Part 2 - How to Challenge an Assignment of Mortgage by Glenn Augenstein continued from Part 1 on DeadlyClear.
Glenn Augenstein, a seasoned researcher and expert witness in foreclosure fraud, has taken the time to research the ancient word “seisin” which gives us better insight into what the mortgage document was meant to convey.
Recent Case Law
Wells Fargo v Erobobo
On this I must first comment that standing, or lack thereof, is considered differently in some jurisdictions than it is others. Some treat it as an affirmative defense that must be pleaded timely or it is considered waived. “Because the issue of standing is distinct from the issue of subject-matter jurisdiction and, thus, can be waived, we hold that an appellate court cannot, on its own motion, resolve an appeal based upon a lack of standing before the trial court.” Harrison v. Leach, 323S.W.3d 702 (Ky. 2010).
Others treat it as a brother to jurisdiction, which cannot be waived, and consider being so closely related that standing, or a lack thereof, cannot be waived and can be raised for the first time on appeal.
The recent Wells Fargo Bank, N.A. v. Erobobo of Supreme Court Kings County NY engaged in a brief discussion in re standing, and how it related to the instant case.“Many decisions treat the question of whether the Plaintiff in a foreclosure action owns the note and mortgage as if it were a question of standing and governed by CPLR 3211(e).” Citigroup Global Markets Realty Corp. v. Randolph Bowling, 25 Misc 3d 1244(A), 906 N.Y.S.2d 778 (Sup. Ct. Kings Cty 2009); Federal Natl. Mtge. Assn. v. Youkelsone, 303 AD2d 546, 546—547 (2d Dept 2003); Nat’l Mtge. Consultants v. Elizaitis, 23 AD3d 630, 631 (2d Dept 2005); Wells Fargo Bank, N.A. v. Marchione, 2009 NY Slip Op 7624, (2d Dept 2009).
“However, Plaintiff’s ownership of the note is not an issue of standing but an element of its cause of action which it must plead and prove.” Wells Fargo Bank, N.A. v. Erobobo, 042913 NYMISC, 2013-50675.
Not to be deterred plaintiff had attempted a bit of misdirection to shift the argument to one of standing. “Plaintiff argues that Defendant’s claim that Plaintiff does not own the note and mortgage amounts to a standing argument, and because Defendant failed to raise standing in his answer as an affirmative defense or pre answer motion, he cannot do so now.” ibid.
This was a well-played “burden of proof” tactic, as the Erobobo general denial was considered sufficient to place the burden on Wells Fargo. The Erobobo Court went on to offer an excellent analysis of the relevant Pooling and Servicing Agreement (PSA) that alleged to own/hold the Erobobo note and mortgage.
“Section 2.01, subsection 1 of the PSA requires that transfer and assignment of mortgages must be effected by hand delivery, for deposit with the Trustee with the original note endorsed in blank.
“Section 2.05 of the PSA requires that the Depositor transfer all right, title, interest in the mortgages to the Trustee, on behalf of the trust, as of the Closing Date. The Closing Date as provided in the PSA is November 14, 2006.
“Option One assigned Defendant’s mortgage loan to the Plaintiff, as the Trustee, on July 15, 2008, approximately eighteen months after the trust had closed.” ibid .
“Under New York Trust Law, every sale, conveyance or other act of the trust on contravention of the trust is void. EPTL §7-2.4. Therefore, the acceptance of the note and mortgage by the trustee after the date the trust closed, would be void.” ibid
Defendant Erobobo argued that in addition to timely conveyance, pursuant to the strict and regimented requirements in Section 2.01 and 2.05, conveyance to the trust must be by a specific party, the Depositor. In Erobobo the “The assignment of the note and mortgage from Option One rather than from the Depositor ABFC violates section 2.01 of the PSA which requires that the Depositor deliver to and deposit the original note, mortgage and assignments to the Trustee.”
“The assignment of the Defendant’s note and mortgage, having not been assigned from the Depositor to the Trust, is therefore void as in being in contravention of the PSA.The evidence submitted by Defendant that the note was acquired after the closing date and that assignment was not made by the Depositor, is sufficient to raise questions of fact as to whether the Plaintiff owns the note and mortgage, and precludes granting Plaintiff summary judgment.” ibid
Standing to challenge an assignment of mortgage was not a central issue in Well Fargo v Erobobo. However, the court made a very significant ruling in respect of the requirements of the PSA, and the application of NY EPTL 7-2.4
It is important to note the ruling inErobobo is merely interlocutory. At some point there may be further deliberations. Until a final order is issued the case remains on the Supreme Court of Kings County NY active docket. No appeal can be taken from an interlocutory order. The entire interlocutory order is available here.
In re Saldivar
Approximately 5.5 weeks after the Erobobo interlocutory order a Texas Bankruptcy Case, In re Saldivar, cited to the case.
