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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Knows About Notes
Regular Forum participants will recall this Forum participant's frequent admonition that ownership and holdership of a promissory note is all about UCC indorsement and delivery.

In a recent decision of the U.S. Bankruptcy Court for the Northern District of Ohio, U.S. Bankruptcy Judge Pat E. Morgenstern-Clarren gives us a lesson on the UCC's indorsement and delivery requirement in dismissing a Bankruptcy claim filed by Ocwen Loan Servicing LLC on behalf of U.S. Bank N.A..  Better yet, it appears that sanctions may still follow!

The case is:

In re Wells, Case No. 08-17639, Chapter 13, UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OHIO, EASTERN DIVISION, 2009 Bankr. LEXIS 1378, June 19, 2009, Decided.

This case may be obtained from Lexis or from PACER.  Perhaps a particpant with Lexis or PACER access can furnish a copy for posting at the Legal Lounge.

In this case, Ocwen Loan Servicing LLC submitted a proof of claim claim to the Bankruptcy Court purporting to act on behalf of U.S. Bank National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4.

The promissory note and mortgage were made out in favor of Aegis Mortgage Corp., as "Lender".  There was no indorsement shown on the promissory note furnished to the Court in support of the claim.  Instead, the attorney for the claimant assured the Court that he was in the process of obtaining an "allonge".  Neither was there any evidence of the delivery of the promissory note to the claimant.

Here is a brief synopsis of the Court's discussion of the indorsement and delivery issues:

A promissory note is usually a negotiable instrument, which provides the person entitled to enforce the note the right to payment of the obligation it represents.[FN 6]  A person is entitled to enforce a note when that person falls into one of three categories.  OHIO REV. CODE § 1303.31(A); see also U.C.C. § 3-301 (2002).  One such category is when the person is a holder of the note.[FN 7]  Generally, a person is a holder of the note by having physical possession of the note, which has either been endorsed to that person or endorsed in blank.[FN 8]  OHIO REV. CODE §§ 1303.31(A)(1) and 1301.01(T)(1); see also U.C.C. §§ 3-301, 1-201 (2002).  A note may be endorsed by an allonge, which is a paper “affixed to the instrument,” which then becomes part of the instrument.  OHIO REV. CODE § 1303.24(A)(2); see also U.C.C. § 3-204 (2002); Adams v. Madison Realty Dev., Inc., 853 F.2d 163, 167 (3d Cir. 1988) (discussing why an endorsement
written on a separate piece of paper must be affixed to the note). 

Once a note is endorsed, its negotiation is complete upon transfer of possession.  OHIO REV. CODE §§ 1303.24(A)(1)(a), 1303.21(A); see also U.C.C. §§ 3-204, 3-201 (2002).  The transfer of possession requires physical delivery of the note “for the purpose of giving the person receiving delivery the right to enforce the instrument.”  OHIO REV. CODE §§ 1303.22(A) and cmt. 1, 1301.01(N); see also U.C.C. §§ 3-203 cmt. 1, 1-201 (2002); Vitols v. Citizens Banking Co., 10 F.3d 1227, 1233 (6th Cir. 1993); Norfolk Shipbuilding & Drydock Corp. v. E.L. Carlyle (In re E.L. Carlyle), 242 B.R. 881, 887 (Bankr. E.D. Va. 1999); Grant S. Nelson & Dale A. Whitman, 1 Real Estate Finance Law § 5.28 (5th ed. 2008).  However, “. . . possession alone does not establish that the party [in possession of a note] is entitled to receive payments under it.” Citizens Fed. Sav., 78 Ohio App.3d at 287.

There is no evidence before the court that the note executed by Michelle Wells was negotiated from Aegis Lending Corporation to U.S. Bank.  The note is, therefore, still payable to Aegis Lending Corporation.  The corollary is that U.S. Bank has not shown that it had an interest in the note on October 15, 2008, when it filed the proof of claim in this case.  Nor has U.S. Bank shown that it has such an interest today.


