In courtrooms across the country, judges are foreclosing on homes based on improperly prepared documentation, some of which may even be fraudulent. At the heart of the problem are entities like Mortgage Electronic Registration System (MERS), which itself is owned by many of the largest financial institutions in the U.S. If MERS and other similar firms acting as foreclosing entity were required to show legal proof of mortgage assignment, the documentation offered could reveal a lack of capitalization that would make the bank bailout look like lunch money.
Imagine you are a judge in a state court mortgage foreclosure part, or maybe in a bankruptcy court.
Your experience and training tells you what is supposed to happen. An originator of a mortgage, with the actual wet ink documents in hand and full knowledge of the transaction, makes MERS the nominee for the holder of the mortgage and records the mortgage in MERS’s name and gives physical custody of the wet ink documents to MERS. The originator then assigns the mortgage and note to Bank. Bank, with full knowledge of the assignment transaction, may assign it further, perhaps into a trust to back up Residential Mortgage Backed Security (RMBS). All of this would be done with proper notice to MERS who would always be up to date on who is the most recent assignee of the mortgage. When the time comes to foreclose, MERS would release the wet ink documents to the lawyers for the last assignee, who would use those original documents to foreclose.
Now comes into your court, a party claiming to be the lender—or at least the lender’s successor in interest—saying that it has acquired the homeowner’s mortgage by assignment. The homeowner took out the mortgage 5 or 6 years ago from XYZ originator, but the loan was recorded at the county clerk’s office or local land office as being in the hands of MERS.. I have explained about MERS and other issues relating to sloppy mortgage document handling in prior posts.
Attached to the complaint is a document which, on its face, appears to be an assignment of the mortgage from MERS to plaintiff. It is signed by a person with an official looking title at MERS. So, would you be safe in assuming that the person who signed the assignment:
1) went and fetched this mortgage out of a file room at MERS;
2) checked it over to make sure it was properly assigned from the originator to MERS; and
3) that the party to which the assignment was about to made had paid for the right to own the mortgage, before executing the assignment?
No, you would not.
In the Aughts, during the rush to make loans and generate all those origination fees, front line lenders and mortgage brokers would zoom through paperwork and flip the mortgages immediately over to trusts and servicers. They didn’t always complete the paperwork to assign the mortgage over to either MERS or to the trust. The mortgage may have been filed with the county clerk as belonging to either MERS or to some mortgage back securities trust, but the actual assignment papers might never have been executed. And although money moved around from the servicers, originators and investors, paperwork indicating payment for the transfer of a particular mortgage was not always provided.
Nonetheless, servicers acted as if the loans had actually been paid for and properly assigned and sent out notices to homeowners saying that payments on a particular mortgage were now to be directed to this servicer. The homeowners paid the servicers who presumably forwarded on a net amount, less their servicing fees, to the investors in the Residential Mortgage Backed Securities (RMBS).
Then one day, the homeowner goes into default. The trustee for the trust that is supposed to be holding the mortgage for the benefit of the investors in the RMBS, springs into action and want s to foreclose. Well, actually, the servicer springs into action using the name and consent of the trustee — the servicer makes tons more in fees from foreclosure than it does from mortgage modification.
The servicer hires a law firm. The law firm will need an assignment document as proof that the trustee owns the note and has standing to foreclose. Where does the law firm get this assignment? Does the trustee contact MERS and ask for assignment? Does the trustee have to pay somebody to buy the note? Does MERS prepare the document and send it over?
In many instances, an employee of the servicer, or of a document mill executes hired by the servicer, creates and signs the assignment from the originator, indicating that he or she is an officer of the originator. Sometimes an employee of the law firm executes an assignment from MERS indicating that he or she is an officer of MERS.
In neither case, is it likely that the person executing the assignment has ever clapped eyes on the mortgage documents. Rarely, if ever, does the signer have any direct knowledge of whether any money has actually changed hands to effectuate the purchase of this mortgage by the entity which will be receiving it and foreclosing upon it. In order for someone to acquire rights under a note, they must be a “purchaser for value”.
Let me say this again. People who are not actually employees or officers of the originator, sign as if they are. People who don’t actually know if a loan was ever paid for, are executing documents as if they do. They are purporting to transfer mortgages from the originator to either MERS, or to an entity called the “depositor” who deposits the mortgage into a RMBS trust, or directly to a RMBS trust. People who are not employees of MERS are executing documents purporting to transfer mortgages — which may or may not have actually been properly transferred into MERS — from MERS to RMBS trusts.
AND NOBODY IS TELLING THE JUDGES OR THE HOMEOWNERS THAT THESE DOCUMENTS HAVE NO ACTUAL KNOWLEDGE BEHIND THEM.
I am not accusing the people who sign these things of deliberately lying, in the sense that you tell a deliberate falsehood knowing it to be false. I’m sure they “hope” the documents are accurate; they just have no way of knowing.
Click here to read about a law firm that creates, and has its own employees sign, assignments from MERS that it uses as exhibits in the cases it brings. Click here to read about a group of people signing on behalf of many different originators simultaneously.
Having read these articles about created assignments and a "clone army" of officers signing documents, courts should pay attention to the fact that the signatories are pretending to work for the GRANTOR — the original lender or someone in the chain. However, they are really being paid by the GRANTEE — the mortgage servicer working on behalf of the trust. Talk about your conflict of interest.
The signers have no personal knowledge as to the accuracy of anything they are representing.
So, when you, the judge, are presented with this complaint and the documents which purports to effect various assignments, how do you know if any of it is real? You don’t.
[Earlier posts in this series and related links at Kouril’s Foreclosure Fraud Resources]