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This is my first diary entry and I’m not going to hide the fact that this information comes from personal experience and need.  When I made mortgage payments to Chase Home Finance, LLC, it claimed ownership of my mortgage note, also known as a deed of trust note, or ‘loan’ note (hereafter "Note").  During the same time period that Chase claimed ownership of my Note, so did Fannie Mae.  However, I soon discovered that neither Chase nor Fannie Mae owned my Note.  It was, and still is, owned by a mortgage backed security trust (MBST) which purchased my Note from neither Chase nor Fannie Mae but from yet another purported owner of my Note.   In my extended diary I give the UCC statute common to all states and also recent case citations (one is less than two weeks old) that you, your attorney or your friend’s attorney will need for a successful “show me the note” defense.  Yes! It works!

You need to know this; that the term, “show me the note” is a misnomer.  Under the Uniform Commercial Code (UCC), Section 309 of Article 3 (UCC 3:309)  the Note owner does not need to show a Note, whether original or a copy, in order to enforce it “if” it once had possession of the Note and now claims to have lost it or that it was accidently destroyed.  That, however, is not the problem that banks face.  The problem banks are having with the “show me the note” defense is proving that they have a right to enforce the Note, even if they can produce a copy.   The UCC, at 3:309(2), says that the bank must ‘prove’  its right to enforce the Note.  You ask the bank, “Where did you get that Note?  Show me the endorsements”.  The bank must show the ‘chain of title’ from the original Lender bank to itself, and that it cannot do.  Almost always, the Lender sold your Note to Fannie Mae the day it was signed which then, within days, sold it to another entity and so on until it ended up in a "mortgage backed security trust", or MBST.  Fannie Mae no longer owns your Note, nor does MERS.
The United States Bankruptcy Court for the Eastern District of California issued a ruling dated May 20, 2010, in the matter of In re: Walker, Case No. 10-21656-E-11, stating that “Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.”  Though this  conclusion was based upon California law it is the same UCC and real estate law as most other states have adopted.  The In re: Walker court states that the Note and the mortgage are inseparable, and that an assignment of the Note carries the mortgage with it, “while an assignment of the latter [the mortgage] alone is a nullity” (most foreclosing companies claim ownership of the mortgage only, not the note making the mortgage a nullity).   Meaning; if a  bank claims to own the mortgage but doesn’t also own your Note, it cannot foreclose.  This concept is from ancient English Common Law codified by most states as the UCC, for Notes (a Note is personal property), and also from real estate law and practice for the mortgage ( a mortgage is not personal property, it is real property).  
A more recent California case, Gomes v Countrywide Home Loans, et al., D057005, Ct. Appeals CA, 4th Dist., Div One, February 18, 2011, did not address the “show me the note” defense though it was widely expected to do so.  However, in Gomes the CA court cited two cases approvingly where the “show me the note” defense was accepted by federal courts; Castro v Executive Trustee Services, LLC, (D Ariz, 2009 February 23, 2009, CV-08-2156-PHX-LOA) 2009 US Dist Lexus 14134,  and Weingartner v Chase Home Finance, LLC, (D Nev 2010) 702 F Supp2nd 1276, 1282-1283, .  
The CA court noted that the issue in those two cases cited in the preceding paragraph (the “show me the note” issue) was not the same issue that it had to decide in Gomes.  In the Gomes case the plaintiff, Jose Gomes, did not raise the “show me the note” defense.  Instead, his case was a lawsuit for discovery in order to find out ‘if’ he could raise the “show me the note” defense.  The Gomes court held that such a lawsuit, making ‘no’ specific allegations, did not state a cause of action as a matter of law.  Gomes alleged only that ‘upon information and belief’ MERS did not own his Note or did not have authority from the Note owner to foreclose and Jose Gomes wanted to know if his “information and belief” was true, because he didn't really knowif it was true.  The Gomes court, finding that Gomes made no allegation upon which it could rule, agreed with the lower court that his case should be dismissed.  The Gomes court never addressed the “show me the note” defense in its published opinion.  
 The most recent case that expounds upon the “show me the note” defense, as does Weingartner, continues with the reasoning made in previous court rulings made in Kansas, Ohio and Michigan and other states making ownership of your Note a requirement in order to commence a foreclosure, whether in a judicial or non-judicial state.  See, Eastern District Bankruptcy Court for New York, In Re: Ferrell L. Agard, Case No. 810-77338, February 10, 2011 issued less than two weeks ago, .  In this case Ferrell Agard, the home owner, lost for reasons having nothing to do with ownership of the mortgage Note, but the Hon. Robert E. Grossman, Bankruptcy Judge, stated, “However, in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing before this Court”.  In other words, Mr. Banker, if you want to foreclose, or file a Proof of Claim and set aside the ‘stay’ order that stops you from foreclosing, you must “Prove” that you own “both” the mortgage (deed of trust) and the note (meaning: prove a valid “chain of title”).  So my friends, the “show me the note” foreclosure defense gains in strength with every court decision.  Spread the word.  

Originally posted to Amicus curiae on Wed Feb 23, 2011 at 06:11 PM PST.

Also republished by Community Spotlight.

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Comment Preferences

    •  Great diary! (19+ / 0-)

      Thanks for posting it.

      "We the People of the United States...." -U.S. Constitution

      by elwior on Wed Feb 23, 2011 at 08:29:03 PM PST

      [ Parent ]

      •  Great diary... but............................ (12+ / 0-)

        the legal defense is going to run into a problem down the line.

        I know this system from having worked on the computer systems that support both the initial auction process and the mortgage-payment receivables. In fact, Chase does the work collecting mortgage payments as a legal agent of the owner of the bond that includes the specific mortgage.

        Here's a typical mortgage time line:

        1. Mortgage is finalized as a contract.
        2. The originating institution collects up some number of these mortgages as a "packet" and forwards them on through the computerized in-flow system to be securitized.
        3. The packet containing the mortgage is rated by a rating agency and then put up for auction. Preparation work is done either by BoNY or Chase. Auctions, themselves, are run by The Fed.
        4. The whole packet is bought at auction.
        5. Ownership of the whole packet -- coming out of the auction -- is located at a single-porpoise shell corporation (just to see if you are awake, no offense intended.) This shell is what the Diary refers to as a "mortgage backed security trust", or MBST.
        6. The shell MBST will always own the mortgage until either it is paid off, or until the mortgage defaults at which point ownership is supposed to revert to the initiator, or to a signer-of-record which has assumed that liability. (Responsibility of the initiator/signer depends on the specific contracts related to the in-flow process.)
        7. Normal mortgage payments are contracted to such as Chase. That is legal, normal, A.O.K. You the mortgage payer pay Chase.
        8. When default occurs, however, Chase may or may not be contracted to serve as legal agent for the initiator or signer. Betcha-betcha-betcha one helluva lot of the mortgage-agent companies in the Sand States -- Florida, California, Arizona, New Mexico -- are out of business. There is nobody back at the initiator (think of him as a proxy for baseball's First Base) to take the returning defaulted mortgage.
        9. MERS never owns anything.
        10. In practice, the shell MBST system worked hunky-dory for a century.
        11. Come the second Big Bubble (2003-2008) out of Greenspan-Bernanke hell, the MBST system got flooded with mortgage defaults and initiator bankruptcies. Essentially, the MBST system collapsed.

        The shell MBST likely owns the mortgage, come Armageddon and/or The Flood II. If a default has occurred then ownership should have been kicked back to the initiator or to a signer.

        Gee, that didn't happen cuz Chase liked seeing those mortgage payments coming in -- few though they might have been -- and Chase figured out that they could claim ownership of the property and steal the proceeds from the likely-bankrupt initiator or the benighted signer.

        Get to Court..................

        One way to beat Chase is to demand admissions that prove that Chase is stealing the property from the MBST and/or initiator and/or signer.

        Florida has facilitated such land grabs by the thousands.

        Baksheesh.... Republicans. More baksheesh....

        Keep in mind that Chase is stealing the mortgage, itself, from the lawful owners.

        -- Stealing the house seals the deal for them.

        -- Then the house is resold at an insiders auction, similar to the Gestapo auctions (1944-1945) for property stolen from concentration camp victims.

        Expect to see Republican office holders doing very well indeed through participation at these auctions. And a few bank-sucking Democrats.

        Have a nice day.

        •  It's all in the POA, isn't it vets74? (1+ / 0-)
          Recommended by:

          I know that Fannie Mae is supposed to replace the defaulting Note with another one (ha!) that is not in default per the PSA.  What has been found by some lawyers is that the defaulting note cannot be located.  Hence, it is 'lost'.  Meaning: UCC 3-309(2) is triggered.  If Fannie Mae commences foreclosure and does not possess the note it must claim (not necessarily 'prove') that the note is 'lost' or accidently destroyed.  When Fannie Mae does that, it must prove that it came by the note honestly and provide a valid chain of title.  The MBST, in the chain of title, supposedly, cannot prove that it had possession of the note.  Also, according to the Florida Banker's Association the notes were shredded because Fannie Mae decided to digitalize everything, in those cases the notes were not "accidently" destroyed and most courts hold that purposeful destruction voids the note.  MBST's are having difficulty proving that they received anything other than a computer disc with digitalized notes to prove ownership.  And, so it goes.  The matter of the endorsement of the note by various sellers of notes is a whole 'nother matter that screws up Fannie Mae.

          •  You're minimizing the role of The Fed and... (0+ / 0-)

            the preparation system for the Fed auctions.

            I have worked hands-on with these systems.

            For a specific mortgage, the path ends up leading to inclusion in a packet of mortgages. Each packet is then auctioned -- with The Fed running the auctions -- and a bond is issued for the packet.

            The shell corporation MBST is a legal convenience. It is a "synthetic" entity. Each MBST owns the mortgages and the proceeds from its bond's mortgages.

            Each MBST owns mortgages. MERS owns nothing.

            The preparation system does indeed verify the information on the mortgages that go through auctions.

            In reality, the problem you are getting to is that the underlying information at the time of the auction can all change. Sourcing organizations went bankrupt by the hundreds. Mortgage payment statuses were misreported for years.

            Assignments of Agent responsibilities to organizations such as Chase are legitimate. That is how mortgage business has been run for decades. big problem is that MERS failed to do quality control work...... cuz that is expensive and it embarrasses criminals.

            Bad data from 15,000 to 20,000 criminals went quite smoothly into MERS. Mortgage brokers as a class went over to crime.

  •  It is nothing short of wonderful (55+ / 0-)

    that the scales of justice are being balanced. Whenever homebuyers sit down to sign off on the paperwork that indentures them to decades of mortgage payments they are presented with dozens of documents that they must sign without fully - or even partially - understanding.

    They do this to make the purchase binding and "legal". Now the wheel comes full turn and the banks and mortgage companies that required all of this signed documentation find that, they too, have to present full documentation for foreclosure procedings to make them "legal" - and quite often they can't do it - the scales of justice come into balance.

  •  Great work, Amicus! Thanks for sharing. (17+ / 0-)

    I know this will be of help to lots of folks.

    Stonewall was a RIOT!

    by ExStr8 on Wed Feb 23, 2011 at 06:46:59 PM PST

  •  There are limits to using (38+ / 0-)

    claims about the ownership of the note and failures to adequately assign and record assignments of the security instrument, etc.

