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In a unanimous decision, the Alabama Court of Civil Appeals reversed a lower court decision on a foreclosure case, U.S. Bank v. Congress and remanded the case to trial court. We d flagged this case as important because to our knowledge, it was the first to argue what we call the !ew "ork trust theor#, namel#, that the election to use !ew "ork law in the overwhelming ma$orit# of mortgage securiti%ations meant that the parties to the securiti%ation could operate onl# as stipulated in the pooling and servicing agreement that created that particular deal. &ver '(( #ears of precedents in !ew "ork have produced well settled case law that deems actions outside what the trustee is specificall# authori%ed to do as )void acts* having no legal force. +he rigidit# of !ew "ork trust has serious implications for mortgage securiti%ations. +he ,SAs re-uired that the notes .the borrower I&Us/ be transferred to the trust in a ver# specific fashion .endorsed with wet ink signatures through a particular set of parties/ before a cut0off date, which t#picall# was no later than 1( da#s after the trust closing. +he problem is, as we ve described in numerous posts, that there appears to have been massive disregard in the securiti%ation for compl#ing with the contractual re-uirements that the# established and appear to have complied with, at least in the earl# #ears of the securiti%ation industr#. It s difficult to know when the breakdown occurred, but it appears that well before 2((302((4, man# subprime originators -uit bothering with the nerd# task of endorsing notes and completing assignments as the ,SAs re-uired5 the# seemed to take the position the# could do that right before foreclosure. Indeed, that s kosher if the note has not been securiti%ed, but as indicated above, it is a no0go with a !ew "ork trust. +here is no legal wa# to remed# the problem after the fact. +he solution in the Congress case appears to have been a practice that has since become troublingl# become common6 a fabricated allonge. An allonge is an attachment to a note that is so firml# affi7ed that it can t travel separatel#. +he fact that a note was submitted to the court in the Congress case and an allonge that fi7ed all the problems appeared magicall#, on the eve of trial, looked highl# sus. +he allonge also contained signatures that looked less than legitimate6 the# were digiti%ed .remember, signatures as supposed to be wet ink/ and some were shrunk to fit signature lines. +hese issues were raised at trial b# Congress s attorne#s, but the fact that the magic allonge appeared the +hursda# evening before 8emorial 9a# weekend 2('' when the trial was set for +uesda# morning meant, among other things, that defense counsel was put on the back foot .for instance, how do #ou find and engage a signature e7pert on such short notice: Answer, #ou can t/. +he case was ruled in favor of the US Bank, in a narrow and strained opinion .which was touted as significantb# reliable securiti%ation industr# booster ,aul ;ackson/. It argued that the case was an e$ectment action .the final step to get the borrower out after the foreclosure was final/ so that, per securiti%ation e7pert, <eorgetown law professor Adam =evitin, ..the -uestion of ownership of the note was not an issue of standing, but an affirmative defense for which the homeowner had the burden of proof>Cra%# or not, however, this meant that the homeowner wasn t actuall# challenging the trust s standing. ?rom there it was a small step for the court to sa# that the homeowner couldn t invoke the terms of the ,SA because she wasn t a part# to it>.. +he case has been remanded back to trial court, and the $udges put the issue of the allonge front and center. ?iled under6 foreclosure +agged6 @ Adam =evitin, Alabama, allonge, BUA9B! &? ,A&&?, credit bid, e7 parte communication, fabricated allonge, fabricated documents, $udges, !aked Capitalism, !ew "ork trust, ,aul ;ackson, ,ooling and Servicing Agreement, ,SA, AB8IC, U.S. Bank, U.S. Bank v. Congress, #ves Smith