“Foreclosure processing delays continue to mask the true face of the foreclosure situation, although there were some clues in the May numbers of what lies behind that mask,” said James J. Saccacio, chief executive officer of RealtyTrac. “First, activity spiked in May for various stages of the foreclosure process in some states, a pattern that has occurred in several states over the past few months. This pattern provides evidence that lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures and as they determine that some local markets are able to absorb more foreclosure inventory.” [Emphasis mine. – PCQ] Mortgage News Daily, June 15, 2011
Considering its source, the above quote caught my attention. Here, a reliable mortgage industry news release seems to believe that the Big Banks are actually “overhauling” their paperwork and documentation procedures. The inference being, I suppose, that the next round of home foreclosures will finally comply with those pesky state laws governing the recording of mortgage and trust deed assignments. If this is so, ReconTrust apparently never got the memo.
As discussed in an earlier post here, ReconTrust, the wholly owned subsidiary of Bank of America, had previously suspended their foreclosures toward the end of last year. Although no explanation was ever given, most observers believed it was to “re-examine” their procedures and bring them into compliance with local laws. Since the suspension of foreclosures followed Judge Alley’s decision in the McCoy case, the hope was that lenders were going to review processes, locate old trust deed assignments, and record them, before foreclosure.
A more cynical view was that the banking industry was waiting to see what would happen at the Oregon Legislature, where there was a stealth campaign going on by the lender lobby, to persuade politicians to remove the “successive recording” requirement of ORS 86.735(1), which is the foundation of Oregon’s non-judicial trust deed foreclosure law. [Without requiring the recording of successive trust deed assignments, non-judicial foreclosures in Oregon could be conducted by virtually any lender asserting the right to do so. In fact, this has been the case for the past few years; lenders have routinely ignored Oregon’s recording law, before commencing a trust deed foreclosure. As a result, lenders who had never before appeared in the chain of title, could simply assert that they now have the right of foreclosure, based upon an assignment from a bogus MERS “officer.” Judge Alley’s decision was an effort to stop that practice. – PCQ] However, as noted in my earlier post, the lenders’ efforts to avoid Oregon’s foreclosure law and Judge Alley’s ruling, were, in the immortal words of Arch Villain, Snidely Whiplash, “foiled again.”
So what’s up now? Did the banks decide to go back to the drawing board, dig deep into their records, and locate the necessary Trust Deed Assignments? Unfortunately, as discussed in my earlier post, it appeared that at least in the Bend area, nothing had changed. Recon’s new Notices of Default were a mirror image of the earlier ones they had previously “rescinded.” [But how does a bank rescind a foreclosure by saying the default was “cured”, and then re-file the foreclosure based upon the same default they said had been “cured”? – PCQ]
Ignoring this inconsistency in their recorded documents, it appears the sham has created a much larger problem than Recon realizes. As we know, most Oregon Trust Deeds provide that after an uncured default by the borrower, a “power of sale” is conferred upon the Trustee. This means the Trustee (or “Successor Trustee”) is then authorized to foreclose the borrower – i.e. legally remove their interest in the property for failure to pay the promissory note. Only after receiving the power of sale is the Trustee authorized to commence the foreclosure by recording a Notice of Default (“NOD”) in the public records of the county in which the subject property is located.
Of the Oregon Trust Deeds I have reviewed, the “power of sale,” may not be invoked by the foreclosure trustee (e.g. ReconTrust), until after: (a) The lender has given the borrower at least 30 days written notice; (b) Setting forth the default and the amount necessary to cure; and (c) The borrower has failed to cure within the prescribed time frame. Only then may the Trustee record the NOD.
While 30-day written notices were presumably given by Recon before the first NODs were recorded, based upon my limited sampling, this does not appear to have been done before the second NODs were filed. The reason the 30-day notice must again be given a second time is because when Recon pulled its NODs, their rescission documents uniformly recite that the NOD has been withdrawn and the Trust Deed is reinstated, “as if no acceleration had occurred.” This means that once the default under the Trust Deed has ostensibly been cured, the Trustee’s “power of sale” cannot be unilaterally invoked again until after the 30-day notice has again been sent, the time has expired, and the borrower’s default remains uncured. Ergo, Recon has no power of sale and no foreclosure can be commenced.
So it appears ReconTrust is now doubling down – betting that no one will oppose its illegal foreclosures: First, because there are still no new recordings of Trust Deed Assignments[1], in continued violation of Oregon law and McCoy; and secondly, because Recon, acting as the foreclosure Trustee for Bank of America, is now proceeding without the “power of sale.”
Conclusion. So my questions of Recon are, “Who’s running the show over there? Isn’t there anyone at the top of the corporate food chain that reads the law?” After all, they couldn’t believe this ruse of stopping and re-starting their foreclosures would go unnoticed – especially if nothing changed between their first and second foreclosure of the same property.
I must admit that when I first began following the credit crisis and the foreclosures tsunami that resulted, I assumed the banks and their foreclosure mill lawyers were doing what they did because they believed they had a colorable argument to do so. I no longer believe that. I now suspect they do what they do because they believe they can get away with it. There can be no other explanation. After all, we’re reading the same laws and the same foreclosure documents. For months Recon has been publicly quiet – some might say “coy” – in avoiding any explanation for its actions. Perhaps Recon missed the class on accountability. Bueller? Bueller? Bueller?
[1] In answer to the rejoinder that there may not have been any other assignments by Bank of America (fka, Countrywide), one need only look at the identity of the original lenders of these loans. For example, Countrywide securitized most of its loans. As explained in my earlier posts, here and here, securitization, by necessity, requires multiple assignments between the participating banks. If an assignment in the chain of title is not recorded by the time a non-judicial foreclosure is commenced, it violates the McCoy holding (and more recently, the Hooker case). Check the MERS number. Does it show the “investor” to be Fannie Mae, U.S. Bank (acting as a REMIC trustee), or some entity other than the foreclosing bank? If so, this suggests not only that the foreclosing lender is not the true owner of the loan, but that the Trust Deed was “assigned” without a recording on the public record.
