Some Very Bad News For The "Sweep Fraudclosure Under The Rug" Brigade

Tyler Durden's picture


Here is why this is relevant:

This was an Amicus Curiae brief (friend of the court) filed by the Massachusetts Attorney General Martha Coakley. (see attached)
Page 10:
“Plaintiffs’ claims that the Land Court’s ruling will cause widespread confusion or significant cost to innocent parties are greatly exaggerated, and such reasoning does not warrant ignoring the plain requirements of the law designed to protect Massachusetts consumers. Indeed, it is the foreclosing entities themselves who will bear the greatest cost of clearing titled from their invalid foreclosures.   Having profited greatly from practices regarding the assignment and securitization of mortgages not grounded in the law, it is reasonable  for them to bear the cost of failing to ensure that such practices conformed to Massachusetts law.”
Page 4-5:
“Rose Mortgage was the original lender for the Ibanez mortgage and Option One Mortgage Corporation was the original lender for the LaRace mortgage.  Rose endorsed the Ibanez note and property assigned the mortgage to Option One.  Option One then executed an endorsement of both promissory notes in blank, making each “payable to bearer” and negotiated by transfer alone until specifically endorsed.”  In both cases, Option One also executed an assignment of the mortgage in blank (i.e. without a specified assignee).  These blank assignments were never recorded and were not legally recordable because they failed to identify the assignee [cites state law].”
“After Option One sold the Ibanez mortgage to Lehman Brothers.  Lehman Brothers then sold the mortgage, together with hundreds of other loans, to Structured Asset Securities Corporation (“SASC”).  SASC then sold these loans to the Structured Asset Securities Corporation Mortgage Loan Trust 2006-Z, of which plaintiff U.S. Bank National Association (“U.S. Bank”) was the Trustee. All off the supporting documents concerning the Ibanez mortgage were placed into a “collateral file” and presumably were transferred between the entities listed above as each transaction was completed.  This collateral file contained the original promissory note, the Rose Mortgage endorsement of the promissory note to Option One, Option One’s blank endorsement of the promissory note, the mortgage issued to Rose Mortgage Inc., the assignment of the mortgage from Rose to Option One and Option One’s blank mortgage assignment”
[Goes through similar for the LaRace mortgage]
Page 8:
The Land Court was correct to invalidate the foreclosure on two distinct grounds.  First, the plaintiffs lacked the legal authority to conduct the foreclosures because they were not among the parties authorized to do so under either the statutory power of sale or under G.L.c. 244 §14.  Second, even if the plaintiffs had the legal authority to foreclose (which they did not) the foreclosures would still have been invalid because the notices issued by the plaintiffs failed to name the present holder of the mortgage as required under G.L. c. 244 §14.  To foreclose on a mortgage securing property in the Commonwealth, one must be the holder of the mortgage.  To be the holder of the mortgage, one must be the original mortgagee or be the assignee under a valid assignment of the mortgage.  It is not sufficient to possess the mortgagor’s promissory note.  The Land court correctly held that the plaintiffs, U.S. Bank and Wells Fargo were not holders of the Ibanez and LaRace mortgages at the time of the foreclosure because they were not assignees of valid assignments of the mortgages.  Without valid assignments, the plaintiffs lacked the legal authority to foreclose the mortgages.  This, without more, is sufficient grounds on which to invalidate the foreclosures and the Land Court was correct to do so.”
Page 10:
“Plaintiffs’ claims that the Land Court’s ruling will cause widespread confusion or significant cost to innocent parties are greatly exaggerated, and such reasoning does not warrant ignoring the plain requirements of the law designed to protect Massachusetts consumers. Indeed, it is the foreclosing entities themselves who will bear the greatest cost of clearing titled from their invalid foreclosures.   Having profited greatly from practices regarding the assignment and securitization of mortgages not grounded in the law, it is reasonable  for them to bear the cost of failing to ensure that such practices conformed to Massachusetts law.”
Page 11:
“Plaintiffs had no legal authority to foreclose because they were not the original mortgagees, were not authorized by the power of sale, and because they lacked valid assignments of the Ibanez and LaRace mortgages.”
Page 12:
“Plaintiffs are not the mortgagees of the Ibanez or LaRace loans.”
Page 16:
“Neither plaintiff was authorized by the power of sale in the respective mortgages.”
Page 17:
The assorted securitization documents do not establish or compromise valid assignments.”
Plaintiffs contend that various securitization documents constructively assigned to them the Ibanez and LaRace mortgages.  Specifically, the plaintiffs contend that the Ibanez mortgage was assigned to U.S. Bank by way of a Trust Agreement that is not part of the record, but is purportedly evidenced by a Private Placement Memorandum.  They contend that Wells Fargo received the LaRace mortgage via a Purchase and Sale Agreement.  In each case, plaintiffs’ argument is without merit.”

