Show Me the Note Litigation

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Show Me the Note Litigation

I know how popular this topic is, so I wanted to devote a bit of insight on a discrete thread.

In California, there are a handful of lawyers doing nothing but fighting the banks over the fraud and predatory lending that went on during the bubble.  Most of these hardy attorneys work for legal aid organizations, and are dedicated to the core.  There are also private lawyers who are exceptionally bright, and who also do this work, with a specialty in doing appellate issues.

One such attorney has taken a most interesting position.  This attorney has focused squarely upon a narrow issue: to whom does the borrower owe the monthly payments?  Real simple, huh?  You would think, but not so fast . . .

California does not use the term "mortgage."  Instead, there is the term Deed of Trust.  Don't get hung up on the jargon.  The concept is the same.  The borrower signs the dotted line, promising to repay the lender.  The lender wants collateral for the promise to pay back the loan, so the lender takes a security interest in the real property.  Some states call it a lien, mortgage, whatnot.  Remember the concept is simple: borrower either pays as agreed, or the bank takes the collateral, and that is that.

So, now we have the interesting situation where it is not the neighborhood bank that takes back the house from the deadbeat who defaults on the loan payments.  Now, we have securitization.  Original lender lends money, then transfers the right to be paid back to someone else, who then pools thousands of these rights to be paid back, into a single security, then sells the security to investors.  The entity which collects the monthly payments from the borrower, and then sends the payments on to the proper investors, is called the "servicer."  The problem is, that the original lender never provided the borrower with any proof that the loan was assigned.  Instead, the original lender just tells the borrower to "send your payments to xxxxx."

Well, who is xxx?  Why do they get the money?  In California, the borrower has the right to demand that the lender provide such proof. 

What happened in one case, this attorney filed a declaratory relief action (a lawsuit).  The borrower was current on the payments, but just wanted to know to whom were the payments really owed?  This makes sense, since what if someone came in later and said they never got paid? 

The attorney asked the court to enforce that provision of California law, requiring the lender to provide the documents proving to whom the monthly payments are owed.  The bank cried foul, and said no way.  The court then threw out the lawsuit, claiming that since there was no foreclosure action, since the borrower was current on all payments, the court had no authority to force the "servicer" to prove that it was entitled to collect the monthly payments.

This case is now on appeal.  In the reply to this post, are the Appellants Opening Brief, and the Reply Brief.  This paints a very clear picture of the case, the issue, and the arguments.  It is a VERY interesting case, one seemingly impossibly simple, yet profoundly significant since if the borrower wins the case, the servicer has to provide documents showing that the original note was properly assigned.  We all know they can't do that in millions of cases (robosigners, remember), so if this one little, tiny, insignificant borrower wins this case, then there will be a clear, simplified process to challenge EVERY SINGLE MORTGAGE IN CALIFORNIA.  Holy mother of job security  (for lawyers, that is)!!!!

Anyhow, let's see what shakes out.  The Court of Appeal is very slow.  It takes around a year or so for the decision to come down.  If the borrower loses, oh well, since it does not change the dynamic, it only eliminates a possible streamlined method to challenge a mortgage.  Stay tuned!

Edited by admin on 11/08/2014 - 06:05

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Riley v. America’s Wholesale Lender - Appellant's Opening Brief

"Beth A. Riley, Plaintiff and Appellant,
vs.
America’s Wholesale Lender; Countrywide Home Loans, Inc.; Bank of America Corporation,
Defendants and Respondents.
APPEAL FROM THE JUDGMENT OF THE SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO THE HONORABLE RICHARD E. L. STRAUSS, JUDGE
NO. 37-2009-00094779-CU-OR-CTL

