Vous êtes sur la page 1sur 18

Bankclassactions

Page 1 of 18

z z z z

HOME ARTICLES ATTORNEY LOGIN HOME OWNER LOGIN

z z z z z z z

Home Search Class Actions/Investigations Consumer Complaint Volume By Lender Articles My Account Activity Home Owner Comments/Stories Contact Us

Pages
{ {

About thank you

Archives
{ { { { { { { { { { { { { { { { {

May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011

Categories
{ { { { { { { { { { { { { { { { { { { { { { {

21st Mortgage Corporation (1) Accredited Home Lenders (8) Aiken Housing Center (1) AMC Mortgage Services (2) American Express Bank (PHH Mortgagge) (1) american general (1) AMERICAN GENERAL CONSUMER FINANCE CO.( AN A.G.I. COMPANY) (1) American Home Mortgage Corp. (17) American Home Mortgage Servicing, Inc./ SASCO (1) american loans and funding (1) Ameriquest Mortgage (4) AmTrust Bank (1) Aurora Loan Services (17) Aztec Financial (1) Bank of America (479) baymark financial (1) BB&T Mortgage (4) Beneficial (6) Carrington Mortgage (1) Cenlar or Crescent Mtg (1) CENLAR, FSB (1) Central Mortgage (1) Central Mortgage Company (2)

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 2 of 18

{ { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { { {

Central Pacific Bank (1) Charter One (1) Chase (65) Chase Home Finance (114) Chase Manhattan Mortgage (7) Chevy Chase Bank (4) Citi Financial Mortgage (7) Citimortgage (47) class actions (6) coast centeral credit union (1) Colonial Savings (1) Commerical Bank of Monticello,Arkansas 71655 (1) Countrywide (118) Deustch Bank, Morgan Stanley, Dean Witter, Goldman Sachs, and Capital I Trust (1) Deutsche Bank National Trust Company, as Trustee for Fremont Home Loan Trust (1) Deutsche National Bank Trust (1) Ditech (1) Downey Financial Corp. (2) E*Trade (1) EAST WEST BANK (1) Eastern Federal Savings/EFB Mortgage Services (1) Eastern Savings Bank (2) EMC (25) EquiFirst Corporation (1) Everhome Mortgage (1) Everhome Mortgage Company (1) Fifth Third Bank (1) First Commercial Bank of Florida (1) First Horizon Home Loans (5) First Merit Bank (1) Flagstar Bank (9) Fremont Investment & Loan (3) GMAC Mortgage (44) Golf Savings/Sterling Savings Bank (1) Green Tree (12) GreenPoint Mortgage Funding (2) Home American/ Southwestern (1) Homecomings Financial (5) HomeEq Mortgage Servicing (1) Household Finance (7) HSBC Mortgage Corp. (21) IBM Lenders Business Process Services, Inc (1) Indymac Bank (29) J and R Lending (1) Key Bank (1) kondour (1) lend america (1) Lend America/Ideal Mortgage (1) Litton Loan Servicing (23) mays foundation (1) meriwest (1) Metlife Home Loans (1) MGC (1) MGC MORTGAGE (2) Midland Mortgage (9) Mortgage Electronic Registration Systems (3) National City (4) NationStar Mortgage (15) New Century Financial Now Carrington Mortgage Services (4) NovaStar Mortgage Loan Resolution Department (1) Ocwen Federal Bank (38) Option One (8) others (6) Peninsula Equity Funding (1) PHH Mortgage (1) PHH Mortgage in Mt. Laurel, NJ (1) Regions (1) Regions Bank (2) regions morgage (1) ResMae Mortgage Corp. (1) Robo-Signer (1) Saxon (19) Select Portfolio Servicing (7) Springleaf Financial Services (1) Sun Trust Mortgage (16) Uncategorized (9) Unknown. Serviced by OCWEN (1) Unkown, PH&H Mortgage Services & MERS (1) US Bank (21) Vanderbilt Mortgage Finance (1) Wachovia Bank of Delaware (5) Washington Mutual (14) Wells Fargo (104) wells fargo / sps / western capital mortage (1) Wilimintgton finance r (1)

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 3 of 18

Wilshire Credit Corporation (2)

Blogroll
{ { { { { { {

Documentation Plugins Suggest Ideas Support Forum Themes WordPress Blog WordPress Planet

Meta
{ { { {

Log in Valid XHTML XFN WordPress

What is a robo-signerTake a look


November 2nd, 2011

Tags: robo signer, robo signor Posted in Robo-Signer, Uncategorized | No Comments

Notes on Babes & Bankers, Part 1


November 2nd, 2011

You know how everyone says that the bank doesnt want to foreclose because it doesnt want to get into the real estate business? Well, thats a myth. The bank absolutely wants your property, as soon as it can get its hands on it. New laws cover banks losses on houses sold for less than they are worth. This conversation between movie-maker Seanie Blue, who is fighting to keep two houses he built by hand, and Jeff Greenberg, who is an expert on the process of quiet title and other methods to wrest titles away from banks, addresses this myth about banks and real estate ownership. The bank wants your house. Period. And the bank will lie and cheat to get it.

Notes on Babes & Bankers, Part 1 from seanie blue on Vimeo. Tags: babe, bank, banker Posted in Bank of America | 1 Comment

Great Foreclosure Reversal Decision Against MERS in MI

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 4 of 18

May 16th, 2011

STATEOFMICHIGAN COURTOFAPPEALS RESIDENTIAL FUNDING CO, LLC, f/k/a RESIDENTIAL FUNDING CORPORATION, Plaintiff-Appellee, FOR PUBLICATION April 21, 2011 9:00 a.m. v No. 290248 Kent Circuit Court GERALD SAURMAN, LC No. 08-011138-AV Defendant-Appellant. BANK OF NEW YORK TRUST COMPANY, Plaintiff-Appellee, v No. 291443 Jackson Circuit Court COREY MESSNER, LC No. 08-003406-AV Defendant-Appellant. Before: WILDER, P.J., and SERVITTO and SHAPIRO, JJ. SHAPIRO, J. These consolidated cases each involve a foreclosure instituted by Mortgage Electronic Registration System (MERS), the mortgagee in both cases. The sole question presented is whether MERS is an entity that qualifies under MCL 600.3204(1)(d) to foreclose by advertisement on the subject properties, or if it must instead seek to foreclose by judicial process. We hold that MERS does not meet the requirements of MCL 600.3204(1)(d) and, therefore, may not foreclose by advertisement. I. BASIC FACTS AND PROCEDURAL HISTORY In these cases, each defendant purchased property and obtained financing for their respective properties from a financial institution. The financing transactions involved loan documentation (the note) and a mortgage security instrument (the mortgage instrument). The original lender in both cases was Homecoming Financial, LLC. 2 Each note provided for the amount of the loan, the interest rate, methods and requirements of repayment, the identity of the lender and borrower and the like. The mortgage instrument provided for rights of foreclosure of the property by the mortgagee in the event of default on the loan. The lender, though named as the lender in the mortgage security instrument, was not designated therein as the mortgagee. Instead, the mortgage stated that the Mortgage Electronic Registration Systems, Inc (MERS) is the mortgagee under this Security Instrument and it contained several provisions addressing the relationship between MERS and the lender including: MERS is Mortgage Electronic Registration Systems Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lenders successors and assigns. MERS is the mortgagee under this Security Instrument. *** This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrowers covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower does hereby mortgage, warrant, grant and convey to MERS (solely as nominee for Lender and Lenders successors and assigns) and to the successors and assigns of MERS, with the power of sale, the following described property . . . . Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lenders successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument. Defendants defaulted on their respective notes. Thereafter, MERS began non-judicial foreclosures by advertisement as permitted under MCL 600.3201, et seq., purchased the property at the subsequent sheriffs sales and then quit-claimed the property to plaintiffs as respective successor lenders. When plaintiffs subsequently began eviction actions, defendants challenged the respective foreclosures as invalid, asserting, inter alia, that MERS did not have authority under MCL 600.3204(1)(d) to foreclose by advertisement because it did not fall within any of the three categories of mortgagees permitted to do so under that statute. The district courts denied defendants assertions that MERS lacked authority to foreclose by statute and their conclusions were affirmed by the respective circuit courts on appeal. We granted leave to appeal in both cases.1 1 Residential Funding Co, LLC v Saurman, unpublished order of the Court of Appeals, entered May 15, 2009 (Docket No. 290248); Bank of New York Trust Co v Messner, unpublished order of the Court of Appeals, entered July 29, 2009 (Docket No. 291443). 3 II. ANALYSIS A. STANDARD OF REVIEW We review de novo decisions made on motions for summary disposition,2 Coblentz v Novi, 475 Mich 558, 567; 719 NW2d 73 (2006), as well as a circuit courts affirmance of a district courts decision on a motion for summary disposition. First of America Bank v Thompson, 217 Mich App 581, 583; 552 NW2d 516 (1996). We review all affidavits, pleadings, depositions, admissions and other evidence submitted by the parties in the light most favorable to the party opposing the motion, in this case, defendants. Coblentz, 475 Mich at 567-568. We also review de novo questions of statutory interpretation and application. Id. at 567. The primary goal of statutory interpretation is to give effect to the intent of the Legislature. This determination is accomplished by examining the plain language of the statute. Although a statute may contain separate provisions, it should be read as a consistent whole, if possible, with effect given to each

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 5 of 18

provision. If the statutory language is unambiguous, appellate courts presume that the Legislature intended the meaning plainly expressed and further judicial construction is neither permitted nor required. Statutory language should be reasonably construed, keeping in mind the purpose of the statute. If reasonable minds could differ regarding the meaning of a statute, judicial construction is appropriate. When construing a statute, a court must look at the object of the statute in light of the harm it is designed to remedy and apply a reasonable construction that will best accomplish the purpose of the Legislature. [ISB Sales Co v Daves Cakes, 258 Mich App 520, 526-527; 672 NW2d 181 (2003) (citations omitted).] B. MERS BACKGROUND The parties, in their briefs and at oral argument, explained that MERS was developed as a mechanism to provide for the faster and lower cost buying and selling of mortgage debt. Apparently, over the last two decades, the buying and selling of loans backed by mortgages after their initial issuance had accelerated to the point that those operating in that market concluded that the statutory requirement that mortgage transfers be recorded was interfering with their ability to conduct sales as rapidly as the market demanded. By operating through MERS, these financial entities could buy and sell loans without having to record a mortgage transfer for each transaction because the named mortgagee would never change; it would always be MERS even though the loans were changing hands. MERS would purportedly track the mortgage sales internally so as to know for which entity it was holding the mortgage at any given time and, if 2 In Docket No. 290248, the district court granted summary disposition under MCR 2.116(C)(10). In Docket No. 291443, the district court granted summary disposition under MCR 2.116(I)(2) (If it appears to the court that the opposing party, rather than the moving party, is entitled to judgment, the court may render judgment in favor of the opposing party.). 4 foreclosure was necessary, after foreclosing on the property, would quit claim the property to whatever lender owned the loan at the time of foreclosure. As described by the Court of Appeals of New York, in MERSCORP, Inc v Romaine, 8 NY3d 90, 96; 861 NE2d 81(2006): In 1993, the MERS system was created by several large participants in the real estate mortgage industry to track ownership interests in residential mortgages. Mortgage lenders and other entities, known as MERS members, subscribe to the MERS system and pay annual fees for the electronic processing and tracking of ownership and transfers of mortgages. Members contractually agree to appoint MERS to act as their common agent on all mortgages they register in the MERS system. The initial MERS mortgage is recorded in the County Clerks office with Mortgage Electronic Registration Systems, Inc. named as the lenders nominee or mortgagee of record on the instrument. During the lifetime of the mortgage, the beneficial ownership interest or servicing rights may be transferred among MERS members (MERS assignments), but these assignments are not publicly recorded; instead they are tracked electronically in MERSs private system. In the MERS system, the mortgagor is notified of transfers of servicing rights pursuant to the Truth in Lending Act, but not necessarily of assignments of the beneficial interest in the mortgage. [Footnotes omitted.] The sole issue in this case is whether MERS, as mortgagee, but not noteholder, could exercise its contractual right to foreclose by means of advertisement. C. MCL 600.3204(1)(d) Foreclosure by advertisement is governed by MCL 600.3204(1)(d), which provides, in pertinent part: [A] party may foreclose a mortgage by advertisement if all of the following circumstances exist: *** (d) The party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage. The parties agree that MERS is neither the owner of the indebtedness, nor the servicing agent of the mortgage. Therefore, MERS lacked the authority to foreclose by advertisement on defendants properties unless it was the owner . . . of an interest in the indebtedness secured by the mortgage. MCL 600.3204(1)(d). The question, then, is what being the owner . . . of an interest in the indebtedness secured by the mortgage requires. According to Blacks Law Dictionary, to own means [t]o have good legal title; to hold as property; to have a legal or rightful title to. Blacks Law 5 Dictionary (6th ed). That text defines an interest as the most general term that can be employed to denote a right, claim, title or legal share in something. Indebtedness is defined as [t]he state of being in debt . . . the owing of a sum of money upon a certain and express agreement. In these cases, a promissory note was exchanged for loans of $229,950 and $207,575, respectively. Thus, reasonably construing the statute according to its common legal meaning, ISB Sales Co, 258 Mich App at 526-527, the defendants indebtedness is solely based upon the notes because defendants owed monies pursuant to the terms of the notes. Consequently, in order for a party to own an interest in the indebtedness, it must have a legal share, title, or right in the note. Plaintiffs suggestion that an interest in the mortgage is sufficient under MCL 600.3204(d)(1) is without merit. This is necessarily so, as the indebtedness, i.e., the note, and the mortgage are two different legal transactions providing two different sets of rights, even though they are typically employed together. A mortgage is [a] conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms. The mortgagee has an interest in the property. See Citizens Mtg Corp v Mich Basic Prop Ins Assoc, 111 Mich App 393, 397; 314 NW2d 635 (1981) (referencing the mortgagees interests in the property). The mortgagor covenants, pursuant to the mortgage, that if the money borrowed under the note is not repaid, the mortgagee will retain an interest in the property. Thus, unlike a note, which