    In non-judicial foreclosure states where lenders may foreclose without ever going to court, those claims have not been particularly successful. The claims have been much more successful in judicial foreclosure states where the bank must come in to court as a plaintiff and has the burden of proof.  It has similarly been more successful in bankruptcy cases where federal standing requirements have stopped banks who can't prove ownership or proper authorization as agent for the owner.  

    There is no one size fits all or surefire defense to foreclosures.  The law is complicated, there are peculiarities to laws in different states.  It is an avenue that should be explored by anyone wishing to fight a foreclosure, but success is not assured.

    •  Because they don't have to prove (18+ / 0-)

      standing because they don't have to go to court.  I don't think that means that if the homeowner goes to court for declaratory relief, they won't have to make the requisite showing (the holder's intent to foreclose?) So, if the analysis is correct, irrespective of Gomes, a homeowner served with notice should move for declaratory relief before the foreclosure occurs--not after?

      Ordinary political process is dead. The Supreme Court killed it. In Chambers. With a gavel.

      by Publius2008 on Wed Feb 23, 2011 at 08:53:00 PM PST

      [ Parent ]

      •  But That's Precisely (5+ / 0-)

        What Gomes held in California - the homeowner can't go to court to get declaratory relief without at least some facts specific to his mortgage once the non-judicial foreclosure process has begun because nothing in CC 2924 et. seq. (our non-judicial foreclosure statutes, which commence the process with a notice of default) authorizes the inquiry the homeowner is trying to make.  The practical effect is that one cannot plead on information and belief a mere supposition based upon generalities and then hope to prove his case through later.  Nothing in Gomes says that the outcome would have been different post-notice of default.  Please read the case.  Don't rely upon either diarist OR ME.  Read it for yourself.

        I think it is a legitimate question in California whether the action would have survived demurrer had the homeowner brought it before any default had occurred.  In such a situation, the foreclosure statutes aren't triggered at all.  Thus, it becomes a vanilla declaratory relief action.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Thu Feb 24, 2011 at 04:48:59 AM PST

        [ Parent ]

        •  I like that a lot. (1+ / 0-)
          Recommended by:

          I think it is a legitimate question in California whether the action would have survived demurrer had the homeowner brought it before any default had occurred.  In such a situation, the foreclosure statutes aren't triggered at all.  Thus, it becomes a vanilla declaratory relief action.

          What you're asking for relief from... is the usurpation of the mortgage payments by a corporation, as a legal individual, who is not authorized to receive those payments.

          Conditions of the formation of the shell MBST ownership trust included that the mortgages held are legal contracts.

          That ownership is the sole reason d'etre for the shell MBST existence and its contract with The Fed to assume ownership of its mortgage packet.

          Where the contracts are illegal or fraudulent, ownership should revert immediately to the initiator, as per the contract between the Fed and the shell MBST.

          Lawyers love this kinda stuff....

          •  I am not a California lawyer (2+ / 0-)
            Recommended by:
            elmo, Deep Texan

            but in general, a declaratory judgment action must involve a real issue in controversy, not a hypothetical question.   If the mortgage is not in default, getting an opinion about the legality of foreclosure is not a sure bet.

            You might get a question resolved as to whether the servicer collecting your note has the legal authority, ie, was authorized by the note holder to collect, is you could show some confusion or uncertainty because you have received contradictory demands for payment.   It is not the same question, but would involve much the same legal inquiry into the documentation of the loan as to who is the note holder, is their a valid agency, ie, servicing agreement, etc.    Some people have had problems with competing demands for payment from lenders, not being given credit for payments made when servicers are changed, etc.

            •  Yes, jfromga, you're right (0+ / 0-)

              There are two issues that are often confused; the first is that one who enforces a Note in his/her "possession" as a nominee or holder or having some other capacity, does not need to show authority to enforce the Note.  The second issue is where one who does not have possession of the Note tries to enforce it.  In that case, the home owner may ask, "did you lose it"?  If the Note is lost or accidently destroyed it can still be enforced "IF" the enforcer can prove that it came into possession of the Note honestly and can prove a valid chain of title.  If the enforcer can't prove it, it can't enforce the Note.  Google this case as an example of how most courts interpret UCC 3-309(2) which requires a chain of title of those who do not possess the Note; "DCM Limited Partnership v Wang, 555 F Supp2nd 808 (2008)".  Thank you for your response.

              •  only some states rule (0+ / 0-)

                that a mortgage note is subject to the UCC, an all states search on Westlaw would demonstrate that.  Many states seem to be influenced by the official comment that indicates the UCC would not apply to subsequent transfers and sales of mortgage notes.

                As for some of the other arguments on 'show me the note', they can and do fail under state law reviews, even in federal courts:

                see Nicholson v. One West Bank, 2010 WL 2732325.

      •  Thank you for you response (6+ / 0-)

        I am in a non-judicial foreclosure state where, as you know, there is no judicial review of a foreclosure which is done by notice published in a newspaper.  A lawsuit can be filed to enjoin the foreclosure if the homeowner had grounds (I always have found grounds), or it can be filed after the Sheriff's Sale to void the Sheriff's Deed that was issued at the Sheriff's Sale, ab initio (from the beginning, as though the sale never occured).  There is a redemption period after the Sheriff's Deed is issued, up to a year, usually six months, so there is plenty of time to file a lawsuit to void the deed.  I usually wait until after the redemption period has run and the bank files to evict my clients.  The lawsuit challenges the right or authority of the foreclosing party to foreclose and I aske to set aside the deed because the Sheriff's Sale has no statutory force or effect.  I have never had any of my actions get in front of a judge.  The banks have always wanted to settle the case before we get in front of a judge.  The settlement is usually a mortgage modifiaction, an extension of the redemption time, or an agreement to start the foreclosure process all over again (in those cases where my clients have little chance of winning but want to save money by not paying rent for as many months as possible).  Every state is the same as far as 'most' section of the UCC are concerned.  The UCC provisions pertain to the Note but not the mortgage.  The mortgage is controlled, for the most part, English common law as codified in a state's statutes and by published court opinions and precedent.  Most states real estate laws are based on English common law.  But, that being said, there are differences between the states and that is why Borrowers should have an attorney.  Local attorneys know how their state's laws can be used to defend a Borrower. Again, thank you for your response.

        •  This part (1+ / 0-)
          Recommended by:

          is REALLY starting to piss many of the Floridians I know off:

          The settlement is usually a mortgage modifiaction[spelling], an extension of the redemption time, or an agreement to start the foreclosure process all over again (in those cases where my clients have little chance of winning but want to save money by not paying rent for as many months as possible).  

          I have people on my street who haven't paid a dime on their mortgage in 18 months.  Their houses are in disrepair, and I couldn't move if I wanted to. In Florida it now takes nearly 2 years from the time people go delinquent to the time people are get foreclosed.

          It's outrageous.

          I am a lawyer, and people certainly have their rights, but these delaying tactics are insult to those who are paying our mortgages every month.

          These foreclosures need to happen.

          The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

          by fladem on Thu Feb 24, 2011 at 06:33:35 AM PST

          [ Parent ]

          •  Blame the banks. Had they kept (8+ / 0-)

            their affairs in proper order and been satisfied with the honest buck they could make issuing a loan, this wouldn't be an issue.

          •  Why? So your property values can crash (0+ / 0-)


            The more foreclosures on your block, the lower your property value.  Homes in disrepair...or vacant boarded up bank-owned crap.

            It's a funny kind of mind that spends its time thinking "why won't the man hurry up and throw my neighbors out on the street".

            Article 23 of the Universal Declaration of Human Rights identifies the ability to organize trade unions as a fundamental human right.

            by JesseCW on Thu Feb 24, 2011 at 07:35:54 AM PST

            [ Parent ]

            •  The longer this drags on the (0+ / 0-)

              uncertainty drags on.

              If they get foreclosed the houses get resold.

              The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

              by fladem on Thu Feb 24, 2011 at 08:03:17 AM PST

              [ Parent ]

              •  To the huge hoards of qualified (1+ / 0-)
                Recommended by:
                MT Clarity

                buyers desperate to pay what the banks are asking?


                Article 23 of the Universal Declaration of Human Rights identifies the ability to organize trade unions as a fundamental human right.

                by JesseCW on Thu Feb 24, 2011 at 08:05:11 AM PST

                [ Parent ]

              •  The houses don't get re-sold (0+ / 0-)

                The banks are making it very hard to buy these houses so they sit unattended.  If you think the former homeowners are bad neighbors, wait until the banks take over.  

                "Cuz ya ain't done nothing if ya ain't been called a Red." --Faith Petric

                by MT Clarity on Thu Feb 24, 2011 at 09:10:43 AM PST

                [ Parent ]

          •  Thank you fladem (0+ / 0-)

            Yes, those who are failing to maintain their homes, I suspect that they don't want to put money into a house they may lose.  It's not entirely their fault, in many cases.  The banks delay foreclosing so that they can have the foreclosures spread out over several quarters so that the numbers are less frightening to the country.  So, the people in the homes are staying put and not maintaining the home.  Also, many Borrowers are in a process of so-called "mortgage modification" whereby the banks put the Borrower on a three month trial period of mortgage modification to see if they can make the modified payments.  Those modified mortgage payments are actually higher than the regular mortgage payments because the banks amortize back payments into the new modified payments.  All of this is interesting but what is happending is that the banks rarely make the mortgage modification permanent.  The banks continually extend the so-called three month trial period for years, I know some who have had their three month trial period extended three months at a time for two years so far.  The result is that the Borower will not maintain the home becasue it may be a waste of money.  Those still in their home are there because the bank wants to squeeze more money out of the Borrower (who can blame them for that?) and will not kick them out.  Leaving folks like you in a block of non-maintained homes causing a loss of market value.  Yes, there are some cases where the Borower is the victim of bank fraud, forgery, and were otherwise dishonest and preditory, but for the most part the banks can indeed foreclose, but they don't want to foreclose.  Thank you for your response.

          •  Sucks when the law protects the little guy n/t (0+ / 0-)
        •  again, you overgeneralize (5+ / 0-)

          and states are different.  I am in Georgia, a self help state with no redemption period, the deed is not a sheriff's deed and the Supreme Court has ruled since the action to stop a foreclosure is an equitable action, the borrower must have 'clean hands',  ie, have done equity first, which means being current on the payments.  So, as in Gomes, the borrower never gets to the show me the note case on the merits, its disposed of with no inquiry into the ownership of the note.

          It is important people know their legal rights, but it is equally important that no one misleads them as to their rights when the law for each state and the federal courts varies and they must be prepared to bring the correct arguments and proof forward.     You have glossed over serious issues, cited cases randomly which will not help them at all if they are from different states than the ones they are in,  ignored that the UCC may not apply to real estate transactions at all in some states, etc.

          Almost the same and almost right get people thrown out of court every day.   Do not mislead people by dismissing issues brought forth in this thread.

          •  Has Georgia Adopted UCC 3-309(2)? (0+ / 0-)

            See an attorney about whether Georgia has adopted UCC 3-309(2).  Yes, I do generalize because I am not a licensed attorney in 49 states.  I do know that every state has adopted most of the UCC in its recommended form.  The UCC provision above allows you to make the bank prove that it came by your note honestly, that is, "IF" the bank cannot produce the original note.  Be careful here, because a bank does not have to produce the oringial Note, or a copy of a Note in order to be able to enforce it, but it must prove that it once had possession but it has been lost or accidently destroyed and prove a valid chain of title. Generally speaking of course.  I don't know about Georgia law but ask an attorney to put $50 into research to give you a copy of any Georgia case concerning UCC 3-309(2) to see if it works for you as it does in so many other states and federal jurisdictions.  By the way, I suspect that any librarian will flip over backwards to help you find Georgia case law about that UCC provision.  For free.

