MORTGAGE ASSIGNMENTS AS EVIDENCE OF FRAUD

 

   Lynn Szymoniak,
Esq., Editor, Fraud Digest, February 9, 2010

              
(szymoniak@mac.com)

In the past ten years, hundreds of thousands of residential
mortgages were

bundled together (often in groups of about 5,000 mortgages),
and investors

were offered the opportunity to buy shares of each
bundle.  This process is

called securitization.  

Each such bundle of residential mortgages was given a name,
such as

“Soundview Home Loan Trust 2006 OPT-2.”  The name indicates information

about the particular trust such as the year it was created
(2006) and its contents

(with OPT indicating that the loans in that particular trust
were originally made

by Option One Mortgage).

Each such bundle/trust has a Cut Off Date identified in the
trust documents

(specifically, in the Pooling and Servicing Agreement).  The Cut Off Date is the

date on which all mortgage loans in the trust must be
identified.  In short, a final

list of all of the mortgages in the bundle is set out.  Each trust also has a Closing

Date which is the date that the individual mortgages are
transferred to the Trust

Custodian, who must certify that for each mortgage, the
custodian has a

mortgage note endorsed in blank and proof that the ownership
of the note has

been transferred. 
This proof is most often an Assignment of Mortgage. Most

trusts included the following or equivalent language
regarding the Assignments:

“Assignments of the Mortgage Loans to the Trustee (or its
nominee) will not be

recorded in any jurisdiction, but will be delivered to the
Trustee in recordable

form, so that they can be recorded in the event recordation
is necessary in

connection with the servicing of a Mortgage Loan.

”

Title insurance companies issued policies guaranteeing that
the trust had clear

title to the mortgages.

When widespread defaults occurred, Trustees discovered that
the laws regarding

Mortgage Assignments varied significantly from state to
state.  Many issues

regarding such Assignments were simply unresolved.  One of the most significant

issues was whether Mortgage Assignments could be back-dated
or have

retroactive effective dates. 
This issue arose because Trustees and their lawyers

discovered in the foreclosure process that the Assignments
could not actually be

located, or that certain states did not allow blank
Assignments.

To solve the problem of the missing Assignments, new
Assignments were made

and recorded.  Because
the question of retroactive Assignments had not been 2

resolved, most of these Assignments did not set forth the
actual date that the

Assignment took place. 
The Assignments were signed and notarized as if the

transfer took place many years after the actual transfer
date.

The Assignments were prepared by specially selected law
firms and companies

that specialized in providing “mortgage default
services” to banks and mortgage

companies.  In
jurisdictions with a high rate of mortgage defaults, over 80% of

the filed Mortgage Assignments in the last three years were
prepared and filed

by the same five or six law firms and default processing
companies.

In many states, two such Assignments were prepared and
filed. The first was

prepared in the name of Mortgage Electronic Registration
Systems as “nominee”

for the particular bank or mortgage company. When MERS
authority to file

foreclosures and Assignments was challenged in most
jurisdictions, with varying

results, a non-MERS Assignment was prepared as well.

In all of these cases, the Assignment was prepared to
conceal the actual date

that the property was acquired by the Trust.  An examination of the Assignments

filed showing the grantee as the Trust – such as “Soundview
Home Loan Trust

2006 – OPT 2” – shows that most of these Assignments were
prepared and filed

in 2008 and 2009, when, in reality, the mortgages and notes
were actually

assigned – albeit defectively – prior to the closing date of
the Trust.  While the

exact closing date can only be determined by looking at the
trust documents,

any Trust that includes the year in 2006 in its title most
likelyclosed in 2006.

If a Mortgage Assignment is dated, notarized and filed in a
year after

the year set forth in the name of the grantee trust on the
Assignment,

it is actually an Assignment specially, and in many cases,
fraudulently,

made to facilitate foreclosures. 

