Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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William A. Roper, Jr.
The Connecticut Court of Appeals has given defendant borrowers some clarity as to the potency of a standing argument in a decision reversing judgment in the case of Equity One, Inc. v. Shivers, released last week.  This decision has some excellent language which should be encouraging to those raising a standing argument in a judicial foreclosure setting everywhere:

"On appeal, the defendant claims that the court improperly failed to conduct an evidentiary hearing to determine if it had subject matter jurisdiction when he raised the issue of the plaintiff's standing. We agree.

We begin with a brief statement of our well settled principles regarding subject matter jurisdiction. "Jurisdiction over the subject matter is the court's power to hear and decide cases of the general class to which the proceedings at issue belong." Haigh v. Haigh, 50 Conn. App. 456, 460-61, 717 A.2d 837 (1998); Koskoff v. Planning & Zoning Commission, 27 Conn. App. 443, 446, 607 A.2d 1146, cert. granted, 222 Conn. 912, 608 A.2d 695 (1992) (appeal dismissed November 10, 1992). Once the question of lack of jurisdiction of a court is raised, it "must be disposed of no matter in what form it is presented." Carten v. Carten, 153 Conn. 603, 610, 219 A.2d 711 (1966). "Whenever a court finds that it has no jurisdiction, it must dismiss the case, without regard to previous rulings." Cross v. Hudon, 27 Conn. App. 729, 732, 609 A.2d 1021 (1992).

"In determining whether  [*5]  a court lacks subject matter jurisdiction, the inquiry usually does not extend to the merits of the case. . . . Nevertheless, the court must determine whether it has the power to hear the general class [of cases] to which the proceedings in question belong. . . . Because the elements of subject matter jurisdiction are dependent upon both law and fact . . . in some cases it may be necessary to examine the facts of the case to determine if it is within a general class the court has power to hear. . . . Further, [w]hen issues of fact are necessary to the determination of a court's jurisdiction, due process requires that a trial-like hearing be held, in which an opportunity is provided to present evidence and to cross-examine adverse witnesses." (Citations omitted; internal quotation marks omitted.) Id., 733.

Additionally, "a party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim. . . . Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable  [*6]  right, title or interest in the subject matter of the controversy." (Internal quotation marks omitted.) Fleet National Bank v. Nazareth, 75 Conn. App. 791, 793, 818 A.2d 69 (2003).

In the present case, the record does not reveal that the court provided the defendant with an evidentiary hearing as to the issue of the plaintiff's standing. The defendant raised the issue of the plaintiff's standing by filing an objection to the plaintiff's motion to reopen and to reenter the judgment. The defendant also moved the court to compel the plaintiff to produce the original mortgage note in order to prove that it had standing to institute the foreclosure action. Furthermore, as indicated in the transcript of the November hearing respecting the plaintiff's motion to reopen and to reenter judgment, the defendant orally raised the issue of the plaintiff's standing to the court; specifically, he contended that the plaintiff lacked standing to pursue the foreclosure action because it was not the holder of the note at the time that it instituted the foreclosure action.

The court never held an evidentiary hearing to determine whether the plaintiff was the holder of the note at the time that it instituted  [*7]  the foreclosure action. The only hearing that the court held was in November, 2008, in response to the plaintiff's motion to reopen and to reenter judgment. At that hearing, the court primarily addressed issues relative to the reentering of the judgment of foreclosure, namely, the amount of debt and the setting of the law days. The court also concluded that the plaintiff had standing. This conclusion, however, was based on a brief colloquy between the court and the plaintiff's counsel in which the plaintiff's counsel presented an original copy of the note to the defendant and stated that he believed that the note was provided to the court at the time of the original judgment.

The court did not find specifically that the plaintiff was the holder of the note at the time that it instituted the action. Because jurisdiction in this case hinges on a factual determination regarding the plaintiff's status as holder of the note when it instituted this action, we conclude that the court improperly failed to determine the pertinent facts necessary to ascertain whether jurisdiction existed. Accordingly, we remand the case for an evidentiary hearing to ascertain the plaintiff's status at the time  [*8]  it commenced the action so that the trial court can properly determine whether it has subject matter jurisdiction."

