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By way of Naked Capitalism I came across a Scott's Investment Blog article consisting in most part of an e-mails from anonymous financial services industry insiders that contend the fraudulent foreclosure documents scandal may be reasonably expected to cause massive further disruption to our financial system and hopefully rekindle interest in tightening the reins on banks. It is also hoped that it will rekindle the bankers' interest in modifying securitized mortgages. Assuming, that is, they even have the legal authority to do so.

And, as a side benefit, it may make Rick Santelli's head explode because as our insider contends:

If for whatever reason any of these [chain of title] signatures is skipped, [which they appear to have been en masse]then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.

To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.

Read that last sentence again, please. Don’t worry, I’ll wait.

You read it again? Good: Now you see the can of worms that’s opening up.

It looks like at last the weak have a hefty weapon with which to do battle with the strong. Except that the real villains, the banks who engineered this mess, gracefully and profitably stepped aside by means of securitizing mortgages they originated and selling them, in some cases fraudulently, to hapless institutional investors.

Mass defaults sans foreclosure sale proceeds on existing mortgages and reparations paid to the already foreclosed upon would prove so massively destabilizing would produce a gigantic sucking sound so fearful so as to inspire some fast tap dancing at the federal level. As one insider notes:

The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby. They wanted to shove down that law, so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their master’s will by a voice vote—so that there would be no registry of who had voted for it, and therefore no accountability.)

And President Obama’s pocket veto of the measure? He had to veto it—if he’d signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as unconstitutional in short order. (But he didn’t have the gumption to come right out and veto it—he pocket vetoed it.)

Other developments includes:  banks' voluntary foreclosure moratorium, actions by states' attorneys general, SEIU's lauching of Where's The Note Campaign At the very least, it is to be hoped that this will engender negotiations between borrowers and bond holders to more equally, rationally and in a less systemically damaging manner share the burdens of the crisis.

I encourage all to read the original Scott's Investment piece and if you have a mortgage just say to your bank: PAPERS, PLEASE!

Originally posted to Wolf10 on Mon Oct 18, 2010 at 06:52 AM PDT.

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Comment Preferences

    •  In law enforcement, keeping the chain of (9+ / 0-)

      evidence intact is essential for a conviction and police agencies spend a lot of money doing that and training their employees to do it.
      If there has to been an unbroken chain of mortgage ownership, then those who have been foreclosed upon have a powerful weapon to use.[until they run into the Robert's Court; or is it Robber's Court?]

    •  This might be the only stimulus some people (2+ / 0-)
      Recommended by:
      science nerd, Wolf10

      will get.

      If the bank can't provide clear title & the mortgage is no longer owned, then the mortgagee can live in the house pretty much for free.

      This means the money they can't afford to pay for the mortgage they can spend on themselves and family or at least not get deeper in debt.

      This problem hurts only one class of borrowers - people trying to sell their house NOW because they don't have clear title on the house either.  But for other people with underwater or unaffordable homes, this is a great breather.

      Unfortunately, the banks will probably get more money from the gov't because of TBTF, but losing all these loans will not make the top 4 banks go belly up.   They'll get their eyebrows singed, but they have more profit than they should anyhow.

      Somehow, the bank lobby and compliant Congresspeople will find a way to put this back on the homeowner/taxpayers.

      HylasBrook @62 - fiesty, fiery, and fierce

      by HylasBrook on Mon Oct 18, 2010 at 08:28:15 AM PDT

      [ Parent ]

      •  That case cited is interesting but the question (3+ / 0-)
        Recommended by:
        nchristine, HylasBrook, Wolf10

        is whether courts in different states will all take the same position on fraudulent documents, and dismiss 'with prejudice'.  

        A suit dismissed with prejudice is dead and cannot be brought again in any form or forum.

        Many of these however seem to be being adjourned or dimissed without a statement of prejudice, which means they are dismissed 'without prejudice,' at least in the state I practiced in,  and the bank is free to find other evidence it thinks will fly, and come back for another attempt at foreclosure.

        Normally fraud on the court by the use of demonstrably fraudulent documents is a fatal defect to the matter sought to be proven by the false paper, at least, and the court exacts penalties for the filer of said paper. But it remains to be seen if filing junk paperwork will in the area of foreclosures produce any consensus as to dismissals with prejudice or without.  

        •  There's a lot of money at stake here, will be (0+ / 0-)

          interesting (by someone who's not impacted) to see what the next step is.

