In a hastily convened telephone conference, B.L. Zebub, Belial Bank’s devilish, but distraught, leader, queries the attendees on the remarkable [some might say “miraculous”] turning of the tide [which some might liken to the parting of the Red Sea] for Bantam Borrowers over the past couple of weeks in Oregon. Since such analogies smack of divine intervention, B.L. Zebub, who is captain of the “Other Team,” regards them as blasphemous, and grounds for expulsion from his little coterie of today’s callers. Of particular concern to our heretofore confident commander, is the recent ruling by Federal Judge Simon in the James case and the 11th hour passage of Oregon’s SB 1552.
In attendance are some of the best and brightest minds in the banking, servicing, and title industries: B.L.’s honest but naïve legal intern, Les Guile [who has begun to lose patience with the “See No Evil” attitude of some of the telephone attendees]; title industry hand-wringer Liz Pendens [who has decided that she is through carrying the water for the more powerful Big Banks]; Liz’s polar opposite, Dee “The Destroyer” Faulting, of the default servicing industry [who was once spotted over the Christmas Holidays trying to remove a ten dollar bill stuck in a Salvation Army Red Kettle]; Damian Faust, Belial’s lead counsel [whose Curriculum Vitae touts that fact that he received a perfect score on the MMPI for anti-social behavior]; and lastly, the Bank’s chief schemer and PR man, Kenneth Y. Slick III (aka “KY”), who is reveling in his recent success in expunging from the public record an old teenage criminal conviction for cruelty to small animals that his third ex-wife had threatened to take public. B.L.’s loyal secretary, Lucy Furr, has dutifully transcribed this conversation. As before, I promised my contacts at Wikileaks that I would not reveal the true source of this purloined post. – PCQ
B.L. Zebub: “Well, let’s get started. No need for introductions; time’s running out – and so is our luck. I want to hear from you Damien; what the hell is happening?! One day we’re riding high, confident in the fact that we’re getting the best of those pesky little borrowers, and now we’re on the ropes. I thought the Beyer result and the first James ruling signaled the end of the issue; MERS was held to be a legal beneficiary in those cases, so I thought we could move on. Hell, our lobbyists down at the Oregon Legislature were telling the politicians during the 2012 Session that they were so confident in the future, we didn’t even need to sneak in a last minute gut-and-stuff bill this time.
Damien Faust: B.L., I have to say, I suspected it was too good to last. Yes, we had our “15 minutes”, but I was never comfortable with either of the two rulings. I went back and checked the transcript of our telephone conference that Lucy prepared following the Beyer and James wins. Here’s what I said the about the Beyer and first James decisions:
“The Beyer opinion is a good example of what can happen when borrowers represent themselves; the judge drinks the banks’ Kool Aid that is served up in the form of legal arguments that remain largely unopposed. *** In this case, the judge actually concluded that MERS was a “beneficiary” under Oregon law because it was entitled to “benefits” – i.e. the right to receive the loan payments under the promissory note. *** The amazing thing is that MERS itself has never argued that. If someone sent MERS a mortgage payment, they would toss it back to them like a hand grenade without the pin.” Even our naïve legal intern here, Les Guile could see the skewed logic of the Beyer case.
Les Guile: Mr. Faust, I may have been naïve when I first began interning here, but certainly no longer. Quoting Johnny Nash, “I can see clearly now.” Thanks for opening my eyes to the sordid underbelly of the banking industry. However, please don’t excuse me for ‘twisting the knife’, but the rest of the transcript seems to suggest you were pretty proud of the fact that you were one of the drafters of the MERS trust deed language Judge Simon recently referred to as the “law or custom” clause, which he promptly struck down.
‘That’s the hilarious part! Guile, you were little more than a gleam in your father’s eye when we came up with this ruse – and I’m proud to admit that I had a hand in it. All of us, myself and the other Big Bank attorneys were having drinks one night, and trying to figure out how portray MERS as a ‘beneficiary.’ *** We knew that ORS 86.705(1) defined a Beneficiary under a Deed of Trust as “…the person named or otherwise designated in a trust deed as the person for whose benefit a trust deed is given, or the person’s successor in interest….” We thought and thought of arguments supporting our position that MERS could act as the nominal beneficiary even though it wasn’t actually “benefitted” by the trust deed. Mind you, we had lawyers at this meeting that graduated summa cum-laude in sophistry. *** The bottom line is that we concluded we couldn’t spin the word “beneficiary” and “benefit” to mean anything other than what a 5th grader understood it to mean. So we came up with the next best solution, and it paid off in spades as shown in the Beyer decision. We began inserting into all of the lending industry’s trust deeds a provision that reads as follows:
‘Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to releasing and cancelling this Security Instrument.’
