Judge in Countrywide case forced to recuse himself for having HUGE conflict of interest

February 05, 2010, 05:44 PM EST
By Cary O’Reilly
Feb. 5 (Bloomberg) — A Florida judge was ordered to remove himself from a foreclosure proceeding by Bank of America Corp.’s Countrywide unit after the homeowner claimed the judge received a discount loan from an affiliate of the mortgage lender.

Circuit Judge Hugh Carithers in Jacksonville, Florida, must enter a recusal order and ask Chief Circuit Judge Donald Moran to pick a replacement, a district court of appeals ruled today.

Joseph W. Mines Jr., who is representing himself in the foreclosure proceeding, alleged the judge had received favorable interest rates not available to the public in his own dealings with a lender affiliated with Countrywide, court records show. Mines’s home was just about to be sold when he filed his claim seeking the judge’s removal, according to the case docket.

“This court finds these facts, taken as true as they must be, would prompt a reasonably prudent person to fear that he or she would not obtain a fair and impartial hearing,” the appeals court in Tallahassee, Florida, said its ruling.

Pat Ryan, a courtroom clerk for Carithers, said she hadn’t seen the ruling and couldn’t comment. Directory assistance had no phone listing for Joseph Mines in Jacksonville.

The case is Countrywide v. Mines, 2007-CA-6852, Fo


An Allonge is invalid unless the original Note is “all backed up”

*This is not legal advice, just informational editorialization.

This is big.

I have felt for some time, that the use of an Allonge as evidence for the endorsement of a Note is not legally sufficient, unless the back of the Note is chaulk full of endorsements, requiring an “extra paper”. Thus was born the Allonge.

This case is older, however, it goes indepth to cite case law surrounding the UCC and interpretation of the Holder in Due Course and ……..

How an endorsement by Allonge is not valid unless the back of the Note is full of other endorsements!!!!!!!!!!!!!!

Pribus v. Bush


Citation Number 118 Cal.App.3d 1003, 173 Cal.Rptr. 747, 749 (1981)

May 12, 1981
Superior Court of Orange County, No. 314923, Philip Edgar Schwab, Jr., Judge.
Howser, Gertner & Brown and David L. Sanner for Defendant and Appellant.
Stephen D. Johnson for Plaintiff and Respondent.
Opinion by Morris, J., with Kaufman, Acting P. J., and Garst, J.,*fn* concurring.
Civ. No. 23473
1981.CA.40697 ; 173 Cal. Rptr. 747; 118 Cal. App. 3d 1003
May 12, 1981
Superior Court of Orange County, No. 314923, Philip Edgar Schwab, Jr., Judge.
Howser, Gertner & Brown and David L. Sanner for Defendant and Appellant.
Stephen D. Johnson for Plaintiff and Respondent.
Opinion by Morris, J., with Kaufman, Acting P. J., and Garst, J.,*fn* concurring.

Defendant appeals from a judgment enjoining the foreclosure of a trust deed on plaintiff’s house, and ordering the cancellation of a promissory note signed by plaintiff. Judgment was entered against defendant after the trial court concluded that he was not a holder in due course.

Charles Pribus, the son of Helen Pribus (plaintiff), owed $126,500 to Ford and Mary Williams. At Charles’ request, plaintiff executed a promissory note for $126,500 and a trust deed on plaintiff’s house to secure the note, both in favor of the Williams. Charles delivered the trust deed to Ford Williams, who caused it to be recorded. The note was never delivered. Ford Williams then induced the plaintiff to execute a second promissory note for $126,500, the subject of this appeal. The trial court made the finding, which is not now challenged, that this note was executed on the false representation by Williams that he would hold the note and would make no use of it. The court also made the uncontroverted finding that plaintiff received no consideration for the note.
Within a few months, Williams bought from Philip Bush (defendant) an option to purchase Bush’s contractual rights to buy an apartment complex in Texas. As part of Williams’ written agreement with defendant Bush, Williams assigned the trust deed on plaintiff’s house to defendant and transferred to defendant the promissory note which Williams had induced plaintiff to execute. Stapled to the note was a paper, signed by Ford and Mary Williams, which stated: “For a valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned do hereby assign the attached Note to Phillip L. Bush.” There was sufficient space on the note itself to write an indorsement in the words that were written on the paper stapled to the note.
After an unsuccessful effort to collect on the promissory note, defendant filed a “Notice of Breach and Default and of Election to Cause Sale of Real Property Under Deed of Trust.” Plaintiff responded by initiating the present action, seeking “cancellation of instrument, declaratory relief, and injunction.”

