WE are all learning, to our deep distress, how the perpetual pursuit of profits drove so many of the bad decisions that financial institutions made during the mortgage mania.
But while investors tally the losses that were generated by loose lending so far, the impact of another lax practice is only beginning to be seen. That is the big banks’ minimalist approach to meeting legal requirements — bookkeeping matters, really — when pooling thousands of loans into securitization trusts.
Stated simply, the notes that underlie mortgages placed in securitization trusts must be assigned to those trusts soon after the firms create them. And any transfers of these notes must also be recorded.
But this seems not to have been a priority with many big banks. The result is that bankruptcy judges are finding that institutions claiming to hold the notes that back specific mortgages often cannot prove it.
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Unfortunately, unless you represent borrowers, the vast flow of notes into the maw of the securitization industry meant that a lot of mistakes were made. When the borrower defaults, the party seeking to enforce the obligation and foreclose on the underlying collateral sometimes cannot find the note. A lawyer sophisticated in this area has speculated to one of the authors that perhaps a third of the notes “securitized” have been lost or destroyed. The cases we are going to look at reflect the stark fact that the unnamed source’s speculation may be well-founded.
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Folks, this is it. This is no sensationalist story. There is no exaggeration here. This is happening thousands of times each month in our court systems! Only, the homeowners are real, the institutions are real and they are really illegally seizing and evicting homeowners. The DO NOT own these loans or mortgages yet they are alleging they do. The Court Systems are NOT requiring them to prove it with valid documentation. When they do produce some documentation, it is fabricated and lacks authenticity. I can prove it nearly every time.
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Luis Molina is not a lawyer and he has never played one on TV.
But that didn’t stop him from putting on his best suit, marching into a Miami courtroom this month and going up against an attorney with 30 years of experience to stop a foreclosure proceeding against his family’s home. Molina did such a good job of representing himself that the judge in the case thought he was a lawyer and punctuated his ruling in Molina’s favor by tearing up the other side’s motion for summary judgment and throwing it over his shoulder.
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In the confusing sea of paperwork transferring mortgage notes from lender to holder to securitized pool, many consumers aren’t at all sure exactly which entity owns their mortgage notes, or how one entity is related to another.
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Another simple but important issue to investigate is the Note that the Plaintiff actually attaches (if and when they do attach a copy of the Note). What you want to zero in on are the endorsements on the Note (or usually, the lack thereof). Understanding the securitization process is key in what you’re looking for on the Note. The endorsements should absolutely follow the chain of ownership from Originator to Seller to Sponsor/Master Servicer to Depositor to Trustee. If you’re not seeing at least 3 endorsements on the Note then you know that this is NOT an original Note regardless of what’s alleged and/or claimed as to its authenticity. We know Portfolio Lending is a dinosaur and literally >95% of all residential loans made since the late 1990′s are/were securitized. Given these facts, we know exactly what to look for.
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