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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Arizona Bill Would Void Foreclosures Without Full Title History


Feb. 23 (Bloomberg) -- Arizona may become the first state to require lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, under a bill passed yesterday by its Senate.

The legislation, which is headed to the House after being approved 28-2 in the Republican-dominated Senate, would allow foreclosure sales to be voided if lenders that didn’t originate the loan can’t produce the full chain of title. Arizona permits nonjudicial foreclosures, meaning property can be seized from the homeowner without a court order.

Lawmakers in states including New York, Oregon and Virginia also have proposed legislation to address concerns among consumer advocates that lenders or mortgage servicers are using incomplete or false paperwork to repossess properties in default. The attorneys general of all 50 states are jointly investigating how the mortgage-servicing industry operates.

“If you foreclose on somebody you should have to tell them who owns the property,” Michele Reagan, who sponsored Senate Bill 1259, said in a telephone interview. “People have the right in this country to face their accusers.” The Republican lawmaker is in litigation with her mortgage servicer, which she said won’t identify the owner of the loan.

The bill is opposed by the Arizona Bankers Association; the Arizona Trustees Association, which represents the trustees that conduct foreclosure auctions on behalf of lenders; and Merscorp Inc., an industry-owned company that operates a database with more than half of all U.S. mortgages. Matthew Benson, a spokesman for Arizona Governor Jan Brewer, a Republican, said she doesn’t comment on legislation until it reaches her desk.

Names, Addresses

The bill would require lenders to provide a document attached to the notice of foreclosure sale with the name and address of every beneficial owner of the deed of trust in chronological order, along with the date, recordation number and a description of the instrument that “conveyed the interest of each beneficiary.”

Anyone with an interest in the property could file an action to void the sale for failure to comply and be entitled to an award of attorney fees and damages, according to the bill, which wouldn’t affect past foreclosures.

“If Arizona passes this, it will be the only state in the union that will require a production of chain of title,” said Paul Hickman, chief executive officer of the Arizona Bankers Association in Phoenix. “States that pass these types of laws will be riskier environments to lend in and more difficult environments to get a loan in.”

Foreclosure Crisis

Arizona had a foreclosure filing rate of one in 175 households in January, the second-highest among states, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data. Nationally, a record share of mortgages were in the foreclosure process at the end of 2010 as lenders such as Bank of America Corp. and JPMorgan Chase & Co. temporarily delayed seizures to review allegedly improper documents. The state attorneys general and federal regulators are investigating the practice of using assembly lines of employees to sign thousands of affidavits and other documents without reading them, a practice known as robo-signing.

The Arizona proposal was suggested to Reagan by her attorney, Beth Findsen, who said she also helped write the bill. Reagan and her husband, David Gulino, were sued by their servicer, Fort Worth, Texas-based Colonial Savings FA, after they told the bank in a July 2009 letter that they were rescinding the loan because it failed to disclose certain fees and that its underwriter inflated their income by 12 percent in violation of the federal Truth in Lending Act.

Suit, Countersuit

Colonial Savings asked the court to declare that the couple isn’t entitled to revoke the loan. Reagan and Gulino filed their own suit, arguing that they were steered to an adjustable-rate mortgage they didn’t need and that Colonial Savings won’t tell them who owns their loan. Janet Walter, a spokeswoman for Colonial Savings, declined to comment.

“It makes Michele mad that the bank servicers will not disclose to a borrower the true noteholders,” Findsen said. “She was taken aback that such basic information was not readily available.”

Reagan’s bill has both technical and conceptual problems, and could add to uncertainty over title in the state, said Richard Chambliss, president of the Arizona Trustees Association in Phoenix.

Lenders that don’t file mortgage assignments with county recorders offices could face borrower challenges if the bill passes, even though the assignments weren’t required by state law, Chambliss said. Banks using Reston, Virginia-based Merscorp’s database typically don’t file assignments because the ownership information is supposed be tracked electronically.

Proposed Amendment

The trustees association has suggested an amendment to the bill that would instead require the owner to certify to the trustee that it has the legal right to foreclose. Under the amendment, which wasn’t taken up by the Senate, the lender could face perjury charges if the certification is found to be false.

“Is this bill intended to punish the lenders and screw up the process or address the problem that needs to be solved?” Chambliss said. “What is it accomplishing by requiring that the history from the birth of the deed of trust to 20 assignments down the road have to be fully identified?”

About two thirds of mortgages originated in the previous decade were bundled into securitized trusts and sold to investors. Loans were typically sold at least three times, and often many more, before reaching the trust.

Loan Modifications

The Arizona legislation would make it easier for borrowers to negotiate loan workouts, said Walter E. Moak, a bankruptcy attorney in Chandler, Arizona. Servicers often reject modification requests because the borrower doesn’t meet investor guidelines, even as they refuse to identify the investors, Moak said.

“The person who has decision-making power is not the servicer, it’s the investors,” he said.

Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City, said the legislation will test the completeness and accuracy of bank records. The law could also have the unintended consequence of pushing more lenders to modify loans rather than face a voided sale.