Following a trial on the merits, the court found for the plaintiff. Although the promissory note was a negotiable instrument payable to order, the court held that the plaintiff could assert the defenses of fraudulent inducement and lack of consideration against the defendant because he was not a holder in due course.*fn1 The court concluded that the Williams’ indorsement of the promissory note was not sufficient for effective negotiation, because 1) the paper attached to the note was ineffective as an indorsement because there was sufficient space to write the indorsement on the note itself, and 2) the Williams retained an interest in the note. Judgment was entered ordering the cancellation of the promissory note and enjoining the defendant from foreclosing on the trust deed. This appeal followed.

California Uniform Commercial Code section 3302, subdivision (1) provides,*fn2 “A holder in due course is a holder who takes the instrument a) For value; and (b) In good faith; and (c) Without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.” In the present case, the trial court did not question defendant’s status as a holder in due course because of any failure to satisfy the value, good faith, or no notice requirements. Rather, the court concluded that defendant is not a holder in due course because he is not a holder at all, an essential prerequisite to qualifying as a holder in due course. A holder is “a person who is in possession of . . . an instrument . . ., issued or indorsed to him . . . .” (? 1201, subd. (20).) The trial court ruled that the Williams’ signature on the paper attached to the promissory note did not qualify as an indorsement because there was adequate space for the indorsement on the note itself.*fn3 We affirm the judgment.

Section 3202, subdivision (2) states, “An indorsement must be written by or on behalf of the holder and on the instrument or on a paper so firmly affixed thereto as to become a part thereof.” Thus, the code does not say whether or not such a paper, called an “allonge,” may be used when there is still room for an indorsement on the instrument itself. Nor has any reported California case dealt with this issue under the code.*fn4 The code does, however, instruct us as to where to look for the law with which to resolve the issue. Section 1103 states that “[unless] displaced by the particular provisions of this code, the principles of law and equity, including the law merchant . . . shall supplement its provisions,” and that section’s Uniform Commercial Code comment notes “the continued applicability to commercial contracts of all supplemental bodies of law except insofar as they are explicitly displaced by this Act.” Therefore, since the Commercial Code has not addressed the issue, we decide the present case according to the rules on allonges of the law merchant.*fn5

Although the cases are not unanimous, the majority view is that the law merchant permits the use of an allonge only when there is no longer room on the negotiable instrument itself to write an indorsement. (See generally Annot., Indorsement of Negotiable Instrument By Writing Not On Instrument Itself (1968) 19 A.L.R.3d 1297, 1301-1304; Annot., Indorsement of Bill or Note by Writing Not On Instrument Itself (1928) 56 A.L.R. 921, 924-926.) Typical of the majority position is Bishop v. Chase (1900) 156 Mo. 158 [56 S.W. 1080]. There it was held that the general rule is that an instrument could be indorsed only by writing on the instrument itself, but that an exception to the rule allows the use of an attached paper “when the back of the instrument is so covered as to make it necessary.” (Id., 56 S.W. at p. 1083.) Thus, the court invalidated an attempted indorsement by allonge when “there was plenty of room upon the back of the note to have made the indorsement, and the only excuse for not doing so was that it was more convenient to assign it on a separate paper.” (Id., 56 S.W. at p. 1084.)*fn6

As the Bishop case indicates, the law merchant rule on allonges was developed as a refinement of the basic rule that an indorsement must be on the instrument itself. This basic rule must have become impractical when strictly applied in certain multiple indorsement situations, due to the finite amount of space on any given instrument. The allonge, then, was apparently created to remedy the inconveniences of the basic rule, not as an alternative method of indorsement. Support for this analysis is found in Folger v. Chase (1836) 35 Mass. (18 Pick.) 63. There, the Massachusetts Supreme Court dealt with an allonge indorsement as a case of first impression. The indorsement had been made on “a paper attached to the back of the note by a wafer” because the back of the note was covered with previous indorsements. The defendants, citing the basic rule, contended that no indorsement had been made. The court disagreed. “The objection is, that such an indorsement is not sanctioned by custom; but we think it is supported by the reasons on which the custom was originally founded. Bills of exchange and promissory notes were indorsed on the back of the bills and notes, because it was a convenient mode of making the transfer, and in order that the evidence thereof might accompany the note. Such an indorsement as this will rarely happen, and no authority to support it could reasonably be expected; but there is no authority against it.” (Id., at p. 67.)*fn7