[6]  OHIO REV. CODE §§ 1303.03, 1303.31; see also U.C.C. §§ 3-104, 3-301 (2002).  The court finds that the note signed by Michelle Wells in this case is, in fact, a negotiable instrument.

[7]  A “person” under OHIO REV. CODE § 1301.01 “includes an individual or an organization.”  See also U.C.C. § 1-201 (2002).

[8]  A person may be entitled to enforce a negotiable instrument if it has possession of the note without proper endorsement(s); however, proof that the person has rightful possession is required.  OHIO REV. CODE § 1303.22, cmt. 1; see also U.C.C. § 3-203, cmt. 1; Citizens Fed. Sav. & Loan Ass’n of Dayton v. Core Inv., 78 Ohio App.3d 284, 287, 604 N.E.2d 772, 774 (Ohio Ct. App. 1992), cause dismissed by appellant, 64 Ohio St.3d 1410 (1992).


The decision also took note of language appearing within the purported assignments (probably forgeries) which seemed to convery Aegis' interest in both the promissory note and mortgage.  Noting that ownership and the right to enforce are transfered by indorsement and delivery, the Court declared: "An attempt to assign a note [within the mortgage assignment] creates a claim to ownership, but does not transfer the right to enforce the note.".


Ominously for Ocwen and U.S. Bank, the Court also gave the following indication at the conclusion of its decision:  "The court will issue a separate show cause order on U.S. Bank regarding its factual and legal bases for filing claim 1."

I would expect sanctions to follow!

Three cheers for U.S. Bankruptcy Judge Pat E. Morgenstern-Clarren!!

REMEMBER:  With respect to the promissory note it is ALL ABOUT indorsement and delivery.
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I have a copy of the Memorandum and Order but do not know how to upload on the website.  .The order is in pdf format and that is not one of the formats supported here.  If someone could tell me who to send it to or give me instructions on uploading, I would be more than happy to do so.
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I downloaded the Memorandums and Opinion regarding the trashing given to Aegis and Ocwen.  In addition I have the Court Order for Aegis and Ocwen to appear and show cause WHY they filed the claims (they are in hot water).  The OSC also directs that officers of Aegis and Ocwen show up PERSONALLY.

I don't have a clue HOW to post these PDF files either in the forum or the legal lounge.  These are dynamite to read.

If the moderator or responsible person will send me a PM I'll reply with the PDF files.  Here is a cut and paste from the 6-19-2009 Order to Aegis and Ocwen.  If I were these two companies I'd start thinking about how  big a check to bring the homeowners and an additional amount for BAIL!

For the reasons stated in the memorandum of opinion and order sustaining the debtors’ objection to claim 1 entered this same date, U.S. Bank National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4, and Ocwen Loan Servicing LLC, are to appear through officers with general corporate responsibility on July 21, 2009 at 8:30 a.m. in Courtroom 2A, Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, Ohio and show cause regarding the factual and legal bases for filing claim 1.

Attorney Christian Niklas, who represents U.S. Bank, is to serve this order on: (1) an appropriate corporate officer of U.S. Bank National Association, as Trustee for the Registered Holders of Aegis Asset Backed Securities Trust Mortgage Pass-Through Certificates, Series 2005-4; (2) an appropriate officer of Ocwen Loan Servicing LLC; and (3) general counsel for those entities. Mr. Niklas is to file a certificate of service within 5 days of the entry this order stating the names and addresses of the officers served.

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Guys correct me if I'm wrong...But isn't this U. S. Bank National Association still part of the ole Wells Fargo, Homeq, Wachovia,Option One and Hsbc nightmare? I bet you'll find I believe their all in the same basket of hog wash....


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Please email, and include your pdf files in your email.

Thank you.
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The Equitable One
This is a very good read in understanding the issue involved.

Nice to see that a BK court is "in the know" and acting in accordance with the facts and law.

