Hello All
Sorry, my goal is to get one of these out once a day, not once a week, just that the schedule has precluded this over the past two weeks.
Shout out to the new subscribers (as well as existing ones), I am extremely grateful you are on board the foreclosure defense train. As a reminder my website can be found at www.foreclosuresinmass.com [our blog has other archived foreclosure stories]
In the course of my occupation as a foreclosure defense attorney, I have truly become to understand the true meaning of being a “counselor” During the past decade and one-half, I have experienced some truly heartbreaking and tragic circumstances related to foreclosure.
Going back to the “Great Recession”. circa 2008 - 2018, I witnessed many unfortunate situations play out, which I know is but a microcosm of the entire universe of devastating events related to foreclosure that play out daily.
The casual observer is usually ready to quip that, “hey the deadbeat isn’t paying the mortgage, so what is the issue?”.
The “issue” is that the financial industry is making trillions off the backs of individuals that probably never should have been approved for a loan. The reason these folks were “approved” is due to the “wonderful” concept of “mortgage securitization”.
That is after the mortgage loan is “originated”, the original “lender” sells the right to the payment from the underlying mortgage note out to the “secondary mortgage market.
Think of it as selling the right to a 30 year payment stream under the contractual terms of the Note. This model fits perfectly to the securitization paradigm, whereby many/most times the “originating bank” might be a large national bank, [think Bank of America, Wells Fargo Bank, etc]. The originating bank creates an “off balance sheet entity [termed a Special Purpose Vehicle (“SPV”), or Special Purpose Entity (“SPE”), which usually takes the form of a New York Common Law Trust, or Delaware Statutory Trust.
SPE/SPVs are commonly used to securitize loans (or other receivables). For example, a bank may wish to issue a mortgage-backed security whose payments come from a pool of loans. However, to ensure that the holders of the mortgage-backed securities have the first priority right to receive payments on the loans, these loans need to be legally separated from the other obligations of the bank. This is done by creating an SPE, and then transferring the loans from the bank to the SPE/SPV.
However, the ingenious financial folks figured out to develop two types of transactions involving the orignal lender, 1) “Servicing Released” sales, and 2) “Srevicing Retained sales. The distinction is an important one for the original bank.
Under a “Servicing Retained” transaction, [lets use Bank of America (“BOA”) as an example], say BOA originates the mortgage loan, then sells it into its “securitization paradigm”, the borrower is completely unaware of these opaque transactions and believes that BOA still owns their mortgage
In a Servicing Retained scenario, even though BOA sols the loan to an SPE/SPV long ago, as they retained the “right” to be the “mortgage servicer” for the loan, BOA continues to send mortgage statements for monthly payments to you, the borrower. So, understandably (and deceptively), BOA creates the appearance that they still “own” your mortgage loan.
These SPE/SPV entities are required to have a “Pooling and Servicing Agreement” (“PSA”) [for public offerings] or a “Private Placement Memo” (“PPM”) for a “non-public” solitary purchaser of the entire loan universe of a “securitization”. These are the “governing documents” for the SPE/SPV Trust that holds the “collateral” [title top the security (mortgage), as well as the right to payment from the underlying mortgage pool, in which a Trustee is ap[pointed to oversee the Trust.
So after the loan is originated, then sold, the originating bank could care less if the loan is foreclosed upon, as it no longer “owns” the right to payment. Although many SPE/SPV “Governing Document PSA’s allow the oriiginal “lender” to buyback securities representing the right to payment for their originated loans after default, [yes the fun never ends for the financial industry, and at YOUR “expense”].
The “geniuses” who developed mortgage securitization failed to understand the intersection of its complicated financial instruments, with the various states real property law in connection with the mortgage as title to land.
All of the above brings me to last week, in which (again) I was required to travel to a distant location in Massachusetts, as well as New Haven Connecticut for two different hearings.
The Massachusetts case involves an action for an eighty-two year old individual, in which I have defended in a post foreclosure situation since 2018. Like many of my cases, the “big bank Trustee” is being represented by a “tall building law firm”.
This defense culimated with a December 2023 trial, in which the “Big Bank, presented its sole witness who was an employee of a “mortgage servicer” appointed to “service” my client’s mortgage loan on behalf of the “big bank trustee for the SPV”.
The witness was called, and after the “tall building well rehearsed dog and pony show Q&A, I was provided the opportunity to cross-examine the “witness”.
There are primarily two types of “mortgage jurisdictions” in the United States, 1) Title Theory [in which the borrower deeds title to the property to the “lender”, but maintains the right to “redeem”], and 2) Lien Theory [where the borrower retains title and the “lender” maintains a lien on the property. My case in Massachusetts involved Massachusetts law, and therefore involved a “Title Theory State”, in which this states highest Court OPINED in U.S. Bank v. Ibanez, 458 Mass. 638, 649 (2011) [a case that I successfully argued], “That a transfer of a mortgage represents a transfer of an inrterest in land that requires a writing signed by the Grantor”, and then at p. 651 of the same opinion that when dealing with a PSA, that a schedule of loans that specifically identifies a borrower MAY suffice to show that the loans were assigned to the (SPE/SPV), However it must be shown that the entity assigning those mortgage loans to the SPV/SPE actually owened the same.
