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John Joseph Volin #009880 Trucly D. Pham #026088 2033 East Warner Road, Suite 106 Tempe, Arizona 85284 Phone: (480) 820-5568 Fax: (480) 820-3575 E-mail: joe@volinlaw.com tpham@volinlaw.com Attorney for Debtors

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ARIZONA

IN RE: HOWARD RICHARD VEAL, JR. and SHELLI AYESHA VEAL, Debtors.

Case No: 2:09-bk-14808 RJH Memorandum in Support of Debtors’ Objection to Claim No. 4-1 Filed by American Home Mortgage Servicing, Inc. Hearing Date: Date: December 7, 2009 Time: 2:30 p.m. Courtroom: 603

MEMORANDUM OF POINTS AND AUTHORITIES I. Background On July 20, 2009 American Home Mortgage Servicing, Inc. filed a proof of claim listing itself as the Creditor.

Attached to the proof of claim and marked as Exhibit A the Claimant states: Itemization of claim and summary of supporting documents for claim of American Home Mortgage Servicing, Inc., as servicing agent for Wells Fargo Bank, N.A., as Trustee for Option One Mortgage Loan Trust

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2006-3 Asset-Backed Certificates, Series 2006-3 regarding certain collateral described as 2100-2 Hazel Dell Rd, Springfield, Illinois 62703. This information, provided by the Claimant, would seem to support the Debtor’s allegation that the Claimant is not a real party in interest and that the money owed on the promissory note, at least according to the Claimant is owed to the Option One Mortgage Loan Trust (the Trust).

9 The Claimant has produced several documents to support its 10 allegation that it has standing to file the proof of claim. 11 12 13 14 15 16 17 18 19 20 21 22 23 Corporation and made payable to Option One. 24 when the note was endorsed and there is no evidence that it was ever 25 There is no indication these documents lead to the conclusion that both American Home All of

Mortgage Servicing, Inc. and the Option One Mortgage Loan Trust do not have standing and are not parties in interest. The Debtors dispute that Claimant is the holder of the Note and affirmatively allege that American Home Mortgage Servicing, Inc. and the Trust, Wells Fargo Bank, N.A., as Trustee for Option One

Mortgage Loan Trust 2006-3 Asset-Backed Certificates, Series 2006-3, do not have standing to file a proof of claim. II. The Note The Note is dated August 9, 2006 and GFS Mortgage Corporation is named as payee. The Note is endorsed by GFS Mortgage

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delivered to Option One, or any other entity.

It is impossible to

tell what entity the Option One in the endorsement refers to. III. The Mortgage The Mortgage, also dated August 9, 2006, runs from the Debtor to GFS Mortgage Corporation as the lender. IV. Movant’s Proof of Holder/Owner To support its contention that Movant has standing and is a party in interest, Movant has produced an Assignment of Mortgage

9 from GFS Mortgage Corporation to Option One Mortgage Corporation, a 10 California Corporation. 11 12 13 14 15 16 17 18 19 20 21 22 23 Home Mortgage Servicing. 24 25 assignment purports to be notarized, the notarization is not dated. It appears from a notation on the document that it may have been recorded on May 12, 2008. As further evidence of its claim, Claimant attached as an This assignment is not dated. Although the

exhibit a letter from Jordan D. Dorchuck, a lawyer who works for American Home Mortgage Servicing. evidence of anything. This letter is not admissable

However, it does support Debtor’s contention The letter documents that

that the Claimant does not have standing.

the servicing rights of Option One Mortgage Corporation have been acquired by American Home Mortgage Servicing. It does not document

not any promissory notes or mortgages have been acquired by American

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V.

Mortgage Backed Securitization & REMICS Securities backed by pools of mortgage loans are sold to

investors (such as pension funds) via Real Estate Investment Conduits (or “REMICS”). In this case, the REMIC is a Trust that qualifies for special tax treatment under the Internal Revenue Code (“IRC”). The REMIC provisions of the IRC are complex and failure to adhere to them could result in enormous tax liability for the REMIC, servicers and investors.

9 In its simplest form, securitization involves a sale of a large 10 11 12 13 14 15 16 17 18 19 20 21 22 23 identity of the sponsor, the depositor, and the trustee are public 24 records available at www.sec.gov on the 424B5 filed by the trust. 25 copy of the 424B5 can be found at A pool of mortgage loans by the originator (here, GFS Mortgage Corporation) to a “bankruptcy remote” Trust in a manner that qualifies as a “true sale.” This protects the mortgage loan

receivables from the creditors of the Originator. Bonds of various grades are offered and sold to investors and subsequently paid (in theory, at least) from the revenue streams of the mortgage loans. The securitization process is an unbroken chain of transfers of the note and mortgage from the originator (GFS Mortgage Corporation) to the sponsor (OPTION ONE MORTGAGE CORPORATION), then from the Sponsor to the Depositor (OPTION ONE MORTGAGE ACCEPTANCE CORPORATION) and from the Depositor to the Trustee Wells Fargo Bank, N.A., a national banking association. The information regarding the

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http://www.sec.gov/Archives/edgar/data/1378102/000088237706003670/d5 81063_424b5.htm See eg., Timothy C. Leixner, Esq., Securitization of Financial Assets (Holland & Knight LLP 2007) and Milton A. Vescovacci, Esq. Servicing Real Estate Mortgage Investment Conduits in U.S. Mortgage Securitizations (Ackerman Senterfitt 2006). VI. Pooling & Servicing Agreement (“PSA”) The PSA is a tri-party agreement between the Depositor, the

