HER: “Honey, is that you? You’re home early from the firm. Usually, on Fridays, you go over to Lucifer’s Lounge with the other attorneys for shots of Devil’s Springs Vodka, and regale each other with stories of the families you foreclosed during the week. Honey? Honey? What’s wrong?”
HIM: “I think I screwed up….”
HER: “Was it a little, itsy, bitsy, ‘No one will ever know,’ mistake – or one of those ‘Where’s my passport’ mistakes?”
HIM: “Where is my passport, by the way?”
HER: “Uh Oh. I’ll crack out a fresh bottle of Devil’s Springs Vodka and we can talk. As your wife, I can’t be compelled to testify, and you’ve got the Fifth Amendment against self-incrimination. Tell me about it.”
HIM: “Well, this goes back to a trust deed foreclosure that we started early in 2012. This was before the Niday case that said MERS cannot act as a ‘beneficiary’ under a trust deed. At that time, the Oregon Court of Appeals hadn’t spoken, so there was no clear state law saying that if MERS was involved in a completed foreclosure, it was void. The Oregon federal court judges were not in agreement. There was a split of opinion….”
HER: “Wait, wait, wait! Remember, I didn’t go to law school. You’ll have to give me the “Readers Digest” version of this MERS thing.”
HIM: “Sorry. In a nutshell, Oregon has law called the “Oregon Trust Deed Act.” It’s been in existence since 1959, with very few changes. Its main features were that borrowers were given more leeway to cure their defaults and avoid foreclosure – but if the lender did foreclose, they did not have to go to court to do so, and there was no “right of redemption” to the borrower to re-acquire the property after the foreclosure sale. Although lenders could foreclose judicially, they rarely did. And if the foreclosure was of a ‘residential trust deed,’ the lender could not get a deficiency judgment even if they went to court.
For years, the lenders in Oregon always conducted non-judicial foreclosures. But when the foreclosure crisis hit, circa 2007, cases started coming out all over the country, saying that MERS could not act as a ‘nominee’ for the lenders in the foreclosure process.
In Oregon there was an argument under the trust deed statutes that if MERS, acting as a ‘beneficiary,’ began doing things in a non-judicial foreclosure that were supposed to be performed by the lender, the foreclosure was illegal. But since no Oregon state court had expressly said so, our law firm continued with its non-judicial foreclosures anyway. It was cheaper and faster than judicial foreclosures.”
HER: “OK, I think I understand. There was no definitive law that said MERS’ involvement in non-judicial foreclosures was actually “illegal.” So far so good. It doesn’t sound like doing a non-judicial foreclosure in early 2012 was a hanging offense. But what was MERS doing in the foreclosure process that was questionable anyway?”
HIM: “Well… It was there mostly for administrative convenience, but in retrospect the protocol was a sham. Banks had their own low level employees sign documents as MERS “officers” based upon a bogus set of MERS corporate appointments. When a foreclosure needed to be started, a MERS “officer,” acting as a beneficiary, would execute an Assignment of the Trust Deed to the lender or servicer who was supposed to be the current owner of the loan. The reason this was necessary was because the original lender that funded the loan likely had sold the paper years earlier to a private securitization trust, or Fannie Mae or Freddie Mac. In order to have “standing” to foreclose, it was necessary that the bank doing so actually have ownership of the loan – thus, the Trust Deed Assignment process.
The problem in Oregon and elsewhere was that only the beneficiary can assign the trust deed; and the law says the “beneficiary” is the one who is “benefited.” Only the lender is benefited – MERS receives no benefit under the trust deed, and in fact, cannot accept loan payments on behalf of the lender. Although it seems obvious today that a non-benefited entity can’t act as a “beneficiary” in Oregon – it wasn’t until the Niday decision on July 18, 2012, that the Oregon Court of Appeals confirmed what the foreclosure defense attorneys had been saying for years. Until Niday, there was no ‘binding’ Oregon law on the issue, since the federal court judges were in disagreement, and there was a split of opinion.”
HER: “OK, but I still don’t see that you or your firm did anything wrong, since you’d filed the foreclosure before the decision came out.”