See:  Equity One, Inc. v. Shivers, AC 30600, APPELLATE COURT OF CONNECTICUT, 125 Conn. App. 201; 2010 Conn. App. LEXIS 531, September 17, 2010, Argued, November 23, 2010, Officially Released.

http://www.jud.state.ct.us/external/supapp/Cases/AROap/AP125/125ap73.pdf

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William A. Roper, Jr.
NOTE:  Caution To Those In Non-Judicial Foreclosure States

I recently received an inquiry from a borrower in a non-judicial foreclosure state, asking for help identitfying authoritative standing decisions that might be helpful in resisting an already completed non-judicial foreclosure in the borrower's jurisdiction.

I want to emphasize that while making a standing argument can be a potent defensive tactic in many judicial foreclosure jurisdictions, in non-judicial foreclosure states, the alleged mortgage investor typically is seeking to foreclosure using a private power of sale appearing within the deed of trust, security deed or other mortgage security instrument.

With a private sale, the alleged mortgage investor is NOT usually seeking to invoke a Court's jurisdiction to effect the foreclosure and the standing argument is therefore usually ineffective.  The two most common defensive strategies used in non-judicial foreclosure states include Bankruptcy and affirmative action by the borrower to obtain a Temporary Restraining Order restraining the sale.

In a Bankruptcy setting, the alleged mortgage investor again is placed in the position of needing to come into court to (a) file a proof of claim, and/or (b) file a motion for relief of stay.  In some instances, the borrower has successfully filed an adversary action against the alleged mortgage investor.

While a borrower may be able to successfully resist a claim or a motion for relief of stay based upon the alleged mortgage investor's failure to prove its rights (which is comparable to the standing argument), the pure standing argument is usually applicable only in a judicial foreclosure setting.

THIS IS A TREACHEROUS AREA OF THE LAW AND YOU DO NOT WANT TO PUT YOUR HOME AT RISK PURSUING AN INVALID STRATEGY.  CONSULT A LAWYER FAMILIAR WITH THE LAW IN YOUR JURISDICTION!
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William A. Roper, Jr. wrote:
NOTE:  Caution To Those In Non-Judicial Foreclosure States

I recently received an inquiry from a borrower in a non-judicial foreclosure state, asking for help identitfying authoritative standing decisions that might be helpful in resisting an already completed non-judicial foreclosure in the borrower's jurisdiction.

I want to emphasize that while making a standing argument can be a potent defensive tactic in many judicial foreclosure jurisdictions, in non-judicial foreclosure states, the alleged mortgage investor typically is seeking to foreclosure using a private power of sale appearing within the deed of trust, security deed or other mortgage security instrument.

With a private sale, the alleged mortgage investor is NOT usually seeking to invoke a Court's jurisdiction to effect the foreclosure and the standing argument is therefore usually ineffective.  The two most common defensive strategies used in non-judicial foreclosure states include Bankruptcy and affirmative action by the borrower to obtain a Temporary Restraining Order restraining the sale.

In a Bankruptcy setting, the alleged mortgage investor again is placed in the position of needing to come into court to (a) file a proof of claim, and/or (b) file a motion for relief of stay.  In some instances, the borrower has successfully filed an adversary action against the alleged mortgage investor.

While a borrower may be able to successfully resist a claim or a motion for relief of stay based upon the alleged mortgage investor's failure to prove its rights (which is comparable to the standing argument), the pure standing argument is usually applicable only in a judicial foreclosure setting.

THIS IS A TREACHEROUS AREA OF THE LAW AND YOU DO NOT WANT TO PUT YOUR HOME AT RISK PURSUING AN INVALID STRATEGY.  CONSULT A LAWYER FAMILIAR WITH THE LAW IN YOUR JURISDICTION!