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 6 of 18

evidences a debt and represents the obligation to repay, a mortgage represents an interest in real property contingent on the failure of the borrower to repay the lender. The indebtedness, i.e., the note, and the mortgage are two different things. Applying these considerations to the present case, it becomes obvious that MERS did not have the authority to foreclose by advertisement on defendants properties. Pursuant to the mortgages, defendants were the mortgagors and MERS was the mortgagee. However, it was the plaintiff lenders that lent defendants money pursuant to the terms of the notes. MERS, as mortgagee, only held an interest in the property as security for the note, not an interest in the note itself. MERS could not attempt to enforce the notes nor could it obtain any payment on the loans on its own behalf or on behalf of the lender. Moreover, the mortgage specifically clarified that, although MERS was the mortgagee, MERS held only legal title to the interest granted by defendants in the mortgage.3 Consequently, the interest in the mortgage represented, at most, an interest in defendants properties. MERS was not referred to in any way in the notes and only Homecomings held the notes. The record evidence establishes that MERS owned neither the notes, nor an interest, legal share, or right in the notes. The only interest MERS possessed was in the properties through the mortgages. Given that the notes and mortgages are separate 3 We note that, in these cases, MERS disclaims any interest in the properties other than the legal right to foreclose and immediately quitclaim the properties to the true owner, i.e., the lender. 6 documents, evidencing separate obligations and interests, MERS interest in the mortgage did not give it an interest in the debt. Moreover, plaintiffs analysis ignores the fact that the statute does not merely require an interest in the debt, but rather that the foreclosing party own that interest. As noted above, to own means to have good legal title; to hold as property; to have a legal or rightful title to. None of these terms describes MERS relationship to the note. Plaintiffs claim that MERS was a contractual owner of an interest in the notes based on the agreement between MERS and the lenders misstates the interests created by that agreement. Although MERS stood to benefit if the debt was not paidit stood to become the owner of the propertyit received no benefit if the debt was paid. MERS had no right to possess the debt, or the money paid on it. Likewise, it had no right to use or convey the note. Its only right to possess was to possess the property if and when foreclosure occurred. Had the lender decided to forgive the debt in the note, MERS would have had no recourse; it could not have sued the lender for some financial loss. Accordingly, it owned no financial interest in the notes. Indeed, it is uncontested that MERS is wholly without legal or rightful title to the debt and that there are no circumstances under which it is entitled to receive any payments on the notes. The dissent relies on the language in the mortgage instrument to suggest a contractual basis to find that MERS has an ownership interest in the loan. However, the fact that Homecomings gave MERS authority to take any action required of the Lender did not transform MERS into an owner of an interest in the notes. Trustees have the authority to take action on behalf of a trust; they can even be authorized to take any action. Nevertheless, such authority does not give them an ownership interest in the trust. Moreover, the provision on which the dissent relies (but does not fully quote) contains language limiting MERS to taking action on behalf of the lenders equitable interest in the mortgage instrument.4 The relevant language provides that the borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument (emphasis added) and gives MERS the right: to exercise any or all of those interests . . . and to take any action required of the Lender including, but not limited to, releasing and canceling this Security Instrument . . . . (emphasis added). Thus, the contract language expressly limits the interests MERS owns to those granted in the mortgage instrument and limits MERS right to take action to those actions related to the mortgage instrument. Nothing in this language permits MERS to take any action with respect to the debt, or provides it any interest therein. Finally, even assuming that the contract language did create such a right, Homecomings cannot grant MERS the authority to take action where the statute prohibits it. Regardless of whether Homecomings would like MERS to be able to take such action, it can only grant MERS 4 Though the lenders do not hold legal title to the mortgage instrument, they do have an equitable interest therein. See Alton v Slater, 298 Mich 469, 480; 299 NW 149 (1941); Atwood v Schlee, 269 Mich 322; 257 NW 712 (1934). The lenders equitable interest in the mortgage does not, however, translate into an equitable interest for MERS in the loan. 7 the authority to take actions that our Legislature has statutorily permitted. Where the Legislature has limited the availability to take action to a specified group of individuals, parties cannot grant an entity that falls outside that group the authority to take such actions. Here, the Legislature specifically requires ownership of an interest in the note before permitting foreclosure by advertisement. The contention that the contract between MERS and Homecomings provided MERS with an ownership interest in the note stretches the concept of legal ownership past the breaking point. While the term may be used very loosely in some popular contexts, such as the expression to own a feeling, such use refers to some subjective quality or experience. We are confident that such a loose and uncertain meaning is not what the Legislature intended. Rather, the Legislature used the word owner because it meant to invoke a legal or equitable right of ownership. Viewed in that context, although MERS owns the mortgage, it owns neither the debt nor an interest in any portion of the debt, and is not a secondary beneficiary of the payment of the debt.5 The dissents conclusion, that MERS owns an interest in the note because whether it ultimately receives the property depends on whether the note is paid, similarly distorts the term interest from a legal term of art to a generalized popular understanding of the word. It may be that MERS is concerned with (i.e., interested in) whether the loans are paid because that will define its actions vis--vis the properties, but being concerned about whether someone pays his loan is not the same as having a legal right, or even a contingent legal right, to those payments. Plaintiffs are mistaken in their suggestion that our conclusion that MERS does not have an interest in the indebtedness renders that category in the statute nugatory. We need not determine the precise scope of that category, but, by way of example, any party to whom the note has been pledged as security by the lender has an interest in the indebtedness because, under appropriate circumstances, it owns the right to the repayment of that loan. Plaintiffs also argue that MERS had the authority to foreclose by advertisement as the agent or nominee for Homecomings, who held the note and an equitable interest in the mortgage.

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 7 of 18

However, this argument must also fail under the statute because the statute explicitly requires that, in order to foreclose by advertisement, the foreclosing party must possess an interest in the indebtedness. MCL 600.3204(1)(d). It simply does not permit foreclosure in the name of an agent or a nominee. If the Legislature intended to permit such actions, it could have easily included agents or nominees of the noteholder as parties that could foreclose by advertisement. 5 The dissents analogy between MERS ability to own an interest in the note and an easementholders ownership of an interest in land without owning the land is unavailing. An easement holder owns rights to the land that even the landholder cannot infringe upon or divest him of, see Dobie v Morrison, 227 Mich App 536, 541; 575 NW2d 817 (1998) (noting that a fee owner cannot use the burdened land in any manner that would interfere with the easement holders rights), while the interest the dissent contends MERS owns would be equal to or less than that of the noteholder and the noteholder could completely divest MERS of the alleged interest by forgiving the note without MERS having any recourse. Accordingly, the analogy fails. 8 Indeed, had the Legislature intended the result suggested by plaintiffs, it would have merely had to delete the word servicing. The law is clear that this Court must avoid construction that would render any part of the statute surplusage or nugatory. Wickens v Oakwood Healthcare Sys, 465 Mich 53, 60; 631 NW2d 686 (2001). Thus, the Legislatures choice to permit only servicing agents and not all agents to foreclose by advertisement must be given effect. Similarly, we reject plaintiffs reliance on Jackson v Mortgage Electronic Registration Sys, Inc, 770 NW2d 487 (Minn, 2009). Jackson, a Minnesota case, is inapplicable because it interprets a statute that is substantially different from MCL 600.3204. The statute at issue in Jackson specifically permits foreclosure by advertisement if a mortgage is granted to a mortgagee as nominee or agent for a third party identified in the mortgage, and the third partys successors and assigns. Id. at 491. Thus, the Minnesota statute specifically provides for foreclosure by advertisement by entities that stand in the exact position that MERS does here. Indeed, the Minnesota statute is frequently called the MERS statute. Id. at 491. Our statute, MCL 600.3204(1)(d) makes no references to nominees or agents. Rather, it requires that the party foreclosing be either the mortgage servicer or have an ownership interest in the indebtedness. The Jackson statute also revolves around the mortgage, unlike MCL 600.3204(1)(d), which uses the term indebtedness, which, as discussed previously, is a reference to the note, not the mortgage. Thus, Jackson has no application to the case at bar. Moreover, the Minnesota statute demonstrates that if our Legislature had intended to allow MERS to foreclose by advertisement, they could readily have passed a statute including language like that included in Minnesota. D. ANALYSIS BEYOND THE LANGUAGE OF THE STATUTE Plaintiffs suggest that, despite the plain language of the statute, the Legislature did not create three discrete categories of entities that could foreclose by advertisement. Instead, plaintiffs assert that the Legislature envisioned a continuum of entities: those that actually own the loan, those that service the loan, and some ill-defined category which might be called everything in between. However, courts may not rewrite the plain statutory language and substitute our own policy decisions for those already made by the Legislature. DiBenedetto v West Shore Hosp, 461 Mich 394, 405; 605 NW2d 300 (2000). Thus, without any language in the statute providing for a continuum, let alone an analysis of what it constitutes, we find no merit in this position. Plaintiffs also raise a straw man argument by citing this Courts decision in Davenport v HSBC Bank USA, 275 Mich App 344; 739 NW2d 383 (2007) where we observed that [o]ur Supreme Court has explicitly held that [o]nly the record holder of the mortgage has the power to foreclose under MCL 600.3204. Davenport, 275 Mich App at 347, quoting Arnold v DMR Financial Services, Inc (After Remand), 448 Mich 671, 678; 532 NW2d 852 (1995). However, the facts in Davenport do not reflect that the party who held the note was a different party than the party who was the mortgagee. Davenport, 275 Mich App at 345. Indeed, the fact that the Court used the term mortgage interchangeably with indebtedness, id. at 345-347, rather than distinguishing the two terms, indicates that the same party held both the note and the mortgage. Because the instant cases involve a situation where the noteholder and mortgage holder are separate entities, the general proposition set forth in Davenport does not apply. There is nothing 9 in Davenport holding that a party that owns only the mortgage and not the note has an ownership interest in the debt. 6 We also note that Arnold, the Supreme Court case relied upon in Davenport, was interpreting a previous version of MCL 600.3204, which was substantially revised when the Legislature adopted the version we must apply in this case. The statute as it existed when Arnold was decided included a provision stating: To entitle any party to give a notice as hereinafter prescribed, and to make such a foreclosure, it shall be requisite: *** (3) That the mortgage containing such power of sale has been duly recorded; and if it shall have been assigned that all the assignments thereof shall have been recorded. [Arnold, 448 Mich at 676.] This requirement, that a noteholder could only foreclose by advertisement if the mortgage they hold is duly recorded, is no longer part of the statute and does not apply in this case. The version of the statute interpreted in Arnold also lacked the language, later adopted, and operative in this case, specifically permitting foreclosure by advertisement of the owner of the note. Moreover, the language the Legislature chose to adopt in the amended language appears to reflect an intent to protect borrowers from having their mortgages foreclosed upon by advertisement by those who did not own the note because it would put them at risk of being foreclosed but still owing the noteholder the full amount of the loan. Under MCL 440.3602, an instrument is only discharged when payment is made to a person entitled to enforce the instrument. Those parties listed in MCL 600.3204(1)(d)the servicer, the owner of the debt, or someone owning an interest in the debtwould all be persons entitled to enforce the instrument that reflects the indebtedness. As previously noted, MERS is not entitled to enforce the note. Thus, if MERS were permitted to foreclose on the properties, the borrowers obligated under the note would potentially be subject to double-exposure for the debt. That is, having lost their property to MERS, they could still be sued by the noteholder for the amount of the debt because MERS does not have the authority to discharge the note. MERS