            •  yes, and there does not appear (0+ / 0-)

              to be a case on point of 309, but other cases in which a note secured by a security deed comes up, the courts do not apply the UCC rules to transfers and assignments but apply the real property rules. That is controlled by a separate statute, OCGA Section 44-14-64. Georgia is one of only two title states, if you sign a deed to secure debt, you have transfered the title to your property to the lender, subject to a right to have it transferred back upon payment of the debt.  Makes for some unusual situations, and the courts tend to allow a lender to choose the real estate foreclosure rules, even if personalty was conveyed with the real estate that would otherwise be covered by the UCC,  and avoid applicability of the UCC altogether.   Owning the dirt gives the lender a procedural and substantive leg up.

              Further Section 309 in Georgia is only for lost/stolen/ destroyed instruments, and would not apply to any transaction where the note exists even if it did apply to real estate notes.

    •  Thank you/Non-judicial states as well (30+ / 0-)

      I am engaged in foreclosure defense in a non-judicial state and here is my experience:  After the Sheriff's Sale, during the redemption period and often after the redemption period has run, I file to set aside the Sheriff's Sale and Sheriff's Deed on the basis that the sale was fraudulent, i.e., the "assignment of mortgage" was forged (signed by a robo-signer or false corporate officer, forgery in most states), was assigned by MERS or other company without authority or power to do so, the mortgage was "split"from the Note, i.e., a mortgage without an underlying debt cannot be in default and is a nullity, a Note without a mortgage is an unsecured note, and so one.  BUT, I never get to have my arguments heard by a judge, BECAUSE the banks, or Fannie Mae or whoever did the foreclosure want to settle immediately.  It has been easy money.  Truthfully.

      •  Hahahahahaha! Fantastic. (9+ / 0-)

        I love this.

        Each time a person stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope... --RFK

        by expatjourno on Thu Feb 24, 2011 at 12:02:49 AM PST

        [ Parent ]

      •  Where do you practice? (5+ / 0-)
        Recommended by:
        x, JimWilson, alizard, vets74, FarWestGirl

        I have some business to send your way.

        My idea of an agreeable person is a person who agrees with me. Benjamin Disraeli

        by pvmuse on Thu Feb 24, 2011 at 12:30:56 AM PST

        [ Parent ]

        •  Thank you! (2+ / 0-)
          Recommended by:
          doingbusinessas, GANJA

          Thank you for your response and offer to send business my way.  I am trying to retire and get out of litigation and the law business.  However, I do want to help attorneys in states where statutes are based upon English common law (for the mortgage issues) and the UCC (for the Note issues).  Homeowners facing foreclosure should know that, nationwide, there are foreclosure defenses and that they don't have to curl up into a dark corner and lose their home without a fight and that there are attorneys who know how to help.  Maybe.  The "show me the note" foreclosure defense is in flux with different jurisdictions ruling in deifferent ways.  However, more and more jurisdictions that have not yet made decisions are now deciding that the defense has merit.  In some jurisdictions the state courts are of no help, but the bankruptcy court will save them.  In other jurisdictions the bankruptcy court has ruled against the defense, but they can change their minds and MERS and the other banks know that.  A good fight usually never makes it to the judge, it is settled before any hearing or trial.  I have yet to get in front of a judge.  The usual settlement is a mortgage modification, sometimes my client just wants more time not to make any monthly payments and settles for an additional six months in the house.  All cases are different.  As a litigation attorney, the law says what I say it says, until the judge says otherwise.  Again, thank you for your response.

          •  So how about Arizona? (0+ / 0-)

            Amicus, last year Chase came after my property pretty much out of the blue. Getting an intent to foreclose notice when you have never missed a payment is a great way to make a person realize that they don't really own 'their' home.

            I damn near just walked away. However we hired a lawyer who in the long run turned out to be pretty much a waste of time and money. Yes we just paid the bastards the money we 'owed' ('late (read bullshit) charges'). I could have done that without the lawyer.

            So now I am in a constant state of flux here. I (I think understandably) hate the living fuck out of Chase. They have taken away any illusion that I had that I was safe and in my own home. At this point, after nearly 20 years in this home, I neither feel that I own it nor do I want to be here anymore. I doubt if I will ever want to 'own' a home again.

            In 2001, pre 911, we had taken out a mortgage with Greenpoint to expand and improve our home. It was later sold to WAMU. Now Chase has it. I truly wish that I had never done this. And before anybody pipes up about affording it, affording it was never a problem. It's not that we can't pay, it's that now we feel like we are being held hostage in our own home (well, their fucking house).

            •  Help indeed, Ganja (1+ / 0-)
              Recommended by:

              Yes, there are lots of Arizona federal cases intepreting Arizona's UCC 3-309(2) and state cases as well.  These might be found by googling or make a librarian flip over backwards for you (they are so happy to help) to find state and Arizona federal cases concerning UCC 3-309(2).  The second paragraph of 3-309 is the one that gives you the right to require a 'chain of title' from the alleged Note holder.  Of course, anyone can enforce a Note even if they don't have the original or can't prove that they have authority to enforce it.  BUT, if they can't produce the Note, they have to say that they lost it, or accidently destroyed it and then they have to prove a valid 'chain of title'. I have many horrific stories about Chase.  There comes a time when a home is not longer a happy place, no longer an asset it becomes a liability, that is when you owe more than what is owed on a mortgage.

              •  Thanks for the response Amicus. (0+ / 0-)

                I have bookmarked this article and will be referring back to it. Have you considered or created a Group on this subject? If so I would certainly sign onto it. Thanks again.

                •  Group? I don't know what that is. (1+ / 0-)
                  Recommended by:

                  I'll have to look into it.  From the responses I know of at least one troll and some others asking for information that would take me a month of Sundays to write.  For example, "what state and federal court decisions actually concern UCC 3-309?"  Uhhh, every local, state and federal court jurisdiction have such published cases, and then I pull one from each of six states.  A group might be a good idea as soon as I can figure out how to do it.  Thanks.

      •  Important Safety Tip (7+ / 0-)

        Not all states have a redemption period post non-judicial foreclosure.  In California, no such right of redemption exists.  (It applies only to judicial foreclosure.)

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Thu Feb 24, 2011 at 04:49:54 AM PST

        [ Parent ]

    •  Thank you (22+ / 0-)

      and everything you say is true, every case that I have handled has been different, the "Assignment of Mortgage" was (1) signed by a robo-signer and all that would entail, (2) was signed by a false corporate officer and in fact was a forgery, (3) the assignor lack authority or power to assign the mortgage.  Also, in some cases, but not all, the mortgage is split from the note and the mortgagee is doing the foreclosing, but the mortgage cannot be in default because there is no underlying debt.  In some cases, but not all, the Note holder no longer has the mortgage and the Note is now unsecured and the mortgage is a nullity.  You are right, but "show me the note" has worked for every case.

      •  I'm sure I could dig out legal ownership. (0+ / 0-)

        It's not impossible to track out who or what owns a mortgage. The shell MBST exists and the agent assignments are registered.

        But........ but... but................

        There is so much illegal activity going on during the foreclosure process and subsequent disposal of the properties that the criminals running these systems want nothing to do with John Q. Public getting a disclosure process going against them.

        Robo-signing is the least of it.

        Assignment of agent status to such as Chase -- that's what is nonexistent for actions beyond taking in the first mortgage payments. No one ever authorized Chase to do anything else..... many more times than not for the sand State mortgages.

        •  You hit the nail on the head vets (0+ / 0-)

          there is sooo much crap going on, forgery and fraud under different guises.  I hired a mortgage audit company to dig through the "Edgar" software used by the SEC to find out which MBST owned my note.  

    •  And (1+ / 0-)
      Recommended by:

      you probably shouldn't count on "show me the note" to get you completely out of a debt that you do, actually, owe. You're not likely to get to keep your house free and clear out of this, in other words.

      But it can give you excellent leverage to renegotiate your mortage to something more advantageous to you.

    •  Is there an easy way to find a list of states (0+ / 0-)

      that shows whether they are judicial or non?

      Information is abundant, wisdom is scarce. The Druid

      by FarWestGirl on Thu Feb 24, 2011 at 09:28:55 AM PST

      [ Parent ]

  •  A Couple of Questions (35+ / 0-)

    (1) Can you repost your links to leagle? They come up blank pages (the Leagle page is there, just not the case.)

    (2) Can you cite a single case, in any jurisdiction, dealing with this subject that involves the UCC? No, you can't - because as any licensed lawyer knows, the UCC does not apply to the creation or perfection of real estate interests.  (See Revised UCC § 9-109(d)(11).

    By the way, your statement that the UCC "applies to all states?" That's not true.  For example, California has its own Commercial Code.  It is modified from the UCC.  But it is not the UCC.  Some states have either adopted the UCC - what we lawyers call a "model" code - wholesale.  Others have not.

    (3) Have you actually read the underlying cases, or just read websites describing them to you as a layperson? I caution you to do so sitting right next to a real estate lawyer if you have not actually done the latter.  I'll give you an example of why, using two examples:  a completely false statement in your diary (which you no doubt got from your secondary source) about what the Gomes court supposedly "cited with approval) and part of the court's reasoning in Weingardenwhich your diary claim upholds the "show the note defense" (but really allows a case to go to trial on a "show me a valid substitution of trustee defense (a different legal issue) all while confirmingthat a nominee such as MERS if properly delegated the agency necessary to act on behalf of the original lender in the original deed of trust by being named a nominee, might have indeed had the power to cause a non-judicial foreclosure of the plaintiff's residence but only a trial could say for sure.  

    As it relates to Weingardner, this is what the court actually said:

    Plaintiffs also sometimes allude to the third and last definition of “nominee,” pointing out that the nominee only has legal title: “A party who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.” Id. Plaintiffs then claim that this does not entitle such a nominee to substitute a trustee on behalf of the holder. This argument, however, conflates the concept of a "nominee” with its definition.  In the context of a nominee on a deed of trust, this implies that the nominee is granted authority as an agent to act on behalf of the nominator (holder of the promissory note) as to administration of the deed of trust, which would include authority for substitution of trustees-what other duty would the administrator of a deed of trust have to perform? The third definition of “nominee” does not negate the second.  It simply claims that a nominee is a party holding legal title (as opposed to equitable title) to the property.  This third definition is given in the context of receiving and distributing funds.  Assuming it can be applied to the mortgage context, the nominee would be a person who administers the deed of trust for the benefit of others. This creates no conflict with the second definition. It still indicates that a nominee is a kind of agent working for the benefit of another. In the present case, that other person is the holder of the promissory note or its assigns.

    The trouble typically begins when a nominee substitutes a new trustee on the deed of trust, which it has the right to do as the holder's nominee. The substituted trustee then forecloses when the mortgagor/trustor defaults on the promissory note. The mortgagor/trustor then complains that the foreclosing trustee is acting wrongly because it does not itself hold the promissory note, or because it was not the original trustee on the deed of trust, or because the foreclosing trustee was substituted by an entity (usually MERS) that was not an agent of the original or subsequent holder of the note. Oftentimes, the argument the mortgagor/trustor makes is not clear.  But one thing is clear: so long as the note is in default and the foreclosing trustee is either the original trustee or has been substituted by the holder of the note or the holder's nominee, there is simply no defect in foreclosure, at least in states such as
    Nevada where a trustee may foreclose non-judicially.