The LaRace Securitization Documents
As the Land Court found, the LaRaces gave a mortgage to Option One when the loan was initially made.  Thereafter, Option One executed an assignment of the mortgage “in blank,” i.e., without naming the party to whom the mortgage was to be assigned.  As detailed above and by the Land Court, this “assignment in blank” was ineffective to transfer any interest in the mortgage.   Wells Fargo contends that the LaRace mortgage was assigned to it by the Pooling and Servicing Agreement it entered into with Asset Backed Funding Corporation (“ABFC”).  This agreement purports to transfer and assign all of the rights of ABFC to Wells Fargo.  However, there is nothing the record that ABFC had any interest in the LaRace mortgage.  Thus, even if the language in the Pooling and Servicing agreement was sufficient to transfer all of ABFC’s interests in the LaRace mortgage, the assignment would be ineffective because ABFC had no interest in the LaRace mortgage to transfer.”

Page 20:
“Not only did plaintiff’s lack legal authority to foreclose, but the foreclosures are invalid because the notices published prior to foreclosure are fatally deficient.”
-    G.L. c 244, §14 requires that the notice identify the “present holder” of the mortgage
-    Plaintiffs’ false identification of themselves as the “present holders” in their foreclosure notices renders the notices fatally deficient
-    Plaintiffs’ argument that they held the mortgages notwithstanding the lack of valid, written assignments as of the date of the foreclosures is unsupported by law.
Page 27:
“There are no grounds on which to limit the Land Court’s decision to future cases”
-    Plaintiffs request that if the Land Court’s decision is upheld, this Court limit its application only to future foreclosures.  This argument is without any basis in law and should be rejected.”
-    Notwithstanding the “industry practice” of subprime lenders and other who created mortgage backed securities, the statutory requirements at issue int his case are long –settled.

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JLee2027's picture

Jim Cramer was just pumping BAC last night.

HelluvaEngineer's picture

Yeah, I actually saw that.  Unfortuntately.  Something about BAC owning more homes than anyone, and since housing was about to make a complete recovery...

What bothers me about his show is that lately his callers all sound like they are 65-75 years old and chasing return to save their retirement.

Salinger's picture



WTF watching Cramer and reading ZH   talk about oxymoron

Almost Solvent's picture

Assuming that's not sarcasm, one should keep their friends close and their enemies closer.

How can you defeat your enemy if you do not study its ways?

TheProphet's picture

Yeah. Reading ZH is the Oxy... watching Cramer is the moron.

TheProphet's picture

Yeah. Reading ZH is the Oxy... watching Cramer is the moron.

JLee2027's picture

For the record, I didn't watch, I just flipped channels while making din-din. But I have in the past, it's a macabre fascination like watching a train wreck in slow motion.

Cognitive Dissonance's picture

Too much of Jim Cramer causes blindness. Oh, wait a minute. Mom told me too much of something causes blindness, but I can't remember what.

Anyone? Bueller? Bueller?

carbonmutant's picture

Cramer causes contradictory spikes in your neural net leading to memory loss which leads to a decline in various neurotransmitters such as Serotonin ( source of confidence). The other thing as well as drinking and excessive eating are attempts to boost serotonin back to normal levels.

jus_lite_reading's picture

The real news is that the Primary dealers submitted $25 BILLION into todays POMO!!


Tom Servo's picture

So I guess the false flag terror hit is going to happen soon, so to get this off the news (if it even makes the news....)


HelluvaEngineer's picture

Why?  Looks like the /ES is bouncing now and this will all be forgotten by Monday.

pan-the-ist's picture

When will the begin to investigate fraudulent mortgage origination?

tsx500's picture

uhhhh.....when will Megan Fox show up at my front door and unzip my fly  ?

docj's picture

Good call by the SJC.  Let's see if (hope) it's the start of a state tsunami.

JLee2027's picture

Yeah baby.

Stop your MERS Mortgage payment now. They can't foreclose....because they broke state property laws and no longer own your home. It's yours!

Arthor Bearing's picture

Well remember that there are still quantum meruit (unjust enrichment) contract claims by banks against mortgagors as well as equitable remedies. Courts have broad power to remedy unfair results. But this definitely gives momentum to the homeowners and it's very helpful that there's SJC endorsement of weighing the bankers' profits into the unjust enrichment balance. 

JLee2027's picture


The bank sold the mortgage and was paid by the buyer. There is no unjust enrichment, except by the bank...who sold junk that cannot be foreclosed on. I didn't do anything wrong. 

Sig Sauer's picture

sorry, but your obligation doesn't just disappear.  best case is it is now an unsecured obligation.

Skeebo's picture

Which means if you are willing to take a significant credit hit... you own your house free and clear.

What's the value of a couple hundred grand extra over several years in your pocket vs your credit score?

Course, you'd never be able to move again, but still... their could be an interesting cost benefit analysis run there, especially if you were say... in you were 65+ and liked your current home...

JLee2027's picture

Me thinks the banks would be around much longer, and if you have enough of a PM stash you can in the future. 

TeMpTeK's picture

Your Honor.. Im not saying I dont owe a payment.. Im saying I dont owe a payment to the Plaintiff...

Bye Bye MERS

docj's picture

Methinks you'd best to a very thorough title search before trying that little stunt.

Strider52's picture

So, who actually owns the home, since the title wasn't properly transferred? The last legal title-holder?

ReallySparky's picture

Virginia, there is a Santa Claus.