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 8 of 18

members may agree to relinquish the right of collection once foreclosure occurs, but even if they were to do so within MERS, that would not necessarily protect the borrower in the event a lender violated that policy or the note was subsequently transferred to someone other than the lender.7 6 In addition, while we reject plaintiffs overly broad reading of Davenport for the reasons just stated, we note that even under that reading, plaintiffs would merely have to obtain assignment of the mortgage from MERS prior to initiating foreclosure proceedings. 7 The dissents observation that, had Homecomings remained the mortgagee, it would have had the right to foreclose by advertisement does not change the outcome because the statutory 10 These risks are, however, not present in a judicial foreclosure. MCL 600.3105(2) provides: After a complaint has been filed to foreclose a mortgage on real estate or land contract, while it is pending and after a judgment has been rendered upon it, no separate proceeding shall be had for the recovery of the debt secured by the mortgage, or any part of it, unless authorized by the court. Thus, once a judicial foreclosure proceeding on the mortgage has begun, a subsequent action on the note is prohibited, absent court authorization, thereby protecting the mortgagor from double recovery. See Church & Church Inc v A-1 Carpentry, 281 Mich App 330, 341-342; 766 NW2d 30 (2008), affd in part, vacated in part, and affd on other grounds in part, 483 Mich 885 (2009); United States v Leslie, 421 F2d 763, 766 (CA6, 1970) ([I]t is the purpose of the statute to force an election of remedies which if not made would create the possibility that the mortgagee could foreclose the mortgage and at the same time hold the maker of the note personally liable for the debt.). Given that this risk of double-exposure only occurs where the mortgage holder and the noteholder are separate, the Legislature limited foreclosure by advertisement to those parties that were entitled to enforce the debt instrument, resulting in an automatic credit toward payment on the instrument in the event of foreclosure.8 While MERS seeks to blur the lines between itself and the lenders in this case in order to position itself as a party that may take advantage of the restricted tool of foreclosure by advertisement, it has, in other cases, sought to clearly define those lines in order to avoid the responsibilities that come with being a lender. For example, in MERS v Neb Dept of Banking and Fin, 270 Neb 529; 704 NW2d 784 (2005), the Nebraska Department of Banking and Finance asserted that MERS was a mortgage banker and, therefore, subject to licensing and registration requirements. Id. at 530. MERS successfully maintained that it had nothing to do with the loans and did not even have an equitable interest in the property, holding only legal title to the language provides that it is Homecomings additional status as the noteholder that would give it that right. The question before us is whether a mortgagee that is not a noteholder has the right to foreclose by advertisement. 8 The dissents assertion that MCL 600.3105(2) provides for an election of remedies that prevents this double recovery is erroneous, because that statute governs only judicial foreclosures, not foreclosures by advertisement. MCL 600.3105(2) requires the filing of a complaint, something that does not occur in foreclosure by advertisement. Absent the complaint, there is no time during which a complaint would be pending or any judgment that could be rendered upon it that would prohibit the filing of any separate proceeding . . . for the recovery of the debt secured by the mortgage. See also Cheff v Edwards, 203 Mich App 557, 560; 513 NW2d 439 (1994) (holding that foreclosure by advertisement is not a judicial action). Consequently, the prohibitions expressed in MCL 600.3105(2) would not apply to foreclosure by advertisement and, therefore, would not protect borrowers from double recovery is MERS were permitted to foreclose by advertisement. 11 interests granted by Borrower. Id. at 534. The court accepted MERS argument that it is not a lender, but merely a shell designed to make buying and selling of loans easier and faster by disconnecting the mortgage from the loan. Id. at 535. Having separated the mortgage from the loan, and disclaimed any interest in the loan in order to avoid the legal responsibilities of a lender, MERS nevertheless claims in the instant case that it can employ the rights of a lender by foreclosing in a manner that the statute affords only to those mortgagees who also own an interest in the loan. But as the Nebraska court stated in adopting MERS argument, MERS has no independent right to collect on any debt because MERS itself has not extended any credit, and none of the mortgage debtors owe MERS any money. Id. at 535 The separation of the note from the mortgage in order to speed the sale of mortgage debt without having to deal with all the paper work of mortgage transfers appears to be the sole reason for MERS existence. The flip side of separating the note from the mortgage is that it can slow the mechanism of foreclosure by requiring judicial action rather than allowing foreclosure by advertisement. To the degree there were expediencies and potential economic benefits in separating the mortgagee from the noteholder so as to speed the sale of mortgagebased debt, those lenders that participated were entitled to reap those benefits. However, it is no less true that, to the degree that this separation created risks and potential costs, those same lenders must be responsible for absorbing the costs. III. CONCLUSION Defendants were entitled to judgment as a matter of law because, pursuant to MCL 600.3204(1)(d), MERS did not own the indebtedness, own an interest in the indebtedness secured by the mortgage, or service the mortgage. MERS inability to comply with the statutory requirements rendered the foreclosure proceedings in both cases void ab initio. Thus, the circuit courts improperly affirmed the district courts decisions to proceed with eviction based upon the foreclosures of defendants properties. In both Docket No. 290248 and 291443, we reverse the circuit courts affirmance of the district courts orders, vacate the foreclosure proceedings, and remand for further proceedings consistent with this opinion. We do not retain jurisdiction. Defendants, as the prevailing parties, may tax costs. MCR 7.219(A). /s/ Douglas B. Shapiro /s/ Deborah A. Servitto S T A T E O F M I C H I G A NC O U R T O F A P P E A L SRESIDENTIAL FUNDING CO, LLC, f/k/aRESIDENTIAL FUNDING CORPORATION,PlaintiffAppellee,FOR PUBLICATIONApril 21, 20119:00 a.m.v No. 290248Kent Circuit CourtGERALD SAURMAN, LC No. 08-011138-AVDefendant-Appellant.BANK OF NEW YORK TRUST COMPANY,Plaintiff-Appellee,v No. 291443Jackson Circuit CourtCOREY MESSNER, LC No. 08-003406-AVDefendant-Appellant.Before:

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 9 of 18

WILDER, P.J., and SERVITTO and SHAPIRO, JJ.SHAPIRO, J.These consolidated cases each involve a foreclosure instituted by Mortgage ElectronicRegistration System (MERS), the mortgagee in both cases. The sole question presented iswhether MERS is an entity that qualifies under MCL 600.3204(1)(d) to foreclose byadvertisement on the subject properties, or if it must instead seek to foreclose by judicial process.We hold that MERS does not meet the requirements of MCL 600.3204(1)(d) and, therefore, maynot foreclose by advertisement.I. BASIC FACTS AND PROCEDURAL HISTORYIn these cases, each defendant purchased property and obtained financing for theirrespective properties from a financial institution. The financing transactions involved loandocumentation (the note) and a mortgage security instrument (the mortgage instrument).The original lender in both cases was Homecoming Financial, LLC.2Each note provided for the amount of the loan, the interest rate, methods andrequirements of repayment, the identity of the lender and borrower and the like. The mortgageinstrument provided for rights of foreclosure of the property by the mortgagee in the event ofdefault on the loan. The lender, though named as the lender in the mortgage security instrument,was not designated therein as the mortgagee. Instead, the mortgage stated that the MortgageElectronic Registration Systems, Inc (MERS) is the mortgagee under this SecurityInstrument and it contained several provisions addressing the relationship between MERS andthe lender including:MERS is Mortgage Electronic Registration Systems Inc. MERS is a separatecorporation that is acting solely as a nominee for Lender and Lenders successorsand assigns. MERS is the mortgagee under this Security Instrument.* * *This Security Instrument secures to Lender: (i) the repayment of the Loan, and allrenewals, extensions and modifications of the Note; and (ii) the performance ofBorrowers covenants and agreements under this Security Instrument and theNote. For this purpose, Borrower does hereby mortgage, warrant, grant andconvey to MERS (solely as nominee for Lender and Lenders successors andassigns) and to the successors and assigns of MERS, with the power of sale, thefollowing described property . . . . Borrower understands and agrees that MERSholds only legal title to the interests granted by Borrower in this SecurityInstrument, but, if necessary to comply with law or custom, MERS (as nomineefor Lender and Lenders successors and assigns) has the right: to exercise any orall of those interests, including, but not limited to, the right to foreclose and sellthe Property; and to take any action required of Lender including, but not limitedto, releasing and canceling this Security Instrument.Defendants defaulted on their respective notes. Thereafter, MERS began nonjudicialforeclosures by advertisement as permitted under MCL 600.3201, et seq., purchased the propertyat the subsequent sheriffs sales and then quit-claimed the property to plaintiffs as respectivesuccessor lenders. When plaintiffs subsequently began eviction actions, defendants challengedthe respective foreclosures as invalid, asserting, inter alia, that MERS did not have authorityunder MCL 600.3204(1)(d) to foreclose by advertisement because it did not fall within any of thethree categories of mortgagees permitted to do so under that statute. The district courts denieddefendants assertions that MERS lacked authority to foreclose by statute and their conclusionswere affirmed by the respective circuit courts on appeal. We granted leave to appeal in bothcases.11 Residential Funding Co, LLC v Saurman, unpublished order of the Court of Appeals, enteredMay 15, 2009 (Docket No. 290248); Bank of New York Trust Co v Messner, unpublished orderof the Court of Appeals, entered July 29, 2009 (Docket No. 291443).3II. ANALYSISA. STANDARD OF REVIEWWe review de novo decisions made on motions for summary disposition,2 Coblentz vNovi, 475 Mich 558, 567; 719 NW2d 73 (2006), as well as a circuit courts affirmance of adistrict courts decision on a motion for summary disposition. First of America Bank vThompson, 217 Mich App 581, 583; 552 NW2d 516 (1996). We review all affidavits, pleadings,depositions, admissions and other evidence submitted by the parties in the light most favorable tothe party opposing the motion, in this case, defendants. Coblentz, 475 Mich at 567-568.We also review de novo questions of statutory interpretation and application. Id. at 567.The primary goal of statutory interpretation is to give effect to the intent ofthe Legislature. This determination is accomplished by examining the plainlanguage of the statute. Although a statute may contain separate provisions, itshould be read as a consistent whole, if possible, with effect given to eachprovision. If the statutory language is unambiguous, appellate courts presumethat the Legislature intended the meaning plainly expressed and further judicialconstruction is neither permitted nor required. Statutory language should bereasonably construed, keeping in mind the purpose of the statute. If reasonableminds could differ regarding the meaning of a statute, judicial construction isappropriate. When construing a statute, a court must look at the object of thestatute in light of the harm it is designed to remedy and apply a reasonableconstruction that will best accomplish the purpose of the Legislature. [ISB SalesCo v Daves Cakes, 258 Mich App 520, 526-527; 672 NW2d 181 (2003)(citations omitted).]B. MERS BACKGROUNDThe parties, in their briefs and at oral argument, explained that MERS was developed as amechanism to provide for the faster and lower cost buying and selling of mortgage debt.Apparently, over the last two decades, the buying and selling of loans backed by mortgages aftertheir initial issuance had accelerated to the point that those operating in that market concludedthat the statutory requirement that mortgage transfers be recorded was interfering with theirability to conduct sales as rapidly as the market demanded. By operating through MERS, thesefinancial entities could buy and sell loans without having to record a mortgage transfer for eachtransaction because the named mortgagee would never change; it would always be MERS eventhough the loans were changing hands. MERS would purportedly track the mortgage salesinternally so as to know for which entity it was holding the mortgage at any given time and, if2 In Docket No. 290248, the district court granted summary disposition under MCR2.116(C) (10). In Docket No. 291443, the district court granted summary disposition under MCR2.116(I)(2) (If it appears to the court that the opposing party, rather than the moving party, isentitled to judgment, the court may render judgment in favor of the opposing party.).4foreclosure was necessary, after foreclosing on the property, would quit claim the property towhatever lender owned the loan at the time of foreclosure.As described by the Court of Appeals of New York, in MERSCORP, Inc v Romaine, 8NY3d 90, 96; 861 NE2d 81(2006):In 1993, the MERS system was created by several large participants in thereal estate mortgage industry to track ownership interests in residential mortgages.Mortgage lenders and other entities, known as MERS members, subscribe to theMERS system and pay annual fees for the electronic processing and tracking ofownership and transfers of mortgages. Members contractually agree to appointMERS to act as their common agent on all mortgages they register in the MERSsystem.The initial MERS mortgage is recorded in the County Clerks office withMortgage Electronic Registration Systems, Inc. named as the lenders nomineeor mortgagee of record on the instrument. During the lifetime of the mortgage,the beneficial ownership interest or servicing rights may be transferred amongMERS members (MERS assignments), but these assignments are not publiclyrecorded; instead they are tracked electronically in MERSs private system. Inthe MERS system, the mortgagor is notified of transfers of servicing rightspursuant to the Truth in Lending Act, but not necessarily of assignments of thebeneficial interest in the mortgage. [Footnotes omitted.]The sole issue in this case is whether MERS, as mortgagee, but not noteholder, couldexercise its contractual right to foreclose by means of advertisement.C. MCL 600.3204(1)(d)Foreclosure by advertisement is governed by MCL 600.3204(1)(d), which provides, inpertinent part:[A] party may foreclose a mortgage by advertisement if all of the followingcircumstances exist:* * *(d) The party foreclosing the mortgage is either the owner of the indebtedness orof an interest in the indebtedness secured by the mortgage or the servicing agentof the mortgage.The parties agree that MERS is neither the owner of the indebtedness, nor the servicing agent ofthe mortgage. Therefore, MERS lacked the authority to foreclose by advertisement ondefendants properties unless it was the owner . . . of an interest in the indebtedness secured bythe mortgage. MCL 600.3204(1)(d).The question, then, is what being the owner . . . of an interest in the indebtednesssecured by the mortgage requires. According to Blacks Law Dictionary, to own means [t]ohave good legal title; to hold as property; to have a legal or rightful title to. Blacks Law5Dictionary (6th ed). That text defines an interest as the most general term that can beemployed to denote a right, claim, title or legal share in something. Indebtedness is definedas [t]he state of being in debt . . . the owing of a sum of money upon a certain and expressagreement.In these cases, a promissory note was exchanged for loans of $229,950 and $207,575,respectively. Thus, reasonably construing the statute according to its common legal meaning,ISB Sales Co, 258 Mich App at 526-527, the defendants indebtedness is solely based upon thenotes because defendants owed monies pursuant to the terms of the notes. Consequently, inorder for a party to own an interest in the indebtedness, it must have a legal share, title, or rightin the note.Plaintiffs suggestion that an interest in the mortgage is sufficient under MCL600.3204(d)(1) is without merit. This is necessarily so, as the indebtedness, i.e., the note, and themortgage are two different legal transactions providing two different sets of rights, even thoughthey are typically employed together. A mortgage is [a] conveyance of title to property that isgiven as security for the payment of a debt or the performance of a duty and that will becomevoid upon payment or performance according to the stipulated terms. The mortgagee has aninterest in the property. See Citizens Mtg Corp v Mich Basic Prop Ins Assoc, 111 Mich App393, 397; 314 NW2d 635 (1981) (referencing the mortgagees interests in the property). Themortgagor covenants, pursuant to the mortgage, that if the money borrowed under the note is notrepaid, the mortgagee will retain an interest in the property. Thus, unlike a note, whichevidences a debt and represents the obligation to repay, a mortgage represents an interest in realproperty contingent on the failure of the borrower to repay the lender. The indebtedness, i.e., thenote, and the mortgage are two different things.Applying these considerations to the present case, it becomes obvious that MERS did nothave the authority to foreclose by advertisement on defendants properties. Pursuant to themortgages, defendants were the mortgagors and MERS was the mortgagee. However, it was theplaintiff lenders that lent defendants money pursuant to the terms of the notes. MERS, asmortgagee, only held an interest in the property as security for the note, not an interest in thenote itself. MERS could not attempt to enforce the notes nor could it obtain any payment on theloans on its own behalf or on behalf of the lender. Moreover, the mortgage specifically clarifiedthat, although MERS was the mortgagee, MERS held only legal title to the interest granted bydefendants in the mortgage.3 Consequently, the interest in the mortgage represented, at most, aninterest in defendants properties. MERS was not referred to in any way in the notes and onlyHomecomings held the notes. The record evidence establishes that MERS owned neither thenotes, nor an interest, legal share, or right in the notes. The only interest MERS possessed was inthe properties through the mortgages. Given that the notes and mortgages are separate3 We note that, in these cases, MERS disclaims any interest in the properties other than the legalright to foreclose and immediately quitclaim the properties to the true owner, i.e., the lender.6documents, evidencing separate obligations and interests, MERS interest in the mortgage didnot give it an interest in the debt.Moreover, plaintiffs analysis ignores the fact that the statute does not merely require aninterest in the debt, but rather that the foreclosing party own that interest. As noted above, toown means to have good legal title; to hold as property; to have a legal or rightful title to.None of these terms describes MERS relationship to the note. Plaintiffs claim that MERS wasa contractual owner of an interest in the notes based on the agreement between MERS and thelenders misstates the interests created by that agreement. Although MERS stood to benefit if thedebt was not paidit stood to become the owner of the propertyit received no benefit if thedebt was paid. MERS had no right to possess the debt, or the money paid on it. Likewise, it hadno right to use or convey the note. Its only right to possess was to possess the property if andwhen foreclosure occurred. Had the lender decided to forgive the debt in the note, MERS wouldhave had no recourse; it could not have sued the lender for some financial loss. Accordingly, itowned no financial interest in the notes. Indeed, it is uncontested that MERS is wholly withoutlegal or rightful title to the debt and that there are no circumstances under which it is entitled toreceive any payments on the notes.The dissent relies on the language in the mortgage instrument to suggest a contractualbasis to find that MERS has an ownership interest in the loan. However, the fact thatHomecomings gave MERS authority to take any action required of the Lender did nottransform MERS into an owner of an interest in the notes. Trustees have the authority to takeaction on behalf of a trust; they can even be