ISSUES PRESENTED
This appeal presents a procedural question and a
substantive question:
1. Did the trial court err in sustaining defendants’
demurrer without leave to amend on the ground that there was
no controversy requiring a judicial declaration of rights?
2. When a borrower signs a promissory note for a loan to
buy real property, does that buyer have the right to know who
holds the note once it is sold or its servicing rights are assigned to
third parties?
INTRODUCTION
Until the fairly recent creation of the secondary mortgage
market, the traditional relationship between a borrower seeking
to buy a home and a lender willing to lend money for that purpose
was one-to-one: a savings and loan or bank would lend its
depositors’ money to the home buyer, who then repaid the same
institution that had lent the money. In California, such a loan
was secured by a deed of trust that named the lender as the
beneficiary. The lender held the note and deed of trust until the
2
borrower repaid the loan, at which time the lender surrendered
both the note and the deed of trust to the borrower.
Today, by contrast, a loan is likely to be sold immediately
into the secondary mortgage market, where it is bundled with
thousands of other loans and sold as collateral for mortgagebacked
securities. In a matter of weeks a loan may have been
sold and resold so many times that the borrower has no idea who
actually owns it. The borrower simply gets a notice directing that
all further payments be sent to a loan servicer, with no notice as
to who—or what—now owns the loan.
As millions of borrowers have defaulted on their loans, the
servicers have started foreclosure proceedings. But when a
borrower wants to renegotiate her loan or work out a payment
plan to avoid foreclosure, she may not be able to do so—she has
no idea who holds her note, since her only contact is with the loan
servicer. But the servicer may not be authorized to negotiate loan
modifications on the note holder’s behalf, or may be so overwhelmed
by defaulting borrowers that it simply refers the matter
to a foreclosure specialist having neither the authority nor the
incentive to work with the borrower to restructure her loan.
3
Plaintiff/appellant Beth A. Riley is one of those borrowers
whose note was presumably sold and assigned into the secondary
market. Because defendants refused to produce any proof as to
who holds her note, Riley sued to get the answer to a simple
question: What is the identity of the current holder of the
promissory note she signed in 2005 when she borrowed $476,000
to buy a home?
STATEMENT OF THE CASE
1. Nature of Action and Relief Sought
Riley sued for declaratory relief after receiving notice from
defendants Countrywide Home Loans, Inc. (“Countrywide”) and
Bank of America Home Loans (“BAC”) (collectively, “defendants”)
in February 2008 that payments for a home loan Riley had
obtained in 2005 from her original lender, America’s Wholesale
Lender (“AWL”), should be sent to Countrywide.
Through her attorney, Riley asked for documents related to
her loan under Civil Code § 2943. After both Countrywide and
BAC failed to provide her with any proof that AWL had assigned
her loan to either of them, Riley sued for a declaration as to her
4
rights regarding her loan and to determine the ownership of the
promissory note she signed.
Defendants demurred, alleging that there is no existing
controversy as to the ownership of the loan or to whom payments
are due. Riley seeks a declaration under a basic principle of
contract law: a party purporting to hold an interest in a
promissory note secured by a deed of trust it acquired by transfer,
grant, or assignment must be able to prove that interest before it
can enforce the note.
The trial court held that there was no controversy. Riley
seeks relief from the trial court’s ruling sustaining defendants’
demurrer without leave to amend.
2. Statement of Facts and Procedural History
On December 19, 2005, Riley borrowed $476,000 to buy a
house in Lakeside, California, executing a promissory note (“the
Note”) in favor of the lender, AWL. As is common practice for
real property loans in California, the Note was secured by a deed
of trust (“the Deed of Trust”). It identifies Riley as the Borrower,
AWL as the Lender, California Land Title as the Trustee, and
1 BAC acquired Countrywide in 2008.
5
Mortgage Electronic Registration Service (“MERS”) “acting solely
as a nominee for Lender and Lender’s successors and assigns” as
the beneficiary.
Starting around February 2008, Riley began to receive
statements regarding her loan from Countrywide and BAC1. She
later received statements from BAC in May and June 2009.
On June 1, 2009, Riley’s counsel asked BAC under Civil
Code § 2943 for copies of documents related to her loan and to the
Note’s sale, transfer, or assignment. BAC did not respond. On
June 25, 2009, counsel again asked BAC for those documents. On
July 1, 2009, BAC replied that it would respond in due time. It
never did. Appellant’s Appendix (“AA”) 3:11–4:1.
On July 27, 2009, Riley sued for a declaration of her rights
under the Note. The trial court granted defendants’ first
demurrer with leave to amend, and Riley filed and served her
First Amended Complaint (“FAC”). AA 1-5. Defendants again
demurred. AA 6-12; see also AA 13-16; 17-19. The trial court
issued a tentative ruling sustaining the demurrer without leave
to amend. AA 20. The hearing was held on September 3, 2010.
6
On September 6, 2010, a Judgment on Order was entered
that adopted the tentative ruling. AA 21-22. Notice of Entry of
Judgment was filed on September 30, 2010. AA 23-25. Riley
timely filed her Notice of Appeal on October 1, 2010. AA 26-27.
3. Statement of Appealability
The right to appeal lies from the judgment or order of
dismissal when a demurrer is sustained without leave to amend.
Kong v. City of Hawaiian Gardens Redevelopment Agency (2002)
108 Cal.App.4th 1028, 1032.
4. Standard of Review
On appeal from a dismissal following the sustaining of a
demurrer, the appellate court reviews the complaint de novo to
determine whether it alleges facts stating a cause of action under
any legal theory. Los Altos Golf and Country Club v. County of
Santa Clara (2008) 165 Cal.App.4th 198, 203, citing Kamen v.
Lindly (2001) 94 Cal.App.4th 197, 201.
On appeal from a dismissal following such an
order [demurrer sustained without leave to
amend], we assume the truth of all facts properly
7
pleaded in the complaint and its exhibits or
attachments, as well as those facts that may fairly
be implied or inferred from the express
allegations . . . . We are not bound by the trial
court’s construction of the complaint . . . . Rather,
we independently evaluate the complaint,
construing it liberally, giving it a reasonable
interpretation, if possible, and reading it as a
whole, while viewing its parts in context.
Cobb v. O’Connell (2005) 134 Cal.App.4th 91, 95.
(citations and internal quotation marks omitted).
The appellate court reviews a ruling to grant or deny
declaratory relief for abuse of discretion. Pellegrini v. Weiss
(2008) 165 Cal.App.4th 515, 529 (citation omitted).
Here, so that she could immediately bring this appeal, Riley
did not seek further leave to amend. Therefore, the Court will
review the trial court’s ruling to determine if it abused its
discretion in denying Riley declaratory relief and sustaining the
demurrer.
ARGUMENT
1. A demurrer does not test the facts.
A complaint is not an evidentiary document; its purpose is
to tell the defendant the nature of the plaintiff’s claims:
8
The complaint . . . serves to frame and limit the
issues and to apprise the defendant of the basis
upon which the plaintiff is seeking recovery. In
fulfilling this function, the complaint should set
forth the ultimate facts constituting the cause of
action, not the evidence by which plaintiff
proposes to prove those facts.
Committee on Children’s Television, Inc. v.
General Foods Corp. (1983) 35 Cal.3d 197, 211-
212 (citations omitted).
Except through strictly limited taking of judicial notice, a
demurrer does not address the plaintiff’s evidence:
It is not the ordinary function of a demurrer to
test the truth of the plaintiff’s allegations or the
accuracy with which he describes the defendant’s
conduct. A demurrer tests only the legal sufficiency
of the pleading. It admits the truth of all
material factual allegations in the complaint . . .;
the question of plaintiff’s ability to prove these
allegations, or the possible difficulty in making
such proof does not concern the reviewing court.
Id. at 213-214.
2. Riley has alleged sufficient facts for declaratory
relief.
The trial court ruled that Riley’s FAC did not allege
sufficient facts for a declaratory relief action. Reporter’s
Transcript of hearing on September 3, 2010 (“RT”) at 5:22-26. In
9
doing so, the court interpreted the FAC’s allegations too
narrowly. Under Code of Civil Procedure § 1060, a cause of action
for declaratory relief may be brought to determine the parties’
rights under a written instrument such as a contract:
Any person interested under a written
instrument, . . . or under a contract, or who
desires a declaration of his or her rights or duties
with respect to another, or in respect to, in, over
or upon property, . . . may, in cases of actual
controversy relating to the legal rights and duties
of the respective parties, bring an original action
or cross-complaint in the superior court for a
declaration of his or her rights and duties in the
premises, including a determination of any
question of construction or validity arising under
the instrument or contract.
The requirements for stating a claim for declaratory relief
are set forth in Californians for Native Salmon and Steelhead
Association v. Dept. of Forestry (1990) 221 Cal.App.3d 1419, in
which the court found that it was an abuse of discretion to
dismiss the action:
Where . . . a case is properly before the trial court,
under a complaint which is legally sufficient and
sets forth facts and circumstances showing that a
declaratory adjudication is entirely appropriate,
the trial court may not properly refuse to assume
jurisdiction; . . . if it does enter a dismissal, it will
be directed by an appellate tribunal to entertain
the action. Declaratory relief must be granted
10
when the facts justifying that course are
sufficiently alleged. Any doubt should be resolved
in favor of granting declaratory relief.
Id. at 1426-1427 (citations and internal
quotations omitted).
In granting the demurrer, the trial court adopted its
Tentative Ruling of September 2, 2010, including the following:
While she alleges that she denies that Defendants
are the current beneficiaries under the Note
because they have not provided evidence of how
they acquired ownership of the Note, Plaintiff
does not allege any facts to support that her
denial constitutes an actual, justiciable
controversy. For example, she does not allege that
she is the rightful beneficiary under the Note,
that another entity is the rightful beneficiary, or
that she has no obligation to make payments to
Defendants since they are not the rightful
beneficiaries. As such, it remains unclear as to
what “controversy” she wants the Court to decide
in this action.
AA 20.
But Riley did allege such facts in her FAC, as follows:
• On December 19, 12005, Riley entered into a written
contract in the form of a promissory note (the Note) to
borrow $476,000 from AWL. AA 2:8-10.
• AWL sold the Note on the secondary mortgage market.
AA 2:12-13.
11
• The Note and Deed of Trust identify AWL as the Lender
and specify that payments are to be made to AWL. AA
2:11; 3:6-7.
• Riley received a notice regarding the assignment of the
servicing rights to Countrywide as well as statements
from BAC. AA 8-12.
• Riley does not know if there has been a legal assignment
of the Note or who currently holds it, and Riley denies
that BAC is the current holder or agent of the current
holder. AA 4:4-12.
• Riley made a demand to BAC under Civil Code § 2943
for information regarding her loan, including a
beneficiary statement, which BAC refused to provide
either before this suit was filed or in response to
discovery requests for documents after litigation began.
AA 3:12-26.
• There is a controversy between plaintiff and defendants
over the identity of the Note’s current beneficiary to
whom plaintiff owes the obligation of repayment. AA
4:8-12.
12
The controversy the trial court failed to see is not whether
Riley is the beneficiary of the Note or Deed of Trust, as the Court
stated. Clearly she is not. Yet contrary to the Tentative Ruling,
Riley implied in the FAC (at ¶¶ 20 and 21) that defendants are
not the Note’s rightful owner, and also expressly alleged that
defendants have offered no proof that they are its rightful owner
or the rightful owner’s agents:
20. Plaintiff has received no notice of the Note’s
assignment and does not know whether any
legal assignment of her Note has occurred.
Plaintiff acknowledges a contractual
obligation to make ongoing mortgage
payments on the Loan but seeks to identify
the party to whom her contractual
obligation is owed.
21. A controversy exists between plaintiff and
defendants over the proper current
beneficiary under the Note and Deed of
Trust, in that defendants claim to be or to
represent the current Note’s beneficial
owner, and plaintiff denies that claim. The
basis for plaintiff’s position is that
defendants have not provided any evidence
of how they or their principal acquired
ownership of the Note.
AA 4:4-12.
Riley seeks declaratory relief based on her allegations that
her contract with AWL—the Note—has been assigned to an
13
unknown party and that she is entitled to know under what
authority defendants claim any interest in the Note, whether as
holders or as agents for the holder. According to the trial court,
these allegations are not sufficient to create a controversy
regarding Riley’s obligations under the Note. AA 20.
But it follows from Riley’s allegations that, if defendants
are not the Note’s rightful holders or agents of the holder, Riley
has no obligation to continue to make payments to any of them.
Defendants argue in their demurrer that, on the contrary, she is
obliged to pay them. This dispute is the controversy that the
trial court failed to acknowledge.
Under Civil Code § 2943(b)(1) Riley has a right to know
who holds her note. As alleged in the FAC, “defendants claim to
be or to represent the current Note’s beneficial owner, and
plaintiff denies that claim.” AA 4:9-10. In short, Riley denies
that defendants have any interest in the Note; defendants claim
that they do. These allegations are sufficient to sustain a cause of
action for declaratory relief.
Under Commercial Code § 3301(a), only a holder may
enforce an instrument, including a secured note:
14
“Person entitled to enforce” an instrument means
(a) the holder of the instrument, (b) a nonholder
in possession of the instrument who has the rights
of a holder, or (c) a person not in possession of the
instrument who is entitled to enforce the
instrument pursuant to Section 3309 or
subdivision (d) of Section 3418. A person may be
a person entitled to enforce the instrument even
though the person is not the owner of the
instrument or is in wrongful possession of the
instrument.
“Holder” means “the person in possession of a negotiable
instrument that is payable either to bearer or, to an identified
person that is the person in possession.” Comm. Code
§ 1201(21)(A).
The person in possession of the Note has the power of
enforcement. Comm. Code § 3203(a). The FAC contains no
allegation that either Countrywide or BAC has possession of the
Note, holds the Note, or has acquired the rights of the original
holder, AWL. See In Re Hwang (Bankr. C.D.Cal. 2008) 396 B.R.
757, 764-765. The FAC alleges that the Note was resold into the
secondary market, but also that “plaintiff does not know whether
any legal assignment of her Note has occurred.” AA 4:4-5. Thus
the FAC contains no concession that defendants have any rights
under § 3203 to enforce the Note, either as a holder or as an agent
15
of the holder. To rule as it did, the trial court must have relied
solely on defendants’ unsworn argument that they own the Note,
or have authority from its owner. Yet the recent “robosigning”
scandal and endemic foreclosure problems involving thousands of
mortgages countrywide have shown that it is not sufficient to
take the servicers’ word for it when so much is at stake. See, e.g.,
U.S. Bank National Assn. v. Ibanez (Jan. 7, 2011) Supreme
Judicial Court of Massachusetts, No. SJC-10694 (noting “the
utter carelessness with which the plaintiff banks documented the
titles to their assets.” Cordy, J., conc. opn.).
3. Declaratory relief is proper because Riley has
the right to know who holds her Note.
Where . . . a case is properly before the trial court,
under a complaint which is legally sufficient and
sets forth facts and circumstances showing that a
declaratory adjudication is entirely appropriate,
the trial court may not properly refuse to assume
jurisdiction . . . .
Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th
634, 647 (citations omitted).
Unlike a situation in which a contract has already been
breached and one of the parties can pursue a breach of contract
16
claim, Riley is not trying to remedy a past act, nor is she
defending a foreclosure action; her claim is for prospective relief,
not remedial relief of a previous wrong. Here, unlike a case
involving a breach of contract, there is no other cause of action
available to Riley that would preclude the declaratory relief she
seeks. See Travers v. Louden (1967) 254 Cal.App.2d 926 (abuse of
discretion not to dismiss the declaratory relief action when breach
of contract was the proper claim):
There is unanimity of authority to the effect that
the declaratory procedure operates prospectively,
and not merely for the redress of past wrongs. It
serves to set controversies at rest before they lead
to repudiation of obligations, invasion of rights or
commission of wrongs; in short, the remedy is to
be used in the interests of preventive justice, to
declare rights rather than execute them.
Id. at 931.
Columbia Pictures Corporation v. De Toth (1945) 26 Cal.2d
753 held that declaratory relief was proper to determine the
rights of Columbia and De Toth, a film director who was alleging
that his contract with the studio was no longer in effect.
Columbia sued for a declaration as to the contract’s validity. The
court held that, even though there may have been other
17
alternatives, it was an abuse of discretion to deny declaratory
relief. Id. at 762.
Here, Riley is suing to determine what obligations—if
any—she owes to defendants under the Note and Deed of Trust.
Although the facts differ from Columbia Pictures, conceptually
the parties are in similar circumstances—in each instance, there
is a contract and uncertainty as to the plaintiff’s future
obligations under that contract.
Riley’s counsel acknowledged at the hearing that there
were statutory claims she could have brought, but chose not to
assert. RT 5:3-8. But as was true in Columbia Pictures, the
availability of alternative remedies is insufficient to warrant its
denial.
The mere circumstance that another remedy is
available is an insufficient ground for refusing
declaratory relief, and doubts regarding the
propriety of an action for declaratory relief . . .
generally are resolved in favor of granting relief.
Filarsky v. Superior Court (2002) 28 Cal.4th 419,
433, citing Code Civ. Proc. § 1062 (declaratory
relief is cumulative to other remedies).
As the court held in Meyer, supra:
One test of the right to institute proceedings for
18
declaratory judgment is the necessity of present
adjudication as a guide for plaintiff’s future
conduct in order to preserve his legal rights. . . .
Declaratory relief pursuant to this section has
frequently been used as a means of settling
controversies between parties to a contract
regarding the nature of their contractual rights
and obligations.
Meyer at 647 (citation and internal quotation
marks omitted).
Here, Countrywide and BAC are claiming an interest in a
contract between Riley and AWL, without offering any proof of an
ownership interest. The Deed of Trust names neither Countrywide
nor BAC as the lender or beneficiary. Thus, this action is
meant to determine the parties’ rights not only as to who holds
the Note, but also as to whether the Note is still secured by the
Deed of Trust. This action would lead to a determination that
would guide Riley in her future actions regarding the Note and
the Deed of Trust and will “liquidate doubts with respect to
uncertainties or controversies which might otherwise result in
subsequent litigation.” Meyer at 647.
The importance of a declaration of rights in this instance
cannot be overstated. When, as here, a noteholder’s identity is at
issue, establishing that identity also establishes what entity has
19
the right to foreclose on the security. Domarad v. Fisher & Burke
(1969) 270 Cal.App.2d 543.
[W]e note the following established principles:
that a deed of trust is a mere incident of the debt
it secures and that an assignment of the debt
carries with it the security; that a deed of trust is
inseparable from the debt and always abides with
the debt, and it has no market or ascertainable
value, apart from the obligation it secures; and
that a deed of trust has no assignable quality
independent of the debt, it may not be assigned or
transferred apart from the debt, and an attempt
to assign the deed of trust without a transfer of
the debt is without effect.
Id. at 553-554 (citations and internal quotations
omitted).
In Lomanto v. Bank of America, NTSA (1972) 22 Cal.
App.3d 663, a case involving foreclosure on a deed of trust, the
court held that it was an abuse of discretion to sustain a
demurrer to a claim for declaratory relief on the ground that Code
of Civil Procedure § 1061 barred the cause of action:
The present case is one involving rights and
duties of the parties under a deed or instrument
in writing. The time was ripe for such a
declaration, inasmuch as Bank’s proceedings for
foreclosure under the trust deed were not by court
action.
Id. at 668 (demurrer sustained on other grounds).
20
Unlike Lomanto, no foreclosure has been initiated here.
But without a declaration of rights, defendants will continue to
assert an ownership interest in the Note and Deed of Trust, and
may seek to foreclose on it, with no proof that they have the right
to do so.
Contrary to Zetterberg v. State Department of Public Health
(1974) 43 Cal.App.3d 657, this action can resolve a justiciable
controversy regarding the ownership of the Note and Deed of
Trust. In Zetterberg, unlike here, the issue was a generalized
request for an interpretation of statutes relating to the
enforcement of clean-air regulations, not a specific declaration of
the parties’ contract rights and obligations. Zetterberg observed
this distinction in upholding the dismissal of the declaratory
relief action:
The standard for the granting of declaratory relief
is well established. [T]he controversy must be of a
character which admits of specific and conclusive
relief by judgment within the field of judicial
determination, as distinguished from an advisory
opinion upon a particular or hypothetical state of
facts. The judgment must decree, and not suggest,
what the parties may or may not do.
Id. at 661 (internal quotation marks omitted).
21
Here, the court has the opportunity to decree what rights
and obligations each party owes to the other. Declaratory relief
should be granted.
CONCLUSION
The trial court erred in finding that, despite the ongoing
controversy that Riley has alleged concerning ownership of her
loan, she had not stated a cause of action for declaratory relief. If
Riley is not entitled to a declaration as to the identity of the
holder of her loan, then she—and other borrowers similarly
situated—cannot identify the entity with which she can negotiate
any modification or restructuring of her loan. Without that
information, she is at risk of losing her home through foreclosure.
The Court should find that the trial court erred in
sustaining defendants’ demurrer without leave to amend and
dismissing the action. Therefore Riley respectfully asks the
Court to reverse the trial court’s order of dismissal and direct
that defendants be held to answer."