    Perhaps you or the blogger you got your statements from didn't understand this language.  That's OK.  

    But there is absolutely no excuse for the claim about Gomes "citing with approval" other cases.  This is what, in fact, the Gomes court said about those cases:

    Gomes cites three federal district court cases two of which are unpublished which he says recognize a right to bring a legal challenge to an entity's authority toinitiate a foreclosure process.  (Weingartner v. Chase Home Finance, LLC (D. Nev.2010) 702 F.Supp.2d 1276 (Weingartner); Castro v. Executive Trustee Services, LLC  (D.Ariz. 2009, Feb. 23, 2009, No. CV-08-2156-PHX-LOA) 2009 U.S. Dist. Lexis 14134 (Castro); Ohlendorf v. Am. Home Mortgage Servicing
    (E.D. Cal. 2010, Mar. 31, 2010,No. CIV. S-09-2081 LKK/EFB) 2010 U.S. Dist. Lexis 31098 (Ohlendorf ).)  The cases are not controlling on us and, in any event, they are not on point, as none recognize a cause of action requiring the noteholder's nominee to prove its authority to initiate a foreclosure proceeding. . . .It is also significant that in each of these cases,the plaintiff's complaint identified a specific factual basis for alleging that the foreclosure was not initiated by the correct party.

    Sorry, but that is categorically not "citing with approval."  No honest lawyer would ever make the claim that a court discussing, then deciding to ignore as irrelevant, cases cited by a party is "citing with approval."

    (4)  Is there a reason that you, unlike me in my diary of the other day, do not qualify your statements about the "show the note" defense by noting its complete dependence upon a variety of factors -- most notably, the state law where the property is situated (which is what has been applied by the federal courts in the cases you cite?)  Since the entire point of my diary was to caution people to get a qualified lawyer in their state, not to contend that the defense has no possibility of success at all, I'm just curious.

    I want to be clear about my motives in writing about this subject.  It is to help people, not hurt them.  Perhaps folks who don't know my writing here don't know that.  I would not have written my diary about Gomes unless I'd (a) been practicing in this particular field a very long time in California and (b) didn't perceive diaries -- such as this one -- trying to make broader than it really is the possible use of the defense.  Whether or not it is viable is completely dependent upon state law.  No matter how many federal courts rule on the matter, it's totally dependent upon state law.  Some states have rejected the defense, others have accepted it.  And nobody but a qualified lawyer in the homeowner's state can predict which way it will go.  You do a disservice, despite your personal experience, if you do not qualify your writing with that undeniable truth.

    If you don't stand for something, you will go for anything. Visit Maat's Feather

    by shanikka on Wed Feb 23, 2011 at 08:09:37 PM PST

    •  Shanikka - can you explain how does MERS even (4+ / 0-)

      "exist" - how can they "circumvent" the state recording statutes?

      •  two different questions (8+ / 0-)

        They exist generally because we allow corporations to exist, provided they follow the requirements of corporate law.

        As to the 2nd part, as a general proposition, states follow one of three types of recording statutes, Race (as in foot race to the court house), Race Notice, and Notice.

        In a Race notice state ( an extreme minority of states, I think only two are pure Race states - LA is one) the party who records first wins. Period. End of Story. I have never practiced in a pure Race recording statute state.

        The majority of states are either a Notice or a Race Notice recording state. I am not going to try to explain the intracacies of these two recording statutes. I will say
        NEITHER requires you to record your interest in land. Its a carrot and stick approach. If you want to take advantage of the protection afforded property owners you must record. But you don't have to. I suspect the same is true for the Race Statute states, but I have only practiced in Notice (Florida) and Race Notice (GA) states.

        So in the vast majority of states, MERS isn't circumventing the recording statute, but not recording. Its making life difficult for title examiners and loan closers and its shabby trick to get out of paying recording fees and its a load of dynamite waiting to explode in several ways, but its not circumventing the recording statute.

        "Once in a while you get shown the light In the strangest of places if you look at it right"

        by molly bloom on Thu Feb 24, 2011 at 06:12:25 AM PST

        [ Parent ]

        •  What She Said (4+ / 0-)

          And thanks for saying it!

          If you don't stand for something, you will go for anything. Visit Maat's Feather

          by shanikka on Thu Feb 24, 2011 at 06:41:17 AM PST

          [ Parent ]

          •  your welcome (1+ / 0-)
            Recommended by:

            I am also a member of the California bar, but have been on inactive since I passed it. I appreciated your article on Gomes as I am real property lawyer and am involved with foreclosure defense. I have also (over 5 years ago) done mortgage foreclosure for lenders.

            "Once in a while you get shown the light In the strangest of places if you look at it right"

            by molly bloom on Thu Feb 24, 2011 at 07:24:06 AM PST

            [ Parent ]

            •  Glad to Know It! (1+ / 0-)
              Recommended by:
              molly bloom

              We really do need more lawyers willing to work on defense since of course all the large firms won't touch the cases.  But they are hard cases and they do require creativity in California.  I believe there are viable possible defenses here in CA but that this particular one isn't, regardless of what is happening in judicial foreclosure states.

              If you don't stand for something, you will go for anything. Visit Maat's Feather

              by shanikka on Thu Feb 24, 2011 at 08:28:07 AM PST

              [ Parent ]

        •  can't believe I screwed that up (1+ / 0-)
          Recommended by:

          Race recording statutes are the extreme minority.

          "Once in a while you get shown the light In the strangest of places if you look at it right"

          by molly bloom on Thu Feb 24, 2011 at 06:42:28 AM PST

          [ Parent ]

          •  No Worries (1+ / 0-)
            Recommended by:

            There are days when I go back and read a comment I posted in the heat of the moment and realize I made a fundamental error and just slap myself ;)  The important thing is that you corrected it, even though it was a secondary point to your larger answer!

            If everyone who blogged held themselves to the same standard - admit a factual error rather than just go silent in embarrassment - we might one day actually get somewhere in terms of being able to rely upon the Internet ;)

            If you don't stand for something, you will go for anything. Visit Maat's Feather

            by shanikka on Thu Feb 24, 2011 at 07:26:58 AM PST

            [ Parent ]

    •  Thank you (8+ / 0-)

      Legle takes up to a minute to show up, try alternate sites using google.  With my first diary entry knowing how to pick sites to link to was an issue only after I posted the entry.  As for the rest of your comments I disagree with everything you say, but then again, litigation lawyers do disagree, that's our job, and that's why we have judges, not only to declare who is right on a particular issue, but often to declare that both sides are wrong and that the judge's position is correct, but only if the court of appeals agrees.  It seems that our profession is one of disagreeable people.  LOL

      •  Wait, what? (12+ / 0-)

        I get that lawyers disagree on aspects of the law, but it seems like shanikka's criticisms were pretty specific:

        1. Does any relevant case use the UCC?
        2. Does Gomez say what you claim it says?
        3. Does Weingarden say what you claim it says?
        4. Is state law more relevant in these cases?

        If you disagree, by all means, provide the evidence that's necessary to defend your diary, but you can't just brush it off with an LOL.  


        Saint, n. A dead sinner revised and edited. - Ambrose Bierce

        by pico on Wed Feb 23, 2011 at 11:04:57 PM PST

        [ Parent ]

        •  Thank you Pico (2+ / 0-)
          Recommended by:
          wader, pico

          I really like your Ambrose Bierce quote.  I thank you for your response because it gets to the meat of the matter.  For your question (1):  Every local, state and federal court has had cases involving the UCC which concerns personal propery, not real estate though there are a couple of exceptions.  To locate cases for your jurisdiction call any legal librarian, probably your local library will help you or give you a number to call.  Your State has a Law Library and they would probably fall over backwards to help a real citizen.  The UCC provision I cite is Article 3, Section 309.  It has two paragraphs.  The first paragraph says that you don't need the Note in your possession to enforce it.  Then, there's the usual 'however' that the law gets into.  The second paragraph of UCC 3-309 states that if you don't have possession of the Note the person wanting to enforce it must prove that they have a right to enforce it.  That has been interpreted in many ways but for the most part that second paragraph means that the person who wants to enforce the Note must prove that it came by the Note honestly and that he can prove where he got it and that the person he got it from had a right to transfer it, i.e., that there is a proper "chain of title".  That UCC 3-309 provision and all other UCC sections have been accepted by all states.  However, the states are allowed to make changes in the UCC and many states have done so.  I don't know of any state that has changed UCC 3-309 but there are 50 states and it is possible if not likely.  Therefore, you must contact an attorney to determine if your state's UCC 3-309 is the same as in those states where the courts have published opinions favorable to your position.  All states have had their UCC 3-309 interpreted by all local, state and federal courts.  There is "no" federal UCC law and all federal courts interpreting any UCC provision must use the statue of the state in which the litigation arises.  So, a federal court in New York must use New York law and a federal court in New Mexico must use New Mexico law and so on.  I don't know what state you are in but here are a few examples:  for Massachusetts, "Marks v Braunstein, No. 09-11402-NMG, US Dist Ct, Dist of MA, Dated September 14, 2010"; for Arizona, "Diessner v MERS, 618 F Supp2nd 1184, 1187 (2009)"; for Michigan, "DCM Ltd Partnership v Wang, 555 F Supp2d 808 (2008)".  The Michigan case is a very common opinion, in the DCM case they sued Wang for $3 million on a Note.  Wang acknowledged that he signed the Note, but disputed that DCM was "the" DCM to whom he owed money.  That issue was determined by use of the Michigan version of UCC 3-309 (which is the same as most other states version), the second paragraph which requires, in effect, that the person claiming the money must show a valid "chain of title".  
          Now as to your question number (2):  "Gomes" says that California law does not require a holder of a Note who files  a cause of action to enforce a Note to prove that it has authority to do so.  Having the authority to enforce a Note, if you have it in your possession does not require that you prove that you have the authority to enforce the Note.  That is different from a person who does NOT have possession of the Note.  In that case, where the person who wants to enforce a Note does not have possession of it, if California has not adopted its own version of UCC 3-309, then he MUST prove that he has a proper right to enforce the Note using a valid "chain of title" process.  If, of course, the defendant challenges his right to enforce the Note.  The "Gomes" case never did decide anything about the "show me the note" foreclosure defense.  I do state in my extended diary entry that the "show me the note" is a misnomer.  What it should really be called is "show me the valid chain of title unless you have actual possession of the note" defense.  If a bank is asked to produce a Note in the discovery process and cannot do so, no harm no foul.  The bank can say that it can't find it.  The bank can still enforce it, but then, becasue of the UCC 3-309(2), the bank must prove a valid "chain of title" in order to enforce the note.  It may seem complicated but calling the defense the "show me the note" defense is what it is called and who am I to change it?
          As to your question (3):  Yes, the "Weingarten" case is very powerful and you should read it.  If you google the case name you will find many sites where you can get the original court opinon.  "Weingarten" focuses mainly on the mortgage and mortgage assignments and other real estate documents interpreted using real estate law, not the UCC.  As "Gomes" says, "Weingarten" recognizes the right to bring a legal challenge to an entitie's authority to commence foreclosure.  "Gomes" does not disagree, meaning in my mind that it does not disapprove of "Weingarten", but it does distinguish the case as not favoring Jose Gomes because that is not the issue that "Gomes" brings to the court.  Of course you have a right to challenge an entitie's right to commence a foreclosure, but that is not what Jose Gomes was doing.  So, the court in "Gomes" said the "Weingarten" case used by Jose Gomes does not help hime because that is not the issue that he brought before the court.  
          As to your question number (4):  Because many banks are not headquartered in the same state as the Borrower, the Borrower can file in federal court to challenge a foreclosure instead of state court.  Why would a Borrower's attorney do that?  It's a matter of individual strategy.  If I don't like the state court judge in my area, I'll file in federal court if I can.  Most of the time the state lawsuits are removed to the federal court by the bank, in order to harass the Borrower and sometimes because the bank does not like the state judge.  If the case is removed or filed in federal court, the federal court must use state law and state precedent in its making of a decision on the case.  That is because real estate law for the most part is the law of the state.  Also, Borrowers ofter do file a lawsuit based upon federal law, though those cases can also be filed in state court, such as the Truth in Lending Law, RESPA and so on.
          Again, thank you for questions and I hope that I didn't give you too little or too much information.  I don't know who your are so I don't know what I need to say or what I can assume that you already know.  If I didn't present the material in a way that is respectful in your mind please forgive me.  And remember, nothing in law is in stone and many will not agree with what I say or how I interpret case law and statutes.  That is why we have to read the court opinions over and over again.

