Split: The Note and the Deed of Trust (Redux)

The Note and Mortgage are split in judicial states the same as the Note and Deed of Trust in non-judicial states.

Split: The Note and the Deed of Trust (Redux)

by Daniel Edstrom

The Note and Mortgage are split in judicial states the same as the Note and Deed of Trust in non-judicial states.

The first issue is that the note was sold in 2005 but the Deed of Trust appears to have been left behind.  For the uninitiated, if the Note and Deed of Trust are split, this causes a nullity.  A nullity means the security interest is lost and the debt becomes unsecured.  In securitization this is standard operating procedure and is one of the issues that we are left to face.  Upwards of 60,000,000 homes may be unencumbered leaving those who own the notes on these houses with no power of sale.  And more considering MERS wasn’t the only party involved in splitting the note from the security instrument.

Who owns these loans if they are unsecured?  That was the whole purpose of creating the securitization diagram in the first place.

The result?  More questions, few answers.

Suffice it to say that it appears the investors who purchased unregistered securities from the trusts own the loans, but that is not entirely clear.  Had the transaction parties actually followed the law or their own agreements the meltdown may have been averted and this (along with many other issues) would be moot.  It is no wonder that servicers declare this information as proprietary – because they really have no idea.  They probably know who the “investor” is, but this is just an incorrect name for the Trustee of the securitized trust.

Anyway, the meltdown begins and in February 2007, the originator of my loan, Mortgage Lenders Network USA, Inc. (MLN) enters Chapter 11 bankruptcy.  At this point, as far as I know, MLN is the owner of the note and Deed of Trust.  However, MLN was really only the sub-servicer as they had sold the note into securitization without my knowledge.  In the MLN bankruptcy, the note and the Deed of Trust were not listed as assets of the bankruptcy estate.  It is my understanding that when you hide assets from a bankruptcy trustee that this is a significant Federal offense.  For those interested 11 U.S.C. section 541 defines “property of the estate” and 18 U.S.C. section 152 defines bankruptcy crimes for failure to fully disclose property of the bankruptcy estate.

Regardless of my opinions above, Dolan Media (which owns National Default Exchange, known as NDEx West, LLC), in conjunction with a law firm, Barrett Daffin Frappier Turner and Engel (BDFTE), decided that MLN still had legal ownership of the Deed of Trust and used MERS (Mortgage Electronic Registration Systems, Inc.) as “nominee” of MLN to assign the Deed of Trust (along with the note).  This is where the foreclosure mill, robo-signing craziness starts to get interesting.  It turns out that the person who (allegedly) executed the note is really Chief Litigation Counsel for BDFTE.  A foreclosure mill law firm.  Stephen C. Porter signed as an assistant secretary for MERS.  Whether or not that is true is a post for another day.

The interesting part is what I and others have found after scouring county recorders offices for other assignments executed by Stephen C. Porter.  They are easy to find as they are executed by the thousands.  Remember, NDEx West announced at one point they had processed 50,000 foreclosure files in 3 months.  An awesome achievement of destroying marriages and families which is OK because for this specific period, it resulted in 23.6 million in revenue.  It turns out that Stephen C. Porter’s signature changes significantly depending on what year it is and what state it is.  It may be that to keep track of when and where he is signing that he uses different signatures.  It could also be that he is ambidextrous and has so many assignments that he does two at the same time.  This would explain why he has two main signatures, with a few others for good measure.  An esteemed AV rated attorney whose law firm handles foreclosures for Fannie Mae and probably Freddie Mac would never stoop to allowing others in the office to sign his name.  The other great thing about being Chief Counsel for a law firm such as BDFTE is that you get to also have other jobs, such as assistant secretary of MERS.  I didn’t know what an assistant secretary of MERS does, but after looking into it, it appears that it gives you the opportunity to sign your name.  Thousands of times a month.

Did I mention that Stephen C. Porter is also a Vice President of Wells Fargo Bank, N.A.?   It is amazing that Wells Fargo Bank let’s one of their Vice Presidents also work for a law firm that handles their foreclosures.   For most companies and banks this would be a major conflict of interest but for Wells Fargo Bank it gives them somebody on the inside at the law firm so they probably get really good rates on foreclosures.  Or maybe it is the law firm that has somebody on the inside of Wells Fargo Bank to ensure that BDFTE gets all the good foreclosures.  It is a good thing that Stephen C. Porter is actually a Vice President at Wells Fargo Bank because if he wasn’t I would think that this would be considered counterfeiting, forgery, uttering a fraudulent document, mail fraud, wire fraud, bankruptcy fraud, etc.  But that would be impossible because he has 36 years in practice as a lawyer and as an AV rated attorney he “Meets Very High Criteria of General Ethical Standards“.