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

California Lawyer
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Offline
Joined: 06/14/2011
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Riley v. America’s Wholesale Lender - Reply Brief

This is the Reply Brief, filed in response to the bank's opposition to the Appellants Opening Brief.  This puts the nail in the coffin, so to speak.

"INTRODUCTION
In 2009, when plaintiff-appellant Beth A. Riley wanted to know who currently held the promissory note (“the Note”) secured by the Deed of Trust on her home, her attorney made a demand under Civil Code § 2943 of defendants Countrywide Home Loans, Inc. and Bank of America. Riley demanded a copy of the note and other documents that would show who held her note. Riley wanted this information in case a change of circumstances might require her to talk to the lender about renegotiating the terms of her loan.
Under Civil Code § 2943, defendants had 21 days to produce Riley’s loan documents. They did not do so. Riley’s attorney made a second demand; again defendants failed to produce the documents. Appellant’s Appendix (“AA”) 3:11–4:1. After these two futile attempts, Riley sued for declaratory relief, seeking an order mandating that defendants do what § 2943 commands: produce her Note and other loan documents.
In response, defendants say two things:
(1)    Riley has no right to ask the court to enforce § 2943 or to discover the holder’s identity because there is no current controversy—her loan is not in foreclosure. Respondents’ Brief (“RB”) at 4.
(2)    If Riley misses payments and her loan does go into foreclosure, she will then have no right to know who holds her note because, under California’s nonjudicial foreclosure scheme, the foreclosing trustee has no duty to produce the note. RB at 6.
In Joseph Heller’s satiric novel CATCH-22, bomber pilots did not have to fly missions if they were crazy. But there was a catch: if they asked not to fly because they were crazy, that meant they were not really crazy, so they had to keep flying: Catch-22. Today, Riley finds herself in an equally absurd position. She knows her note has been sold, but she does not know who holds it now. Riley cannot get her documents under § 2943 because the defendants have refused to—or perhaps cannot—produce them. But the trial court accepted defendants’ argument that this alone is not a worthy controversy.
Without a controversy like a pending foreclosure, the court denied declaratory relief by way of an order that defendants produce Riley’s documents. But, if Riley does go into foreclosure—which presumably would be enough of a controversy for declaratory relief—then under Civil Code § 2924, defendants do not have to produce the Note: Catch-22.
If the trial court’s ruling is allowed to stand, then § 2943 may as well be stricken from the Civil Code. Lenders can simply tell borrowers: “We’ll never produce your loan documents; we don’t have to.”
ARGUMENT
1.    Riley seeks not the original note, but a copy of it with all modifications.
Defendants argue that, under California’s foreclosure scheme, Civil Code § 2924 et seq., a foreclosing party does not have to produce the note. Perhaps not, but Riley did not ask for the note from a foreclosing party under § 2924. Instead, she asked for the note and other documents under Civil Code § 2943. Its language is clear and concise:
A beneficiary, or his or her authorized agent, shall, within 21 days of the receipt of a written demand by an entitled person or his or her authorized agent, prepare and deliver to the person demanding it a true, correct, and complete copy of the note or other evidence of indebtedness with any modification thereto, and a beneficiary statement.
Civil Code §2943(b)(1).
Courts have held in other cases that the failure to follow § 2943 may be grounds for a claim against the beneficiary. For example, Venhaus v. Schultz (2007) 155 Cal.App.4th 1072 held that the failure to provide documents demanded under § 2943, even if done so negligently, could support a claim of negligent interference with prospective economic advantage.
As the holder of a deed of trust against Venhaus’s real property, Shultz was required by Civil Code section 2943, subdivision (b) to provide Venhaus with a beneficiary statement (as defined in section 2943, subdivision (a)(2)) within 21 days of the receipt of the written demand for the statement.
If Shultz failed to submit such a statement in accordance with the statute, or if the statement provided was inaccurate—at least if the inaccuracy was a result of Shultz’s negligence, her conduct was sufficiently wrongful to support the negligent interference claim.
Id. at 1080 (citations omitted).
Black v. Sullivan (1975) 48 Cal.App.3d 557 held that attorneys who held a beneficial interest by way of assignment in a deed of trust were liable for conspiring with the assignors to violate the assignors’ statutory duty to provide information after a demand under § 2943. Id. at 567. Although Riley is not alleging that she is in the same situation as the plaintiffs in Venhaus or Black, she is entitled to her documents, just as they were. She made her demand; she should have received her documents.
Bank of America failed to produce the documents Riley demanded. If the courts refuse to declare that Bank of America must produce these documents under § 2943, then these defendants and others can simply ignore the statute and operate beyond the law with impunity.
Courts often say that, if a party does not like the law, he or she should seek a remedy through the legislature. Here the legislature has spoken. The law is clear, and so is defendants’ disregard for it. The Court simply needs to enforce the law as written.
2.    The parties’ disagreement regarding defendants’ failure to provide copies of loan documents presents a real controversy justifying declaratory relief.
Citing Zetterberg v. State Department of Public Health
(1974) 43 Cal.App.3d 657, defendants argue that there is no controversy that merits declaratory relief. As Riley argued in her Opening Brief, the relief sought in Zetterberg was in no way similar to the relief Riley seeks here. AOB at 20.
Californians for Native Salmon and Steelhead Association et al. v. Department of Forestry (1990) 221 Cal.App.3d 1419 distinguished Zetterberg. It held that the plaintiffs were entitled to declaratory relief because the defendant agency had failed to timely respond to public comments on timber-harvesting plans and had failed to properly evaluate them. Id. at 1427-1428.
Zetterberg involved a generalized review of policy, which the court held not to be a “controversy.” On the other hand, in Californians for Native Salmon and Steelhead Association, the Department of Forestry had failed to follow statutes regarding the timber-harvesting plans, much as defendants here have failed to follow the statute requiring them to provide Riley copies of her loan documents. Because the Department’s failure was specific, this failure to follow mandated procedures created a controversy that warranted declaratory relief.
Here, unlike in Zetterberg, Riley is not asking for an advisory opinion, nor is her complaint based on a hypothetical scenario. As Riley has alleged (AA 3:12-26), she made her demand under Civil Code § 2943. Defendants ignored that demand, twice. By granting declaratory relief, the court can decree that defendants must follow the statute and produce the documents. Thus Riley is seeking very specific relief based on the legislature’s statutory intent that borrowers be entitled to see the documents held by their lender if they ask for them.
CONCLUSION
In this uncertain world a borrower does not know when unemployment, illness, or other misfortune may affect her income and threaten her ability to make timely home loan payments. It is only prudent to be prepared. To that end, she is entitled by law to know in advance the identity of the lender she must contact to seek a loan modification. It is, after all, in the interest of both parties to keep the borrower in her home and paying on the loan, even if its terms have been renegotiated to make them affordable.A prudent borrower will not wait to learn the identity of her noteholder until the inexorable engine of nonjudicial foreclosure has been engaged.
This Court should reverse the ruling of the trial court and allow Riley’s claim for declaratory relief to proceed."