HIM: “Well it gets worse. The bank that ostensibly held the loan being foreclosed, took a MERS Assignment of Trust Deed from the originating lender that funded the loan. It was signed by a faux “MERS Assistant Vice President,” who was really just a low level bank employee. No real problem yet, since Niday hadn’t come out, and the MERS certifying officer scam is yesterday’s news. The Niday opinion came out on July 18, 2012. Our non-judicial sale was scheduled for July 17 – one day earlier. Still no problem, since the foreclosure trustee conducting the sale presumably wasn’t aware of the holding yet.”
HER: “I don’t get it. Unless the foreclosure trustee was Nostradamus, he or she didn’t knowingly conduct an illegal foreclosure on July 17 – one day before Niday. Obviously, if it occurred after the decision became public, it would be a different story. But it didn’t. No harm, no foul. I’ll drink to that. Bottoms Up!”
HIM: “I wish I could say that was the end of the story – but it’s not. After the foreclosure, the trustee conducting the auction has to file a Trustee’s Deed, conveying the property back to the highest bidder, which is usually the bank. In this case, the Trustees’ Deed was signed by a notorious robo-signer, conveying the property to Fannie Mae, the owner of the loan. It was recorded eight days after the Niday decision.”
HER: “Hmmmm. The screw turns. Well, that’s a problem for the foreclosure trustee company – not its law firm. I’m assuming the firm had no active involvement in the recording of the Trustee’s Deed. Right? (Silence) Honey, I’m right aren’t I??!!”
HIM: (Pausing) “I don’t want to answer that. It’s better that you can say you never knew, just in case there is litigation and someone wants to take your deposition. Suffice it to say that when Niday came out, it sent ripples through every foreclosure mill in Oregon. We’d look pretty stupid if we said we didn’t know anything about the effect of Niday eight days after the robo-signer signed and recorded the Trustee’s Deed. We’d also look pretty stupid if we didn’t do anything about our pending non-judicial foreclosures after Niday. But recording a Trustee’s Deed a week after Niday on a non-judicial foreclosure completed one day before Niday, makes us look – well, you pick the adjective; ‘devious’, ‘sneaky’, ‘shifty’, ‘dishonest’, ‘tricky’, ‘underhanded’….
When Niday came out, most foreclosure sales were stopped dead in their tracks – especially if MERS had its “fingerprints” on them. In fact, some lenders today are even re-doing their completed non-judicial foreclosures, filing all over again in court, just to make sure that a MERS-tainted foreclosure doesn’t create a flawed legal title going forward. Even to the most distant observer, this suggests that the prevailing legal opinion was that legal title would ultimately be declared defective if MERS was involved in the non-judicial foreclosure.
In light of this, who would ever believe that after Niday, we didn’t evaluate how to proceed, and just decided to press ahead and record the Trustee’s Deed, hoping no one would take notice. For us to have permitted a Trustee’s Deed to have been recorded after Niday would have been questionable under any circumstances. Since we managed and monitored all of the non-judicial foreclosures, to have permitted the foreclosure trustee to deed back to Fannie Mae would be very suspect. But that still isn’t the end of the story. It gets worse – if that’s possible.”
HER: “OK, OK, OK. The firm can offer up its ‘Mea Culpas’ to Fannie Mae. They’re big boys. Given their reputation for cookie jar accounting and profligate executive bonus, I’m sure they would not let a little foreclosure funny business bother them.”
HIM: “If it were only that simple!”
HER: “Honey, I don’t like the direction of this conversation. Where’s my passport, anyway?”
HIM: “Very Funny. You’re going to have to stick around. If I have to do a perp walk with a rain coat covering the cuffs, you’ve got to be beside me. Word is that the federal judges give married guys shorter sentences. Besides, I’m more worried about losing my law license than going to jail. Who was the last lawyer you saw going to jail for any foreclosure shenanigans?”
HER: “Whew! Well, if David Stern is still a member in good standing of the Florida bar association, then maybe you don’t have anything to worry about. It seems that getting disbarred takes some doing.”
