“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.
When lenders, servicers and their attorneys foreclose a home with knowledge that they do not have a sufficient legal foundation to do so [e.g. lack of “standing” – PCQ] to support the foreclosure, it is much more serious than a mere “flaw” – it is a fraud on the legal system. And the mantra that “the borrower was already in default” ignores the heart of the issue – it’s illegal. [Imagine the police deciding not to give a suspect his Miranda Warning “because he had already committed a crime.” – PCQ]
However, I doubt whether Oregon lawyers handling foreclosures or advising lender clients about doing so, can easily avoid legal sanction by explaining that these activities are mere “flaws” in the foreclosure process. Here are some snippets from the Oregon State Bar’s Oregon Rules of Professional Conduct (“ORPC”) that deserve attention:
RULE 1.2 SCOPE OF REPRESENTATION AND ALLOCATION OF AUTHORITY BETWEEN CLIENT AND LAWYER
- A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law. [Italics mine – PCQ]
RULE 8.4 MISCONDUCT
It is professional misconduct for a lawyer to:
- engage in conduct involving dishonesty, fraud, deceit or misrepresentation that reflects adversely on the lawyer’s fitness to practice law;
- engage in conduct that is prejudicial to the administration of justice; [Italics mine. – PCQ]
And to avoid arguments over terminology, the Oregon State Bar has defined some of the more contentious terms lawyers haggle about. [E.g. What is the meaning of “is”? – PCQ]:
- “Fraud” or “fraudulent” denotes conduct that is fraudulent under the substantive or procedural law of the applicable jurisdiction and has a purpose to deceive. [Italics mine – PCQ]
- “Knowingly,” “known,” or “knows” denotes actual knowledge of the fact in question…. [Italics mine – PCQ]
Thus, it would seem an Oregon lawyer might have some difficulty avoiding actual knowledge that their client is perpetrating a fraud when their lender/servicer-client commences a foreclosure by a REMIC Trustee under the following circumstances:
- The REMIC Trustee just recently acquired the Trust Deed by assignment from MERS or the original lender years after the REMIC had already been closed. [Hint: The Pooling and Servicing Agreements (“PSAs”) governing the operations of REMICs invariably recite that the REMIC had already received the Note and Trust Deed years earlier. So why is it being transferred into the REMIC now? Moreover, the PSAs also provide that, with few exceptions, the REMIC may not transfer loan documents in and out of the Trust after its official closing date, which is normally six months after the REMIC itself closed. – PCQ]
- The Trust Deed was assigned through a legal document signed by a bogus “officer” who is either a robo-signer or low level employee with no employment relationship to the company on whose behalf they are signing.
- The Successor Trustee who handles the actual foreclosure process, is appointed by another bogus officer, who in many cases, is actually an employee of the Successor Trustee company and has no employment relationship with the company on whose behalf they are signing. [The Successor Trustee is normally appointed by the Beneficiary (i.e. the Lender) in order to commence a foreclosure. The original Trustee – not to be confused with a REMIC Trustee under the PSA – is normally named in the initial Trust Deed with the borrower, and usually limits their involvement to removing the lien upon payoff of the promissory note. – PCQ]
- The Successor Trustee has no actual knowledge about whether the borrower they are foreclosing is in default.
- The Successor Trustee is actually a wholly-owned subsidiary of the foreclosing Beneficiary (i.e. the lender) identified in Trust Deed even though Oregon law prohibits a Trustee from also being the Beneficiary. [See,ORS 86.705(1) and (6) – PCQ]
- When the trust deed foreclosure is commenced in Oregon by the filing of the Notice of Default, the law is routinely broken by not recording all trust deed assignments as required by ORS 86.735(1). [The recording of all assignments would enable the borrower to identify the current owner of their loan. Under current practice in Oregon, a borrower in foreclosure cannot tell from the Notice of Default who owns their loan. And worse, when borrowers ask the foreclosing entity who owns their loan, the information is refused. – PCQ]
Yet, this is what occurs every day during a residential foreclosure, both in Oregon and elsewhere. When I have raised these issues with lender and servicer attorneys, they have demurred, saying they would pass the information along to their client. In other words, metaphorically speaking, they morph into Sargent Schultz of Hogan’s Heroes, and exclaim, “I know nothing!”
But until the press, pundits, and politicians begin to treat this activity as fraud rather than merely flaws, there will be no public outrage and nothing will change. However, for Oregon lawyers, there is no safe harbor in obfuscation. Time will tell.