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 10 of 18

authorized to take any action. Nevertheless, suchauthority does not give them an ownership interest in the trust. Moreover, the provision onwhich the dissent relies (but does not fully quote) contains language limiting MERS to takingaction on behalf of the lenders equitable interest in the mortgage instrument.4 The relevantlanguage provides that the borrower understands and agrees that MERS holds only legal title tothe interests granted by Borrower in this Security Instrument (emphasis added) and givesMERS the right: to exercise any or all of those interests . . . and to take any action required ofthe Lender including, but not limited to, releasing and canceling this Security Instrument . . . .(emphasis added). Thus, the contract language expressly limits the interests MERS owns tothose granted in the mortgage instrument and limits MERS right to take action to those actionsrelated to the mortgage instrument. Nothing in this language permits MERS to take any actionwith respect to the debt, or provides it any interest therein.Finally, even assuming that the contract language did create such a right, Homecomingscannot grant MERS the authority to take action where the statute prohibits it. Regardless ofwhether Homecomings would like MERS to be able to take such action, it can only grant MERS4 Though the lenders do not hold legal title to the mortgage instrument, they do have an equitableinterest therein. See Alton v Slater, 298 Mich 469, 480; 299 NW 149 (1941); Atwood v Schlee,269 Mich 322; 257 NW 712 (1934). The lenders equitable interest in the mortgage does not,however, translate into an equitable interest for MERS in the loan.7the authority to take actions that our Legislature has statutorily permitted. Where the Legislaturehas limited the availability to take action to a specified group of individuals, parties cannot grantan entity that falls outside that group the authority to take such actions. Here, the Legislaturespecifically requires ownership of an interest in the note before permitting foreclosure byadvertisement.The contention that the contract between MERS and Homecomings provided MERS withan ownership interest in the note stretches the concept of legal ownership past the breaking point.While the term may be used very loosely in some popular contexts, such as the expression toown a feeling, such use refers to some subjective quality or experience. We are confident thatsuch a loose and uncertain meaning is not what the Legislature intended. Rather, the Legislatureused the word owner because it meant to invoke a legal or equitable right of ownership.Viewed in that context, although MERS owns the mortgage, it owns neither the debt nor aninterest in any portion of the debt, and is not a secondary beneficiary of the payment of the debt.5The dissents conclusion, that MERS owns an interest in the note because whether itultimately receives the property depends on whether the note is paid, similarly distorts the terminterest from a legal term of art to a generalized popular understanding of the word. It may bethat MERS is concerned with (i.e., interested in) whether the loans are paid because that willdefine its actions vis--vis the properties, but being concerned about whether someone pays hisloan is not the same as having a legal right, or even a contingent legal right, to those payments.Plaintiffs are mistaken in their suggestion that our conclusion that MERS does not havean interest in the indebtedness renders that category in the statute nugatory. We need notdetermine the precise scope of that category, but, by way of example, any party to whom the notehas been pledged as security by the lender has an interest in the indebtedness because, underappropriate circumstances, it owns the right to the repayment of that loan.Plaintiffs also argue that MERS had the authority to foreclose by advertisement as theagent or nominee for Homecomings, who held the note and an equitable interest in the mortgage.However, this argument must also fail under the statute because the statute explicitly requiresthat, in order to foreclose by advertisement, the foreclosing party must possess an interest in theindebtedness. MCL 600.3204(1)(d). It simply does not permit foreclosure in the name of anagent or a nominee. If the Legislature intended to permit such actions, it could have easilyincluded agents or nominees of the noteholder as parties that could foreclose by advertisement.5 The dissents analogy between MERS ability to own an interest in the note and an easementholdersownership of an interest in land without owning the land is unavailing. An easementholder owns rights to the land that even the landholder cannot infringe upon or divest him of, seeDobie v Morrison, 227 Mich App 536, 541; 575 NW2d 817 (1998) (noting that a fee ownercannot use the burdened land in any manner that would interfere with the easement holdersrights), while the interest the dissent contends MERS owns would be equal to or less than thatof the noteholder and the noteholder could completely divest MERS of the alleged interest byforgiving the note without MERS having any recourse. Accordingly, the analogy fails.8Indeed, had the Legislature intended the result suggested by plaintiffs, it would have merely hadto delete the word servicing. The law is clear that this Court must avoid construction thatwould render any part of the statute surplusage or nugatory. Wickens v Oakwood HealthcareSys, 465 Mich 53, 60; 631 NW2d 686 (2001). Thus, the Legislatures choice to permit onlyservicing agents and not all agents to foreclose by advertisement must be given effect.Similarly, we reject plaintiffs reliance on Jackson v Mortgage Electronic RegistrationSys, Inc, 770 NW2d 487 (Minn, 2009). Jackson, a Minnesota case, is inapplicable because itinterprets a statute that is substantially different from MCL 600.3204. The statute at issue inJackson specifically permits foreclosure by advertisement if a mortgage is granted to amortgagee as nominee or agent for a third party identified in the mortgage, and the third partyssuccessors and assigns. Id. at 491. Thus, the Minnesota statute specifically provides forforeclosure by advertisement by entities that stand in the exact position that MERS does here.Indeed, the Minnesota statute is frequently called the MERS statute. Id. at 491. Our statute,MCL 600.3204(1)(d) makes no references to nominees or agents. Rather, it requires that theparty foreclosing be either the mortgage servicer or have an ownership interest in theindebtedness. The Jackson statute also revolves around the mortgage, unlike MCL600.3204(1)(d), which uses the term indebtedness, which, as discussed previously, is a referenceto the note, not the mortgage. Thus, Jackson has no application to the case at bar. Moreover, theMinnesota statute demonstrates that if our Legislature had intended to allow MERS to forecloseby advertisement, they could readily have passed a statute including language like that includedin Minnesota.D. ANALYSIS BEYOND THE LANGUAGE OF THE STATUTEPlaintiffs suggest that, despite the plain language of the statute, the Legislature did notcreate three discrete categories of entities that could foreclose by advertisement. Instead,plaintiffs assert that the Legislature envisioned a continuum of entities: those that actually ownthe loan, those that service the loan, and some ill-defined category which might be calledeverything in between. However, courts may not rewrite the plain statutory language andsubstitute our own policy decisions for those already made by the Legislature. DiBenedetto vWest Shore Hosp, 461 Mich 394, 405; 605 NW2d 300 (2000). Thus, without any language in thestatute providing for a continuum, let alone an analysis of what it constitutes, we find no meritin this position.Plaintiffs also raise a straw man argument by citing this Courts decision in Davenport vHSBC Bank USA, 275 Mich App 344; 739 NW2d 383 (2007) where we observed that [o]urSupreme Court has explicitly held that [o]nly the record holder of the mortgage has the power toforeclose under MCL 600.3204. Davenport, 275 Mich App at 347, quoting Arnold v DMRFinancial Services, Inc (After Remand), 448 Mich 671, 678; 532 NW2d 852 (1995). However,the facts in Davenport do not reflect that the party who held the note was a different party thanthe party who was the mortgagee. Davenport, 275 Mich App at 345. Indeed, the fact that theCourt used the term mortgage interchangeably with indebtedness, id. at 345-347, rather thandistinguishing the two terms, indicates that the same party held both the note and the mortgage.Because the instant cases involve a situation where the noteholder and mortgage holder areseparate entities, the general proposition set forth in Davenport does not apply. There is nothing9in Davenport holding that a party that owns only the mortgage and not the note has an ownershipinterest in the debt. 6We also note that Arnold, the Supreme Court case relied upon in Davenport, wasinterpreting a previous version of MCL 600.3204, which was substantially revised when theLegislature adopted the version we must apply in this case. The statute as it existed when Arnoldwas decided included a provision stating:To entitle any party to give a notice as hereinafter prescribed, and to make such aforeclosure, it shall be requisite:* * *(3) That the mortgage containing such power of sale has been duly recorded; andif it shall have been assigned that all the assignments thereof shall have beenrecorded. [Arnold, 448 Mich at 676.]This requirement, that a noteholder could only foreclose by advertisement if the mortgage theyhold is duly recorded, is no longer part of the statute and does not apply in this case. The versionof the statute interpreted in Arnold also lacked the language, later adopted, and operative in thiscase, specifically permitting foreclosure by advertisement of the owner of the note. Moreover,the language the Legislature chose to adopt in the amended language appears to reflect an intentto protect borrowers from having their mortgages foreclosed upon by advertisement by thosewho did not own the note because it would put them at risk of being foreclosed but still owingthe noteholder the full amount of the loan.Under MCL 440.3602, an instrument is only discharged when payment is made to aperson entitled to enforce the instrument. Those parties listed in MCL 600.3204(1)(d)theservicer, the owner of the debt, or someone owning an interest in the debtwould all be personsentitled to enforce the instrument that reflects the indebtedness. As previously noted, MERS isnot entitled to enforce the note. Thus, if MERS were permitted to foreclose on the properties, theborrowers obligated under the note would potentially be subject to double-exposure for the debt.That is, having lost their property to MERS, they could still be sued by the noteholder for theamount of the debt because MERS does not have the authority to discharge the note. MERSmembers may agree to relinquish the right of collection once foreclosure occurs, but even if theywere to do so within MERS, that would not necessarily protect the borrower in the event a lenderviolated that policy or the note was subsequently transferred to someone other than the lender.76 In addition, while we reject plaintiffs overly broad reading of Davenport for the reasons juststated, we note that even under that reading, plaintiffs would merely have to obtain assignmentof the mortgage from MERS prior to initiating foreclosure proceedings.7 The dissents observation that, had Homecomings remained the mortgagee, it would have hadthe right to foreclose by advertisement does not change the outcome because the statutory10These risks are, however, not present in a judicial foreclosure. MCL 600.3105(2)provides:After a complaint has been filed to foreclose a mortgage on real estate or landcontract, while it is pending and after a judgment has been rendered upon it, noseparate proceeding shall be had for the recovery of the debt secured by themortgage, or any part of it, unless authorized by the court.Thus, once a judicial foreclosure proceeding on the mortgage has begun, a subsequent action onthe note is prohibited, absent court authorization, thereby protecting the mortgagor from doublerecovery. See Church & Church Inc v A-1 Carpentry, 281 Mich App 330, 341-342; 766 NW2d30 (2008), affd in part, vacated in part, and affd on other grounds in part, 483 Mich 885 (2009);United States v Leslie, 421 F2d 763, 766 (CA6, 1970) ([I]t is the purpose of the statute to forcean election of remedies which if not made would create the possibility that the mortgagee couldforeclose the mortgage and at the same time hold the maker of the note personally liable for thedebt.).Given that this risk of double-exposure only occurs where the mortgage holder and thenoteholder are separate, the Legislature limited foreclosure by advertisement to those parties thatwere entitled to enforce the debt instrument, resulting in an automatic credit toward payment onthe instrument in the event of foreclosure.8While MERS seeks to blur the lines between itself and the lenders in this case in order toposition itself as a party that may take advantage of the restricted tool of foreclosure byadvertisement, it has, in other cases, sought to clearly define those lines in order to avoid theresponsibilities that come with being a lender. For example, in MERS v Neb Dept of Bankingand Fin, 270 Neb 529; 704 NW2d 784 (2005), the Nebraska Department of Banking and Financeasserted that MERS was a mortgage banker and, therefore, subject to licensing and registrationrequirements. Id. at 530. MERS successfully maintained that it had nothing to do with the loansand did not even have an equitable interest in the property, holding only legal title to thelanguage provides that it is Homecomings additional status as the noteholder that would give itthat right. The question before us is whether a mortgagee that is not a noteholder has the right toforeclose by advertisement.8 The dissents assertion that MCL 600.3105(2) provides for an election of remedies thatprevents this double recovery is erroneous, because that statute governs only judicialforeclosures, not foreclosures by advertisement. MCL 600.3105 (2) requires the filing of acomplaint, something that does not occur in foreclosure by advertisement. Absent the complaint,there is no time during which a complaint would be