Les Guile (resuming): “And when I stated that I felt this clause that was buried in a 10-page legal document was a ‘sneaky’ thing to do, you said:
‘Well, Guile don’t be too dismissive of the ploy. It actually worked. Both Judges in the Beyer and James cases bought it. The Judge in Beyer even went so far as to rely upon the provision by saying that ‘…the trust deed repeatedly calls MERS the beneficiary, a statement which would not comply with law or custom unless MERS’s powers were expanded to include the right to receive payment of the obligation.’ I admit that the reasoning sounds err, a bit circular, but we’ll take our points any way we can, even if the ref made the wrong call.’”
B.L. Zebub: “Damien, I have to agree with Les. Your little victories were kinda short lived, it seems to me. So while you were patting yourself on the back because you were able to fool some of the judges, you apparently didn’t fool all of them. Who is this Judge Michael Simon anyway? I’ve never heard of him?”
Damien Faust: “B.L., he’s brand new to the federal bench. He was just sworn in last July, 2011. He worked at the Portland office of Perkins Coie, a large, Seattle-based law firm. He specialized in business litigation, and had been a partner at Perkins since 1990. Prior to that he served as a Trial Attorney at the U.S. Department of Justice where he handled civil and criminal antitrust matters. He’s got some pretty impressive credentials: J.D. cum laude in 1981 from Harvard Law and a B.A. summa cum laude from UCLA.”
K.Y. Slick: “Well dammit, this cannot stand. We have to figure out some way to blunt the effect of this second ruling in the James case. I just read that 41-page opinion, and in one fell swoop, Judge Simon destroyed our two dominant pro-lender holdings, Beyer, by Judge Mosman, and the first James case by Magistrate Stewart.
- First he ruled that MERS is a mere nominee, and as such cannot be a “beneficiary.”
- From that conclusion, it wasn’t much of a stretch to say that MERS cannot act like a beneficiary and assign trust deeds.
- Next he ruled – which was bound to happen next – that all of the successive assignments of the trust deed – even those implicit assignments that Oregon law says occur when the promissory note alone is transferred – must be recorded under ORS 86.735(1) before foreclosing Oregonians out of their homes. This conclusion summarily destroyed our “single assignment” argument that we thought would carry the day.
- Then he slammed the back door on us by saying that we couldn’t “contract around” the clear definition of a “beneficiary” in ORS 86.705(1) in order to make MERS something it isn’t. He said it was against public policy, or something crazy thing.
- Then, just to make sure MERS wouldn’t rise from the dead, he drove a large wooden stake through its heart by tossing out our great “law or custom” exception in the MERS trust deeds. Hell, Judge Mosman seemed to have no trouble with it, and Magistrate Stewart bought it too. But Judge Simon dissected the language word-by-word, and said it meant something other than what we’d been telling the courts it meant. Unfortunately, it seems he’s the first judge who actually read the language in plain English.
So I say, enough is enough. Next year, let’s get that Sunriver legislator, what’s his name? Whazzit? Whozzit? Something like that. Anyway, let’s get him to sneak in some legislation that overrules the effect of Judge Simon’s ruling. What better quisling could we get to do this?! He’s from the epicenter of the Central Oregon housing crisis and co-chair of the House Consumer Protection Committee. He can wrap himself in sheep’s clothing, and tell people that what he’s doing is for the good of his constituency.
Liz Pendens: “K.Y., the legislator’s name is Gene Whisnant. But I’m not sure there is enough wool in all of New Zealand to disguise his motives. Currently, he’s been taking a beating for his pro-lender activities. Even in the Oregonian criticized him for turning his back on the state’s distressed homeowners, including his own constituents from Central Oregon. And to make matters worse, he recently carried the water for the lenders when they tried to “gut and stuff” two pro-consumers’ bills with watered-down pro-bank language. Despite his efforts to sabotage it, Senate Bill 1558 passed – so, in the immortal (but never actually uttered) words of Desi to Lucy, Rep Whisnant ‘has some ‘splaining to do.’ So, K.Y. if you want to hire someone to carry legislation for the Big Banks, Re. Whisnant isn’t your guy. He’s so toxic, even the Occupy Wall Street crowd is after him. But, frankly K.Y. I’m not so sure you’re going to find much legislative support for creating laws to avoid the effect of Judge Simon’s ruling. It was the most thorough of all the Oregon MERS opinions from the federal bench to date. The simple reason is that he did his homework. Additionally, he had the benefit of some great legal briefing on behalf of Mr. and Mrs. James. I’m of the belief that this opinion will become the template for future pro-consumer decisions. I think that with McCoy and Hooker, James will be the trifecta for this horse race; the Beyer and the earlier James rulings, are eating dust, and so are the Big Bank attorneys that rode into town on those losers.”
