P. 1
10 17 2011 Dobson v Wells Fargo Bank w

10 17 2011 Dobson v Wells Fargo Bank w

|Views: 47|Likes:
Published by mmeindl

More info:

Published by: mmeindl on Feb 02, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

12/02/2012

pdf

text

original

No.

260A11 FOURTH DISTRICT

SUPREME COURT OF NORTH CAROLINA

****************************************

LINDA G. DOBSON, )
)
Plaintiff-Appellant, )
)
v. ) From Duplin County
) No. 07 CVS 1017
SUBSTITUTE TRUSTEE SERVICES, ) COA10-632
INC., Substitute Trustee and WELLS )
FARGO BANK MINNESOTA, N.A. )
as Trustee for Equivantage Home Equity )
Loan Trust, 1996-4, Note Holder, )
EQUVANTAGE, INC., and AMERICA`S )
SERVICING COMPANY, )
)
Defendants-Appellees. )

****************************
PROPOSED BRIEF OF AMICI CURIAE NORTH CAROLINA JUSTICE
CENTER, NORTH CAROLINA ADVOCATES FOR JUSTICE, CENTER FOR
RESPONSIBLE LENDING, MAINE ATTORNEYS SAVING HOMES, THE
FINANCIAL PROTECTION LAW CENTER, AARP, AND THE NATIONAL
ASSOCIATION OF CONSUMER ADVOCATES IN SUPPORT OF PLAINTIFF-
APPELLANT
*****************************
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
I NDE X
TABLE OF CASES AND AUTHORITIES ............................. iii
INTRODUCTION ...................................................................... 2
SUMMARY OF ARGUMENT .................................................. 4
ARGUMENT.............................................................................. 5
I. PRESENTING THE NOTE AND PROVING THE
RIGHT TO ENFORCE IT UNDER THE UCC .............. 5
A. Historical Background of Article 3 of the Uniform
Commercial Code .................................................. 5
B. The Dobson Note Is a Negotiable Instrument That
Can Be Enforced Only in Accordance with the
Provisions of Article 3 of the UCC........................ 6
C. Wells Minnesota Was Required to Produce the
Original Note in Court in Order to Be Entitled to a
Judgment upon it. ................................................... 8
D. Ms. Dobson Did Not Waive Her Right to Compel
Wells Minnesota to Produce the Original Note. .. 15
E. A Photocopy of a Note, by Itself, Is Never
Sufficient to Prove the Right of a Party to Enforce
a Negotiable Note. ............................................... 16
F. The Interdependency of the Rules in UCC Article
3 ............................................................................ 19
II. AFFIDAVITS IN FORECLOSURE PROCEEDINGS
MUST COMPLY WITH BASIC STANDARDS FOR
AFFIDAVITS IN COURT PROCEEDINGS ................ 20
A. In North Carolina, Foreclosure Affidavits Must
Present Admissible Facts Based on Personal
Knowledge ........................................................... 20
B. In North Carolina, Affidavits May Not Be Used to
Supplant the Court`s Function to Decide Questions
of Law .................................................................. 23
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-ii-

III. ABUSES IN THE EXECUTION OF AFFIDAVITS
AND OTHER DOCUMENTS IMPUGN THE
INTEGRITY OF THE FORECLOSURE PROCESS ... 27
A. To Streamline the Foreclosure Process and Cut Costs,
Mortgage Companies Routinely File Untrustworthy
Affidavits and Fraudulent Documents. .......................... 28
B. Federal and State Governments Respond to
Mortgage Servicers` Fraudulent Conduct. ........... 33
C. Robo-Signing and Other Fraudulent Practices
Result in Wrongful Foreclosures. ........................ 41
i. Robo-signed affidavits are fundamentally
unreliable as evidence of ownership or
default ........................................................ 41
ii. False affidavits mask servicer errors that
lead to wrongful foreclosure ...................... 43
iii. Wrongful foreclosure of active duty military
personnel .................................................... 47
CONCLUSION ........................................................................ 50
CERTIFICATE OF SERVICE ................................................ 53

w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-iii-

T ABL E OF CASES AND AUT HORI TI ES
CASES
Adams v. Madison Realty & Dev., Inc., 853 F. 2d 163 (3d
Cir. 1988) .............................................................................. 7
Bird v. Bird, 363 N.C. 774, 688 S.E.2d 420 (2010) ................. 20
Comml Sec. Co. v. Main St. Pharmv, 174 N.C. 655, 94
S.E. 298 (1917) ................................................................... 10
Deutsche Bank Natl Trust Co. v. Babb, RE-09-01, (Me.
Dist. Ct., Bidd.) .................................................................. 14
Deutsche Bank Natl Trust Co. v. Tarantola (In re
Tarantola), No. 4:09-bk-09703-EWH, 2010 WL
3022038 (Bankr. D. Ariz. July 29, 2010) ........................... 11
Dobson v. Sub. Tr. Servs., -- S.E.2d --, 2011 WL 1854315
(N.C. Ct. App. May 17, 2011) .............................. 3, 6, 15, 43
Hills v. Gardiner Sav. Inst., 309 A.2d 877 (Me. 1973) ............ 11
HSBC Bank USA, N.A. v. Taher, 2011 WL 2610525 (N.Y.
Sup. Ct., July 1, 2011) ........................................................ 39
HSBC Mortg. Servs., Inc. v. Murphy, 2011 ME 59, 19 A.3d
815 (2011) .......................................................................... 39
In re Brown, 156 N.C. App. 477, 577 S.E.2d 398 (2003) ........ 21
In re Gilbert, -- N.C. App. --, 711 S.E.2d 165, --, 2011 WL
1645699 (N.C. Ct. App. May 3, 2011)................... 12, 21, 26
In re Helms, 55 N.C. App. 68, 284 S.E.2d 553 (1981) ............ 15
In re Michael Weinman Assocs., 333 N.C. 221, 424 S.E.2d
385 (1993) ............................................................................ 2
In re Ocwen Fed. Bank FSB Mortg. Servicing Litig., No.
04-CV-2714 (N.D. Ill. July 1, 2011), ECF No. 476........... 45
In re Parsley, 384 B.R. 138 (Bankr. S.D. Tex. 2008) .............. 43
In re Stewart, 391 B.R. 327 (Bankr. E.D. La. 2008) .... 43, 45-46
In re Wilson, No. 07-11862, 2011 WL 1337240 (Bankr.
E.D. La. Apr. 7, 2011) ............................................. 30, 43-45
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-iv-

James v. U.S. Bank Natl Assn, 272 F.R.D. 47 (D. Me.
2011) ............................................................................. 13, 27
Lemon v. Combs, 164 N.C. App. 615, 596 S.E.2d 344
(2004) ...................................................................... 20-21, 22
Ohio v. GMAC Mortgage, LLC, 760 F. Supp. 2d 741 (N.D.
Ohio 2011) .......................................................................... 36
Ruscalleda v. HSBC Bank USA, 43 So.3d 947 (Fla. Dist. Ct.
App. 2010) .......................................................................... 42
Sheehy v. Mandeville, 11 U.S. 208, 218 (1812) ................... 5, 19
Singleton v. Stewart, 280 N.C. 460, 186 S.E.2d 400 (1972) .... 23
TCI F REO2, LLC v. Leibowitz, No. 16-2004-CA-4835 (Fl.
Cir. Ct., Duval Cnty. May 1, 2006) .................................... 32
Union Sav. Bank v. Cassing, 691 S.W.2d 513 (Mo. Ct. App.
1985) ..................................................................................... 9
U.S. Bank Trust Nat'l Assoc. v. Yulee, No. 2009-CA-003074
(Fla. Cir. Ct. 2009) ............................................................. 42
Ward v. Durham Life Ins. Co., 90 N.C. App. 286, 186
S.E.2d 400 (1988) ......................................................... 23, 24
Wash. Mut. Bank v. Phillip, No. 16359/08, 2010 WL
4813782 (N.Y. Sup. Ct. Nov. 29, 2010) ....................... 38-39
Wells Fargo Bank, N.A. v. Yulee, No. 2010-CA-004731
(Fla. Cir. Ct. Apr. 14, 2010) ............................................... 42

ST ATUT ES
12 U.S.C. §§ 5001-5018 ............................................................. 9
12 U.S.C. § 5004 ........................................................................ 9
50 U.S.C. App. § 521 ............................................................... 47
50 U.S.C. App. § 527 ............................................................... 47
50 U.S.C. App. § 533 ............................................................... 47
N.C. Gen. Stat. § 1A-1, Rule 56 ............................................... 20
N.C. Gen. Stat. § 25-1-201 ......................................................... 7
N.C. Gen. Stat. §§ 25-3-101, et seq. ........................................... 5
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-v-

N.C. Gen. Stat. § 25-3-104 ..................................................... 6, 9
N.C. Gen. Stat. § 25-3-203 ....................................................... 10
N.C. Gen. Stat. § 25-3-204 ........................................... 10, 11, 12
N.C. Gen. Stat. § 25-3-301 ............................................... 7, 8, 10
N.C. Gen. Stat. § 25-3-308 ......................................... 7, 8, 15, 16
N.C. Gen. Stat. § 25-3-309 .................................................. 16-19
N.C. Gen. Stat. § 45-21.12A ................................................... 47
N.C. Gen. Stat. § 8C-1, Rule 602 ............................................. 21
U.C.C. § 3-203 official cmt. 1 .................................................... 9
U.C.C. § 3-301 ........................................................................... 8
U.C.C. § 3-308 ........................................................................... 8

OT HER AUT HORI TI ES
Admin. Order 01-2010, In re Residential Mortg.
Foreclosure Pleading & Document Irregularities (Dec.
20, 2010) ....................................................................... 39, 47
Admin. Order of the Chief Admin. Judge of the NY Courts
(Mar. 2, 2011) ..................................................................... 38
Andrew Keshner, New Court Rule Says Attorneys Must
Verify Foreclosure Papers, N.Y. L.J., Oct. 21, 2010 ........ 38
Congressional Oversight Panel, November Oversight
Report: Examining the Consequences of Mortgage
Irregularities for Financial Stability and Foreclosure
Mitigation (2010) ................................................... 28, 29, 41
Dem. StaII S. oI Comm. on Oversight & Gov`t ReIorm,
112
th
Cong., Fighting on the Home Front: The Growing
Problem of Illegal Foreclosures Against U.S.
Servicemembers (July 12, 2011) ................................... 47-48
Deposition of Beth Ann Cotrell., Operations Supervisor for
Chase Home Finance, taken in Chase Home Finance,
LLC v. Koren, No. 50-2008-CA-016857 (Fla. Cir. Ct.
May 17, 2010) .............................................................. 30, 33
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-vi-

Deposition of H. John Kennerty, Loan Administration
Manager and Vice-President of Loan Documentation at
Wells Fargo Mortgage, taken in Geline v. Nw. Tr.
Servs., Inc., No. 09-2-46576-2 SEA (Wash. Super. Ct.
May 20, 2010) ......................................................... 30, 31-32
Deposition of Jeffrey Stephan, Limited Signing Officer for
GMAC, taken in GMAC Mortg. LLC v. Neu, No. 50
2008 CA 040805XXXX MB (Fla. Cir. Ct. Dec. 10,
2009), filed in U.S. Bank Natl Assn v. James, No.
2:09-cv-00084-JHR (D. Me. July 20, 2010), ECF No.
153-6. .................................................................................. 30
Deposition of Jeffrey Stephan, Limited Signing Officer for
GMAC, taken in Fed. Natl Mortg. Assn v. Bradburv,
BRI-RE-09-65 (Me. Dist. Ct., June 7, 2010), filed in
U.S. Bank Natl Assn v. James, No. 2:09-cv-00084-
JHR (D. Me. July 20, 2010), ECF No. 153-1 ......... 30, 32-33
Deposition of Xee Moua, Vice-President of Loan
Documentation for Wells Fargo Home Mortgage,
taken in Wells Fargo Bank, NA v. Stipek, No. 50
2009 CA 012434XXXXMB AW (Fla. Cir. Ct. Mar. 9,
2010) ....................................................................... 30, 31, 32
Fed. Reserve Sys., Office of the Comptroller of the
Currency, & Office of Thrift Supervision,
Interagency Review of Foreclosure Policies and
Practices (2011) .......................................................... passim
Florida A. G. Investigating Three More Foreclosure Law
Firms, Miami Herald (Feb. 9, 2011) ............................. 42-43
Foreclosed Justice: Causes and Effects of the Foreclosure
Crisis: Hearing Before the Comm. on the Judiciary,
H.R., 111th Cong. 126 (Dec. 2 & 15, 2010) (Testimony
of James A. Kowalski, Jr.) ................................ 28-29, 42, 44
Foreclosed Justice: Causes and Effects of the Foreclosure
Crisis: Hearing Before the Comm. on the Judiciary,
H.R., 111th Cong. 292, (Dec. 2 & 15, 2010) (Testimony
of Thomas A. Cox, Esq., Volunteer Program
Coordinator, Maine Attorneys Saving Homes) ............. 28-29
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-vii-

Forum: Fighting on the Home Front: The Growing Problem
of Illegal Foreclosures Against U.S. Servicemembers,
112
th
Cong. (July 12, 2011) (Statement of Captain
Kenneth R. Gonzales) ........................................................ 48
Grant Gilmore, Formalism and the Law of Negotiable
Instruments, 13 Creighton L. Rev. 441 (1979) .................... 7
Glenn A. Grant, Acting Admin. Dir. of the Courts, Notice to
the Bar (Dec. 20, 2010) ...................................................... 38
Hearing on Legislation Pending Before the S. Comm. on
Jeterans Affairs, 112th Cong. (1st Sess. June 8, 2011)
(Statement of Senator Sheldon Whitehouse) ..................... 49
Jef Feely, JPMorgan Settles Military Mortgage Suits for
$56 Million, Bloomberg Businessweek (Apr. 21, 2011) ... 49
Letter from Benjamin Diehl, Deputy Attorney Gen., State
of Cal., to Steve Stein, SVP Channel Dir., JP Morgan
Chase (Sept. 30, 2010) ....................................................... 37
Letter from Ten U.S. Senators to John Walsh, Acting
Comptroller of the Currency, Ben S. Bernanke,
Chairman, Bd. of Governors of the Fed. Reserve Sys.,
and Martin Gruenberg, Acting Chairman, Fed. Deposit
Ins. Corp. (July 20, 2011) ................................................... 40
Letter from Terry Goddard, Attorney Gen., State of Ariz., to
Servicers (Oct. 7, 2010). ................................................ 36-37
Lily Leung, Banks to be Put on the Spot for Military
Foreclosures, San Diego Union Tribune (July 14, 2011) .. 49
Mem. in Supp. of Pet. for Prelim. Approval of Class Action
Settlement, Rowles v. Chase Home Fin., LLC, No. 9:10-
1756-MBS (D.S.C. Apr. 21, 2011), ECF 36-1 .............. 48-49
Michelle Conlin & Pallavi Gogoi, AP Exclusive: Mortgage
Robo-Signing Goes On, Associated Press, (July 19,
2011) ....................................................................... 37, 38, 40
Michelle Conlin & Pallavi Gogoi, Lawmakers Call for
Hearings on Robo-Signing, Associated Press (July 20,
2011) ................................................................................... 38
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-viii-

Nan Heald, Justice for Some, A Report on Unmet Legal
Needs in Maine (2009) ....................................................... 47
Nick Gale, Madigan and Other Attorneys General Meet
with Banks on Foreclosure Practices, WJBC (June 23,
2011) ................................................................................... 36
Order to Show Cause, In re Residential Mortg. Foreclosure
Pleading & Document Irregularities, No. F-059553-10
(N.J. Super. Ct. Ch. Div. Dec. 20, 2010) ..................... 39, 40
Paul Kiel, Internal Doc Reveals GMAC Filed False
Document in Bid to Foreclose (July 27, 2011) .................. 28
Pooling and Servicing Agreement Relating to Equivantage
Home Equity Loan Trust Among Equivantage
Acceptance Corp., as Sponsor, Equivantage Inc., as
Servicer, and Norwest Bank Minnesota, N.A., as
Trustee, (Nov. 1, 1996) ...................................................... 24
Press Release, Bd. of Governors of the Fed. Reserve Sys.
(July 20, 2011) .................................................................... 27
Press Release, MI Office of the Attorney Gen., Schuette
Issues Subpoenas in Criminal Probe of Mortgage
Processors (June 15, 2011) ........................................... 37-38
Press Release, Nat`l Ass`n oI Attorneys Gen., 50 States
Sign Mortgage Foreclosure Joint Statement (Oct. 13,
2010) .............................................................................. 35-36
Press Release, U.S. Dep`t oI Justice, Justice Department
Settles with Bank of America and Saxon Mortgage for
Illegally Foreclosing on Servicemembers (May 26,
2011) ................................................................................... 48
Robo-Signing, Chain of Title, Loss Mitigation, and Other
Issues in Mortgage Servicing: Hearing Before the
Subcomm. on Hous. & Cmty. Opportunity of the H.
Comm. on Fin. Servs., 111th Cong. 229 (Nov. 18, 2010)
(Testimony of Julia Gordon, Senior Policy Counsel,
Center for Responsible Lending) .................................. 28-29
S. 486, 112th Cong. (1st Sess. 2011)........................................ 49
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-ix-

Shahien Nasiripour, Confidential Federal Audits Accuse
Five Biggest Mortgage Firms of Defrauding Taxpayers,
Huffington Post (May 17, 2011) ........................................ 35
Susannah Nesmith, Retired Cook Fights Two Banks to Save
Home of 47 Years from Foreclosure, Daily Bus. Rev.,
December 1, 2010 ......................................................... 45-46
The Need for Natl Mortg. Servicing Standards: Hearing
Before the S. Comm. on Banking, Housing & Urban
Affairs, 112th Cong. (May 12, 2011) (Testimony of
Diane E. Thompson) ............................................... 41-42, 46
U.S. Gov't Accountability Office, Mortgage Foreclosures:
Documentation Problems Reveal Need for Ongoing
Regulatory Oversight, GAO-11-433 (2011) ...................... 35
William H. Lawrence, Understanding Negotiable
Instruments and Payment Systems § 1.03 (Matthew
Bender & Co. 2002) ............................................................. 6
TRE ATISES
Brandis on North Carolina Evidence § 130 (3d ed. 1988) ....... 23



w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
No. 260A11 FOURTH DISTRICT

SUPREME COURT OF NORTH CAROLINA

****************************************

LINDA G. DOBSON, )
)
Plaintiff-Appellant, )
)
v. ) From Duplin County
) No. 07 CVS 1017
SUBSTITUTE TRUSTEE SERVICES, ) COA10-632
INC., Substitute Trustee and WELLS )
FARGO BANK MINNESOTA, N.A. )
as Trustee for Equivantage Home Equity )
Loan Trust, 1996-4, Note Holder, )
EQUVANTAGE, INC., and AMERICA`S )
SERVICING COMPANY, )
)
Defendants-Appellees. )

****************************
PROPOSED BRIEF OF AMICI CURIAE NORTH CAROLINA JUSTICE
CENTER, NORTH CAROLINA ADVOCATES FOR JUSTICE, CENTER FOR
RESPONSIBLE LENDING, MAINE ATTORNEYS SAVING HOMES, THE
FINANCIAL PROTECTION LAW CENTER, AARP, AND THE NATIONAL
ASSOCIATION OF CONSUMER ADVOCATES IN SUPPORT OF PLAINTIFF-
APPELLANT
*****************************

ISSUE PRESENTED

I. DID THE COURT OF APPEALS ERR IN REVERSING THE
TRIAL COURT`S AWARD OF SUMMARY JUDGMENT IN
FAVOR OF THE PLAINTIFF-APPELLANT, MS. DOBSON?

w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-2-

I NTRODUCTI ON
'|F|oreclosure under a power oI sale in a mortgage is not favored in the law,
and its exercise by the mortgagee will be watched with jealousy.¨ In re Michael
Weinman Assocs., 333 N.C. 221, 228, 424 S.E.2d 385, 389 (1993).
In the current foreclosure crisis and during the decade leading up to it,
mortgage servicers have increasingly ignored this principle. In their effort to
'streamline¨ practices to save money and improve eIIiciency, the nation`s largest
servicers too often have engaged in questionable practices that infect the integrity
of the foreclosure process, and undermine the confidence of the market, consumers
and the courts in the fairness and propriety of foreclosures. That confidence can be
restored only by ensuring strict compliance with the laws that undergird the
foreclosure process and ensure its integrity the Uniform Commercial Code
(UCC) and the Rules of Evidence.
It is for this reason that amici, the North Carolina Justice Center, the Center
for Responsible Lending,
1
North Carolina Advocates for Justice, the Financial
Protection Center, Maine Attorneys Saving Homes and the AARP, write to explain
the widespread abuses in the mortgage servicing and foreclosure industry and to
urge this Court to reinforce two basic but fundamental principles of law. First,

1
Special thanks to our intern, Christa Wittenberg, University of Michigan Law
School, Class of 2012, for her extraordinary work on the brief.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-3-

strict compliance with Article 3 of the UCC is essential in determining who has the
right to enforce the note in a foreclosure proceeding and under what circumstances.
Second, affidavits submitted in North Carolina foreclosure proceedings must
satisfy the general standards for evidence submitted by affidavit, just as they would
in any other court proceeding.
Amici share the concern of Judge Hunter (dissenting) that the majority`s
decision may be construed to permit alleged holders to evade their burden of proof
and Ioreclose 'merely by producing photocopies oI the instrument¨ and with
affidavits that are facially incompetent. See Dobson v. Sub. Tr. Servs., -- S.E.2d --,
2011 WL 1854315, at *5 (N.C. Ct. App. May 17, 2011) (Hunter, J. dissenting).
The trial court got it right. Its decision to enjoin Wells Fargo Bank, Minnesota,
N.A. as Trustee for Equivantage Home Equity Loan Trust 1996-4 (Wells
Minnesota)
2
from foreclosing until it could produce the note and prove its right to
enforce it should be upheld. The Court of Appeals decision failed to follow these
basic and long-standing principles of law and should be reversed.