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 11 of 18

pending or any judgment that could berendered upon it that would prohibit the filing of any separate proceeding . . . for the recoveryof the debt secured by the mortgage. See also Cheff v Edwards, 203 Mich App 557, 560; 513NW2d 439 (1994) (holding that foreclosure by advertisement is not a judicial action).Consequently, the prohibitions expressed in MCL 600.3105(2) would not apply to foreclosure byadvertisement and, therefore, would not protect borrowers from double recovery is MERS werepermitted to foreclose by advertisement.11interests granted by Borrower. Id. at 534. The court accepted MERS argument that it is not alender, but merely a shell designed to make buying and selling of loans easier and faster bydisconnecting the mortgage from the loan. Id. at 535. Having separated the mortgage from theloan, and disclaimed any interest in the loan in order to avoid the legal responsibilities of alender, MERS nevertheless claims in the instant case that it can employ the rights of a lender byforeclosing in a manner that the statute affords only to those mortgagees who also own aninterest in the loan. But as the Nebraska court stated in adopting MERS argument, MERS hasno independent right to collect on any debt because MERS itself has not extended any credit, andnone of the mortgage debtors owe MERS any money. Id. at 535The separation of the note from the mortgage in order to speed the sale of mortgage debtwithout having to deal with all the paper work of mortgage transfers appears to be the solereason for MERS existence. The flip side of separating the note from the mortgage is that itcan slow the mechanism of foreclosure by requiring judicial action rather than allowingforeclosure by advertisement. To the degree there were expediencies and potential economicbenefits in separating the mortgagee from the noteholder so as to speed the sale of mortgagebaseddebt, those lenders that participated were entitled to reap those benefits. However, it is noless true that, to the degree that this separation created risks and potential costs, those samelenders must be responsible for absorbing the costs.III. CONCLUSIONDefendants were entitled to judgment as a matter of law because, pursuant to MCL600.3204(1)(d), MERS did not own the indebtedness, own an interest in the indebtednesssecured by the mortgage, or service the mortgage. MERS inability to comply with the statutoryrequirements rendered the foreclosure proceedings in both cases void ab initio. Thus, the circuitcourts improperly affirmed the district courts decisions to proceed with eviction based upon theforeclosures of defendants properties.In both Docket No. 290248 and 291443, we reverse the circuit courts affirmance of thedistrict courts orders, vacate the foreclosure proceedings, and remand for further proceedingsconsistent with this opinion. We do not retain jurisdiction. Defendants, as the prevailing parties,may tax costs. MCR 7.219(A)./s/ Douglas B. Shapiro/s/ Deborah A. Servitto Posted in Uncategorized | 4 Comments

The People vs. Goldman Sachs: A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges
May 13th, 2011

The People vs. Goldman Sachs: A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges Rolling Stone.com By MATT TAIBBI http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511?page=6 MAY 11, 2011 9:30 AM ET Another extraordinary example of Goldmans penchant for truth avoidance came when Joshua Birnbaum, former head of structured-products trading for the bank, gave a deposition to Levins committee. Asked point-blank if Goldmans huge short on mortgages was an intentional bet against the market or simply a hedge against potential losses, Birnbaum played dumb. I do not know whether the shorts were a hedge, he said. But the committee, it turned out, already knew that Birnbaum had written a memo in which he had spelled out the truth: The shorts were not a hedge. When Birnbaums lawyers learned that their clients own words had been used against him, they hilariously sent an outraged letter complaining that Birnbaum didnt know the committee had his memo when he decided to dodge the question. They also submitted a supplemental answer. Birnbaum now said, Having reviewed the document the staff did not previously provide me his own words! I can now recall that I believed these short positions were not a hedge. (Goldman, for its part, dismisses Birnbaum as a single trader who neither saw nor knew the firms overall risk positions.) When it came time for Goldman CEO Lloyd Blankfein to testify, the banker hedged and stammered like a brain-addled boxer who couldnt quite follow the questions. When Levin asked how Blankfein felt about the fact that Goldman collected $13 billion from U.S. taxpayers through the AIG bailout, the CEO deflected over and over, insisting that Goldman would somehow have made that money anyway through its private insurance policies on AIG. When Levin pressed Blankfein, pointing out that he hadnt answered the question, Blankfein simply peered at Levin like he didnt understand. But Blankfein also testified unequivocally to the following: Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market. The fact is, we were not consistently or significantly net-short the market in residential mortgage-related products in 2007 and 2008. We didnt have a massive short against the housing market, and we certainly did not bet against our clients. Levin couldnt believe what he was hearing. Heck, yes, I was offended, he says. Goldmans CEO claimed the firm didnt have a massive short, when the opposite was true. First of all, in Goldmans own internal memoranda, the bank calls its giant, $13 billion bet against mortgages the big short. Second, by the time Sparks and Co. were unloading the Timberwolves of the world on their unicorns and flying pigs in the summer of 2007, Goldmans mortgage department accounted for 54 percent of the banks risk. That means more than half of all the banks risk was wrapped up in its bet against the mortgage market a massive short by any definition. Indeed, the bank was betting so much money on mortgages that its executives had become comically blas about giant swings on a daily basis. When Goldman lost more than $100 million on August 8th, 2007, Montag circulated this e-mail: So who lost the hundy? This month, after releasing his report, Levin sent all of this material to the Justice Department. His conclusion was simple. In my judgment, he declared, Goldman clearly misled their clients, and they misled the Congress. Goldman, unsurprisingly, disagreed: Our testimony was truthful and accurate, and that applies to all of our testimony, said spokesman Michael DuVally. In a statement to Rolling Stone, Goldman insists that its behavior throughout the period covered in the Levin report was consistent with responsible business practice, and that its machinations in the mortgage market were simply an attempt to manage risk. It wouldnt be hard for federal or state prosecutors to use the Levin report to make a criminal case against Goldman. I ask Eliot Spitzer what he would do if he were still attorney general and he saw the Levin report. Once the steam stopped coming out of my ears, Id be dropping so many subpoenas, he says. And I would parse every potential inconsistency between the testimony they gave to Congress and the facts as we now understand them. I ask what inconsistencies jump out at him. They keep claiming they were only marginally short, that it was more just servicing their clients, he says. But it sure doesnt look like that. He pauses. They were $13 billion short. Thats big 50 percent of their risk. It was so completely disproportionate. Lloyd Blankfein went to Washington and testified under oath that Goldman Sachs didnt make a massive short bet and didnt bet against its clients. The Levin report proves that Goldman spent the whole summer of 2007 riding a big short and took a multibillion-dollar bet against its clients, a bet that incidentally made them enormous profits. Are we all missing something? Is there some different and higher standard of triple- and quadruple-lying that applies to bank CEOs but not to baseball players? This issue is bigger than what Goldman executives did or did not say under oath. The Levin report catalogs dozens of instances of business practices that are objectively shocking, no matter how any high-priced lawyer chooses to interpret them: gambling billions on the misfortune of your own clients, gouging customers on prices millions of dollars at a time, keeping customers trapped in bad investments even as they begged the bank to sell, plus myriad deceptions of the failure to disclose variety, in which customers were pitched investment deals without ever being told they were designed to help Goldman clean its bad inventory. For years, the soundness of Americas financial system has been based on the proposition that its a crime to lie in a prospectus or a sales brochure. But the Levin report reveals a bank gone way beyond such

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 12 of 18

pathetic little boundaries; the collective picture resembles a financial version of The Jungle, a portrait of corporate sociopathy that makes you never want to go near a sausage again. Upton Sinclairs narrative shocked the nation into a painful realization about the pervasive filth and corruption behind Americas veneer of smart, robust efficiency. But Carl Levins very similar tale probably will not. The fact that this evidence comes from a U.S. senators office, and not the FBI or the SEC, is itself an element in the worsening tale of lawlessness and despotism that sparked a global economic meltdown. Why should Carl Levin be the one who needs to do this? asks Spitzer. Wheres the SEC? Where are any of the regulatory bodies? This isnt just a matter of a few seedy guys stealing a few bucks. This is America: Corporate stealing is practically the national pastime, and Goldman Sachs is far from the only company to get away with doing it. But the prominence of this bank and the high-profile nature of its confrontation with a powerful Senate committee makes this a political story as well. If the Justice Department fails to give the American people a chance to judge this case if Goldman skates without so much as a trial it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are. Posted in Uncategorized | No Comments

Freddie Mac Bars Foreclosure Actions in the Name of MERS


March 25th, 2011

03/24/2011 BY: CARRIE BAY as Posted at www.dsnews.com Freddie Mac issued new policy guidelines to its servicers this week that prohibit foreclosures in the name of Mortgage Electronic Registration Systems Inc. (MERS). MERS was developed by the industry to keep track of the servicing rights on home loans. It was designed as a paperless property registry to facilitate the quick transfer of mortgages between lenders, as well as investors in mortgage-backed securities. In certain jurisdictions, servicers use the MERS name to initiate foreclosures on properties listed in its registry on behalf of the creditor. But this approach has been challenged repeatedly by homeowners who say the electronic system has no standing to act as the mortgagee nominee in foreclosure actions. MERS argues that borrowers are required to sign documents stating that MERS can assume rights and responsibilities on behalf of creditors, and this reasoning has led a number of state courts to uphold MERS right to foreclose. Still, the electronic registry has come under heavy fire lately. It became a focus of last falls robo-signing scandal when the MERS name appeared within defective affidavits and regulators extended their servicing investigations to include the system and its role in the foreclosure process. Fannie Mae told its servicers last spring that they were no longer allowed to foreclose in the name of MERS, and now Freddie Mac is following suit. Freddie has updated its servicer guide to eliminate the option for the foreclosure counsel or trustee to conduct a foreclosure in the name of MERS. The new rule is effective for mortgages registered with MERS that are referred to foreclosure on or after April 1, 2011. Posted in Uncategorized | 11 Comments

U.S. Pushes Mortgage Deal


February 24th, 2011

Obama Proposal Seeks Multibillion-Dollar Settlement of Loan-Servicing Cases


from http://online.wsj.com By NICK TIMIRAOS, DAN FITZPATRICK and RUTH SIMON The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force Americas largest banks to pay for reductions in loan principal worth billions of dollars. Terms of the administrations proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns wont be borne by investors who purchased mortgage-backed securities, these people said. If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said. But forging a comprehensive settlement may be difficult. A deal would have to win approval from federal regulators and state attorneys general, as well as some of the nations largest mortgage servicers, including Bank of America Corp., Wells Fargo & Co, and J.P. Morgan Chase & Co. Those banks declined to comment. A settlement could help lift a cloud of uncertainty that has stalled the foreclosure process since last fall. Economists have warned that foreclosures need to proceed for the housing market to continue on a path to recovery. Its unclear how many borrowers would benefit from a deal. Servicers have thus far had difficulty managing the volume of troubled loans. So far, most loan modifications have focused on shrinking monthly payments by lowering interest rates and extending loan terms. Banks, as well as mortgage giants Fannie Mae and Freddie Mac, have been shy to embrace principal reductions, in part due to concerns that many borrowers who can afford their loans will stop paying in the hope of being rewarded with a smaller loan. But some economists warn that rising numbers of underwater borrowers will drag on housing markets and the economy for years unless more is done to help them. The settlement terms remain fluid, people familiar with the matter cautioned, and havent been presented to banks. Exact dollar amounts havent been agreed on by U.S. regulators and state attorneys general. Regulators are looking at up to 14 servicers that could be a party to the settlement. The deal wouldnt create any new government programs to reduce principal. Instead, it would allow banks to devise their own modifications or use existing government programs, people familiar with the matter said. Banks would also have to reduce second-lien mortgages when first mortgages are modified. Several federal agencies have been scrutinizing the nations largest banks over breakdowns in foreclosure procedures that erupted last fall. Last week, the Office of the Comptroller of the Currency said only a small number of borrowers had been improperly foreclosed upon. But the regulator raised concerns over inadequate staffing and weak controls over certain foreclosure processes. A settlement must satisfy an unwieldy mix of authorities, including state attorneys general and regulators such as the newly formed Bureau of Consumer Financial Protection, who support heftier fines. They must also appease banking regulators, such as the OCC, that are concerned penalties could be too stiff. Nothing has been finalized among the states, and its our understanding that the federal agencies we are in discussions with have not finalized their positions, said a spokesman for Iowa Attorney General Tom Miller, who is spearheading a 50-state investigation of mortgage-servicing practices. Last autumn, units of the nations largest banks were forced to suspend foreclosures amid allegations that bank employees routinely signed off on foreclosure documents without personally reviewing case details. In subsequent examinations, federal bank regulators said they found deficiencies and shortcomings in document procedures and other violations of state law. At issue now is a debate over who has been harmed by improper foreclosure practices, and how much. The OCCs examination concluded only a small number of borrowers were improperly foreclosed upon, and banks have argued that any settlement should reflect that fact. Other federal agencies and state officials say banks exacerbated the woes of troubled borrowers by resisting the necessary investments in staff and technology to provide timely, effective help. Under the administrations proposed settlement, banks would have to bear the cost of all writedowns rather than passing them on to other investors. The settlement proposal focuses on pushing servicers who mishandled foreclosure procedures to eat losses, by writing down loans that they service on behalf of clients. Those clients include mortgage-finance giants Fannie Mae and Freddie Mac, as well as investors in loans that were securitized by Wall Street firms. Bank executives say principal cuts dont necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications. First, it will be difficult to determine who gets reductions and who doesnt. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured with that number is limited, one of these people said. If a single settlement cant be reached, different federal agencies could seek smaller penalties through regular enforcement channels, and banks could face the prospect of