The minority position is best expressed in Crosby v. Roub (1863) 16 Wis. 616, 626-628.*fn8 There it was said that “the usual reason stated for using [an allonge] is, that there is no longer room on the note to make the indorsement. But this does not mean that there must be an actual physical impossibility to write the indorser’s name on the original paper. On the contrary, the usage of the mercantile law is, as Chief Justice Marshall says, ‘founded in convenience.’ And all that its spirit or its letter requires is, that when it is inconvenient to write on the back of the note the real contract between the vendor and the vendee, which, if so written, would pass the title, it may be written on another paper and attached to it with like effect.” (Id., at p. 626.)*fn9 The Crosby case was considered, but rejected, in a number of majority jurisdictions. (See, e.g., Bishop v. Chase, supra, 56 S.W. at pp. 1083-1084; Doll v. Hollenback (1886) 19 Neb. 639 [28 N.W. 286, 288].)

[118 CalApp3d Page 1010]
The majority view interpretation of the law merchant rule of allonges was adopted statutorily in California. When the Civil Code was enacted in 1872, it contained these two provisions: 1) section 3109 — “One who agrees to indorse a negotiable instrument is bound to write his signature upon the back of the instrument, if there is sufficient space thereon for that purpose,” and 2) section 3110 — “When there is not room for a signature upon the back of a negotiable instrument, a signature equivalent to an indorsement thereof may be made upon a paper annexed thereto.”*fn10
These Civil Code sections were in force for 45 years until California adopted the Uniform Negotiable Instruments Act. The act, like its successor, the Uniform Commercial Code, did not state whether or not an allonge could be used when there was still room for an indorsement on the instrument itself. Section 31 of the act (former Civ. Code, ? 3112) stated in part, “The indorsement must be written on the instrument itself or upon a paper attached thereto.” (Stats. 1917, ch. 751, ? 1, p. 1538.) However, also like the Uniform Commercial Code, the Uniform Negotiable Instruments Act intended prior law not in conflict with the act to supplement the act. Former Civil Code section 3266d stated in part, “In any case not provided for in this title the rules of the law merchant shall govern.” (Stats. 1921, ch. 194, ? 12, p. 215.) Thus, it has been held that the act was “but a statutory affirmation of the rule of the old law merchant” that an allonge “was allowable only when the back of the instrument itself was so covered with previous indorsements that convenience or necessity required additional space for further indorsements.” (Clark v. Thompson (1915) 194 Ala. 504 [69 So. 925, 926]; see also Plattsmouth State Bank v. Redding (1935) 128 Neb. 268 [258 N.W. 661, 663].)

We conclude that the majority view of the law merchant relating to allonges is the better reasoned one, and is the view adopted by the Legislature.*fn11 It follows, then, that the assignment by allonge of plaintiff’s promissory note by the Williams to the defendant was ineffective as an indorsement, since there was sufficient space on the note itself for the indorsement. There having been no indorsement of the note, the defendant is not a holder in due course and, therefore, takes the note subject to the defenses that plaintiff has against the Williams. (? 3306.) The judgment is affirmed.

We conclude that the majority view of the law merchant relating to allonges is the better reasoned one, and is the view adopted by the Legislature.*fn11 It follows, then, that the assignment by allonge of plaintiff’s promissory note by the Williams to the defendant was ineffective as an indorsement, since there was sufficient space on the note itself for the indorsement. There having been no indorsement of the note, the defendant is not a holder in due course and, therefore, takes the note subject to the defenses that plaintiff has against the Williams. (? 3306.) The judgment is affirmed.