HIM: “Well, let me finish, then you tell me how low the standard must get before one gets their ticket punched. You see, the borrower, a single mom with two kids, was still living in the house. She got a pro bono attorney who pushed back against the bank. The matter went on for a few more months. Finally, we filed an eviction against her. We won, she lost. But she still didn’t move out.”
HER: “Wait! What do you mean, you filed an eviction against her?! I know that the purchaser at a foreclosure sale has a right to possession if the borrower refuses to vacate, but that assumes a lawful foreclosure sale doesn’t it? While the foreclosure trustee can be forgiven for the July 17 foreclosure, since he or she presumably didn’t know about the Niday decision, that doesn’t explain why they would record the Trustee’s Deed more than a week after Niday. How do you base a lawful eviction on an unlawful foreclosure? It strikes me that the attorney handling the eviction was committing a fraud on the court by pretending to have a legal right of ownership, when in fact, he did not. Or to put a finer point on it, the attorney was actually trying to evict the borrower from a home the borrower still legally owned – except for the fact that the trustee recorded a bogus deed. I hope you’ve got a good explanation for this, because I can’t believe what I’m hearing.”
HIM: “Then you’re not going to like the epilogue. You see, after we won the eviction, the borrower still remained in the property. Apparently there was a mix-up with her attorney, and she thought they were going to appeal the case. But they apparently couldn’t meet the bonding requirements for the appeal – which meant that the eviction judgment was still effective. So armed with the judgment, we went to the county sheriff and got a Writ of Assistance, permitting us to lock her and the kids out of their home. That was right before Christmas. The house had a Christmas Tree up and holiday food in the fridge. We posted the house with a contact number – the real estate agent who handles our REO listings – and the borrower was frantically trying to reach the agent to get back in. However, apparently the agent never returned the calls, so this single mom and two kids ended up staying with people from their church. Another attorney got involved and demanded that we allow her back in over the holidays. But we checked with the bank and they told the attorney to pound sand. She fought us; she lost, and ‘to the victor go the spoils.’”
HER: “Riddle me this Batman: What more important use did the bank have for the house over the Christmas Holidays? Had they already sold it to some family who needed to get immediate access? Were they afraid the mom and kids would torch the place they’d lived in for several years? Was there some legal reason the bank couldn’t say ‘OK, we’ll amend the Judgment of Restitution granted by the eviction court, and require that you be out on January 2, 2013?’ Or did the house that had once been a Home, lie vacant, cold, and dark over the Holidays, just so the bank could prove a point?”
HIM: “Look, we’re just the attorneys. We don’t make these decisions. We do what we’re told to do.”
HER: “I think I heard the same excuse at Nuremburg. The difference was that in Germany you might get shot for disobeying orders. Not so here. Did anyone make an effort to “recommend” or “suggest” that the bank simply push back the turnover date in the Judgment of Restitution? There was little or no risk in doing so. What I think I’m hearing is that as amoral as the bank’s refusal may have been, neither you, the firm, nor apparently anyone else, tried to do the right thing. And since you’re just a small cog in the Big Bank Machinery, you don’t believe your conduct was equally reprehensible; you were just following orders. Is that about right?”
HIM: “Look, it’s those orders that pay our bills; that keeps food on the table and clothes on our back. What would you have me do? Grow a conscience? I checked that at the door when I joined the firm. If I left, they’d find someone to replace me the same day.”
HER: “Well, you and the firm better hope that the borrower you illegally kicked out of their own home doesn’t find someone to help make this right. I don’t know what that might be, but frankly, I’d like to see some ultimate justice brought to this situation. I guess right now, all we can do is wait. However, I have a suspicion that when legal justice fails to bring about the right result, divine justice eventually does. It may take a bit longer, but good generally prevails over evil.” [To be continued.]Posted in Fannie&Freddie, Foreclosure, Foreclosure Mills, Legislation - Oregon, MERS, Trust Deeds | Tagged Bank Ethics?, Banks, Foreclosure, Foreclosure Mills, MERS, Trust Deeds