Just to be doubly sure that the above assignment executed by Stephen C. Porter is valid, David Seybold, General Counsel for BDFTE decided to execute another assignment from MERS as nominee of MLN.  Yes again.  Twice.  They take nothing for granted.  You can be sure if the job has to be done right, BDFTE is the company to get it done.  You see they are owned and managed by Dolan Media, a publicly traded company whose symbol is DM.  Jim Dolan just announced in the 3rd quarter conference call for 2010 talked about robo-signing and “other process related issues”.  Jim Dolan said that these issues “does not occur inside of NDEx”.  He said they use their own processing systems that avoid, and in many cases don’t even allow, some of the problems that are in the news.  Their lawyers are satisfied that proper legal procedures are in place and that their people are properly trained.   Whew, that is a relief because as an investor I would be concerned if Dolan Media, their subsidiaries or the law firms they were involved with were doing what the other foreclosure mill law firms are doing (you know, like forgery, counterfeiting, slandering title to homeowners properties, mail fraud, wire fraud, notary fraud, fraud upon the court, etc).  It is awesome that your ambidextrous lawyers make doubly sure that you do things correctly.  You designed the automated foreclosure workflow to make sure that if there is any doubt at all, you execute a second assignment (just to cover all bases).   And it is a good thing that you do not rescind the first assignment because that way if anything is wrong with either one, the other one will still be good.  As a software, network and systems architect with over 18 years of experience,  I can tell you that I hope to someday live up to the high standard of excellence that your firm requires in its software, internal controls and employee training.

And it gets even better.  Just to make sure that you assigned my Deed of Trust correctly, you assigned the first one to “US BANK, NATIONAL ASSOCIATION, AS TRUSTEE BY RESIDENTIAL FUNDING COMPANY, LLC FKA RESIDENTIAL FUNDING CORPORATION ATTORNEY IN FACT” and you assigned the second one to “U S BANK NATIONAL ASSOCIATION, AS TRUSTEE“.   The “attorney in fact” is kind of weird but I am assuming you mean Wells Fargo Bank, N.A. who is the sub-servicer.

Apparently my house must be worth something good because everyone wants to buy it.   My $500,000.00 loan on my property which is now worth $200,000.00 must have a goldmine on it.  Since I live near where gold was discovered in 1849 I decided I would start digging holes in my yard attempting to locate the hidden gold.   Both assignments say “FOR VALUE RECEIVED”.  Even though I wasn’t allegedly making payments on my house and it was in foreclosure, it was sold twice.  Both times MERS as nominee for MLN sold it, once to Wells Fargo Bank (?) and once to US Bank, as Trustee.  Both allegedly paid money (FOR VALUE RECEIVED) for an allegedly non-performing loan.  They must know something that I don’t.  It turns out they are correct.  But that is a post for another day.

What is amazing to me is that Wall Street has figured out a way for the originator of my loan to  sell my loan at least 3 times.   First, according to the SEC Filings for the RASC Series 2005-EMX4 trust, they sold the loan to EMAX, who sold it to Residential Funding Company who sold it to Residential Asset Securities Corporation who sold it to US Bank as the Trustee of the RASC Series 2005-EMX4 trust (on or before 11/17/2005).  Then amazingly in February 2009 MLN sold the Deed of Trust along with the note to Wells Fargo Bank (?), and lastly in July 2009 MLN sold the Deed of Trust along with the note to US Bank as Trustee.  I sold a car one time.  They took the car and I couldn’t sell it again.  Maybe next time I will sell it but not let them have it.  Then I can sell it to somebody else and get the money twice.  But I guess I am not as smart as these lawyers because I cannot figure out what to do with the person I first sold it to.  Wouldn’t they get upset if I didn’t actual give them the car?  Or if I didn’t give the second person the car wouldn’t they be upset?  How do I get the DMV different titles showing 3 different sales?  I guess I need to go to law school to figure that one out as it is just beyond my understanding.

Internal controls must be important.  I heard about them after Enron.  Apparently publicly traded companies need them, as well as national banks – otherwise things can go haywire.  I will need to spend time figuring them out, but I won’t have time for that until I figure out who owns my loan (so I can get my loan mod).  The government said they had a large number of them available and I heard only a couple were actually used.  There are plenty left over that I can choose from, but for some reason the servicer won’t send me a list and they won’t accept mine.