“I like it because it forces the financial institution into providing information about who owns loans and rebuild transparency,” Peterson said. “It makes it significantly more difficult to foreclose if they don’t have good records of the history of ownership of the loan.”

--With assistance from Thom Weidlich in Brooklyn, New York, and Jody Shenn in New York. Editors: Larry Edelman, Christine Maurus

To contact the reporter on this story: Prashant Gopal in New York at

To contact the editor responsible for this story: Kara Wetzel at

© Copyright 2010 Bloomberg News. All rights reserved.

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Lengthy message - AZ House changes to the bill shown at end of message.  The House version, which make amendments to the Senate version requires that the Trustee file a SWORN AFFIDAVIT instead of a summary document listing chian of title.  As we all know, few Trustee will be able to comply for reasons we all know.  I highlighted in red some of the important House verbiage.

Here is a link to video recordings of the hearings on SB1259.

The bill has been approved by the State Senate and was transmitted to the House on 02/22/2011.  Below is the calendar of the bill as of this morning.  The video is worth watching.  You will see the NOT FORMER MERS Corporate Secretary Will Hultman trying to explain to Senators WHY MERS is such a great deal for the state.  Ya, baloney.

TITLE: foreclosures; proof of ownership
Vote Detail 01/26/11 BI 02/08/11 (4-0-2-0) DP

01/26/11 RULES 02/14/11 PFC
CONSENT CALENDAR: 02/14/11 1:30 PM
Vote Detail 02/22/11 28 2 0 0


So far the bill does not show any amendments have or were made to the original bill- which is good news.

HOWEVER, various individuals convinced the Senate that the 'summary document' required by the statute was not strict enough, i.e., that it was unsworn.  The House version of this bill, HB2124 (here is a link: ) has changed the verbiage from simply a summary document to an affidavit.  The text of the House Version is show below.  The obvious reason for the trustee document being an affidavit is to use the criminal statutes to attack the affiant and their false document.  The house versions is a far more powerful weapon against false documents used by the trustees and others.

Be it enacted by the Legislature of the State of Arizona:

Section 1.  Title 33, chapter 6.1, article 1, Arizona Revised Statutes, is amended by adding section 33-810.01, to read:

START_STATUTE33-810.01.  Stay of trustee's sale; affidavit; one‑year period

A.  On receipt of a notice of sale, the owner of the property may deliver to the trustee an affidavit for temporary stay of trustee's sale.    The affidavit shall be sworn to and signed by at least one of the owners of the trust property and the owner's signature shall be notarized.  The affidavit shall contain the statement of that owner as follows:

1.  The owner is a natural person.

2.  The loan that is secured by the property was incurred primarily for personal, family or household purposes.

3.  The loan is secured by a first or second deed of trust or a home equity loan on real property that is improved with one to four residential units.

4.  The real property that is subject to foreclosure is the principal residence of the owner.

5.  The owner owns no other real property.

6.  The real property is located in this state.

B.  The affidavit shall also include the owner's telephone number, mailing address and any other contact information for the owner.

C.  The owner shall mail the affidavit to the trustee at the address provided by the trustee in the notice of sale.  On receipt of an affidavit that appears on its face to be complete, the trustee shall postpone the sale for at least sixty days and shall provide notice of the postponement of the sale to all persons who are required to receive a notice of sale.

D.  During the sixty-day postponement period, the owner shall have the opportunity to negotiate a revised payment or other revised terms of the loan and may accept the assistance of a representative of a private nonprofit organization, a representative of a city, town, county or state government or a representative of a federal agency to assist the owner in meeting with and negotiating a resolution with the lender.  The trustee shall assist in providing information, including lender contact information, and shall cooperate with any meetings and negotiations that occur between the owner and lender.

E.  During the sixty-day postponement period, the owner shall make payments on the loan that is in foreclosure in an amount that the owner and lender agree is just and equitable.  Failure to make the payment agreed to pursuant to this subsection terminates the stay of foreclosure, and on notice from the lender of failure to make a payment after the expiration of the sixty-day period, the trustee may reschedule the trustee's sale.  If the owner continues to make a timely monthly payment in the amount agreed to pursuant to this subsection, a trustee's sale may not be held any earlier than one year after the date of the originally scheduled trustee sale.  On completion of the one‑year period, and unless the lender has revised the terms of the loan and directed the trustee to cancel the sale, the trustee's sale may proceed as otherwise provided by law. END_STATUTE

Sec. 2.  Delayed repeal

Section 33‑810.01, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2014.

Sec. 3.  Severability

If a provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.

Sec. 4.  Legislative intent

The legislature declares that a serious public emergency exists with respect to real estate foreclosures in this state due to widespread and fundamentally unsound lending practices for mortgage loans, second mortgages and home equity loans.  These lending practices have skewed the real estate and mortgage market in this state, have caused distress to consumers, neighborhoods and communities and have adversely affected the economic health of this state.  The legislature declares that it is in the interests of this state that during this time of serious economic strain, homeowners should be permitted an opportunity to work with their lenders to reconfigure their obligations in a manner that preserves neighborhoods and protects both consumers and lenders.

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