      •  Wait a Minute (14+ / 0-)

        Your "I disagree with everything you say" is not engaging in good faith discussion, not when my questions to you were very specific.  I cited the exact statutes and language upon which my comment relied, so that you knew I was not coming at this without care.  

        If you are relying upon the legal authorities you did cite, you need to explain why those authorities read differently than you've summarized them.  I've just posted what they actually say, so that folks understood the basis for my disagreement with the breadth of your legal conclusions.  (Or in the case of the UCC, my disagreement with your assertions about its applicability.)  Recognizing that of course no lawyer can read every thing every day, I asked you to cite your sources.

        That's not unreasonable, lawyer to lawyer.  So I hope you reconsider your approach.  If I'm wrong I'm more than happy to say I'm wrong about the limits of this defense (I reiterate that I believe it is a state-by-state defense.)   But after 20 years of practice, including working with homeowners on a variety of mortgage, brokerage and title stripping frauds since 1999,  I don't think I am.  

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Thu Feb 24, 2011 at 04:41:54 AM PST

        [ Parent ]

      •  That was not the most helpful reply, IMHO (2+ / 0-)
        Recommended by:
        JesseCW, jfromga

        Perhaps not intended, but it appears that you are avoiding the issues raised about your assertions made in this diary.

        What does "disagree with everything you say" even mean?  Most of what I take from shannika's points is that each state and situation matters - there's no single "winning point", here - and the technical, legal aspects involved are key.

        I believe that you made a similar point above in the comments stream, but perhaps on a separate technical item being considered.

        So, I fail to see how you disagree with everything she offered.

        I have no skin in this debating game, but do admit to having a tough time recommending your diary without reading a contextual response to seemingly reasonable questions from your fellow lawyers (of which I am not).

        "So, please stay where you are. Don't move and don't panic. Don't take off your shoes! Jobs is on the way."

        by wader on Thu Feb 24, 2011 at 07:07:39 AM PST

        [ Parent ]

    •  Corrected the links to cited cases here: (8+ / 0-)

      The diarist inadvertently included "tail" commas after the URLss, so I removed those "tail" commas and got the link:

      •  Thanks! (9+ / 0-)

        You fixing the links saves me the trouble of having to pull the cases up from Westlaw so I appreciate it.

        From the Court in the Castro case, which the diarist said "accepted" the "show me the note defense" but which in fact merely allowed the plaintiffs to amend their complaint in an effort to plead specific facts needed to trigger, under Arizona law, the right to a court declaration about MERS' standing (same as Gomes in , although Gomes DENIED the homeowner leave to amend the complaint:

        The Court agrees with Defendants that the Complaint lacks sufficient facts to state claims pursuant to Rule 12(b)(6) and fails to meet the tightened Twombly standard for violations of HOEPA, TILA, the FTCA and the federal and Arizona RICO statutes. Assuming Plaintiffs are attempting to allege a fraud claim, it also fails to satisfy the heightened pleading standard applicable to fraud allegations under Rule 9(b). The Complaint does not contain factual allegations sufficient to "raise a right to relief above the speculative level" for violations of FDCPA, RESPA, HOEPA, TILA, and FTCA. Id. Indeed, Plaintiffs' claims of violations of these federal acts amount to mere conjecture without any showing of entitlement to relief. The Complaint itself admits as much when it concedes the "specifics . . . are unknown" for violations of HOEPA, TILA, and FTCA, docket # 1-3, ¶¶ 35-36, and Defendants "may have also violated provisions of [RESPA]." Id. at ¶ 32 (emphasis added).

        Viewing the Complaint's factual allegations as true, as it must, the Court, however, finds that Plaintiff's Complaint alleges sufficient facts to withstand Defendants' Rule 12(b)(6) challenge to Plaintiffs' state-law claim for declaratory relief that "Defendants are not entitled to enforce the underlying promissory note described in the [deed of trust]." (docket 1-3, ¶ 27 at 9).  Arizona law, set forth in its version of the Uniform Commercial Code on negotiable instruments, A.R.S. §§ 47-3301 et seq. and 3104, provides that a note qualifying as a negotiable instrument can be enforced by a "holder of the instrument" or a "non holder in possession of the instrument who has the rights of a holder or a person not in possession of the instrument who is entitled to enforce the instrument . . . ." A.R.S. § 47-3301. According to the Complaint, neither ETS nor MERS is a holder of the note related to the subject deed of trust. The deed of trust indicates "The Note means that Borrower [Plaintiffs] owes Lender [Home Loan Corp.] $240,000.00 . . . ." (Exh. A at 2; docket # 9-2) Based on the documents before the Court and because neither ETS nor MERS is allegedly a lawful holder of the note, it is a prerequisite to enforcing the note that ETS or MERS is a transferee in possession entitled to the rights of a holder. A.R.S. § 47-3301. Thus, in order to enforce the note under Arizona law, ETS or MERS must prove a sufficient transfer from the initial holder (originally Home Loan Corp. to whom the note was made payable by Plaintiffs) to ETS or MERS as a person or entity who is entitled to enforce the instrument. Id. Having elected to proceed via Rule 12(b)(6), rather than Rule 56, this portion of Defendants' Motion will be denied because the record contains insufficient information to resolve the issue whether ETS or MERS is entitled to enforce the instrument as a matter of law.

        In an abundance of caution and in fairness to both Plaintiffs and Defendants, the Court will permit Plaintiffs to file an Amended Complaint to include specific facts explaining why Plaintiffs are entitled to a declaration that Defendants may not enforce the deed of trust and foreclose on Plaintiffs' property based on Plaintiffs' admitted default on the note.

        In other words, the federal court in Castro, relying on Arizona law, found within the context of a motion to dismiss the possibility of a valid defense within a context where it was required to assume that everything the homeowner said was true. But the court did not say that it actually was true - or that the defense existed in that case.  It instead said that the homeowner had NOT adequately pled the defense, because the homeowner didn't have enough specific facts.  It then gave the homeowner a second chance to do so, "out of an abundance of caution." (quoting the court.)  So this particular case is going to come back.

        But nowhere does the court find that MERS is not a valid transferee, or that it cannot show that the transfer of rights it received is valid under Arizona law.  It couldn't make such a finding, given the posture of the case and the lack of specific information put forth by the homeowner and the defendants about the nature of the rights transferred from the original lender to MERS at that juncture.  

        So, at least on its face, Castro left the homeowner in an only slightly better position than the court in Gomes:  if the homeowner cannot amend to plead something specific about his mortgage, not just generalities, to show why he is entitled to declaratory relief about MERS' rights, he will ultimately be tossed out of court in Arizona, too.

        Moreover, this case does not examine the deed of trust at all, which is really the instrument at issue.  (Arizona is also a non-judicial state.) I do find it interesting that the court considers the underlying transfer of the note to be the issue in the case.  (I also note that even in Arizona, contrary to the diarist's contention, they have their own Commercial Code, which is a modified version of the UCC, not the UCC itself.)  I find it interesting because there is an Arizona case that has been decided addressing this issue within the context of the "show the note defense" within the context of a declaratory relief action:  Contreras v. US Bank.   In Contreras, the court held that the deed of trust (the document which actually contains the rights at issue in foreclosure in a non-judicial state like Arizona or California - the right to seize the home upon default and sell it to pay the note) is NOT a negotiable instrument, and  is NOT governed by the Arizona Commercial Code at all.  It squarely rejects the "show the note defense" on those grounds.  

        I have no idea whether Contreras is binding authority in Arizona, or whether it was issued before or after Castro.  But that's a question that should be answered before trying to rely on Castro in Arizona.

        There is no need to discuss Agard, the other decision linked by the diarist, because (a) there is no question that the defense has worked in New York (a judicial foreclosure state) - as well as other judicial states like Florida and (b) everything the Agard court said was dicta, by its own admission, because it found that none of the law relating to the show me the note defense applied where the judgment of foreclosure had already been received by the lender and it upheld the foreclosure of the home anyway.

        I am hoping the diarist will respond on the merits.  Because he has again misrepresented what these cases actually say and do, without making sure that everyone knows that this is a state-by-state fight and there simply is no general "show me the note" defense that is guaranteed to work in all states.  Again, all I care about is that - I certainly don't spend my days and nights cheering for lenders and celebrate when those that helped destroy our economy take a hit.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Thu Feb 24, 2011 at 05:53:05 AM PST

        [ Parent ]

      •  Bless you, (0+ / 0-)

        I can't thank you enough, I've been scratching my head over this problem.

  •  Thank you for posting this! (5+ / 0-)

    I will keep it handy to send off to anyone I know who might need it.

    My dear friend who just went through a divorce is afraid she is going to lose her house which she got in the settlement because she was a stay at home mother and now she has to get her husband off the loan but no bank so far will give her a loan by herself or with a co-signer. She has been making the payments by herself for two years now. It really angers me that the banks are going so conservative all of a sudden when they were the ones behaving like drunken miscreants.

    •  Thank you for your kind thoughts (13+ / 0-)

      Your friend may want to have her home appraised and if the market value is less than what she owes, and since she can't get a mortgage anyway, she should walk and consider renting for a few years.  My house dropped $100,000.00 below what I owe so I quit making payments in November, 2009.  I'm still in the house, but it's not an asset, it's a liability.  As far as I am concerned the bankers caused a nationwide drop in housing values so I am fighting foreclosure every step of the way.  By the way, the Mortgage Brokers Association walked away from their $31 million mortgage on their Washington, D.C. headquarters.  

      •  In fact............... (0+ / 0-)
        Like millions of American households, the Mortgage Bankers Association found itself stuck with real estate whose market value has plunged far below the amount it owed its lenders. But the trade group for mortgage lenders is refusing to say exactly how it extracted itself from that predicament.

        On Friday, CoStar Group Inc., a provider of commercial real estate data, announced that it had agreed to buy the MBA's 10-story headquarters building in Washington, D.C., for $41.3 million. The price is far below the $79 million the trade group says it paid for the glass-walled building in 2007, while it was still under construction. The price also is far below the $75 million financing that the MBA received from a group of banks led by PNC Financial Services Group Inc. to finance the purchase.

