Alabama Court of Civil Appeals Yves Smith from Naked Capitalism has it right in the article below and

you should not only read it but study it. The following are my comments in addition to the well written analysis on Naked Capitalism. Alabama is a very conservative state that has consistently disregarded issues regarding the rules of evidence and civil procedure until this decision from the Alabama Court of Civil Appeals was handed down on June 8, 2012. Happy Birthday, Brother! This court has finally recognized (a) that documents are fabricated shortly before hearings and (b) that it matters. They even understand WHY it matters. Judges talk to teach other both directly and indirectly. Sometimes it almost amounts to ex parte contact because they are actually discussing the merits of certain arguments as it would effect cases that are currently pending in front of them. I know of reports where Judges have stated in open Court in Arizona that they have spoken with other Judges and DECIDED that they are not going to give relief to deadbeat borrowers. So this decision in favor of the borrower, where a fabricated “Allonge” w as used only a couple of days before the hearing is indicative that they are starting to change their thinking and that the deadbeats might just be the pretender lenders. But they missed the fact that an allonge is not an instrument that transfers anything. It is not a bill of sale, assignment or anything else like that. It is and always has been something added to a previously drafted instrument that adds, subtracts or changes terms. See my previous article last week on Allonges, Assignments and Endorsements. What they DID get is that under New York law, the manager or trustee of a so-called REMIC, SPV or “Trust” cannot do anything contrary to the instrument that appointed the manager or trustee to that position. This is of enormous importance. We have been saying on these pages and in my books that it is not possible for the trustee or manager of the “pool” to accept a l oan into the pool if it violates the terms expressly stated in the Pooling and Servicing Agreement. If the cut-off date was three years ago then it can’t be accepted. If the loan is in default already then it cannot be accepted. So not only is this allonge being rejected, but any actual attempt to assign the instrument into the “pool” is also rejected. What that means is that like any contract there are three basic elements — offer, consideration and acceptance. The offer is clear enough, even if it is from a party who doesn’t own the loan. The consideration is at best muddy because there are no records to show that the REMIC or the parties to the REMIC (investors) ever funded the loan through the REMIC. And the acceptance is absolutely fatal because no investor would agree or did agree to accept loans that were already in default. The other thing I agree with and would expand is the whole notion of the burden of proof. In this case we are still dealing with a burden of proof on the homeowner instead of the pretender lender. But the door is open now to start talking about the burden of proof. Here, the Court simply stated that the burden of proof imposed by the trial judge should have been by a preponderance (over 50%) of the evidence instead of clear and convincing (somewhere around 80%) of the evidence. So if it is more likely than not that the instrument was fabricated, the document will NOT be accepted into evidence. The next thing to work on is putting the burden of proof on the party seeking affirmative relief — i.e., the one seeking to take the home through foreclosure. If you align the parties properly, all of the other procedural problems disappear. That will leave questions regarding admissible evidence (another time). Keep in mind that this decision will have rumbling effects throughout Alabama and other states but it is only persuasive, not authoritative. So the fact that this appellate court made this decision does not mean you win in your case in Arizona. But it can be used to say “Judge, I know how the bench views these defenses and claims. But it is becoming increasingly apparent that the party seeking to foreclose is now and always was a pretender. And further, it is equally apparent that they are submitting fabricated and forged documents. ‘More importantly, they are trying to get you to participate in a fraudulent scheme they pursued against the investors who advanced money without any proper documentation. This Alabama Appellate Court understands, now that they have read the Pooling and Servicing Agreement, that it simply is not possible for the investors to be forced into accepting a defaulted loan long after the cut-off date established in the PSA.

