Daily Archives: October 7, 2013

Link

Glaski Decision Appears to Place Lenders on Notice to Verify Accuracy and Effectiveness of Loan Assignments

Glaski Decision Appears to Place Lenders on Notice to Verify Accuracy and Effectiveness of Loan Assignments

 

by:
Duane Morris LLP – Philadelphia Office

 
September 11, 2013

Previously published on September 10, 2013

The recent decision in Glaski v. Bank of America, National Association, et al., 160 Cal. Rptr. 3d 449 (2013), may, at least in certain circumstances, impact the ability of residential mortgage-backed security and commercial mortgage-backed security lenders to keep pooling and servicing agreements out of two-party borrower-lender disputes, and appears to place lenders on notice to verify the accuracy and effectiveness of their loan assignments.

In Glaski, the borrower’s residence was foreclosed upon (due to nonpayment) by the successor to a securitized trust. After the foreclosure, the borrower filed a complaint for fraud, quiet title, wrongful foreclosure, declaratory relief and cancellation of foreclosure documents against the successor to the securitized trust, among other entities (the “Lender Defendants”). The Lender Defendants filed a demurrer (a motion to dismiss) to the complaint, which the lower court granted without leave to amend. The borrower appealed the decision to the California Court of Appeal, which vacated the order granting the demurrer on certain of the causes of action, allowing the borrower’s complaint to survive at least in part.

Of particular note is that the Court of Appeal reversed the lower court on the count, alleging wrongful foreclosure. 160 Cal. Reptr. 3d at 459. Key to this reversal was whether the mortgage was properly transferred into a securitized trust, which impacted the borrower’s standing to assert the cause of action. The loan was initially made by Washington Mutual Bank, FA (WaMu) in 2005. In late 2005, the WaMu Mortgage Pass-Through Certificates Series 2005-AR17 Trust was formed under New York law (the “Securitized Trust”). The loan documents in question, though, were not transferred into the Securitized Trust at that time. In September 2008, WaMu was seized by the FDIC, and its assets were sold to JPMorgan Chase Bank, N.A. (“Chase”). Also in September 2008, the borrower spoke to Chase, or an agent of Chase, about modifying his loan, and he continued to speak to Chase about modifying the loan through May 2009. Nevertheless, in December 2008, the borrower’s loan documents were transferred by Chase to the Securitized Trust. On the same date that the loan documents were transferred to the Securitized Trust, a notice of default and election to sell under deed of trust was filed (a non-judicial foreclosure). On June 15, 2009, Chase as trustee transferred the loan documents to Bank of America as Trustee. Also on June 15, 2009, a trustee’s deed upon sale was recorded. 160 Cal. Reptr. 3d at 455. The borrower’s complaint alleged that the foreclosure was wrongful because the loan documents had not been properly transferred into the securitized trust, and the foreclosure was initiated by a party that did not hold the deed of trust. 160 Cal. Reptr. 3d at 454-55.

In particular, the borrower contended that because the loan was not transferred by the Securitized Trust’s cutoff date provided for in the Pooling and Servicing Agreement governing the Securitized Trust (which was 90 days after December 2005), the purported transfer to the Securitized Trust was void, resulting in the foreclosure being void as well. In order for the borrower’s allegations to succeed, and for the borrower to have standing, the borrower must have asserted a defect that would actually void the assignment of the loan documents, not merely render the assignment voidable. The Court of Appeal noted that there were two lines of cases: those holding that New York law provides that where a pooling and serving agreement establishes a closing date after which the trust may no longer accept loans, a trustee’s attempt to accept a loan after the closing date is void; and those that hold such attempted transfers simply are voidable. 160 Cal. Reptr. 3d at 463. The Court of Appeal joined those courts that found such attempted transfers to be void.

The Court of Appeal found that the borrower’s “factual allegations regarding post-closing date attempts to transfer his deed of trust into the WaMu Securitized Trust are sufficient to state a basis for concluding the attempted transfers were void. As a result, Glaski has stated a cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e., Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the Glaski deed of trust.” 160 Cal. Reptr. 3d at 463.

The court concluded:

“[t]hat a borrower may challenge the securitized trust’s chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust’s closing date. Transfers that violate the terms of the trust instrument are void under New York trust law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement.”

160 Cal. Reptr. 3d at 452.

Link

Iceland bounces back from the banking brink

Iceland bounces back from the banking brink

A new mood of proud nationalism is emerging in economically resurgent Iceland after an out-of-control banking system sank the country into financial meltdown exactly five years ago. Riding this wave of confidence is 38-year-old prime minister, Sigmundur Davíd Gunnlaugsson, elected in April on populist promises of mortgage relief for every homeowner.

Gunnlaugsson earned his spurs in years of outspoken campaigning against the foreign creditors who still haunt Iceland, particularly the British and the Dutch governments, which intervened after the collapse of Landsbanki – the bank behind Icesave – on 7 October 2008.

