FORECLOSURE DEFENSE RESEARCH ASSISTANCE III

December 17, 2012

BANKRUPTCY CASES INVOLVING MORTGAGE-BACKED TRUSTS WHERE THE TRUSTEE WAS NOT ALLOWED TO PROCEED BECAUSE OF STANDING OR LOAN DOCUMENTATION ISSUES

 

Cases

 

In re Bass,

720 S.E.2d 18, (N.C.Ct.App.2011)

Mortgage Amount: $139,988

Trial court dismissed the claim of U.S. Bank, as Trustee.

“In the case sub judice, Petitioner has offered only a bare assertion that the challenged stamp is a facially valid indorsement. Absent an allonge, testimony, or other evidence indicating that the stamp is an authorized signature, it would be imprudent for this Court to accept Petitioner’s position. We hold that the facial invalidity of this stamp is competent evidence from which the trial court could conclude the stamp is “unsigned” and fails to establish negotiation from Mortgage Lenders to Emax. Consequently, Petitioner has failed to establish it is the holder of the Note, and the trial court did not err in dismissing Petitioner’s summary foreclosure proceedings against Respondent. For the foregoing reasons, the trial court’s order is Affirmed.”

 

In re Bevins,

Case No. 10-12856, USBC, Northern District of New

York, Albany Division

Trust: RALI2006QS18

U.S. Trustee Davis filed objections to a proof of claim filed by a mortgage servicer.  The servicer filed an Assignment of Mortgage by MERS. The Trustee asserted that Deutsche Bank had no standing because an Assignment of Mortgage does not demonstrate that there was also an assignment of the underlying note.

 

In re Canellas,

Case No. 6:09-bk-12240-ABB, M.D. Fla. 2009

Trust: Lehman Brothers Small Balance Commercial

Mort. PT Certs., 2006-3

“Movant asserts in its Motion it is the “owner and holder” of the Note and Mortgage, but has presented no evidence substantiating that assertion. The copies of the Note presented do not contain an endorsement evidencing an assignment of the Note. The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of the Note..

The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.

 

Deutsche Bank National Trust Company v. Tarantola,

Case No. 4:09-bk-09703-EWH, Bankr., D. AZ. July 29,  2010

Trust: Argent Securities, Inc. ABPT Certs., 2004-W8

Deutsche’s Motion for Relief from Stay was denied.

“Deutsche’s witness admitted that the Allonge was created after the MRS was filed to “get the attorneys the information they needed.” (Tr. 36, 47, 73.) Creation of evidence to support a motion for relief from stay, after filing has been found to violate Fed. R. Bankr. P. 9011(b)(3)… Deutsche’s witness also admitted that the Allonge had not been attached to the Original, but to a copy. (Tr. 79.) The Allonge, therefore, was never properly affixed to the Note and could not accomplish a transfer of the Note under ARIZ. REV. STAT. ANN. § 47-3204(A) (2010). Last, but certainly not least, even if the Allonge had been affixed to the Original, it would have been ineffective to transfer the Note to Deutsche because the party executing the Allonge had no authority to do so. First, while the Allonge is executed by Kathy Smith “as an Assistant Secretary and Vice President” of Argent, the evidence presented by Deutsche demonstrates that she was instead a “Special Officer of Citi Residential Lending Inc.” exercising the LPA. But the LPA only authorized assignments in specific circumstances not present here…

If, in the future, the court is confronted with filings as deficient and incorrect as filed in this case, the court will issue an order to show cause and consider imposing sanctions including, but not limited to, an award of fees to debtors’ counsel for having to oppose motions filed without proper evidence or worse with improper evidence.”

 

Deutsche Bank National Trust Company v. Triplett,

Cuyahoga App. No. 94924, 2011-Ohio-478

Trust: HSI Asset Securitization Trust 2007-HE1

Mortgage Amount: $81,000

Summary judgment for bank reversed.

“In the instant case, since it is undisputed that the assignment of the mortgage was executed and recorded after Deutsche Bank filed its foreclosure complaint, then the only evidence in the record that the Magistrate could have relied on to conclude that Deutsche Bank was a real party in interest was the affidavit of ownership dated March 31, 2009 and filed February 2, 2010. Thus, our resolution hinges on whether an affidavit of ownership, standing alone, is sufficient to satisfy Jordan.