These Specially-Made Assignments have created havoc in the
courts.  In many

cases, the Specially-made Assignments are dated AFTER the
foreclosure action

has been initiated, making it appear that the Trust somehow
magically knew

prior to the assignment that it would acquire the defaulting
property several

months after the foreclosure action was initiated. 

Repeatedly, courts have asked Trustees to explain why they
were acquiring nonperforming loans and whether such acquisition was a violation
of the trustee’s

fiduciary duty to the Trust. 
No Trustee has ever come forth and explained that

the Trust actually acquired the loan years before the Assignment.  As a result,

there are many decisions with observations similar to this
observation made by

Judge Arthur M. Schack of Kings County, New York, in HSBC
Bank v. Valentin, 21

Misc. 3d 1124 [A]:3

Further, according to plaintiff’s application, the default
of

defendants Valentin and Ruiz began with the nonpayment of

principal and interest due on  January 1, 2007. Yet, four months

later, plaintiff HSBC was willing to take an assignment of
the

instant nonperforming loan. The Court wonders why HSBC would

purchase a nonperforming loan, four months in arrears?

And in Deutsche Bank National Trust Co. v. Harris, Judge
Arthur M. SCHACK,

Kings, New York, Index No. 39192/2007 (05 FEB 2008):

Further, the Court requires an explanation from an officer
of

plaintiff DEUTSCHE BANK as to why, in the middle of our
national

sub-prime mortgage financial crisis, DEUTSCHE BANK would

purchase a non-performing loan from INDYMAC…

In Massachusetts in October, 2009, Land Court Judge Keith
Long reaffirmed a

March, 2009, ruling that a lender cannot begin foreclosure
proceedings before

the lender has filed and recorded the Assignment, stating:

The blank mortgage assignments they possessed transferred

nothing…in Massachusetts, a mortgage is a conveyance of land.

Nothing is conveyed unless and until it is  validly conveyed. The

various agreements between the securitization entities
stating that

each had a right to an assignment of the mortgage are  not

themselves an assignment and they are certainly not in
recordable

form. U.S. Bank National Association v. Ibanez,
Massachusetts Land

Court Misc. Case No. 384283, consolidated with two other
cases.

Many authors expect the Massachusetts Supreme Court to
reverse the Ibanez

decision, but the uncertainty itself, as in the case of the
MERS challenges,

caused lenders to flood recording offices with new
Assignments.

In cases where the Trust failed to get a valid Assignment,
the problem is

complicated by the bankruptcy of the major loan originators,
including American

Home Mortgage, Option One Mortgage, and Countrywide Home
Loans.

When these big mortgage companies filed for bankruptcy, they
did not disclose

the mortgages already sold to the trusts as assets, because
the transfers

occurred months and years prior to the bankruptcy
filing.  Years later, when the

Assignments were required for foreclosures, a bankruptcy
court’s permission was

needed to Assign billions of dollars in mortgages.  Most likely in fear that a

Bankruptcy Judge would not rubber stamp such a request, no
such permission

has ever been sought.4

In lieu of valid Assignments, Trusts continue to rely on
Assignments specially

made by their own law firms and mortgage default service
companies.

Eventually, these fraudulent Assignments are being discovered
by Courts, and

the foreclosing trusts required to prove that they own the
Mortgage and Note in

the foreclosure action without reliance on Assignments that
misrepresent the

date of the actual transfer to the Trust the authority of
the signers of the

bankrupt original lenders. 
For thousands of homeowners, this realization has

come too late.

Aside from the law firms and mortgage  servicing companies that fraudulently

produced Assignments, the entities at greatest risk that the
fraudulent

Assignments scheme will be exposed are the Title Companies
that guaranteed

the clear and correct transfer of ownership to the
Trusts.  Also at risk are the

trust creators themselves and the Trustees.  Both groups of entities have been

on notice for several years that the faulty Assignments were
likely to jeopardize

the Trusts’ claims to ownership and ability to foreclose in
the event of default,

yet have failed to disclose this critical
information to trust shareholders and