Disposition FOOTNOTES
11 We have found four Uniform Commercial Code cases that discuss the allonge issue which is presented here. Three of the cases state the majority position. (Shepherd Mall St. Bank v. Johnson (Okla. 1979) 603 P.2d 1115, 1118; Tallahassee Bank & Trust Company v. Raines (1972) 125 Ga.App. 263 [187 S.E.2d 320, 321]; James Talcott, Inc. v. Fred Ratowsky Associates, Inc., supra, 2 U.C.C. R.S. at p. 1137.) The fourth case did not decide the issue. (Estrada v. River Oaks Bank & Trust Co. (Tex.Civ.App. 1977) 550 S.W.2d 719, 725.)

Florida jumps on board with new Foreclosure Mediation law

The Supreme Court of Florida recently entered an Administrative Order requiring mandatory mediation in all foreclosure actions directed at “homestead” property (primary residence demonstrated by certain evidence). The Order requires that the foreclosing party disclose, as part of the Mediation procees, certain documents including proof of ownership of the Note and Mortgage and all evidence of chain of title as well, in addition to other documents. The entry of the Order was the result of the Supreme Court’s adoption of findings by the Florida Task Force Report on Foreclosures which was originally issued on August 19, 2009.

FDN attorney Jeff Barnes, Esq., who is a Florida Certified Circuit Civil Mediator, provided, to the Chief Judges of certain Judicial Districts in Florida, a comprehensive presuit mediation plan for foreclosure cases over a year ago, which set forth implementing law, procedures for implementation, mediation procedures, payment of mediation fees, sanctions for noncompliance, etc. It is unknown whether Mr. Barnes’ proposals were considered in the creation of the Administrative Order (no credit is given), but at least Florida has finally acted to stem the tide of the tsunami of foreclosures being instituted by the likes of the Law Offices of David J. Stern and Florida Default Law Group which have been instituted with no or defective “Assignments” and other legal infirmities in the hopes that the borrower will not defend and that the foreclosure will proceed without opposition regardless of what is filed in the lawsuit.

Stern and Florida Default are mentioned for a reason. The Task Force Report identified “two law Firms” in Florida as filing the majority of the foreclosure actions. It is no secret to us in this business that Stern and Florida Default are these two Firms.

Stern is also mentioned as it has gone so far as to foreclose on a borrower’s property even though the borrower was paying on a forebearance agreement with the servicer and an employee of Stern’s law office told the borrower “Don’t worry about the foreclosure as you are paying the servicer”. Despite this statement which the borrower reasonably relied on (as it came from the law Firm representing the foreclosing party), Stern obtained a “default” summary judgment even though the borrower was current on the forebearance agreement, claiming that the borrower never responded to the lawsuit!

Florida Default is a Firm which has many times shown that it has no intention of complying with the Local Rules of the Florida Courts; has paid monetary sanctions in connection with its violation of court orders; and, according to one Judicial Assistant in Florida, treats Judges with the same disrespect that it treats opposing counsel.

Hopefully, the Administrative Order will cause some of this nonsense to subside.

Jeff Barnes, Esq. http://www.ForeclosureDefenseNationwide.com

Obama modification plan a farce…

Homeowners Often Rejected Under Obama Plan
By Kevin G. Hall G. Hall | McClatchy Newspapers

WASHINGTON — Ten months after the Obama administration began pressing lenders to do more to prevent foreclosures, many struggling homeowners are holding up their end of the bargain but still find themselves rejected, and some are even having their homes sold out from under them without notice.

These borrowers, rich and poor, completed trial modifications of their distressed mortgage, and made all the payments, only to learn, often indirectly, that they won’t get help after all.

How many is hard to tell. Lenders participating in the administration’s Home Affordable Modification Program, or HAMP, still don’t provide the government with information about who’s rejected and why.

To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That’s averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks.

In the fine print of the form homeowners fill out to apply for Obama’s program, which lowers monthly payments for three months while the lender decides whether to provide permanent relief, borrowers must waive important notification rights.

This clause allows banks to reject borrowers without any written notification and move straight to auctioning off their homes without any warning.

That’s what happened to Evangelina Flores, the owner of a modest 902 square-foot home in Fontana, Calif. She completed a three-month trial modification, and made the last of the agreed upon monthly payments of $1,134.60 on Nov. 1. Her lawyer said that in late November, Central Mortgage Company told her that it would void her adjustable-rate mortgage, which had risen to a monthly sum above $2,000, and replace it with a fixed-rate mortgage.