Hundreds of thousands of ordinary British and Dutch savers had previously switched their savings into online Icesave accounts, attracted by market-beating interest rates and promises that: “You can also rest assured that with Icesave you are offered the same level of financial protection as every bank in the UK.”

When the crash came, however, Iceland’s deposit guarantee proved worthless, forcing the UK and the Netherlands to use their own taxpayer funds to compensate ordinary savers and sparking a poisonous diplomatic row.

It was a spat that, against the odds, Iceland won. While many other politicians in Iceland had urged a policy of appeasing the enraged British and Dutch governments, Gunnlaugsson had insisted they should go hang. “Icelanders, as descendants of the Vikings, are highly individualistic and have difficulty putting up with authorities, let alone oppression,” he said in one of his first speeches as prime minister on Iceland’s Independence Day in June this year.

Is the Promissory Note Even Enforceable?

Deadly Clear

Judge UnEnforceableWhen all is said and done the courts come back to the main premise, “Did you pay?”. That is so injudicious on so many levels. The deeper we get into securitization and contract law we soon realize (after dissection) there is one very basic question being ignored – “Is the Promissory Note even enforceable?”

Sheila Bair’s (former FDIC Chairperson) new book, Bull By the Horns, addresses issues that must be taken into careful consideration when considering the validity of foreclosures – and she does it with impressive candor. Sheila separates the MBS into 2 categories:

View original post 2,757 more words

Video

Sen Landrieu on Senate Floor: Biggert Waters Flood Act ‘Never Voted On’ ‘Went Dark’, ‘Tucked into Transportation bill’

The allegations in this video…BY A UNITED STATES SENATOR….are terribly, terribly disturbing….A United States Senator alleges that the US Senate never actually voted on the Biggert Water Flood Legislation. Watch the video of US Senator Landreau.

Link

Disability, USA: 60 Minutes story on federal disability program that could become the first federal benefits program to run out of money

Disability, USA: 60 Minutes story on federal disability program that could become the first federal benefits program to run out of money

There is a Senate hearing scheduled tomorrow on a subject of some importance to millions of Americans, but with the government shutdown it’s not clear that the Senate Committee on Government Affairs will be able to pay for a stenographer to record the event. The hearing involves the Federal Disability Insurance Program, which could become the first government benefits program to run out of money. When it began back in the 1950s it was envisioned as a small program to assist people who were unable to work because of illness or injury.

 

Today, it serves nearly 12 million people — up 20 percent in the last six years — and has a budget of $135 billion. That’s more than the government spent last year on the Department of Homeland Security, the Justice Department, and the Labor Department combined. It’s been called a “secret welfare system” with it’s own “disability industrial complex,” a system ravaged by waste and fraud. A lot of people want to know what’s going on. Especially Sen. Tom Coburn of Oklahoma.

 

Tom Coburn: Go read the statute. If there’s any job in the economy you can perform, you are not eligible for disability. That’s pretty clear. So, where’d all those disabled people come from?

 

The Social Security Administration, which runs the disability program says the explosive surge is due to aging baby boomers and the lingering effects of a bad economy. But Sen. Tom Coburn of Oklahoma, the ranking Republican on the Senate Subcommittee for Investigations — who’s also a physician — says it’s more complicated than that. Last year, his staff randomly selected hundreds of disability files and found that 25 percent of them should never have been approved — another 20 percent, he said, were highly questionable.

Link

Mizuho Bank admits senior execs knew of shady loans

Mizuho Bank admits senior execs knew of shady loans

TOKYO — Mizuho Bank said that at least four senior executives in charge of legal compliance knew about loan transactions with crime-syndicate members for more than two years from 2010 but that they didn’t alert the bank’s chief executive or its board.

A week after the Financial Services Agency slapped the core banking unit of Mizuho Financial Group Inc. JP:8411 -0.48%   MFG +0.47%  with an order to submit a plan to improve its operations, the explanation was the first time that the bank has provided any insight into how senior management came to know about the loans extended through its credit loan unit.

The scandal has attracted the attention of people in the highest levels of Japan’s government, with even the head of the country’s central bank weighing in on the matter.

Toshitsugu Okabe, the bank’s deputy president, told reporters on Friday that some senior executives, including deputy presidents who were in charge of compliance at various points in time from 2010, had learned of the transactions linked to criminal groups.

Link

Indicted attorney points a finger at JPMorgan in mortgage fraud

Indicted attorney points a finger at JPMorgan in mortgage fraud

Over five years, federal prosecutors in Pittsburgh have convicted more than 100 mortgage industry brokers, appraisers, closing agents and real estate attorneys — but just a handful of bank employees, and all of those at the branch level.

Late last month, one attorney charged with fraud suggested in court filings that global financial giant JPMorgan Chase Bank was more complicit in the last decade’s mortgage crime wave than some people who have been charged criminally.

Arthur Smith, a Downtown-based real estate attorney facing wire fraud, bank fraud, conspiracy, money laundering and tax charges, has subpoenaed the bank, whose loan losses are at the center of the indictment against him. He’s demanding documentation of any federal investigations stemming from its transactions in Western Pennsylvania.