          Bank of America has already re-started its foreclosure process. Let's see if the other 3 of the big 4 follow suit.

          HylasBrook @62 - fiesty, fiery, and fierce

          by HylasBrook on Mon Oct 18, 2010 at 05:03:57 PM PDT

          [ Parent ]

  •  Then there's this. (7+ / 0-)

    http://www.huffingtonpost.com/...

    To those who are using the banks' own sloppy bookkeeping against them....stick it to them, baby!

    Freedom has two enemies: Those who want to control everyone around them...and those who feel no need to control themselves.

    by Sirenus on Mon Oct 18, 2010 at 06:58:34 AM PDT

  •  they rely on shame and fear of the masses (5+ / 0-)

    to keep paying on their mortgages in spite of the pickle these banks have gotten themselves into.  If only the public as a mass would just stop paying on their mortgages--maybe that would stop their greedmongering shit in its tracks.  Once again, the regular guy gets screwed:  on the way up and on the way down.  Only Wall Street figures out how to come out ahead every time.  

  •  chain of title (11+ / 0-)

    The fact there is a gap in the note structure does not relieve the debtor of paying off the note according to its terms.  this is basic law 101.  the issue is who can enforce the note-not its validity.  Whoever wrote the E-mail is either ignorant of the law or is purposely being deceptive.

    •  But what is the effect on the borrower? (6+ / 0-)

      While I agree that folks won't be entirely relieved of legitimately owed debts but I do think the screw up will give them a very big bargaining chip in negotiating for a reasonable modification. No?

      The frog jumped/ into the old pond/ plop! (Basho)

      by Wolf10 on Mon Oct 18, 2010 at 07:13:21 AM PDT

      [ Parent ]

    •  Good information. My question is then, (4+ / 0-)

      to whom does the debtor pay if the title chain has been broken. Wouldn't the current holder have to document they he/she is the valis holder and that would involve considerable research.

      •  Since I'm on both sides of this (4+ / 0-)

        thing: I am close to underwater on my mortgage and I have a pension that probably owns some of this paper, I'm hoping homeowners and investors in securitized mortgages can get together without the finagling intermediation of the lying, thieving bankers.

        The frog jumped/ into the old pond/ plop! (Basho)

        by Wolf10 on Mon Oct 18, 2010 at 07:18:13 AM PDT

        [ Parent ]

        •  I"d like to see a mechanism for arbitration (3+ / 0-)
          Recommended by:
          cotterperson, trashablanca, Wolf10

          since everyone knows someone owns something.

          IN fact, it should be pretty simple: if I've paid you for something, I track down the payment.  Whether you completed the docs isn't important to the fact I bought it.

          I did some case where Lloyds of London issued a hundred million dollar policy of reinsurance.  So I asked, "where's the policy"?  And they informed me that the policy is usually not issued until well after the policy term expires.  Until then, there's just a "binder", noting the premium and amount. Shockingly, everyone accepted that as good enough to prove the policy terms of the policy TBD.

          Yes, I'd give the Devil benefit of law, for my own safety's sake!

          by Inland on Mon Oct 18, 2010 at 07:34:17 AM PDT

          [ Parent ]

          •  Perhaps "interpleader." (3+ / 0-)
            Recommended by:
            Angie in WA State, Inland, Wolf10

            Interpleader is a legal action that the debtor files with the court. The debtor says, "hey court, I owe this money to somebody, but it's not clear who. You sort it out." The debtor pays the money to the court, then the competing creditor-claimants try to convince the court they're entitled to it.

            The problem, of course, is that this requires the debtor (a) to have the money, and (b) to go to a lot of trouble and expense to hire a lawyer. So it's not really practical for most homeowners behind on their mortgage.

            "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

            by HeyMikey on Mon Oct 18, 2010 at 10:10:18 AM PDT

            [ Parent ]

      •  Whoever has the note. (2+ / 0-)
        Recommended by:
        cotterperson, Wolf10

        Although without the mortgage it's difficult to enforce.

    •  Would the entity (2+ / 0-)
      Recommended by:
      cotterperson, Wolf10

      who can enforce the note (theoretically) revert back to the last entity on the chain before it was broken?  

      "You have attributed conditions to villainy that simply result from stupidity"

      by newfie on Mon Oct 18, 2010 at 07:18:53 AM PDT

      [ Parent ]

      •  If that is the case then the party (4+ / 0-)

        beyond the break in the chain who has been receiving an income stream that is suddenly blocked will become very, very unhappy. I assume investor lawsuits will become even more abundant.

