Oregon Bank Foreclosures: Frequently Unanswered Questions

The following Frequently Unanswered Questions have been provided in an effort to better understand Big Banks and their systemic inability to explain, answer, or even address, basic questions that pervade the Oregon foreclosure landscape.  Since the they have not offered the slightest explanation to frequently ask questions,  I am compelled to do so.  If  I am wrong, perhaps a Big Bank attorney will let me know. – PCQ

Question: When the Big Banks halted their foreclosures in light of the robo-signing scandal last year, and resumed again this year, what precisely did they do to correct the earlier problems?

Answer: Nothing. In fact, when they rescinded their Notices of Default, the merely recorded the same ones oftentimes with little or nothing changed.  Since several months had elapsed, one would think they would at least have updated the information, but normally they did not.

Question: If they would have “corrected” their default filings, what would one expect to see?

Answer: Well, since ORS 86.735(1) is still alive and well, the only thing they could have  done would have been to record all successive assignments from the date of the original loan.  But they couldn’t do that, since those assignments – if they ever existed in the first place – were either lost or destroyed years ago.

Question: But I understand that some lawyers are taking the position that ORS 86.735 permits a “single assignment” i.e. from the originating lender holding the trust deed, to the foreclosing lender.  If so, that would seem to cure the problem, and make the resulting foreclosure legal.  Right?

Answer: There are some problems with this position.  First, if the originating lender securitized the loan – i.e. irrevocably transferred all “right, title and interest” in the loan shortly after closing, there is nothing to assign to the foreclosing lender today. You cannot assign something you no longer have. Second, in some cases, the originating lender no longer exists, either by bankruptcy or sale.  If so, how can they transfer the right of foreclosure to another lender today?  If the lender doesn’t exist, who has their right to assign the trust deed.  Third, this is where MERS comes in: The originating lender bank – assuming they exist today – knows nothing about the assignment, since it is MERS, acting as the strawman for the assignee lenders, who executes the assignment.  So you may have a low level employee of the foreclosing lender, acting as a “Vice President” for the originating, i.e. assigning lender, signing the assignment, and then immediately, acting as a “Vice President” of the foreclosing lender, appointing the Successor Trustee to conduct the foreclosure.  In some instances, you may even learn that the signatory is not related to either lender, and in fact, is a full time employee of the Successor Trustee (who may or may not be a legal MERS member).  Metaphorically, this is like saying that the first, second, and third basemen on the New York Yankees, can all be the same person at the same time.

Question: So is this why Wells Fargo, Chase, and some other lenders, are starting to do judicial foreclosures, so they don’t have to continue this ruse?

Answer: It may be.  However, to hear the banks tell it, there is nothing wrong with their current non-judicial foreclosure model.  If that’s true, then why go to the ridiculous time and expense of doing judicial foreclosures in the  first place?  All it does is cause further delay, since they have to give judicially foreclosed borrowers a 180 day right of redemption after the sale. [Query: What good is a right of redemption to a borrower if they are redeeming a home whose value is less than the loan they will have to pay off?]  Furthermore, it appears the title industry didn’t get the lenders’ memo.  They are still inserting a warning in their preliminary title reports on bank REO sales, saying that if the foreclosure didn’t comply with Judge Alley’s ruling in the McCoy case, they may not be able to insure marketable title.  Since some title companies are still writing “McCoy Exceptions” it suggests that they may not be on the same page with the banks.  In short, the title industry believes some “clarity” would be helpful, but the lending industry does not.

Question: I don’t get it.  Last year, the banks were trying to get the Oregon legislature to amend ORS 86.735(1) so as to avoid having to record all of their errant trust deed assignments.  They were predicting Armageddon if the legislature didn’t give them the right to do legally what they’d been doing illegally for the last several years.  This year, they’ve concluded they will either foreclose judicially – so they don’t have to comply with 86.735(1), or foreclose non-judicially –  and just pretend they’re still complying.  Why don’t they all get on the same page?

Answer: Good question.   Perhaps one of the Big Banks who lobby the Oregon Legislature can answer this one. Anyone? Anyone? Anyone?