“Oh what a tangled web we weave, when first we practice to deceive.”
Sir Walter Scott (1771-1832)
This holding was inevitable. It has been the subject of my numerous posts, here, here, and here. Sooner or later courts would begin to actually “connect the dots” from (a) the bank claiming the right of foreclosure back to (b) the originator of the loan. Once they took the time to do so, they would realize that the REMIC trustee asserting the right of foreclosure, could not prove that the note and mortgage (or trust deed) had ever been deposited into the REMIC trust.
In Horace v. LaSalle Bank, filed on March 31, 2011, Judge Johnson’s logic is simple, straightforward, and unassailable: The Trustee of the REMIC trust (LaSalle Bank) may not prosecute a foreclosure, if that trust did not actually hold the note and mortgage sought to be foreclosed. The ruse perpetrated by LaSalle Bank in the Horace case is not uncommon. It has has been perpetrated by many foreclosing banks when acting as a “Trustee” for a REMIC into which the subject loan was supposedly deposited. Judge Johnson’s well-crafted opinion is straightforward. He’s done his homework, and it shows. The holding is well worth reading.
The reason these documents never made it into the trust is simple, but inexcusable: The banks and their Wall Street cronies were too busy making loans and making money to attend to the mundane business of manually transferring the original documents into the trusts as required by their governing PSAs. Where these documents are today – Iron Mountain or the bottom of a shredder bin – no one knows.
A REMIC is strictly controlled by the terms of its own Pooling and Servicing Agreement (“PSA”) and by New York trust law, the state in where most REMICs are created. If the promissory note, by successive endorsement or transfer, was never deposited into the trust before the Cut-Off Date specified in the PSA, then it’s not in the trust. If it’s not in the trust, then the trustee has no ability to foreclose the property. Finis
The last point to be made here is this: Despite the efforts of the lending and title industries to enact pro-MERS legislation under the guise of “freeing up commerce,” it will come to naught. Even if states such as Oregon are successful in enacting legislation that permits MERS to continue with its off-record transfers in violation of Oregon foreclosure statutes, there is no way to avoid the fact that most lenders, acting as trustees of securitized loans today, can prove that the trust on whose behalf they are foreclosing, holds the subject loan.
All banks acting as foreclosing REMIC trustees, foreclosure mill attorneys representing these banks, title companies insuring title for these banks, and the banks’ foreclosure trustees swimming at the bottom of the food chain, like ReconTrust, are fully aware aware of this dirty little secret. Yet each pretends not to know the truth, in order to cloak themselves with “Sgt. Schultz deniability.” It represents the demise of intellectual honesty at every level – except, hopefully by the courts.