        I think the principal point is bank malfeasance. As long as the victims were the little folk, i.e. borrowers, the attitude has been fukkem. But now that investor interests may be threatened, action is needed.

        The frog jumped/ into the old pond/ plop! (Basho)

        by Wolf10 on Mon Oct 18, 2010 at 07:24:47 AM PDT

        [ Parent ]

      •  But if they've been paid for the note... (2+ / 0-)
        Recommended by:
        newfie, Wolf10

        they've been paid. No?

        "Be just and good." John Adams to Thomas Jefferson

        by ogre on Mon Oct 18, 2010 at 10:02:31 AM PDT

        [ Parent ]

        •  I would think so. (1+ / 0-)
          Recommended by:
          Wolf10

          The only positive I see out of this is that those facing foreclosure can gum up the works and stay in their house longer.  I'm not about to rush out and challenge my mortgage.  

          "You have attributed conditions to villainy that simply result from stupidity"

          by newfie on Mon Oct 18, 2010 at 10:13:32 AM PDT

          [ Parent ]

    •  I think that's right. (3+ / 0-)
      Recommended by:
      BlackSheep1, science nerd, Wolf10

      But as a practical matter, people who aren't paying the notes still stay in the houses until it gets straighted out, and in a non recourse state where there wasn't equity, that's free money for him.

      Yes, I'd give the Devil benefit of law, for my own safety's sake!

      by Inland on Mon Oct 18, 2010 at 07:29:31 AM PDT

      [ Parent ]

    •  Correct, people are confusing note v mortgage (2+ / 0-)
      Recommended by:
      cotterperson, Wolf10

      Just to add to what you said, it's important for people to realize that when a person borrows money to buy a house, he enters into two important documents, the note and the mortgage.

      The note is the evidence of the debt; it's basically an IOU.

      The mortgage is the pledge of the house or property and says, basically, if I fail to pay the note, you can take back my house.

      The rules on notes are very flexible.  Pretty much whoever has the physical note can collect on it.  Iirc, ownership of the note really goes to whoever has physical possession of it, sort of like a check that's been endorsed.

      The mortgage is much more difficult to get ownership of and this is where the scandal is.  If the original lender sells the note (debt) and mortgage (right to foreclose), the sale of the mortgage must be recorded in the local deeds office.  This seems to be where people are getting confused with the idea of "chain of title" because that term is used with respect to deeds.

      Even if A tries to transfer the mortgage to B and doesn't succeed, as has apparently happened, it doesn't mean that there is no debt and doesn't even mean there's no mortgage.  

      The mortgage holder with the imperfect interest has to go back to the deeds office and refile, this time properly and it now has a good security interest in the property.

      The danger to the person (B) who bought the note and mortgage  is that we have this peculiar system of "racing to the deeds office" so that interests, including foreclosure interests, take precedence according to the chronological order in which they are recorded.  If someone (C) files another interest in the property before the mortgage holder refiles, then C's interest is superior to B's.

      Hey here's an idea!!!  If people really want to resist the foreclosure epidemic, here's what they could do.

      Let's say you have a house in foreclosure but the mortgage was fraudulently conveyed.  Could you grant a mortgage or security to your brother or sister or trusted friend, before B refiles?  It should have priority, right?

      •  Careful. (2+ / 0-)
        Recommended by:
        RoCali, Wolf10

        Most states' recording statues only give priority to a bona fide purchaser for value and without notice of the prior sale.  You'd have to commit a fraud on your "brother, sister or trusted friend."  They might not prevail anyway, and you'd go to jail.

        But, having said that, I've seen it done. Sometimes crime does pay.

        Human reason treads water in a sea of animal impulses.

        by legalarray on Mon Oct 18, 2010 at 08:28:23 AM PDT

        [ Parent ]

    •  It's a bigger question than that. Basic law 102. (5+ / 0-)

      Though it is said that the assignment of the note carries with it the right to foreclose, what if it's not an assignment of the note, but a share of the proceeds of a pool of many such notes? I suggest that this would result in the actual owner of the note being someone who has already made his profit and is now dissolved, long gone, insolvent, or (as I would be) in hiding.

      To complicate things further, if any of these sales of rights in the note are not recorded or recordable, they are subject to intervening rights of innocent third parties who may have bought an interest in that note without notice of the prior sale.  That makes a foreclosed property virtually uninsurable and unmarketable.