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

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Riley v. America’s Wholesale Lender - docket website

For those who want all the nitty gritty, go here.

The case was argued today.  So, look for the decision to come down in 6-8 months, by my best guess.

If anyone has any specific questions, note that you all know exactly what I know now.  The arguments are laid out precisely, and very concisely.

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

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Latest Nevada Law on the Issue

(No written assignment = no standing to foreclose = Wells Fargo cannot foreclose = oops!)

127 Nev. Adv. Op. 40


MOISES LEYVA, Appellant,
v.
NATIONAL DEFAULT SERVICING CORP.; AMERICAS SERVICING COMPANY; AND WELLS FARGO, Respondents.


No. 55216.

Supreme Court of Nevada.


July 7, 2011.
Crosby & Associates and David M. Crosby and Troy S. Fox, Las Vegas, for Appellant.
Snell & Wilmer, LLP, and Gregory A. Brower and Cynthia Lynn Alexander, Las Vegas, for Respondents America's Servicing Company and Wells Fargo.
Wilde & Associates and Gregory L. Wilde, Las Vegas, for Respondent National Default Servicing Corp.
BEFORE THE COURT EN BANC.

OPINION

By the Court, HARDESTY, J.:
In this appeal, we consider issues arising out of Nevada's Foreclosure Mediation Program. First, we must determine whether a homeowner who is not the original mortgagor is a proper party to participate in the program. We conclude that the Foreclosure Mediation statute, NRS 107.086, and the Foreclosure Mediation Rules (FMRs) dictate that a homeowner, even if he or she is not the named mortgagor, is a proper party entitled to request mediation following a notice of default.
Second, we must determine if a party is considered to have complied with the applicable statute and FMRs governing document production in a mediation proceeding by producing what the district court referred to as "essential documents." In this, we address whether substantial compliance satisfies the mandates of the statute and FMRs. Because we conclude that strict compliance is compelled by NRS 107.086(4) and (5), that the assignment offered was defective, and that no endorsement of the mortgage note was provided according to Article 3 of the Uniform Commercial Code, we conclude that Wells Fargo failed to produce the documents required under NRS 107.086(4). Additionally, we recently concluded in Pasillas v. HSBC Bank USA, 127 Nev. ___, ___. P.3d ___ (Adv. Op. No. 39, July 7, 2011), that a party's failure to produce the enumerated documents required by NRS 107.086 and the FMRs prohibits the district court from directing the program administrator to certify the mediation so that the foreclosure process can proceed. Here, we again conclude that, due to the statute's and the FMRs' mandatory language regarding document production, a party is considered to have fully complied with the statute and rules only upon production of all documents required. Failure to do so is a sanctionable offense, and the district court is prohibited from allowing the foreclosure process to proceed. Therefore, we must reverse and remand this case to the district court for it to determine appropriate sanctions against respondents.[1]

FACTS AND PROCEDURAL HISTORY

Appellant Moises Leyva received and recorded a quitclaim deed in 2007 in exchange for taking over monthly mortgage payments on a residence in Las Vegas. Leyva did not expressly assume the mortgage note, however, and it remained in the original mortgagor's name, Michael Curtis Ramos. Nonetheless, Leyva made the mortgage payments in Leyva's name to respondent Wells Fargo's servicing company for 25 months. Thereafter, Leyva defaulted on the mortgage and, upon receiving a notice of election to sell, decided to pursue mediation through the Foreclosure Mediation Program. Both he and Ramos signed the form electing to mediate. The mediation occurred on September 23, 2009,[2] and Leyva, Ramos, and Wells Fargo were represented by counsel at the mediation. Leyva was present at the mediation, while Ramos was available by telephone. At the mediation, Wells Fargo produced a certified copy of the original deed of trust and mortgage note, on both of which MortgageIT, Inc., not Wells Fargo, was named as the lender, as well as a notarized statement from a Wells Fargo employee asserting that Wells Fargo was in possession of the deed of trust and mortgage note, as well as any assignments thereto. Wells Fargo did not submit copies of any assignments. The parties failed to resolve the foreclosure at the mediation, and the mediator's statement indicated that Wells Fargo failed to bring the statutorily required documents to the mediation. The mediator did not, however, indicate that Wells Fargo participated in the mediation in bad faith.
Leyva then filed a petition for judicial review in district court, claiming that Wells Fargo mediated in bad faith and that it should be sanctioned. After conducting hearings on the petition, the district court found that

there is a lack of showing of bad faith on the part of [Wells Fargo] in that all essential documents were provided, contrary to the indication of the mediator, and that [Wells Fargo] otherwise negotiated in good faith notwithstanding the fact that an agreement was not

reached.

Absent

timely appeal, a Letter of Certification shall enter.

(Emphasis added.) This appeal followed.[3]

DISCUSSION

In resolving this appeal, as a preliminary matter, we must determine whether Leyva could properly elect to mediate and participate in the mediation even though he was not a named party on the mortgage note and did not assume the note in his purchase of the residence. Determining that he could participate as the title holder of record, we next consider whether the district court erred in finding that Wells Fargo brought "all essential documents" to the mediation. In doing so, we address Wells Fargo's argument that possessing the original mortgage note and deed of trust is sufficient to demonstrate ownership of the same. We conclude that Wells Fargo failed to produce the documents required under the applicable statute and FMRs and to otherwise show that it had an enforceable interest in the property subject of the mediation. Accordingly, the district court abused its discretion, and sanctions are warranted pursuant to our holding in Pasillas, 127 Nev. at ___, ___ P.3d at ___.

Leyva was a proper party to the mediation

Wells Fargo first argues that because Leyva was neither the grantor on the deed of trust nor the obligor on the note, he was not a proper party to the mediation. We disagree.
NRS 107.086(3) allows "[t]he grantor or the person who holds the title of record" to elect to mediate. (Emphasis added.) Similarly, FMR 5(1) states that "any grantor or person who holds the title of record and is the owner-occupant of a residence" is eligible to participate in the Foreclosure Mediation Program. (Emphasis added.) Leyva recorded his ownership of the subject property in March 2007 and is therefore clearly the title holder of record eligible to participate in the Foreclosure Mediation Program.
Even though the mortgage note remained in Ramos's name, this bifurcation of title ownership and liability on the note served only to potentially limit the foreclosure solutions available to Leyva at the mediation, not to exclude all possible remedies. And while Wells Fargo argues that modification was not an option because Leyva lacked authority over the loan, the record reflects that Ramos, the person with such authority, signed the election-of-mediation form, was represented by counsel at the mediation, and was available by telephone during the mediation. Therefore, Wells Fargo's argument lacks merit. Regardless, because both NRS 107.086(3) and FMR 5(1) permit the person holding the title of record to mediate, and Wells Fargo does not dispute that Leyva possessed a valid, recorded quitclaim deed, we conclude that Leyva could properly elect to mediate and was eligible to participate in the Foreclosure Mediation Program.

Wells Fargo failed to meet the mediation program's documentation requirements, compelling consideration of sanctions

In Pasillas, we held that if a party fails to (1) provide the required documents, or (2) either attend the mediation in person or, if the beneficiary attends through a representative, that person fails to have authority to modify the loan or access to such a person, the district court is required to impose appropriate sanctions. 127 Nev. at ___, ___ P.3d at ___. Here, despite Wells Fargo's failure to bring the assignments for the mortgage note and deed of trust, the district court refused to impose sanctions.[4] "[W]e . . . review a district court's decision regarding the imposition of sanctions for a party's participation in the Foreclosure Mediation Program under an abuse of discretion standard." Id.
Wells Fargo concedes that it did not provide written assignments of the deed of trust and mortgage note as required by NRS 107.086(4) and FMR 5(6). Nevertheless, it argues that it fulfilled the purpose of the statute and rule, and thus, its failure to bring actual copies of any assignments was harmless. In essence, Wells Fargo asserts that its failure to strictly comply with the statute's and FMRs' requirements should not subject it to sanctions, because it substantially complied with those requirements.
"Substantial compliance may be sufficient `to avoid harsh, unfair or absurd consequences.' Under certain procedural statutes and rules, however, failure to strictly comply . . . can be fatal to a case." Leven v. Frey, 123 Nev. 399, 407, 168 P.3d 712, 717 (2007) (quoting 3 Norman J. Singer, Statutes and Statutory Construction § 57:19, at 58 (6th ed. 2001)). To determine whether a statute and rule require strict compliance or substantial compliance, this court looks at the language used and policy and equity considerations. Id. at 406-07, 168 P.3d at 717. In so doing, we examine whether the purpose of the statute or rule can be adequately served in a manner other than by technical compliance with the statutory or rule language. See id. at 407 n.27, 168 P.3d at 717 n.27 (citing White v. Prince George's County, 877 A.2d 1129, 1137 (Md. Ct. Spec. App. 2005) ("Where the purpose of the notice requirements is fulfilled, but not necessarily in a manner technically compliant with all of the terms of the statute, this Court has found such substantial compliance to satisfy the statute." (internal quotation omitted))).
Here, both the statutory language and that of the FMRs provide that the beneficiary "shall" bring the enumerated documents, and we have previously recognized that "`shall' is mandatory unless the statute demands a different construction to carry out the clear intent of the legislature." S.N.E.A. v. Daines, 108 Nev. 15, 19, 824 P.2d 276, 278 (1992); see also Pasillas, 127 Nev. at ___, ___ P.3d at ___. The legislative intent behind requiring a party to produce the assignments of the deed of trust and mortgage note is to ensure that whoever is foreclosing "actually owns the note" and has authority to modify the loan. See Hearing on A.B. 149 Before the Joint Comm. on Commerce and Labor, 75th Leg. (Nev., February 11, 2009) (testimony of Assemblywoman Barbara Buckley). Thus, we determine that NRS 107.086 and the FMRs necessitate strict compliance.
Because we conclude that strict compliance is necessary, we must discuss what constitutes a valid assignment of deeds of trust and mortgage notes. Transfers of deeds of trust and mortgage notes are distinctly separate, thus we discuss each one in turn.