More on internal controls later.

Author: dmedstrom

Reverse Engineering and Failure Analysis - Reverse Engineering Wall Street

19 thoughts on “Split: The Note and the Deed of Trust (Redux)”

  1. Great Article Dan! As you know I have a very similar situation, only my Originator was HOME123/New Century. Then upon my default, Chase Home Finance paid MERS for the Deed of Trust and Note ( if you believe that I’ve got some swamp land you’ll be interested in)

    Keep up the great work!

    Tim S.

  2. Tim S.
    email me…I have HOme123 and chase

    some of us pro se’s are getting cash settlements by filing APS against New Century/Home123 up in their bankruptcy in Delaware

    some have settled for upwards of 60K…in cash


  3. I was searching for dirt on Barrett Daffin when I found this blog. Since providing evidence of mortgage fraud is my business, and livelihood and with my knowledge of this issue I felt I should chime in here and clear up an apparent misunderstanding. I hope no one minds.

    The issue in regard to the separation of the note from the deed of trust is called bifurcation. In paragraph 2 of the article above it is stated that, –
    “The first issue is that the note was sold in 2005 but the Deed of Trust appears to have been left behind.”
    That is lawful as you will see below.

    Then it is stated, “For the uninitiated, if the Note and Deed of Trust are split, this causes a nullity”.
    Not necessarily. Keep reading.

    The deed of trust follows the note, but the note does not follow the deed of trust. See: CARPENTER V. LONGAN, 83 U. S. 271 (1872) in where it says:
    [quote]The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity. [end quote]

    This decision was upheld by the Kansas Supreme Court in Landmark National Bank v Kesler and again in Tarrant County, Texas in re Order for Foreclosure Concerning Geoffrey Wilner in where Wilner was facing Deutsche Bank National Trust Company as Trustee in CAUSE NO. 096 239885 09.

    Thank you for letting me post. I hope that helps.

    Steve Skidmore CCO
    Endless Fraud Detection Services Corp.

  4. Steve–unless ones deed assignment says explicitly that the note comes along with the deed during the assignment. Mine says that and others in Calif have the same thing. Please avoid generalizations.

  5. Hi Abby,

    The assignment does not have to say explicitly that the note comes along with the deed during the assignment as it is a given.

    There is nothing general about what was determined in Carpenter v Longan. “An assignment of the note carries the mortgage with it” means just that, and “an assignment of the latter alone is a nullity.”

    To try to explain a little better, the “note” is a negotiable instrument, the deed of trust (or in some states the mortgage) is a security instrument that secures the real property (your house) to the note. If the security instrument (mortgage/deed of trust) is assigned by itself then the security instrument is no longer securing the real property to the note.

    A party can foreclose on a default note IF they are in possession of both the negotiable instrument and the security instrument, or if there has been a proper assignment from the “Real Party In Interest” conveying the instruments to the foreclosing party granting said party to take action “in the name of the real party in interest ” (see federal rules of civil procedure, rule 17 (a) (1)).

    If they have the note it is asserted that the deed traveled with it, but if all they have is the deed of trust then they have nothing upon which they can base a valid claim.

    If you have MERS in your mortgage it is void. MERS has bifurcated EVERY instrument they ever touched and therefor have nullified every instrument they have touched.

    Steve Skidmore CCO
    Endless Fraud Detection Services Corp.

    1. Very interesting, there is currently a case in the Washington State Supreme court to clarify the validity of MERS as the beneficiary under a Deed to Trusts. Given the defense used by MERS in the Nebraska Supreme Court decision that MERS only has rights to the the title not the note, they may just hoisted on the petard of their own over cleverness. Recently adopted MERS Rule 8 would seem to indicate they know there is a problem asserting that MERS has rights in the note itself or even with asserting right to title in the name of MERS itself (aside: in which case just what are they doing in the process at all?)

      It seems to me they just run a datawarehouse full of really, really dirty and unscrubbed garbage quality data. Their “title owning” subsidiary such as it appears on my Deed of Trust is a sham. Recent inquiry to MERS literally asking them query that database was answered very quickly by a response from MERS (email boiler plate through their secured email portal) that they have no responsibility and it all belongs to the servicer. Note the sink ship throwing off the rats! Which is odd since I would have thought it belongs to the note and title holder. My challenge to the BoA has been to prove that they have right to be the servicers which is a fancy world for debt collector – the term that BofA is forced used when they automatically record your phone calls. So far they failed utterly; which is interesting because you can’t collect a debt you don’t own or are not authorized by someone who does own the debt.