FaithEqualsZero's picture

Is there an honest court still out there? Whats the catch?

Cognitive Dissonance's picture

Supreme Court, Ponzi banks, Congress giving it all away, martial law, SEC Porn, DOJ is DOA etc. Take your pick which "catch" you wish to examine today.

tamboo's picture

An attorney was sitting in his office late one night, when Satan appeared before him. The Devil told the lawyer, "I have a proposition for you. You can win every case you try, for the rest of your life. Your clients will adore you, your colleagues will stand in awe of you, and you will make embarrassing sums of money. All I want in exchange is your soul, your wife's soul, your children's souls, the souls of your parents, grandparents, and parents in law, and the souls of all your friends and law partners." The lawyer thought about this for a moment, then asked, "So, what's the catch?"

I Am The Unknown Comic's picture

Tamboo, that's the first time you made me laugh.  Believe it or not, I haven't heard that joke before.  I will be using it all weekend, and will mention you as the source.  Thanks. Cheers.

zero-g's picture

Nice, first good laugh of the day!

LMAO's picture

Whats the catch?


Well if this shit is going to stick (which I seriously doubt as the fine gov. of the USSA will be working on a backdoor deal in which the perpetrators will receive a thumbs up and carry on deal) and the mortgage/banking industry has to take a serious hit, the taxpayer of course will be forced to the rescue.

Business as usual.

Carry on, nothing to see here.



JLee2027's picture

Federal Government can't do laws are state law; not a Federal issue.

We should all thank the Founding Fathers today. This was one of the protections built into the system.

Widowmaker's picture

Don't be an ass-clown.  Anything involving money is a Federal issue.   If your state is in the red it belongs to the Fed. 

They can, and will taketh away (pick any entitlement from highways to health care).

JLee2027's picture

What kind of sad country are you from? That's simply not true in the United States. Real Property Rights are the strongest in the world here.

TeMpTeK's picture

Over 200 years of well settled contract and property case law cannot be undone...without a revolution by morning..

Broken title is Broken title.. You cant stiff the locality of its filing/recording fees which are required by law....then try to get its courts to back u up.. Every DA in the country will defend its own couffers..The banks are Beat!


MachoMan's picture

How the hell is it going to get overturned?  On some procedural issue?  The providence of recording acts and the like are held by states... 

If the feds want to implement a national solution, then it will only apply to prospective foreclosures...  further, it will probably overstep federal authority and be patently unconstitutional...  and, in that case, you can expect the SCOTUS to strike it down (yes, that SCOTUS).

That is not to say that any other state has to follow this decision...  as all have different rules...  but, it is clearly an important step in the process and, in all likelihood, the facts present in the ibanez case will be incredibly similar to those throughout the country, including the applicable land statutes.

TeMpTeK's picture

Agreed.. A national solution would never pass muster..

Jason T's picture

should I but TOL before it gets upgraded because its been up the last few weeks?

americanspirit's picture

Honest judges. Military intelligence. Both oxymorons.

LFMayor's picture

Go stick that military intelligence cliche right up your ass, next to your head. Included is my most heartfelt junk, dicksmack.

chumbawamba's picture

Jeez, dude.  It's not like he's the first person to ever use that phrase.

Hits home, does it?

I am Chumbawamba.

youngman's picture

I still think the Feds will intervene and put this to bed somehow.....

Eternal Student's picture

They will certainly try. The question is whether they will be successful. If the Feds don't try, they (I.e. we) will probably get stuck with the tab for the clean up, one way or another. So there's a huge financial incentive for them to try and change the law.

The problem here is that this is under centuries (at least) of Common Law. Common Law is what says that "the rain may enter your house, but the King may not". People in the Judicial arena really do take this stuff very, very seriously. And not just them. Many make a very strong argument that it is this type of law which separates success and failure when it comes to Capitalism.

So even if the Banks are able to get the law changed, it will absolutely be challenged, and any changes have a very good chance of being struck down.

Personally, I think the Banks are completely screwed. But beware a wounded animal, especially a crazy one.

MachoMan's picture

All this means is that the notes are going to get put back on the originators or the first to securitize, whichever is latter...  which then entails them going out of business given the underwater nature of the collateral/debtor.  This leaves a few scenarios: (1) get a GSE to go ahead and be assigned the things to save the originators or (2) let them fail and have the TBTF (or wealthy private actor) come in and pick them up for pennies on the dollar, thus increasing their level of capitalization and systemic risk.  The size of the originator will determine which scenario occurs. 

MaximumPig's picture

My guess is that the fix will come in the form of an exception to the REMIC tax rules, which currently have severe adverse consequences for adding collateral to a REMIC trust more than 90 days after closing.  If the IRS (which is part of Tim Geithner's Treasury) creates an exception for these situations (i.e. where the assignments of mortgages to the trusts are flawed, leaving the trust without proper standing to foreclose), the banks can then go back and paper over the assignments properly, get the mortages into the trust, and then have a clear path to foreclosure.  It will still be time-consuming and probably a little more costly than now but it is not a wholesale wipeout of collateral as it currently is, at least in Massachusetts after this case.