2
To distinguish between the two separate defendant Wells Fargo entities we refer
to defendant, Wells Fargo Bank, Minnesota, N.A. as Trustee for Equivantage
Home Equity Loan Trust 1996-4, the purported note holder, as 'Wells Minnesota¨
and the defendant servicer, Wells Fargo Home Mortgage, a.k.a. Wells Fargo Bank
N.A., a.k.a. America`s Servicing Company as 'America`s Servicing Company¨ or
'ASC.¨
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-4-

SUMMARY OF ARGUMENT
Two sets of bedrock rules form the critical underpinnings that create
confidence in the integrity of the courts, certainty of property rights and the
foreclosure process. The Uniform Commercial Code defines and sets the standards
for transferring, owning and enforcing negotiable instruments. The Rules of
Evidence set the standards for assessing whether evidence is sufficient to prove up
claims in a court of law. Recent practices designed by mortgage servicers to
expedite foreclosures and avoid the legitimate costs associated with proper
foreclosure practices have led to an alarming erosion of these bedrock rules and a
severe decline in confidence in the integrity of the foreclosure process. Systemic
fraudulent practices, such as robo-signing and other abusive document creation and
record-keeping practices have led to wide-ranging public and private
investigations, including a joint federal regulatory enforcement action against all
fourteen of the largest mortgage servicers and an ongoing fifty-state attorney
general investigation of these practices.
Established legal principles have been ignored in the flood of foreclosures
created by the real estate bubble. Amici respectfully submit that compliance with
these basic, foundational rules will preserve confidence in the courts and North
Carolina`s foreclosure process, and will assure that no homeowner ever loses a
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-5-

home because it is quicker or easier to fabricate documents than to present proper
evidence to our courts.
ARGUMENT
I. PRESENTI NG T HE NOT E AND PROVI NG T HE RI GHT T O
ENF ORCE I T UNDER T HE UCC

Article 3 of the UCC defines the law of negotiable instruments, who has the
right to enforce those instruments and what must be proven to establish the right to
enforce the note in a foreclosure action. Article 3 is codified in §§ 25-3-101 to 25-
3-605 of the North Carolina General Statutes.
A. Historical Background of Article 3 of the Uniform Commercial
Code

'The practice oI this country is to require that the note should be produced,
or its absence accounted Ior, and the rule is a saIe one.¨ Sheehy v. Mandeville, 11
U.S. 208, 218 (1812). This plain statement of the rule in 1812 remains good law
today. In this case where the defendant defaulted, Chief Justice Marshall came to
this clear conclusion: 'default dispenses with the proof of the note, but not with
its production.¨ Id. (emphasis added).
The rule of law stated by Chief Justice Marshall was consistent with the law
of the merchant that was developing simultaneously in England during the
fourteenth through eighteenth centuries and that ultimately led to England`s Statute
of Anne in 1704 and then to its Bills of Exchange Act in 1882. These acts in turn
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-6-

were the models for the Uniform Negotiable Instruments Law promulgated in this
country in 1924 by the National Conference of Commissioners of Uniform State
Laws (NCCUSL). In 1952, this same elemental principle of negotiable
instruments law, requiring production of the original note in a suit upon it, was
carried forward by the NCCUSL into Article 3 of the modern Uniform
Commercial Code adopted by all fifty states.
3

B. The Dobson Note Is a Negotiable Instrument That Can Be
Enforced Only in Accordance with the Provisions of Article 3 of
the UCC.

The Dobson note is a negotiable instrument. It is negotiable because it
meets the negotiability criteria of N.C. Gen. Stat. § 25-3-104(a): (1) it is payable
'to the order oI Lender,¨ (2) it is payable at a definite time, and (3) it contains no
promises other than for the payment of money except for undertakings expressly
permitted by N.C. Gen. Stat. § 25-3-104(a)(3). (R p. 152.) Wells Minnesota
agreed that the Dobson note is negotiable by opposing Dobson`s motion Ior
summary judgment
4
by claiming it was a holder of the Dobson note with the right

3
For a detailed history regarding the development of the law leading to the
provisions of Article 3 of the Uniform Commercial Code, see William H.
Lawrence, Understanding Negotiable Instruments and Payment Systems § 1.03
(Matthew Bender & Co. 2002).
4
Wells Minnesota was unable to establish its right to foreclose in the proceeding
before the Duplin County Clerk of Superior Court. See Dobson, 2011 WL
1854315, at *1. Dobson filed the instant action to enjoin Wells Minnesota from
serial attempts to foreclose until an accounting could be completed to determine
whether she was in default and if so, how much she owed and whether Wells
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-7-

to enforce it.
5
Whether Wells Minnesota has the right to enforce the Dobson note
and what it must prove to establish it is a holder in a court enforcement action are
defined by Article 3 of the UCC. N.C. Gen. Stat. §§ 25-3-301(i) & 25-3-308(b).
The rules set forth in Article 3 of the UCC, and their formalities (such as the
one requiring production of the original note) were developed by financial
institutions and the financial services industries for their own protection.
6
Thus,
'|I|inancial institutions, noted Ior insisting on their customers` compliance with
numerous ritualistic formalities, are not sympathetic petitioners in urging
relaxation oI an elementary business practice.¨ Adams v. Madison Realty & Dev.,
Inc., 853 F. 2d 163, 169 (3d Cir. 1988).



Minnesota was the holder of her note with the right to enforce it. See R pp. 3-13.
Dobson filed the successful motion for summary judgment that resulted in a ruling
in her favor and ultimately this appeal. See R pp. 368-72.
5
'Holder` means . . . |t|he person in possession oI a negotiable instrument that is
payable either to bearer or to an identified person that is the person in possession.¨
N.C. Gen. Stat. § 25-1-201(21). Wells Minnesota asserted its holder status through
its aIIiant JenniIer Robinson, stating: 'Wells Fargo is the present and current
holder of the Note.¨ R p 238, Robinson AII. ¶ 7. However, as discussed infra
Section III.B, this statement of Jennifer Robinson is a legal conclusion that Courts
disregard. Wells Minnesota must prove, not simply declare, that it has the status of
a holder.
6
See generally Grant Gilmore, Formalism and the Law of Negotiable Instruments,
13 Creighton L. Rev. 441 (1979).
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-8-

C. Wells Minnesota Was Requi red to Produce the Original Note in
Court in Order to Be Entitled to a Judgment upon it.

Here, Wells Minnesota unjustifiably argues for a relaxation of the
requirement of the Uniform Commercial Code that requires it to produce the
original negotiable note in court when seeking recovery upon it. This requirement
is drawn from UCC §§ 3-301 and 3-308(b). UCC § 3-301(i) (N.C. Gen. Stat. § 25-
3-301(i)) requires that a party claiming to be a 'holder¨ oI a note (as Wells
Minnesota claims to be here), be in possession of the note in order to be entitled to
enforce it. When that enforcement right is asserted in a court proceeding, Wells
Minnesota must then produce the note in court. N.C. Gen. Stat. § 25-3-308(b)
states:
(b) If the validity of signatures is admitted or proved and there is
compliance with subsection (a) of this section, a plaintiff producing
the instrument is entitled to payment if the plaintiff proves
entitlement to enforce the instrument under G.S. 25-3-301, unless the
defendant proves a defense or claim in recoupment.

(emphasis added). UCC § 3-308(b) is the only section in Article 3 where the terms
'plaintiII¨ and 'deIendant¨ are used; it clearly is speciIying what the plaintiII must
do in court. The plaintiff must produce the original note in court to become
entitled to a court order for the defendant to pay the plaintiff.
7


7
The ordinary party roles where lender is plaintiff and the homeowner is
the defendant are reversed in this case. The lender here too must produce
the note to reIute Ms. Dobson`s competent evidence that Wells Minnesota is
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-9-

The requirement for the production of the original note arises out of the
unique nature of negotiable instruments. Anglo-American jurisprudence requires
the production of the original instrument
8
because its value, much like money,
subsists in the instrument itself. See UCC § 3-203 official cmt. 1 ('An instrument
is a reiIied right to payment. The right is represented in the instrument itselI.¨). A
photocopy of an instrument has no more value or significance than a photocopy of
a dollar bill.
9

Construing provisions of the UCC that are equivalent to those in force in
North Carolina, the Missouri Court of Appeals explained that '[i]n the case of suit
on the note, presentment of the note or satisfactory proof that it has been lost or
destroyed are essential elements of the case because the instrument itself is the
exclusive ground for the cause of action.¨ Union Sav. Bank v. Cassing, 691
S.W.2d 513, 514 (Mo. Ct. App. 1985) (emphasis added). Without the instrument,
meaning the original document bearing the signatures of the maker(s) and any
indorsees, there simply is no cause of action.

not the holder in possession; as discussed n. 4, supra, an aIIiant`s assertion
cannot substitute for production, nor is it entitled to any weight.
8
'Instrument` means a negotiable instrument.¨ N.C. Gen. Stat. § 25-3-104(b).
9
The only exception to this rule is Ior electronically created 'substitute checks.¨
These are permitted by the federal Check 21 Act, 12 U.S.C. §§ 5001-5018, but
with rigorous warranty requirements to protect against the presentment of
duplicates. 12 U.S.C. § 5004 (2006).
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-10-

The requirement for the production of the original note in court arises out of
the particular rights that arise in favor of the person in possession of it under N.C.
Gen. Stat. § 25-3-301. While there can be an infinite number of photocopies of
any given promissory note, there can be only one original. Only by requiring the
production of that single original note can the court, and the note obligor, be
certain that the person claiming rights under that note is the party who is truly
entitled to enforce it. And, only by rigorous adherence to that requirement can the
court protect a homeowner against a second claim on the note by some other
person coming forward with proof of actual possession of the original note.
The unique manner in which the enforcement rights of negotiable notes are
transferred also mandates that the original note be produced in court when
enforcement is being sought. Article 3 of the UCC provides that the right to
enforce a note may be transferred by delivery of the note, but such delivery does
not transfer any right to enforce the note as holder unless the indorsements
necessary to create holder status are on or affixed to the original note. See N.C.
Gen. Stat. §§ 25-3-203 & 25-3-204.
Article 3 of the UCC permits an indorsement to be made upon the
instrument itself, or on a separate piece of paper
10
'aIIixed¨ to the note. N.C. Gen.
Stat. § 25-3-204(a). As with checks, indorsements made on promissory notes are

10
This separate but attached paper is 'sometimes termed an allonge.`¨ Comml
Sec. Co. v. Main St. Pharmy, 174 N.C. 655, 656, 94 S.E. 298, 298 (1917).
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-11-

often made on the back of the signature page of the note, such that inspection of a
photocopy of the note (where often only the printed sides of pages are copied) may
not reveal such indorsements. The court, in inspecting only a photocopy of a note,
cannot determine whether any purported allonge appearing on a separate page from
the note is truly affixed to the original note as required by N.C. Gen. Stat. § 3-
204(a). See, e.g., Deutsche Bank Natl Trust Co. v. Tarantola (In re Tarantola),
No. 4:09-bk-09703-EWH, 2010 WL 3022038, at *3-4 (Bankr. D. Ariz. July 29,
2010) (holding that an allonge created aIter the commencement oI litigation 'to get
the attorneys the [evidence] that they needed¨ to create standing, but not in
existence at the time of filing and never affixed to the original note, does not create
an indorsement) (internal citations omitted).
Further, without examining the original note, it is not possible for the court
to determine with certainty the order of indorsements on a note bearing multiple
indorsements (including possible multiple allonges), a finding crucial to a
determination of whether the purported indorsements are in the correct order to
convey holder status to the person seeking enforcement. See Hills v. Gardiner Sav.
Inst., 309 A.2d 877, 880 (Me. 1973) ('An instrument`s useIulness in negotiation or
transfer can only be evidenced by looking at it or any attachments.¨).
The Dobson note consists of two printed pages of text. Because the original
note has never been produced in court in this case, it was not possible for the
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-12-

Superior Court to know, nor is it possible for this Court to know, whether the
original note was printed on the front and back sides of the same sheet of paper, or
whether it was printed on only one side each of two sheets of paper. Without
knowing this, it was not possible for the Superior Court to determine whether the
purported indorsement of EquiVantage, Inc. is stamped on a separate sheet of
paper, or whether it is on the back side of the second page of a two-page note.
This is significant because if the original note was printed on the front and back
sides of the same sheet of paper, then the purported indorsement must be on a
separate sheet of paper, and Wells Minnesota
11
has offered no proof as to whether
the separate sheet oI paper (an allonge) was 'aIIixed¨ to the note as required by
N.C. Gen. Stat. § 25-3-204. Further, the production of only a photocopy of a note
leaves open the possibility that another allonge may exist, indorsing the note to a
different party. This leaves Ms. Dobson open to a possible future claim by such a
party coming forward with the original note and asserting a claim based upon such
a differing indorsement. See In re Gilbert, -- N.C. App. --, 711 S.E.2d 165, --,
2011 WL 1645699, at *5 (N.C. Ct. App. May 3, 2011) ('Establishing that a party
is the holder of the note is essential to protect the debtor from the threat of multiple
judgments on the same note¨).

11
Through its failure to produce the note, Wells Minnesota was unable to present
suIIicient evidence to rebut Dobson`s claim that it lacks physical possession oI the
note and that the note is not properly indorsed to the correct trustee of the relevant
trust.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-13-

These requirements of Article 3 for a party to produce the original note with
proper indorsements in court are meaningful technicalities. Failures of compliance
with these Article 3 requirements are creating disorder and difficulties for courts
and homeowners across the country. For example, GMAC Mortgage LLC was
sanctioned in Maine for its 'bad Iaith¨ filing of an affidavit through which it
attempted to establish U.S. Bank as holder using a fabricated note indorsement.
See James v. U.S. Bank Natl Assn, 272 F.R.D. 47, 48 (D. Me. 2011).
12
The
affiant, Jeffrey Stephan, attached to his affidavit a photocopy of the note, with an
attached allonge signed by Stephan himself. (From the inception of the case, and
throughout pre-trial discovery, GMAC had maintained that a different photocopy
of the note showing no indorsement to U.S Bank was a true and correct copy of the
original note.) When GMAC was confronted by James with proof that the Stephan
allonge, purporting to indorse the note to the plaintiff, U.S. Bank, was a
fabrication, it immediately retreated and claimed that Stephan's purported
indorsement was a 'mistake.¨ U.S. Bank then produced yet another version in the
form of a photocopy of the note now bearing two entirely new and also suspect,
stamped indorsements on the signature page. Before further investigation could be
made into the authenticity of the two new indorsements, GMAC Mortgage
dismissed its foreclosure action and settled the homeowner's counterclaims.

12
Amici CRL and Thomas A. Cox, Esq. were co-counsel in the Maine case.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-14-

If GMAC had complied with the dictates of UCC § 3-308(2) by producing
the original note at the time that summary judgment was sought, it would have
been impossible for it to present an admittedly false allonge and possibly
fabricated indorsements. Similiarly, in Deutsche Bank Natl Trust Co. v. Babb,
RE-09-01, (Me. Dist. Ct., Bidd.) the foreclosing plaintiff presented a photocopy of
a note bearing a stamped indorsement immediately below the borrowers' signature.
The copy was ultimately shown to be a fabrication when the original note was
produced at trial containing two indorsements on the back side of the signature
page and no indorsement on the front.
Foreclosing parties must be held to the rules created by the banks for their
own benefit, and embodied in Article 3 of the UCC. Any failure by courts to
enforce those requirements will expose (often unrepresented) homeowners to the
potential of erroneous judgments in favor of parties not entitled to them and to
subsequent note enforcement actions by other parties proving actual possession of
the original note. The requirement for the production of the original note bearing
proper indorsements is a simple one. Holding financial institutions to this
requirement, created by them for their benefit, does not impose an undue burden.



w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-15-

D. Ms. Dobson Did Not Waive Her Right to Compel Wells Minnesota
to Produce the Original Note.

The majority and dissenting opinions in the Court of Appeals disagreed
whether Ms. Dobson had waived her claim that Wells Minnesota was required to
produce the original note. Those opinions highlight the critical difference between
a situation where a note obligor 'admits that the documents shown him are correct
copies of the original,¨ In re Helms, 55 N.C. App. 68, 70, 284 S.E.2d 553, 554
(1981), and a situation where the obligor makes no such admission.
As Judge Hunter noted in his dissent, there is no admission by Ms. Dobson
in this case that the photocopy of the note produced by Wells Minnesota is a
correct copy of the original. See Dobson, 2011 WL 1854315 at * 6-7. And thus,
once Ms. Dobson produced competent evidence that Wells Minnesota did not
possess the note, she was entitled to summary judgment against Wells Minnesota
unless Wells Minnesota came forward and produced the original note as required
under N.C. Gen. Stat. § 25-3-308(2). Because Wells Minnesota failed to provide
this proof, the Superior Court properly entered summary judgment for Ms.
Dobson. As Judge Hunter accurately stated, any contrary holding 'impermissibly
shiIts the burden oI proving DeIendants` |Wells Minnesota`s| photocopy of the
Note is not an accurate copy of the original to Dobson, when it is the Defendants
who, allegedly, have possession oI the instrument.¨ Dobson, 2011 WL 1854315 at
*7. Especially here, where Ms. Dobson had already presented sufficient evidence
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-16-

that Wells Minnesota was not in possession to obtain summary judgment, such a
shifting of the burden of proof would be contrary to N.C. Gen. Stat. § 25-3-308(2).
Furthermore, any wrongful shifting of the burden of proof to the note obligor
would have left Ms. Dobson in the impossible position of having to prove the
inaccuracy of the photocopy without access to the original document.
The only time that it is appropriate to dispense with the requirement for the
production of the original note is when the note obligor specifically and in explicit
terms waives his/her right to require production of the original note (or when the
note has been lost, destroyed or stolen as discussed in the following section of this
brief). An admission that a photocopy of a note is a correct copy of the original (as
it existed at some point in time) is not such a waiver.
E. A Photocopy of a Note, by I tself, Is Never Sufficient to
Prove the Right of a Party to Enforce a Negotiable Note.

The UCC Article 3 requirement for production of the original note in a court
action to enforce it is further reinforced by the lost, destroyed and stolen note
provisions of Article 3 set forth at N.C. Gen. Stat. § 25-3-309.
13
An interpretation

13
Enforcement of lost, destroyed, or stolen instrument
(a) A person not in possession of an instrument is entitled to enforce the
instrument if (i) the person was in possession of the instrument and entitled
to enforce it when loss of possession occurred, (ii) the loss of possession was
not the result of a transfer by the person or a lawful seizure, and (iii) the
person cannot reasonably obtain possession of the instrument because the
instrument was destroyed, its whereabouts cannot be determined, or it is in
the wrongful possession of an unknown person or a person that cannot be
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-17-

of N.C. Gen. Stat. § 25-3-308(b) as always allowing proof of a right to enforce a
note upon production of a photocopy would render N.C. Gen. Stat. § 25-3-309
completely meaningless. N.C. Gen. Stat. § 25-3-309 describes the proof that is
required when the enforcing party is unable to produce the original note. (This is
not the case here as there is no claim by Wells Minnesota that it was unable to
produce the original note.) This section of the UCC reinforces the concept that the
original note must be produced in all circumstances except those limited
circumstances described in § 25-3-309(a)those circumstances being limited to
instances where the note has been lost, destroyed or stolen.
When a note has been lost, destroyed or stolen, the party seeking
enforcement has to prove each of the three factors delineated in subpart (a) of N.C.
Gen. Stat. § 25-3-309 (see footnote 12). In addition, under subpart (b), the
enIorcing party must prove the terms oI the note and the party`s right to enIorce it,

found or is not amenable to service of process.
(b) A person seeking enforcement of an instrument under subsection (a) of
this section must prove the terms of the instrument and the person's right to
enforce the instrument. If that proof is made, G.S. 25-3-308 applies to the
case as if the person seeking enforcement had produced the instrument. The
court may not enter judgment in favor of the person seeking enforcement
unless it finds that the person required to pay the instrument is adequately
protected against loss that might occur by reason of a claim by another
person to enforce the instrument. Adequate protection may be provided by
any reasonable means.
N.C. Gen. Stat. § 25-3-309.

w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-18-

which is the sole instance under UCC Article 3 where a photocopy can be
used. Once the proof under subpart (a) is made and proof of the terms of and right
to enforce the note is made under subpart (b), a court is still not permitted to enter
an judgment for enforcement of the note unless and until it finds that the note
obligor is adequately protected, or protection is ordered, by the court, against the
possibility of some other person (such as a party actually in possession of the
original note) producing and claiming the right to enforce it.
Production of a photocopy to prove the terms of the note is only one of the
elements of proof required under N.C. Gen. Stat. § 25-3-309. If this Court were to
adopt a rule that a photocopy of a note was sufficient even where there is no claim
that the note had been lost, destroyed or stolen, then no rational party would ever
submit itself to the proof requirements of N.C. Gen. Stat. § 25-3-309. Even in lost,
destroyed or stolen note situations, the party seeking enforcement would opt for the
simple requirement of only producing a photocopy of the note. In that way the
enforcing party would avoid compliance with and thereby eviscerate the
protections Ior the 'lost¨ note obligor built into Article 3 to protect against another
party claiming on the note.
The core principle of N.C. Gen. Stat. § 25-3-309 is to provide protection for
the 'lost¨ note obligor when there is a risk oI an original note turning up in another
party`s hands. The entire structure of Article 3 is built around the concept that
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-19-

production of the original note is what entitles a party to enforce it and that note
obligors must be protected against multiple claims being made on the note. If
those concepts are abandoned, not only does N.C. Gen. Stat. § 25-3-309 become
meaningless, but so too do all of the other provisions of Article 3 regarding transfer
and indorsement oI notes. The concept oI what it means to be a 'holder¨ would be
destroyed. Literally, the entire structure of Article 3 collapses if the principle of
N.C. Gen. Stat. § 25-3-308(b) requiring production of the original note is
abandoned.
F. The I nterdependency of the Rules in UCC Article 3
Article 3 of the UCC is an elegant and utterly inter-dependant set of rules
governing negotiable instruments. With the functionality of every section of
Article 3 dependent upon all other sections, any failure to enforce one section
diminishes or nullifies the efficacy of other sections. The provisions of Article 3
that create specific rights in persons having possession of original notes, and that
require that indorsements be made on those original notes or be affixed to them,
lead inevitably to the requirement that original notes must be presented in court
when enforcement of them is sought. It is therefore critical that the wise ruling of
Chief Justice Marshall 'to require that the note should be produced, or its absence
accounted for,¨ Sheehy v. Mandeville, 11 U.S. 208, 218 (1812), remain the law of
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-20-

the land. If that requirement is taken away or weakened, then the entire structure
of Article 3 of the UCC collapses.
I I. AF F I DAVI TS I N F ORE CL OSURE PROCE EDI NGS MUST COMPL Y
WI T H BASI C ST ANDARDS F OR AF F I DAVI TS I N COURT
PROCE EDI NGS

A. I n North Carolina, Foreclosure Affidavits Must Present
Admissible Facts Based on Personal Knowledge

It is 'well settled¨ in North Carolina, as in other states, that aIIidavits must
be based on personal knowledge. Bird v. Bird, 363 N.C. 774, 777, 688 S.E.2d 420,
422 (2010) (discussing the standard under Rule 56(e));
14
see also Lemon v. Combs,
164 N.C. App. 615, 621-22, 596 S.E.2d 344, 348 (2004) (applying the personal
knowledge requirement of Rule 56(e) to Rule 43(e), which governs evidence on
motions generally). Indeed, 'it is a general legal principle that affidavits must be
based upon personal knowledge.¨ Id. at 622, 596 S.E.2d at 348.
The affidavit must in some way show that the affiant is personally
familiar with the facts so that he could personally testify as a witness.
The personal knowledge of the facts asserted in an affidavit is not
presumed from a mere positive averment of facts but rather the court
should be shown how the affiant knew or could have known such
facts and if there is no evidence from which an inference of personal
knowledge can be drawn, then it is presumed that such does not exist.


