The Subprime Trump Card: Standing up to the Banks [How to Fight Forclosure]

The Subprime Trump Card: Standing up to the Banks

www.globalresearch.ca

New case law indicates that a majority of the 750,000 homeowners expected to lose their homes this year could have a valid defense to foreclosure. As much as $2 trillion in real estate may be vulnerable to this defense, providing a very big stick for a lobby of motivated debtors. Mobilizing that group, in turn, could light a fire under the investors in mortgage-backed securities -- the pension funds, money market funds and insurance companies left holding these "orphan" mortgages. These investors also wield a very big stick, in the form of major law firms on retainer. When the embattled banks demand a bailout because they are "too big to fail," the taxpayers can respond, "You have already failed. It is time to try something new."

(visit the link for the full news article)



[edit on 26-6-2008 by SystemiK]

This is VERY important news to anyone who may find themselves facing forclosure, either now, or in the near future. I've heard briefly about this problem with forclosures once before but not in such detail as in this article. I also did not realize how commonly the lending institutions have screwed up in covering themselves.

With 1.5 million homeowners expected to enter forclosure during 2008 (and half of those expected to see their homes repossed) there are many, many people who might have a chance at saving those homes.

The Legal Trump Card: Make Them Produce the Note

A basic principle of contract law is that a plaintiff suing on a written contract must produce the signed contract proving he is entitled to relief. If there is no signed mortgage note or recorded assignment, foreclosure is barred. The defendant must normally raise this defense, and most defaulting homeowners, being unable to afford attorneys, just let their homes go uncontested. But when the plaintiffs bringing subprime foreclosure actions have been challenged, in most cases they haven’t been able to produce the notes.

In short, these loans have been bought and sold and shuffled around between financial institutions many times. In the interim, many of the originators of mortgages have also closed up shop. There seems to be many cases where a mortgage was never legally assigned to the new holder as well as cases where the paperwork is simply lost.

A Florida legal aid attorney has been able to obtain dismissals for 300 of her clients last year. She said: "about 80 percent of these cases involved lost-note affidavits. Lost-note affidavits are pattern and practice in the industry, they are not exceptions, they are the rule."

This all came to light last fall when a federal judge in Cleveland stopped forclosure on 14 homes by Deutsche Bank due to tit's inability to produce documentation which would establish it's right to sue. (I believe this is the case I read about earlier). Since that time, many other states have taken notice of this precident. In the past, such cases were 'let slide' by the judges, it seems that this may no longer the case and it could save you from losing your house!

It appears to be more than just sloppy paperwork. The banks that originally entered into these risky subprime arrangements generally did so because they had no intention of holding the loans on their books. The mortgages were immediately sliced and diced, bundled up as mortgage-backed securities (MBS), and sold off to investors. Loan originators sold the mortgages to financial institutions or other banks, which then sold the rights to the monthly mortgage payment income to investors, while transferring the responsibility to collect these payments to specialized mortgage servicing companies. The result has been to slice up the mortgage contract, with no party really having ownership of the original paperwork. When foreclosure has been initiated, the servicer or trustee acting as plaintiff now has trouble proving that it originated the mortgage or owned the loan. In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit in court, it must have been assigned the mortgage; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company. Other paperwork has just been lost in the shuffle.

The article goes into much more detail about the process, I highly suggest you take the time to read it.

In a nutshell, this is the crux of the defense:

Some states are judicial foreclosure states and some are non-judicial foreclosure states. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.

It's almost unimaginable that such a situation has occured, but it is yet another indictment of the mess these predatory lenders have created during their mad rush to make money off the unsuspecting. They may well have found themselves in quite a pickle here.

The author of the article, Ellen Brown, suggests that there will be a follow up article in the future.


Please flag this story and please send links of the article to anyone you know who is in danger of losing their homes. You will not likely see this in the MSM and it is something which everyone needs to be aware of...


www.globalresearch.ca
(visit the link for the full news article)


[edit on 26-6-2008 by SystemiK]

So, basically, those who created the mess in an attempt to "get rich quick" and who subsequently sold the debt to another (who then resold that debt and again...and again etc) can not reclaim that property without the paperwork supporting their claim of ownership? Holy Moly! what a mess
I bet there are a few people in the financial industry having brown-trouser moments reading and digesting that little snippet.

Right and lawful though it may be, the laws can easily be changed to close this loophole in favour of the banks and financial institutions issuing repo notices. when did the big guys ever lose out?

reply to post by SystemiK


Great info. thanks for posting it.
Do you know what will happen to the ballence on the loan if the foreclosure is stopped?
Just wondering if the home owner will have to keep paying is all.

reply to post by RedGolem


That is going to be the real quandry here. If forclosure proceedings are started because the homeowner cannot make the payments, and then forclosure is dismissed by the court, who takes the loss? I'm assuming that it is the bank or institution which will absorb the losses. The article touches on this in the last section. I imagine this question will be addressed in the follow up article.

In the meantime I'll see if I can dig up any news items about cases where forclosure has been stalled in the courts and what stipulations they have made regarding future payments.

reply to post by SystemiK


Systemik
Im no expert or anything of the sort. But my guess is going to be the home owner will still be responsible for the loan. The means the intrist will continue to compound. Meaning the loan will never be able to be paid in the home owners life time. I also think a more likely coarse of action will be for the current holder of the mortgage to go back and find where all the origioinal papers are, and do the foreclosure that way.
If the former happens, it means the property will have a lean against it so at the passing of the people who have the loan the bank will be able to claim it from the estate. Or perhaps bankrupt proceedings.

This Bloomberg article seems to be the one which broke the story:

Link

The person in the article, has not made a payment on his $1.5m mortgage since 2002. I believe you are right that the interest would be accruing over that time but he still has his house in 2008.

I agree with his statement: "If you're going to take my house away from me, you better own the note''. Obviously they can not produce the paperwork for one reason or another.

The crux of the matter here is that financial institutions are going into foreclosure procedings and offering a lost-note affidavit in lieu of an the actual note and this was being 'rubber stamped' by the judges. People have the right to challenge this (and should). People could be getting screwed here (alternatively there are people gaming the system).

This will surely be getting more coverage over the next few months...




[edit on 26-6-2008 by SystemiK]

Originally posted by SystemiK
This Bloomberg article seems to be the one which broke the story:

Link

The person in the article, has not made a payment on his $1.5m mortgage since 2002. I believe you are right that the interest would be accruing over that time but he still has his house in 2008.

I agree with his statement: "If you're going to take my house away from me, you better own the note''. Obviously they can not produce the paperwork for one reason or another.

Does that guy pay for property tax? See how long you go without paying the Government and see who Really owns your home.

reply to post by 38181


Excellent point. No question at all about that one....