The deed of trust, with any assignments, identifies the person who is foreclosing

In this case, Wells Fargo was not the original named beneficiary on the deed of trust, but it contends on appeal that it has the right to foreclose as the assignee of the original beneficiary, MortgageIT. Although Wells Fargo conceded during oral argument that it did not provide the written assignment, it claims that because it provided a certified copy of the deed of trust and a notarized statement from its employee claiming that it was the rightful owner of the deed of trust, no written assignment was necessary. We disagree.
A deed of trust is an instrument that "secure [s] the performance of an obligation or the payment of any debt." NRS 107.020. This court has previously held that a deed of trust "constitutes a conveyance of land as defined by NRS 111.010."[5] Ray v. Hawkins, 76 Nev. 164, 166, 350 P.2d 998, 999 (1960). The statute of frauds governs when a conveyance creates or assigns an interest in land:

No estate or interest in lands, . . . nor any trust or power over or concerning lands, or in any manner relating thereto, shall be created, granted, assigned, surrendered or declared . . ., unless ... by deed or conveyance, in writing, subscribed by the party creating, granting, assigning, surrendering or declaring the same, or by the party's lawful agent thereunto authorized in writing.

NRS 111.205(1) (emphases added). Thus, to prove that MortgageIT properly assigned its interest in land via the deed of trust to Wells Fargo, Wells Fargo needed to provide a signed writing from MortgageIT demonstrating that transfer of interest. No such assignment was provided at the mediation or to the district court, and the statement from Wells Fargo itself is insufficient proof of assignment. Absent a proper assignment of a deed of trust, Wells Fargo lacks standing to pursue foreclosure proceedings against Leyva.

Mortgage note

The proper method of transferring the right to payment under a mortgage note is governed by Article 3 of the Uniform Commercial Code—Negotiable Instruments, because a mortgage note is a negotiable instrument.[6] Birkland v. Silver State Financial Services, Inc., No. 2:10-CV-00035-KJD-LRL, 2010 WL 3419372, at *4 (D. Nev. Aug. 25, 2010). The obligor on the note has the right to know the identity of the entity that is "entitled to enforce" the mortgage note under Article 3, see NRS 104.3301, "[o]therwise, the [homeowner] may pay funds to a stranger in the case." In re Veal, No. 09-14808, 2011 WL 2304200, at *16 (B.A.P. 9th Cir. June 10, 2011)(holding, in a bankruptcy case, that AHMSI did not prove that it was the party entitled to enforce, and receive payments from, a mortgage note because it "presented no evidence as to who possessed the original Note. It also presented no evidence showing [endorsement of the note either in its favor or in favor of Wells Fargo, for whom AHMSI allegedly was servicing the [bankrupt party's] Loan."). If the homeowner pays funds to a "stranger in the case," then his or her obligation on the note would not be reduced by the payments made. See id. at *7 ("if a[n obligor on a mortgage note] makes a payment to a `person entitled to enforce,' the obligation is satisfied on a dollar for dollar basis, and the [obligor] never has to pay that amount again").
Wells Fargo argues that, under Nevada law, possession of the original note allowed it to enforce the note. We disagree and take this opportunity to clarify the applicability of Article 3 to mortgage notes, as we anticipate increasing participation in the Foreclosure Mediation Program, as well as a corresponding increase in the number of foreclosure appeals in this state. As discussed below, we conclude that Article 3 clearly requires Wells Fargo to demonstrate more than mere possession of the original note to be able to enforce a negotiable instrument under the facts of this case.
Pursuant to NRS 104.3102(1), Article 3 applies to negotiable instruments. Negotiable instruments are defined as

an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(a) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(b) Is payable on demand or at a definite time; and

(c) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money.

NRS 104.3104(1). Thus, a mortgage note is a negotiable instrument, and any negotiation of a mortgage note must be done in accordance with Article 3.
A note can be made payable to bearer or payable to order. NRS 104.3109. If the note is payable to bearer, that "indicates that the person in possession of the promise or order is entitled to payment." NRS 104.3109(1)(a). However, "[a] promise or order that is not payable to bearer is payable to order if it is payable to the order of an identified person .... A promise or order that is payable to order is payable to the identified person." NRS 104.3109(2).
For a note in order form to be enforceable by a party other than to whom the note is originally payable, the note must be either negotiated or transferred.[7] A "`[negotiation means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder." NRS 104.3201(1). "[I]f an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder."[8] NRS 104.3201(2) (emphasis added). An "endorsement" is a signature that is "made on an instrument for the purpose of negotiating the instrument." NRS 104.3204(1). Thus, if the note is payable to the order of an identifiable party, but is then sold or otherwise assigned to a new party, it must be endorsed by the party to whom it was originally payable for the note to be considered properly negotiated to the new party. Once a proper negotiation occurs, the new party, or "note holder," with possession is entitled to enforce the note. NRS 104.1201(2)(u)(1) ("Holder means . . . [t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.").
If a party cannot attain "holder" status by showing a valid negotiation, the party may establish its right to enforce the note by showing that the note has been validly transferred. NRS 104.3203(2). The only distinction between a negotiation and a transfer is that, in the case of a transfer, the note need not be endorsed by the party who is relinquishing enforcement rights. Because a transferred note is not endorsed, however, the party seeking to establish its right to enforce the note "must account for possession of the unendorsed instrument by proving the transaction through which the transferee acquired it." U.C.C. § 3-203 cmt. 2 (explaining the effect of § 3-203(b), codified in Nevada as NRS 104.3203(2)). In other words, because the party seeking to enforce the note cannot "prove" its right to enforce through the use of a valid endorsement, the party must "prove" by some other means that it was given possession of the note for the purpose of enforcing it.[9]
In this case, the adjustable rate mortgage note provides: "In return for a loan that I have received, I promise to pay U.S. $192,000.00 . . . plus interest, to the order of Lender. Lender is [MortgageIT, Inc.]" (emphasis added). Because the mortgage note is payable to the order of a specific party, MortgageIT, to negotiate the note to a new party, in this case Wells Fargo, Wells Fargo must have possession of the note and the note must be properly endorsed by MortgageIT. See NRS 104.3201(2). No such endorsement was included in the documents produced at mediation or in the documents filed with the district court, nor was a valid assignment produced as proof of the note's transfer, and mere possession does not entitle Wells Fargo to enforce the note. Therefore, because the mortgage note is payable to MortgageIT, unless Wells Fargo can prove that the note was properly endorsed or validly transferred, thereby making it the party entitled to enforce the note, it has not demonstrated authority to mediate the note.
As we concluded in Pasillas, a foreclosing party's failure to bring the required documents to the mediation is a sanctionable offense under NRS 107.086 and the FMRs. Therefore, we conclude that the district court abused its discretion when it denied Leyva's petition for judicial review. Accordingly, we reverse the district court's order and remand this matter to the district court with instructions to determine the appropriate sanctions for Wells Fargo's violation of the statutory and rule-based requirement. In doing so, the district court should consider the factors discussed in Pasillas.[10]
DOUGLAS, C.J., SAITTA, PICKERING, CHERRY, GIBBONS AND PARRAGUIRRE, JJ., concur.
[1] Because we reverse on other grounds, we do not reach Leyva's contention that respondent Wells Fargo also participated in the mediation in bad faith because it refused to offer anything other than a cash-for-keys option to avoiding foreclosure.
[2] Therefore, this mediation was governed by the Foreclosure Mediation Rules in effect from July 31, 2009, until September 28, 2009, at which time the rules were amended. See In the Matter of the Adoption of Rules for Foreclosure Mediation, ADKT 435 (Order Adopting Foreclosure Mediation Rules, June 30, 2009, and Order Amending Foreclosure Mediation Rules and Adopting Forms, September 28, 2009). Although the changes required some renumbering of the rules, the language of the rules important to this case, namely, those specifying who can participate in the mediation and the documents that must be provided, remain essentially the same.
[3] This court has jurisdiction over the appeal from the district court's final order in the judicial review proceeding. Nev. Const. art. 6, § 4; NRAP 3A(b)(1).
[4] At the time the district court entered its order, the Pasillas opinion had not been published.
[5] "`Conveyance' shall be construed to embrace every instrument in writing, except a last will and testament, whatever may be its form, and by whatever name it may be known in law, by which any estate or interest in lands is created, aliened, assigned or surrendered." NRS 111.010(1).
[6] Article 3 is codified in NRS 104.3101-.3605.
[7] Since the documents provided at the mediation did not establish transfer of either the mortgage or the note, we express no opinion on the issue addressed in the Restatement (Third) of Property section 5.4 concerning the effect on the mortgage of the note having been transferred or the reverse.
[8] Under NRS 104.3301(1)(a), a person entitled to enforce an instrument is "[t]he holder of the instrument."
[9] To "prove" a transaction under NRS 104.3203(2), a party must present evidence sufficient to establish that it is more likely than not that the transaction took place. NRS 104.3103(1)(i) (defining "prove"); NRS 104.1201(h) (defining "burden of establishing").
[10] In Pasillas, we concluded that the following nonexhaustive list of factors would aid district courts in determining what sanctions are appropriate: "whether the violations were intentional, the amount of prejudice to the nonviolating party, and the violating party's willingness to mitigate any harm by continuing meaningful negotiation." Pasillas v. HSBC Bank USA, 127 Nev. ___, ___, ___ P.3d ___, ___ (Adv. Op. No. 39, July 7, 2011).