14
North Carolina Rule oI Civil Procedure 56(e) provides that 'Supporting and
opposing affidavits shall be made on personal knowledge, shall set forth such facts
as would be admissible in evidence, and shall show affirmatively that the affiant is
competent to testiIy to the matters stated therein.¨ N.C. Gen. Stat. § 1A-1, Rule 56.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-21-

Id. at 622-23, 596 S.E.2d at 349 (emphasis added) (quoting 3 Am. Jur. 2d
Affidavits § 14).
15

These rules apply to mortgage foreclosure proceedings, just as they do to
any proceeding in which affidavits are submitted in support of requests for relief.
See In re Gilbert, 2011 WL 1645699, at *8-10 (finding affidavits not based on
personal knowledge incompetent evidence of possession); see also In re Brown,
156 N.C. App. 477, 485-86, 577 S.E.2d 398, 403-04 (2003) ('we Iind no reason
why this Court should distinguish between affidavits filed in support of a motion
for summary judgment and affidavits filed in support of a petition for
Ioreclosure¨); Lemon, 164 N.C. App. at 620-23, 596 S.E.2d at 347-49 (citing cases
that apply the personal knowledge requirement in motions for summary judgment,
default judgment, to dismiss for lack of jurisdiction, for Rule 11 sanctions, and for
search warrants).
The affidavit of Jennifer Robinson,
16
submitted in support of Wells
Minnesota`s opposition to Dobson`s summary judgment motion, Iails to comply
with these well-established principles of North Carolina law. Affiant Robinson

15
This is consistent with the personal knowledge requirement in the Rules of
Evidence, which provides that a 'witness may not testiIy to a matter unless
evidence is introduced sufficient to support a finding that he has personal
knowledge oI the matter.¨ See Rule 602, N.C. Gen. Stat. § 8C-1, Rule 602 ('A).
The same language appears in Rule 602 of the Federal Rules of Evidence.
16
The Robinson Affidavit appears at R pp. 237-41, with attachments at R pp. 242-
355.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-22-

asserts that she is employed by the servicer, ASC, as 'a DeIault Litigation
Specialist . . . and I am familiar with and have personal knowledge of the
Linda G. Dobson account more speciIically described below.¨ R p. 237,
Robinson AII. ¶ 2 (emphasis added). Robinson`s Iailure to detail her job
responsibilities at ASC renders her sworn statements facially incompetent as
evidence; she fails to show that she is a 'qualiIied witness¨ under Evidence Rule
803(6) to authenticate the business records of ASC, and she fails to show that she
is a competent witness under Rule of Civil Procedure 56(e) to make sworn
statements as to the content of those records. She fails to meet the requirement that
her 'aIIidavit must in some way show that the aIIiant is personally Iamiliar with
the Iacts so that |s|he could personally testiIy as a witness.¨ Lemon v. Combs, 164
N.C. App. at 622, 596 S.E.2d at 349 (quoting 3 Am. Jur. 2d Affidavits § 14).
A closer look at the record also suggests that Ms. Robinson could not have
had true, first-hand knowledge of any matters relating to the Dobson mortgage
which was originated in 1996 and allegedly assigned to Wells Minnesota in 2001;
her limited employment history with ASC dates only to August of 2006,
17
and her
sworn interrogatory response proves ASC`s knowledge is limited to the

17
A discovery response sworn to by Jennifer L. Robinson on January 4, 2008,
states that Ms. Robinson has her address in Frederick, Maryland (where her
aIIidavit was notarized), and that she has been 'DeIault Litigation Specialist for
America`s Servicing Company, Employed at the above-referenced position for 5
months.¨ R p. 198, response to interrogatory 1.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-23-

inIormation that is contained in the 'call log/servicing notes.¨
18
It is therefore
unsurprising that the trial court declined to rely upon any factual statement in this
aIIidavit in considering Wells Minnesota`s opposition to the Dobson summary
judgment motion.
B. I n North Carolina, Affidavits May Not Be Used to Supplant the
&RXUW¶V Function to Decide Questions of Law

It is also a long-standing and uncontroversial principle of the law of North
Carolina that affidavits must present facts based on personal knowledge, not legal
conclusions. See, e.g., Singleton v. Stewart, 280 N.C. 460, 467, 186 S.E.2d 400,
405 (1972) (holding an affidavit statement referring to the notice required for a
binding contract was inadmissible as a legal conclusion); Ward v. Durham Life Ins.
Co., 90 N.C. App. 286, 289, 186 S.E.2d 400, 405 (1988) ('A trial court may not
consider portions of an affidavit not based on the affiant's personal knowledge or
which merely state the aIIiant's legal conclusion.¨); Brandis on North Carolina
Evidence § 130 (3d ed. 1988).
Despite the clarity of North Carolina law, Wells Minnesota purports to
establish itselI as holder by Iiat solely through Ms. Robinson`s conclusory
statement: 'Wells Fargo |Minnesota| is the present and current holder oI the Note.¨

18
'|T|he extent oI the inIormation any individual employed by Wells |Minnesota|
would have in regards to the PlaintiII`s account is obtainable Irom the call
log/servicing notes and the payment and transaction history.¨ See R p. 200,
response to interrogatory 5.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-24-

R p. 238, Robinson Aff. ¶ 7.
19
However, as an unsupported legal conclusion that
only the court is competent to make (based on a review of the evidence including
the original note), this must fail. See Ward, 90 N.C. App. at 289, 186 S.E.2d at
405. Under the UCC, the facts required to prove holder status are possession of the
note and indorsements sufficient to give the possessor the right to enforce it.
Those Iacts are missing Irom Robinson`s aIIidavit, and it is doubtIul that she was a
competent witness to prove them.
As an employee of the servicer, ASC, and not of the purported note-holder,
Wells Minnesota, it is unlikely that Ms. Robinson was in a position to know
whether Wells Minnesota possesses the original note, raising the strong suspicion
that her conclusory statement lacks any factual underpinning.
20
This should come
as no surprise given the significant inconsistencies in the record regarding

19
Ms. Robinson`s aIIidavit makes clear that her use oI the name 'Wells Fargo¨
refers to Wells Minnesota. (R p. 237, Robinson Aff. ¶ 3.)
20
In fact, the pooling and servicing agreements governing mortgage-backed
securities generally provide clear criteria for storage of the notes and frequently
prohibit the mortgage servicer from serving as the custodian of any original
documents. Such restrictions apply here. The pooling and servicing agreement for
the Equivantage Home Equity Loan Trust 1996-4 was not put in the record
presented to the trial court and is not included in the record on appeal. This
pooling and servicing agreement can be obtained electronically. See Pooling and
Servicing Agreement Relating to Equivantage Home Equity Loan Trust Among
Equivantage Acceptance Corp., as Sponsor, Equivantage Inc., as Servicer, and
Norwest Bank Minnesota, N.A., as Trustee, §§ 3.5, 3.6, 8.14 (Nov. 1, 1996),
available at http://www.sec.gov/Archives/edgar/data/933505/0001005477-96-
000590.txt.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-25-

origination, transfers and assignments of the note,
21
not the least of which is Wells
Minnesota`s interrogatory admission that the Dobson loan origination Iile has
apparently gone missing.
22


21
Robinson identifies three different entities as possible noteholdersNorwest
Bank Minnesota as Trustee, Wells Fargo Minnesota as Trustee or Norwest Home
Imp.but she did not provide facts to substantiate that any one of these entities is
in possession oI the note, a deIect that may derive Irom Robinson`s employment
by ASC and not Wells Minnesota. Compare Robinson`s assertions that: (1) the
payment rights in the Note were 'assigned to Norwest Bank Minnesota, National
Association, as Trustee of Equivantage Home Equity Loan Trust 1996-4 under the
pooling and servicing agreement dated as of November 01, 1996 . . . by way of an
assignment dated September 28, 2001,¨ (R p. 238, Robinson AII. ¶ 6), with (2) a
Consent Order dated April 28, 2005, authenticated by Robinson (R p. 238,
Robinson AII. ¶ 14), which recites that the Note had been assigned to 'A.S.C.
Servicer for Norwest Home Imp.¨ (R p. 290), and (3) that Norwest Bank
Minnesota is 'now known as Wells |Minnesota|¨ (R p. 238, Robinson AII. ¶ 6).
Ms. Robinson also failed to provide any explanation or supporting documentation
as to how Norwest Bank Minnesota may have become Wells Minnesota.
22
In response to an interrogatory directly asking (1) whether Wells Minnesota had
'in |its| possession the loan origination documents,¨ and iI not (2) which person or
corporation was in possession of these documents, Wells Minnesota responded:
The Defendant Wells [Minnesota] was not the original lender for this
loan, but acquired the loan by way oI assignment. . II the DeIendant
Wells [Minnesota] has the requested documentation, said
documentation would be located in an origination file that should have
been sent to the Defendant Wells [Minnesota] at the time of
assignment. At the time these interrogatories were answered, the
Defendant Wells [Minnesota] is unsure as to whether a loan origination
file was sent to it at the time of assignment.
.
In the event that Wells [Minnesota] does not have the loan origination
file in its possession, Wells Fargo [Minnesota] is unsure as to which
person or entity would have a copy of the loan origination file.
R pp. 201-02, response to Interrogatory 9.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-26-

Robinson`s aIIidavit, including her Iailure to explain the basis oI her
asserted personal knowledge, and her statements of legal conclusion devoid of
supporting factual statements, all improper under North Carolina law, are the same
fundamental defects seen in other robo-signed affidavits widely used by the
mortgage servicing industry.

The North Carolina Court of Appeals recently
considered affidavits of GMAC Mortgage, LLC, including an affidavit of robo-
signer Jeffrey Stephan, which, like the affidavit statement of Jennifer Robinson,
purported to identiIy the 'holder oI the Note and Deed oI Trust.¨ In re Gilbert,
2011 WL 1645699, at *8. The Gilbert court considered and disregarded these
'conclusory¨ statements because they were 'a legal conclusion that is to be
determined by a court of law on the basis oI Iactual allegations.¨ Id. at *9. The
court further found that an affidavit statement asserting possession was
incompetent because it did not supply those 'Iacts Irom which the trial court could
determine who has possession oI the Note.¨ Id.
The factual and legal deficiencies in the Robinson affidavit specifically, and
those in the industry generally, reinforce the importance of strict adherence to the
requirements for affidavits in North Carolina.


w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-27-

III. ABUSES I N T HE E XE CUTI ON OF AF F I DAVI TS AND OT HER
DOCUMENTS I MPUGN T HE I NT E GRI T Y OF T HE
F ORE CL OSURE PROCESS

The recent foreclosure crisis has revealed stunning patterns of abuse by
lenders and mortgage servicers at every stratum oI our nation`s mortgage system,
from deceptive conduct at origination
23
to outright fraud in foreclosure
proceedings. See, e.g., James, 272 F.R.D. at 49 (sanctioning GMAC for filing
fraudulent affidavits in support of summary judgment in foreclosure proceedings).
It has unfortunately become routine practice for all large mortgage servicers
to file so-called 'robo-signed¨ aIIidavits, in which employees oI entities seeking to
foreclose sign sworn statements attesting to purported facts of which they have no
knowledge.
24
As described more fully below, in most cases the robo-signer simply
checks that the name and signature are accurate and never even looks at the loan
file. The fundamental untrustworthiness of robo-signed foreclosure affidavits filed
by mortgage servicers and the risk of extraordinary resultant harm to home-owners

23
For example, on July 20, 2011 the Federal Reserve fined Wells Fargo Company
and Wells Fargo Financial $85 million Ior 'IalsiIy|ing| borrowers` income
inIormation¨ in mortgage applications between 2004 and 2008. Press Release, Bd.
of Governors of the Fed. Reserve Sys. (July 20, 2011), available at
http://www.federalreserve.gov/newsevents/press/enforcement/20110720a.htm
24
See Fed. Reserve Sys., Office of the Comptroller of the Currency, & Office of
Thrift Supervision, Interagency Review of Foreclosure Policies and Practices 7
(2011), available at http://www.occ.treas.gov/news-issuances/news-
releases/2011/nr-occ-2011-47a.pdf (Interagency Review) (sanctioning the fourteen
largest servicers for unsafe and unsound foreclosure practices).
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-28-

makes it all the more important for this Court to reaffirm what is already the law in
North Carolina: affidavits made without personal knowledge, that assert legal
conclusions, or that fail to establish the basis for the aIIiant`s knowledge, are not
competent evidence.
A. To Streamline the Foreclosure Process and Cut Costs, Mortgage
Companies Routinely File Untrustworthy Affidavits and
F raudulent Documents.

Robo-signing and other fraudulent mortgage servicer practices have gained
widespread attention in the wake oI the Ioreclosure crisis, but it has been 'standard
industry practice¨ Ior mortgage servicers Iiling Ioreclosure actions to submit Ialse
affidavits, fraudulently backdated documents and other fraudulent documents
25
in
court 'Ior most oI the past decade.¨
26
Foreclosed Justice: Causes and Effects of

25
In addition to false affidavits, mortgage servicers have also fabricated mortgage
assignments and other documents, including on behalf of entities that no longer
even exist. See Paul Kiel, Internal Doc Reveals GMAC Filed False Document in
Bid to Foreclose (July 27, 2011, 1:07 PM),
http://www.propublica.org/article/gmac-mortgage-whistleblower-
foreclosure/single.
26
For further testimony and reports detailing these practices over the past decade,
see, for example, Congressional Oversight Panel, November Oversight Report:
Examining the Consequences of Mortgage Irregularities for Financial Stability
and Foreclosure Mitigation 46-49 (2010), available at
http://cybercemetery.unt.edu/archive/cop/20110402010313/http://cop.senate.gov/d
ocuments/cop-111610-report.pdf (COP Report); Foreclosed Justice: Causes and
Effects of the Foreclosure Crisis: Hearing Before the Comm. on the Judiciary,
H.R., 111th Cong. 292, (Dec. 2 & 15, 2010) (Testimony of Thomas A. Cox, Esq.,
Volunteer Program Coordinator, Maine Attorneys Saving Homes 3-16), available
at http://judiciary.house.gov/hearings/pdf/Cox101202.pdf (Cox Test.); Robo-
Signing, Chain of Title, Loss Mitigation, and Other Issues in Mortgage Servicing:
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-29-

the Foreclosure Crisis: Hearing Before the Comm. on the Judiciary, H.R., 111th
Cong. 126 (Dec. 2 & 15, 2010) (Testimony of James A. Kowalski, Jr., Law Offices
of James A. Kowalski, Jr., PL, Jacksonville, FL 1-2) (Kowalski Test.) (emphasis
omitted).
27
Unfortunately, these practices have become the norm as mortgage
companies have bypassed the steps that are legally required to foreclose on a
home. See COP Report at 10-13, 46-47; Interagency Review at 7; Kowalski Test.
at 1-4; Cox Test. at 3-7.
Having taken extensive depositions of robo-signers over a period of years,
Mr. Kowalski explained in his Congressional testimony how robo-signing works:
[M]ost of the servicers use 'Signing Officers¨ rows of individuals
who sit before reams of documents prepared by others, with not even
a modest wink at the business records exception to the hearsay rule,
and who sign the documents only to have the document transported
across the business campus to rows of notaries, who attest to the
signatures without ever complying with the basics of their state's
notary laws.

Kowalski Test. at 1-2; see also Cox Test. at 6-7. It is the job of these robo-signers
to simply sign documents without verifying any of the statements or even checking
the loan file, at best reviewing only a few facts from a computer screen, facts they

Hearing Before the Subcomm. on Hous. & Cmty. Opportunity of the H. Comm. on
Fin. Servs., 111th Cong. 229 (Nov. 18, 2010) (Testimony of Julia Gordon, Senior
Policy Counsel, Center for Responsible Lending 11) (Gordon Test.) available at
http://www.responsiblelending.org/mortgage-lending/policy-
legislation/congress/Gordon-Waters-testimony-final.pdf.
27
Available at http://judiciary.house.gov/hearings/pdf/Kowalski101202.pdf
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-30-

have no responsibility for generating. See In re Wilson, No. 07-11862, 2011 WL
1337240, at *9 (Bankr. E.D. La. Apr. 7, 2011). Depositions and trial testimony of
mortgage servicer employees and government investigations have confirmed the
accuracy oI Mr. Kowalski`s description.
28
See, e.g., In re Wilson, 2011 WL
1337240 at *9-12; Interagency Review at 7.

28
A full accounting of robo-signing practices throughout the country is beyond the
capabilities of this brief. However, amici provide several examples of typical
deposition testimony: Deposition of Xee Moua, Vice-President of Loan
Documentation for Wells Fargo Home Mortgage (Moua Dep.), taken in Wells
Fargo Bank, NA v. Stipek, No. 50 2009 CA 012434XXXXMB AW (Fla. Cir. Ct.
Mar. 9, 2010), available at
http://www.lsnj.org/NewsAnnouncements/Foreclosure/materials/EXHIBITGWells
FargoDepositionMoua.pdf; Deposition of Jeffrey Stephan, Limited Signing Officer
for GMAC (Stephan Dep. Maine), taken in Fed. Natl Mortg. Assn v. Bradburv,
BRI-RE-09-65 (Me. Dist. Ct., June 7, 2010), filed in U.S. Bank Natl Assn v.
James, No. 2:09-cv-00084-JHR (D. Me. July 20, 2010), ECF No. 153-1;
Deposition of H. John Kennerty, Loan Administration Manager and Vice-President
of Loan Documentation at Wells Fargo Mortgage (Kennerty Dep.), taken in Geline
v. Nw. Tr. Servs., Inc., No. 09-2-46576-2 SEA (Wash. Super. Ct. May 20, 2010),
available at
http://www.lsnj.org/NewsAnnouncements/Foreclosure/materials/EXHIBITGWells
FargoDepositionKennerty.pdf; Deposition of Beth Ann Cotrell., Operations
Supervisor for Chase Home Finance (Cotrell Dep.), taken in Chase Home Finance,
LLC v. Koren, No. 50-2008-CA-016857 (Fla. Cir. Ct. May 17, 2010), available at
http://www.lsnj.org/NewsAnnouncements/Foreclosure/materials/EXHIBITGChase
DepositionCottrell.pdf; see also Deposition of Jeffrey Stephan, Limited Signing
Officer for GMAC (Stephan Dep. Florida), taken in GMAC Mortg. LLC v. Neu,
No. 50 2008 CA 040805XXXX MB (Fla. Cir. Ct. Dec. 10, 2009), filed in U.S.
Bank Natl Assn v. James, No. 2:09-cv-00084-JHR (D. Me. July 20, 2010), ECF
No. 153-6.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-31-

Wells Fargo Home Mortgage (Wells Fargo),
29
one of the largest mortgage
companies in the country, executes all of the documents necessary for foreclosures
nationwide from an office in Fort Mill, South Carolina. See Kennerty Dep. 4:22-
23, 7:7-20 ('Yes. . . . My office is the one that handles all of it [for the entire
country|.¨). Based almost exclusively on what their computer system pops up and
spits out, employees sign all documents that are presented to them without
verifying any substantive information. See Kennerty Dep. 43:1-48:25; 56:7-;
57:21-64:20; see also Moua Dep. 9:7-11:20, 29:4-39:24 (testimony by Wells Fargo
employee that she executed as many as 300-500 foreclosure documents in a two
hour period each day and that her only responsibility was to ensure that her name
and title were correct before signing).
By design, the sole responsibility of employees in the document execution
department is, as the name suggests, to execute documents, trusting that some other
division of Wells Fargo has confirmed that the information is correct:
Q. So how do you know when you`re signing this document that it`s true
and correct?
A. There are people that are responsible for . . . maintaining that foreclosure
matrix. . . .
Q. Who puts the information into the matrix?
A. It`s generated Irom our Ioreclosure departments. SpeciIically, I don`t
know who. . . .
Q. And so when you sign |these documents|, you don`t have any
independent knowledge about whether or not the information is truthful,

29
Wells Fargo Home Mortgage is the same entity that is the servicer in the Dobson
case, 'doing business as America`s Servicing Company.¨ R p. 237.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-32-

you`re relying on other people in the process to make sure that the
inIormation is correct on the document that you`re signing?
A. Yes.

Kennerty Dep. 62:8-64:20.
Employees tasked with executing documents have little training or
knowledge of foreclosure. For example, Ms. Moua was given the title of Vice
President of Loan Documentation, and with it the authority to sign on Wells
Fargo`s behalI, two years aIter being hired as a temporary worker in the document
execution department. Moua Dep. 9:7-11:20, 39:13-24. Her sworn statements
have included legal conclusions that servicers typically include in robo-signed
affidavits and are similar to those made in this case,
30
such as 'there`s no genuine
issue oI material Iact¨ and '|p|laintiff is entitled to enforce the note and mortgage.¨
Id. at 41:2-24. Not surprisingly, Moua did not even understand her own
assertionsthat is, the meaning oI 'no genuine issue oI material Iact.¨ Id. at
41:14-16.
The same practices are employed at every major mortgage servicer. See,
e.g., Interagency Review at 7; TCI F REO2, LLC v. Leibowitz, No. 16-2004-CA-
4835 (Fl. Cir. Ct., Duval Cnty. May 1, 2006) (sanctioning GMAC Mortgage, LLC
for filing fraudulent affidavits); Stephan Dep. Maine 46:9-47:21; 61:24-68:3

30
See R p. 238, Robinson AII. ¶ 7 ('Wells Fargo is the present and current holder
oI the Note.¨); id. p. 239-40, ¶¶ 14, 15 ('PlaintiII again deIaulted¨); id. p. 240, ¶ 19
('Although not germane to a power oI sale Ioreclosure hearing¨)
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-33-

(testifying that as GMAC`s limited signing oIIicer, he signed between 8,000 to
10,000 documents a month without reading them, including summary judgment
affidavits, and that this conduct reIlected GMAC`s oIIicial policy); Cotrell Dep.
9:19-14:2, 56:12-57:1, 73:13-76:4 (testimony by employee of Chase Home
Finance that she signed thousands of affidavits a month to be used in foreclosure
proceedings, including affidavits of default and affidavits of lost notes and
mortgages, all without verifying any information); Cotrell Dep. 11:11-18 ('Q. . . .
you stated That plaintiII is entitled to enIorce the note and mortgage.` Again, did
you have personal knowledge of that? A. No knowledge. Q. Did you do anything
to veriIy that statement? A. No.¨).
B. Federal and State Governments Respond WR0RUWJDJH6HUYLFHUV¶
F raudulent Conduct.

