The Problem of Foreclosure Titles Securitized by MERS
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Transcript of The Problem of Foreclosure Titles Securitized by MERS
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The Problem ofThe Problem ofForeclosure TitlesForeclosure Titles
In NSP AcquisitionsIn NSP AcquisitionsWhy The Title of the Foreclosure SaleWhy The Title of the Foreclosure Sale
Buyer Is Often DefectiveBuyer Is Often Defective
How Can We Deal With the Problem?How Can We Deal With the Problem?
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SecuritizationSecuritization
Flow Chart andFlow Chart andStructureStructure
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Transfer of Promissory NoteTransfer of Promissory Note
Negotiable instrument under Article 3 ofNegotiable instrument under Article 3 of
the UCCthe UCC
Transferred by:Transferred by: EndorsementEndorsement
Delivery of the instrumentDelivery of the instrument
Acceptance of deliveryAcceptance of delivery Negotiation = Endorsement + Delivery +Negotiation = Endorsement + Delivery +
AcceptanceAcceptance
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Transfer of MortgageTransfer of Mortgage
Mortgage is a real estate instrumentMortgage is a real estate instrument Subject to the statute of fraudsSubject to the statute of frauds
Must comply local real estate lawMust comply local real estate law Transferred by:Transferred by: Written assignmentWritten assignment Delivery of the instrumentDelivery of the instrument
Acceptance of deliveryAcceptance of delivery Recording of transferred mortgageRecording of transferred mortgage Assignment = Written Transfer/AssignmentAssignment = Written Transfer/Assignment
+ Delivery + Acceptance + Recording+ Delivery + Acceptance + Recording
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Notarization RequirementsNotarization Requirements
Most state laws require strict complianceMost state laws require strict compliance Signer must admit, by oath or affirmation, in theSigner must admit, by oath or affirmation, in the
PRESENCE of notary to having voluntarilyPRESENCE of notary to having voluntarilysigned the document, and signers capacitysigned the document, and signers capacity
Signer must make the OATH or AFFIRMATIONSigner must make the OATH or AFFIRMATIONbefore signingbefore signing
Must identify the signer by a federal or stateMust identify the signer by a federal or stateissued photographic IDissued photographic ID
Penalties include civil and criminalPenalties include civil and criminal Felony in most states to take a falseFelony in most states to take a false
acknowledgementacknowledgement
Document is invalid with improper notarizationDocument is invalid with improper notarization
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The Alphabet ProblemThe Alphabet Problem
With Securitized TransfersWith Securitized Transfers The loan closed in the name of theThe loan closed in the name of the
Broker/LenderBroker/Lender
Broker is funded by Warehouse Line of CreditBroker is funded by Warehouse Line of Credit
Warehouse Lender then sells paper to aWarehouse Lender then sells paper to aSpecial Investment Vehicle (SIV)Special Investment Vehicle (SIV)
SIV then sells paper the Sponsor/DepositorSIV then sells paper the Sponsor/Depositor
Sponsor or Depositor then transfers to TrustSponsor or Depositor then transfers to Trust
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How Many TransfersHow Many Transfers
A-Transfer:A-Transfer: Consumer to BrokerConsumer to Broker
B-Transfer:B-Transfer: Broker to Warehouse LenderBroker to Warehouse Lender
C-Transfer:C-Transfer: Warehouse Lender to SIVWarehouse Lender to SIV
D-Transfer:D-Transfer: SIV to the Depositor or SponsorSIV to the Depositor or Sponsor
E-Transfer:E-Transfer: Depositor or Sponsor to TrustDepositor or Sponsor to Trust
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How Many DocumentsHow Many Documents
FourFourassignments and deliveries andassignments and deliveries andacceptances of the Mortgageacceptances of the Mortgage
FourFourendorsements and deliveries of the Noteendorsements and deliveries of the Note
EightEight separate notarizationsseparate notarizations
EightEight UCC-1 financing statementsUCC-1 financing statements
FourFourrecordingsrecordings
FourFourfiling and transfer feesfiling and transfer fees
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ABCDE Problem with the NotesABCDE Problem with the Notes
A.A. Consumer signs and delivers to Broker/LenderConsumer signs and delivers to Broker/Lender
B.B. Broker/Lender must endorse & deliver toBroker/Lender must endorse & deliver to
