Belial Bank Telephone Conference Discussing MERS and the McCoy Case

[Caveat: As recited on my website, Q-Law.com, unless expressed otherwise, all contents are solely those of the author and do not necessarily represent the views of my clients. This post is for entertainment purposes only. Truth, like beauty, is in the eyes of the beholder. The satire is mine. – PCQ]

As succinctly stated by C.S. Lewis in his Preface to The Screwtape Letters, ” I have no intention of explaining how the correspondence which I now offer to the public fell into my hands.”

CEO: “OK, do we have everyone on the line? Why don’t we do brief introductions, if we could. I’m not sure everyone is familiar with each other. I am B.L. Zebub, President and CEO of Belial Bank. I speak for the Big Banks on behalf of our lending industry.

Voice #1: “Well, OK, I’ll go next. My name is Lucy Furr, and I’m Assistant to the President. I work closely with BL. I’ll be taking notes of this phone conference. Just so you know, no one should make notes or take any recordings of this conference. My notes will be compiled into a summary, and after review and approval by BL, they will become our ‘official record.’ However, this conversation is intended to be absolutely confidential and the summary will not be made available to public under any circumstances. We need to be able to speak freely here. For all intents and purposes, this conference never occurred.”

Voice #2: My name is Liz Pendens, and I represent the title insurance industry. I’m new to this group. Continue reading “Belial Bank Telephone Conference Discussing MERS and the McCoy Case”

“…the powers accorded to MERS by the Lender [whose name appears in the Trust Deed] – with the Borrower’s consent – cannot exceed the powers of the beneficiary. The beneficiary’s right to require a non-judicial sale is limited by ORS 86.735. A non-judicial sale may take place only if any assignment by [the Lender whose name appears in the Trust Deed] has been recorded.”

[Frank R. Alley III, Chief Bankruptcy Judge, published opinion, Donald McCoy III v. BNC Mortgage, et al., Adversary No. 10-6224 -fra, Case No. 10-63814-fra-13, February 7, 2011]

Slapdown! In a relatively uncomplicated adversary proceeding in Oregon’s bankruptcy court, Judge Alley hit the nail squarely on the head: If lenders in Oregon want to foreclose people out of their homes, they must follow ORS 86.735(1). Or in the words of one Oregon title counsel, Judge Alley’s decision means that “…all assignments behind a MERS trust deed must be recorded for a non-judicial foreclosure. In McCoy, it appeared there were unrecorded assignments by the original lender identified in the promissory note. A “beneficiary” in Oregon is defined as the entity or person identified in the trust deed as the one for whose benefit the trust deed is given (or their successor in interest) – that was not MERS, but rather the original lender making the actual loan to the borrower.

For some reason, this relatively simple requirement has been routinely and flagrantly ignored in virtually every non-judicial foreclosure I have reviewed last year and this year. I suspect if I went back to 2008 and 2009, I would see the same thing. And this holding isn’t confined to situations in which MERS is the (nominal) beneficiary.

As this site has repeatedly pointed out, the Oregon statute is pretty clear: Oregon Revised Statute 86.735(1) provides that a successor trustee [i.e the bank’s “enforcers” who actually process the foreclosure from beginning to end – PCQ] may foreclose a trust deed by advertisement and sale if “(t)he trust deed, any assignments of the trust deed by the trustee or the beneficiary and any appointment of a successor trustee are recorded…” in the public records of the county in which the property is located. [Underscore mine. PCQ] Continue reading “The McCoy Case Analyzed – MERS Smackdown!”

Breaking News! An exciting new board game has just been introduced to the marketplace – THE MODIFICATION GAME! Not since the Great Depression have people had this much fun at home. Gathered around the kitchen table, your friends and family will squeal with delight as they compete against one another in this fast paced contest of wills and skills. Ethics not required.

The object of the game is simple: See which one of you can foreclose a family the fastest. And here’s the twist – while each family thinks they’re getting a loan modification, the joke’s on them! Actually, while they’re negotiating with a make-believe “home modification expert,” you’re actually setting them up for a foreclosure! Can you imagine the look on your opponent’s face when they learn that the home they thought they could keep, was actually being taken away from them?