Although robo-signing practices have been ongoing for years, the recent
foreclosure crisis brought them into the spotlight, leading to government
investigations by the federal prudential regulators, the Departments of Justice
(DOJ), Treasury and Housing and Urban Development (HUD), all fifty state
attorneys general, and even some state and federal courts.
The federal prudential regulators investigated the foreclosure practices of the
fourteen largest mortgage servicers, including Wells Fargo, and issued a report and
consent orders, imposing sanctions. They found these servicers routinely created
Ioreclosure documents that violate state and Iederal law, 'emphasizing speed and
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-34-

cost efficiency over quality and accuracy.¨ Interagency Review at 7 (finding
practices at each oI the Iourteen largest servicers investigated 'resulted in unsaIe
and unsound practices and violations of applicable federal and state law and
requirements¨). In their investigation oI the fourteen largest servicers, who
account for sixty-eight percent of the mortgage servicing industry, the regulators
were unable to identify a single entity that conducted its foreclosure business
properly. See id.
The Iederal prudential regulators Iound 'critical weaknesses¨ in the practices
oI these largest servicers, including 'numerous inaccurate aIIidavits and other
foreclosure-related documents,¨ Id. at 1-2, 8. Each servicer was required to enter
into a compliance program and to retain an independent examiner to conduct an in-
depth review of foreclosures filed in 2009 and 2010, and to assess the harm to
homeowners caused by its errors. Id. at 13. That further review was essential to
redressing servicer problems and reforming practices because, as the federal
regulators acknowledge, their investigation only scratched the surface. Id. at 1.
No investigation was made regarding the accuracy of servicing records that
were the basis for sending a homeowner to foreclosure in the first place.
The file reviews did not include a complete analysis of the
payment history of each loan prior to foreclosure or potential
mortgage-servicing issues outside of the foreclosure process.
Accordingly, examiners may not have uncovered cases of
misapplied payments or unreasonable fees, particularly
when these actions occur red prior to the default that led to
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-35-

the foreclosure action. The foreclosure-file reviews also may
not have uncovered certain facts related to the processing of a
foreclosure that would lead an examiner to conclude that a
foreclosure otherwise should not have proceeded.

Id. at 2 (emphasis added).
At the same time, other federal agencies, including the Treasury Department,
DOJ and HUD, have joined forces in their own investigation of robo-signing
practices. U.S. Gov`t Accountability OIIice, Mortgage Foreclosures:
Documentation Problems Reveal Need for Ongoing Regulatory Oversight, GAO-
11-433, at 36-37 (2011) (GAO Report).
31
HUD also found potential violations of
the False Claims Act for federal reimbursements obtained by servicers for money
lost in foreclosures based on faulty documentation. See Shahien Nasiripour,
Confidential Federal Audits Accuse Five Biggest Mortgage Firms of Defrauding
Taxpayers, Huffington Post (May 17, 2011).
32

General Roy Cooper of North Carolina is on the executive committee of the
fifty-state attorney general investigation and has been joined by the North Carolina
Commissioner of Banks. See Press Release, Nat`l Ass`n oI Attorneys Gen., 50
States Sign Mortgage Foreclosure Joint Statement (Oct. 13, 2010).
33
The attorneys

31
Available at http://www.gao.gov/new.items/d11433.pdf
32
Available at http://www.huffingtonpost.com/2011/05/16/foreclosure-fraud-audit-
false-claims-act_n_862686.html
33
Available at http://www.naag.org/joint-statement-of-the-mortgage-foreclosure-
multistate-group.php
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-36-

general were the first to challenge the foreclosure and robo-signing practices of the
large servicers that 'may constitute a deceptive act and/or an unIair practice or
otherwise violate state laws.¨ Id. Although this in-depth investigation is ongoing,
Attorneys General Cooper and Lisa Madigan of Illinois have recently expressed
their intent to file lawsuits against servicers if settlement discussions with servicers
break down. See Nick Gale, Madigan and Other Attorneys General Meet with
Banks on Foreclosure Practices, WJBC (June 23, 2011).
34

Individual attorneys general have also taken action. Former Ohio Attorney
General Richard Cordray (recently nominated to head the Consumer Financial
Protection Bureau) sued GMAC to enjoin foreclosures resulting from robo-signed
affidavits. See Ohio v. GMAC Mortgage, LLC, 760 F. Supp. 2d 741 (N.D. Ohio
2011). Attorney General Terry Goddard of Arizona wrote to mortgage servicers
expressing concern over robo-signing practices and inaccurate documentation,
informed them that use of robo-signed documents 'would likely constitute a
violation of the Arizona Consumer Fraud Act,¨ and demanded review oI robo-
signed documents and assurances that servicers will comply with Arizona state
law. Letter from Terry Goddard, Attorney Gen., State of Ariz., to Servicers 1, 2

34
Available at http://wjbc.com/madigan-and-other-attorneys-general-meet-with-
banks-on-foreclosure-practices/
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-37-

(Oct. 7, 2010).
35
The California Attorney General demanded that JP Morgan
Chase halt foreclosures until it could demonstrate compliance with California law,
because its prior veriIication oI compliance was 'suspect¨ based on use oI robo-
signed affidavits. Letter from Benjamin Diehl, Deputy Attorney Gen., State of
Cal., to Steve Stein, SVP Channel Dir., JP Morgan Chase 1-2 (Sept. 30, 2010).
36

Attorneys general in Michigan, Delaware, New York, and Illinois have also
entered the fray. See Michelle Conlin & Pallavi Gogoi, AP Exclusive: Mortgage
Robo-Signing Goes On, Associated Press, abcnews.go.com (July 19, 2011).
37
In
Michigan, the Attorney General stepped up his investigation of fraudulent
documents Iiled with register oI deeds oIIices throughout the state, taking 'the rare
step in June of filing criminal subpoenas to out-of-state mortgage processing
companies after 23 county registers of deeds filed a criminal complaint with his
office over robo-signed documents they say they have received.¨ Conlin & Gogoi,
Mortgage Robo-Signing Goes On, see also Press Release, MI Office of the

35
Available at
http://www.azag.gov/press_releases/oct/2010/Mortgage%20Loan%20Servicer%20
Letter.pdf
36
Available at
http://ag.ca.gov/cms_attachments/press/pdfs/n1996_jp_morgan_chase_letter_.pdf
37
Available at http://abcnews.go.com/Business/wireStory?id=14100478
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-38-

Attorney Gen., Schuette Issues Subpoenas in Criminal Probe of Mortgage
Processors (June 15, 2011).
38

Many other states are continuing to investigate and take action, including in
Guilford County, North Carolina, where the Register of Deeds received so many
suspect documents in 2010 and 2011, that he had 'no choice¨ but to 'stop||
accepting questionable paperwork.¨ See Conlin & Gogoi, Mortgage Robo-
Signing Goes On; Michelle Conlin & Pallavi Gogoi, Lawmakers Call for
Hearings on Robo-Signing, Associated Press, July 20, 2011.
39

Courts, too, have taken independent steps to protect their integrity,
scrutinizing foreclosure affidavits, dismissing or delaying foreclosures, imposing
new filing requirements,
40
and sanctioning large servicers who file robo-signed

38
http://www.michigan.gov/ag/0,1607,7-164-46849_47203-257956--,00.html.
39
Available at http://abcnews.go.com/Business/wireStory?id=14110280
40
The highest courts of three statesNew Jersey, Vermont and New Yorkall
established rules in residential Ioreclosure actions to require plaintiII`s counsel to
certify that they have communicated with an employee of the foreclosing entity
who has personally reviewed and confirmed the accuracy of documents. See
Glenn A. Grant, Acting Admin. Dir. of the Courts, Notice to the Bar (Dec. 20,
2010), available at http://www.judiciary.state.nj.us/notices/2010/n101220a.pdf; Vt.
R. Civ. P. 80.1(g)(2); Andrew Keshner, New Court Rule Says Attorneys Must
Verify Foreclosure Papers, N.Y. L.J., Oct. 21, 2010; Admin. Order of the Chief
Admin. Judge of the NY Courts (Mar. 2, 2011), available at
http://www.nycourts.gov/attorneys/pdfs/AdminOrder_2010_10_20.pdf. Failure to
follow the new court rules in New York could result in dismissal of the
foreclosure. See, e.g., Wash. Mut. Bank v. Phillip, No. 16359/08, 2010 WL
4813782, at *5 (N.Y. Sup. Ct. Nov. 29, 2010) (giving plaintiII`s counsel Iorty-five
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-39-

affidavits. See, e.g., HSBC Bank USA, N.A. v. Taher, 2011 WL 2610525, at *15-
18 (N.Y. Sup. Ct., July 1, 2011) (dismissing foreclosure case where three robo-
signed affidavits had been filed and issuing a show cause order to President and
CEO of HSBC Bank to account for its repeated conduct in filing robo-signed
affidavits); HSBC Mortg. Servs., Inc. v. Murphy, 2011 ME 59, ¶¶ 10-17, 19 A.3d
815, 820-22 (2011) (vacating summary judgment based on 'inherently
untrustworthy¨ aIIidavits).
In December 2010, the New Jersey court system entered a series of orders
aIter identiIying 'serious questions about the accuracy and reliability of documents
submitted to courts by lenders and service providers in support of foreclosure
complaints,¨ Order to Show Cause, In re Residential Mortg. Foreclosure Pleading
& Document Irregularities, No. F-059553-10 (N.J. Super. Ct. Ch. Div. Dec. 20,
2010) (Order to Show Cause),
41
and concerns about 'instances oI pervasive robo-
signing` in Ioreclosure and bankruptcy Iilings¨ in New Jersey, Admin. Order 01-
2010 at 3, In re Residential Mortg. Foreclosure Pleading & Document
Irregularities (Dec. 20, 2010) (Admin. Order).
42
The court required nearly all
servicers to document that their foreclosure practices were not in violation of the

days to correct deficiencies in paperwork or the court would dismiss the
foreclosure).
41
Available at http://www.judiciary.state.nj.us/notices/2010/n101220c.pdf.
42
Available at http://www.judiciary.state.nj.us/notices/2010/n101220b.pdf.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-40-

law, but ordered six large servicers with a record oI 'questionable practices,¨
including Wells Fargo, to show cause why the court 'should not suspend the
processing oI all Ioreclosure matters¨ and impose sanctions. Order to Show Cause
at 2.
Despite the reports, investigations, sanctions, and promises to stop, robo-
signing and other fraudulent practices remain ongoing in North Carolina and
throughout the nation. See Conlin & Gogoi, Mortgage Robo-Signing Goes On.
Just last month, ten senators wrote to the federal banking regulators after new
reports emerged that 'mortgage servicers continue to engage in widespread robo-
signing`¨ asking that investigatory documents regarding these practices be made
public. Letter from Ten U.S. Senators to John Walsh, Acting Comptroller of the
Currency, Ben S. Bernanke, Chairman, Bd. of Governors of the Fed. Reserve Sys.,
and Martin Gruenberg, Acting Chairman, Fed. Deposit Ins. Corp. (July 20, 2011).
43

These investigations demonstrate that the problem of robo-signed affidavits is one
that pervades the mortgage industry, is not likely to be soon remedied, and causes
significant harm to homeowners trying to save their homes.



43
Available at
http://menendez.senate.gov/imo/media/doc/Letter%20to%20regulators%20on%20t
ransparency%20in%20foreclosure%20reviews.pdf
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-41-

C. Robo-Signing and Other Fraudulent Practices Result in Wrongful
Foreclosures.

The law in North Carolina (and elsewhere) requiring affidavits to be (1)
signed by a person with personal knowledge of the facts, who (2) makes statements
of fact not legal conclusions, and (3) explains the basis of his or her knowledge, is
not just formality Ior Iormality`s sake. When these rules go unenIorced Ior long
enough, the type of conduct described above is the inevitable result. And while the
Iull scope oI mortgage servicers` Iraudulent conduct may yet be unknown, it is
already clear that robo-signed affidavits have had real, harmful effects on
homeowners, including wrongful foreclosures.
i. Robo-signed affidavits are fundamentally unreliable as evidence of
ownership or default

Although servicers have claimed their documentation practices did not result
in wrongful foreclosure, the evidence demonstrates otherwise. While we will
likely never know how many homeowners were wrongfully foreclosed on, the
abusive and fraudulent conduct detailed above can and does result in wrongful
foreclosures against homeowners who are not in default, and also presents a
serious risk that multiple banks will seek to foreclose on the same mortgage and
note.

See, e.g., COP Report at 5; The Need for Natl Mortg. Servicing Standards.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-42-

Hearing Before the S. Comm. on Banking, Housing & Urban Affairs, 112th Cong.
(May 12, 2011) (Testimony of Diane E. Thompson 12-15) (Thompson Test.).
44

Instances of multiple banks claiming ownership of the same note and
attempting to foreclose on the same mortgage have already begun to appear. See,
e.g., Ruscalleda v. HSBC Bank USA, 43 So.3d 947, 949 (Fla. Dist. Ct. App. 2010)
(reversing award of summary judgment in favor of the foreclosing bank after
discovering that HSBC Bank and American Home Mortgage Servicing 'were
simultaneously attempting to foreclose on the exact same mortgage in two different
divisions of the [same] court¨). U.S. Bank and Wells Fargo Bank have sued on the
same note and both attempted to foreclose on the same house. Compare Wells
Fargo Bank, N.A. v. Yulee, No. 2010-CA-004731 (Fla. Cir. Ct. Apr. 14, 2010),
reprinted in Kowalski Test. at Ex. 1, with U.S. Bank Trust Natl Assoc. v. Yulee,
2009-CA-003074 (Fla. Cir. Ct. 2009), reprinted in Kowalski Test. at Ex. 1.
Similarly, both Bank of America and PennyMac have sought to foreclose on the
same property in a case involving the law firm of David J Stern.
45
See Susannah

44
Available at
http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Testimony&Hea
ring_ID=f7e75053-78b6-4a27-b2bb-0e8ebca7d7f5&Witness_ID=d9df823a-05d7-
400f-b45a-104a412e2202.
45
The Law Offices of David J. Stern is one of the foreclosure mill firms currently
under investigation by the Florida Attorney General for engaging in widespread
robo-signing and other fraudulent practices in foreclosure proceedings. See Florida
A. G. Investigating Three More Foreclosure Law Firms, Miami Herald (Feb. 9,
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-43-

Nesmith, Retired Cook Fights Two Banks to Save Home of 47 Years from
Foreclosure, Daily Bus. Rev., December 1, 2010.
ii. False affidavits mask servicer errors that lead to wrongful
foreclosure

In addition to problems regarding ownership of the note, in many cases
affidavits regarding the fact and amount of default are fundamentally unreliable.
46

A recent bankruptcy case explains how inaccuracies resulting from typical
but improper mortgage servicing practices can result in wrongful foreclosures of
homeowners who are not delinquent.
47
See In re Wilson, 2011 WL 1337240, at *7-
12. A mortgage servicer moved to lift the bankruptcy stay claiming a delinquency

2011), available at http://www.miamiherald.com/2011/02/09/2058301/florida-ag-
investigating-three.html.
46
The Dobson case presents an example of faulty affidavit evidence regarding the
fact and amount of default. After the Clerk denied foreclosure on that basis, Ms.
Dobson sought an equitable accounting in large part because ASC does not know
how much she actually owes. See Dobson, 2011 WL 1854315, at *1-2.
47
Due to their unique role in overseeing debtor estates, bankruptcy judges have
been instrumental in uncovering many details of the mortgage servicing industry`s
malfeasance. See, e.g., In re Wilson, 2011 WL 1337240 at *5 & n.38 (detailing
fraudulent policies and practices of Lender Processing Services in connection with
the filing of affidavits of default in foreclosure proceedings); In re Parsley, 384
B.R. 138 (Bankr. S.D. Tex. 2008) (detailing the relationship between Countrywide
and its local and national counsel, including counsel`s role in constructing
mortgage payment histories for court proceedings without input from Countrywide
and Countrywide`s policy barring communication with its local counsel). While
uncovered by bankruptcy judges, these types of abusive servicing practices are
'not peculiar to loans involved in bankruptcy¨; they are 'systematic¨ and 'exist
during all stages oI |a| loan`s administration.¨ In re Stewart, 391 B.R. 327, 340
(Bankr. E.D. La. 2008).
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-44-

in the account, even though the debtor had made all payments and was current
under the bankruptcy plan. Id. at *7-9. The judge determined that the affidavit
purporting to establish the delinquency was a 'sham.¨ Id. at 9. The aIIiant had 'no
personal knowledge regarding the loan file save for the three (3) or four (4) facts
read off a computer screen that she neither generates nor understands.¨ Id. at *9.
She did not know that the debtors had timely sent their payments because the
payments 'were not posted |in the computer system|,¨ which, per company policy,
was the only source of information she reviewed prior to signing foreclosure
affidavits.
48
Id. at *6, 13.
The Louisiana Bankruptcy court`s punctilious analysis oI the 'evidence¨
presented by the servicer and the contrary evidence of the homeowner and
bankruptcy trustee exposed the wrongful attempt to foreclose in the absence of a
delinquency. The judge`s thorough analysis made it abundantly clear that
affidavits routinely submitted by servicers in support of foreclosurewhether to

48
The testimony by the mortgage servicer in this case is consistent with other
testimony regarding the 'dual track¨ that prevents homeowners who are actually
current from demonstrating that the foreclosure was wrongfully filed, and prevents
those behind in their payments Irom mitigating the eIIects oI a deIault. 'The most
signiIicant problem . . . is the dual track` system, where homeowners dealing with
one unit of a servicer on a loan modification will quickly end up in a foreclosure
handled by another unit oI the same servicer¨ because oI 'Iirewalls between
themselves, where an employee of one unit cannot even access the computer
database used by another unit even where the information is critical and could
either (1) prevent a foreclosure or (2) demonstrate that the foreclosure was wrongly
Iiled in the Iirst place.¨ Kowalski Test. at 2.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-45-

establish ownership of the note or defaultare just as likely to be false as true and
are insufficiently reliable to substitute for live testimony in courts. Id. at *9-10,
*12-13 (sanctioning mortgage company).
Other pervasive errors lead to the filing of false affidavits and wrongful
foreclosures, including routine failures of servicers to properly apply payments in
the manner required by the note and mortgage and improper assessments of
unwarranted Iees to customers` accounts.
49
In In re Stewart, 391 B.R. 327 (Bankr.
E.D. La. 2008), for example, the court determined that Wells Fargo`s computer
system had been programmed to systematically apply payments contrary to the
terms of the notes and mortgages, choosing to first satisfy 'late charges and
inspection fees instead of the principal and interest outstanding,¨ where it was
required to apply payments first to escrow, interest and principal, and only then to
fees. 391 B.R. at 348-50. Wells Fargo also had a 'corporate practice¨ oI Iailing to
notify borrowers of certain charges assessed against their accounts, charges which

49
Judge Norgle recently approved a final settlement in multi-district litigation
against Ocwen Loan Servicing. See Revised Final Approval Order and Judgment,
In re Ocwen Fed. Bank FSB Mortg. Servicing Litig., No. 04-CV-2714 (N.D. Ill.
July 1, 2011), ECF No. 476. Ocwen agreed to pay $7,000,000 to settle claims that
it engaged in a wide variety of improper practices in servicing subprime
mortgages, including failing to properly credit borrower payments and improperly
force-placing hazard insurance on properties that were already insured, leading to
improperly assessed 'late charges, delinquencies, or deIaults, and in some cases
leading to improper Ioreclosures.¨ Class Pls.` Mot. & Mem. in Supp. oI Prelim.
Approval at 2, In re Ocwen Federal Bank FSB Mortg. Servicing Litig. (N.D. Ill.
Dec. 13, 2010), ECF No. 358.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-46-

were also frequently improper. Id. at 342. It should come as no surprise that a
'corporate practice¨ oI misapplying payments and wrongfully assessing charges
inevitably leads to demands Ior 'substantially erroneous and increased payments,¨
as it did in In re Stewart, 391 B.R. at 355, or to inaccurate allegations of default
and wrongful foreclosure.
The prevalence of wrongful foreclosures filed in the absence of default by
the homeowner is substantiated by a recent survey of attorneys representing
homeowners in foreclosure. '[N]inety-six attorneys from thirty-four states
reported representing over 1,200 homeowners who had been placed into
foreclosure by a servicer when they were cur rent on thei r payments.¨
Thompson Test. at 12 (emphasis added). Unfortunately, homeowners facing
wrongful foreclosure can usually avoid foreclosure only if they can obtain legal
representation.
50
Without a lawyer, the vast majority are ill-equipped to defend
themselves against abusive practices. That is particularly true if they do not keep
documentation of their complete payment history.
However, default judgments and pro se defendants are common in the
foreclosure context because only a tiny fraction of homeowners facing foreclosure
are able to obtain legal representation. For example, ninety-four percent of

50
'The reconciliation oI Debtor`s account took Wells Fargo four months to
research and three hearings beIore |the| Court to explain.¨ In re Stewart, 391 B.R.
at 355. This close attention is a luxury few borrowers can afford. See Thompson
Test. at 62-63 (describing lack of representation among homeowners).
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-47-

foreclosure cases in New Jersey are characterized by an 'absence oI any
meaningIul adversarial proceeding.¨ Admin. Order at 3. In Maine, ninety-four
percent of homeowners in foreclosure are unable to obtain legal representation. See
Nan Heald, Justice for Some, A Report on Unmet Legal Needs in Maine 1,
(2009).
51

iii. Wrongful foreclosure of active duty military personnel

Finally, wrongful foreclosures and illegal overcharges of active duty military
members provide an especially troubling example of the harm from mortgage
servicers` use oI robo-signed and fraudulent documents. Federal law strictly
prohibits lenders from foreclosing on active duty military personnel absent a court
order. See Servicemembers Civil Relief Act (SCRA), 50 U.S.C. App. §§ 527, 533.
North Carolina similarly imposes additional duties with respect to active military
personnel. N.C. Gen. Stat. Ann. § 45-21.12A (West 2011). If a lender or
mortgage servicer does attempt to foreclose and the homeowner fails to appear, the
foreclosing plaintiff must always file an affidavit attesting that the homeowner is
not on active military duty in any action. 50 U.S.C. App. § 521.
Recent investigations have revealed that lenders and mortgage servicers
routinely disregard even these laws and file affidavits falsely claiming that
servicemember homeowners are not on active military duty. See Dem. Staff S. of

51
Available at http://www.mbf.org/JusticeforSomeFinalUnmetNeeds3-10.pdf.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-48-

Comm. on Oversight & Gov`t Reform, 112
th
Cong., Fighting on the Home Front:
The Growing Problem of Illegal Foreclosures Against U.S. Servicemembers (July
12, 2011);
52
Forum: Fighting on the Home Front: The Growing Problem of Illegal
Foreclosures Against U.S. Servicemembers, 112
th
Cong. (July 12, 2011) (statement
of Captain Kenneth R. Gonzales);
53
Interagency Review at 1, 3, 7 (finding
wrongIul Ioreclosure oI servicemembers in even the 'relatively small number oI
Iiles¨ reviewed).
In response, the Department of Justice has taken enforcement action against
Bank of America and Saxon Mortgage for illegal foreclosures on active duty
service members in violation of the SCRA between 2006 and 2009 and has
obtained $22 million in relief for the victims. See Press Release, U.S. Dep`t oI
Justice, Justice Department Settles with Bank of America and Saxon Mortgage for
Illegally Foreclosing on Servicemembers (May 26, 2011). Similarly, responding to
a civil class action, JPMorgan Chase recently agreed to pay $56 million to
compensate approximately 6,000 service members for wrongfully foreclosing on
their homes and/or for overcharging them in violation of the SCRA. See Mem. in

52
Available at
http://democrats.oversight.house.gov/images/stories/FULLCOM/712%20soldier%
20forum/Report%20--%20Fighting%20on%20the%20Home%20Front%2007-12-
11.pdf.
53
Available at
http://democrats.oversight.house.gov/images/stories/FULLCOM/712%20soldier%
20forum/Statement%20of%20Captain%20Kenneth%20R%20Gonzales.pdf
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-49-

Supp. of Pet. for Prelim. Approval of Class Action Settlement, Rowles v. Chase
Home Fin., LLC, No. 9:10-1756-MBS (D.S.C. Apr. 21, 2011), ECF 36-1; Jef
Feely, JPMorgan Settles Military Mortgage Suits for $56 Million, Bloomberg
Businessweek (Apr. 21, 2011, 4:49 PM).
54

Investigations into wrongful foreclosures of active duty military and other
violations oI the SCRA are ongoing and the Iull extent oI banks` and servicers`
wrongful conduct toward members of the military remains unknown.
55
More
broadly, mortgage servicers` continued use oI Ialse and untrustworthy aIIidavits in
foreclosure proceedings across the country demonstrates the need to enforce
existing laws regarding the sufficiency of affidavits.