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 13 of 18

separate civil actions from state attorneys general. Any settlement could be one of the largest to hit the mortgage industry. In 2008, Bank of America agreed to a settlement valued at more than $8.6 billion related to alleged predatory lending practices by Countrywide Finance Corp., which it acquired that year. Robin Sidel contributed to this article. Write to Nick Timiraos at nick.timiraos@wsj.com, Dan Fitzpatrick at dan.fitzpatrick@wsj.com and Ruth Simon at ruth.simon@wsj.com By NICK TIMIRAOS, DAN FITZPATRICK and RUTH SIMON The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force Americas largest banks to pay for reductions in loan principal worth billions of dollars. Terms of the administrations proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns wont be borne by investors who purchased mortgage-backed securities, these people said. If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said. But forging a comprehensive settlement may be difficult. A deal would have to win approval from federal regulators and state attorneys general, as well as some of the nations largest mortgage servicers, including Bank of America Corp., Wells Fargo & Co, and J.P. Morgan Chase & Co. Those banks declined to comment. A settlement could help lift a cloud of uncertainty that has stalled the foreclosure process since last fall. Economists have warned that foreclosures need to proceed for the housing market to continue on a path to recovery. Its unclear how many borrowers would benefit from a deal. Servicers have thus far had difficulty managing the volume of troubled loans. So far, most loan modifications have focused on shrinking monthly payments by lowering interest rates and extending loan terms. Banks, as well as mortgage giants Fannie Mae and Freddie Mac, have been shy to embrace principal reductions, in part due to concerns that many borrowers who can afford their loans will stop paying in the hope of being rewarded with a smaller loan. But some economists warn that rising numbers of underwater borrowers will drag on housing markets and the economy for years unless more is done to help them. The settlement terms remain fluid, people familiar with the matter cautioned, and havent been presented to banks. Exact dollar amounts havent been agreed on by U.S. regulators and state attorneys general. Regulators are looking at up to 14 servicers that could be a party to the settlement. The deal wouldnt create any new government programs to reduce principal. Instead, it would allow banks to devise their own modifications or use existing government programs, people familiar with the matter said. Banks would also have to reduce second-lien mortgages when first mortgages are modified. Several federal agencies have been scrutinizing the nations largest banks over breakdowns in foreclosure procedures that erupted last fall. Last week, the Office of the Comptroller of the Currency said only a small number of borrowers had been improperly foreclosed upon. But the regulator raised concerns over inadequate staffing and weak controls over certain foreclosure processes. A settlement must satisfy an unwieldy mix of authorities, including state attorneys general and regulators such as the newly formed Bureau of Consumer Financial Protection, who support heftier fines. They must also appease banking regulators, such as the OCC, that are concerned penalties could be too stiff. Nothing has been finalized among the states, and its our understanding that the federal agencies we are in discussions with have not finalized their positions, said a spokesman for Iowa Attorney General Tom Miller, who is spearheading a 50-state investigation of mortgage-servicing practices. Last autumn, units of the nations largest banks were forced to suspend foreclosures amid allegations that bank employees routinely signed off on foreclosure documents without personally reviewing case details. In subsequent examinations, federal bank regulators said they found deficiencies and shortcomings in document procedures and other violations of state law. At issue now is a debate over who has been harmed by improper foreclosure practices, and how much. The OCCs examination concluded only a small number of borrowers were improperly foreclosed upon, and banks have argued that any settlement should reflect that fact. Other federal agencies and state officials say banks exacerbated the woes of troubled borrowers by resisting the necessary investments in staff and technology to provide timely, effective help. Under the administrations proposed settlement, banks would have to bear the cost of all writedowns rather than passing them on to other investors. The settlement proposal focuses on pushing servicers who mishandled foreclosure procedures to eat losses, by writing down loans that they service on behalf of clients. Those clients include mortgage-finance giants Fannie Mae and Freddie Mac, as well as investors in loans that were securitized by Wall Street firms. Bank executives say principal cuts dont necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications. First, it will be difficult to determine who gets reductions and who doesnt. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured with that number is limited, one of these people said. If a single settlement cant be reached, different federal agencies could seek smaller penalties through regular enforcement channels, and banks could face the prospect of separate civil actions from state attorneys general. Any settlement could be one of the largest to hit the mortgage industry. In 2008, Bank of America agreed to a settlement valued at more than $8.6 billion related to alleged predatory lending practices by Countrywide Finance Corp., which it acquired that year. Robin Sidel contributed to this article.Write to Nick Timiraos at nick.timiraos@wsj.com, Dan Fitzpatrick at dan.fitzpatrick@wsj.com and Ruth Simon at ruth.simon@wsj.com Posted in Uncategorized | 2 Comments

MERS TELLS LENDERS to not foreclose in MERS name!!!


February 24th, 2011

From: http://www.mersinc.org/news Announcement Number 2011-01 Page 1 of 2 To: All MERS Members February 16, 2011 Re: Foreclosure Processing and CRMS Scheduling MERS is providing the following guidance to all Members to strengthen business practices, and minimize reputation, legal and compliance risk to MERS and its Members. In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties right to foreclose. MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges. Consistent with this approach we have enhanced the Corporate Resolution Management System (CRMS) and instituted related policies and procedures designed to strengthen MERS business practices and limit compliance risks. To comply with this guidance, MERS Members should implement the following practices, effective immediately. 1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS name. If a Member determines that it will commence a foreclosure in MERS name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee. 2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute assignments out of MERS name before initiating foreclosure proceedings. Assignments out of MERS name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8). 3. For all future assignments and the execution of other documents in the name of MERS, Members must use a MERS Certifying Officer who has been appointed under our new certifying officer process, which, after November 1, 2010, uses a new form of corporate resolution. Under our new process, all Certifying Officers are also being tested and appointed under the enhanced CRMS. Only Certifying Officers appointed under the new form of corporate resolution, tested, and transitioned onto CRMS after November 1, 2010 should execute assignments. We are in the process of ensuring that all Members are transitioned onto CRMS in compliance with our new policy, and we will work with all Members to ensure the transitions can be accomplished in an orderly and expeditious way. For those Members who have not undergone this transition onto the CRMS, you will receive login credentials and further instructions from MERS on how to complete this process. It is important that you follow all instructions and that you

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 14 of 18

complete this process as quickly as possible. MERS will be communicating with you to notify you when your Company will be transitioned onto the CRMS under our new policy. Once your Company has access to the CRMS, all of your existing and potential Certifying Officers should work quickly to complete the certification process. Once all of your existing and potential Certifying Officers have successfully completed the certification process, you will need to submit your request to MERS for approval. Submissions from your Company will only be accepted during the phase-in period assigned to you. Because it will take some time to transition under our new policy, Certifying Officers can continue to execute documents in MERS name under existing resolutions until the new corporate resolution is issued to your Company. However, if your Company does not submit the request to MERS through the CRMS in the timeframe assigned to you, you will not be issued a new corporate resolution and any prior corporate resolutions issued to your company will be revoked. 4. MERS Members should ensure the accuracy of the information in the complaint and foreclosure affidavit that addresses, where applicable, the authorization under which a MERS Certifying Officer validly assigned the mortgage to the foreclosing note-holder. 5. Other business practices Members should perform on a periodic basis include: Conduct a review of employees designated as Certifying Officers and reconcile to the CRMS to ensure MERS has an up-to-date and accurate list of Certifying Officers; Ensure employees designated as Certifying Officers receive appropriate training to carry out their duties and responsibilities as Certifying Officers; and Reconcile with CRMS to update corporate resolutions and signing authority agreements to ensure appropriate Certifying Officers are validly appointed. If you have any questions regarding this announcement, please contact the MERS Law Department at mers@mersinc.org, or call the MERS corporate office at 703-761-1270 and ask for the MERS Law Department. The MERS Help Desk will not be able to assist in this matter. AnnouncementNumber 2011-01Page 1 of 2To: All MERS Members February 16, 2011Re: Foreclosure Processing and CRMS Scheduling MERS is providing the following guidance to all Members to strengthen business practices, and minimize reputation, legal and compliance risk to MERS and its Members. In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties right to foreclose. MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges. Consistent with this approach we have enhanced the Corporate Resolution Management System (CRMS) and instituted related policies and procedures designed to strengthen MERS business practices and limit compliance risks. To comply with this guidance, MERS Members should implement the following practices, effective immediately.1. MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS name. If a Member determines that it will commence a foreclosure in MERS name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.2. MERS Members shall have a MERS Certifying Officer (also known as MERS Signing Officer) execute assignments out of MERS name before initiating foreclosure proceedings. Assignments out of MERS name should be recorded in the county land records, even if the state law does not require such a recording (see MERS Membership Rule 8).3. For all future assignments and the execution of other documents in the name of MERS, Members must use a MERS Certifying Officer who has been appointed under our new certifying officer process, which, after November 1, 2010, uses a new form of corporate resolution. Under our new process, all Certifying Officers are also being tested and appointed under the enhanced CRMS. Only Certifying Officers appointed under the new form of corporate resolution, tested, and transitioned onto CRMS after November 1, 2010 should execute assignments. We are in the process of ensuring that all Members are transitioned onto CRMS in compliance with our new policy, and we will work with all Members to ensure the transitions can be accomplished in an orderly and expeditious way. For those Members who have not undergone this transition onto the CRMS, you will receive login credentials and further instructions from MERS on how to complete this process. It is important that you follow all instructions and that you complete this process as quickly as possible. MERS will be communicating with you to notify you when your Company will be transitioned onto the CRMS under our new policy. Once your Company has access to the CRMS, all of your existing and potential Certifying Officers should work quickly to complete the certification process. Once all of your existing and potential Certifying Officers have successfully completed the certification process, you will need to submit your request to MERS for approval. Submissions from your Company will only be accepted during the phase-in period assigned to you. Because it will take some time to transition under our new policy, Certifying Officers can continue to execute documents in MERS name under existing resolutions until the new corporate resolution is issued to your Company. However, if your Company does not submit the request to MERS through the CRMS in the timeframe assigned to you, you will not be issued a new corporate resolution and any prior corporate resolutions issued to your company will be revoked.Page 2 of 24. MERS Members should ensure the accuracy of the information in the complaint and foreclosure affidavit that addresses, where applicable, the authorization under which a MERS Certifying Officer validly assigned the mortgage to the foreclosing note-holder.5. Other business practices Members should perform on a periodic basis include: Conduct a review of employees designated as Certifying Officers and reconcile to the CRMS to ensure MERS has an up-to-date and accurate list of Certifying Officers; Ensure employees designated as Certifying Officers receive appropriate training to carry out their duties and responsibilities as Certifying Officers; and Reconcile with CRMS to update corporate resolutions and signing authority agreements to ensure appropriate Certifying Officers are validly appointed. If you have any questions regarding this announcement, please contact the MERS Law Department at mers@mersinc.org, or call the MERS corporate office at 703-761-1270 and ask for the MERS Law Department. The MERS Help Desk will not be able to assist in this matter. Posted in Uncategorized | No Comments

Merscorp Lacks Right to Transfer Mortgages, Judge Says


February 15th, 2011

from: www.bloomberg.com By Thom Weidlich Feb 14, 2011 3:02 PM ET (Corrects to show parties would come before the judge to lift the automatic ban in 20th paragraph.) Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said. U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a significant impact, wrote that the membership rules of the companys Mortgage Electronic Registration Systems, or MERS, dont make it an agent of the banks that own the mortgages. MERSs theory that it can act as a common agent for undisclosed principals is not supported by the law, Grossman wrote in a Feb. 10 opinion. MERS did not have authority, as nominee or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal. Merscorp was created in 1995 to improve servicing after county offices couldnt deal with the flood of mortgage transfers, Karmela Lejarde, a spokeswoman for MERS, said in an interview last year. The company tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell the loans without having to record the transfer with the county. It played a major role in Wall Streets ability to quickly bundle mortgages together in securitized trusts. MERS was still reviewing Grossmans decision and didnt have an immediate comment, Lejarde said in an e-mail Feb. 11. Lejarde didnt immediately respond to an e-mail seeking comment today. Proper Status Dont come around here no more, is basically the message to MERS, said April Charney, a senior attorney with Jacksonville Area Legal Aid in Jacksonville, Florida. The judge basically deconstructed MERS and said theres no possible way in any case you can come in and show you have this appropriate proper status to transfer the note. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgagerecording process, Grossman wrote. The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law. Automatic Shield In the case Grossman ruled on, Credit Suisse Group AGs Select Portfolio Servicing, a mortgage servicer, sought to bypass the automatic shield against legal claims triggered by Ferrel L. Agards filing for personal bankruptcy in September. Select Portfolio wanted permission to foreclose on Agards home in Westbury, New York, on behalf of U.S. Bancorps U.S. Bank unit, the trustee for the mortgage-backed trust the home loan was in. The house is worth about $350,000 and the mortgage amount was $536,921, according to the decision. Grossman ruled in favor of Select Portfolio because he couldnt overrule a November 2008 foreclosure judgment the servicer won in state court, he said. Without that statecourt ruling, Select Portfolio wouldnt have had the right to bring its motion, Grossman said. He then addressed whether a mortgage transfer by MERS is valid, because MERSs role in the ownership and transfer of real-property notes and mortgages is at issue in dozens of cases before this court, including those where there have been no prior dispositive state-court decisions, he wrote.