      And how about this:  If anybody tried to foreclose on one of my clients who couldn't prove they owned the note, I'd not only object to the foreclosure, I'd sue them for refund of my client's payments.

      Human reason treads water in a sea of animal impulses.

      by legalarray on Mon Oct 18, 2010 at 08:17:15 AM PDT

      [ Parent ]

      •  It was title companies refusing to insure (0+ / 0-)

        their search results that kicked this thing off according to the Scott's Investment source.

        Now, the reason this all came to light is not because too many people were getting screwed by the banks or the government or someone with some power saw what was going on and decided to put a stop to it—that would have been nice, to see a shining knight in armor, riding on a white horse.

        But that’s not how America works nowadays.

        No, alarm bells started going off when the title insurance companies started to refuse to insure the titles.

        In every sale, a title insurance company insures that the title is free –and clear —that the prospective buyer is in fact buying a properly vetted house, with its title issues all in order. Title insurance companies stopped providing their service because—of course—they didn’t want to expose themselves to the risk that the chain –of title had been broken, and that the bank had illegally foreclosed on the previous owner.

        Do you practice in CA; how much do you charge? Cheers

        The frog jumped/ into the old pond/ plop! (Basho)

        by Wolf10 on Mon Oct 18, 2010 at 08:25:32 AM PDT

        [ Parent ]

      •  I think the owner of the note is a trust (1+ / 0-)
        Recommended by:
        Wolf10

        Many years ago, I was an associate at a firm that negotiated and drafted the documents for mortgage backed securities.  

        I thought even at that time at that young age that something was screwy because the ownership of the documents was a bit fragmented.

        Iirc, ownership of the notes for the pool of mortgages are transferred to a trust.  These trusts have names like, "Bear Stearns Mortgage Backed Security Trust A-1".  The entity that actually sends out payment notices is the Servicer -- usually a financial institution that has a large billing department.  The actual physical possession of the Note may be with the Servicer or yet another entity, like the "Custodian."

        The idea is that the Trust, Servicer and Custodian unite the ownership interests of "the proceeds of a pool of many such notes".  It seems that many Servicers and Custodians have lost the notes, but I doubt most have.

        As I understand this evolving story, the problem isn't really possession of the notes; it's that the notes were transferred but the accompanying mortgages were not properly transferred and recorded.

        I think we've made the same point about innocent third parties -- that is, that if the transfer of ownership of the mortgage wasn't properly recorded, any intervening third party now has a superior interest in the property.

        •  Very very interesting. (1+ / 0-)
          Recommended by:
          Wolf10

          In theory, the security follows the ownership of the note, which must reside somewhere.  In the case you describe, the trust is the owner, and stays the owner no matter how many beneficiaries of the trust there are or how fragmented the beneficial interests are.

          It seems sound because courts have the power to appoint a sucessor trustee even if the original institutional trustee becomes "unavailable."

          Okay, I guess I could play either hand!

          Human reason treads water in a sea of animal impulses.

          by legalarray on Mon Oct 18, 2010 at 09:15:30 AM PDT

          [ Parent ]

          •  Yes that's correct (1+ / 0-)
            Recommended by:
            Wolf10

            "the trust is the owner, and stays the owner no matter how many beneficiaries of the trust there are or how fragmented the beneficial interests are."

            Exactly.  The beneficial interests are represented by trust certificates (ie basically bonds).

            So the trust owns these assets (notes) and is indebted to the holders of trust certificates.  The certificate holders don't have a direct legal interest in the property of the trust.  Interesting legal question I probably once knew but am not sure about -- are the certificate holders just creditors of the trust or beneficiaries -- or both?

            •  Well, without the documents and some research . . (1+ / 0-)
              Recommended by:
              Wolf10

              But it's an interesting question.  We know that a trust is generally defined as a split of legal and equiptable ownership.  It requires transfer of property (the trust "res") to a trustee to be administered for the benefit of someone.  If it's just a device for holding property, and there is no actual "beneficiary" but only property burdened by contractual obligations, I suggest that it's not a "trust" at all.  Maybe it's just the agent, or mere "nominee" of the fragmented interests, and maybe not even that.

              My head hurts.

              Human reason treads water in a sea of animal impulses.

              by legalarray on Mon Oct 18, 2010 at 12:11:13 PM PDT

              [ Parent ]

              •  You're right. On reflection it's both. (1+ / 0-)
                Recommended by:
                Wolf10

                The trust certificate holder is both the creditor and the beneficiary.  This is customary in many debt relationships in which a trust is created for the creditor -- like deed in trust mortgages, or a trust indenture that creates an ordinary bond issue.