“The information they had given us is that she had qualified and that she would be getting her notice of modification in the first week of December,” said George Bosch, the legal administrator for the Law Firm of Edward Lopez and Rick Gaxiola, which is handling Flores’ case for free.

Flores, 58, a self-employed child care worker, wired her December payment to Central Mortgage Company on Nov. 30, thinking that her prayers had been answered. A day later, there was a loud, aggressive knock on her door.

Thinking a relative was playing a prank, she opened her front door to find two strangers handing her an eviction notice.

“They arrived real demanding, saying that they were the owners,” recalled Flores. “I have high blood pressure, and I felt awful.”

Court documents show that her house had been sold that very morning to a recently created company, Shark Investments. The men told Flores she had to be out within three days. The eviction notice had a scribbled signature, and under the signature was the name of attorney John Bouzane.

A representative in his office denied that Bouzane’s law firm was involved in Flores’ eviction, and said the eviction notice was obtained from Bouzane’s Web site, http://www.fastevictionservice.com.

Why would a lawyer provide for free a document that gives the impression that his law firm is behind an eviction?

“We hope to get the eviction business,” said the woman, who didn’t identify herself.

Flores bought her home in 2006 for $352,000. Records show that it has a current fair-market value of $99,000. The new owner bought it for $78,000 at an auction Flores didn’t even know about.

“I had my dream, but now I feel awful,” said Flores, who remains in the house while her lawyers fight her eviction. “I still can’t believe it.”

How could Flores go so quickly from getting government help to having her home owned by Shark Investment? The answer is in the fine print of standard HAMP documents.

The Aug. 25 cover letter from Central Mortgage Company, the servicer that collects Flores’ mortgage payments, offered Flores a trial modification with this comforting language:

“If you do not qualify for a loan modification, we will work with you to explore other options available to help you keep your home or ease your transition into a new home.”

CMC is owned by Arkansas regional Arvest Bank, itself controlled by Jim Walton, the youngest son of Wal-Mart founder Sam Walton.

A glance past CMC’s hopeful promise finds a different story in the fine print of HAMP document, which contains standardized language drafted by the Obama Treasury Department and is used uniformly by lenders.

The document warns that foreclosure “may be immediately resumed from the point at which it was suspended if this plan terminates, and no new notice of default, notice of intent to accelerate, notice of acceleration, or similar notice will be necessary to continue the foreclosure action, all rights to such notices being hereby waived to the extent permitted by applicable law.”

This means that even when a borrower makes all the trial payments, a lender can put the house up for auction if it decides that the homeowner doesn’t qualify — assuming that foreclosure proceedings had been started before the trial period — without telling the homeowner.

Until now, lenders haven’t even had to notify borrowers in writing that they’d been rejected for permanent modifications.

In January, 11 months after Obama’s plan was announced, homeowners will begin receiving written rejection notices, and the Treasury Department finally will begin receiving data on rejection rates and reasons for rejections.

The controversial clause notwithstanding, the handling of Flores’ loan raises questions.

“Foreclosure actions may not be initiated or restarted until the borrower has failed the trial period and the borrower has been considered and found ineligible for other available foreclosure prevention options,” said Meg Reilly, a Treasury spokeswoman. “Servicers who continue with foreclosure sales are considered non-compliant.”

CMC officials declined to comment and hung up when they learned that a reporter was listening in with permission from Flores’ legal team. Arvest officials also declined comment.

McClatchy did hear from Freddie Mac, the mortgage finance agency seized by the Bush administration in September 2008. Freddie owns Flores’ loan, and spokesman Brad German insisted that Flores was reviewed three times for loan modification.

“In each instance, there was a lack of documentation verifying that she had the income required for a permanent modification,” German said.

That response is ironic, said Michael Calhoun, the president of the Center for Responsible Lending, a nonpartisan group in Durham, N.C., that works on behalf of borrowers.

“These lenders gave loans with no documentation and charged them a penalty interest rate for doing so. And now when the people ask for help, they are using extravagant demands for documentation to give them the back of their hand and continue to foreclosure,” Calhoun said.