“As a threshold matter, the court must first address Chase and Deutsche Bank’s assertion that the Saldivars lack standing to challenge the validity of the assignment of mortgage to the Trust.” In re Saldivar, Case No: 11-10689.
The Saldivar court begins its discussion on Saldivar’s standing to challenge the validity of the assignment stating “’A third party generally lacks standing to challenge the validity of an assignment.’ Bank of American Nat’l Assoc. v. Bassman FBT, L.L.C., et al., 981 N.E.2d 1, 7 (Ill. App. Ct. 2012).” ibid
It then considers whether the Trustee’s acts in contravention to the PSA, and NY EPTL 7-2.4, are ultra vires, and merely voidable, but not void ab initio.
Finally the Saldivar Court states, “Based on the Erobobo decision and the plain language of N.Y. Est. Powers & Trusts Law § 7-2.4, the Court finds that under New York law, assignment of the Saldivars’ Note after the start up day is void ab initio. As such, none of the Saldivars’ claims will be dismissed for lack of standing.” In Re Saldivar, Case No: 11-10689.
There are likely to be further deliberations in In Re Saldivar. The entire In Re Saldivar opinion in is available here:
GLASKI v BofA (PUBLISHED Version)
This case seems to be a “shot heard round world” based on the amount of attention it has received since issue, and subsequent publication. There are a number of nuggets.
“We conclude that a borrower may challenge the securitized trust’s chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust’s closing date. Transfers that violate the terms of the trust instrument are void under New York trust law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement.” Glaski v. Bank of America, National Association, F064556.
I am particularly fond of footnote 6 in which the court states, “Because the trial court took judicial notice of the existence and recordation of the assignment earlier in the litigation, we too will consider the assignment, but will not presume the matters stated therein are true. (See pt. IV.B, post.) For instance, we will not assume that JP Morgan actually held any interests that it could assign to LaSalle Bank. (See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375 [taking judicial notice of a recorded assignment does not establish assignee's ownership of deed of trust].)” ibid
Here the Glaski court is unwilling to extend a presumption of good faith in respect of the validity or veracity of the recorded document. This seems something of a sea change. By refusing to presume good faith the court is unwilling to merely accept as true whatever documents BANA may wave under the Court’s nose. It appears the veracity can be challenged, and must needs be proven.
Another good nugget, “Despite the foregoing cases, we will join those courts that have read the New York statute literally. We recognize that a literal reading and application of the statute may not always be appropriate because, in some contexts, a literal reading might defeat the statutory purpose by harming, rather than protecting, the beneficiaries of the trust. In this case, however, we believe applying the statute to void the attempted transfer is justified because it protects the beneficiaries of the WaMu Securitized Trust from the potential adverse tax consequence of the trust losing its status as a REMIC trust under the Internal Revenue Code. Because the literal interpretation furthers the statutory purpose, we join the position stated by a New York court approximately two months ago:
“Under New York Trust Law, every sale, conveyance or other act of the trustee in contravention of the trust is void. EPTL § 7-2.4. Therefore, the acceptance of the note and mortgage by the trustee after the date the trust closed, would be void.” (Wells Fargo Bank, N.A. v. Erobobo (Apr. 29, 2013) 39 Misc.3d 1220(A), 2013 WL 1831799, slip opn. p. 8; see Levitin & Twomey, Mortgage Servicing, supra, 28 Yale J. on Reg. at p. 14, fn. 35 [under New York law, any transfer to the trust in contravention of the trust documents is void].)” id
The above section seems to have as its intent protection of the bond or certificate holders, the beneficiaries, from adverse tax consequences that could result from the trustee violating the governing trust documents and losing REMIC tax status.
This position is significantly different from the oft repeated lines put forward by bank PR firms of “The homeowner just wants a free house.” There may be further deliberations on Glaski.
The entire Glaski v. Bank of America, National Association opinion, post publication, is available here.
Choice of Law Provision
Upon satisfying the court one has standing to challenge the invalidity of an assignment, or substitution of trustee, or conveyance, where do you go next? The above cases ofErobobo, In re Saldivar, and Glaski all tie in New York Estate Powers and Trust Law (NY EPTL). Several sections, but particularly §7-2.4. If you’re in Ohio, or Nebraska, gaining that standing may not help in having the court apply NY EPTL. Enter the choice of law provision (CLP).
If your battling a party different than the originating lender it is likely your loan has been securitized into a mortgage backed security trust. The PSA is the document that expresses the duties, authorities, and limits and disabilities of the trustee.
In almost all the PSAs I’ve reviewed there is a section, usually in Article 11.04 titled “Governing Law; Jurisdiction.” The language in the first sentence or two usually reads something like:
“This Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.”