54
Available at http://www.businessweek.com/news/2011-04-21/jpmorgan-settles-
military-mortgage-suits-for-56-million.html.
55
The House Committee on Oversight and Government Reform recently
announced that it would seek documents Irom the nation`s ten largest mortgage
servicers relating to their treatment of active duty military and their families. Lily
Leung, Banks to be Put on the Spot for Military Foreclosures, San Diego Union
Tribune (July 14, 2011, 11:29 PM), available at http://www.union-
trib.com/news/2011/jul/14/issa-led-group-put-banks-spot-illegal-military-for/. In
the Senate, a bill has been introduced to double the maximum criminal penalties
for violations of the SCRA and to establish other protections for servicemembers
from wrongful foreclosure. See S. 486, 112th Cong. (1st Sess. 2011); see also
Hearing on Legislation Pending Before the S. Comm. on Jeterans Affairs, 112th
Cong. (1st Sess. June 8, 2011) (statement of Senator Sheldon Whitehouse),
available at
http://veterans.senate.gov/hearings.cfm?action=release.display&release_id=7ea9a7
b8-dda1-4e67-983e-71f6a051ec7a.
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-50-

The solution is simple: affidavits should be filed only by individuals who
have actually reviewed the physical loan documents and other records and
confirmed their accuracy, and original documentation should be demanded by the
courts. The affidavits themselves should contain enough information so that
Courts and parties can evaluate whether statements are based on personal
knowledge or custody and control. Moreover, there is no reason to ever accept as
'evidence¨ statements oI legal conclusions that are not appropriately part of an
affidavit. It is time to restore confidence in the integrity of the foreclosure process
by ensuring strict compliance with the bedrock rules: the UCC and the Rules of
Evidence.
CONCLUSI ON
For the foregoing reasons, amici respectfully request that the Court reinstate
the ruling of the trial court, entering partial summary judgment for Ms. Dobson.
Respectfully submitted this 5
th
day of August 2011.

NORTH CAROLIN JUSTICE CENTER

Electronically Submitted
By: Carlene McNulty
224 S. Dawson Street
P.O. Box 28068
Raleigh, NC 27611
Telephone No.: (919) 856-2161
Email: carlene@ncjustice.org
N.C. State Bar No. 12488
Counsel for all Amici
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-51-


N.C. R. App. P. 33(b) Certification:
I certify that the attorneys listed below have
authorized me to list their names on this
document as if they had personally signed.

NORTH CAROLINA JUSTICE CENTER

By: Judith Welch Wegner
2307 Pickard Mountain Road
Hillsborough, NC 27278
Telephone No. (919) 280-5608
Email: judithwegner@gmail.com
N.C. State Bar No. 15654

CENTER FOR RESPONSIBLE LENDING

By: Nina F. Simon (pro hac vice pending)
By: Joanne L. Werdel
910 17th Street NW, Suite 500
Washington, DC 20006
Telephone No.: (202) 349-1850
Email: Nina.Simon@responsiblelending.org
joanne.werdel@responsiblelending.org

MAINE ATTORNEYS SAVING HOMES

By: Thomas A. Cox (pro hac vice pending)
P.O. Box 1314
Portland, ME 04104
Telephone No. (207) 749-6671
Email: tac@gwi.net

Amici Parties:

North Carolina Justice Center, Raleigh, NC

Center for Responsible Lending, Washington, DC

Maine Attorneys Saving Homes, Portland, ME
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-52-


North Carolina Advocates for Justice, Raleigh, NC

AARP Foundation Litigation, Washington, DC

Financial Protection Law Center, Wilmington, NC

National Association of Consumer Advocates, Washington, DC
w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m
-53-

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on August 5, 2011, I served a copy of the
foregoing Amicus Brief upon all counsel of record by depositing a copy with the
United States Post Office, postage prepaid, addressed as follows:

John A. Mandulak
The Law Firm of Hutchens, Senter
& Britton, P.A.
P.O. Box 2505
Fayetteville, North Carolina 28302
Attorney for Defendant-Appellees
Anne J. Randall
Legal Aid of North Carolina, Inc.
P.O. Box 814
Wilmington, NC 28402
Attorney for Plaintiff-Appellant

Celia Pistolis
John Christopher Lloyd
Legal Aid of North Carolina, Inc.
P.O. Drawer 26087
Raleigh, NC 27611
Attorneys for Plaintiff-Appellant





/s/ Carlene McNulty

w
w
w
.
S
t
o
p
F
o
r
e
c
l
o
s
u
r
e
F
r
a
u
d
.
c
o
m

INDE X TABLE OF CASES AND AUTHORITIES ............................. iii

INTRODUCTION ...................................................................... 2 SUMMARY OF ARGUMENT.................................................. 4 ARGUMENT.............................................................................. 5 I. PRESENTING THE NOTE AND PROVING THE RIGHT TO ENFORCE IT UNDER THE UCC .............. 5 A. B. Historical Background of Article 3 of the Uniform Commercial Code .................................................. 5 The Dobson Note Is a Negotiable Instrument That Can Be Enforced Only in Accordance with the Provisions of Article 3 of the UCC........................ 6 Wells Minnesota Was Required to Produce the Original Note in Court in Order to Be Entitled to a Judgment upon it. ................................................... 8

C.

D. E.

F.

ww

w. St op
A. B.

II. AFFIDAVITS IN FORECLOSURE PROCEEDINGS MUST COMPLY WITH BASIC STANDARDS FOR AFFIDAVITS IN COURT PROCEEDINGS ................ 20 In North Carolina, Foreclosure Affidavits Must Present Admissible Facts Based on Personal Knowledge ........................................................... 20 In North Carolina, Affidavits May Not Be Used to of Law .................................................................. 23

Fo re

Ms. Dobson Did Not Waive Her Right to Compel Wells Minnesota to Produce the Original Note. .. 15 A Photocopy of a Note, by Itself, Is Never Sufficient to Prove the Right of a Party to Enforce a Negotiable Note. ............................................... 16 The Interdependency of the Rules in UCC Article 3............................................................................ 19

clo su

re Fr au d. co m

-ii-

A. To Streamline the Foreclosure Process and Cut Costs, Mortgage Companies Routinely File Untrustworthy Affidavits and Fraudulent Documents. .......................... 28 B. C. Federal and State Governments Respond to ........... 33 Robo-Signing and Other Fraudulent Practices Result in Wrongful Foreclosures. ........................ 41 i. Robo-signed affidavits are fundamentally unreliable as evidence of ownership or default ........................................................ 41

ii. iii.

Wrongful foreclosure of active duty military personnel.................................................... 47

CONCLUSION ........................................................................ 50 CERTIFICATE OF SERVICE ................................................ 53

ww

w. St op

Fo re

clo su

False affidavits mask servicer errors that lead to wrongful foreclosure...................... 43

re Fr au d. co m

III. ABUSES IN THE EXECUTION OF AFFIDAVITS AND OTHER DOCUMENTS IMPUGN THE INTEGRITY OF THE FORECLOSURE PROCESS ... 27

.............. 14 Tarantola).D.... Servs..... 688 S...... Tex......... 655..... Ct. 07-11862.. App........ 2010) . 333 N..Y. Ct...... 15...... 309 A. Servs........... 298 (1917).... 2010 WL 3022038 (Bankr....C...... 2011 WL 2610525 (N...... Bidd... No...C. Inst....E..E.................. Bank F SB Mortg....... Taher .....2d 165............43..R......... 94 S. 2 In re Ocwen Fed... --... 20 ............. 2011) ..... 3............ May 3. Ct....... 2011 WL 1854315 (N........C... 15 In re Michael Weinman Assocs...A.. 7 Bird v.... 363 N....... 2008). 11 Hills v..E... La.. D...E....................... Sub.. App. Tr.E... 39 clo su Dobson v. 384 B... 7. 2011)........ Inc.. 138 (Bankr....-iii- T A B L E O F C ASES A N D A U T H O R I T I ES C ASES Adams v. 04-CV-2714 (N..... 1988).30....C..... E....... 2011).. 21 In re Gilbert.........C... 2011 WL 1645699 (N.. Inc. July 1.. -..... 2011 WL 1337240 (Bankr.N... v..... 43-45 Fo re H SBC Mortg. 45 In re Parsley. 55 N.. 43 In re Stewart...... St op In re Helms. E.. App... 10 . 853 F......... (Me...E..3d 815 (2011) .........S. 2d 163 (3d Cir.. La. Servicing Litig.. 39 In re Brown........2d 398 (2003) . v... 284 S.......................... 19 A.....C..... 424 S.) . No...... RE-09-01........ Bird....... 774....... co m ..2d 877 (Me...E........ App..... -....... 174 N.....R... S............D.......... 6. Sup....D.......... 45-46 In re Wilson.. 2008) ..... Gardiner Sav............ 12.....C.................... July 29.. 577 S.. May 17.. N.. Ariz. Apr... App.....D..2d 420 (2010) .. 68............. Murphy. 2011 ME 59....... --. 43 re Fr au d....... July 1................2d 553 (1981) . 156 N........ 477............. 327 (Bankr. 21........ 1973) . Madison Realty & Dev..... No. 221..... 711 S. 2011) ..... 2011). 11 H SBC Bank U SA...... ECF No....... 26 ww w.....C... Ct.......2d --.. 476... 391 B.....2d 385 (1993) ..... 4:09-bk-09703-EWH....... Ill...... Dist..

...-iv- Lemon v.... 23 TCI F RE O2...... Duval Cnty.. Bank v...... 218 (1812) .... Stewart .... App....C............. 596 S.......... co m ....... v....... 5...............E. 691 S........C.................... 24 Wells F argo Bank................................ 14.............. 615... 5 Fo re Wash.. No......... Sup... Cassing... Ct... 9 50 U.....S.. 186 S...E..... § 5004 .....S... 7 N... App..... LLC ......C..... Nov................. 2006)............ App. Cir..........................C................... § 533 ..................C...... Stat.......... 36 Ruscalleda v... 32 Union Sav... Mandeville... 272 F.........R...... GMAC Mortgage.. 2010) ........... 47 50 U..... 2011) . 16-2004-CA-4835 (Fl.. Combs.. §§ 5001-5018 ........S..... Yulee. 208........................................C....................C..................... Ct... 16359/08.. App.... 9 12 U.... § 521 ................................ § 1A-1...........C................... Cir.. Ohio 2011) ............ No... May 1... 29.....C...... 286.. Cir............. 22 Ohio v.................2d 400 (1972) ......E.. Gen........................ Ct.................................... Bank v............... 42 Sheehy v.............. § 527 ............ 2009-CA-003074 (Fla.................. 47 (D........ 23. Durham Life Ins...... Phillip. Ct. App........ 20 N...........2d 344 (2004) .. 2d 741 (N.................... 2009) ... Dist.......... Co. Ct.....3d 947 (Fla....... Stat...... Gen.. 1985) .. N... 2010 WL 4813782 (N. 27 ............ 42 ST A T U T ES ww w..........D....... Yulee.... 2010) .... 9 U. Bank Trust Nat'l Assoc............ Supp.. 2010) .......C..20-21...S........ 13......................... App................. Apr......D.. Me..... §§ 25-3-101...... 47 50 U....2d 400 (1988)..........C..W.. LLC v........................... 760 F...............A.... et seq...S.............. 164 N.... 460. 11 U............ 186 S.. 19 Singleton v.... Ct....2d 513 (Mo..... 2010-CA-004731 (Fla..... Stat...... § 25-1-201 .............. No............... 47 N....... Rule 56 ....... 42 Ward v.....S.......... No.. 38-39 clo su re Fr au d... App.........Y........ 280 N................. Mut............. St op 12 U...... Gen.... 43 So.. 90 N.. Leibowitz...........S.. v. H SBC Bank U SA ..

.............. 38 clo su re Fr au d. Operations Supervisor for Chase Home Finance. 8.. Servicemembers (July 12............... 10 N... 2011).. 7..... 10..... § 8C-1......................... November Oversight Report: Exa mining the Consequences of Mortgage Irregularities for F inancial Stability and Foreclosure Mitigation (2010) ..........12A ..... 47 N................................. Koren.... LLC v............... 8................. Gen.......... 10 N... 12 N...............................C......-v- N.................... 33 Fo re Admin....................... 2...... 20........ New Court Rule Says Attorneys Must Verify Foreclosure Papers................. 16-19 N...J............. 47-48 ww w........ 15.... 8 O T H E R A U T H O R I T I ES Admin....C. L...C.... 2011) ..........C.. Order 01-2010..................C..S.................. 8 U........... May 17.. Gen.. 39....... § 45-21..................C. Stat.. Ct... 21 U..........C. No.......C......Y....... Judge of the NY Courts (Mar........ Order of the Chief Admin........ Gen... 29.. F ighting on the Home F ront: The Growing Problem of Illegal Foreclosures Against U........... 7......... § 25-3-309 ........ Stat................................. N....C. § 25-3-204 ..................... St op Deposition of Beth Ann Cotrell... 41 112th Cong................ 21. In re Residential Mortg........... 38 Congressional Oversight Panel..... 16 N.... Gen......... 30......... 28.............. Cir................ 1 ....... 50-2008-CA-016857 (Fla. 2010) ... Stat.............C..... Gen........ § 25-3-104 ..... Stat..... Gen..... 9 N... 11. § 25-3-308 ............................................ § 3-203 official cmt.... § 25-3-301 ........C.. Stat........... Stat.... Gen.C..... § 3-301 ....... Gen.................................C.......................... Rule 602 ............ co m ...... 2010) .. Foreclosure Pleading & Document Irregularities (Dec. 47 Andrew Keshner............... 6...... taken in Chase Home F inance...... Stat...................C......................... § 25-3-203 ... 9 U............. Stat........... 2010 ....... § 3-308 ..... Oct.

..42-43 Foreclosed Justice: Causes and Effects of the Foreclosure Crisis: Hearing Before the Comm... Limited Signing Officer for GMAC.. 2 & 15..... Investigating Three More Foreclosure Law F irms. Loan Administration Manager and Vice-President of Loan Documentation at Wells Fargo Mortgage..R..... 09-2-46576-2 SEA (Wash....28-29. Dec. Inc. 153-1 .... & Office of Thrift Supervision............. Me. 2009).. taken in Wells F argo Bank. ECF No.. Jr......... Tr.. John Kennerty.... 30 Deposition of Jeffrey Stephan.......... July 20. 32 ww w.. 2010) ..... 2010).. 111th Cong.................. 111th Cong. Ct....R.. Nw.. July 20.... Me.. taken in GMAC Mortg.............. 31...... Super... May 20. LLC v.) ...... Volunteer Program Coordinator......... 2010) (Testimony of James A.. 292.. Cir... Kowalski.. No.. June 7.. NA v... on the Judiciary... 9. Servs....... 44 Foreclosed Justice: Causes and Effects of the Foreclosure Crisis: Hearing Before the Comm... Ct..... 2010).. No....... .... 31-32 ....... No.... Ct... Neu... 2 & 15...... Cir........... Dist.... Limited Signing Officer for GMAC......... BRI-RE-09-65 (Me.......... 2010). Vice-President of Loan Documentation for Wells Fargo Home Mortgage.. 10.30........... Mar........ filed in ........... 2011) .... 30........ 2010) (Testimony of Thomas A. 9...... co m Deposition of H.. (Dec.... 126 (Dec. 2010) ...... ECF No... Interagency Review of Foreclosure Policies and Practices (2011) . 2:09-cv-00084-JHR (D......-vi- Deposition of Jeffrey Stephan.. taken in Geline v.. H.......... 28-29 Fo re Fed......... Cox.. 42.. Miami Herald (Feb..G... Maine Attorneys Saving Homes). Stipek . 50 2009 CA 012434XXXXMB AW (Fla. 2:09-cv-00084JHR (D. 32-33 Deposition of Xee Moua. Ct......... 153-6.......... St op F lorida A.30. H... Office of the Comptroller of the Currency........ ................ No....... No. on the Judiciary.......... passim clo su re Fr au d..... 50 2008 CA 040805XXXX MB (Fla...... Reserve Sys.. Esq.

48 . 40 clo su Letter from Benjamin Diehl........... Acting Comptroller of the Currency........... Acting Admin...... Lawmakers Call for Hearings on Robo-Signing. 2011) (Statement of Captain Kenneth R............. Bloomberg Businessweek (Apr....S........ on .... 7 Glenn A.. 112th Cong... and Martin Gruenberg. 2011) (Statement of Senator Sheldon Whitehouse) ..... SVP Channel Dir....... Corp. Reserve Sys.. 2011) ........ Rev.C.. (July 20. JPMorgan Settles Military Mortgage Suits for $56 Million............... of Pet..... 2011) ........ 2010) ....-vii- Grant Gilmore..........S.. (July 12...... 36-37 Lily Leung..... Fed..... Attorney Gen............ 38 Hearing on Legislation Pending Before the S.. Senators to John Walsh. Chase Home F in............. to Servicers (Oct. Bernanke....................................... Banks to be Put on the Spot for Military Foreclosures......................... Servicemembers. co m Forum: F ighting on the Home F ront: The Growing Problem of Illegal Foreclosures Against U. 49 ww w. Deposit Ins..... 40 Michelle Conlin & Pallavi Gogoi.. Approval of Class Action Settlement... ECF 36-1........................... 2011)... of Governors of the Fed............. Bd........ 7.... to Steve Stein. State of Cal.... For malism and the Law of Negotiable Instruments... Notice to the Bar (Dec............... 30. LLC . No. (1st Sess.......... 49 Jef Feely.......... 9:101756-MBS (D.. June 8... 112th Cong.. 2011) .... Acting Chairman.. 37... 441 (1979) .... in Supp........... Gonzales) ... Associated Press.. 2011) .... of the Courts................. 2010). 2010) ... 38 Fo re Letter from Ten U... Chairman.. Associated Press (July 20... 13 Creighton L..... State of Ariz.............S... 21....... Deputy Attorney Gen......... Dir. JP Morgan Chase (Sept... 21....... Comm.... Apr..... Grant.... 37 re Fr au d........... 48-49 Michelle Conlin & Pallavi Gogoi............ San Diego Union Tribune (July 14... Ben S.. St op Mem............. 20.. for Prelim.. (July 19............ AP Exclusive: Mortgage ... 38..... 49 Letter from Terry Goddard............ Rowles v... 2011) ..

..... Servs... 28-29 S. (July 20............ A Report on Unmet Legal Needs in Maine (2009) ......... 24 Press Release.......... as Trustee.. 2011) ............. 37-38 Sign Mortgage Foreclosure Joint Statement (Oct....... 2011) ...... & C mty.... Center for Responsible Lending) ........ 28 Pooling and Servicing Agreement Relating to Equivantage Home Equity Loan Trust Among Equivantage Acceptance Corp.................................... Schuette Issues Subpoenas in Criminal Probe of Mortgage Processors (June 15.................................. 47 ......... 36 Order to Show Cause. Opportunity of the H... 229 (Nov.. Loss Mitigation......... St op Robo-Signing. In re Residential Mortg...... WJBC (June 23...... as Sponsor. 13.... 2011).................. 2011) ................... 2011). Internal Doc Reveals GMAC F iled False Document in Bid to Foreclose (July 27.......... 2011) ..................... Bd.... 39................... 18... and Norwest Bank Minnesota. 112th Cong..... (Nov............... on F in......... Ch.................... Super. Dec.......... Senior Policy Counsel. 2010) .... 2010) .. No....... on Hous..... N............ co m Nan Heald. 40 Paul Kiel................... as Servicer..............-viii- Nick Gale..... Div..... Ct.... (1st Sess...... Justice for Some... 486............. Chain of Title........ 2010) (Testimony of Julia Gordon..... Reserve Sys..... and Other Issues in Mortgage Servicing: Hearing Before the Subcomm............. Equivantage Inc. 1..............J... of Governors of the Fed........ MI Office of the Attorney Gen............ Madigan and Other Attorneys General Meet with Banks on Foreclosure Practices.. F-059553-10 (N.... 48 ww w... 49 Fo re clo su re Fr au d.........A...... Comm...... 27 Press Release......... 20................. 35-36 Justice Department Settles with Bank of America and Saxon Mortgage for Illegally Foreclosing on Servicemembers (May 26........ 1996) ..... 111th Cong........................................................ Foreclosure Pleading & Document Irregularities..

................... 112th Cong..... 45-46 vicing Standards: Hearing Before the S......... 2011) (Testimony of Diane E.... 35 William H...... 23 ww w... St op Fo re clo su re Fr au d. 6 T R E A T ISES Brandis on North Carolina Evidence § 130 (3d ed..................... 46 U... GAO-11-433 (2011).. 2002) .... Understanding Negotiable Instruments and Payment Systems § 1... Rev..41-42.....S................ co m Shahien Nasiripour............................ (May 12...... 2011) ........ Comm.... Daily Bus..... 2010 . on Banking..... Gov't Accountability Office..... Retired Cook Fights Two Banks to Save Home of 47 Years from Foreclosure .................... Confidential Federal Audits Accuse F ive Biggest Mortgage F irms of Defrauding Taxpayers... Huffington Post (May 17..................03 (Matthew Bender & Co.. Housing & Urban Affairs...... Mortgage Foreclosures: Documentation Problems Reveal Need for Ongoing Regulatory Oversight............. 35 .. December 1...... Thompson) ....-ix- Susannah Nesmith......... Lawrence..... 1988) ..........