I've already read the order. I'm looking forward to seeing the additional info you have Ken.

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I emailed the PDF files to the Moderator this morning.  If anyone wants them direct just send a PM to me.

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tired and tattered
Kathy I believe you are right. I have HomEq and when I sent my QWR letter they informed me that US Bank N/A was the trustee of my loan. I had asked for the owner of the mortgage and never received and answer. Only the trustee.
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I found this old book on Google Books that has some old stuff about negotiable instruments in Ohio.  I know it is old, but I found it searching for an old case the banks were using so maybe it is still OK:

Negotiable Instruments
The digest of the decisions of the courts of Ohio from the ..., Volume 6 By William Herbert Page

Can anyone say if this is good?
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Hmmm..... I would come back with an allonge indorsed by the original lender in blank, turning it into a bearer instrument, but then again I'm in California so that type of sh$t is allowed in this State...
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John Lewis

Quote: Knows About Notes:


“REMEMBER: With respect to the promissory note it is ALL ABOUT indorsement and delivery.”

?What is the best strategy to prove or disprove ‘delivery’?  Is it through discovery ie to determine ones process of accepting delivery of the ‘note’?  And, how would you serve discovery if a ‘note’ has been assigned several times eg: to validate delivery for each assignment in the chain?

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John Lewis wrote:

Quote: Knows About Notes:


“REMEMBER: With respect to the promissory note it is ALL ABOUT indorsement and delivery.”

?What is the best strategy to prove or disprove ‘delivery’?  Is it through discovery ie to determine ones process of accepting delivery of the ‘note’?  And, how would you serve discovery if a ‘note’ has been assigned several times eg: to validate delivery for each assignment in the chain?

A note endorsed in blank is a bearer instrument.  Generally, possession of the instrument allows for enforcement of the instrument.  It's almost the same as cash.  When a bank transfers a note it would be by overnight Carrier, insured, with a delivery receipt.  

This receipt would be the best evidence of delivery.  Aside from an affidavit of the actual individual that received the note at the bank (good luck with that one) it may be the ONLY admissible evidence of delivery if a homeowner properly makes a well researched objection.  

This information (including the delivery receipts) would seem to be available through discovery.  However, this is NOT helpful to a defendant.  

Some homeowners are under the misconception that the note never made it to the trust, that the note was destroyed for some reason, these have proved to be incorrect.  The servicer is the real party pushing litigation, not the trustee.  These documents (delivery receipts) are not in the servicer's files, they are in the trustee's files (just like the PSA says).  The REAL problem the Servicer has is a PROOF problem not a securitization or delivery problem.  They are going to have trouble PROVING when the note was delivered.  In fact, this is the last thing on the foreclosure mills mind.  Asking, and even COMPELLING the servicer (Plaintiff) to produce these documents would be a formula for disaster.  

You are essentially PROVING the Plaintiff's case for them, taking away all questions and doubt.

Homeowners would be better off making a well researched argument showing the requirement for the Plaintiff to PROVE delivery and watch them flail around for a while.  Object to their inadmissible affidavit attempting to prove delivery and watch them flail around some more.  In the end, a homeowner should still have the expectation in the back of their mind that some kind of delivery receipt may be produced by the real trustee at some point.  You would NEVER want to HELP them with this and COMPEL them to produce something that will lead to your quick demise.

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I would also add, by not requiring the Plaintiff (servicer) to produce a receipt, you are giving the Plaintiff the Maximum opportunity to perjure themselves as well as produce fraudulent receipts.  This is a common theme in many posts, don't take them to school and TELL them what they need to prove their case.  Let them tell their story in discovery and poke holes in it. 

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John Lewis

ok, I think i finally get it -- I believe William A Roper Jr said, and this is from my memory, "Let the banks put in their information, then you [the homeowner] attack that information."  THANK U VERY MUCH FOR YOUR INPUT! jl

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In a post a little more than a year ago, Mr. Roper gave a few suggested baseline discovery questions:


Defensive Discovery: Starting Off On the Right Foot!!-4893757


As you will see, this thread was then hijacked by Texas who presented a much larger list of discovery questions which took the thread in a different direction.