And on that note....

MOTION TO STRIKE PORTIONS OF DEFENDANT’S ANSWER FILED BY J.P. MORGAN CHASE BANK, N.A.

San Mateo County_Law & Motion_Tentative Ruling:

CLJ 202669 J.P. MORGAN CHASE BANK, N.A. VS. VIRGILIO ORTIZ, ET AL.

· DENIED. The Motion of Plaintiff to Strike Portions of the Defendant Jamie Ortiz’ Answer is DENIED. See, Code of Civ. Proc. Sec. 1161a and Vella v. Hudgins (1977) 20 Cal.3d 251, 255.

· Plaintiff is seeking to establish its right to possession under CCP Sec. 1161a, under which Plaintiff is obligated to show it has perfected title! An “eviction after foreclosure . . . sale under CCP Sec. 1161a requires the purchaser seeking eviction to have ‘duly perfected’ title. Thus, in Sec. 1161a UDs, a plaintiff’s lack of title is a defense.” Friedman, Garcia & Hagarty, Landlord-Tenant (The Rutter Group) Sec. 8:388, citing Vella v. Hudgins (1977) 20 Cal.3d 251, 255 and Evans v. Sup.Ct. (Robbins) (1977) 67 Cal.App.3d 162, 169.

· The Vella court states: “A qualified exception to the rule that title cannot be tried in unlawful detainer is contained in Code of Civil Procedure section 1161a, which extends the summary eviction remedy beyond the conventional landlord-tenant relationship to include certain purchasers of property . . . . Section 1161a provides for a narrow and sharply focused examination of title.” Vella, supra, 20 Cal.3d 251 at 255.

· There is nothing contrary to law or improper about the allegations made in the Answer.

· If the tentative ruling is uncontested, it shall become the order of the court, pursuant to Rule 3.1308(a)(1), adopted by Local Rule 3.10, effective immediately, and no formal order pursuant to Rule 3.1312 or any other notice is required, as the tentative ruling affords sufficient notice to the parties.


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William A. Roper, Jr.
J.D.:

A very nice and helpful post, particularly for those in California!

I am certainly NOT contending that defendant's should not be arguing that the title is defective when there are clearly identifiable defects in the private sale.

Rather, I am suggesting that the arguments need to be carefully framed in respect of the law of the jurisdiction where the subject property is located, rather than invoking cases on standing from judicial foreclosure jurisdictions.

I would also repeat my caution that a defendant seek counsel and fully understand and appreciate alternative strategies in consideration of defects in a private sale.  Raising the issue of title validity within an ejectment proceeding is very often going to bar relitigation of this issue in another subsequent proceeding, so if raised there it needs to be a winning argument. 

In some places, the limitation period for a quiet title or trespass to try title action is long and the limitations period for a suit on a note or foreclosure by power of sale after acceleration is relatively SHORT.  If the title is litigated right away within the context of an ejectment proceeding, the alleged mortgage investor may be able to simply repeat the private sale process CORRECTLY and effect a valid foreclosure.  By contrast, if the borrower abandoned possession of the property and waited until AFTER the running of the limitations period to try the questionable title, defeating the defective title might result in recovery of the property with no other remedy available to the alleged mortgage investor.

While I realize that most distressed borrowers are not faced with the luxury of a strategic retreat in the face of homelessness, I am pointing out that from a strategic standpoint, winning the ejectment proceeding may be at a cost of ultimately losing the war.  By contrast, a tactical retreat might yield a total victory years later.

I would reiterate the desirability of carefully reading the law and cases of the appropriate jurisdiction and obtaining the best competent counsel possible to weigh the various alternatives.

The defense suggested in California seems very plausibly to be an effective means of resisting an ejectment at least until the title acquired through the private sale process can be repaired!
 
Other strategies, including Bankruptcy and litigation of the title after limitations on the note and private sale passes, ought to be considered and weighed in respect of the unique facts of a case, the laws of the jurisdiction and the circumstances of the borrower.
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