In U.S. Bank Natl. Assn. v. Duvall, Cuyahoga App. No. 94714, 2010-Ohio-6478, this Court’s recent decision affirming the trial court’s dismissal of a foreclosure complaint involving facts substantially similar to the present case, we rejected an affidavit that stated the plaintiff acquired the note and mortgage prior to the filing of the complaint. Likewise, Deutsche Bank’s affidavit of ownership, sworn out more than a year after the foreclosure complaint was filed, is insufficient to vest the bank with standing to file and maintain the action.”

 

In re Doble,

2011 WL 1465559 (Bankr. S.D. Cal. April 14, 2011)

Trust: Harborview Mort. Loan Trust 2005-6

Mortgage amount: $650,000

Sanctions were imposed by the bankruptcy court on HSBC, its attorneys and agents.  The bank and its lawyers were sanctioned for “pressing a relief motion on admissions that were known to be untrue and signing and filing pleadings without knowledge or inquiry regarding the matters pled therein.”  The bankruptcy court held four hearings over several days.

“The most disconcerting misrepresentation to the Court was Defendants’ submission of multiple “true and correct” copies of the Note under penalty of perjury without any endorsement from Plaza. Whether the Note was endorsed is central to the merits of this case. When Defendants finally submitted an endorsed copy of the Note on November 8, 2010, they attempted to pass off the first three unendorsed copies of the Note as “illegible.” The first three copies of the Note were fully readable, so the phantom endorsement page was not a problem with legibility. The timing of this tardily produced endorsement, produced after several requests, suggests it was added only in response to the litigation. To add to the Court’s incredulity, Defendants have never answered the Court’s specific questions as to when and under what circumstances this newly proffered endorsement was executed.”

 

In re Foreclosure Cases ( Judge Boykin),

No. 07 Civ. 2282, 2007 WL 3232430

(N.D. Ohio Oct. 31, 2007)

Fourteen cases dismissed for lack of standing where the mortgage assignments were executed after the complaint was filed. On October 31, 2007, Judge Boyko dismissed 14 more Deutsche Bank cases.

 

In re Foreclosure Cases (Judge Holschuh),

Case 2:07-cv-0016-JDH-TPK

(S.D. Ohio December 27, 20O7)

Fifteen cases dismissed for lack of standing where the mortgage assignments were executed after the complaint was filed.

 

In re Foreclosure Cases (Judge O’Malley),

(N.D. Ohio December 14, 2007)

Thirty-two cases dismissed for lack of standing where the mortgage assignments were executed after the complaint was filed.

 

In re Foreclosure Cases (Judge Rose),

(N.D. Ohio December 14, 2007)

Twenty cases dismissed for lack of standing where the mortgage assignments were executed after the complaint was filed.

 

In re Hayes,

393 B.R.259

Bankr. D. Mass. 2008

Trust: Argent Mortgage Securities, Inc. ABPT Certs.,

Series 2004-W11

Deutsche Bank, as Trustee of Argent Mortgage Securities, Inc. Asset-Backed Pass through Certificates Series 2004-W11, filed a Motion without Recourse for Relief from Stay against Hayes, claiming that it had standing to seek relief because Hayes’ mortgage transferred from Argent Mortgage Securities to them. The Court used the “real party in interest” rule under Section 362 of the Bankruptcy Code to determine standing, stating that a “real party in interest” is 1) the party with the legal right to bring suit, and 2) a party who is not seeking to assert another party’s rights. Id at 371, citing In re Woodberry, 383 B.R. 373 (Bankr. D.S.C. 2008). The Court determined that Deutsche Bank was not a “real party in interest” because it never proved that Hayes assigned its mortgage to Argent Mortgage Company, LLC or Argent Securities, Inc., the trust’s depositor, in the Pooling and Servicing Agreement (“PSA”) of the Trust. In addition, the Court asserted that Deutsche Bank “submitted no evidence that the November 3, 2004 mortgage was included in the PSA or was subject to Section 2.09 of the PSA.” Judge Joan M. Feeney ordered Deutsche Bank to show cause, as to why they should not be sanctioned under Fed.R.Bankr.P.9011 for filing without competent evidence that they had standing. The Court subsequently released the order to Show Cause because the parties reported in open court that the matter was resolved.

