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Foreclosures And The Massachusetts Ibanez Case

Jeff Brown
3 min read

Sometime in 2009 I began tellin’ whoever would listen, to ask their lender for the original note — especially if they were in the middle of either a loan mod or default. Events have since shown why this would’ve (and has for many) been an effective way to get lenders moving faster than a stalled ice berg. A case in point was a couple in my neighborhood who had an Option ARM. Without even asking they received a FedEx one day, giving them 10 days to sign an incredibly favorable loan modification.

How favorable?

It went from an Option ARM to a fixed rate, amortizing loan without any more negative amortization leading to the ever growing loan balance. They were given an interest rate of about 3% the first couple years, then spent the next few years rising to 5% — all of it payable interest only till it reached the 5% level. Then it was amortized long term. They signed and returned it the next day. Think the lender had the original note? I don’t, though surely it could’ve been another motivation lighting a fire under their posteriors.

Maybe lenders standing in court have the note, but the assignments have been botched beyond all ability to honestly stand before an experienced judge with a straight face, while claiming to have followed the law to the letter. From my research it’s obviously the case that lenders and their attorneys have no problem committing mass perjury with impunity. Don’t believe me? Then will you believe judges? They’re now openly chastising lenders and their lawyers in open court.

Unfortunately they’re not using the ‘P’ word — perjury — which is exactly what it is.

The central issue now garnering center stage is note assignments — when/if they were executed — were they done (not makin’ this up) after the fact from a previously signed BLANK form — or is there even a somewhat coherent paper trail at all.

Lenders are now rallying around what’s known as Pooling Service Agreements — PSAs. These are incredibly complex mortgage securitization agreements that many experts think may hold the ultimate answer to who has legal standing in court to foreclose. The bank in the Ibanez case — I kid you not — didn’t obtain the proper assignment of the note till over a year after they went to court!

What really galls? Those sympathetic to lenders want us all to consider this gross negligence and what seems to many, perjury, to be viewed as — wait for it — here it comes — a mere technicality. In a nutshell, that’s what they think of our intelligence.

NYU Ethics Professor Weighs In

“When the consequence of a lawyer plying his trade is the loss of someone’s home, and it turns out there are documents being given to the courts that have no basis in reality, the profession gets a very big black eye,” said Stephen Gillers, an expert in legal ethics at New York University.

Really professor? The legal profession gets a black eye for becoming serial perjurers for hire? Wanna rethink that one, maybe?

PSAs routinely call for properly executed assignments in a timely manner, not pre-signed blank assignment forms executed willy nilly at the lender’s whim. The court addressed this pretty directly when it said:

“We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice. Where a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage.” (Emphasis mine)

Based on that, if the lenders can indeed go back to their records (An unintended joke.) and show the court proof of the required docs having been attended to in the manner prescribed by the court, they’ll have no further problems.

Think that’s the case?

It’s past time for judges to grow a pair. When fabricated signatures provided by robo-signers with phony notarizations claiming outright falsehoods are consistently submitted to you in open court, you must, once and for all, call them for what they are — textbook perjury.

This issue is part of the cornerstone of our financial system, and should never be treated with this kind of arrogantly cavalier attitude. The fact that so many of our judges are allowing it is prima facie evidence that the rule of law is not being applied — not even the spirit. Until this is reversed, we’re all gonna be suffering the consequences.

At least the Ibanez case is a start. We’ll see.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.