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 15 of 18

Original Lender Select Portfolio argued in part that MERSs February 2008 assignment of the mortgage to U.S. Bank was valid because Agard agreed that MERS would hold title to it for the original lender, Bank of America Corp.s First Franklin, and for whichever banks it was further assigned to. First Franklin transferred the promissory note the mortgage secured to Lehman Brothers Holdings Inc.s Aurora Bank and Aurora to U.S. Bank, according to the decision. An adverse ruling regarding MERSs authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States, Grossman wrote. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS intervened in the case and argued that Agards mortgage, the terms of its membership agreement and New York state law gave it the authority to assign the mortgage. MERS says it holds title to mortgages for its members as both nominee and mortgagee of record. Select Portfolio Grossman said Select Portfolio had to show that U.S. Bank owned both the note and the mortgage, and there was no evidence that it held the note. The judge disagreed with Select Portfolios argument that U.S. Bank held the note because the note follows the mortgage, which it said U.S. Bank owned. By MERSs own account, the note in this case was transferred among its members, while the mortgage remained in MERSs name, Grossman wrote. MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths. The judge said that the membership agreement wasnt enough to assign the mortgage and that to do so the lender would have to give power of attorney or similar authority to MERS. MERSs membership rules dont create an agency or nominee relationship and dont clearly grant MERS authority to take any action with respect to mortgages, including transferring them, Grossman wrote. Because the interests at issue concern real property land and buildings under state law, any transfer has to be in writing, which isnt done under the MERS system, he said. Nominee Status Without more, this court finds that MERSs nominee status and the rights bestowed upon MERS within the mortgage itself, are insufficient to empower MERS to effectuate a valid assignment of mortgage, the judge wrote. MERSs position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best. Grossman said parties coming to him to seek to lift the automatic ban on legal claims in cases involving MERS will have to show they own both the mortgage and the note. The case is In re Agard, 10-77338, U.S. Bankruptcy Court, Eastern District of New York Central Islip). To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at tweidlich@bloomberg.net. To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net. Merscorp Lacks Right to Transfer Mortgages, Judge Says By Thom Weidlich Feb 14, 2011 3:02 PM ET (Corrects to show parties would come before the judge to lift the automatic ban in 20th paragraph.) Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said. U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, in a decision he said he knew would have a significant impact, wrote that the membership rules of the companys Mortgage Electronic Registration Systems, or MERS, dont make it an agent of the banks that own the mortgages. MERSs theory that it can act as a common agent for undisclosed principals is not supported by the law, Grossman wrote in a Feb. 10 opinion. MERS did not have authority, as nominee or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal. Merscorp was created in 1995 to improve servicing after county offices couldnt deal with the flood of mortgage transfers, Karmela Lejarde, a spokeswoman for MERS, said in an interview last year. The company tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell the loans without having to record the transfer with the county. It played a major role in Wall Streets ability to quickly bundle mortgages together in securitized trusts. MERS was still reviewing Grossmans decision and didnt have an immediate comment, Lejarde said in an e-mail Feb. 11. Lejarde didnt immediately respond to an e-mail seeking comment today. Proper Status Dont come around here no more, is basically the message to MERS, said April Charney, a senior attorney with Jacksonville Area Legal Aid in Jacksonville, Florida. The judge basically deconstructed MERS and said theres no possible way in any case you can come in and show you have this appropriate proper status to transfer the note. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgagerecording process, Grossman wrote. The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law. Automatic Shield In the case Grossman ruled on, Credit Suisse Group AGs Select Portfolio Servicing, a mortgage servicer, sought to bypass the automatic shield against legal claims triggered by Ferrel L. Agards filing for personal bankruptcy in September. Select Portfolio wanted permission to foreclose on Agards home in Westbury, New York, on behalf of U.S. Bancorps U.S. Bank unit, the trustee for the mortgage-backed trust the home loan was in. The house is worth about $350,000 and the mortgage amount was $536,921, according to the decision. Grossman ruled in favor of Select Portfolio because he couldnt overrule a November 2008 foreclosure judgment the servicer won in state court, he said. Without that statecourt ruling, Select Portfolio wouldnt have had the right to bring its motion, Grossman said. He then addressed whether a mortgage transfer by MERS is valid, because MERSs role in the ownership and transfer of real-property notes and mortgages is at issue in dozens of cases before this court, including those where there have been no prior dispositive state-court decisions, he wrote. Original Lender Select Portfolio argued in part that MERSs February 2008 assignment of the mortgage to U.S. Bank was valid because Agard agreed that MERS would hold title to it for the original lender, Bank of America Corp.s First Franklin, and for whichever banks it was further assigned to. First Franklin transferred the promissory note the mortgage secured to Lehman Brothers Holdings Inc.s Aurora Bank and Aurora to U.S. Bank, according to the decision. An adverse ruling regarding MERSs authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States, Grossman wrote. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS intervened in the case and argued that Agards mortgage, the terms of its membership agreement and New York state law gave it the authority to assign the mortgage. MERS says it holds title to mortgages for its members as both nominee and mortgagee of record. Select Portfolio Grossman said Select Portfolio had to show that U.S. Bank owned both the note and the mortgage, and there was no evidence that it held the note. The judge disagreed with Select Portfolios argument that U.S. Bank held the note because the note follows the mortgage, which it said U.S. Bank owned.

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 16 of 18

By MERSs own account, the note in this case was transferred among its members, while the mortgage remained in MERSs name, Grossman wrote. MERS admits that the very foundation of its business model as described herein requires that the note and mortgage travel on divergent paths. The judge said that the membership agreement wasnt enough to assign the mortgage and that to do so the lender would have to give power of attorney or similar authority to MERS. MERSs membership rules dont create an agency or nominee relationship and dont clearly grant MERS authority to take any action with respect to mortgages, including transferring them, Grossman wrote. Because the interests at issue concern real property land and buildings under state law, any transfer has to be in writing, which isnt done under the MERS system, he said. Nominee Status Without more, this court finds that MERSs nominee status and the rights bestowed upon MERS within the mortgage itself, are insufficient to empower MERS to effectuate a valid assignment of mortgage, the judge wrote. MERSs position that it can be both the mortgagee and an agent of the mortgagee is absurd, at best. Grossman said parties coming to him to seek to lift the automatic ban on legal claims in cases involving MERS will have to show they own both the mortgage and the note. The case is In re Agard, 10-77338, U.S. Bankruptcy Court, Eastern District of New York Central Islip). To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at tweidlich@bloomberg.net. To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net. Posted in Uncategorized | 1 Comment

Obama Administration Plan Provides Path Forward for Reforming Americas Housing Finance Market, Winding down Fannie Mae and Freddie Mac
February 11th, 2011

From www.treasury.gov 2/11/2011 Reforms Will Shrink the Governments Footprint in Housing Finance on a Responsible Timeline, Help Protect Taxpayers Plan Includes Critical Measures to Help Fix the Fundamental Flaws in the Mortgage Market, Better Target Governments Support for Affordable Housing WASHINGTON Today, the Obama Administration delivered a report to Congress that provides a path forward for reforming Americas housing finance market. The Administrations plan will wind down Fannie Mae and Freddie Mac and shrink the governments current footprint in housing finance on a responsible timeline. The plan also lays out reforms to continue fixing the fundamental flaws in the mortgage market through stronger consumer protection, increased transparency for investors, improved underwriting standards, and other critical measures. Additionally, it will help provide targeted and transparent support to creditworthy but underserved families that want to own their own home, as well as affordable rental options. This is a plan for fundamental reform to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it, said Treasury Secretary Tim Geithner. We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market. This report provides a strong plan to fix the fundamental flaws in the mortgage market and better target the governments support for affordable homeownership and rental housing, said Housing and Urban Development Secretary Shaun Donovan. We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford. This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners. The Obama Administrations reform plan will: 1. Wind Down Fannie Mae and Freddie Mac and Help Bring Private Capital Back to the Market. In the wake of the financial crisis, private capital retreated from the housing market and has not yet returned, leaving the government to guarantee more than nine out of every 10 new mortgages. That assistance has been essential to stabilizing the housing market. However, the Obama Administration believes that, under normal market conditions, the private sector subject to stronger oversight and standards for consumer and investor protection should be the primary source of mortgage credit and bear the burden for losses. The report recommends using a combination of policy levers to wind down Fannie Mae and Freddie Mac, shrink the governments footprint in housing finance, and help bring private capital back to the mortgage market. The Obama Administration is committed to proceeding with great care as we work toward the objective of ensuring that government support is withdrawn at a responsible pace that does not undermine the economic recovery. Phasing in Increased Pricing at Fannie Mae and Freddie Mac to Make Room for Private Capital, Level the Playing Field. The Administration recommends ending unfair capital advantages that Fannie Mae and Freddie Mac previously enjoyed by requiring them to price their guarantees as though they were held to the same capital standards as private banks or financial institutions. This will help level the playing field for the private sector to take back market share. Although the pace of these increases will depend significantly on market conditions, the Administration recommends bringing Fannie Mae and Freddie Mac to a level even with the private market over the next several years. Reducing Conforming Loan Limits. To further reduce Fannie Mae and Freddie Macs presence in the market, the Administration recommends that Congress allow the temporary increase in those firms conforming loan limits (the maximum size of a loan those firms can guarantee) to reset as scheduled on October 1, 2011 to the levels set in the Housing and Economic Recovery Act (HERA). We will work with Congress on additional changes to conforming limits going forward. Phasing in 10 Percent Down Payment Requirement: To help further protect taxpayers, we recommend requiring larger down payments from borrowers. Going forward, we support gradually increasing required down payments so that any mortgage that Fannie Mae and Freddie Mac guarantee eventually has at least a 10 percent down payment. Winding Down Fannie Mae and Freddie Macs Investment Portfolios: The Administrations plan calls for continuing to wind down Fannie Mae and Freddie Macs investment portfolio at an annual rate of no less than 10 percent per year. Returning Federal Housing Administration (FHA) to its Traditional Role. As Fannie Mae and Freddie Macs presence in the market shrinks, we will encourage program changes at FHA to ensure that the private sector not FHA picks up this new market share. The Administration recommends that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on October 1, 2011, after which it will explore further reductions. The Administration will also put in place a 25 basis point increase in the price of FHAs annual mortgage insurance premium, as detailed in the Presidents 2012 Budget. Throughout the transition, we remain committed to ensuring that Fannie Mae and Freddie Mac have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations. This assurance is essential to continued economic stability. We recognize the critically important role that Fannie Mae and Freddie Mac and their employees have played in the housing finance market while they have operated in conservatorship. We look forward to continuing to work with them to find ways to develop and implement the longer term reform solutions that the Administration determines together with Congress. 2. Fix the Fundamental Flaws in the Mortgage Market. The Obama Administration is committed to fixing the fundamental flaws in the housing finance chain. That process is already underway as we move to fundamentally transform the mortgage market through the Dodd-Frank Wall Street Reform and Consumer Protection Acts (DoddFrank Acts) critical reforms. Implementing these key measures, as well as additional reforms outlined in this report, will help to strengthen the long-term health of the mortgage market for borrowers, lenders, and investors. Helping Consumers Avoid Unfair Practices and Make Informed Decisions About Mortgages: The Administration will continue to implement the Dodd-Frank Acts reforms to strengthen anti-predatory lending protections, improve underwriting standards, require lenders to verify a borrowers ability to pay, and provide increased mortgage disclosures for consumers. Increasing Accountability and Transparency in the Securitization Process: The Administration is currently working on rules to require originators and securitizers to keep greater skin in the game and to align incentives across the