 

In re Kemp,

440 B.R. 624 (Bankr. D.N.J. 2010)

Trust: CWABS 2006-8

Mortgage Amount: $167,199

“Countywide’s claim here must be disallowed, because it is unenforceable under New Jersey law on two grounds.  First, under New Jersey’s Uniform Commercial Code (“UCC”) provisions, the fact that the owner of the note, the Bank of New York, never had possession of the note, is fatal to its enforcement. Second, upon the sale and mortgage to the Bank of New York, the fact that the note was not properly indorsed to the new owner also defeats the enforceability of the note.”

 

In re Lippold,

Case No. 11-12300 (Bankr. SDNY 2011)

Trust: Asset-Backed Sec. Corp. Home Equity Loan Trust,

Series AEG 2006-HE1

Mortgage Amount: $344,000

U.S. Bank’s Motion to lift the automatic bankruptcy stay in order to foreclose denied.

“The language of the Assignment in this case purports to transfer both the Mortgage and the Note to U.S. Bank. But MERS, as the purported assignor, could not legally assign the Note; it only had legal rights with respect to the Mortgage. Aegis did not confer any rights on MERS in the Note—MERS is not a party to the Note nor is there any indication that MERS was authorized to take any action with respect to the Note. See Agard, 444 B.R. at 246. Thus, “assignment of the note [is] . . . beyond MERS’s authority as nominee or agent of the lender.” Silverberg, 926 N.Y.S.2d at 538. There is also no evidence in the record showing that U.S. Bank received physical delivery of the Note, or that U.S. Bank is in possession of the Note. Since U.S. Bank failed to “provide satisfactory proof of its status as the owner or holder of the note at issue,” see Escobar, 2011 WL 3667550, at *9, the Court concludes that U.S. Bank does not have standing to obtain stay relief.”

 

In re Nosek,

544 F.3d 34 (1st. Cir. 2008)

Ameriquest Mortgage Company (“Ameriquest”) claimed that it was the holder of Nosek’s mortgage, despite the fact that Ameriquest was the loan originator, had not held the note since November 30, 1997, and ended its mortgage servicer role as of March 31, 2005. Judge Joel B. Rosenthal placed blame on Ameriquest, the mortgage servicer, and Wells Fargo, the mortgage lender, for the mishandling of the Mortgage Assignment, stating: “It is the creditor’s responsibility to keep a borrower and the Court informed as to who owns the note and mortgage and is servicing the loan, not the borrower’s or the Court’s responsibility to ferret out the truth…That Ameriquest had no role after March 2005—well before the trial in Adversary Proceeding 04-4517, was unknown to the court.” Judge Rosenthal also blamed Wells Fargo, the mortgage lender, for the mishandling of the Mortgage Assignment, stating “This Court will not allow Wells Fargo or any other mortgagee to shirk responsibility by pointing the finger at their servicers.” Judge Rosenthal imposed sanctions of $250,000 on Ameriquest and Wells Fargo, as well as sanctions on the law firms. The fines were later reduced to $5,000.

 

In re Nuer,

No.08-17106

Bankr. S.D.N.Y. 2010

Trust: Long Beach Mortgage Loan Trust 2006-2

Diane G. Adams, the United States Trustee for the Southern District of New York, in a Memorandum of Law of the United States Trustee in Support of Sanctions Against J.P.Morgan Chase Bank National Association, filed January 4, 2010, alleged that “Chase has filed documents that appear to be either patently false or misleading in connection with the Motion for Stay Relief…Chase took the posiion that it was acting only as the servicer of the Mortgage. Chase at the same time attached documents which supported a different position.”

The Trustee reviewed the testimony of Mr. Herndon, a witness for Chase, who testified that the chain of title for the property in question passed through three entities. Previously, however, Chase had submitted contrary documents. In particular, Chase had submitted an assignment “that appeared to show that Chase assigned its right as mortgagee to Deutsche, as trustee for Long Beach Mortgage Trust 2006-2. The Assignment was signed by Scott Walter as “Attorney in Fact for Chase (the “Walter November 1 Assignment”)… It was signed on November 1, 2008, after the Filing Date. This 2008 Assignment to a trust that closed in 2006 signed by an individual who did not in fact work for Chase has become the focus of the sanctions debate. Regarding the Walter Assignment, the Trustee states: “Here, the misconduct of Chase includes the attachment of the Walter November 1 Assignment…Chase’s own witness could not explain the Walter November 1 Assignment…” [Walter was actually an employee in the Minnesota office of Lender Processing Services.]