B.L. Zebub: “We Liz, thanks for the sports imagery, but this doesn’t really address what we’re going to do about this nasty turn of events. Not only did we get our head handed to us on a platter by Judge Simon, but we now have to contend with SB 1558 which actually expands homeowners’ pre-foreclosure and foreclosure rights. This is the worst couple of weeks I can remember. Dee, we haven’t heard from you. You’ve always had some pretty aggressive and mischievous tricks up your sleeve. I don’t know of anyone who enjoys foreclosing Oregonians out of their homes more than you. Hell, this time last year, I remember when you saved up hundreds of default notices just so you could send them out to homeowners on the Ides of March! Absolutely Demonic!”
Dee Faulting: Thanks for the accolades, B.L. I’ve been just trying to absorb all this. It wasn’t that long ago when we were popping champagne and celebrating that we were finally free to foreclose Oregonians without having to comply with that pesky recording requirement in ORS 86.735(1). Now, as if it wasn’t enough of a burden to have to record all our trust deed assignments before a non-judicial foreclosure, Judge Simon interpreted that to include the assignments that occur by operation of law when the promissory note is transferred. Hell, if we don’t know where the formal assignments were – or even if they exist – how are we going to be able to track down the note transfers? And even if we did, what would we record? And how can we record a document that doesn’t exist? And how could we create it now to relate back in time? Who would notarize that…well, I’m sure we’ve still got a few robo-signers around who’d gladly comply. My take on this is that we’re all going to have to go to court to foreclose so we won’t have to comply with ORS 86.735(1). Besides, if I understand correctly, our duty to mediate under SB 1552 doesn’t apply if the foreclosure is judicial – just non-judicial.”
Les Guile: “Well, I have a question for everyone here. Given you collective intelligence and experience, why is it you didn’t see this coming long ago? All one needed to do is stand back a ways and look at the Big Picture. How could anyone believe that this MERS ruse would win out in the end? It was never vetted at the start – all the legal arguments today have been cobbled together over the years to deal with the judicial fallout that arose during the foreclosure crisis. MERS was just created out of whole cloth by the banking industry – with the acquiescence of the title industry – sorry Liz, but you know it’s true. Some would say it was too cute by half. I mean, how can a lender who is owed money, and was for years “THE BENEFICIARY” under the trust deed, now say that as a mere “nominee” of the beneficiary, it can act like the legal beneficiary? That’s like me appointing you as my attorney-in-fact under a power of attorney, and then you delegating to your “nominee” the power to act on my behalf. Your nominee can’t be you, and only you have the legal power to act on my behalf. Sooner or later someone was going to wake up and see this for what it was – a giant ruse perpetrated by the Big Banks and their foreclosure mill attorneys, to get around 40+ years of Oregon trust deed law. And meanwhile, instead of pursuing short sales and deeds-in-lieu-of-foreclosure on a fast track basis, the banking industry continues to waste its time and money on the wrong side of the foreclosure debate. And when I say “the wrong side”, I mean legally, ethically, morally, politically, and every other aspect. There is nothing about the banks’ side that is defensible. If you were proud of what you do, you wouldn’t be operating in the shadows. You wouldn’t be using quislings like Rep. Whisnant to carry a gut-and-stuff bill that would obviously hurt consumers. I understand he’s running for re-election, so we’ll see what his constituents have to say soon enough. When are you all going to wake up and realize that in the long run, Good trumps Bad. Right trumps Wrong. It might take some time, but that has been the history of the world. Doing the right thing from the start yields the best results. It might cost some money up front, but nothing like what it costs you to correct the problems you’ve created. So, let me suggest that you take some of the millions of dollars that you’d spend on lawyers, and focus on making things right with homeowners. Treat them like you did when you first made them a loan; treat them as if you really wanted their business in the future after this mess goes away. Imagine that the folks seeking a principal reduction or some other loan modification are some of your own family. Imagine that you had to explain to someone in the future, why you chose to fight at every turn, rather than put down your gun and just talk. Might does not always make right. [To be continued.]