        John Courson, chief executive officer of the trade group, declined in an interview Saturday to say whether the MBA would pay off the full loan amount. "We're not going to discuss the financing," he said. A spokeswoman for the MBA added that the MBA has reached "an agreement with all relevant parties" regarding the outstanding amount on that loan but declined to provide any details. A spokesman for PNC, a banking company based in Pittsburgh, declined to comment.

        Holliday Fenoglio Fowler LP, a real estate advisory firm, announced in June 2008 that it had arranged the $75 million financing for the MBA. At that time, HFF said the acquisition loan took the form of a variable-rate, 30-year taxable bond transaction backed by a letter of credit from PNC. HFF said such bonds are typically sold to money market funds.

        WSJ --

        Likely, MBA stuck the mortgage lender for part of the loss from $75-million to $41.3-million.

        That is somewhat different from walking out on a mortgage.

  •  It's no fun (45+ / 0-)

    being a title searcher these days (to the degree that it ever was).  The lazy slapdash quick-buck sloppiness on the part of banks, lawyers, loan originators, etc that has infested the industry for the past 15 years is all coming home to roost, and it's being dumped on us, the lowest paid people in the fucking industry, to clean all the fucking messes up.  You see all the lazy, sloppy, self-indulgent  ego-gratification behavior that's epidemic on the roads these days, everyone behind their wheels with the attitude that "the rules are for everybody else"?  Well that same attitude and behavior has been brought to your most important legal and financial documents by the professionals you pay big money to in the belief that you're getting professional grade work.

    Well you didn't and you're not, and the whole damned industry is creaking to a halt as schmucks like me try to clean up every damned piece of property it seems.  It's hideous, it's a nightmare, there's no money for us and we lost half our trained people in the washout during the housing bust, bottlenecks forming everywhere and STILL all the lawyers and bankers and realtors and buyers and sellers are shouting "Now!"  "Right away!" "We are closing yesterday!"  They haven't learned a damned thing, still trying to act like it's the go-go years when the system is in overload and impending total system failure.

    Don't say nobody warned you.  Well, us title searchers are nobodies, so let me correct that, say "Some nobody warned me."

    "Power concedes nothing without a demand. It never did and it never will." ~Frederick Douglass

    by ActivistGuy on Wed Feb 23, 2011 at 08:15:18 PM PST

    •  How do you even do it (8+ / 0-)

      when MERS is private?  Can you really figure out who holds the note?  Doesn't securitization mean the note is chopped into many pieces?

      Ordinary political process is dead. The Supreme Court killed it. In Chambers. With a gavel.

      by Publius2008 on Wed Feb 23, 2011 at 09:03:35 PM PST

      [ Parent ]

      •  Thank you, Yes MERS Keeps Records (9+ / 0-)

        There are firms out there advertising that they do "Mortgage Audits", they charge a fee and will give you a run down of who has had your not and who has it now,  they research, with something called "Edgar Software", SEC reports that report where your mortgage is.  I have an expert who can testify in court as to the veracity of the Mortgage Audit and it also gives you a great basis for discovery with Production of Document, Interrogatories and Request for Admissions.  And, yes, the concept of the Note being chopped into many pieces is that of a Note being packaged with many (tens of thousands) other Notes and sold, en masse, to a mortgage backed security trust (MBST) with each investor owning only a small fraction of the package of Notes.  The MBST owns the notes, they are not just a security, however, the Notes are referred to a being securitized.

        •  The trust MAY own the note. IF the seller (0+ / 0-)

          actually did the paperwork to transfer it into the trust. It's my understanding that that's the little step that Countrywide took to skipping from 2004-5 though 2009.

          Information is abundant, wisdom is scarce. The Druid

          by FarWestGirl on Thu Feb 24, 2011 at 09:37:19 AM PST

          [ Parent ]

          •  Seller of Note gets the $ (1+ / 0-)
            Recommended by:

            but doesn't transfer the Note.  That is justice.  However, if a bank sold the note but didn't transfer the note, I suspect that the trust 'thinks' it owns the note and has reported its purchase to the SEC.  What a nightmare trying to explain that to a county judge.  lol

            •  There was something recently about a huge (0+ / 0-)

              Wall Street firm buying up millions of dollars worth of MBS's because the investors had purchased in good faith and the banks, (ie Countrywide in particular), were the ones that screwed up and hadn't done the paperwork and were therefor going to be on the hook for the full value of the investment. If I'd had any money, I'd have seriously thought of shorting B of A. ;-)

              Information is abundant, wisdom is scarce. The Druid

              by FarWestGirl on Thu Feb 24, 2011 at 11:12:44 AM PST

              [ Parent ]

    •  Title Searchers Are The Backbone of Dreams (11+ / 0-)

      Thank you for being on the front line, in the trenches so-to-speak.  At least, for the most part, the working environment is dry, clean, warm or cool as desired.  Unfortunately the position is low paid.

    •  THANK YOU!!! (1+ / 0-)
      Recommended by:

      We're trying to REFINANCE, have been for MONTHS, it's a disaster. They are so disorganized, invent new requirements at the 11th hour, drag their feet, leave out information, don't call, then call needing new information yesterday. And yes, we had a nightmare producing the dreaded original "note" which they didn't even bother trying to find, gave us like 3 days to do find it ourselves.  It would have set us back thousands of dollars if we didn't have it. Well, 1 phone call later I got it.  I fear that they're going to try to screw us down the road, but there's no other reputable bank, it's either Wells Fargo or BofA it seems.  We should have gone with our credit union back in October when this all started.

    •  Spot on and a problem for this society on a wide (3+ / 0-)
      Recommended by:
      mrkvica, ActivistGuy, jfromga

      front far beyond the topic here.

      You see all the lazy, sloppy, self-indulgent  ego-gratification behavior that's epidemic on the roads these days, everyone behind their wheels with the attitude that "the rules are for everybody else"?

      To an extent I think few realize, because it is the frog in gradually heating water thing and most really pay no attention anyway, we are becoming a lawless society. We see it on the roads. We saw it in federal contracting when in the early Bush years one of the greats in the academic world dealing with contract matters described the conditions as "lawless." We are seeing echoes in some state legislatures with near outright sedition.

      The only foes that threaten America are the enemies at home, and those are ignorance, superstition, and incompetence. [Elbert Hubbard]

      by pelagicray on Thu Feb 24, 2011 at 07:31:12 AM PST

      [ Parent ]

    •  Question_Activist Guy? (0+ / 0-)

      You know the system so well, why are the banks holding on to all these foreclosures and short sales?  It makes no sense, the bondholders are not getting paid, the bank has all of these overpriced mortgages on the books and the inventory is being destroyed by neglect.   Is it because they are afraid of the title issues?  Is would seem to make more sense for them to just adjust the mortgage value down and prevent the foreclosure or short sales and the absolute destruction of the value of the property.  

  •  This is not sustainable. (17+ / 0-)

    The government will have to come up with some guidelines for these kinds of situations. While it sounds like social justice, it is not. Here in 3rd World SE Asia, we have clouded title to both commercial and residential real estate, and it is a nightmare. The value of a parcel depends on the apparent soundness of the title the current owner (who might not even be the owner) has. Taxes go unpaid for years because no one knows who should be paying them. The party with the most money for lawyers, and bribes, always wins. This is one reason we are the 3rd World. Clear title is preferable.

    I voted with my feet. Good Bye and Good Luck America!!

    by shann on Wed Feb 23, 2011 at 08:17:20 PM PST

    •  I know how I would have done it. (9+ / 0-)

      Unlike the court in Gomes, I would have said the statutory language clearly requires the holder to seek foreclosure--you cannot defy the statute's language by allowing the original holder to assign to MERS a right to foreclose at such time as you don't hold the note any longer.  I would have given MERS 60 days to show the note and the holder's consent to foreclosure.  I would have gone one step further and required MERS to create a public system for determining and authenticating owners of notes.

      Ordinary political process is dead. The Supreme Court killed it. In Chambers. With a gavel.

      by Publius2008 on Wed Feb 23, 2011 at 09:07:52 PM PST

      [ Parent ]

      •  Thank you, and Yes (4+ / 0-)
        Recommended by:
        alizard, vcmvo2, radarlady, FarWestGirl

        The problem with the Gomes court is that it had none of these issues brought to it by the Gomes attorneys.  In fact, 'NO' issues were brought to the court of appeals and it was unable to address any issue at all other than the fact that the trial court was correct in dismissing the case because NO wrongdoing was even alleged.  There is a public system for determining ownership of notes, but most people don't know about the "Edgar Software" for SEC Report searches.  Some companies charge a fee but they will do a Mortgage Audit, something Gomes' attorneys didn't know about, showing the trail of your Note right to the mortgage backed security trust (MBST).

        •  Shannika said it above (0+ / 0-)

          but I will reiterate it again because you keep ignoring the real meaning of the Gomes case.

          In California when the lender elects non-judicial foreclosure, a statute sets the legal defenses a borrower may raise to stop a foreclosure.   It is a specific list, and the California courts have consistently ruled that any defense not in the list will not be heard by the court.  The Califorinia courts refuse to expand the list as written by the state legislature.  "Show me the note" is not a legal defense in the list of defenses as written by the legislature.   The court in Gomes specifically addressed the "show me the note defense" and the plaintiff's argument that the court should expand the legislature's list to include it since it is a new situation the legislature has not yet had time to deal with since the start of the mortgage securitization mess.  The Court specifically said  "NO".   It ruled the 'show me the note defense' is not in the California statute so the plaintiff had no case, period.  In the issue of amending the complaint to show facts that may prove that the lender foreclosing did not own the note, the court said that  an amendment would be fruitless, because no set of facts could change the legal problem that the 'show me the note' defense is not in the statute.

          The case is specific to a California statute in the non-judicial foreclosure situation, and is unlikely to  have meaning outside of California state court actions.  

          I am also disturbed by your statement that as a litigator, the law is what you say it is until the judge says otherwise.  I believe the more accurate, more professional, and more truthful statement for potential clients to hear, is that lawyers give opinions, generally and hopefully, educated and experienced opinions, about what the law is, the pros and cons of various positions one can take based on that opinion, the contrary positions that can be taken by the other side in the litigation that may have merit, and the likelihood of success of any given argument or course of action, and a recommendation to the client.  Ultimately, an action may be settled, which leaves all legal questions ultimately unanswered, but if not settled, the courts determine the law.   I cannot conceive of telling a client the law is what I say it is and not warning them of all the caveats to successfully litigating a case to a conclusion.    Some issues are more settled, less clouded with facutal inconsistencies, etc.   But this is an area where the law is being made daily,  state law varies significantly, the procedural posture of the cases has made a difference to outcomes, etc.

    •  Agreed. It's horribly destructive to a functional (9+ / 0-)

      government and economic system when businesses like Wells Fargo, JP Morgan Chase, and other major housing market companies can't simply comply with the law and good record keeping.

      •  Can't or won't? The problem is that they (0+ / 0-)

        think they're too big to need to do the same paperwork as the rest of the world. I so want to see them hang, (metaphorically), for this.