AND THE NATIONAL ASSOCIATION OF CONSUMER ADVOCATES IN SUPPORT OF PLAINTIFFAPPELLANT ***************************** ISSUE PRESENTED I. v. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Defendants-Appellees. SUBSTITUTE TRUSTEE SERVICES. DID THE COURT OF APPEALS ERR IN REVERSING THE FAVOR OF THE PLAINTIFF-APPELLANT. 1996-4. CENTER FOR RESPONSIBLE LENDING. AARP. 07 CVS 1017 COA10-632 . w. 260A11 FOURTH DISTRICT SUPREME COURT OF NORTH CAROLINA **************************************** LINDA G.No. as Trustee for Equivantage Home Equity Loan Trust. THE FINANCIAL PROTECTION LAW CENTER. MS. Substitute Trustee and WELLS FARGO BANK MINNESOTA. DOBSON? ww Fo re **************************** clo su re Fr au d. Plaintiff-Appellant. INC. NORTH CAROLINA ADVOCATES FOR JUSTICE. MAINE ATTORNEYS SAVING HOMES.. DOBSON.A. St op PROPOSED BRIEF OF AMICI C URIAE NORTH CAROLINA JUSTICE CENTER. co m From Duplin County No. Note Holder. SERVICING COMPANY. N.

C. St op Fo re foreclosure process and ensure its integrity clo su the Uniform Commercial Code re Fr au d. Maine Attorneys Saving Homes and the AARP. Class of 2012. consumers and the courts in the fairness and propriety of foreclosures. 228.2d 385. That confidence can be restored only by ensuring strict compliance with the laws that undergird the (UCC) and the Rules of Evidence. co m In re Michael . the Financial Protection Center. University of Michigan Law School. write to explain the widespread abuses in the mortgage servicing and foreclosure industry and to urge this Court to reinforce two basic but fundamental principles of law. ww 1 Special thanks to our intern. 221.1 North Carolina Advocates for Justice. mortgage servicers have increasingly ignored this principle. In their effort to servicers too often have engaged in questionable practices that infect the integrity of the foreclosure process.E. and undermine the confidence of the market. w.-2- INTRODUC TI ON e in a mortgage is not favored in the law. 424 S. 333 N. It is for this reason that a mici . the North Carolina Justice Center. the Center for Responsible Lending.. Weinman Assocs. In the current foreclosure crisis and during the decade leading up to it. First. Christa Wittenberg. 389 (1993). for her extraordinary work on the brief.

just as they would in any other court proceeding.a. The Court of Appeals decision failed to follow these 2 ww To distinguish between the two separate defendant Wells Fargo entities we refer to defendant. as Trustee for Equivantage Home Equity Loan Trust 1996and the defendant servicer. Amici share the concern of Judge Hunt decision may be construed to permit alleged holders to evade their burden of proof 2011 WL 1854315. Second. N. Wells Fargo Home Mortgage. Sub. 2011) (Hunter. Tr. Servs. at *5 (N.S. Minnesota. Its decision to enjoin Wells Fargo Bank. Wells Fargo Bank w. J. May 17.E. The trial court got it right.A. App. Ct. co m .-3- strict compliance with Article 3 of the UCC is essential in determining who has the right to enforce the note in a foreclosure proceeding and under what circumstances. Fo re N. -.k..2d --.A. as Trustee for Equivantage Home Equity Loan Trust 1996-4 (Wells clo su affidavits that are facially incompetent. dissenting). Wells Fargo Bank. See Dobson v. a. affidavits submitted in North Carolina foreclosure proceedings must satisfy the general standards for evidence submitted by affidavit. Minnesota. re Fr au d. Minnesota)2 from foreclosing until it could produce the note and prove its right to enforce it should be upheld. St op basic and long-standing principles of law and should be reversed.C.

-4- SU M M A R Y O F A R G U M E N T Two sets of bedrock rules form the critical underpinnings that create confidence in the integrity of the courts. Recent practices designed by mortgage servicers to expedite foreclosures and avoid the legitimate costs associated with proper severe decline in confidence in the integrity of the foreclosure process. owning and enforcing negotiable instruments. The Uniform Commercial Code defines and sets the standards for transferring. The Rules of Evidence set the standards for assessing whether evidence is sufficient to prove up claims in a court of law. and will assure that no homeowner ever loses a Fo re record-keeping practices have led to wide-ranging public and private clo su foreclosure practices have led to an alarming erosion of these bedrock rules and a re Fr au d. Systemic fraudulent practices. St op general investigation of these practices. co m . including a joint federal regulatory enforcement action against all fourteen of the largest mortgage servicers and an ongoing fifty-state attorney created by the real estate bubble. foundational rules will preserve confidence in the courts and North ww w. Amici respectfully submit that compliance with these basic. certainty of property rights and the foreclosure process. Established legal principles have been ignored in the flood of foreclosures foreclosure process. such as robo-signing and other abusive document creation and investigations.

St op Id. clo su U. The rule of law stated by Chief Justice Marshall was consistent with the law Fo re fault dispenses with the proof of the note. ARGUMENT I. 218 (1812). Article 3 is codified in §§ 25-3-101 to 253-605 of the North Carolina General Statutes. A. H istorical Background of A rticle 3 of the Uniform Commercial Code . Mandeville . This plain statement of the rule in 1812 remains good law today. 208. These acts in turn w. PR ESE N T I N G T H E N O T E A N D PR O V I N G T H E R I G H T T O ENF ORC E IT UND ER T H E UC C Article 3 of the UCC defines the law of negotiable instruments. but not with re Fr au d. In this case where the defendant defaulted. who has the right to enforce those instruments and what must be proven to establish the right to enforce the note in a foreclosure action. co m Sheehy v. 11 . (emphasis added).-5- home because it is quicker or easier to fabricate documents than to present proper evidence to our courts.S. Chief Justice Marshall came to its production of the merchant that was developing simultaneously in England during the ww fourteen of Anne in 1704 and then to its Bills of Exchange Act in 1882.

§ 25-3-104(a)(3). It is negotiable because it re Fr au d. Stat. (R p. 2002). Stat. see William H. Lawrence. requiring production of the original note in a suit upon it. In 1952.03 (Matthew Bender & Co.3 B. See Dobson. T he Dobson Note Is a Negotiable Instrument T hat C an Be E nforced O nly in Accordance with the Provisions of A rticle 3 of the U C C. Gen. and (3) it contains no permitted by N. at *1. co m . (2) it is payable at a definite time. this same elemental principle of negotiable instruments law. § 25-3-104(a): (1) it is payable . 4 ww Wells Minnesota was unable to establish its right to foreclose in the proceeding before the Duplin County Clerk of Superior Court. was carried forward by the NCCUSL into Article 3 of the modern Uniform Commercial Code adopted by all fifty states.-6- were the models for the Uniform Negotiable Instruments Law promulgated in this country in 1924 by the National Conference of Commissioners of Uniform State Laws (NCCUSL). 152. St op summary judgment4 by claiming it was a holder of the Dobson note with the right Fo re promises other than for the payment of money except for undertakings expressly clo su The Dobson note is a negotiable instrument.C. Understanding Negotiable Instruments and Payment Systems § 1. 2011 WL 1854315. Gen. how much she owed and whether Wells w. Dobson filed the instant action to enjoin Wells Minnesota from serial attempts to foreclose until an accounting could be completed to determine whether she was in default and if so. meets the negotiability criteria of N.C.) Wells Minnesota agreed that the Dobson note is negotiab 3 For a detailed history regarding the development of the law leading to the provisions of Article 3 of the Uniform Commercial Code.

-7- to enforce it. 1988). 853 F. Madison Realty & Dev. Stat. 6 ww See generally Grant Gilmore. Rev. Gen. this statement of Jennifer Robinson is a legal conclusion that Courts disregard. 368-72.. Wells Minnesota asserted its holder status through holder of th infra Section III. not simply declare. co m Adams v. Fo re clo su re Fr au d. 2d 163.B. See R pp. with numerous ritualistic formalities. are not sympathetic petitioners in urging Inc. Dobson filed the successful motion for summary judgment that resulted in a ruling in her favor and ultimately this appeal. See R pp. Wells Minnesota must prove. St op Minnesota was the holder of her note with the right to enforce it.5 Whether Wells Minnesota has the right to enforce the Dobson note and what it must prove to establish it is a holder in a court enforcement action are defined by Article 3 of the UCC. Formalism and the Law of Negotiable Instruments.C. Gen.6 Thus. §§ 25-3-301(i) & 25-3-308(b). 441 (1979). The rules set forth in Article 3 of the UCC. N. 13 Creighton L. .C. 5 payable either to bearer or to an identified person that is the person in possess N. and their formalities (such as the one requiring production of the original note) were developed by financial institutions and the financial services industries for their own protection. Stat. that it has the status of a holder. § 25-1-201(21). 3-13. w.. 169 (3d Cir.

St op Fo re (b) If the validity of signatures is admitted or proved and there is compliance with subsection (a) of this section. Gen. a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under G. The lender here too must produce w. clo su re Fr au d. be in possession of the note in order to be entitled to enforce it. Wells Minnesota unjustifiably argues for a relaxation of the requirement of the Uniform Commercial Code that requires it to produce the original negotiable note in court when seeking recovery upon it. § 253-301(i) Minnesota claims to be here). Here.-8- C. Gen. . UCC § 3-308(b) is the only section in Article 3 where the terms do in court.C. When that enforcement right is asserted in a court proceeding. Stat.7 ww 7 The ordinary party roles where lender is plaintiff and the homeowner is the defendant are reversed in this case. N. co m W ells Minnesota W as Required to Produce the O riginal Note in Court in O rder to Be E ntitled to a Judgment upon it. unless the defendant proves a defense or claim in recoupment. § 25-3-308(b) states: (emphasis added). UCC § 3-301(i) (N.C. This requirement is drawn from UCC §§ 3-301 and 3-308(b). Wells Minnesota must then produce the note in court. The plaintiff must produce the original note in court to become entitled to a court order for the defendant to pay the plaintiff. 25-3-301.S. Stat.

S. 1985) (emphasis added). 12 U. Without the instrument. supra cannot substitute for production. . 691 ww These are permitted by the federal Check 21 Act.-9- The requirement for the production of the original note arises out of the unique nature of negotiable instruments. 8 9 w. but with rigorous warranty requirements to protect against the presentment of duplicates.S. subsists in the instrument itself.C. § 5004 (2006). presentment of the note or satisfactory proof that it has been lost or destroyed are essential elements of the case because the instrument itself is the S. re Fr au d. 1 ( An instrument photocopy of an instrument has no more value or significance than a photocopy of a dollar bill. Cassing. §§ 5001-5018. Anglo-American jurisprudence requires the production of the original instrument8 because its value. Fo re exclusive ground for the cause of action clo su North Carolina. 12 U. the Missouri Court of Appeals explained that [i]n the case of suit Union Sav. 4.2d 513.C. 9 Construing provisions of the UCC that are equivalent to those in force in on the note. as discussed n. 514 (Mo. See UCC § 3-203 official cmt. St op indorsees. much like money. App.W. there simply is no cause of action. Bank v. meaning the original document bearing the signatures of the maker(s) and any not the holder in possession. A -3-104(b). co m ). nor is it entitled to any weight. Ct.

174 N. 94 S. See N. While there can be an infinite number of photocopies of any given promissory note. instrument itself. only by rigorous adherence to that requirement can the court protect a homeowner against a second claim on the note by some other The unique manner in which the enforcement rights of negotiable notes are transferred also mandates that the original note be produced in court when enforce a note may be transferred by delivery of the note. re Fr au d. and the note obligor.C. As with checks. but such delivery does not transfer any right to enforce the note as holder unless the indorsements Gen. be certain that the person claiming rights under that note is the party who is truly entitled to enforce it. 298. Article 3 of the UCC provides that the right to y. And. 298 (1917). clo su person coming forward with proof of actual possession of the original note. § 25-3-301.C. § 25-3-204(a). Stat. Gen.E. indorsements made on promissory notes are 10 w. there can be only one original. Fo re enforcement is being sought. Stat. 655. 656. St op necessary to create holder status are on or affixed to the original note. Gen. Article 3 of the UCC permits an indorsement to be made upon the N.C.-10- The requirement for the production of the original note in court arises out of the particular rights that arise in favor of the person in possession of it under N.C. Only by requiring the production of that single original note can the court. §§ 25-3-203 & 25-3-204. or on a separate piece of paper10 ww Stat. co m .

cannot determine whether any purported allonge appearing on a separate page from the note is truly affixed to the original note as required by N. without examining the original note. 1973) transfer can only be evidenced by looking at it or any attachments.. at *3-4 (Bankr. Ariz. 2010) the attorneys the [evidence] existence at the time of filing and never affixed to the original note. The court. Tarantola (In re Tarantola). See Hills v. Gardiner Sav.. but not in . Trust Co. does not create an indorsement) (internal citations omitted).-11- often made on the back of the signature page of the note. Stat. in inspecting only a photocopy of a note. Gen.2d 877. Inst. § 3204(a). co m to create standing. such that inspection of a photocopy of the note (where often only the printed sides of pages are copied) may not reveal such indorsements. ww note has never been produced in court in this case.g. July 29. No. it was not possible for the w. v.C. e. 2010 WL 3022038. 4:09-bk-09703-EWH. ). Because the original Fo re Further. 309 A. 880 (Me. See. a finding crucial to a convey holder status to the person seeking enforcement. St op determination of whether the purported indorsements are in the correct order to The Dobson note consists of two printed pages of text. D. to determine with certainty the order of indorsements on a note bearing multiple indorsements (including possible multiple allonges). it is not possible for the court clo su re Fr au d.

and Wells Minnesota11 has offered no proof as to whether re Fr au d. Ct. --. 11 ww note and that the note is not properly indorsed to the correct trustee of the relevant trust. at *5 (N. the production of only a photocopy of a note different party. it was not possible for the Superior Court to determine whether the purported indorsement of EquiVantage. --. nor is it possible for this Court to know. -. 711 S. This leaves Ms. This is significant because if the original note was printed on the front and back sides of the same sheet of paper. Further.-12- Superior Court to know. or whether it is on the back side of the second page of a two-page note. Without knowing this. is stamped on a separate sheet of paper. indorsing the note to a clo su separate sheet of paper. w.N. then the purported indorsement must be on a N. Dobson open to a possible future claim by such a party coming forward with the original note and asserting a claim based upon such 2011 WL 1645699. Stat. App.C. May 3. Through its failure to produce the note.C. St op a differing indorsement. 2011) ( is the holder of the note is essential to protect the debtor from the threat of multiple judgments on the same note ). whether the original note was printed on the front and back sides of the same sheet of paper. or whether it was printed on only one side each of two sheets of paper. Wells Minnesota was unable to present Fo re leaves open the possibility that another allonge may exist. App. co m . See In re Gilbert. § 25-3-204.E. Gen.2d 165.C. Inc.

St op indorsement was a mistake.S.) When GMAC was confronted by James with proof that the Stephan clo su attached allonge signed by Stephan himself.S Bank was a true and correct copy of the allonge. purporting to indorse the note to the plaintiff. GMAC Mortgage LLC was sanctioned in Maine for filing of an affidavit through which it attempted to establish U. U. it immediately retreated and claimed that Stephan's purported form of a photocopy of the note now bearing two entirely new and also suspect. (From the inception of the case. Esq. 48 (D. GMAC had maintained that a different photocopy of the note showing no indorsement to U.-13- These requirements of Article 3 for a party to produce the original note with proper indorsements in court are meaningful technicalities. 272 F. Before further investigation could be made into the authenticity of the two new indorsements.12 The affiant. For example. 2011). GMAC Mortgage ww dismissed its foreclosure action and settled the homeowner's counterclaims. Bank. Bank as holder using a fabricated note indorsement. and re Fr au d. co m .S. U. Jeffrey Stephan. were co-counsel in the Maine case. Bank then produced yet another version in the Amici CRL and Thomas A. stamped indorsements on the signature page. Fo re original note. 47. Cox. was a fabrication.D. See James v.R. attached to his affidavit a photocopy of the note. U. Bank Nat Ass n.S. Me. 12 w.S. Failures of compliance with these Article 3 requirements are creating disorder and difficulties for courts and homeowners across the country. with an throughout pre-trial discovery.

Babb. co m . it would have been impossible for it to present an admittedly false allonge and possibly fabricated indorsements. in Deutsche Bank Nat l Trust Co. ww w. The copy was ultimately shown to be a fabrication when the original note was produced at trial containing two indorsements on the back side of the signature Foreclosing parties must be held to the rules created by the banks for their own benefit. Dist. Holding financial institutions to this requirement. Ct. Bidd. St op the original note. v. created by them for their benefit. and embodied in Article 3 of the UCC. Any failure by courts to potential of erroneous judgments in favor of parties not entitled to them and to subsequent note enforcement actions by other parties proving actual possession of proper indorsements is a simple one. does not impose an undue burden.) the foreclosing plaintiff presented a photocopy of a note bearing a stamped indorsement immediately below the borrowers' signature. The requirement for the production of the original note bearing Fo re enforce those requirements will expose (often unrepresented) homeowners to the clo su page and no indorsement on the front.-14- If GMAC had complied with the dictates of UCC § 3-308(2) by producing the original note at the time that summary judgment was sought. RE-09-01. Similiarly.. re Fr au d. (Me.

554 (1981). The majority and dissenting opinions in the Court of Appeals disagreed whether Ms. Stat. As Judge Hunter noted in his dissent.2d 553. See Dobson. 70. where Ms. Dobson. there is no admission by Ms. In re Hel ms. 284 S. Dobson produced competent evidence that Wells Minnesota did not possess the note.C. Dobson had waived her claim that Wells Minnesota was required to produce the original note. 2011 WL 1854315 at * 6-7. and a situation where the obligor makes no such admission. App. when it is the Defendants ww *7. Those opinions highlight the critical difference between a situation where a note obligor admits that the documents shown him are correct copies of the original.C. Gen. she was entitled to summary judgment against Wells Minnesota unless Wells Minnesota came forward and produced the original note as required under N. once Ms. w. co m photocopy of the Ms. Because Wells Minnesota failed to provide this proof. the Superior Court properly entered summary judgment for Ms.-15- D.E. St op Fo re clo su Note is not an accurate copy of the original to Dobson. Dobson had already presented sufficient evidence re Fr au d. 68. 2011 WL 1854315 at . Especially here. Dobson. 55 N. And thus. § 25-3-308(2). Dobson in this case that the photocopy of the note produced by Wells Minnesota is a correct copy of the original. Dobson Did Not W aive Her Right to Compel W ells M innesota to Produce the O riginal Note.

clo su note has been lost. § 25-3-309.13 An interpretation 13 ww w. destroyed or stolen as discussed in the following section of this re Fr au d. or stolen instrument (a) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred. by Itself. The UCC Article 3 requirement for production of the original note in a court action to enforce it is further reinforced by the lost. Stat.-16- that Wells Minnesota was not in possession to obtain summary judgment. Gen. (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure. An admission that a photocopy of a note is a correct copy of the original (as it existed at some point in time) is not such a waiver. Gen.C. its whereabouts cannot be determined. Dobson in the impossible position of having to prove the inaccuracy of the photocopy without access to the original document. Furthermore. A Photocopy of a Note. such a shifting of the burden of proof would be contrary to N. Is Never Sufficient to Prove the Right of a Party to E nforce a Negotiable Note.C. St op E nforcement of lost. destroyed. § 25-3-308(2). The only time that it is appropriate to dispense with the requirement for the production of the original note is when the note obligor specifically and in explicit terms waives his/her right to require production of the original note (or when the brief). and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed. any wrongful shifting of the burden of proof to the note obligor would have left Ms. or it is in the wrongful possession of an unknown person or a person that cannot be Fo re E. Stat. co m . destroyed and stolen note provisions of Article 3 set forth at N.

destroyed or stolen.C. § 25-3-309. N. § 25-3-309 (see footnote 12). Gen.C. Stat. re Fr au d. § 25-3-308(b) as always allowing proof of a right to enforce a note upon production of a photocopy would render N. the party seeking enforcement has to prove each of the three factors delineated in subpart (a) of N.) This section of the UCC reinforces the concept that the original note must be produced in all circumstances except those limited circumstances described in § 25-3-309(a) those circumstances being limited to When a note has been lost. ww found or is not amenable to service of process. (This is not the case here as there is no claim by Wells Minnesota that it was unable to produce the original note.C. under subpart (b). the clo su instances where the note has been lost.C. 25-3-308 applies to the case as if the person seeking enforcement had produced the instrument. § 25-3-309 describes the proof that is required when the enforcing party is unable to produce the original note. In addition. w. Stat. co m . Stat. Gen. G. (b) A person seeking enforcement of an instrument under subsection (a) of this section must prove the terms of the instrument and the person's right to enforce the instrument. N.-17- of N.S. Stat. Adequate protection may be provided by any reasonable means. destroyed or stolen. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Gen. Gen. St op Fo re Gen.C. § 25-3-309 completely meaningless. Stat. If that proof is made.

Even in lost. Production of a photocopy to prove the terms of the note is only one of the adopt a rule that a photocopy of a note was sufficient even where there is no claim that the note had been lost. Stat. co m . If this Court were to re Fr au d. In that way the party claiming on the note. Gen. Gen. St op enforcing party would avoid compliance with and thereby eviscerate the The entire structure of Article 3 is built around the concept that Fo re submit itself to the proof requirements of N. Stat. § 25-3-309. a court is still not permitted to enter an judgment for enforcement of the note unless and until it finds that the note obligor is adequately protected.-18- which is the sole instance under U C C A rticle 3 where a photocopy can be used . clo su elements of proof required under N. destroyed or stolen.C. Gen. § 25-3-309. against the possibility of some other person (such as a party actually in possession of the original note) producing and claiming the right to enforce it. or protection is ordered.C. the party seeking enforcement would opt for the simple requirement of only producing a photocopy of the note. Once the proof under subpart (a) is made and proof of the terms of and right to enforce the note is made under subpart (b). § 25-3-309 is to provide protection for ww w. then no rational party would ever destroyed or stolen note situations. by the court.C. Stat. The core principle of N.

