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.