        Information is abundant, wisdom is scarce. The Druid

        by FarWestGirl on Thu Feb 24, 2011 at 09:42:07 AM PST

        [ Parent ]

    •  The govt has set "guidlines." (6+ / 0-)

      The guidelines are called real property laws which were flagrantly and fraudulently ignored in a greed inspired feeding frenzy for fees associated with the selling of mortgages to feed the MBS bubble. The only issue here is whether the courts will rule in accordance with the law if those being foreclosed upon have the knowledge, means, and energy to properly execute lawsuits. The banks are betting few will be able to withstand their assault and have spent good money to ensure government will look the other way.

      I totally agree that this is unsustainable if we are to remain a nation where the rule of law reigns supreme. The alternative is to fall into third world status in yet another manner.

      Time makes more converts than reason. Thomas Paine, Common Sense

      by VTCC73 on Wed Feb 23, 2011 at 09:21:46 PM PST

      [ Parent ]

      •  Yes! The Rule of Law Must Be Followed (5+ / 0-)

        The case cited in the extended diary entry, In re: Ferrell L. Agar, holds exactly what you propose.  Judge Grossman notes that MERS claims that it has at least 50% of the mortgages in the country and screwing with it would cause havoc!  Judge Grossman says, okay, that may be true, but here's the law and I'm following the law and we've had since the Magna Carta (he didn't really say that I just analogizing) and I'm going to follow the law regardless of the havoc to MERS and its ilk.  You're right on point with the way the courts are starting to go.

      •  Too Big To Jail (7+ / 0-)

        means that when laws are broken on a grand enough scale, by powerful enough criminals, it is cost effective for our corporate overlords to retroactively unbreak the laws, rather than prosecute the criminals.  If it works for torture, why shouldn't it work for fraud?

        Look for a retroactive legalization of MERS and a federal usurpation of States' control over real estate and foreclosure in the coming months.

    •  Clouded Titles Are Here Indeed (9+ / 0-)

      Most people don't know this but if they have purchased a home within the past couple of years the "Satisfaction of Mortgage" filed when the previous owners mortgage was 'paid off' was filed by the wrong bank, a bank that didn't even own the note when it was supposedly paid off.  Therefore, the new owners bought a house that doesn't have a release of the old owners mortgage because whoever filed the "Satisfaction of Mortgage" did not own the Note that was supposedly paid off.  Talk about clouded titles, this problem is just now beginning to be appreciated by title companies.  Thank you for your comments.

  •  Excellent information! (4+ / 0-)

    There is so much phoney paper out there everyone should be warned.  I've seen stories of three different parties seeking foreclosure on the same property and cases where there was not even a mortgage.

    Thanks for the well written diary!

    Be the change you want to see in the world. -Gandhi

    by DRo on Wed Feb 23, 2011 at 09:21:13 PM PST

    •  Thank you. (6+ / 0-)

      Horrific stories, I feel so sad.  Frankly, when I file a lawsuit on the "show me the note" foreclosure defense I have never been able to get in front of a judge because the foreclosing party always settles, immediately!  Think about it, if the mortgagee doesn't own the note, the mortgage cannot be in default, it's a factual and legal impossibility because there is no underlying debt, unless they can produce a chain of title proving they have a right to collect on the note.  On the other hand, if the note owner doesn't own the mortgage, and they usually don't, there is no security and the note is simply and unsecured debt.  The banks do not want to take a chance with a judge these days.

    •  What I'd like to know is ... (7+ / 0-)

      do people who aren't in trouble, paying their mortgages, need to worry about this paper?

      Our goal is to pay off our mortgage as soon as we can. On the current schedule, we will pay off our 30 year mortgage in another 2 to 3 years (12 years before schedule).

      Do we need to worry that we are paying the wrong entity because somebody didn't transfer the paper correctly?

      Great minds discuss ideas; Average minds discuss events; Small minds discuss people. -- Eleanor Roosevelt

      by hungrycoyote on Wed Feb 23, 2011 at 10:58:42 PM PST

      [ Parent ]

      •  Excellent question (4+ / 0-)

        I don't know the answer to that but I think everyone should be aware of the funny stuff going on. I heard that there were cases in Florida where the property tax was not paid (although it was sent to the mortgage holder) and the local authority sold the 'receivables' to a bidder who foreclosed for sometimes less than a quarter of the annual tax that had been due. As soon as the bidder bought the receivable they added enormous fees and began the foreclosure process.

        Be the change you want to see in the world. -Gandhi

        by DRo on Wed Feb 23, 2011 at 11:19:23 PM PST

        [ Parent ]

        •  I live in Florida and that's not the only crazy (7+ / 0-)

          thing going on down here. There are companies that are going to empty houses, changing the locks, and renting them out claiming adverse possession. I posted about this in another real estate diary yesterday:

          McNair estimates that during the past several months he's placed 60 to 70 families along Florida's west coast into empty houses.

          "They're empty and they're available, readily available, and you can use them awhile," McNair said.

          McNair says he is staying within the letter of the law because he is only taking possession of the homes, not staking a claim to ownership.

          He argues Homes for Americans is not renting or leasing the homes in question, though the occupants do pay an annual $495 membership fee to join the program. They also pay a monthly fee to occupy a house, part of which goes for his company's administrative costs.

          Companies charging for homes without owners' permission

          Then there's this one:

          Pasco County deputies arrested a 43-year-old man Friday and accused him of collecting $30,000 in rent money on properties he didn't own.

          George Allen Ola Jr., of 8831 Garden Party St., is charged with scheme to defraud. He posted a $10,000 bail and was released shortly after his arrest last week.

          Ola couldn't be reached for comment on Monday.

          Investigators said Ola entered a contract with Bay Vista Realty in May to lease the properties he said he owned. Ola provided Bay Vista with notarized copies of quit claim deeds that were filed with the Pasco County clerk of court.

          The filings show the properties were deeded to Fifth Third Equity Group Inc., a company Ola incorporated in December 2009, between January and April. But investigators said Ola forged the names of the homeowners.

          Land O' Lakes man charged with renting out homes he didn't own

          Great minds discuss ideas; Average minds discuss events; Small minds discuss people. -- Eleanor Roosevelt

          by hungrycoyote on Thu Feb 24, 2011 at 12:03:10 AM PST

          [ Parent ]

      •  Yes. Protect yourself and have the search done. If (2+ / 0-)
        Recommended by:
        mary4, hungrycoyote

        it's kosher and your money's going where it should be, then fine, if there's a problem, then you can get on top of it early. Don't tell your lender you're checking, just do it and have the info in a safe place.

        Information is abundant, wisdom is scarce. The Druid

        by FarWestGirl on Thu Feb 24, 2011 at 09:48:03 AM PST

        [ Parent ]

        •  Thank you for the response. A little more (0+ / 0-)

          detail. Who do I contact to have a search done? An attorney or a title company?

          Great minds discuss ideas; Average minds discuss events; Small minds discuss people. -- Eleanor Roosevelt

          by hungrycoyote on Thu Feb 24, 2011 at 11:41:07 AM PST

          [ Parent ]

          •  A title company. They will charge a (1+ / 0-)
            Recommended by:

            (usually) small fee. You can shop around online. If you're in a small town, you might want to go to another town, but that's probably just my naturally suspicious mind talking. ;-)

            I hadn't ever heard of the Edgar software that's mentioned elsewhere in the diary, but that may not be a bad question to ask the title company about.

            Good luck and congrats on being that close to a mortgage burning party!

            Information is abundant, wisdom is scarce. The Druid

            by FarWestGirl on Thu Feb 24, 2011 at 02:37:22 PM PST

            [ Parent ]

  •  Will I own my property? (8+ / 0-)

    We are going to pay our house off in less than a year, and presumably will get a title.  When we go to sell, will there be a problem with our title?  I have no idea if Wells Fargo sold our note--but if they did--is my title clouded?  I actually am wondering if there will be a problem with getting our hands on the paper.  This thing has messed up the system for everyone,

    The party of No is well on their way to becoming the party of nobody. Alan Grayson

    by Leftleaner on Wed Feb 23, 2011 at 09:58:06 PM PST

    •  If you got in 15 or more years ago (4+ / 0-)
      Recommended by:
      Ray Radlein, JesseCW, Kwamo, FarWestGirl

      you're probably safe.

      Unless you recently re-fi'd.

      Make sure everyone's vote counts: Verified Voting

      by sacrelicious on Wed Feb 23, 2011 at 10:35:02 PM PST

      [ Parent ]

    •  They can foreclose on houses (1+ / 0-)
      Recommended by:

      that never even had a mortgage. Stock up on lawyers, guns and money.

    •  Good question. (3+ / 0-)
      Recommended by:
      Ray Radlein, JesseCW, FarWestGirl

      "Faced with what is right, to leave it undone shows a lack of courage." - Confucius -/- "Yeah, well, the Constitution is worth it if you succeed." - Nancy Pelosi

      by nailbender on Wed Feb 23, 2011 at 10:56:02 PM PST

      [ Parent ]

    •  Get a title search in advance! Any discrepancies (2+ / 0-)

      you will know plenty in advance. Just call the title company who issued your title. Not a large fee to do so!

      "Then they came for me - and there was no one left to speak for me." ~kay~

      by Kwamo on Thu Feb 24, 2011 at 02:23:22 AM PST

      [ Parent ]

    •  You already have title (0+ / 0-)

      What you will need to do is to get the lien removed, which shouldn't be much of a problem.

      Oh Yeah? Go Friend Yourself!

      by roguetrader2000 on Thu Feb 24, 2011 at 06:55:47 AM PST

      [ Parent ]

    •  You already have title (3+ / 0-)
      Recommended by:
      maryb2004, pelagicray, JesseCW

      You have title subject to an encumberance known as a  mortgage/ deed of trust/ deed to secure debt (depending on where you live).

      What you want it is the original note marked paid in full and signed by the lender, if you can get it. IF you do get it, don't burn it as people used to do. Burn a copy if you want to follow the old ritual.

      A mortgage/ deed of trust/ deed to secure debt is worthless without a valid unpaid note. If what we call the underlying debt (the promissory note) is paid, the security instrument is void. The original note marked paid in full or satisfied, by the lender is stil the gold standard (Sorry Ron Paulites).  

      Finally most, if not all states have a statute of limitations (SOL) of enforcement. Can't tell you what your states  SOL is. By way of example only, in Florida its calculated from the "face of the mortgage".  If the mortgage give sufficient information to calculate a final payment date, then add 5 years to that date (5 years to bring suit for non payment). If the due date cannot be calculated from the printed terms of the mortgage, then add 20 years to the date of the mortgage.

      "Once in a while you get shown the light In the strangest of places if you look at it right"

      by molly bloom on Thu Feb 24, 2011 at 07:10:34 AM PST

      [ Parent ]

      •  A question in general that is more "political" is (0+ / 0-)

        the entire issue of non-judicial vice judicial foreclosure systems. I have not researched this but it would seem the non-judicial idea was one of "streamlining" and avoiding court "clutter" with possibly a strong dose of lender self interest lobbying in the state house. Citizens often pay little to no attention to such "technical" legal matters before their elected representatives. We need to be more aware of these issues.

        I question whether on matters as serious as real property ownership, something that does seriously impact individual lives and is also a base for the economic stability of the nation should be removed from judicial review.

        The opinion of people much more familiar with the current state and legal background of the state's positions would be interesting. That might help inform us as citizens on a position to take with our representatives in the legislatures.

        The only foes that threaten America are the enemies at home, and those are ignorance, superstition, and incompetence. [Elbert Hubbard]

        by pelagicray on Thu Feb 24, 2011 at 07:52:04 AM PST

        [ Parent ]

        •  Start by researching lien theory and title theory (1+ / 0-)
          Recommended by:

          All states follow one of those two theories. I believe, but could be wrong, that its roughly split 50/50.