                I've been out of the field so long, I'm rusty!

                Cheers.

        •  Okay you guys, give us non-lawyers, (0+ / 0-)

          not legal advice, but suggestions as how to proceed if all one wants to do is negotiate with the principal party of interest.

          For 14 months I got the runaround from Chase trying to get a loan modification. At long last they said the investor declined. I suspect the investor never had anything to do with it and I just want to deal directly with that investor.

          I have submitted a request for documentation of title to the bank.

          The frog jumped/ into the old pond/ plop! (Basho)

          by Wolf10 on Mon Oct 18, 2010 at 09:23:19 AM PDT

          [ Parent ]

          •  Not legal advice, but (1+ / 0-)
            Recommended by:
            Wolf10

            it sounds like your mortgage was sold at some point.  The "investor" is probably a trust that has issued mortgage backed securities.  

            Try to find out if your mortgage was sold as part of a mortgage backed securities issue.  The rest of this assumes that it was.

            The thing is that the trust "investor" is a passive vehicle with almost no activities or staff.  All that is delegated to the "Servicer."  If you were communicating with Chase that's probably the Servicer.

            One thing that screwed up the entire system was that the ownership was divorced from servicing, which includes decision making on things like loan modifications.

            So even if Chase as Servicer wanted to modify the loan for you and thousands of others (to prevent default on the bonds), they might have to do something preposterous like get 51% of the owners of trust certificates to agree, which is pretty much impossible because they are scattered across the globe.  Find out who the Servicer is and work on them, because the system usually delegates a lot of power to the Servicer to make decisions on behalf of the trust.

            But you may be in the bind that these fools created by divorcing ownership from servicing.

            •  I was dealing with Chase for over a year (0+ / 0-)

              and they finally told me the investor decided to deny a modification. This may be true but I'm demanding documentation so that I may identify the investor, contact them and verify. In said letter I am also informing them of my intention to default in which I cite as my inspiration the recent mortgage defaults as those of the Mortgage Bankers' Association and Morgan Stanley. Cheers and thank you.

              The frog jumped/ into the old pond/ plop! (Basho)

              by Wolf10 on Mon Oct 18, 2010 at 10:38:39 AM PDT

              [ Parent ]

  •  So how (5+ / 0-)

    So how will it be that it's the poor people who are at fault in THIS screw-up?  

    "Liars" who "bought more house than they could afford" and "parasites" who expected the government and Rick Santelli to pay their mortgages were wrongly (mostly) blamed for the first part of the mess.  So how did they infiltrate the banks' internal workings and screw up the paperwork, too?

    I'm sure we'll find out soon enough.

    Bank bastards!

  •  Just the "Where's the Note" (7+ / 0-)

    push is going to crush these banks.  They certainly do not have the manpower to search for millions of notes.  To add to their chagrin, the Dodd bill forces them to produce in 30 days instead of the 60 days they used to be allowed.  Now, if they were robo stamping stuff because they didn't have the manpower to do the job right, do you think they can find all those notes people are requesting?  Beat them at their own game, bury them under a mountain of paperwork.  'Tis a fitting end for them.  Oh yeah, if they can't produce in 30 days, they owe you 3 thousand dollars ;)  Enjoy!

    ~War is Peace~Freedom is Slavery~Ignorance is Strength~ George Orwell "1984"

    by Kristina40 on Mon Oct 18, 2010 at 07:26:43 AM PDT

  •  Maybe the Feds can find a charge in this (3+ / 0-)
    Recommended by:
    cotterperson, Kristina40, Wolf10

    to hang on Mozilo - other than the one he just copped a plea to.

    "Who am I to give science the brush?" Sugarpuss O'Shea

    by semiot on Mon Oct 18, 2010 at 07:34:55 AM PDT

  •  I do wish (7+ / 0-)

    people would educate themselves on how the pocket veto works in all circumstances.

    If Obama had just merely pocket vetoed the bill as of today would be law.  Why isn't it? Because he sent it back to the House thus making it a protective return veto. The bill cannot be taken up again until January 2011.

    Next, had he done a straight veto the Senate could have easily have taken a veto override vote. Remember the bill was passed by veto proof majorities.

    Now however, with the cascading wave of info coming out about the piss poor mortgage signing practices, hopefully the chances of an override vote have gotten slimmer.