Warehouse Lender & written acceptanceWarehouse Lender & written acceptance
C.C. Warehouse Lender must endorse &Warehouse Lender must endorse &deliver to the SIV & written acceptancedeliver to the SIV & written acceptance
D.D. SIV must endorse and deliver to theSIV must endorse and deliver to the
Depositor & written acceptanceDepositor & written acceptance
E.E. Depositor must endorse and deliver toDepositor must endorse and deliver to
the Trust & written acceptancethe Trust & written acceptance
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The AllongeThe Allonge
A paper attached to a negotiable noteA paper attached to a negotiable note
Purpose is to provide written endorsementPurpose is to provide written endorsement
Only used when back of negotiableOnly used when back of negotiable
instrument isinstrument is FULLFULL (no room)(no room)
No need for notarizationNo need for notarization
Simple signature and title sufficient,Simple signature and title sufficient,
as with endorsement on noteas with endorsement on note
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Similar ABCDE ProblemSimilar ABCDE Problem
With the Mortgage InstrumentWith the Mortgage InstrumentA.A. Consumer must sign and deliver to BrokerConsumer must sign and deliver to Broker
B.B. Broker must assign and deliver to the Warehouse LenderBroker must assign and deliver to the Warehouse Lender
C.C. Warehouse Lender must assign and deliver to the SIVWarehouse Lender must assign and deliver to the SIV
D.D. SIV must assign and deliver to the DepositorSIV must assign and deliver to the Depositor
E.E. Depositor must assign and deliver to the TrustDepositor must assign and deliver to the Trust
And all these assignments must be recorded!And all these assignments must be recorded!
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Who Holds the Bearer PaperWho Holds the Bearer Paper
and Mortgages for the Trust?and Mortgages for the Trust? Normally a third-party bank that providesNormally a third-party bank that provides
document custody services to the trustdocument custody services to the trust
Provides trailing document filingsProvides trailing document filings
Provides custody chambers for all membersProvides custody chambers for all members
Executes assignments for membersExecutes assignments for members
Execute endorsements for membersExecute endorsements for members
Executes deliveries and acceptancesExecutes deliveries and acceptances
Provide on-line document status certificationsProvide on-line document status certifications
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What Does Trust Really Hold?What Does Trust Really Hold?
Electronic data with loan numbers & collateralElectronic data with loan numbers & collateraldescriptionsdescriptions
Electronic image of the original deed of trustElectronic image of the original deed of trust Electronic image of the original mortgage noteElectronic image of the original mortgage note
Rights in the documents by way of UCC-1Rights in the documents by way of UCC-1
financing statements and the pooling & servicingfinancing statements and the pooling & servicingagreementsagreements
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The 3d-PartyThe 3d-Party
Outsource ProvidersOutsource Providers Fidelity National Default ServicesFidelity National Default Services
First American National Default ServicesFirst American National Default Services
National Default Exchange, LPNational Default Exchange, LP
(Barrett Burke Owned Entity)(Barrett Burke Owned Entity)
Promiss Default SolutionsPromiss Default Solutions(McCalla Raymer Owned Entity)(McCalla Raymer Owned Entity)
National Trustee ServicesNational Trustee Services(Morris Schneider Owned Entity)(Morris Schneider Owned Entity)
LOGS Financial ServicesLOGS Financial Services(Gerald Shapiro Owned Entity)(Gerald Shapiro Owned Entity)
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What Do the OutsourceWhat Do the Outsource
Providers Do for the Servicers?Providers Do for the Servicers?
Create AssignmentsCreate Assignments Create AllongesCreate Allonges Create EndorsementsCreate Endorsements
Sign documents as if they were the VP or SecretarySign documents as if they were the VP or Secretaryof a Bank, SIV, Depositor, Sponsor or the Trustof a Bank, SIV, Depositor, Sponsor or the Trust
Notarize these documentsNotarize these documents Create Lost Note AffidavitsCreate Lost Note Affidavits Create Lost Assignment AffidavitsCreate Lost Assignment Affidavits Create Lost Allonge AffidavitsCreate Lost Allonge Affidavits Draft court pleadings and noticesDraft court pleadings and notices
Draft default correspondence, reports, etc.Draft default correspondence, reports, etc.
