Wednesday, September 21, 2011

Who owns the note?

Who owns the Note?  From the Florida Bar News
John Adams, as a new lawyer, was very nervous when he tried his first case in court, according to biographer David McCullough.

The future second president of the United States was representing a man whose crops were damaged when a neighbor’s horses broke through a fence.

He lost the case because, in preparing the necessary writ, Adams omitted the required words “the county in the direction to the constables of Braintree.” (Or perhaps that technicality was important because his opposing counsel was the son of the judge.)

There’s an echo of Adams’ woes resounding in mortgage foreclosures and the scandals surrounding faulty paperwork filed in Florida and around the country by lenders and those servicing mortgages.

Questions raised include: How widespread is the problem with “robosigned” documents, that is, foreclosure paperwork signed by people who aren’t familiar with the cases and who haven’t personally verified the information is correct? Or problems with improper notarization of foreclosure documents, with improper service, or with missing mortgage assignments, or in some cases outright forged documents?

What’s the Significance?
Beyond that, are the problems with the documents significant? Are they just technical and don’t affect the underlying failure of the borrower to repay the lender? Is a missing assignment as mortgage notes change hands more or less significant than a robosigned affidavit? Are paperwork snafus significant challenges to the functioning of the legal system that also carry implications on the trustworthiness of the title of foreclosed property?

The answers may well affect the ability of Florida courts to handle nearly 400,000 pending cases. Florida’s court funding is also heavily dependent on forclosure filing fees. The slowdown in filings following the revelations a year ago of paperwork problems turned a surplus in court funding into a deficit and forced the courts to borrow money to finish the last fiscal year and begin the current one.

For the moment, title insurers, key to a functioning real estate market, say they are still underwriting titles for foreclosed properties sold by banks (but not if the banks retain the title). That’s because of Florida case law and what they see as due process protections in the foreclosure process that give foreclosed property owners a chance to challenge.

Boca Raton’s Margery Golant, who defends homeowners in foreclosure actions, said she thinks robosigning is nearly universal in foreclosure paperwork.

“Most of these cases are not litigated. Those that are, the plaintiffs fight tooth and claw to avoid discovery,” Golant said. “They don’t want to explain themselves, and when they do have to explain themselves, they can’t.”

“If you know what you’re looking for, you can find the fraud on the face of the document. It’s systemic,” said April Charney, a Jacksonville Area Legal Aid attorney and acknowledged expert on foreclosure defense. “It’s like paperwork HIV; everyone has the same virus because it was so systemic.”

She said the problem extends beyond foreclosures into the paperwork of most mortgages in recent years, because they were handled the same way to get them ready to be bundled and sold as mortgage-backed securities.

“It’s likely in any residential mortgage loan where there has been some transfer from the originating lender. Then you almost definitely have fraudulent paperwork in the chain of title on that loan,” she said.


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