    All the above said there is a on going Constitutional argument about this type of veto.

    In the choice between changing ones mind and proving there's no need to do so, most people get busy on the proof.

    by jsfox on Mon Oct 18, 2010 at 07:37:58 AM PDT

  •  Good diary, except for the bit about Obama. (3+ / 0-)
    Recommended by:
    splashoil, science nerd, Wolf10

    He "really" vetoed it, as in writing a statement about why he wouldn't sign it and returning it to Congress.  

    Credit where it is due.

  •  this won't necessarily be the result everywhere (2+ / 0-)
    Recommended by:
    HeyMikey, Wolf10

    Georgia has taken an opposite postion in one case, it is a title state, ie, the security deed doesn't merely create a lien, it passes legal title which is reconveyed only when the debt is paid.

    Georgia is also a non-judicial state wherein a borrower must sue to stop a foreclosure. This can create some procedural twists that hurt borrowers.  There is one case in which the Supreme Court ruled that a borrower is not entitled to equity, ie, to enjoin a sale, if the borrower has not paid the money or made an offer of tender, and further, the borrower has to figure out who the loan was transferred to and name that party in the suit.  To obtain a cancellation of the security deed, the borrower has to show payment.

    Taylor, Bean & Whitaker Mortg. Corp. v. Brown
    276 Ga. 848, 583 S.E.2d 844
    Ga.,2003.
    June 30, 2003

    This case also arose in a defaulting borrower context, which given Georgia's traditional creditor friendly positions, somewhat explains the outcome.  Nevertheless, this case also contradicts another long standing rule, that title can't be made good if there is no appropriate transfer of debt of record, this is not in the MERS, as nominee, context, so it doesn't resolve the issue if MERS may foreclose in its name as nominee, but here the Supreme Court holds that without a proper transfer and assignment to the actual owner of the note and security deed, a sale done by a prior holder who has sold the note is invalid:

    Cary v. Guiragossian
    270 Ga. 192, 508 S.E.2d 403
    Ga.,1998.
    November 02, 1998 (Approx. 5 pages)

    This arose in the context of two parties, neither the defaulting borrower, asserting rights under the ownership of the banks, so it avoids the issues of the TB&W v. Brown case about not helping out a defaulting borrower.

    There is however a statutory claim for wrongful foreclosure in Georgia, and it does not rest in equity, so its possible that an invalid sale because the foreclosing entity does not own the note and security, is a wrongful foreclosure and could lead to damages claims.  What damages a borrower who isn't paying a note might suffer is a separate question, you may have a claim but no damages.

    DeGolyer v. Green Tree Servicing, LLC
    291 Ga.App. 444, 662 S.E.2d 141
    Ga.App.,2008.
    April 18, 2008 (Approx. 17 pages)

    This issue may be revisited in light of new situations where apparently MERS and no one else has any idea who the owner of the debt is.   But right now, things don't look good in Georgia for a defaulted borrower to use the defense that MERS doesn't own the note and security deed.

    Another interesting note, this is a factual statement of what the Court understood about the MERS system in 2003:

    "MERS, which began operating in 1997, is a private company created by the mortgage banking industry for the purpose of establishing a centralized, electronic system for registering the assignments and sales of residential mortgages, with the goal being the elimination of costly paper work every time a mortgage loan is sold. See Slesinger & McLaughlin, "Mortgage Electronic Registration System," 31 Idaho L.Rev. 805 (1995); Herstein, "Real Property," 44 Wayne L.Rev. 1019, 1104 (1998); "MERS Registers 15 Millionth Loan," Special Report: Mortgage Servicing, Vol. 27, No. 33, p. 22, National Mortgage News, May 12, 2003; "MERS: Every Commercial Loan Needs a MOM; Commercial; Mortgage Electronic Registration Systems, Inc.; MERS," Mortgage Banking (ISSN: 0730-0212), No. 4, Vol. 63, p. 79 (January 1, 2003). Under the MERS system, the borrower and the original lender name MERS as the grantee of any instrument designed to secure the mortgage loan. The security instrument is then recorded in the local land records, and the original lender registers the original loan on MERS's electronic system. Thereafter, all sales or assignments of the mortgage loan are accomplished electronically under the MERS system. Id. MERS currently has over 15 million loans registered, and is registering over 40% of all mortgage loans originating in the United States. National Mortgage News, May 12, 2003, supra."

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