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How to Identify a DefectiveHow to Identify a Defective
Endorsement or AllongeEndorsement or Allonge Allonge can never be used to transfer aAllonge can never be used to transfer a
mortgagemortgage
Allonge can never be used if there is enoughAllonge can never be used if there is enoughroom on the original mortgage note for theroom on the original mortgage note for the
written endorsementwritten endorsement
Note is endorsed and not assignedNote is endorsed and not assigned Date of the endorsement is before or after theDate of the endorsement is before or after the
date of the registration of trustdate of the registration of trust
And much more And much more
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Defective EndorsementsDefective Endorsements
Notary is from Dakota County, MinnesotaNotary is from Dakota County, Minnesota
Notary is from Hennepin County, MinnesotaNotary is from Hennepin County, Minnesota
Notary is from Jacksonville, FloridaNotary is from Jacksonville, Florida
Signors company has no offices in notarys stateSignors company has no offices in notarys state
Date of endorsement and date of notarizationDate of endorsement and date of notarizationare differentare different
Signors name is stamped not written in scriptSignors name is stamped not written in script
Signor claims to have signing authoritySignor claims to have signing authoritybut no authority attachedbut no authority attached
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What About the Mortgages?What About the Mortgages?
Assignments and delivery follow same model as with theAssignments and delivery follow same model as with thenotesnotes
MERS is used to avoid registration of each assignmentMERS is used to avoid registration of each assignmentwith local register of deedswith local register of deeds
MERS claims no beneficial interest in the noteMERS claims no beneficial interest in the note MERS claims no ownership rights in note or mortgageMERS claims no ownership rights in note or mortgage
MERS claims it is nominee for true ownerMERS claims it is nominee for true owner
MERS delegates signing authority to all MERS membersMERS delegates signing authority to all MERS membersto sign documents as officers of MERSto sign documents as officers of MERS
MERS does not supervise any of its designated signorsMERS does not supervise any of its designated signors
MERS is not registered as a foreign corporation in mostMERS is not registered as a foreign corporation in moststatesstates
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How Does TrustHow Does Trust
Establish Lawful Ownership?Establish Lawful Ownership? Unbroken chain of note endorsements andUnbroken chain of note endorsements and
acceptances from A to B, B to C, C to D,acceptances from A to B, B to C, C to D,and D to Eand D to E
Unbroken chain of mortgage assignments andUnbroken chain of mortgage assignments anddeliveries and acceptances from A to B, B to C,deliveries and acceptances from A to B, B to C,C to D, and D to EC to D, and D to E
Unbroken chain of UCC-1 financing filingsUnbroken chain of UCC-1 financing filingsthroughout the chainthroughout the chain
Unbroken chain of recorded mortgageUnbroken chain of recorded mortgageassignmentsassignments
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But What Is FiledBut What Is Filed
In a Typical Foreclosure?In a Typical Foreclosure? Complaint alleging that the borrower (A)Complaint alleging that the borrower (A)
executed a note and mortgage in favor of theexecuted a note and mortgage in favor of the
plaintiff (E)plaintiff (E)
Note and mortgage from borrower (A) toNote and mortgage from borrower (A) tooriginating lender (B) attachedoriginating lender (B) attached
Sometimes a purported mortgage assignmentSometimes a purported mortgage assignment
from (B) to (E) attached, also purporting tofrom (B) to (E) attached, also purporting toassign the noteassign the note
This assignment always defective, often notThis assignment always defective, often not
recordedrecorded
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The Paper Trail andThe Paper Trail and
The Lack of Truth in LabelingThe Lack of Truth in Labeling
Electronic dataElectronic data
Fake dates & forged signaturesFake dates & forged signatures
False notarizationsFalse notarizations False assignmentsFalse assignments
Fake endorsementsFake endorsements
Fraudulent lost note affidavitsFraudulent lost note affidavits
Recreated documents & recordsRecreated documents & records
Allonges and moreAllonges and more
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Is the Trust Really Secured?Is the Trust Really Secured?
MAYBE But it would be very difficult for anyMAYBE But it would be very difficult for any
securitized trust to produce a valid set of originalsecuritized trust to produce a valid set of original
and unbroken assignments and endorsementsand unbroken assignments and endorsements
Even if the trust producesEven if the trust produces ALLALL of the requiredof the required
documents, there is still the issue of the legalitydocuments, there is still the issue of the legality
of the role of MERS on all required documentsof the role of MERS on all required documents
for recordingfor recording
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Questions?Questions?David WiechelDavid Wiechel
Telephone 937-765-4546Telephone 937-765-4546
Email [email protected] [email protected]
111 East Cecil Street111 East Cecil Street
Springfield, OH 45504Springfield, OH 45504