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 17 of 18

securitization chain. Dodd-Frank charged the SEC with setting stricter disclosure requirements so that investors can more easily understand the underlying risks of securities, and establishing an Office of Credit Ratings to more effectively regulate the credit rating agencies. Creating a More Stable Mortgage Market: The Administration supports stronger capital standards to help ensure that banks can better withstand future downturns, declines in home prices and other sudden shocks, without jeopardizing the health of the economy. Additionally, the comprehensive reforms undertaken pursuant to the DoddFrank Act to constrain excessive risk in the financial system, including strengthened and coordinated oversight through the Financial Stability Oversight Council (FSOC), will help build a healthier and more stable mortgage market for the long term. Servicing and Foreclosure Processes: The Administration supports several immediate and near-term reforms to correct problems in mortgage servicing and foreclosure processing to better serve both homeowners and investors. These include putting in place national standards for mortgage servicing; reforming servicing compensation to help ensure servicers have proper incentives to invest the time and effort necessary to work with borrowers to avoid default or foreclosure; requiring that mortgage documents disclose the presence of second liens and define the process for modifying a second lien in the event the first lien becomes delinquent; and considering options for allowing primary mortgage holders to restrict, in certain circumstances, additional debt secured by the same property. Forming a New Task Force on Coordinating and Consolidating Existing Housing Finance Agencies: Following on the Presidents call in the State of the Union to reform government to build a stronger future, the Administration will create a task force to explore ways in which the Department of Housing and Urban Development, the Department of Agriculture, and the Department of Veterans Affairs housing finance programs can be better coordinated, or even consolidated. 3. Better Target the Governments Support for Affordable Housing. The Administration believes that we must continue to help ensure that Americans have access to quality housing they can afford. This does not mean, however, that our goal is for all Americans to become homeowners. Instead, we should make sure opportunities are available for all Americans who have the credit history, financial capacity, and desire to own a home have the opportunity to take that step. At the same time, we should ensure that there are a range of affordable options for the millions of Americans who rent, whether they do so by choice or financial necessity. Moving forward, we must design access and affordability policies that are better targeted and focused on providing support that is financially sustainable for families and communities. The Administration recommends initially focusing our efforts on four primary areas: Reforming and Strengthening the FHA: We will continue to ensure that creditworthy borrowers who have incomes up to the median level for their area have access to affordable mortgages, but we will do so in a way that is healthy for FHAs long-term finances, including considering options such as lowering the maximum loan-to-value ratios for qualifying mortgages and adjusting pricing. Rebalancing our Housing policy and Strengthening Support for Affordable Rental Housing: The plan advocates additional support for rental housing through measures that could include expanding the FHAs capacity to support lending to the multifamily market, with reforms like risk sharing with private lenders and dedicated programs for hard to reach property segments like smaller properties. Ensuring that Capital is Available to Credit-worthy Borrowers in All Communities, Including Rural Areas, Economically Distressed Regions, and Low-income Communities: The plan calls for greater transparency by requiring securitizers to disclose information on the credit, geographic, and demographic characteristics of the loans they package into securities. The Administration will explore other measures to make sure that secondary market participants are providing capital to all communities in ways that reflect activity in the private market, consistent with their obligations of safety and soundness. Supporting a Dedicated Funding Source for Targeted Access and Affordability Initiatives: The plan calls for a dedicated, budget neutral, financing mechanism to support homeownership and rental housing objectives. The Administration will work with Congress on developing this funding mechanism going forward. 4. Longer-Term Reform Choices. The report also puts forward longer-term reform choices for structuring the governments future role in the housing market. Each of these options would produce a market where the private sector plays the dominant role in providing mortgage credit and bears the burden for losses, but each also has unique advantages and disadvantages that we must consider carefully. Deciding the best way forward will require an honest discussion with Congress and other stakeholders about the appropriate role of government over the longer term. The Obama Administration looks forward to working to build consensus, on a bipartisan basis, with a wide range of stakeholders on this issue. To read the Obama Administrations report on the future of housing finance, please visit, link. Obama Administration Plan Provides Path Forward for Reforming Americas Housing Finance Market, Winding down Fannie Mae and Freddie Mac 2/11/2011Reforms Will Shrink the Governments Footprint in Housing Finance on a Responsible Timeline, Help Protect Taxpayers Plan Includes Critical Measures to Help Fix the Fundamental Flaws in the Mortgage Market, Better Target Governments Support for Affordable Housing WASHINGTON Today, the Obama Administration delivered a report to Congress that provides a path forward for reforming Americas housing finance market. The Administrations plan will wind down Fannie Mae and Freddie Mac and shrink the governments current footprint in housing finance on a responsible timeline. The plan also lays out reforms to continue fixing the fundamental flaws in the mortgage market through stronger consumer protection, increased transparency for investors, improved underwriting standards, and other critical measures. Additionally, it will help provide targeted and transparent support to creditworthy but underserved families that want to own their own home, as well as affordable rental options. This is a plan for fundamental reform to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it, said Treasury Secretary Tim Geithner. We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market. This report provides a strong plan to fix the fundamental flaws in the mortgage market and better target the governments support for affordable homeownership and rental housing, said Housing and Urban Development Secretary Shaun Donovan. We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford. This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners. The Obama Administrations reform plan will: 1. Wind Down Fannie Mae and Freddie Mac and Help Bring Private Capital Back to the Market. In the wake of the financial crisis, private capital retreated from the housing market and has not yet returned, leaving the government to guarantee more than nine out of every 10 new mortgages. That assistance has been essential to stabilizing the housing market. However, the Obama Administration believes that, under normal market conditions, the private sector subject to stronger oversight and standards for consumer and investor protection should be the primary source of mortgage credit and bear the burden for losses. The report recommends using a combination of policy levers to wind down Fannie Mae and Freddie Mac, shrink the governments footprint in housing finance, and help bring private capital back to the mortgage market. The Obama Administration is committed to proceeding with great care as we work toward the objective of ensuring that government support is withdrawn at a responsible pace that does not undermine the economic recovery. Phasing in Increased Pricing at Fannie Mae and Freddie Mac to Make Room for Private Capital, Level the Playing Field. The Administration recommends ending unfair capital advantages that Fannie Mae and Freddie Mac previously enjoyed by requiring them to price their guarantees as though they were held to the same capital standards as private banks or financial institutions. This will help level the playing field for the private sector to take back market share. Although the pace of these increases will depend significantly on market conditions, the Administration recommends bringing Fannie Mae and Freddie Mac to a level even with the private market over the next several years. Reducing Conforming Loan Limits. To further reduce Fannie Mae and Freddie Macs presence in the market, the Administration recommends that Congress allow the temporary increase in those firms conforming loan limits (the maximum size of a loan those firms can guarantee) to reset as scheduled on October 1, 2011 to the levels set in the Housing and Economic Recovery Act (HERA). We will work with Congress on additional changes to conforming limits going forward. Phasing in 10 Percent Down Payment Requirement: To help further protect taxpayers, we recommend requiring larger down payments from borrowers. Going forward, we support gradually increasing required down payments so that any mortgage that Fannie Mae and Freddie Mac guarantee eventually has at least a 10 percent down payment. Winding Down Fannie Mae and Freddie Macs Investment Portfolios: The Administrations plan calls for continuing to wind down Fannie Mae and Freddie Macs investment portfolio at an annual rate of no less than 10 percent per year. Returning Federal Housing Administration (FHA) to its Traditional Role. As Fannie Mae and Freddie Macs presence in the market shrinks, we will encourage program changes at FHA to ensure that the private sector not FHA picks up this new market share. The Administration recommends that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on October 1, 2011, after which it will explore further reductions. The Administration will also put in place a 25 basis point increase in the price of FHAs annual mortgage insurance premium, as detailed in the Presidents 2012 Budget. Throughout the transition, we remain committed to ensuring that Fannie Mae and Freddie Mac have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations. This assurance is essential to continued economic stability. We recognize the critically important role that Fannie Mae and Freddie Mac and their employees have played in the housing finance market while they have operated in conservatorship. We look forward to continuing to work with them to find ways to develop and implement the longer term reform solutions that the Administration determines together with Congress. 2. Fix the Fundamental Flaws in the Mortgage Market. The Obama Administration is committed to fixing the fundamental flaws in the housing finance chain. That process is already underway as we move to fundamentally transform the mortgage market through the Dodd-Frank Wall Street Reform and Consumer Protection Acts (Dodd-Frank Acts) critical reforms. Implementing these key measures, as well as additional reforms outlined in this report, will help to strengthen the long-term health of the mortgage market for borrowers, lenders, and investors. Helping Consumers Avoid Unfair Practices and Make Informed Decisions About Mortgages: The Administration will continue to implement the Dodd-Frank Acts reforms to strengthen anti-predatory lending protections, improve underwriting standards, require lenders to verify a borrowers ability to pay, and provide increased mortgage disclosures for consumers. Increasing Accountability and Transparency in the Securitization Process: The Administration is currently working on rules to require originators and securitizers to keep greater skin in the game and to align incentives across thesecuritization chain. Dodd-Frank charged the SEC with setting stricter disclosure requirements so that investors can more easily understand the underlying risks of securities, and establishing an Office of Credit Ratings to more effectively

http://bankclassactions.com/articles/

5/20/2012

Bankclassactions

Page 18 of 18

regulate the credit rating agencies. Creating a More Stable Mortgage Market: The Administration supports stronger capital standards to help ensure that banks can better withstand future downturns, declines in home prices and other sudden shocks, without jeopardizing the health of the economy. Additionally, the comprehensive reforms undertaken pursuant to the Dodd-Frank Act to constrain excessive risk in the financial system, including strengthened and coordinated oversight through the Financial Stability Oversight Council (FSOC), will help build a healthier and more stable mortgage market for the long term. Servicing and Foreclosure Processes: The Administration supports several immediate and near-term reforms to correct problems in mortgage servicing and foreclosure processing to better serve both homeowners and investors. These include putting in place national standards for mortgage servicing; reforming servicing compensation to help ensure servicers have proper incentives to invest the time and effort necessary to work with borrowers to avoid default or foreclosure; requiring that mortgage documents disclose the presence of second liens and define the process for modifying a second lien in the event the first lien becomes delinquent; and considering options for allowing primary mortgage holders to restrict, in certain circumstances, additional debt secured by the same property. Forming a New Task Force on Coordinating and Consolidating Existing Housing Finance Agencies: Following on the Presidents call in the State of the Union to reform government to build a stronger future, the Administration will create a task force to explore ways in which the Department of Housing and Urban Development, the Department of Agriculture, and the Department of Veterans Affairs housing finance programs can be better coordinated, or even consolidated. 3. Better Target the Governments Support for Affordable Housing. The Administration believes that we must continue to help ensure that Americans have access to quality housing they can afford. This does not mean, however, that our goal is for all Americans to become homeowners. Instead, we should make sure opportunities are available for all Americans who have the credit history, financial capacity, and desire to own a home have the opportunity to take that step. At the same time, we should ensure that there are a range of affordable options for the millions of Americans who rent, whether they do so by choice or financial necessity. Moving forward, we must design access and affordability policies that are better targeted and focused on providing support that is financially sustainable for families and communities. The Administration recommends initially focusing our efforts on four primary areas: Reforming and Strengthening the FHA: We will continue to ensure that creditworthy borrowers who have incomes up to the median level for their area have access to affordable mortgages, but we will do so in a way that is healthy for FHAs long-term finances, including considering options such as lowering the maximum loan-to-value ratios for qualifying mortgages and adjusting pricing. Rebalancing our Housing policy and Strengthening Support for Affordable Rental Housing: The plan advocates additional support for rental housing through measures that could include expanding the FHAs capacity to support lending to the multifamily market, with reforms like risk sharing with private lenders and dedicated programs for hard to reach property segments like smaller properties. Ensuring that Capital is Available to Credit-worthy Borrowers in All Communities, Including Rural Areas, Economically Distressed Regions, and Low-income Communities: The plan calls for greater transparency by requiring securitizers to disclose information on the credit, geographic, and demographic characteristics of the loans they package into securities. The Administration will explore other measures to make sure that secondary market participants are providing capital to all communities in ways that reflect activity in the private market, consistent with their obligations of safety and soundness. Supporting a Dedicated Funding Source for Targeted Access and Affordability Initiatives: The plan calls for a dedicated, budget neutral, financing mechanism to support homeownership and rental housing objectives. The Administration will work with Congress on developing this funding mechanism going forward. 4. Longer-Term Reform Choices. The report also puts forward longer-term reform choices for structuring the governments future role in the housing market. Each of these options would produce a market where the private sector plays the dominant role in providing mortgage credit and bears the burden for losses, but each also has unique advantages and disadvantages that we must consider carefully. Deciding the best way forward will require an honest discussion with Congress and other stakeholders about the appropriate role of government over the longer term. The Obama Administration looks forward to working to build consensus, on a bipartisan basis, with a wide range of stakeholders on this issue. To read the Obama Administrations report on the future of housing finance, please visit, link. Posted in Uncategorized | No Comments

Maryland Class Action stops 10,000 GMAC foreclosures


January 20th, 2011

by David Dayen posted on DinsFla site In a major ruling Friday, a coalition of nonprofit defense lawyers and consumer protection advocates in Maryland successfully got over 10,000 foreclosure cases managed by GMAC Mortgage tossed out, because affidavits in the cases were signed by Jeffrey Stephan, the infamous GMAC robo-signer who attested to the authenticity of foreclosure documents without any knowledge about them, as well as signing other false statements. The University of Maryland Consumer Protection Clinic and Civil Justice, Inc., a nonprofit, filed the class action lawsuit, arguing that any case using Jeffrey Stephan as a signer was illegitimate and must be dismissed. In court Friday, GMAC agreed to dismiss every case in Maryland relying on a Stephan affidavit. They can refile foreclosure actions on the close to 10,000 homes, but only at their own expense, and subject to new Maryland regulations which require mandatory mediation between borrower and lender before moving to foreclosure. Civil Justice and the Consumer Protection Clinic also want any cases with affidavits from Xee Moua of Wells Fargo, who has also admitted to robo-signing, thrown out, but that case has not yet been settled. This was not the plan of GMAC and other banks caught using robo-signers last year. They hoped to undergo a pause in proceedings, run a quick double-check and then issue substitute documents in the same cases. That would have been a much more rapid solution for the banks and would have resulted in many more foreclosures. Now GMAC has to go back and basically file the entire case all over again, meaning they have to give notice of foreclosure to the borrower, engage the borrower in modification options, and basically run through the whole process from the beginning. They cannot use the shortcut solution, thanks to the class action suit filed. GMACs dismissal of every foreclosure in Maryland shows their doubts they would have won the class action. My questions are pretty simple, if one robo signer in one state caused 10,000 foreclosures to stop dead in their tracks what happens when exposing all robo signers (we know of at least 430) are used in all states to stop illegal foreclosures? Or used to have the foreclosures unwound? What happens to those who have already been foreclosed upon using an illegal robo signed substitution of trustees or assignments to foreclosure. What title insurance companies are about to eat a huge pile of predatory lender seasoned crapola? Tags: bank class action, gmac class action, jeffrey stephan, maryland class action gmac, mortgage class action, robo signer, xee moua Posted in class actions | 5 Comments Older Entries Home | Articles | My Account Activity | Consumer Complaint Volume By Lender | Search Class Actions | Contact Us | Privacy Policy | Terms of Use copyright 2010-2011, BankClassActions.com, Inc. All Rights Reserved

http://bankclassactions.com/articles/

5/20/2012

Vous aimerez peut-être aussi