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

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Ca lawyer

You have got my attention and I am interested but, given the legal profession's predilection for verbose expression, I keep drifting off into a daydream. No offense meant but how about an executive summary? Are these deadbeats going to get away without having to pay their mortgage even though they can afford to do so? Where was it ever implied in the original  agreement that they had the right to negotiate better terms.

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Executive Summary, Just for You, Atlee

Since you asked, I will be happy to provide you with an executive summary of this topic. I wanted to provide source material, so instead of doing a summary again, I figured you all would read these and understand.  Maybe this law stuff is for you like the charts and technical analysis is for me?

Riley v. America's Wholesale Lender:

Summary: California home mortgage borrower is trying to determine to whom is owed the monthly payment.  Borrower is current on the mortgage.  Original lender is America's Wholesale Lender, but borrower is told to make payments to Bank of America.  California has a law that says the home loan lender must provide copy of note and any assignment upon written request.  Borrower duly asks Bank of America for copy of written note and assignment.  Bank of America tells borrower to pound sand.  Borrower lawyers up.

With me, so far?

Lawyer files lawsuit for borrower against Bank of America, the "servicer" of the mortgage.  The servicer, is usually, like here, someone else besides the originating lender, who the original lender purportedly assigned the loan (the right to receive the borrower's payments, and initiate foreclosure if the borrower defaults). 

The lawsuit is called a Declaratory Relief action.  This means that where there is a written contract, the parties to the contract can file a lawsuit to ask the court to "declare" the rights and remedies of the parties to a contract.  Usually, a declaratory relief action is filed where an insurance company does not want to pay for a claim, since there may be an insurance coverage dispute.  So, the insurance carrier files a "dec relief" action, and asks the court to declare that the insurer has no obligation to provide coverage.  Dec relief actions are usually appealed, too.

So, Bank of America files a document with the court, and asks the court to throw the lawsuit out of court.  The lender says that declaratory relief is not an appropriate lawsuit, because the borrower is current on the payments, hence there is no dispute, and nothing for the judge to decide.  Trial judge agrees, and throws out the lawsuit.

Borrower's lawyer says, not so fast, and appeals the trial court's ruling.  The borrower's lawyer says there IS a dispute, namely, whether Bank of America has the right to collect the payments now, or to foreclose later if borrower defaults, BECAUSE there is no proof that Bank of America is entitled to receive payments on the loan, because there is no written compliance with the law that says Bank of America must provide written proof of such to the buyer upon demand.

Court of Appeal has received all the written briefing, heard oral argument today, and hopefully will issue an opinion before the end of the year.  If the court of appeal rejects the borrower's argument, (which is expected by the way, because the 4th District is notorious for siding against borrowers), then the borrower will take this to the CA Supreme Court.  They may or may not decide to take the case, who knows.

Anyway, this is the short version.

The Nevada case is similar, which basically prevents a bank from foreclosing unless it proves it has all the paperwork.  The case rejected the bank's argument that a declaration from someone who works for the bank is sufficient to prove that the assignment has taken place, instead of producing the actual, written document itself.  Basically, to foreclose, the bank must provide proper assignment paperwork, or it will be unable to initiate a foreclosure action.

Both of these are harbingers of what is to come.

Right now, I am gearing up to do some quiet title lawsuits, with some of these very same theories.  Maybe I am on to something, maybe not?  Who knows? 

This sure beats trying to figure out what the hell a MCD or RSI or Bollinger band chart is saying . . .

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

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Answer to your Questions, Atlee

atlee wrote:

You have got my attention and I am interested but, given the legal profession's predilection for verbose expression, I keep drifting off into a daydream. No offense meant but how about an executive summary? Are these deadbeats going to get away without having to pay their mortgage even though they can afford to do so? Where was it ever implied in the original  agreement that they had the right to negotiate better terms.

After the Executive Summary, I figured I would post a separate answer to your questions.

I don't know if the deadbeats will get away with not paying off their mortgage.  My suspicion, is that in some cases, yes, in other cases no.  The law is very clear on the issues, in favor of the deadbeats in many circumstances, but there are countervailing equitable remedy arguments.  In non-lawyer speak, this means that it is unfair that the borrower gets a free house.  What should happen is that the lender simply gets title to the house, since the buyer defaulted and per contract, the buyer surrenders the collateral.  Problem is not so easily solved, though.

The damn difficult question is then: if the borrower has to pay for the house out of fairness, but the lending chain of paperwork is all screwed up, from no fault of the borrower, then who among the several entities along the chain of paperwork gets the right to the payments when the original lender is gone? This question has no definitive answer, and each and every one of those entities along the chain has an excellent legal argument.  This is a real Gordian knot, but in this political climate, there is no one capable of untying it.

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"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

kenklave
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I am not familiar with

I am not familiar with California law, but isn't this matter covered by the UCC regarding secured transactions? If so I would agree that the lender has no duty to inform the borrower of anything except where to send payments. If the debt is assigned the lender must notify the borrower of any change regarding payments. If the lender does not, then the borrower may continue paying as before the assignment and will be credited with those payments.

I would also agree with the court that there is no issue unless some party is claiming the borrowers are in default.

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Atlee's Second Question

California Lawyer wrote:

atlee wrote:

You have got my attention and I am interested but, given the legal profession's predilection for verbose expression, I keep drifting off into a daydream. No offense meant but how about an executive summary? Are these deadbeats going to get away without having to pay their mortgage even though they can afford to do so? Where was it ever implied in the original  agreement that they had the right to negotiate better terms.

After the Executive Summary, I figured I would post a separate answer to your questions.

I don't know if the deadbeats will get away with not paying off their mortgage.  My suspicion, is that in some cases, yes, in other cases no.  The law is very clear on the issues, in favor of the deadbeats in many circumstances, but there are countervailing equitable remedy arguments.  In non-lawyer speak, this means that it is unfair that the borrower gets a free house.  What should happen is that the lender simply gets title to the house, since the buyer defaulted and per contract, the buyer surrenders the collateral.  Problem is not so easily solved, though.

The damn difficult question is then: if the borrower has to pay for the house out of fairness, but the lending chain of paperwork is all screwed up, from no fault of the borrower, then who among the several entities along the chain of paperwork gets the right to the payments when the original lender is gone? This question has no definitive answer, and each and every one of those entities along the chain has an excellent legal argument.  This is a real Gordian knot, but in this political climate, there is no one capable of untying it.

Whether the agreement states or implies the ability of the borrower to negotiate better terms or not is irrelevant.  The issue is to whom is the borrower supposed to tender monthly payments, when the original lender says to pay someone else, but the "someone else" fails to comply with California law and prove entitlement to the payments.

Think of it like this: what is borrower makes all the payments, but later, someone else shows up and says pay up?  Borrower will say, "but I made all my payments."  This new person says "I own the note, and I have not been paid.  Pay me or else I will sue."

If there was a quiet title lawsuit, the one with the note would have an excellent argument to compel the borrower to pay up or surrender the property.  Borrower could conceivably sue the entity to whom all the payments were made, but what if that entity is gone?  Second, who the hell wants that problem, anyway.  Is it not just mighty simple to confirm, in writing, the paper trail that the law imposes upon the bank?  If bank says it is entitled to be paid, then it is a simple process to produce the note, and the assignment.  No big deal.

Try this one if you have trouble grasping the concept.  Let's say you have a buddy who wants to buy a used Harley Road King.  He comes to you and asks for money, say, $15,000.  You decide to loan him the money.   What a good friend you are.  But, you wonder if your friend might not pay you back, so you ask him to give you security, collateral, to guarantee repayment.  Your friend says, "no problem.  If I don't pay you, you can have the Harley."  You figure, "Ok, if my friend does not pay, I can take back the Harley, sell it, and get my money back."  So, you loan the money, and you get your friend to sign a promissory note to which he pledges, in writing, the Harley as security.  Your friend buys the Harley, all is good.

Your friend pays you $200 every month as promised.  Then one day, Turd drops a brilliant post, Pailin agrees, and you decide you need $15,000 to buy a massive dip in silver.  So, you decide to sell your Harley note to your neighbor.  You don't bother to sign over the note to neighbor.  He gives you $15,000.  You then tell your friend, "Make your $200 payments to my neighbor.  Here is his information."

Your friend makes $200 payments to neighbor for awhile, then your friend gets a letter from neighbor, which says: "Please make your payments to JoeKa Shaneighneigh."  Your friend then says to himself "I need written proof that I am supposed to pay JoeKa.  What if I pay JoeKa, but Atlee says I was supposed to pay someone else?  What happens if Atlee takes my Harley?"

Now, would your friend be curious as to why he has to make $200 payments to your neighbor, or JoeKa and not you?  Sure.  So your friend tries to find you, but you made so much money on Turd's recommendation, that you bought a Greek island on the cheap, and you are long gone.   (Feeling good, Turd!  Looking good, Atlee!)

So, your friend goes to your neighbor.  He asks neighbor: "why do I have to pay you?"  Neighbor says: "I sold the Harley note to JoeKa.  You owe him."  What the neighbor did not tell your friend, is that the neighbor decided that he could make a bundle pooling a lot of similar notes together as collateral for a security.  But for tax reasons, neighbor creates an investment trust to "hold" the notes.  Only neighbor does not want to pay all the DMV transfer fees, so he sets up a shell company, which acts like it filed all the proper DMV forms to transfer title from the notes from friend, to neighbor, to the trust, etc., but in actuality, the shell entity did not do any of the proper paperwork since it was just a phony shell company designed to avoid the payment of DMV fees. 