So lets now go back to the Courtroom in Massachusetts, I now approach the witness and ask, “what is your evidence that my client’s mortgage loan was transferred to “big bank as Trustee for the SPV?” Response, “Well, there is a recorded assignment of Mortgage that states that JPMorgan Chase Bank received all of Washington Mutual Bank’s assets from the FDIC after Washington Mutual Bank, N.A. collapsed on September 25, 2008”.
I respond, with “Okay, for the record Im going to ask again, does this assignment mean that you are saying that JPMorgan Chase Bank, N.A. assigned my clients mortgage to the “Trustee for the SPV?”. Witness: Well that document (which was recorded in 2012) memorializes the transaction that took place as an operation of law from the FDIC, and represents what took place in the PSA”
I then turn to my trusty (and massive) Trial Exhibit Book, and return to the witness to ask ”Please turn to Exhibit 12 (which is the PSA), and I further specifically ask the witness to turn to the defintions pages in this document, and ask him to read the definition for “Mortgage Loan Purchase Agreement”, Witness: “Under the Mortgage Loan Purchase Agreement, Washington Mutual Bank, N.A. sells the mortgage loans to Washington Mutual Asset Acceptance Coporation (“WMAAC”).
I then ask the witness to turn to the PSA “Preliminary Statement”, and asked the Witness to read it:
“The Company at the Closing Date is the owner of the Mortgage Loans and the other property being conveyed by it to the Trust. On the Closing Date, the Company will sell the Mortgage Loans and certain other assets to the Trust”
I then ask the Witness to read the definition of the term “Company”, Witness: “WaMu Asset Acceptance Corp., as depositor (the “Company”)”
I then ask the witness, “but I thought you said that JPMorgan Chase Bank assigned my client’s loan to the “big bank Trustee for the SPV", AND THAT THAT ASSIGNMENT “MEMORIALIZED WHAT TOOK PLACE IN THE PSA?”
“Well, if you are trying to say that WMAAC is different that JPMorgan Chase, they are all under the same umbrella after JPMorgan Chase acquired all assets of Washington Mutual Bank, N.A.” I responded and asked the witness if he was familiar with Title Theory Mortgage jurisdictions, to which he relied in the Affimative. I then said that WMAAC was a separate corporate entity, in which the Mortgage Loan Purchase Agreement very clearly stated that Washington Mutual Bank, N.A. SOLD the mortgage loans [supposedly including my client’s] identified on a schedule that was not attached) to WMAAC, to which the PSA then states that the Company (WMAAC) then sold these same loans to the “big bank as Trustee for the SPV”.
I then state “Under Massachusetts Supreme Court precedent, there was required to be a “writing” from the Grantor, (Washington Mutual Bank, N.A.) transferring the [defeasible fee] title to my client’s mortgage to WMAAC. You stated you reviewed my client’s “loan file” did you see any evidence of that? Witness Answer: No.
Next Question: In your review of my client’s loan file, did you ever see any writing from WMAAC (Company)_ to the “big bank as Trustee for the SPV?” Witness Answer: No
Next Question: “So what is your basis to state that under Massachusetts state law there was ever a valid transfer of my client’s mortgage to the SPV. Answer “I rely on the documents.”
Also unlike many jurisdictions, in Massachusetts, the mortgage DOES NOT automatically follow the note, meaning that if there is a purported “sale, transfer or assignment of the note, the mortgage DOES NOT automatically follow alnong to any successive purchaser without evidence of contemporaneous writings signed by the Grantor(s) [This will also be argued when I bring down MERS in Massachusetts ONCE AND FOR ALL].
Sounds pretty good right, I mean I think what I argued was quite clear, right? WRONG
After the trial, which was a bench trial, the Judge was required to submit “Findings of Fact and Conclusions of Law along with any Judgment.
About 6 weeks later I receive Judgment, in which all that is said is “Judgment for Plaintiff”. No findings of fact or conclusions of law. I reviewed the docket to the case very closely and no such docuument appeared. I then file a Motion to Vacate Judgment on the basis of failing to comply with this requirement.
Then magically, as if a sugar fairly suddenly appeared and “fixed” the docket, a document is magically placed on the docket back around the time of the Judgment.
I reserved the right to add to the Motion to Vacate once the Findings of Fact/Conclusions of Law was filed, and currently are doing so. and therefore cannot reveal the identity of the case.
However, this would appear to represent another instance in which there is great difficulty in getting the judiciary to listen to valid arguments on behalf of borrowers.
Getting back to the role of “counselor”, the Client is alone, apparently has no one to turn to and calls me numerous times daily to ask me what is to become of her if she gets kicked to the curb, as she has no where to go.
Stories like these become my experience, and I wear tragedies such as this, as if they are my own. It takes a toll on the soul.
I will keep you posted on the final outcome
Have a safe week
Glenn