Disclaimer: I’m a paralegal, not an attorney and cannot give you legal advice. Nothing on this website is meant to be legal advice, and there is no guarantee that the information on my blog will work for your individual situation. Please consult with an attorney if you have questions about your individual situation.
If you're new here, welcome! My name is Christine, and I help people by analyzing their mortgage and foreclosure documents to find the errors, loopholes and mistakes made by the banks.
It has been awhile since we've seen foreclosure issues coming up, and so I'll be working to add more content on foreclosure defense topics.
They are affordable and a resource you can access right now if you're wondering about your own loan and whether there are defenses available to you.
You may want to look at your own loan before you hire me or another property analyst to look for leverage in fighting a foreclosure.
Last week I received an e-mail from a reader asking me several foreclosure related questions. I can't answer them all in one blog post, but we'll start with his question about chain of title issues.
The most important point I want to make is that chain of title issues are the #1 way homeowners gain leverage.
What do I mean by "chain of title issues"?
There is (or used to be) a specific way that loans were handled by a bank. Back in the day, a bank loaned its own money to borrowers to purchase homes.
They kept the Note and recorded Deed/Mortgage PHYSICALLY TOGETHER, probably in their safe, until the loan was paid off. They were generally the lender for the life of the loan.
The note was never recorded, only the DOT/Mortgage.
The DOT/Mortgage is instructions on what to do if you stop paying on the note. It is evidence of the existence of the note. The note is the document that secures your loan on your property.
If you stop paying your loan, the bank must follow the terms in the DOT/Mortgage contract in order to repossess the structure securing your payment of the note. This process is called foreclosure.
When banks began securitizing residential mortgages, they stopped keeping these two parts of your loan in the same physical location. The DOT/Mortgage was recorded. The original note was scanned and often destroyed.
Generally, under the Uniform Commercial Code ("UCC"), if these two documents are not kept together, they are split. When they are split, the Deed/Mortgage is not enforceable. You cannot foreclose on the Deed/Mortgage by itself under the UCC.
Remember, I'm not a lawyer and this is not legal advice.
This means that the foreclosing entity generally must demonstrate that they have both the note and DOT/Mortage in order to foreclose AND they must be transferred/endorsed AT THE SAME TIME.
In all of the hundreds of audits I have done, I have NEVER seen this done correctly. Much of what I do as a loan auditor is track down dates and make sure timelines line up. I have seen many fake documents presented as evidence of standing to foreclose.
If you take nothing else away from this post, know that chain of title issues are the best and easiest way to get leverage against the banks. They are so sloppy that they will create and record documents full of inaccuracies and then attempt to foreclose. They basically do it all for you.
That's why I would skip securitization audits, quiet title audits and every other kind of audit that might be available to homeowners.
Once the bank starts the foreclosure process and begins filing paperwork, that is where the most leverage is found. You might not find anything until the TOD is recorded, unless you were previously in foreclosure.
If that happens, check the accuracy of current foreclosure documents against what they have already recorded and make sure there are the proper transfers recorded that line up with their previous representations.
There should be an unbroken chain of transfers publicly recorded on the property. If not, there are problems for the bank. You must raise these issues before foreclosure, so this is where you may need an attorney's help.
Most of the information you will need is publicly available. You don't need a Bloomberg terminal or anything like that.
You can 100% audit your own loan if you want, if you know what you are looking for. (Get my book if you want to DIY!)
Also, keep in mind that the main reason a lot of arguments, especially securitization arguments, don't work is because the judge does not have the time familiarize themselves with how it all works. If you show up with a cardboard chart with arrows and boxes, the judge will probably be pissed at you. These arguments are far too complex.
The simpler arguments backed by facts and evidence work the best. The burden is on the foreclosing party to prove they have standing.
I'm not saying you should represent yourself here, just that you should keep it simple with your leverage. Don't try to educate the judge or opposing counsel.
On the subject of opposing counsel, I can't tell you how many times I saw lawyers getting duped by their bank clients. Their own lawyers didn't realize what they were doing until the homeowner's attorney produced evidence that made their lawyers look very bad. It's not your job to educate them, so let them look like fools.
You can get most of your leverage from the recorder's office. Usually the bank is the party that fabricated or caused the documents to be fabricated, and then had the documents publicly recorded. The optics are really bad for them.
They also got sued for these kinds of misrepresentations and are supposed to clean up their act, but I doubt they have changed anything.
The inaccuracies in foreclosure documents are widespread because of the way mortgages were originated. Depending on where you got your mortgage, the brokers were often making loans out of a pool of money that was intended for securitization.
There was a pretender lender, usually the bank that brokered your mortgage, and that's who most homeowners thought was their lender. The loan was never really owned by that bank, though. The lender was from the pool of money from investors, pension funds or whoever was funding the pool.
You can find out who the investor is for your loan by searching the MERS database (not sure if MERS is still used now) and then searching the EDGAR database for the pool, and then obtaining the Pooling and Servicing Agreement ("PSA").
The PSA contained all the rules for the administration of the mortgage pool, including the kinds of loans that would go into the pool.
When you start researching the securitization, you begin to see things from a different angle, and it's really interesting.
So, although the loans were already owned by the pool, they didn't disclose the real investor at closing. They used a pretender lender and just tracked ownership of the loans in the MERS database. The loans were usually transferred a couple of times, as detailed in the PSA. If you know where to look and the PSA is available, you don't need a securitization audit to tell you the transfers in your loan.
They didn't publicly record transfers of the loans until foreclosure, another reason why it's so easy to find inaccuracies in the foreclosure documents.
Keep in mind that the incentives to foreclose now are different than they were in the last recession. We had a major crash and at first, the narrative was about deadbeat homeowners. Then, we had the dreaded contagion, which spread to everyone, including the wealthy.
Also, we don't know what the banks will do this time around. I doubt much has changed. Unless the government forces banks to assist people in foreclosure, like the moratoriums during the pandemic, the foreclosure process will probably be the same.
The other thing is, any government mandate MUST give homeowners the right to sue, otherwise it's just toothless. The HAMP program was supposed to make banks do a better job of helping people with loan modifications, but it had no provision for homeowners to sue banks for their non-performance.
That's all I have for this post!
If you have general questions about foreclosure, send me an e-mail: christine (at) Desert Edge Legal [dot] com. I'll do my best to answer them in a blog post so that everyone can benefit from the information.