          Does the security interest (mortgage/ deed of trust/ deed to secure debt) pass title or is it merely a lien?

          Florida is a lien theory state. A mortgage is merely a lien, it does not pass title.

          Georgia is a title theory state. A mortgage would pass title. So they use an instrument called a deed to secure debt (and are the only state to do so to my knowledge).

          Mississippi is another title theory state. A mortgage would pass title. So they use an instrument called a deed a trust (which is more common among title theory states.

          All of these security instruments are a type of contract and the law of contracts does apply to them.

          A deed of trust is a type of trust and is a 3 party contract - a trustee, a beneficiary and a grantor/settlor/trustor (I have seen all 3 terms used, settlor is the preferred term outside the security interest context. In the security interest context, grantor seems to be the preferred term). In terms of a real property security interest, the borrower is the grantor, the lender is the beneficiary and the trustee is a third party who holds a title interest in the land, who is charged with selling the property upon default in payment and giving the proceeds from the sale to lender (foreclosure).

          A deed to secure debt, does away with the trustee concept, and the contract gives the lender a power of attorney on behalf of the landowner to sell the property upon default.

          Regardless of the type of security interest, each state regulates how and when a sale will occur.

          It should be pointed out, that nothing prevents a lien theory state from adopting a non judicial foreclosure process and I suppose a legislature  in a title theory state could decide to overturn the common law theory in its state and declare itself to be a lien theory state, or even a state constitutional amendment by initiative process.

          The big obstacle is the fact that we are a dysfunctional democracy and the special interest will pour $$$ into campaigns to block attempts to change from nonjudicial to judicial.

          Currently Florida statues do not allow deeds of trust or security deeds and require any such security instrument to be foreclosed like a mortgage. However, the mortgage bankers association here tried last year to go to non judicial foreclosure and I believe are trying to do so again. One problem they will run into is the most commonly used mortgage in Florida specifically requires a foreclosure. So any change would violate the sanctity of the borrowers contract and run afoul of the impairment of contract constitutional  clause. This was pointed out to then last year, but that hasn't prevented bankers from trying again.

          Another issue as I see it, is judicial foreclosure in the end is better for the banks. If you get good service on the defendants and if they are not successful in opposing the foreclosure, the banks get court order finding they are the owner of the note and mortgage and entitled to foreclose. If not appealed or vacated (and in Florida the right to vacate for almost all defects ends in one year post judgment. Lack of proper service goes forever). This is a finding of good title. There is not much to be done to overcome this. Its good and marketable title gold.

          Conversely in a non-judicial foreclosure state, it seems to me, the lenders are in a worse position, especially if their title to the security instrument is not well documented, their non-judicial foreclosure may be suspect. Their only hope is adverse possession under color of title (which takes about 7 years and probably would require a quiet title action to clean up).  

          So lenders choose your poison - judicial foreclosure and prove you own the note and mortgage and be done with it. Or non judicial foreclosure and possible cloud on title for 7 years, if you right to the mortgage is not well documented in the public records (tell me again why MERS is superior?).

          Having lived and practiced (represented lenders and conducted foreclosures on the behalf of lenders) in both types of states (and borrowed money against a home in both types) I would opt for the judicial foreclosure state as a borrower. As a lender, all things considered, in normal times it doesn't take that much longer to foreclose judicially than it does to foreclose non-judicially - especially if you have your paperwork right, so I don't think it that much of a hardship.

          My best advice is move to a foreclosure state if you can. If you can't keep every scrap of paper involving your loan. Make multiple back up copies.   Actually do that anyway regardless of whether you live in a judicial or non-judicial foreclosure state.

          "Once in a while you get shown the light In the strangest of places if you look at it right"

          by molly bloom on Thu Feb 24, 2011 at 08:37:24 AM PST

          [ Parent ]

          •  Thanks for the good survey of pros and cons. (0+ / 0-)

            I was specifically thinking of what the citizen's position should be with regard to legislative action. As you mention, we see special interests trying to get changes through legislatures with very little citizen knowledge or even awareness the move is underway. Lacking citizen input the legislators will almost always go along with those interests.

            I can only grin at:

            One problem they will run into is the most commonly used mortgage in Florida specifically requires a foreclosure. So any change would violate the sanctity of the borrowers contract and run afoul of the impairment of contract constitutional  clause. This was pointed out to then last year, but that hasn't prevented bankers from trying again.

            combined with

            Conversely in a non-judicial foreclosure state, it seems to me, the lenders are in a worse position, especially if their title to the security instrument is not well documented, their non-judicial foreclosure may be suspect.

            First, having some background in contracts I am continually amazed at how little basic understanding both individuals and even some businesses have of contracts. Second, it seems that increasingly we do have lawlessness in contracts, something associated with a previous comment. The value of a contract indeed stands basically on the integrity of the parties--the voluntary, good faith agreement--and only secondly on the legal system.

            Both seem to have eroded seriously in the last decades. I have read about and seen second hand how too often a contract is indeed "just a scrap of paper." Though always the case, it increasingly seems contracts are only of value to those with the funds and patience to enforce them in an overloaded legal system--and even then judgments are sometimes ignored. I have watched both individuals on one side and businesses on the other suffering because the other party completely disregarded contractual obligations and counted on the expense, delays and, ultimately in a couple of cases, inability to enforce even judicial judgments against a defaulting party.

            Then, as the paired quotes above indicate, if can be amusing to see how some "business ideas" can be actually counterproductive. Perhaps it is business by ideology rather than hard headed business by principle. Sometimes it gets downright laughable!

            The only foes that threaten America are the enemies at home, and those are ignorance, superstition, and incompetence. [Elbert Hubbard]

            by pelagicray on Thu Feb 24, 2011 at 09:52:33 AM PST

            [ Parent ]

            •  how true (1+ / 0-)
              Recommended by:
              Then, as the paired quotes above indicate, if can be amusing to see how some "business ideas" can be actually counterproductive. Perhaps it is business by ideology rather than hard headed business by principle. Sometimes it gets downright laughable!

              "Once in a while you get shown the light In the strangest of places if you look at it right"

              by molly bloom on Thu Feb 24, 2011 at 10:12:53 AM PST

              [ Parent ]

            •  My position is judicial over non-judicial (1+ / 0-)
              Recommended by:

              I may not have been clear enough. Its clear to me my essay needed editing.

              judicial over non-judicial for the good of both lenders and borrower should be the citizens response. And  this will require whole sale changes in the common law theories of title v lien in half the states.

              "Once in a while you get shown the light In the strangest of places if you look at it right"

              by molly bloom on Thu Feb 24, 2011 at 10:16:02 AM PST

              [ Parent ]

              •  I got it. Yes, muddy property titles hurt all. (0+ / 0-)

                Clarity in property titles is good for business, individuals and the economy in general. Clouded title on real property is a drag on the property long term hurting all. I expect the current fiasco may be biting people and encumbering property for some time to come.

                I doubt it will happen but logical and "progressive" thinking would seem to drive us from the ancient common law to a more codified system. Then there could be a rise in lawyer unemployment!

                Of course I also know the Louisiana codified system inherited from France's Napoleonic Code has some real problems--probably more related to ancient encrustations than codification itself. There seemed no shortage for law work there.

                Forced heirship was one that made living in Louisiana actually risky for those in second marriages. I remember one case of an elderly spouse driven out of the family home when two children of the other reappeared after decades of silence to force sale for their portions. If I recall it was that case that led to some tweaking of the code.

                The only foes that threaten America are the enemies at home, and those are ignorance, superstition, and incompetence. [Elbert Hubbard]

                by pelagicray on Thu Feb 24, 2011 at 12:29:25 PM PST

                [ Parent ]

  •  Look for legislation in the very near future to (8+ / 0-)

    "rectify" this little conundrum for our overlords.  Here's a recent piecethat covers the big change to MERS that the recent Agard decision in NY Bankruptcy court forced.  Here's the money quote from the deciding judge in that case:

    The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.

    Congress will dutifully do this.  They tried last year to take a similar tack (Leahy was actually in on it) , but Obama "excersized" a pocket veto (in quotes because a pocket veto is the absence of action).  

    I'm sorry to be a doomsayer, but I don't see our govt having the guts to stand up to the banks.   They will give them a reprieve.   The markets are too dicey right now and the loss of billions to the banks in evaporated real estate from their books will tip things into a real Depression.  

    On the other hand, things could cascade in that direction anyway, before Congress can act.

    Very strange times we're in right now folks.

    "Faced with what is right, to leave it undone shows a lack of courage." - Confucius -/- "Yeah, well, the Constitution is worth it if you succeed." - Nancy Pelosi

    by nailbender on Wed Feb 23, 2011 at 10:46:02 PM PST

  •  Great Diary but be cautious,, I witness too (11+ / 0-)

    many homeowners scrambling for false hope trying to hold on to their home and their notes were produced and they still were displaced from a foreclosure. Someone above wrote that they wanted to sell their home but wanted to know if there is a cloud on the title? Simply, call a title company and pay a small fee for a  copy of your title via a title search. Just to make sure that if your loan was sold off, not properly discharged or any unknown liens are showing up that you are unaware of, now is the time to know.  There have been times that by checking this route, my clients have found that the loan was not properly discharged nor recorded properly, lender went out of business etc.  hence,,missing note! But again this is not happening as rampant as we may think. I say this only because I see families who are at the end of their redemption period holding out for that one last modification or waiting for our senator to intervene, etc, yes and looking for a note that became quite verifiable but too late and past the redemption period. And, that is the beginning of reality for many that comes hard. I am the one who sees the pets and toys and clothes left behind and the years of memories just deserted. So, on the flip side this cautionary tale is being told for those who feel they perhaps found a remedy. This is a very good  and informative diary a cure for some but not everyone! Stay with reality! Work to change the laws to keep people in their homes in the first dogged place, make these loan modications work, not a temporary fix to only lose your home after 6 months of a temporary payment plan. Fight to change how the banks are dealing with us! They sure along with the past administration didn't fight to keep us out of this mess!!! We need more info here as the diarists provides for those in despair and distressed! I am trying to make a difference in Washington if they'd listen to some of us who actually have ideas!!!

    "Then they came for me - and there was no one left to speak for me." ~kay~

    by Kwamo on Thu Feb 24, 2011 at 02:16:07 AM PST

  •  "Works" in very a limited sense (1+ / 0-)
    Recommended by:

    You still have ruined credit and can never sell your home because no title insurance company will cover a new buyer without the lien being cleared.

    All you have gained is negotiating leverage and the right to squat in your house in perpetuity.

    Oh Yeah? Go Friend Yourself!

    by roguetrader2000 on Thu Feb 24, 2011 at 07:01:17 AM PST

  •  Thank you (0+ / 0-)

    Good news indeed...of course if they extend the citizens united ruling to the buying of judges, then all bets will be off again.  Sorry - my inner cynic is strong this morning :(

    In a controversy the instant we feel anger we have already ceased striving for the truth, and have begun striving for ourselves. " - Buddha Shakyamuni

    by Actbriniel on Thu Feb 24, 2011 at 07:22:48 AM PST

  •  Remember, too (0+ / 0-)

    Lawyers don't work for free. Factor the cost of this kind of litigation into your economic calculus.

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