Neighbor then creates a security for sale to investors.  Neighbor pools a thousand similar notes together, and pledges them as collateral for an investment security, then sells the security to an investor, JoeKa.  Neighbor makes millions in fees for all the transactions.   JoeKa asks neighbor to collect the monthly payments for all of the notes, and agrees to pay neighbor a monthly fee.  JoeKa also says to neighbor, "If anyone does not pay their monthly payment, go ahead and take their collateral.  Sell it, and pay me.  But, I won't pay for the costs of you having to collect, and I won't pay you a monthly fee now since you are not collecting the payment."

Your friend tracks down JoeKa.  He asks him why he must pay JoeKa, and not Atlee or the neighbor.  JoeKa says "I own the right to collect.  Pay up.  If you don't pay, I will take the Harley."  

So, your friend says "screw this.  I am not paying anyone." 

The law says any assignment of the right to pay shall be in writing, or else the assignment is unenforceable, meaning that the person claiming to own the thing purportedly assigned is without the ability to sue to enforce the assignment.

The law says that a debt owed without the accompanying written promise to pay is invalid to enforce sale of the collateral securing the debt.

Now, who gets the Harley?  (Assume that Harley cannot be separated into parts, but must be sold whole, intact).

Should your friend get the Harley, since he promised to pay, but did not honor his obligation, and he got to use the Harley but not pay back the debt used to purchase the Harley?

Should Atlee get the Harley, since he is the holder of the original note, even though he has been paid in full already?

Should neighbor get the Harley, since he paid Atlee, is out the price of the note to Atlee, but got paid some money from JoeKa, even though he cannot show written proof that Atlee assigned the right to payment to neighbor?

Should JoeKa get the Harley, since he is the investor in the trust, having paid neighbor, but JoeKa cannot prove proper assignment of the note from Atlee to neighbor, nor payment of DMV fees to prove actual transfer of title to the Harley to the trust, even though he has paid something to neighbor?

How to sort through this is anyone's guess.

Now you see why it will take years and years.

Throw in title insurance companies.  It then takes on another dimension of complexity.  Let's assume that friend sells Harley to tmosley for $7,000.  Tmosley buys title insurance.  Title insurer says to tmosley: "for $200, we will insure you against bad title to the Harley."  This means that if JoeKa comes out of the woodwork and claims the Harley, the title insurance company will pay for the lawyer to defend the lawsuit, and if JoeKa proves good title to the Harley instead of tmosley, the title insurer will pay tmosley the $7,000 that tmosley lost. 

Insurance companies take years to litigate claims, for a single claim.  Imagine millions and millions of claims!

See why this is such a mess?

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

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Right to know

IMO, I think this is great, this is not some frivolous suit, this is a challenge to the court for help in unraveling this mess. We don't know what this will look like 10 years from now, we all know the banks have screwed the pooch on this, it doesn't get any worse, but it doesn't seem that they are trying to help themselves other than looking for a handout.

I do not agree with the free housing concept, and think that any monies owed that are disputed for whatever reason needs to be paid into an account until the issues are resolved. I know this will not happen, it's to easy like every other problem we have, there are simple solutions but they may not be "politically or monetarily" correct, so nothing get done.

I also see this thing going as self inflicted section 8 housing on a grand scale, until the courts take this subject head on and give definitive answers to the numerous issues, there will be no recovery in housing or anything else. I really do not trust the courts today, but its all we got which is just a very small step above the clowns on the hill.

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Farting in an elevator, your Honor!

The motivation behind these cases is to get deadbeats homes, period.  The reaction by banks and the media are clear.  Some judge, underwater in his mortgage I'm sure, got presented a case where some other dumbass was elbow deep with a big bank and the judge decided to be a one man OJ Jury.  "If there ain't no title, the payments be idle."

Is there any good faith on the part of the litigants, say placing the money in an escrow account until the end of litigations, seeing as these nice lawyers are working for free by kicking up a multi-trillion dollar shitstorm, err employment opportunity?  Not in a single case I've seen.  It's just a means to play the litigation lottery for a free home and live like a king while being freed of everyday responsibilities like the cost of puting a roof over your head.  A pox on all their houses!

The reaction from the public and legislators will be requests for inane solutions like DPH was throwing out where deadbeats get something for free.  No deadbeat should live in a house for any period without paying until every willing-to-pay, rent- on-the-honor-system-alone zombie has been given a chance to submit a competing offer to the bank, you know something greater than zero revenue for beating up the property.  No pay = no stay, period.

I do believe that we should restrict the resale of mortgages, without exception.  Local lenders know people, know their circumstances, know the area, and have a vested interest in keeping their area vibrant.  These cases will not yield that result.  They will cause massive upheaval.  They will reward the scum of society.  They will lock up houses for generations from being available for purchase.

The executive summary:

Nobody that should have bought a home was predated upon.  300k is still 300k over some period.  Can't afford?  Don't commit.  Can't comprende the Algebras?  Don't commit.

Nobody that has paid their bills has been foreclosed upon.

Nobody in the front office cared about the numbers because they were going to sell the loans.

The Secondary  owners didn't care about the numbers because they were gonna get backed by the FED.

The only people that cared about what was happening were the astute renters that refused to purchase and the politicians that pushed homeownership upon the poor and the irresponsible.  The politicians insisted on demographically correct results, and got demographically inevitable financial blowback. 

Then, lawyers got involved.

You can spin it any way you want, but the bottom line is these lawsuits all have nothing to do with what they have to do with legally.  Their sole intent is redistribution of wealth along the demographically correct lines thought to have been assured by the political oversights.

What are you gonna do to make this fair in the future, with the real issue at hand, not the title bomb diversion?  Require arithmetic competency of borrowers?  Require fluency in English so you can demonstrate knowledge of the contract?  Those bastard banks were already discriminating on things like credit scores, income, having a valid SSN, etc as if those things demonstrate you are an upstanding guy and pay your bills.  We worked decades to get those off the table, so there's no way we can do a full retard qualification before handing over in excess of a quarter million dollars in real assets.  I mean come on, this is America, land of the free (everything that isn't bolted down).

Lawyers on these cases should fear every property owner when the inevitable results come down.   It is an assault on decency, property values, and the monetary system we participate in.  It will destroy the lives of many good people who have been taxed beyond their means, and will be conceding to an entire non-participatory class of parasitic hominids an inflated and vibrant lifestyle relative to their own, for the crime of doing the right thing.  Thankfully, should they wonder who brought about the shenanigans, the names of the lawyers will be a matter of record.  If my neighborhood was taken over this way, I think I'd have to go secure my children some homes, send the bank a note saying payments will resume on their 18th birthdays but that the homes were being properly looked after until then, free of any roaches legged six or two.  If the banks didn't like the arrangement, I'd accept it and simply be happy knowing that the house could be properly auctioned in our capitalist tradition and evil wasn't allowed to win, not in my backyard.

These suits are trivial technicalities in the grand scheme of things, but their resolution is anything but.  Turd noted their nature as transformative.  Homeowners out there, know this: you may not be able to sell your house, ever, if it fell under one of the @issue procedures or lenders.  The litigations may outlive you.  Even if you can eventually, 100's of billions of home value will be destroyed because when you get your title, some non-paying schmuck will get his, only he doesn't need his (non-existent) investment back, so he can beat you on the ask.  Home prices will fall.  This is easily the straw that will break the camel's back.  Bernanke may take years, but lawyers beat bankers @ playing economic jenga.  They can identify the single block that holds the whole thing together.

Code The Plumber
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Recovery in housing?

This is nonsense. There will be no recovery until there is an abberation to the southernly of price.  I bring bad news, for we can't even see price from this altitude let alone what is below it.

Prices on houses were retarded, and they STILL ARE.  Everyone needs to accept this.  Housing is still to this day by all real accounts, meaning by what banks from the FED down to mom and pop are prepping for based on historical ratios and current rent levels, going to drop another 20%+ to "recover" to N-O-R-M-A-L.  The last 10 years was smoke and mirrors.  There will be no recovery in housing unless we have seriously SHTF inflation and DOW 18,000 and gold 3k+, at which point you'll get your 2006 prices recovered.

Reality check:  Housing exceeded 10:1 median price to median income in many metro areas.  hmm, OK, so that means if median income was 50k, median home price was 500k.  How does 50K pay 500K in 30 years?  It doesn't.  Go ahead, cut the ratio in half and add a kid or two, a car payment, gasoline, etc.  What fairytale were you all in?  The collapse was not news, it was screamed from rooftops for years because the numbers were insane and a game of hot-potato.  You want to feel stupid for buying a house prior to 2008?  Here, info compiled each year since 2004 or earlier that was ignored because Flip This House was so fun to watch:  http://www.demographia.com/  Until median home price is under 3x median income in your area, you are just in historical average zone, and there is nothing to correct.  What  does that mean for you?  Grab a pair of new shorts, then go here http://www.zipskinny.com/ .

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Angry Code

The anger is palatable.  Reading your post I see much hostility, for PAST CONDUCT, but where is the proposed solution?

I am trying very hard here to contribute to this great forum.  I am also trying very hard to see the wisdom of the long comments you have posted.  I was hoping to provide information, on this topic, to inform, not to persuade anyone, or criticize anyone.

I do see that you have captured a significant essence of some part of the problem.  The past problems are vast, and interconnected, though, and there are many culpable parties. 

In my humble view, I see the recovery of housing to be THE cornerstone to any lasting economic, societal recovery.  How it gets here is anybody's guess.  One sure way is to accelerate the bank's losses, for sure.  Either Bernanke prints to infinity and the collapse occurs by hyperinflation, or the banks fail, and there is mass default and deflation.  Okay, so be it.  What is CERTAIN, is that the system is on life support, and will collapse.  So, my hope is for the collapse to occur sooner rather than later, so we can avoid years and years going in and out of deflation, bouncing along the bottom like Japan, while the kleptocrats steal everything.

In short, as far as a solution is concerned, maybe you can think about this.  Without the failure of TBTF banks, who CREATED this whole mess from (1) securitization and its attendant bastardization of the incentives both for buying and lending; (2) insanely low interest rates which initiated this debacle to begin with following the tech bubble crash in 2000; (3) Bernanke's failed money printing which has up until now, basically hidden the problem from the masses and prolonged the eventual collapse; (4) captured regulators at all levels, including the oval office; then THERE IS NO SOLUTION SHORT OF COLLAPSE.