11 U. Mandeville. 218 (1812). F. remain the law of w.S. or its absence ww accounted for.-19- production of the original note is what entitles a party to enforce it and that note obligors must be protected against multiple claims being made on the note. but so too do all of the other provisions of Article 3 regarding transfer destroyed.C. and that lead inevitably to the requirement that original notes must be presented in court when enforcement of them is sought. Gen. The provisions of Article 3 that create specific rights in persons having possession of original notes. It is therefore critical that the wise ruling of Chief Ju . With the functionality of every section of diminishes or nullifies the efficacy of other sections.C. Stat. Literally. Article 3 of the UCC is an elegant and utterly inter-dependant set of rules governing negotiable instruments. If those concepts are abandoned. any failure to enforce one section clo su T he Interdependency of the Rules in U C C A rticle 3 re Fr au d. co m . St op require that indorsements be made on those original notes or be affixed to them. Gen. § 25-3-309 become meaningless. not only does N. Stat. § 25-3-308(b) requiring production of the original note is abandoned. the entire structure of Article 3 collapses if the principle of N. Sheehy v. 208. Fo re Article 3 dependent upon all other sections.

E. Combs. shall set forth such facts as would be admissible in evidence. which governs evidence on motions generally). 774. 422 (2010) (discussing the standard under Rule 56(e)). The affidavit must in some way show that the affiant is personally familiar with the facts so that he could personally testify as a witness.C. Foreclosure A ffidavits M ust Present A dmissible F acts Based on Personal K nowledge be based on personal knowledge.E. 777. 615. 596 S. In North Carolina.-20- the land.2d 420. co m . at 622. 14 ww opposing affidavits shall be made on personal knowledge. St op Fo re clo su re Fr au d.2d at 348. then it is presumed that such does not exist. Bird.C. 596 S. and shall show affirmatively that the affiant is -1. general legal principle that affidavits must be based upon personal knowledge Id.14 see also Lemon v.E. w. 621-22. Bird v. 348 (2004) (applying the personal knowledge requirement of Rule 56(e) to Rule 43(e). The personal knowledge of the facts asserted in an affidavit is not presumed from a mere positive averment of facts but rather the court should be shown how the affiant knew or could have known such facts and if there is no evidence from which an inference of personal knowledge can be drawn. Rule 56. If that requirement is taken away or weakened. 164 N. then the entire structure of Article 3 of the UCC collapses. 688 S. A F F I D A V I TS I N F O R E C L OSU R E PR O C E E D I N GS M UST C O M P L Y W I T H B ASI C ST A N D A R DS F O R A F F I D A V I TS I N C O U R T PR O C E E D I N GS A. App.2d 344. I I. 363 N.

-21- Id. 16 The Robinson Affidavit appears at R pp. The affidavit of Jennifer Robinson. 2d Affidavits § 14). just as they do to any proceeding in which affidavits are submitted in support of requests for relief.2d at 347-49 (citing cases that apply the personal knowledge requirement in motions for summary judgment. 242355.E.C. Stat. 596 S. 156 N. 477. 164 N. Affiant Robinson 15 ww evidence is introduced sufficient to support a finding that he has personal See Rule 602. 596 S. with attachments at R pp. w. St op This is consistent with the personal knowledge requirement in the Rules of Fo re default judgment. at 620-23. search warrants). at 622-23. See In re Gilbert.2d 398. 15 These rules apply to mortgage foreclosure proceedings. App.2d at 349 (emphasis added) (quoting 3 Am. Lemon. 577 S. Jur.16 submitted in support of Wells with these well-established principles of North Carolina law. for Rule 11 sanctions.E. Rule 602 The same language appears in Rule 602 of the Federal Rules of Evidence. N.C. see also In re Brown. 237-41. § 8C-1. 485-86. Gen. 403-04 (2003) ( why this Court should distinguish between affidavits filed in support of a motion ).C. co m . to dismiss for lack of jurisdiction. App. 2011 WL 1645699. and for clo su for summary judgment and affidavits filed in support of a petition for re Fr au d. at *8-10 (finding affidavits not based on personal knowledge incompetent evidence of possession).E.

Fo re N. .C. at 622. She fails to meet the requirement that A closer look at the record also suggests that Ms. St op which was originated in 1996 and allegedly assigned to Wells Minnesota in 2001. and she fails to show that she is a competent witness under Rule of Civil Procedure 56(e) to make sworn clo su statements as to the content of those records. Jur. Robinson could not have had true. she fails 803(6) to authenticate the business records of ASC.2d at 349 (quoting 3 Am.-22- Specialist .17 and her sworn interrogatory response proves ASC knowledge is limited to the 17 ww A discovery response sworn to by Jennifer L. 2008. Robinson on January 4.E. 2d Affidavits § 14). 164 . Robinson has her address in Frederick. co m Lemon v. App. Combs. and I am familiar with and have personal knowledge of the L inda G . re Fr au d. . 596 S. first-hand knowledge of any matters relating to the Dobson mortgage her limited employment history with ASC dates only to August of 2006. Dobson account responsibilities at ASC renders her sworn statements facially incompetent as evidence. states that Ms. Maryland (where her gation Specialist for -referenced position for 5 w.

e. St op Despite the clarity of North Carolina law. A ffidavits M ay Not Be Used to Supplant the F unction to Decide Q uestions of L aw It is also a long-standing and uncontroversial principle of the law of North Carolina that affidavits must present facts based on personal knowledge. B. . w. Co. 460.E.2d 400.C. 90 N. not legal conclusions. 186 S. See.2d 400. App. Durha m Life Ins. 286. 200. 280 N. 289. In North Carolina.C.g. Wells Minnesota purports to Fo re clo su re Fr au d. 405 (1972) (holding an affidavit statement referring to the notice required for a binding contract was inadmissible as a legal conclusion)... co m See R p.-2318 It is therefore unsurprising that the trial court declined to rely upon any factual statement in this judgment motion. 405 (1988) consider portions of an affidavit not based on the affiant's personal knowledge or Evidence § 130 (3d ed. s 18 ww would have in regards to t response to interrogatory 5. S ingleton v. 1988). 467. 186 S. Ward v. Stewart.E.

as Sponsor. 90 N. §§ 3.) 20 ww In fact. 237.. The pooling and servicing agreement for the Equivantage Home Equity Loan Trust 1996-4 was not put in the record presented to the trial court and is not included in the record on appeal. N. 1996).sec. See Pooling and Servicing Agreement Relating to Equivantage Home Equity Loan Trust Among Equivantage Acceptance Corp. St op Fo re as no surprise given the significant inconsistencies in the record regarding clo su Wells Minnesota.2d at 405. co m . 8.6. available at http://www. 3. and not of the purported note-holder. As an employee of the servicer. Robinson Aff. (R p. This pooling and servicing agreement can be obtained electronically.. as Servicer. as Trustee. raising the strong suspicion that her conclusory statement lacks any factual underpinning. whether Wells Minnesota possesses the original note. Under the UCC.E.20 This should come 19 refers to Wells Minnesota. 238.. App. at 289. ¶ 3. Robinson Aff. as an unsupported legal conclusion that only the court is competent to make (based on a review of the evidence including the original note). See Ward. Equivantage Inc. and Norwest Bank Minnesota. w. ¶ 7. 186 S. Such restrictions apply here.14 (Nov.5. the pooling and servicing agreements governing mortgage-backed securities generally provide clear criteria for storage of the notes and frequently prohibit the mortgage servicer from serving as the custodian of any original documents. Robinson was in a position to know re Fr au d. this must fail. it is unlikely that Ms. ASC. the facts required to prove holder status are possession of the note and indorsements sufficient to give the possessor the right to enforce it.gov/Archives/edgar/data/933505/0001005477-96000590.C.19 However.A. 1.txt.-24- R p. Tho competent witness to prove them.

Fo re 22 In response to an interrogatory directly asking (1) whether Wells Minnesota had clo su Association. the Defendant Wells [Minnesota] is unsure as to whether a loan origination file was sent to it at the time of assignment. by way of an with (2) a Consent Order dated April 28.21 not the least of which is Wells apparently gone missing. In the event that Wells [Minnesota] does not have the loan origination file in its possession. Wells Fargo [Minnesota] is unsure as to which person or entity would have a copy of the loan origination file. 1996 . but she did not provide facts to substantiate that any one of these entities is by ASC and not Wells Minnesota.22 21 Robinson identifies three different entities as possible noteholders Norwest Bank Minnesota as Trustee. 238. response to Interrogatory 9. said documentation would be located in an origination file that should have been sent to the Defendant Wells [Minnesota] at the time of assignment. At the time these interrogatories were answered. Robinson also failed to provide any explanation or supporting documentation as to how Norwest Bank Minnesota may have become Wells Minnesota. . w. 201-02. as Trustee of Equivantage Home Equity Loan Trust 1996-4 under the pooling and servicing agreement dated as of November 01. co m and (3) that Norwest Bank . St op Wells [Minnesota] has the requested documentation. Wells Minnesota responded: The Defendant Wells [Minnesota] was not the original lender for this ww R pp. Wells Fargo Minnesota as Trustee or Norwest Home Imp. . Compare assertions that: (1) the Servicer for Norwest H Ms. transfers and assignments of the note. corporation was in possession of these documents. re Fr au d. authenticated by Robinson (R p. 2005.-25- origination.

all improper under North Carolina law. ww w. co m In re Gilbert. reinforce the importance of strict adherence to the requirements for affidavits in North Carolina. The North Carolina Court of Appeals recently considered affidavits of GMAC Mortgage. which. including an affidavit of robo- signer Jeffrey Stephan. St op The factual and legal deficiencies in the Robinson affidavit specifically. like the affidavit statement of Jennifer Robinson. The Gilbert court considered and disregarded these determined by a court of law on the bas incompetent because it those in the industry generally. 2011 WL 1645699. at *8. The . at *9. and Fo re court further found that an affidavit statement asserting possession was re Fr au d. clo su Id. are the same fundamental defects seen in other robo-signed affidavits widely used by the mortgage servicing industry. LLC. Id. and her statements of legal conclusion devoid of supporting factual statements.-26- asserted personal knowledge.

in most cases the robo-signer simply file.occ. e. Reserve Sys. 2011). available at http://www. (July 20. St op For example. on July 20.pdf (Interagency Review) (sanctioning the fourteen largest servicers for unsafe and unsound foreclosure practices).federalreserve.treas. at 49 (sanctioning GMAC for filing fraudulent affidavits in support of summary judgment in foreclosure proceedings).R. Office of the Comptroller of the Currency.. & Office of Thrift Supervision. w.gov/newsevents/press/enforcement/20110720a. 2011 the Federal Reserve fined Wells Fargo Company Fo re checks that the name and signature are accurate and never even looks at the loan clo su to file so- - re Fr au d. Interagency Review of Foreclosure Policies and Practices 7 (2011). co m A B USES I N T H E E X E C U T I O N O F A F F I D A V I TS A N D O T H E R D O C U M E N TS I M PU G N T H E I N T E G R I T Y O F T H E F O R E C L OSU R E PR O C ESS .htm 24 ww See Fed.-27- III. 272 F. available at http://www. Reserve Sys. The fundamental untrustworthiness of robo-signed foreclosure affidavits filed by mortgage servicers and the risk of extraordinary resultant harm to home-owners 23 of Governors of the Fed.D. The recent foreclosure crisis has revealed stunning patterns of abuse by from deceptive conduct at origination23 to outright fraud in foreclosure proceedings. It has unfortunately become routine practice for all large mortgage servicers foreclose sign sworn statements attesting to purported facts of which they have no knowledge. Ja mes.gov/news-issuances/newsreleases/2011/nr-occ-2011-47a.g.24 As described more fully below.. See.

See Paul Kiel. To Streamline the Foreclosure Process and C ut Costs. on the Judiciary. http://www. Internal Doc Reveals GMAC F iled False Document in Bid to Foreclose (July 27. Maine Attorneys Saving Homes 3-16). Chain of Title. available at http://judiciary. (Dec.propublica. Esq. Cox. fraudulently backdated documents and other fraudulent documents25 in 26 26 ww For further testimony and reports detailing these practices over the past decade.R.gov/hearings/pdf/Cox101202.senate. mortgage servicers have also fabricated mortgage assignments and other documents. Loss Mitigation.house. 2 & 15. 292.pdf (Cox Test.). Mortgage Companies Routinely F ile Untrustworthy A ffidavits and F raudulent Documents. St op In addition to false affidavits. A. 1:07 PM).-28- makes it all the more important for this Court to reaffirm what is already the law in North Carolina: affidavits made without personal knowledge. 111th Cong.. Volunteer Program Coordinator. Fo re 25 clo su Foreclosed Justice: Causes and Effects of re Fr au d.gov/d ocuments/cop-111610-report. Robo-signing and other fraudulent mortgage servicer practices have gained affidavits. and Other Issues in Mortgage Servicing: w. see. co m .pdf (COP Report).. November Oversight Report: Exa mining the Consequences of Mortgage Irregularities for F inancial Stability and Foreclosure Mitigation 46-49 (2010). including on behalf of entities that no longer even exist. 2011. for example. that assert legal conclusions.unt. 2010) (Testimony of Thomas A. available at http://cybercemetery. or that fail to establish the basis for the competent evidence. Foreclosed Justice: Causes and Effects of the Foreclosure Crisis: Hearing Before the Comm. H. RoboSigning.edu/archive/cop/20110402010313/http://cop. Congressional Oversight Panel.org/article/gmac-mortgage-whistleblowerforeclosure/single.

-29- the Foreclosure Crisis: Hearing Before the Comm. who attest to the signatures without ever complying with the basics of their state's notary laws. these practices have become the norm as mortgage companies have bypassed the steps that are legally required to foreclose on a home.R. & C mty. Kowalski Test.. H. 18. 229 (Nov. Kowalski Test. 46-47. PL.) (emphasis omitted). Jr. on the Judiciary. 27 w.gov/hearings/pdf/Kowalski101202. 2010) (Testimony of James A.. at best reviewing only a few facts from a computer screen. FL 1-2) (Kowalski Test. with not even a modest wink at the business records exception to the hearsay rule. facts they ww Hearing Before the Subcomm. at 1-4. Kowalski explained in his Congressional testimony how robo-signing works: re Fr au d. 126 (Dec. Law Offices of James A. Having taken extensive depositions of robo-signers over a period of years. 2010) (Testimony of Julia Gordon. 2 & 15. Cox Test. 111th Cong..) available at http://www.pdf Fo re [M]ost of the servicers use Signing Officers rows of individuals who sit before reams of documents prepared by others.house. Jacksonville. Kowalski..27 Unfortunately. on Hous. Interagency Review at 7. Opportunity of the H. St op to simply sign documents without verifying any of the statements or even checking Available at http://judiciary. Kowalski. Comm. 111th Cong. at 3-7. Senior Policy Counsel. It is the job of these robo-signers the loan file. see also Cox Test. Servs. at 6-7.responsiblelending.org/mortgage-lending/policylegislation/congress/Gordon-Waters-testimony-final. on F in. at 1-2. clo su Mr. co m . See C OP Report at 10-13. and who sign the documents only to have the document transported across the business campus to rows of notaries. Jr.pdf. Center for Responsible Lending 11) (Gordon Test.

No.lsnj. Depositions and trial testimony of mortgage servicer employees and government investigations have confirmed the 28 See.g.org/NewsAnnouncements/Foreclosure/materials/EXHIBITGWells FargoDepositionMoua. June 7. co m .org/NewsAnnouncements/Foreclosure/materials/EXHIBITGWells FargoDepositionKennerty. John Kennerty. However. No. 2011).org/NewsAnnouncements/Foreclosure/materials/EXHIBITGChase DepositionCottrell. No. Ct. No. LLC v. Apr. 09-2-46576-2 SEA (Wash. available at http://www. Ct. 2010)... ta BRI-RE-09-65 (Me. Deposition of H. July 20. 7. Tr. La. 2010). Cir. See In re Wilson.).pdf.). 9. LLC v. 50-2008-CA-016857 (Fla. 2:09-cv-00084-JHR (D. . Operations Supervisor for Chase Home Finance (Cotrell Dep. Stipek . Deposition of Beth Ann Cotrell. Vice-President of Loan Documentation for Wells Fargo Home Mortgage (Moua Dep. Cir. 153-1.. No.). 50 2009 CA 012434XXXXMB AW (Fla. Inc. July 20. St op Fo re clo su re Fr au d. w. 2010). Ja mes. ECF No.-30- have no responsibility for generating. Servs. taken in Wells F argo Bank. Ct. May 17. Dist. No. 2010). taken in Geline v. Limited Signing Officer for GMAC (Stephan Dep. 2010). NA v. Loan Administration Manager and Vice-President of Loan Documentation at Wells Fargo Mortgage (Kennerty Dep. taken in GMAC Mortg. 2011 WL 1337240 at *9-12.S. 2011 WL 1337240. e. 10. 50 2008 CA 040805XXXX MB (Fla. Ct. filed in U. Me. In re Wilson. available at http://www.pdf. Interagency Review at 7. Limited Signing Officer for GMAC (Stephan Dep. No. available at http://www. Ct. 153-6. Maine). Mar. Me. 2010). a mici provide several examples of typical deposition testimony: Deposition of Xee Moua. see also Deposition of Jeffrey Stephan. Nw. 07-11862.lsnj.lsnj. Neu. 2:09-cv-00084-JHR (D. Dec. Cir. Super. ECF No. Deposition of Jeffrey Stephan. 2009). E.pdf. Florida).. at *9 (Bankr. May 20. taken in Chase Home F inance..D. Koren. 28 ww A full accounting of robo-signing practices throughout the country is beyond the capabilities of this brief.

. trusting that some other division of Wells Fargo has confirmed that the information is correct: ww 29 w. 56:7-. 7:7. executes all of the documents necessary for foreclosures nationwide from an office in Fort Mill. South Carolina. 9:7-11:20. . Wells Fargo Home Mortgage is the same entity that is the servicer in the Dobson Fo re By design. See Kennerty Dep. maintaining that foreclosure matrix. . See Kennerty Dep . St op know who. Who puts the information into the matrix? independent knowledge about whether or not the information is truthful.-31- Wells Fargo Home Mortgage (Wells Fargo). . the sole responsibility of employees in the document execution clo su employee that she executed as many as 300-500 foreclosure documents in a two re Fr au d. Based almost exclusively on what their computer system pops up and spits out. see also Moua Dep. My office is the one that handles all of it [for the entire . . and correct? A. co m . 4:2223. as the name suggests. . 29:4-39:24 (testimony by Wells Fargo hour period each day and that her only responsibility was to ensure that her name and title were correct before signing). . 57:21-64:20. to execute documents. . . 43:1-48:25.29 one of the largest mortgage companies in the country. There are people that are responsible for . . department is. employees sign all documents that are presented to them without verifying any substantive information. Q.

p. Moua Dep.30 such as tiff is entitled to enforce the note and mortgage.. at 41:2-24. and with it the authority to sign on Wells execution department. p. Cir. 239- re Fr au d. Kennerty Dep. Maine 46:9-47:21. For example. 2006) (sanctioning GMAC Mortgage.-32- er people in the process to make sure that the A. Leibowitz. Ms. 39:13-24. Stephan Dep. Ct. Yes.g. LLC v. May 1. clo su have included legal conclusions that servicers typically include in robo-signed e. Interagency Review at 7. 16-2004-CA4835 (Fl. St op The same practices are employed at every major mortgage servicer. 9:7-11:20. See. Employees tasked with executing documents have little training or knowledge of foreclosure. No. Moua did not even understand her own assertions 41:14-16. See id. at id. 240. LLC for filing fraudulent affidavits). Her sworn statements affidavits and are similar to those made in this case. Moua was given the title of Vice President of Loan Documentation. TCI F RE O2. Not surprisingly. Fo re Id.. 62:8-64:20. 61:24-68:3 ww 30 w. co m Id. ¶ 19 . Duval Cnty.

you have personal knowledge of that? A. imposing sanctions. the Departments of Justice (DOJ).000 documents a month without reading them. 11:11- B. No knowledge. and that this 9:19-14:2. 56:12-57:1. 73:13-76:4 (testimony by employee of Chase Home Finance that she signed thousands of affidavits a month to be used in foreclosure proceedings. Although robo-signing practices have been ongoing for years. Treasury and Housing and Urban Development (HUD).000 to 10. co m ). They found these servicers routinely created w.-33- (testifying that as GMA signed between 8. Cotrell Dep. all fifty state attorneys general. leading to government investigations by the federal prudential regulators. Q. Did you do anything re Fr au d. Cotrell Dep. F ederal and State Governments Respond F raudulent Conduct. all without verifying any information). and even some state and federal courts. The federal prudential regulators investigated the foreclosure practices of the fourteen largest mortgage servicers. including Wells Fargo. St op Fo re clo su . the recent foreclosure crisis brought them into the spotlight. . including summary judgment affidavits. including affidavits of default and affidavits of lost notes and mortgages. and issued a report and ww consent orders.

See id. at 1-2. examiners may not have uncovered cases of misapplied payments or unreasonable fees. foreclosure- into a compliance program and to retain an independent examiner to conduct an in- homeowners caused by its errors. Id. Id. at 1. the regulators were unable to identify a single entity that conducted its foreclosure business properly. as the federal were the basis for sending a homeowner to foreclosure in the first place. 8. particularly when these actions occur red prior to the default that led to ww w.-34- cost efficie Interagency Review at 7 (finding and unsound practices and violations of applicable federal and state law and fourteen largest servicers. Accordingly. The file reviews did not include a complete analysis of the payment history of each loan prior to foreclosure or potential mortgage-servicing issues outside of the foreclosure process. Each servicer was required to enter re Fr au d. and to assess the harm to clo su Id. That further review was essential to redressing servicer problems and reforming practices because. at 13. their investigation only scratched the surface. who account for sixty-eight percent of the mortgage servicing industry. co m . No investigation was made regarding the accuracy of servicing records that Fo re depth review of foreclosures filed in 2009 and 2010. St op regulators acknowledge.

naag. 13. See Shahien Nasiripour.php w. Confidential Federal Audits Accuse F ive Biggest Mortgage F irms of Defrauding Taxpayers.pdf Fo re clo su re Fr au d.33 The attorneys 31 32 ww Available at http://www.gov/new. at 36-37 (2011) (GAO Report).html 33 Available at http://www. DOJ and HUD. .gao. including the Treasury Department. 2011). at 2 (emphasis added). St op Available at http://www. At the same time. other federal agencies. GAO- 11-433.32 General Roy Cooper of North Carolina is on the executive committee of the fifty-state attorney general investigation and has been joined by the North Carolina Commissioner of Banks.31 HUD also found potential violations of the False Claims Act for federal reimbursements obtained by servicers for money lost in foreclosures based on faulty documentation.huffingtonpost. Mortgage Foreclosures: Documentation Problems Reveal Need for Ongoing Regulatory Oversight. See States Sign Mortgage Foreclosure Joint Statement (Oct.items/d11433. co m the foreclosure action.org/joint-statement-of-the-mortgage-foreclosuremultistate-group.-35- Id. have joined forces in their own investigation of robo-signing practices. Huffington Post (May 17. 2010). The foreclosure-file reviews also may not have uncovered certain facts related to the processing of a foreclosure that would lead an examiner to conclude that a foreclosure otherwise should not have proceeded.com/2011/05/16/foreclosure-fraud-auditfalse-claims-act_n_862686.