      At best (and not yet settled), MERS is reduced to some-sort of self-invented agency relationship to the note holder. The whole strategy of MERS was always to separate the title (“lien”) which secures the note, from the note itself. As such Steve makes a telling point – the notes are good provided the minor detail that they are not lost, but the securing of them is really open to question. I did notice that article 14 of my DOT explicitly says it is severable from the note. Thus the “mortgage follows the note” is a not an absolute doctrine even in a state that tends to favor it. Steve’s claim is that by registering the beneficiary as MERS, this has occurred automatically.

      The rat’s brew of legal poison also includes whether or not such a strategy creates “clouded” titles even while in trust, and “wild” titles when foreclosed with bad implications for future boundary disputes and insurability of title. Steve has mentioned it also has the potential to produce nullified notes (no longer secured by title). On the negative side, does that mean that the note holder (in due process) moving for default throws the process from non-judicial foreclosure into judicial foreclosure – actually not foreclosure at all, just enforcement of the debt? In Washington state non-judicial foreclosure blocks deficiency judgment, but does a judicial foreclosure without security (or simply debt enforcement) makes the entire note open to deficiency (but presumably open to bankruptcy as well)? While the creditor might even chose to write off the loan, there could still be the IRS lurking around deeming the foregone debt to be some twisted form of “income” to be debtor? What happens to the principle residence privilege due to expire at the end of this year?

      Oh what a tangle web we weave… Maybe this is why all dominant societies and empires eventual collapse innerward on themselves. I sometimes wonder if the ghost of the Soviet Union watches what is happening to its former rival while rolling on the floor laughing.

  6. Steve
    I am hearing what you are saying, however, there are situations where the deed of assignment says right on it ‘for value recieved’ blah blah blah the deed is assigned & transferred TOGETHER WITH THE NOTE OR NOTES THEREIN DESCRIBED OR REFERRED TO , THE MONEY DUE AND TO BECOME DUE THEREON WITH INTEREST, AND ALL RIGHTS ACCRUED BLAH BLAH..

    I have one like this and there are others who have same. There is some case law on these types of assignments(of course, very different from what you cite). I am not at my main computer else I would send you that case law.

    In my situation…I have Home123 telling me that Chase bought my loan in Feb. 2006. They have not offered any proof that they actually physically transferred my note to Chase, even though this was asked in informal discovery.

    AND then My Deed of Assignment goes from Home123 directly to US Bank (no name of any securities trust)…but when I asked in informal discovery what was the amount of ‘the value received’ from US Bank by Home123….
    they could not answer and then finally said.there was NO value received.

    Most definately they are caught up in their own lie.

    If you want to email me at carra2009@gmail.com….I can send you a scanned copy of the assignment so you can see the wording.

  7. OH—the assignment from Home123 to US Bank is done in spring of 2007, nearly 14 months after Home123 claims to have sold it to Chase.

  8. Abby in CA, type in the search words I provided in Google search bar. Click on link Google displays which matches the link which you said isn’t working.

  9. yes can someone please just list the appropriate codes, rules, UCC, CC, public law, statutes, etc. all of then as many as possible as well as case law about Bifurcation making the DOT a nulity.. please, I wand the hammer and the nails.. Thank you…

    1. You do not realize what a monumental task it is that you ask. That would take weeks. All of what you seek comes out in our audits and supporting paperwork i.e. mortgage audit, securities audit, QWR, and complaint. We can provide you with all of your discovery work usually for less than you paid in closing costs.

      Please pardon the shameless plug but our company provides our clients with the power that NO other company can. Our paperwork comes with “expert witnesses”. No other company that we have found yet does that much for their clients.

  10. Great posts everyone ! Now lets talk about where the rubber meets the road here. In florida , where I am , the party filing suit to F/C MUST be the owner and holder of the note and mortgage . If they are not they are subject to a 12(b)(6) …For those who dont know what that is , its the fed .r.c.p that says there is a claim upon which relief cannot be granted . And the reason is that with out the note and mortgage the F/c ing party has NO STANDING , no standing to file means they cannot give jurisdiction to the court . So now , lets get to the reason for my post.That is I am thinking about doing a counter claim against my adversary since they have brought a false claim , thereby damaging me through there own greed when they bifurcated the note and mortgage . Anyone here seen a complaint going after thier adversary for bifurcation ? Or will I be the first , if so , maybe I can set a precident . If I do , thier whole house of cards is coming down !!!
    Please dont be shy and post if you guys have seen a well put together complaint logically , intelligently staing the cause of action for bifurcation .

