millions of dollars in recording fees. In 2006, New York State’s highest court told one county it had to record MERS mortgages against its wishes. The county said MERS cost it $1 million a year.

4. Eventually high courts in states with judicial oversight of foreclosures will have to review MERS’s role, Patrick A. Randolph, a professor at the University of Missouri-Kansas City specializing in real-estate law, said in an interview.  “It’s a question of state law,” Randolph said. “The problem is simply confusion about a word the courts are not used to seeing in this context — the word ‘nominee.’”

5.  MERS says it has the right to foreclose because the borrower grants the company legal title to the mortgage and it forecloses as agent for the promissory-note holder. “Courts around the country have repeatedly upheld and recognized this right,” MERS said in an Oct. 4 e-mailed statement.

Since March 2009, supreme courts in Arkansas, Kansas and Maine have found that MERS had no standing in foreclosure proceedings under their states’ laws. The company lends no money and suffers no injury, the panels said.

MERS’s relationship to the bank that owned a loan in question was “more akin to that of a straw man than to a party possessing all the rights given a buyer,” the Kansas Supreme Court wrote. “What stake in the outcome of an independent action for foreclosure could MERS have?”

Hat tip to DS for sending in David Streitfeld’s article from the N.Y. Times:

DENMARK, Me. — The house that set off the national furor over faulty foreclosures is blue-gray and weathered. The porch is piled with furniture and knickknacks awaiting the next yard sale. In the driveway is a busted pickup truck. No one who lives there is going anywhere anytime soon.

In 2003, her brother-in-law at the time offered to sell her a house on property adjacent to his. It was across from a noisy construction supply site. But it was ringed by maple, evergreen and willow trees, and who does not want to be a homeowner, especially when GMAC Mortgage will give you a loan for the entire purchase price and then another loan to improve the property?

“I was very happy,” she remembered. “It was a new beginning.”

Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break.

Read the rest of this entry »

Are the title companies in trouble for insuring robo-signed REO sales, or MERS-related transactions?  

Kingside said, “Not if the sellers are using grant deeds”. 

Here’s the definition:

grant deed n. the document which transfers title to real property or a real property interest from one party (grantor) to another (grantee). It must describe the property by legal description of boundaries and/or parcel numbers, be signed by all people transferring the property, and be acknowledged before a notary public. The transfer is finalized by recording with the County Recorder or Recorder of Deeds. Importantly, a grant deed warrants that the grantor actually owned the title to transfer, which a quit claim deed would not, since it only transfers what the grantor owned, if anything.

A check of recently sold REO properties revealed that four major servicers - BofA, Wells Fargo, J.P.MorganChase, and IndyMac/FDIC – are all using grant deeds to convey ownership to the buyers.  The grant deeds include the warranty, which should relieve the title insurers from responsibility (and put it on the servicers) for robo-signed deocuments fouling up the chain of title.

Click here for an Example of a Grant Deed used recently – remember the bank-owned house in Olivenhain listed for $999,000 that had 17 offers?  It closed for $1,170,000, or 17% over list price.  You can verify that sales price by taking the documentary transfer tax, $1,287 (at top of grant deed) and dividing by .0011.