German said that Flores was sent a letter on Nov. 24, which would have arrived several days later, given the Thanksgiving holiday, informing her that she’d been rejected for a permanent modification. Flores and her attorney said she never got a letter, and neither Freddie Mac nor CMC provided proof of that letter.

Exactly one week after the letter supposedly was sent, Flores’ home was sold to Shark Investments. That company was formed on Aug. 19, according to records on the California Secretary of State’s Web site. Shark Investments, apparently an unsuspecting beneficiary of Flores’ woes, has no phone listing. The Riverside, Calif., address on the company’s filing as a limited liability company traces to a five-bedroom, four-bath house with a swimming pool.

German didn’t comment on whether Flores received sufficient notice under Freddie Mac rules, or how the home could move to sale so quickly.

Flores’ legal team, which specializes in foreclosure prevention, thinks that lenders and servicers are gaming Obama’s housing effort.

“It seems servicers are giving people false hopes by sending them a plan, and they are using the program as a collection method, getting people to pay them with no intention of modifying the loan,” said Bosch. “I believe they are using this as a tool to suck people dry.”

Dashed hopes aren’t exclusive to the working poor such as Flores.

David Smith owns a beautiful home in San Clemente, Calif., the location of the Richard Nixon Presidential Library. Smith purchased his five bedroom home four years ago for $1.3 million. Today, the real estate Web site Zillow.com estimates the value of Smith’s home at $981,000, slightly below the $1 million he still owes on it.

Smith said he went from “making a lot of money to making hardly any” as the national and California economies plunged into deep recession. He’s a salesman serving the hard-hit residential and commercial construction sector. On top of his hardship, Smith’s mortgage exceeds the limits for the HAMP plan.

In late August, Smith signed and returned paperwork in a prepaid FedEx envelope to Bank of America that said it had received the contract needed to modify the adjustable-rate mortgage he originally took out with the disgraced lender Countrywide Financial, which Bank of America bought last year.

The modification agreement shows that Bank of America agreed to give Smith a 3.375 percent mortgage rate through September 2014, and everything Smith paid between now and through 2019 would count as paying off interest. He’d begin paying principal and interest in October 2019, with the loan maturing in 2037.

The deal favors the lender, but Smith, 55, jumped on it because it kept him in the home.

Armed with what he thought was “a permanent modification,” Smith returned a notarized copy of the agreement and made subsequent payments on time.

In return, he got a surprising notice from Bank of America saying that his house would be auctioned off on Dec. 18.

“It looks like they’re trying to sell this out from underneath me,” Smith said. “My wife cries all the time.”

After a Dec. 16 call from McClatchy asking why Bank of America wasn’t honoring its own modification, the lender backed off.

“The case has been returned to a workout status and a Home Retention Division associate will be contacting Mr. Smith for further discussions,” said Rick Simon, a Bank of America spokesman. “The scheduled foreclosure sale will be postponed for at least 30 days to allow for review of the account in hope of completing a home retention solution for Mr. Smith.”

The Center for Responsible Lending says such problems are common.

“Everyone acknowledges that the system is not working well,” Calhoun said.

Maine Foreclosure Mediation Law might be the model for the country.

Is foreclosure mediation going to prevent millions of foreclosures over the next few years?

Probably not, according to a new study released this afternoon by the National Consumer Law Center (NCLC) that looks at how effective 25 foreclosure mediation programs in 14 states have been at preventing foreclosures.

Like President Obama’s HAMP program, foreclosure mediation is a great idea that just doesn’t seem to be taking hold. In fact, most homeowners don’t even know it exists.

Foreclosure mediation programs were designed to help homeowners who were about to be foreclosed upon aren’t working in part because the net present value (NPV) – calculations lenders do to decide whether loan modifications or foreclosures will be more profitable to the lender – aren’t being disclosed to the borrower, along with a lot of other seemingly helpful information, according to “State and Local Foreclosure Mediation Programs: Can they save homes?.”

Geoffry Walsh, a staff attorney with NCLC and author of the study, says these foreclosure mediation programs are surprisingly ineffective.

“There are barriers that preclude homeowners from participating” in foreclosure mediations, Walsh said in a press conference earlier today.