 

In re Obasi,

No.10-10494

Bankr. S.D.N.Y. 2011

Trust: Soundview Home Loan Trust 2005-OPT3

“The claim did not include an assignment of mortgage from Option one to Deutsche Bank, or any other document explaining the basis for Deutsche Bank to seek payment based upon the mortgage between the Debtor and Option One.”

 

In re Parker,

445 B.R. 301 (2011)

Trust: Adj. Rate Mortgage Trust 2007-1

Summary judgment for bank denied because the bank could not prove it was the holder of the note as of the date of the debtor’s bankruptcy filing. The allonge presented by the bank was undated.

 

In re Ruest,

No. 09-01035,

(Bankr. D. Vermont 2011)

Trust: MLMI Trust Series 2006-HE5

“However, the date on which the Bank came into possession of the Note is conspicuously absent from the Bank’s summary judgment pleadings. This presents the same impediment to summary judgment as in Densmore. Since the date the Note was endorsed is a material fact essential to the determination of whether the Bank is entitled to judgment as a matter of law on the issue of standing, and since the record of undisputed material facts does not include any information about the date of the endorsement, summary judgment is not proper. See Densmore, 445 B.R. at 312. Accordingly, the Bank’s motion for summary judgment on the issue of standing is denied.”

 

In re Salazar,

448 B.R. 814 (2011) (Bankr. S.D. Cal. April 12, 2011)

Trust: C-BASS Mortgage Loan AB Certs., Series 2006-

CB2

“Denying relief from stay at this time is the least prejudicial option for both parties. Even if the stay prohibits U.S. Bank from regaining possession of the Property in the near term, that inconvenience is appropriate because the foreclosure process was flawed. The Court has scheduled a further hearing on relief from stay to determine the economic feasibility of Salazar’s plan, and also to order that adequate protection payments be made to U.S. Bank to prevent diminution of the value of its collateral.”

 

In re Sima Schwartz,

366 B.R. 265 (Bankr. D. Mass. 2007)

 

In re David A. Simpson, P.C.,

__N.C. App. __, 711 S.E. 2d 165

Trust: RASC 2006QA6

Mortgage Amount: $525,000

“We conclude the record is lacking of competent evidence sufficient to support tht Petitioner is the owner and holder of Mr. Gilbert’s note and deed of trust.  The trial court erred in permitting the Substitute Trustee to proceed with foreclosure proceedings.”

In Footnote 2, the Court also discussed its concerns over documents submitted as evidence signed by Jeffrey Stephan:

“This Court finds troubling that GMAC Mortgage, LLC was recently found to have submitted a false affidavit by Signing Officer Jeffrey Stephan in a motion for summary judgment against a mortgagor in the United States District Court of Maine. Judge John H. Rich, III concluded that GMAC Mortgage submitted Stephan’s false affidavit in bad faith and levied sanctions against GMAC Mortgage…”

 

In re Tarantola,

2010 WL 3022038 (Bankr.D.Ariz. July 29, 2010)

Trust: Argent Securities, Inc. ABPT Certs., Series

2004-W8

Mortgage Amount: $377,600

“Yet again, the court is called upon to decide whether the purported holder of a note allegedly transferred into a securitized mortgage pool has standing to obtain relief from the automatic stay. Yet again, the movant has failed to demonstrate that it has standing. To make matters worse, the movant filed its motion without evidentiary support of its claim, attempted to create such evidentiary support after the fact, and only disclosed its “real” evidence on the day of the final evidentiary hearing. The relief will be denied.”

“…Frankly, the court is puzzled by Deutsche’s inability to offer competent evidence of its standing. Presumably, the PSA places obligations on Deutsche as the Initial Custodian and as Trustee to maintain records, including original notes and mortgages as well as documentation of all assignments of pooled of notes and mortgages. Deutsche and its servicer, therefore, should be able to easily produce the documents needed to prove standing. Instead of doing so, Deutsche, through its servicer and its counsel, filed the MRS without any evidence of standing, thereafter created an ineffective Allonge and falsely represented that it was attached to the Original. It then waited until the last possible moment to obtain the Original, disclosed the existence of the Original through the testimony of a witness, instead of bringing it to the court’s attention at the commencement of the evidentiary hearing, and failed to satisfactorily explain the discrepancies between the Original and earlier filed versions of the Note.”