It appears the Ohio court is going to be entirely reticent at now having to become knowledgeable in regard to New York law, and particularly NY EPTL. But a lifesaver has been thrown out to us on the frigid, choppy waters. One of the cases referenced and cited to above, Bank of American Nat’l Assoc. v. Bassman FBT, L.L.C., has some very beneficial language in respect of a CLP.
“We are cognizant that we have already concluded that defendants are not entitled to rely on the PSA’s choice-of-law provision; however, we do not view the application of New York law under these circumstances as an invocation by defendants. Quite simply, plaintiff was a party to a transaction that took place under and contained a choice-of-law provision expressly contemplating the application of New York law.”
Continuing, “In any event, by participating in transactions under the PSA, it is plaintiff’s actions, rather than defendants’, that make New York law applicable to this issue.” Bank of American Nat’l Assoc. v. Bassman FBT, L.L.C., et al. 981 N.E.2d 1, 7 (Ill. App. Ct. 2012).
If you scour some legal databases for cases in your jurisdiction it is likely you’ll find some beneficial appellate level case law in respect of CLP. While CLP isn’t frequently discussed it is not a new, unproven legal theory. It has substantial history. With such you should be able to move your court to rule in accordance with New York law.
Bassman continues with this other nugget relating more directly to standing to challenge an assignment, “Therefore, a borrower generally lacks standing to challenge the assignment. Id. at 736. However, a borrower may raise a defense to an assignment that would render it “absolutely invalid,” that is, void. Id. at 735-36;Tri-Cities Construction, Inc. v. American National Insurance Co., 523 S.W.2d 426, 430 (Tex. Civ. App. 1975) (“The law is settled that the obligors of a claim may defend the suit brought thereon on any ground which renders the assignment void, but may not defend on any ground which renders the assignment voidable only, because the only interest or right which an obligor of a claim has in the instrument ofassignment is to insure himself that he will not have to pay the same claim twice.”);
See also: Greene v. Reed, 486 P.2d 222, 224 (Ariz.Ct.App. 1971); cf. Young v. Chicago Federal Savings & Loan Ass’n, 180 Ill.App.3d 280, 284 (1989) (“If a valid assignment is effected, the assignee acquires all of the interest of the assignor in the property that is transferred.” (Emphasis added.) (Internal quotation marks omitted.)); O’Neill v. De Laney, 92 Ill.App.3d 292, 297 (1980) (holding that third party could challenge validity of a contract where she established a “significant and direct interest” in its validity) [emphasis added]. Ibid
Back Dating an AOM, or Substitution of Trustee
With livery of seisin it was the ceremony (and witnesses) that created the conveyance. With the Statute of Frauds it was the writing (and witnesses) that created the conveyance. These were both “present tense” transactions.
Why have we seen so many back dated, past tense, writings in the past several years? Can a present tense transaction be converted to one that is past tense?
The 1st Circuit Court of Appeals in Juarez v Select Portfolio, No. 11-2431, February 12, 2013, handed down what many believed to be a new holding in saying “In this case, even a perfunctory scrutiny of the ‘Corporate Assignment of Mortgage’ attached by Juárez to her amended complaint reveals that we are before a document that was executed after the foreclosure and that it purports to reference, by virtue of its heading, a pre-foreclosure assignment. Specifically, the heading reads ‘Date of Assignment: June 13, 2007,’ and it states that the document was executed ‘[o]n October 16, 2008.’ However, nothing in the document indicates that it is confirmatory of an assignment.”
This section above, and surrounding, was interpreted as meaning back dating of an Assignment of Mortgage was impermissible, and that this was a new holding. I respectfully beg to differ.
Doing some random research in late 2012 I came across a nice 6th Circuit case from 1962. It seems our jurists at that time had more awareness in respect of the history of conveyance of ownership and interests in real property. They weren’t ambiguous about it. While it appears more recently to have been forgotten, it is long standing and well established that conveyances of interests in, or ownership of, land and real estate are present tense transactions only. “Land cannot be transferred except by writing and necessarily is in the present tense. The writing itself is the transfer when executed [emphasis added].”Belcher v Elliot, 312 F.2d 245 (6th Cir. 1962).
Consider in the alternative an analysis by an attorney with whom I consult:
“Here, the purported ‘assignment’ would need to be recorded on or about February 2, 2010, but the actual assignment had not yet occurred, making the task a legal impossibility. The soonest the June 11, 2010 ‘assignment’ could have been recorded would be June 11, 2010 – the day it allegedly occurred. Thus, the recording could never be timely completed to effectuate a February 2, 2010 transfer date. KRS § 382.360(3), supra. (The backdating of a transfer of interest in real property raises other issues as well.
For example, if A owns Blackacre on June 1, 2010 when B is seriously injured on the land due to a latent defect, but A transfers his interest in Blackacre on June 11, 2010, backdating the transfer to be ‘effective’ as of February 2, 2010, does A escape liability for the injuries incurred by B?