  11. The use of Mers bifurcated any of the assignments is at face value a great argument but because of the wording in the Trust Deed that sates that Mers is the Legal Beneficiary for the lender and it’s assigns and that Mers transfers it Beneficial Nominee rights to it assignees in the courts in Utah the judges are dismissing all cases by rule 12 because they have ruled that Mers has the right to foreclose as a nominee for the current beneficiary. You may get somewhere with some Judges on the wrongful foreclosure but if you in default what damages are there. You probably have a case it you were foreclosed in the middle of a loan Modification if you can prove your were not declined. You damages could be all payment made on the loan.

    Unfortunately the Judges have decided in Utah that Mers can foreclose as a nominee for the Servicer, Trust, or Trustee and they just don’t care if they have the Note or standing because you don’t have the Show the note to foreclose in Utah non-judicial foreclosure.

    Judge Dee Benson just stood up to the them and dismissed the Motion to Dismiss but that is not a win. It just said they pushed the probably of success over the line from possible to probable.

    1. The bifurcation argument while intriguing is not the only problem that MERS creates. Not just titles and notes can become separated but so can ownership of the note and servicing the note.

      MERS says in its PR releases and legal filings that it tracks changes in ownership of the note, but when asked to product the record it then says it has no responsibility to do so and refers the mater to “your servicer”, who of course, never claimed to have set up a privatized, unsanctioned land registration system in competition with the county based land title system. But your servicer does claim authority to collect debt that came from MERS! What a piece of buck passing.

      “Servicer” may be defined in some legal context, I really don’t know, but their power is that of debt collector, i.e. they are agents with powers only to the degree they are authorized to act on behalf of the real creditor. “Servicers” are forced to refer to themselves as debt collectors in their recorded communication. The question for a “servicer” is not just bifurcation of title but how did they got authorized to be the debt collector for your note. Remember legally you issued the note and the Deed of Trust/mortgage to secure it. The promissory note is your promise to make payment and you are the ultimate source of it. The DOT/Mortgage is just one of the ways the creditor can try to be made whole if you default on the note (it “secures” the note) through the foreclosure process.

      You have the right to know who holds the note on the other end or you literally could be defrauded into paying to someone who has no right to payment (the fraudster poses wrongfully as the “servicer”). This leaves you still having to pay the rightful owner of the note (being the victim of a crime does not relieve you of the debt). The issue is not minor stuff, the whole debt driven capitalist system collapses if payment of promissory notes fouls up.

      So, even if the note were not secured (nullified) because the Deed of Trust (lien) or mortgage loan agreement was voided (nullified), debt collecting “servicers” could still assert the right to collect payment based solely upon the note. That is why there are two distinct legal documents, the DOT/Mortgage and the promissory note. They could not in this case, however, foreclose on the property.

      Back in the day, “servicer” and note holder would nearly always have been the one and the same, but given the so called financial “industry” (ah, what exactly is it that you produce?) has this wonderful imagination, the role of debt collector and the holder (own) of the debt instrument have become separated. So, you have the right to demand the alleged debt collector (or “servicer” as they like to call themselves) prove they have the authorization to collect not just in the case of foreclosure BUT FOR EVERY SINGLE MORTGAGE PAYMENT. The issue is far, far larger than just foreclosure which affects a relatively small percentage at any one time, but 100% of all mortgages all of the time.

      If not authorized, it seems to me they would also have to return every single penny, with interest, they ever collected. It would be up to the note holder to take it from there if your note which is bearable (possession equals ownership barring foul play) ever became located, without or without a DOT/mortgage in effect.

      Supposed all 60 million home owners with MERS mortgages made the simple and utterly legal request to their servicer to prove that the servicer has the right to collect payments from them. It would be instant chaos for MERS and their ill-behaved confederates. Just make that simple request now. Your “mortgage” company, which really isn’t your mortgage company in the vast majority of cases but simply a servicer, will have to answer.

  12. Pursuant to UCC 3-201, 3-204, and 3-302, a broken chain of assignment renders the Deed of Trust VOID and UNENFORCEABLE and as such, no triggering of the power of sale clause is possible.

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