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SZYMONIAK MORTGAGE FRAUD ARTICLE

SZYMONIAK MORTGAGE FRAUD ARTICLE

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SZVMONIAKFRAUDARTICLE
"INROADSONFORECLOSUREFRAUD"
 
INROADSONFORECLOSUREFRAUDBYMORTGAGESERVICERS
BYLynn
E.
Szymoniak,Esq.,Editor,FraudDigest(szvmoniak@mac.com),April
7,
2010
FannieMaeannouncedarulechangeeffectiveMay
1,2010,
involvingMERS,MortgageElectronicRegistrationSystems,Inc.AccordingtoFannieMae,
Servicing
Guide,
PartVIII,
105;
ConductofForeclosureProceedings,MERSmustnotbenamedasaplaintiffinanyforeclosureaction,whetherjudicialornon-judicial,onamortgageloanownedorsecuritizedbyFannieMae.Accordingtothenewrule,ifMERSisthemortgageeofrecord,eitherbecausethemortgagenamedMERSastheoriginalmortgageeoracompletedandrecordedassignmentnamedMERSasthemortgageeassignee,FannieMaedirects:"theservicermustprepareamortgageassignmentfromMERStotheservicer,andthenbringtheforeclosureinitsownname,unlessFannieMaespecificallyrequiresthattheforeclosurebebroughtinthenameofFannieMae.Inthatevent,theassignmentmustbefromMERStoFannieMae,incareoftheservicerattheservicer'saddressforreceiptofnotices.Inallcases,theassignmentfromMERStotheservicerorFannieMaemustberecordedbeforetheforeclosurebegins."TherulealsoprecludesservicersfromchargingFannieMaeforcorrectingtheseMERSassignments,providing:"FannieMaewillnotreimbursetheservicerforanyexpenseincurredinpreparingorrecordinganassignmentofthemortgageloanfromMERStotheservicerortoFannieMae."Inthepastthreeyears,manyofthemajormortgageservicingcompanieshavepreparedandfiledmortgageassignmentsfromMERStosecuritizedtrustssothatthetrustscouldforeclose.Recently,however,morecourtshaverecognizedthattheassignmentbyMERSwaserroneousbecause1)therewasneveranassignmenttoMERSfromtheoriginallenderinmostcases;and2)suchanasslqnmentwouldhavebeenerroneousbecauseMERSneverownedlegaltitletomortgagesregisteredonitsdatabase.Christopher
L.
Peterson,AssociateDeanofAcademicAffairsandProfessorOfLaw,UniverityofUtah,SJ.QuinneyCollegeof
Law,
setsforththeauthorityfortheconclusionthatMERSisnotamortgageewithrespecttoanyloanregisteredonitsdatabaseinhiscomprehensivearticle,"Foreclosure,SubprimeMortgageLending,andTheMortgageElectronicRegistrationSystem."CourtshavesplitregardingWhetherforeclosureactionscanbebroughtinthenameofMERS,withadefinitetrendtowarddismissingsuchactions.Withthisrulechange,FannieMaeofficialsseemtoacknowledgetheproblemwithMERSassignments.
 
WhileFannieMaeofficialsmayhaveaddressedtheproblemofforeclosuresbroughtinthenameofMERS,theymayhavealsocreatedanothersignificantproblembyadvisingmortgageservicingcompaniestofileforeclosureactionsintheirownnames.DoesamortgageservicingcompanyhaveanybetterclaimtoownershipthanMERS?Manycourtshavealreadyconcludedthatservicingcompaniesarealsolackownershipinterestandstandingtoforeclose.
If
amortgageispartofasecuritizedtrust,thereshould
be
atransferfromtheoriginallender,toadepositor,toasecuritiescompanytoatrust.TransfersbyservicersaremostoftentransfersbyanentitywithnoownershipinteresttotransferinthefirstplacebecausemostoftheservicershavegottentheirrightsfromMERSandMERSitselfhadnoownershipinterest.TheAssignmentsfromandtoMERSandservicersaremostoftenusedwhentheassignmentsthatshouldhaveoccurredaspartofthesecuritizationprocessaremissing.Servicersanddefaultmanagementcompaniesworkingforthesecuritizedtrustsoftenusequestionabletacticswhenthetrustscannotproducethedocuments,particularlythemortgageassignments,necessarytoforeclose.InacasependingintheUnitedStatesBankruptcyCourtfortheSouthernDistrictofNewYork,forexample,
InreSilviaNuer,
CaseNo.08-17106(REG),inaMemorandumofLawoftheUnitedStatesTrusteeinSupportofSanctionsAgainstJ.P.MorganChaseBankNationalAssociation,filedJanuary4,2010,theTrusteereviewedthetestimonyofMr.Herndon,awitnessforChase,whotestifiedthatthechainoftitleforthepropertyinquestionpassedthroughthreeentities."TheoriginallenderinconnectionwiththeloanwastheLongBeachMortgageCompany,asevidencedbytheNoteandMortgagelistingLong
Beach
MortgageCompanyastheinitialowner."Regardingthenextowner,theMemorandumstates:"Next,Mr.HerndontestifiedthatLongBeachSecuritiesCorporationboughttheMortgage.Mr.HerndonacknowledgedthattheMotionforStayReliefdidnotcontainareferencetotheLongBeachSecuritiesCorporationoranydocumentationinconnectiontherewith...Mr.HerndontestifiedthatheknewthatLongBeachSecuritiesCorporationpurchasedtheMortgagebecausehehadreviewedamortgageloanpurchaseagreementdatedFebruary24,2006betweentheLongbeachSecuritiesCorp.aspurchaserandtheLongBeachMortgageCompanyasseller..."Regardingthenextowner,theMemorandumstates:"ThethirdowneroftheMortgage,accordingtothetestimony,wastheLongBeachMortgageTrust2006-2...Mr.HerndonbasedhisknowledgeofthisassignmentonthesystemnotesofChaseaswellasthepoolingandservicingagreementdatedMarch1,2006(the\\PSA")...Mr.HerndonstatedthatthePSAhadareferencetotheMortgageonExhibitA."2

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