9 Servicer and the Trustee. The PSA is the legal mechanism by which 10 the REMIC operates and the failure to abide by its terms may result 11 12 13 14 15 16 17 18 19 20 21 22 23 2006. 24 blank or in the following form: “Pay to the order of Wells Fargo 25 Bank, N.A., as Trustee, without recourse.” The mortgage is required The PSA further requires that the Note be endorsed either in in loss of favorable tax status and imposition of stiff penalties. The PSA for Option One Mortgage Loan Trust 2006-3 Asset-Backed Certificates, Series 2006-3 can be found on the Securities and Exchange Commission’s website www.sec.gov at http://www.sec.gov/Archives/edgar/data/1378102/000088237706003912/d5 79437ex4_1739.htm Section 2.01 of the PSA sets forth the strict manner by which notes and mortgages are to be transferred from the Depositor to the Trust. The PSA recites that the transfer of the mortgage loans is to be done concurrently with the execution of the PSA or no later than the “Cut-off Date,” which for this trust is defined as October 27,

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to be delivered with an original assignment either in blank or to “Wells Fargo Bank, N.A., as Trustee, without recourse.” The provisions of the PSA have not been complied with. No

evidence has been produced to show that the promissory note was endorsed to Wells Fargo as the Trustee. There is no evidence that

the note has been delivered to the document custodian of the trust. In fact, all of the evidence that has been produce establishes that the Claimant does not own the mortgage or the note.

9 The mortgage is required to be transferred to the Trust prior 10 to the cut-off date established by the Trust which was October 27, 11 12 13 14 15 16 17 18 19 20 21 22 23 interest and therefore has no standing to file the Claim. 24 25 2006. The Claimant has produced documentation that the mortgage was The evidence

assigned by GFS to Option One on May 12, 2008.

produced by the Claimant proofs that the Trust did not own the Note prior to the Cut-off Date required by the trust since the assignment signed by GFS was not recorded until May 12, 2008. VII. Movant’s Claim Should be Disallowed for Lack of Standing Rule 17(a) of the Federal Rules of Civil Procedure provides that every action “shall be prosecuted in the name of the real party in interest.” Rule 17(b) of the Federal Rules of Civil Procedure

provides that the party filing the action must have the “capacity to sue or be sued.” In this case, the movant is not the real party in

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VIII.

Movant is not the “holder” of the Note Movant has not shown with competent, admissible evidence that

it is the “holder” of the Note sued upon. The word “holder” has a very specific definition when used in connection with a negotiable instrument such as a note. “Holder with respect to a negotiable instrument, means the person in possession if the instrument is payable to

bearer or, in the case of an instrument payable to an identified possession.” Arizona Revised Statute 47-1201(21)(a) For the Trust, to be the “holder” of the Note, the originator, GFS, must have endorsed the Note either in blank or to the Sponsor person, if the identified person is in

14 as payee and then “transfer possession” of the note to the Sponsor. 15 16 17 18 19 20 21 22 23 24 25 A.R.S. 47-3302. The same endorsement and transfer must have occurred between the Sponsor and Depositor, and between the Depositor and the Trust. Absent this, Movant has not proved that it is the “holder” of the Note with standing to sue. This is not a technical requirement since the Debtor could be exposed to “the danger that multiple ‘holders’ would seek foreclosure [and a money judgment] based upon the same note and mortgage.” Washington Mut. Bank. F.A. v. Green, 156 Ohio App.3d 461 (2004).

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In short, to have standing to sue on the note, Movant must prove unbroken chain of endorsements and transfers of possession.

Instead, Movant has produced a note payable to “Option One” and no evidence of delivery. A statement by Movant’s counsel that these transfers have

occurred has no evidentiary value. Movant must produce a properly endorsed Note and transfer and delivery receipts for every link in the securitization chain. The PSA requires that these documents be

9 deposited with the Trustee’s document custodian. See eg., In re 10 Hayes, 11 12 13 14 15 16 17 18 19 20 21 22 23 The PSA requires a “complete chain of mortgage assignments.” 24 mortgage assignment is the transfer of an interest in land and must 25 A Company v. Rowland, 2008-Ohio-1282. The Claimant, American Home Mortgage Servicing, Inc., is 2008 WL 3870820 (Bankr. D. Mass.) and Everhome Mortgage

asserting that it is the Agent for the Trust. agency relationship has been produced. It

No evidence of this appears that it is

claiming to be the servicer for the Trust.

As a servicer it has no

beneficial interest in the Note and has no standing to bring a claim. IX. In re Hwang, 396 B.R. 757 (Bankr. C.D. Cal. 2008)

Missing Mortgage Assignments Movant has offered a mortgage assignment. It is not

“concurrent” with the Pooling and Service Agreement and appears to be signed well after the Cut-off Date for the Trust.

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satisfy the statute of frauds. Thus, there must be a written mortgage assignment in each link of the securitization chain. The PSA also requires concurrent mortgage assignments from the Sponsor to the Depositor, and the Depositor to the Trustee. No such mortgage assignments have been provided. In mortgage loan securitizations, there is never a direct mortgage assignment from Sponsor to Trustee. Under the PSA, the last mortgage assignment is from the Depositor and the Trustee.

9 It should be noted that the Mortgage has no independent legal 10 significance unless the Trustee also holds the underlying Note, 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Carpenter v. Longan, 83 U.S. 271, 274-275 (1872); In re Vargas (Bankr. Central Dist. CA 2008) (relying upon Carpenter v. Longan in holding that MERS lacks standing). For the foregoing reasons, Debtors respectfully request that the Claim be disallowed. DATED: December 4, 2009 JOHN JOSEPH VOLIN, P.C. By: _/s/ JJV, #09880________________ John J. Volin, #09880 2033 E. Warner Rd., #106 Tempe, AZ 85284 Attorneys for Debtors/Respondents

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