In a collapse, which is certainly coming, and drawing near (look at gold relative to ALL currencies today), deadbeat renters will be the last of your worries.  Survival will necessarily require mobility, and escape from societal scum like the welfare moms and their broods, the gangbangers, people who are dependent upon govt checks every month, and those otherwise normal folks who did not prepare and are now desperate.  Why should you care who lives in the abandoned house in the neighborhood you don't live in?  Is that going to fix the myriad problems?  No.  Is it better that someone lives in the house, rather than gangsters, or crack addicts?  That you had to be prudent and wise is a good thing.  That others did not and are not, is an issue that has not been solved since humans first existed.

At some point, the deserted, dilapidated suburbs will give way to new farms, parks and open spaces.  It will take time to adjust, but we will as a country be able to adapt, and survive.  I like my chances here in the US, versus some other despotic third world country, at least for now.  I mean, look at Detroit.  Who would have thought at the height of the car building boom in the 50's through 60's that all of that would be lost?  Things change. 

Someone said that survival goes not to the strong, but to those who are best at adapting to change.  I firmly believe in that.  Adapting to change requires an open mind, and one free from constraints and normalcy bias.

So, maybe you can direct some of your anger to forward thinking, and look for solutions, instead of carrying around all of your anger and staying in the past.

Just a suggestion.

__________________

"To save yourself from all this that has happened and will continue to happen requires commitment and courage. You have it or you do not. Admit who you are and act accordingly."
Jim Sinclair, December 18, 2012.

Dr. Sandi
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Thanks for trying!

I appreciate your effort to inform us.

However, it's apparent that the replies are more about how to smack down the deadbeats than showing any glimmer of learning from you. The idea of simply finding out who now has the paper is lost in the haze of mindless indignation over somebody getting free rent.

You made the information very accessible and very clear. Unfortunately, many of the assclowns who post here are just too stupid to learn.

But thanks anyway for putting it out there!

Now I'll go back to lurking, which is more educational and draws much less fire from people who are obviously too full of their own bullshit to learn something new when it's offered to them at no cost other than dropping their shields.

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California Lawyer

Thank you for posting this information and your explanations of the foreclosure mess.

I enjoy reading all your posts.

I am fortunate to live an an area of the country that this is not a major problem, but I agree with you, recovery of the housing market is key to any lasting economic recovery in the US.

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CA Lawyer

It's great to have you on this board.  Smart, knowledgeable, sense of humour and a life at work/life outside work attitude.

It sounds like the case you've quoted is one in which the plaintiff is not in default.   That's great because it should remove some of the moral and stick-it-to-the-man type comments.

On the other hand do you think the courts will arrive at a decision or see it as an intellectual exercise with political ramifications and dodge it for now?

Separate question.   What happens when a mortgage is paid in full under these conditions.  Can the discharge process take place or will it be a wild goose chase again to find out who has the right to discharge?

__________________

Swing trade indexed ETFs. Long physical gold, silver, and 1 miner.

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Very interesting read.  Is

Very interesting read. 

Is there any sort of a middle ground where the borrower agrees that he can't pay, the bank agrees that they borked the paperwork, and they both compromise at some reduced dollar value mortgage in exchange for a new, clean title.

Or are the deadbeats just milking the system and the banks too scared to write anything down.

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Code The Plumber

Code The Plumber wrote:

Nobody that has paid their bills has been foreclosed upon.

Care to recant?

http://abcnews.go.com/Business/bank-america-florida-foreclosed-angry-homeowner-bofa/story?id=13775638

I don't think anyone should get a free house.... But banks and mortgage companies are doing some really SH***Y things.

California Lawyer is making some valid points.

I don't know if the subject of this thread is productive or counterproductive but there are some real issues that need to get ironed out and there is going to be some winners and some losers.

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Interesting take, trying to

Interesting take, trying to use 2943 for obtaining the information.  However, even if the information is obtained, it will mean little.

Under 2924, there is no requirement to prove the Note, or other such allegations that homeowners are trying to claim.  Gomes v Countrywide, an Appeals Court decision, held that 2924 compliance was all that was needed.  It also confirmed that MERS was an agent for beneficiaries in a legitimate agency relationship.  Furthermore, it ruled that the borrower, per the DOT, did allow MERS to foreclose on a property.

A borrower obtaining the information from 2943 will still have a difficult time overcoming 2924.  The hope will be that the Note has no endorsements on it, or the endorsements are defective due to a technical nature. 

I have reviewed thousands of sets of loan documents, for both homeowners and for lenders.  My reviews have included Chain of Title, Chain of Note, Comparisons to Securitization documents,  Notary and Signing, and other issues.  Today, I do exams built for OCC Compliance.

I have seen documents that most homeowner attorneys will never see, unless they can get to the Discovery phase and get the documents held by the lender or servicer.  These documents generally tell a different story than what the homeowner documents tell. 

I cannot remember yet a loan with Countrywide whereby an allonge or endorsement has not been present on or with the Note.  These are generally endorsed in blank, which is compliance with both UCC and also the PSA.  So, in this case, it is likely that this will also be the case.

Now, some enterprising attorney will refer to a lack of a complete Chain of Endorsements, even in blank, on the Note.  Only if the PSA calls for a complete Chain of Endorsements from Sponsor to Depositor to Trust, would this be an issue.  And very few PSA's demand such.

The Allonge being attached to the Note may be a different issue.  I have seen Allonges attached, and have seen them not attached.  However, this is likely easily remedied.

The use of an Allonge when there is space on the Note is  another issue that could be brought up. But, there has been no real litigation addressing this issue that I am aware of in CA.  Likely, it would not be an issue.

Chain of Title and Assignments could pose some issues, dependent upon whether MERS was involved in the subject loan, or not.  PSA's will usually say that if the use of MERS is lawful in the state, as it is in CA, then MERS will be used and is sufficient.  If MERS is not on the DOT, then one must look at the wording of the PSA, and then check assignments for compliance.  ( There are technical factors that one must look at, and which most "examiners" or attorneys do not understand regarding assignments and the  Securitization Chain. Often, attorneys will  claim Chain of Assignment issues that I can counter, based upon the entities involved. It all depends upon the situation.)

If there are legitimate claims to be made,  after obtaining the documents, the claims will  need to be strong enough to get past 2924 rulings.  Provided that they do pass 2924, there is still the issue of how easily corrected the issues would be.  If easily corrected, a Court will often side with the lender.  Or they find with the borrower, and then the lender corrects and simply starts over again.

So, even using 2943 to get the documents does not mean much, until one can pass 2924 compliance.  And even then, much would depend upon how easily corrected the issues are.

Don't expect that one will get a home for free.  That will not happen.  Equitable remedies will apply.  And, what is the remedy for a "technical violation" in the foreclosure process, when a homeowner has not made a payment for 1 or 2 years? 

I have spoken with thousands of homeowners in the past four years.  Never have I seen a case whereby the homeowner was not in default, when the lender had claimed that they were in default.

When a homeowner calls, he have one of three objectives in mind, obtain a loan modification, delay the foreclosure for an extended period of time, or get the home for free.  And, the majority begin by wanting the home for free.  If the purpose of the caller is to get the home for free, I  refuse to work with him because he has unrealistic outcomes.  If a modification is the purpose,  then I evaluate the financial condition of the borrower and see if it makes sense to seek  a modification.  If a person cannot  qualify for a mod financially, then there is no reason to accept the client.  And if the homeowner can qualify for  a mod,  then his attorney must provide  written authorization to me to do the exam.

Apples:

Regarding the two parties  coming to a mutual consent, this does not happen often. Only if a homeowner has a "good attorney", and the allegations have sufficient merit, will a lender or servicer consider a modification.  What defines a good attorney is an attorney presents valid arguments,  no theory, and has the documentation to back it up.  Furthermore, the attorney is willing to seek a win/win situation for all parties, and treats the other side with respect.  Otherwise, the lender will fight, and will  win.  Simply put, the spend the homeowner into the ground.

Also, a Portfolio Lender cannot generally offer principal reductions to a homeowner because of liquidity reserve issues.  Such reductions are losses on the balance sheet and decreases liquidity, and must be offset by increasing liquidity, which can only be achieved by re-capitalization.

Securitized loans are also difficult to modify because the terms of the PSA severely restricts what can and can't  be done.  And to this NPV tests, and the difficulty increases expotentially.

Most  homeowners cannot afford the cost of litigation. To  do the job correctly, an  attorney must do multiple depositions, seek discovery time and again, and engage in costly actions.  Additionally, the attorney needs the correct firm to examine any discovery documents and provide the roadmap for litigation.

Homeowners complain about paying a $3500 retainer fee, and $1000 per month for the litigation.  They think that this is too expensive if the action goes longer that 4-6 months.  The problem is that with attorneys, you get what you pay for.  If you are going the cheap route, you will lose completely.  And if saving your home is not worth more than a few thousand dollars, then you are not serious about saving the home.

The truth is that most homeowners are milking the system. I can almost always show that the homeowner knew what he was doing when he got the loan, and usually that the person could not afford the loan in the first place.    When I do an exam, I point such issues out to the homeowner's attorney, so that the attorney can properly evaluate how to handle the  case. 

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Foreclosure of Paid In FULL mortgage

How about the remediation of the attempts of the Banks who hold the illegally transferred notes to foreclose on properties that have been paid in full?

How about this might settle future attempts to erroneously foreclose on properties that have been sent to foreclosure proceedings. I seem to remember a couple who was illegally foreclosed on after they paid off their note with a mortgage company that had failed and been absorbed by another entity.

That entity did not acknowledge the payoff that they inherited from the preceding mortgage company.

I vaguely remember some headlines to the effect of that homeowner foreclosing on a Bank branch, chaining the doors shut, removing the office equipment etc. as a result of this event.

I think the current suit you have so generously shared with us CA Lawyer may have the ability to prevent such discrepancies in the future.

Thanks for taking the time to lay it all out for us. I currently have the ability to pay off my rentals and home, but have chosen not to do so for this very reason. I am hoping that this case will be settled and the paper trail can be rectified before I spend too much more in interest payments unnecessarily.

Best Wishes,

Jager06

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