With a game board that looks somewhat like its outdated predecessor Monopoly [who pays full price for a bunch of little green plastic houses anymore? They’ll be half price at the foreclosure auction!], all of the players start from the same place and with the same amount of money. But with one spin of the Moral Compass, things really change. The one whose spin is the farthest from true North, gets to be a “Belial Banker.” The loser has to be the Hapless Homeowner. Then with a roll of the dice, the excitement begins. Both players draw from their stack of cards. Each card tells them how many spaces they will get to move forward, and contains hilarious messages that will keep the whole family in stitches! Continue reading “THE MODIFICATION GAME – From Your Friends at Belial Bank”

“Abandon all hope, ye who enter here” – Dante’, The Divine Comedy (Inferno)

[What follows is an abbreviated version of a recent telephone conversation I had with the helpline support folks for a major lender. I was trying to help a client who had recently received a notice of foreclosure, although she was current on her modified loan. All names are fictional. The identity of the telephone music has been added for entertainment purposes only. However, I found nothing amusing about this experience. After going through it only once – and based upon client reports who go through it daily – I suspect that Dante’ may have these banks in mind when he created the 8th Circle of Hell. – PCQ]

Time: 1:37 PM, Pacific Standard Time

Ring, ring, ring….

(Recording) “Hello, you have reached Belial Bank’s Borrower Assistance Hotline. We are a debt collector. This call may be monitored or recorded for training purposes. If you are calling to obtain assistance with modifying your loan, say or press “1”; if you are calling to contest an invoice, say or press “2”; if you are calling to pay off a loan, say or press “3”; for all other calls, say or press “666”. Continue reading “The Lenders’ Helpline – A Journey Through the Eighth Circle of Hell”

“Everyone goes through difficult times, and that’s when you need someone on your side the most. Whether you have questions about your mortgage or home equity, our trained associates have solutions that may be right for you. We’re here for you. Call us today.” Bank of America, Foreclosure Help Link

“We haven’t found any problems with the foreclosure process and what we’re saying is that we’ll go back and check our work one more time.” Brian T. Moynihan, Chief Executive Bank of America, speaking to the National Press Club, Washington, D.C. [New York Times].

There are too many definitions of the word “flaw” to set out in this post. Most people know, use and understand the word just fine. To me it suggests an “irregularity” or “defect,” such as that which occurs in a person, a process, or a product. So let’s go with that definition.

But a flaw stops being a flaw when it is done intentionally and repetitively. When motive, purpose and intent, are added into the equation, the word “flaw” becomes a misnomer that diminishes the seriousness of the event – “fraud” is the correct term. So when lenders and servicers – including their enablers in the foreclosure processing and foreclosure mill industries – intentionally prepare, use and file fraudulent documents in order to facilitate a foreclosure (non-judicial or judicial), the action deserves to be called by its true name. Continue reading “Foreclosure Flaws Are Much More Than “Flaws””

As the Realtor® industry enters into 2011, there is little question but that short sales are going to be around for a while. It will take at least two more years as excess inventory from all sources – banks, distressed owners (current and non-current with lender), unsold new construction, new condos, and sellers waiting on the sidelines – depletes itself. However, this is not the only factor causing the current glut of real and shadow inventory. Significantly, the employment picture and general overall confidence in the state and national economy must improve substantially. The consumer exuberance during the holidays does not – in my opinion – necessarily translate into good news for the housing market. It says, at best, that the retail segment of our economy enjoyed some good news for a change.

The bottom line for short sale transaction is that for the foreseeable future, they are going to remain a significant part of many Realtors®’ book of business. Avoiding these transactions is a luxury reserved for the very few. For those Realtors®who saw short sales as a good marketing opportunity early on, they are to be congratulated. However, for those thinking about dipping the veritable “toe in the water,” it’s not too late. I say this because the conventional wisdom about short sales a couple of years ago – if any existed back then – is ancient history. Much has changed for 2011:

Banks have come to accept short sales, and in so doing, they have streamlined their protocols in dealing with them;
With the foreclosure fiasco in the fall of 2010, many lenders are seeing their REO inventory inflate, which suggests they may be more receptive to short sale approvals;
With each new short sale, Realtors® are gaining more experience;
Thanks to the Internet and other sources, the public is becoming more educated about short sales;
Today, the typical homeowner confronting a distressed transaction (i.e. short sale, deed-in-lieu, or foreclosure) is generally not the old “sub-primer” or “flipper” of 2004-2007 who acquired their home with easy credit, no money down, and a “liar loan;”
Today’s distressed homeowners are our neighbors and sometimes ourselves. Many had significant equity at one time. Continue reading “2011 – Realtor® Best Practices For Short Sales”

“The promise given was a necessity of the past: the word broken is a necessity of the present.”
– Niccolo Machiavelli

It was just a matter of time. Sooner or later, trial court rulings against Big Banks were going to make it into the appellate system and become recognized judicial precedent. Such is the case of U.S. Bank Association, Trustee vs. Antonio Ibanez, which consisted of two appeals from trial court rulings that were disposed of in one consolidated court opinion out of Massachusetts. There are several things that distinguish thus case. First, Ibanez does not arise out of a bankruptcy court ruling, as so many previous opinions have. Second, it is not a case of a homeowner/borrower contesting the initial foreclosure action. [Presumably, like most homeowners, they had neither the money nor the appetite for a fight. – PCQ]. Lastly, this consolidated case arose out of the Oregon equivalent of a quiet title action, initiated by the banks well after the foreclosures had been completed. Both lenders sought a judicial declaration that once they had acquired title following the foreclosures, they actually had the legal right to convey marketable title to another purchaser. The banks both failed and flailed.