 

In re Taylor,

407 B.R. 618, 623 (Bankr. E.D. Pa. 2009).

“At issue in these cases are the homes of poor and unfortunate debtors, more and more of whom are threatened with foreclosure due to the historic job loss and housing crisis in this country.  Congress, in its wisdom, has fashioned a bankruptcy law which balances the rights and duties of debtors and creditors.  Chapter 13 is a rehabilitative process with a goal of saving the family home.  The thoughtless mechanical employment of computer driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system.  It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology.  Nothing less should be tolerated.”

 

In re Veal,

450 B.R. 896 (B.A.P. 9th Cir. June 10, 2011)

Trust: Option One Mortgage Loan Trust 2006-3

The appellate court overruled the decision of the bankruptcy court granting Wells Fargo’s motion for relief from stay because Wells Fargo had no standing. The motion of American Home Mortgage Servicing was also overturned. “We have conducted such a review of the record, and we have found nothing in the record that establishes AHMSI’s standing to file the proof of claim.”

 

In re Weisband,

427 B.R. 13 (Bankr. D. Ariz. 2010)

Trust: Structured Asset Securities Corp.

“In this case, however, there is no proof that the allonge containing the special endorsement from GreenPoint to GMAC was executed at or near the time the Note was executed. Furthermore, the Endorsement does not have any identifying numbers on it, such as an account number or an escrow number, nor does it reference the Note in any way. There is simply no indication that the allonge was appropriately affixed to the Note, in contradiction with the mandates of A.R.S. § 47-3204. Thus, there is no basis in this case to depart from the general rule that an endorsement on an allonge must be affixed to the instrument to be valid.”

 

In re Wells,

407 B.R. 873 (Bkrtcy. N.D.Ohio 2009)

Trust: Aegis AB Securities Mortgage PT Certs., 2005-4

Mortgage Amount: $99,700

The Court rejected two assignments prepared years afterthe trust closing date.

“U.S. Bank failed to show that it had standing to file claim 1, and also failed to show at the hearing that it is entitled to enforce the note and mortgage. Claim 1 is, therefore, disallowed under 11 U.S.C. § 502(b)(1). The court will issue a separate show cause order on U.S. Bank regarding its factual and legal bases for filing claim 1.”

 

In re Wilhelm,

407 B.R. 392 (Bankr. D. Idaho 2009)

“Here, even accepting Bank of America/HSBC’s contention that the Court is limited to considering the allegations in the motions, these allegations are insufficient to establish standing. Among other things, the narrative allegations are contradicted by the exhibits to the motions. Moreover, Bank of America/HSBC did not cure the standing issues with the declarations submitted in support of their motions, as these declarations fail to comply with basic evidentiary rules. In short, as discussed further below, standing has not been properly alleged, much less proved…

Turning first to possession, Movants presumably rely on the supporting declarations, because the motions themselves do not allege that Movants possess the notes. (Although the motions typically allege that Movants are the “holders” of the notes, the notes — filed as exhibits to the motion — defeat this allegation since, as already noted, the notes are not indorsed.)…

The declarations parrot the motions, again stating that Movant is the “holder” of the original promissory note at issue. But this statement is an inadmissible legal conclusion — and an impossible one at that, given the absence of indorsements — not a fact. As explained, “holder” is a defined term when dealing with negotiable instruments. To qualify as holders, these Movants must possess an indorsed note. See Idaho Code § 28-1-201(b)(21)(A). None of these notes is indorsed, either in blank or specifically, making it impossible for any of these Movants to be a “holder.” The declarations are insufficient. See, e.g., Nationwide Transp. Fin. v. Cass Info. Sys., Inc.,523 F.3d 1051, 1059-60 (9th Moreover, it is the Court’s job (not the witnesses’) to determine whether the relevant facts establish, as a matter of law, that Movants are holders. The same proposition applies to the question of whether they are non-holders with rights of enforcement. So what the Court needs to know is a fact: Who has possession of the original notes? None of the declarations answers that question. Accord Sheridan, 09.1 I.B.C.R. at 26, 2009 WL 631355, at *5 (noting that the movant’s submissions did not answer “the key question — Who was the holder of the Note at the time of the Motion?”).”

(footnotes omitted)

 

Conclusion: Movants lack standing to seek stay relief.