but as indicated above. you can’t). The problem is. upon whom millions of pensioners depend to make ends meet. None of that was true and it certainly isn’t true now. The case was ruled in favor of the US Bank. it was the first to argue what we call the New York trust theor y. The solution in the Congress case appears to have been a practice that has since become troublingly become common: a fabricated allonge. It argued that the case was an ejectment action (the final step to get the borrower out after the foreclosure was final) so that. that defense counsel was put on the back foot (for instance. And what they are finding is that pension funds and other regulated managed funds were tricked into buying non-existent assets through a bogus mortgage bond. U. looked highly sus. Georgetown law professor Adam Levitin. they seemed to take the position they could do that right before foreclosure. The actual creditors should be given an opportunity to reject non-conforming loans that are submitted after the cut-off date and are therefore indispensable parties to this transaction. . was that these were industry standard loans in good standing. but an affirmative defense for which the homeowner had the burden of proof…Crazy or not. in a narrow and strained opinion (which was touted as significant by reliable securitization industry booster Paul Jackson). The fact that a note was submitted to the court in the Congress case and an allonge that fixed all the problems appeared magically. the Alabama Court of Civil Appeals reversed a lower court decision on a foreclosure case. but it appears that well before 2004-2005. that the election to use New York law in the overwhelming majority of mortgage securitizations meant that the parties to the securitization could operate only as stipulated in the pooling and servicing agreement that created that particular deal. These issues were raised at trial by Congress’s attorneys. namely. Yet they want you to rule that you can force investors from another state or country to accept these loans even though they are either worthless or worth substantially less than the amount represented at the time of the transaction where the investment banker took the money from the investor and put it into a giant escrow fund without regard to the R EMIC’s existence. The rigidity of New York trust has serious implications f or mortgage securitizations. We don’t deny the existence of an obligation. that there appears to have been massive disregard in the securitization for complying with the contractual requirements that they established and appear to have complied with. signatures as supposed to be wet ink) and some were shrunk to fit signature lines.‘If you rule for the pretender creditor here you are doing two things: (1) you are providin g these pretenders with the argument that there is a judicial ruling requiring the innocent investors to take the defaulted loan and suffer the losses when they never had any interest in the loan before and (2) you are allowing and encouraging a party who is not a creditor and never was a creditor to submit a credit bid at auction in lieu of cash thus stealing the property from both the homeowner and in violation of their agency or duty to the investors. it is a no -go with a New York trust.S. which typically was no later than 90 days after the trust closing. It’s difficult to know when the breakdown occurred. however. ‘This Court and hundreds of others across the country are reading these documents now. as we’ve described in numerous posts. Congress and remanded the case to trial court. among other things. this meant that the homeowner wasn’t actually challenging the trust’s standing. per securitization expert. that’s kosher if the note has not been securitized. There is no legal way to remedy the problem after the fact.the question of ownership of the note was not an issue of standing. Bank v.. An allonge is an attachment to a note that is so firmly affixed that it can’t travel separately. Over 100 years of precedents in New York have produced well settled case law that deems actions outside what the trustee is specifically authorized to do as “void acts” having no legal force. The allonge also contained signatures that looked less than legitimate: they were digitized (remember. many subprime originators quit bothering with the nerdy task of endorsing notes and completing assignments as the PSAs required. We’d flagged this case as important because to our knowledge. at least in the early years of the securitization industry. Ruling Hinges on Question of Bogus Allonges In a unanimous decision. on the eve of trial. . The offer and promise made to these investors. but we do deny that this trickster should be given the proceeds of ill -gotten gains. Indeed. The PSAs required that the notes (the borrower IOUs) be transferred to the trust in a very specific fashion (endorsed with wet ink signatures through a particular set of parties) before a cut-off date.” Alabama Appeals Court Reverses Decision on Chain of TitleCase. but the fact that the magic allonge appeared the Thursday evening before Memorial Day weekend 2011 when the trial was set for Tuesday morning meant. how do you find and engage a signature expert on such short notice? Answer.

From there it was a small step for the court to say that the homeowner couldn’t invoke the terms of the PSA because she wasn’t a party to it…. . and the judges put the issue of the allonge front and center.. The case has been remanded back to trial court.

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