“Under most of the foreclosure mediation programs, servicers have all the discretion and homeowners have no power. If the programs demand little or no accountability from servicers, it’s likely foreclosure mediation programs will go the way of the federal foreclosure prevention program” and fail, he predicted.

Walsh said that foreclosure mediation programs could really help homeowners who have been confused by loan modification options or rebuffed by their lenders. The Treasury Dept. could choose to enforce the contracts it has signed with the loan servicers but has chosen not to.

“What programs require are enforceable obligations, structures and duties that few have implemented so far,” Walsh noted.

What Walsh doesn’t understand is why lenders can’t see that they’re losing much more money by letting properties go into foreclosure than by doing loan modifications.

”We looked at the promise of these programs. Investors and homeowners lose substantial amounts of money in foreclosure. Up to two-thirds of the value of the investment is lost when the foreclosure is completed,” Walsh said. But loan modifications only cost investors 5 to 10 percent of their investment.

That may not be a full NPV calculation, but it’s clear to me that it’s better for investors, lenders and homeowners to do a fast loan modification than allow a home to join a few million other foreclosed homes on the market.

“The inability of homeowners to communicate with holders of securitized mortgage obligations has been a significant barrier to completing affordable (loan) modifications that might prevent foreclosures or minimize losses and keep more homeowners in their homes,” Walsh said.

Fixing Foreclosure Mediation Programs

Walsh’s study suggests foreclosure mediation programs include the following:

Require loan servicers to give homeowners the affordable loan modification calculations they made and the results of the NPV tests. Only Maine’s foreclosure mediation programs require this.

  1. The foreclosure mediation programs should require servicers to produce all related documentation, including pooling and servicing agreements, appraisals, and loan payment histories that would facilitate options other than foreclosure.
  2. Require servicers to meet these foreclosure mediation obligations in good faith or otherwise be subject to sanctions. Walsh said that loan servicers have received substantial benefits from the federal government and cash incentives to do loan modifications rather than foreclosures and so should operate in good faith, as a defined legal standard.
  3. Servicers should prove they have the standing to close on loan modifications and have the authority to negotiate loan modifications.
  4. Loan servicers should document that they’ve looked at alternatives to foreclosure, including loan modifications, other state or federal workouts, and short sales.

Can foreclosure mediation programs make a difference?

Treasury threatens to send financial “SWAT” teams to servicers…(yeah sure)

Note Endorsed without Authentication means zip, zilch, nada.

*The following article is not to be construed as legal advice, consult with an attorney for that stuff.
What happens when the lender finally Produces the Note?

The “Produce the Note” defense is not a panacea, a cure-all tactic for homeowners who may be victim of an unlawful foreclosure Complaint. The homeowner may ultimately have their day in Court, where a party, claiming to be the Real Party in Interest, is before the Court with the Original Blue ink Note. Some Notes are lost or destroyed, but many may be retained. What is the defense when the party has an original Promissory Note, and a Mortgage Assignment(if they are not the original lender)?

Discovery and Evidentiary Hearings

The Discovery process is the only way to fight the foreclosure. An esoteric and complicated securitized mortgage defense will rarely work in convincing the Judge to dismiss a foreclosure at a hearing, so the homeowner must begin the argument up front and out of Court using the Civil Rules of Procedure.

If you are ever presented with a Note Endorsement, you must carefully examine the Endorsement and/or Allonge. If you are served an Allonge, the extra piece of paper, this likely means the Endorsement was back dated or fabricated. An allonge was only intended to be used as “extra” endorsing space, assuming the back of the Note or negotiable instrument is full of other signatures.

If the endorsement is not Authenticated, per the Federal Rules of Evidence  901(a), then it may not be allowed into evidence. Here comes the question of “authentication”. What is it?

1. Is it Notarized? How can it be dated without an official Notary Seal?

2. Is there evidence of forgery? Squiggles, photocopy marks, cut and pasted?

3. Is the signing authority including a Power of Attorney?

4. Is the signing authority using a “Limited Signing Authority”?

The list goes on…keep asking these questions in your Discovery. Most rules of Discovery do not limit the amount of questions or the number of requests you may be able to make to the other party. The more questions that go unanswered, the more solid you build your defense and cement your argument. Do not expect the Judge to do this for you, or expect the Court to side with you out of pity…they never feel bad for a commoner.