Although this in-depth investigation is ongoing. Former Ohio Attorney Protection Bureau) sued GMAC to enjoin foreclosures resulting from robo-signed affidavits. See Nick Gale.-36- general were the first to challenge the foreclosure and robo-signing practices of the Id. State of Ariz. to Servicers 1. Attorneys General Cooper and Lisa Madigan of Illinois have recently expressed their intent to file lawsuits against servicers if settlement discussions with servicers break down. Attorney General Terry Goddard of Arizona wrote to mortgage servicers clo su General Richard Cordray (recently nominated to head the Consumer Financial re Fr au d. Supp. 2 ww 34 Available at http://wjbc.com/madigan-and-other-attorneys-general-meet-withbanks-on-foreclosure-practices/ w. Letter from Terry Goddard.. St op violation of the Arizona Fo re 2011).34 Individual attorneys general have also taken action. Ohio expressing concern over robo-signing practices and inaccurate documentation. See Ohio v. WJBC (June 23. 760 F. co m - . GMAC Mortgage. Madigan and Other Attorneys General Meet with Banks on Foreclosure Practices. 2011). 2d 741 (N. informed them that use of robo- signed documents and assurances that servicers will comply with Arizona state law. LLC .. Attorney Gen.D.

go.. Letter from Benjamin Diehl. See Michelle Conlin & Pallavi Gogoi. SVP Channel Dir. AP Exclusive: Mortgage - . Associated Press. 30.pdf ww 36 Available at http://ag.go.. JP Morgan Chase 1-2 (Sept. 7.gov/cms_attachments/press/pdfs/n1996_jp_morgan_chase_letter_.com/Business/wireStory?id=14100478 Fo re companies after 23 county registers of deeds filed a criminal complaint with his clo su Michigan. the Attorney General stepped up his investigation of fraudulent ee also Press Release. State of Cal. Delaware. 2011). 2010). MI Office of the re Fr au d.35 The California Attorney General demanded that JP Morgan Chase halt foreclosures until it could demonstrate compliance with California law.36 Attorneys general in Michigan. New York. - signed affidavits. and Illinois have also entered the fray.ca. abcnews.com (July 19.37 In step in June of filing criminal subpoenas to out-of-state mortgage processing office over robo- - 35 Available at http://www.pdf 37 w. Deputy Attorney Gen.. St op Available at http://abcnews. to Steve Stein.azag.-37- (Oct. 2010). co m .gov/press_releases/oct/2010/Mortgage%20Loan%20Servicer%20 Letter.

-38-

Attorney Gen., Schuette Issues Subpoenas in Cri minal Probe of Mortgage

Processors (June 15, 2011).38

Many other states are continuing to investigate and take action, including in Guilford County, North Carolina, where the Register of Deeds received so many suspect documents in 2010 and 2011, that he

accepting questionable paperwork. See Conlin & Gogoi,

; Michelle Conlin & Pallavi Gogoi, Lawmakers Call for

Hearings on Robo-Signing, Associated Press, July 20, 2011.39

scrutinizing foreclosure affidavits, dismissing or delaying foreclosures, imposing new filing requirements,40 and sanctioning large servicers who file robo-signed

38 39 40

http://www.michigan.gov/ag/0,1607,7-164-46849_47203-257956--,00.html.

Available at http://abcnews.go.com/Business/wireStory?id=14110280
The highest courts of three states New Jersey, Vermont and New York

ww

all to certify that they have communicated with an employee of the foreclosing entity who has personally reviewed and confirmed the accuracy of documents. See Glenn A. Grant, Acting Admin. Dir. of the Courts, Notice to the Bar (Dec. 20, 2010), available at http://www.judiciary.state.nj.us/notices/2010/n101220a.pdf; Vt. R. Civ. P. 80.1(g)(2); Andrew Keshner, New Court Rule Says Attorneys Must Verify Foreclosure Papers, N.Y. L.J., Oct. 21, 2010; Admin. Order of the Chief Admin. Judge of the NY Courts (Mar. 2, 2011), available at http://www.nycourts.gov/attorneys/pdfs/AdminOrder_2010_10_20.pdf. Failure to follow the new court rules in New York could result in dismissal of the foreclosure. See, e.g., Wash. Mut. Bank v. Phillip, No. 16359/08, 2010 WL -five

w. St op

Fo re

clo su

Courts, too, have taken independent steps to protect their integrity,

re Fr au d. co m
-

-39-

affidavits. See, e.g., H S BC Bank U S A, N.A. v. Taher , 2011 WL 2610525, at *1518 (N.Y. Sup. Ct., July 1, 2011) (dismissing foreclosure case where three robo-

signed affidavits had been filed and issuing a show cause order to President and CEO of HSBC Bank to account for its repeated conduct in filing robo-signed

affidavits); H S BC Mortg. Servs., Inc. v. Murphy, 2011 ME 59, ¶¶ 10-17, 19 A.3d 815, 820-22 (2011) .

In December 2010, the New Jersey court system entered a series of orders

submitted to courts by lenders and service providers in support of foreclosure complaints, Order to Show Cause, In re Residential Mortg. Foreclosure Pleading

2010) (Order to Show Cause),41 and concerns about , Admin. Order 01-

Fo re

& Document Irregularities, No. F-059553-10 (N.J. Super. Ct. Ch. Div. Dec. 20,
-

Irregularities (Dec. 20, 2010) (Admin. Order).42 The court required nearly all
servicers to document that their foreclosure practices were not in violation of the days to correct deficiencies in paperwork or the court would dismiss the foreclosure).
41 42

ww

w. St op

2010 at 3, In re Residential Mortg. Foreclosure Pleading & Document

Available at http://www.judiciary.state.nj.us/notices/2010/n101220c.pdf. Available at http://www.judiciary.state.nj.us/notices/2010/n101220b.pdf.

clo su

re Fr au d. co m
uracy and reliability of documents

-40-

law, but ordered six including Wells Fargo, to

at 2.

Despite the reports, investigations, sanctions, and promises to stop, robosigning and other fraudulent practices remain ongoing in North Carolina and throughout the nation. See Conlin & Gogoi,

Just last month, ten senators wrote to the federal banking regulators after new

public. Letter from Ten U.S. Senators to John Walsh, Acting Comptroller of the

and Martin Gruenberg, Acting Chairman, Fed. Deposit Ins. Corp. (July 20, 2011).43 These investigations demonstrate that the problem of robo-signed affidavits is one

significant harm to homeowners trying to save their homes.

ww

43

Available at http://menendez.senate.gov/imo/media/doc/Letter%20to%20regulators%20on%20t ransparency%20in%20foreclosure%20reviews.pdf

w. St op

that pervades the mortgage industry, is not likely to be soon remedied, and causes

Fo re

Currency, Ben S. Bernanke, Chairman, Bd. of Governors of the Fed. Reserve Sys.,

clo su

re Fr au d. co m
. -

co m Robo-Signing and O ther F raudulent Practices Result in W rongful Foreclosures. The law in North Carolina (and elsewhere) requiring affidavits to be (1) signed by a person with personal knowledge of the facts. including wrongful foreclosures.. And while the already clear that robo-signed affidavits have had real. is not just formali enough.g. e.-41- C. C OP Report at 5. ww w. the type of conduct described above is the inevitable result. who (2) makes statements of fact not legal conclusions. Robo-signed affidavits are fundamentally unreliable as evidence of ownership or default in wrongful foreclosure. harmful effects on homeowners. i. While we will likely never know how many homeowners were wrongfully foreclosed on. the foreclosures against homeowners who are not in default. See. . and (3) explains the basis of his or her knowledge. St op abusive and fraudulent conduct detailed above can and does result in wrongful Fo re Although servicers have claimed their documentation practices did not result clo su re Fr au d. and also presents a serious risk that multiple banks will seek to foreclose on the same mortgage and note. the evidence demonstrates otherwise.

44 Instances of multiple banks claiming ownership of the same note and attempting to foreclose on the same mortgage have already begun to appear.senate. e. Thompson 12-15) (Thompson Test.3d 947.). Stern is one of the foreclosure mill firms currently under investigation by the Florida Attorney General for engaging in widespread robo-signing and other fraudulent practices in foreclosure proceedings. at Ex. with clo su divisions of the [same] court .Testimony&Hea ring_ID=f7e75053-78b6-4a27-b2bb-0e8ebca7d7f5&Witness_ID=d9df823a-05d7400f-b45a-104a412e2202. 14. Apr.G.A. reprinted in Kowalski Test. Housing & Urban Affairs. Cir. Investigating Three More Foreclosure Law F irms. Ct. H SBC Bank U SA . ww 45 The Law Offices of David J. 2010-CA-004731 (Fla. Ct. . 2009-CA-003074 (Fla. 43 So. 2009).45 See Susannah Fo re reprinted in Kowalski Test. See F lorida A. 1.S. St op same property in a case involving the law firm of David J Stern. on Banking. w. 2010). Similarly.-42- Hearing Before the S. Bank and Wells Fargo Bank have sued on the re Fr au d. 2011) (Testimony of Diane E. Dist. Compare Wells F argo Bank..cfm?FuseAction=Hearings. 2010) (reversing award of summary judgment in favor of the foreclosing bank after simultaneously attempting to foreclose on the exact same mortgage in two different same note and both attempted to foreclose on the same house. 112th Cong. v. 9. U. Comm. co m . See. (May 12. Miami Herald (Feb. N. 1. 949 (Fla. Ct.g. at Ex. both Bank of America and PennyMac have sought to foreclose on the 44 Available at http://banking. App. Yulee . Cir.gov/public/index. No. Ruscalleda v.

391 B.R. Dobson sought an equitable accounting in large part because ASC does not know how much she actually owes. 340 .-43- Nesmith.g. e.D. Retired Cook F ights Two Banks to Save Home of 47 Years from Foreclosure.html.. In re Wilson. Tex. 2011 WL 1337240 at *5 & n. December 1.D. 2010. ii. 327. La. See Dobson.R. Ms.46 A recent bankruptcy case explains how inaccuracies resulting from typical but improper mortgage servicing practices can result in wrongful foreclosures of homeowners who are not delinquent. 384 B. (Bankr. these types of abusive servicing practices are w.com/2011/02/09/2058301/florida-aginvestigating-three. 2011 WL 1854315. After the Clerk denied foreclosure on that basis. at *1-2. A mortgage servicer moved to lift the bankruptcy stay claiming a delinquency 2011).38 (detailing fraudulent policies and practices of Lender Processing Services in connection with the filing of affidavits of default in foreclosure proceedings). S. clo su re Fr au d. In re Parsley. 47 ww uncovered by bankruptcy judges. See. 138 (Bankr. at *712. 2008). bankruptcy judges have been instrumental in uncovering many details of the mortgage s malfeasance.miamiherald. 2008) (detailing the relationship between Countrywide and its local an mortgage payment histories for court proceedings without input from Countrywide Fo re 46 The Dobson case presents an example of faulty affidavit evidence regarding the fact and amount of default. in many cases affidavits regarding the fact and amount of default are fundamentally unreliable. E.47 See In re Wilson. Rev. co m In re Stewart. St op Due to their unique role in overseeing debtor estates. available at http://www. Daily Bus. 2011 WL 1337240.. F alse affidavits mask servicer errors that lead to wrongful foreclosure In addition to problems regarding ownership of the note.

whether to . even though the debtor had made all payments and was current under the bankruptcy plan. per company policy. co m Id. Id. 13. at *6. and prevents The most one unit of a servicer on a loan modification will quickly end up in a foreclosure ww themselves. St op The testimony by the mortgage servicer in this case is consistent with other re Fr au d. at *7-9. at 2. The judge determined that the affidavit personal knowledge regarding the loan file save for the three (3) or four (4) facts read off a computer screen that she neither generates nor understands. She did not know that the debtors had timely sent their payments because the was the only source of information she reviewed prior to signing foreclosure presented by the servicer and the contrary evidence of the homeowner and delinquency. at *9.-44- in the account. current from demonstrating that the foreclosure was wrongfully filed. The affidavits routinely submitted by servicers in support of foreclosure 48 Fo re bankruptcy trustee exposed the wrongful attempt to foreclose in the absence of a clo su affidavits. 48 Id. . w. where an employee of one unit cannot even access the computer database used by another unit even where the information is critical and could either (1) prevent a foreclosure or (2) demonstrate that the foreclosure was wrongly Kowalski Test. at 9. Id.

La. terms of the notes and mortgages. and only then to clo su system had been programmed to systematically apply payments contrary to the re Fr au d.D.D. 13. E. (N. w. ECF No. ECF No. See Revised Final Approval Order and Judgment. 327 (Bankr. Ocwen agreed to pay $7. charges which 49 ww Judge Norgle recently approved a final settlement in multi-district litigation against Ocwen Loan Servicing. Servicing Litig. including failing to properly credit borrower payments and improperly force-placing hazard insurance on properties that were already insured.000 to settle claims that it engaged in a wide variety of improper practices in servicing subprime mortgages. including routine failures of servicers to properly apply payments in the manner required by the note and mortgage and improper assessments of 49 In In re Stewart. 2008). 358. Id. co m . July 1. 391 B. Ill. In re Ocwen Fed. where it was fees. Bank F SB Mortg. Wells Fargo also notify borrowers of certain charges assessed against their accounts. interest and principal. Dec. and in some cases Approval at 2. Ill. for example.R. Servicing Litig. No. St op Fo re required to apply payments first to escrow. choosing to first satisfy late charges and inspection fees instead of the principal and interest outstanding.. 391 B. 04-CV-2714 (N.D.R. 2011). 476. In re Ocwen Federal Bank F S B Mortg. *12-13 (sanctioning mortgage company).-45- establish ownership of the note or default are just as likely to be false as true and are insufficiently reliable to substitute for live testimony in courts.000. at 348-50. leading to lts. 2010). Other pervasive errors lead to the filing of false affidavits and wrongful foreclosures. at *9-10.

R. at 355.50 Without a lawyer. St op documentation of their complete payment history. 391 B. That is particularly true if they do not keep foreclosure context because only a tiny fraction of homeowners facing foreclosure are able to obtain legal representation. However.200 homeowners who had been placed into re Fr au d. w. or to inaccurate allegations of default and wrongful foreclosure. Id. The prevalence of wrongful foreclosures filed in the absence of default by the homeowner is substantiated by a recent survey of attorneys representing homeowners in foreclosure. homeowners facing representation.-46- were also frequently improper. See Thompson Test. This close attention is a luxury few borrowers can afford.R. Unfortunately. at 12 (emphasis added). 391 B. It should come as no surprise that a as it did in In re Stewart. default judgments and pro se defendants are common in the Fo re wrongful foreclosure can usually avoid foreclosure only if they can obtain legal clo su reported representing over 1. at 342. ninety-four percent of 50 ww k Wells Fargo four months to In re Stewart. the vast majority are ill-equipped to defend themselves against abusive practices. co m and wrongfully assessing charges . at 355. For example. [N]inety-six attorneys from thirty-four states foreclosure by a servicer when they were cur rent on their payments Thompson Test. at 62-63 (describing lack of representation among homeowners).

533.mbf.C. A Report on Unmet Legal Needs in Maine 1. In Maine.pdf.51 iii.S. co m . of 51 w. §§ 527. App. Justice for Some. Wrongful foreclosure of active duty military personnel Finally. Gen. 50 U. St op foreclosing plaintiff must always file an affidavit attesting that the homeowner is Available at http://www. (2009). Staff S. App. Federal law strictly re Fr au d. Fo re North Carolina similarly imposes additional duties with respect to active military clo su -signed and fraudulent documents. See Nan Heald. wrongful foreclosures and illegal overcharges of active duty military members provide an especially troubling example of the harm from mortgage prohibits lenders from foreclosing on active duty military personnel absent a court order. N. the not on active military duty in any action.12A (West 2011). See Dem.org/JusticeforSomeFinalUnmetNeeds3-10.S.C. § 45-21. 50 U. Order at 3. Stat. ninety-four percent of homeowners in foreclosure are unable to obtain legal representation. Ann.C. § 521. See Servicemembers Civil Relief Act (SCRA). If a lender or mortgage servicer does attempt to foreclose and the homeowner fails to appear. Recent investigations have revealed that lenders and mortgage servicers routinely disregard even these laws and file affidavits falsely claiming that ww servicemember homeowners are not on active military duty. personnel.-47- foreclosure cases in New Jersey meani Admin.

oversight.53 Interagency Review at 1. co m . St op compensate approximately 6. Gonzales). 3. F ighting on the Home F ront: The Growing Problem of Illegal Foreclosures Against U. Similarly.oversight.pdf w. 112th Cong. Servicemembers (July 12.000 service members for wrongfully foreclosing on Fo re Justice.house.S. in 52 Available at http://democrats.house. 2011).-48- Reform.S.gov/images/stories/FULLCOM/712%20soldier% 20forum/Statement%20of%20Captain%20Kenneth%20R%20Gonzales. (July 12.pdf. 2011). the Department of Justice has taken enforcement action against service members in violation of the SCRA between 2006 and 2009 and has obtained $22 million in relief for the victims. 112th Cong. Servicemembers. responding to a civil class action. ww 53 Available at http://democrats.gov/images/stories/FULLCOM/712%20soldier% 20forum/Report%20--%20Fighting%20on%20the%20Home%20Front%2007-1211. 7 (finding In response. See Press Releas Illegally Foreclosing on Servicemembers (May 26.. See Mem. JPMorgan Chase recently agreed to pay $56 million to their homes and/or for overcharging them in violation of the SCRA.52 Forum: F ighting on the Home F ront: The Growing Problem of Illegal Foreclosures Against U. 2011) (statement of Captain Kenneth R. Justice Department Settles with Bank of America and Saxon Mortgage for clo su Bank of America and Saxon Mortgage for illegal foreclosures on active duty re Fr au d.

No. Lily Leung.html. of Pet. 54 Available at http://www. 4:49 PM).com/news/2011/jul/14/issa-led-group-put-banks-spot-illegal-military-for/. Chase Home F in. 2011. Rowles v.senate. a bill has been introduced to double the maximum criminal penalties for violations of the SCRA and to establish other protections for servicemembers from wrongful foreclosure. 2011) (statement of Senator Sheldon Whitehouse).businessweek. Jef Feely. St op Fo re clo su foreclosure proceedings across the country demonstrates the need to enforce re Fr au d. ECF 36-1.uniontrib.S.cfm?action=release.com/news/2011-04-21/jpmorgan-settlesmilitary-mortgage-suits-for-56-million. Apr. See S. San Diego Union Tribune (July 14. 21.C.55 More broadly.gov/hearings. 2011).. 2011). Approval of Class Action Settlement. 112th Cong. see also . Banks to be Put on the Spot for Military Foreclosures. Bloomberg Businessweek (Apr. June 8. w. 486. for Prelim. JPMorgan Settles Military Mortgage Suits for $56 Million. LLC . 2011.-49- Supp. 9:10-1756-MBS (D.display&release_id=7ea9a7 b8-dda1-4e67-983e-71f6a051ec7a. 11:29 PM). 21. available at http://www. In the Senate. (1st Sess. 55 The House Committee on Oversight and Government Reform recently ww e servicers relating to their treatment of active duty military and their families. 112th Cong.54 Investigations into wrongful foreclosures of active duty military and other wrongful conduct toward members of the military remains unknown. available at http://veterans. m existing laws regarding the sufficiency of affidavits. co m . (1st Sess.

Box 28068 Raleigh. a mici respectfully request that the Court reinstate clo su C O N C L USI O N by ensuring strict compliance with the bedrock rules: the UCC and the Rules of NORTH CAROLIN JUSTICE CENTER Electronically Submitted By: Carlene McNulty 224 S. entering partial summary judgment for Ms. Moreover. there is no reason to ever accept as at are not appropriately part of an affidavit. the ruling of the trial court. St op ww Fo re For the foregoing reasons. State Bar No. and original documentation should be demanded by the courts. 12488 Counsel for all Amici re Fr au d. Dawson Street P.-50- The solution is simple: affidavits should be filed only by individuals who have actually reviewed the physical loan documents and other records and confirmed their accuracy. It is time to restore confidence in the integrity of the foreclosure process Evidence.O. w. Respectfully submitted this 5th day of August 2011.C.org N. The affidavits themselves should contain enough information so that Courts and parties can evaluate whether statements are based on personal knowledge or custody and control.: (919) 856-2161 Email: carlene@ncjustice. Dobson. NC 27611 Telephone No. co m .

Cox (pro hac vice pending) P. Box 1314 Portland.net re Fr au d.org joanne. R. NC ww Center for Responsible Lending. Raleigh.-51- NORTH CAROLINA JUSTICE CENTER By: Judith Welch Wegner 2307 Pickard Mountain Road Hillsborough. St op Fo re clo su By: Nina F. (919) 280-5608 Email: judithwegner@gmail. Simon (pro hac vice pending) By: Joanne L. . Suite 500 Washington. Portland. (207) 749-6671 Email: tac@gwi. ME 04104 Telephone No. 15654 CENTER FOR RESPONSIBLE LENDING Amici Parties: North Carolina Justice Center. co m N. DC Maine Attorneys Saving Homes. Werdel 910 17th Street NW. P.C. App. ME w.Simon@responsiblelending. 33(b) Certification: I certify that the attorneys listed below have authorized me to list their names on this document as if they had personally signed.com N. Washington.org MAINE ATTORNEYS SAVING HOMES By: Thomas A.O.C. DC 20006 Telephone No.werdel@responsiblelending. State Bar No.: (202) 349-1850 Email: Nina. NC 27278 Telephone No.

Wilmington. Washington. DC Financial Protection Law Center.-52- AARP Foundation Litigation. St op Fo re clo su re Fr au d. Raleigh. DC ww w. Washington. NC . co m North Carolina Advocates for Justice. NC National Association of Consumer Advocates.

Inc.O. Senter & Britton. NC 27611 Attorneys for Plaintiff-Appellant Fo re ww w. Box 814 Wilmington. co m Anne J.A. Box 2505 Fayetteville. P. 2011. Mandulak The Law Firm of Hutchens. North Carolina 28302 Attorney for Defendant-Appellees Celia Pistolis John Christopher Lloyd Legal Aid of North Carolina. Drawer 26087 Raleigh. P. NC 28402 Attorney for Plaintiff-Appellant . Randall Legal Aid of North Carolina. St op clo su /s/ Carlene McNulty re Fr au d. P. addressed as follows: John A. I served a copy of the foregoing Amicus Brief upon all counsel of record by depositing a copy with the United States Post Office.O.O. postage prepaid. P.-53- CERTIFICATE OF SERVICE I HEREBY CERTIFY that on August 5. Inc.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->