The Ibanez ruling was released on Friday, January 7, 2011. The facts of the consolidated cases are substantially similar, so I will summarize them as if a single case. Essentially, the borrowers closed their loans directly with the lenders that loaned them the money (the “Originating Banks”). The mortgages were duly recorded on the public record. Through successive assignments, both loans were pooled and securitized into REMIC trusts. In one case, the REMIC Trustee was Wells Fargo, and in the other case, it was U. S. Bank. Both of these lenders, acting in the capacity as Trustees for the REMICs, initiated foreclosure proceedings against the borrowers, seeking to either sell the properties at auction, or recover them back to re-sell. Continue reading “The Ibanez Decision Analyzed – Smackdown!”

Much attention has been paid, of late, to the many stories of lender and servicer abuses in judicial foreclosure states. To explain, a “judicial foreclosure state” is one in which the foreclosure process requires that the instrument (i.e. a mortgage or trust deed) securing the borrower’s promissory note, must be foreclosed by filing legal documents in court. Conversely, if a homeowner wanted to defend against such a foreclosure, they too, would have to file papers in court. When a legal process requires court action, it necessarily means that lawyers are involved, and a judge must decide the outcome. It also means that the documents filed in court are accessible to the public. Lastly, and perhaps most important, in judicial foreclosure states, if a homeowner resists the foreclosure, he or she has a legal right to demand that the lender or servicer produce their documentation for review – this is known as the “discovery process.”

Florida, where many of the initial reports of lender and servicer abuse first began appearing, is a “judicial foreclosure state.” Accordingly, when Florida homeowners, foreclosure defense attorneys, consumer advocates, blogs, and others, began pointing out the many outrageous practices some lenders and servicers were engaged in, it was only a matter of time before the courts would sit up and take notice – which they eventually did.

Many of these abuses are almost inconceivable by modern day American legal, business, and ethical standards. By way of example only, these abuses include the following: Continue reading “MYTH #1: Lender & Servicer Abuse Only Occurs in “Judicial Foreclosure States””

Doublethink: “…the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them. … To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while take account of the reality which one denies—all this is indispensably necessary.” (George Orwell, 1984)

Introduction. To understand MERS® requires an exercise in Doublethink. On the one hand, one must acknowledge that MERS® is not a product of any law, statute or ordinance found in this country. It is an entirely fictional construct, inspired, designed and implemented by the U.S. lending industry. On the other hand, one must believe that the MERS® system of electronically “registering” mortgages and trust deeds (collectively, “mortgages”), is a perfectly acceptable modern day substitute for the age-old system of recording documents. This post asks whether MERS® solves the problems it purports to address, and, if so, is that a good thing?

How MERS® Describes Itself. “MERS®” stands for “Mortgage Electronic Registration Systems, Inc.” It is little more than a massive, online database, where member banks “register” their multiple transfers of mortgages between themselves. They go to great lengths to say that they are merely “…acting solely as a nominee for Lender and Lender’s successors and assigns.” Their registered trademark includes the phrase: “Process loans, not paperwork.” MERS®’ website describes themselves as follows: Continue reading “MERS: Good Strawman or Bad Strawman?”

Background. The residential loan market experienced tremendous growth between 2004 and 2007. Lenders were able to accommodate millions of borrowers, because they quickly sold the loans they made into the secondary mortgage market, thus “recycling” their funds for further loans. Initially, the secondary mortgage market was dominated by two major players, Fannie Mae and Freddie Mac. Upon receipt of the loans they purchased from the banks, Fannie and Freddie, in turn, bundled them into pools, and sold them as securities to pension funds and other large investors.

The vehicle of choice for these mortgage-backed securities (“MBS”) was the REMIC. The term stands for “Real Estate Mortgage Investment Conduit.” In short, a REMIC is a trust into which pools of promissory notes (debt instruments – like an IOU) and mortgages or trust deeds (the security instruments which permit foreclosure if the notes are not paid).

These loan pools range in risk from the highest quality down the credit chain to the lowest quality. The loans are, figuratively speaking, sliced and diced into many “tranches” (French for “slice”), each one varying in degrees of risk of default. At this point, the loans lose their identity as individual notes and mortgages, and consist only of blended pieces of loans. The tranches are investment graded by their contents. Some tranches are rated safer than others, depending upon the loan mix each contains. The riskier the tranche, the better the yield. Although the safer tranches have lower yields, their investors receive returns before those holding the higher-yielding, but riskier tranches. Continue reading “What’s in Your REMIC?”