Mr. Roper's suggested questions are really quite interesting and suggest a very thoughtful discovery strategy not found in the various long lists of discovery questions posted by Ann, et al.


One of the core problems in pursuing defensive discovery is that the foreclosure mills routinely engage in serious discovery abuse.  The plaintiff will Object and refuse to answer many questions which under the law and the rules they could be compelled to answer if the Judge simply enforced the rules after a motion to compel.


Defendants who simply take some extended list of discovery questions from amongst the many lists floating around (including those posted by Ann) are playing into the plaintiff's hands and making enforcement of discovery difficult.


As Mr. Roper points out in his post, the plaintiff's objection is likely to assert:


You will be told that your question is unduly burdensome, oppressive, costly and that it inquires into matters outside of the scope of permissible discovery.


Look carefully, at Mr. Roper's questions and then compare these with the questions suggested by "Texas".


Mr. Roper's questions are open ended and invite the plaintiff to identify and explain any document destruction, whether any documents are lost or missing and identify and explain whether any documents have been altered, forged, fabricated, etc.


Bear in mind that Interrogatories must be answered under oath. 


Think about ALL of the myths about promissory notes or other documents being destroyed.  Mr. Roper has expressed and others of us believe that these myths are untrue.  If there are no destroyed documents, then the answer to this question is very simple for the plaintiff.  The answer should be simply "None".  How can a plaintiff assert that this question is unduly burdensome, oppressive or costly to answer?


Similarly, the question as to lost documents has the same simple appeal.  If there are no documents that are lost or missing, then again the answer is simply "None" or other words to this effect.  This is also a question that would be almost impossible for a court to find to be burdensome or oppressive.


In most cases, this question will be of minimal import, but probably deserves to be asked anyway.  In cases where there has been any allegation of a lost note, the question is really important.  It asks for an explanation about the loss of the instrument.


The third question though is a real gem.  It asks the plaintiff to self identify any documents which have been forged, fabricated, altered, etc.  For all of the various assertions by the swindlers and scam artists about "pretender lenders" and fraud, instead of asserting fraud, Mr. Roper's question asks the plaintiff under oath to identify any fraud.


Now this may seem fairly passive, it is really quite brilliant.  Many of the assignment forgeries were procured by foreclosure mills from various professional contract forgers and perjurers, to use Mr. Roper's words.  Proving that a document is a forgery or fabricated solely for use in the suit can be problematic, particularly when the contract forgers and perjurers are out of state and sometimes no longer in business.


Mr. Roper's question asks the plaintiff to identify under oath the questionable documents.


Once again, if there are no questionable documents, the plaintiff can simply answer "None".  The question can hardly be described as burdensome or oppressive UNLESS the plaintiff's fabrication, forgery and document alteration activity is so extensive that it would shoick the conscience of the court.


However, if the plaintiff answers this question under oath and specifies that there are no such documents, if some documents can later be proven to involve fraud, the plaintiff now has an additional problem of perjury.


One might think that the perjury is minor compared to the forgery.  But bear a couple of things in mind. 


First, very often, the forgery was fabricated and uttered by an entity other than the plaintiff.  The perjury will be by the plaintiff.


Second, the plaintiff is often careful not to expressly embrace the forged document.  If you look carefully at pleadings, most often the forged assignments are not authenticated by the plaintiff.  That is, rarely will the plaintiff put the assignment in by affidavit, proving it up and swearing to it.  Instead, they will attach the assignment to some "Notice of Filing of Assignment".  They keep the forgery at arms length.


When the assignment is attacked or challenged, they immediately alter their story and claim that the assignment was unnecessary and that they are not relying on the assignment.


When the defendant attacks the assignment, the plaintiff backs away.  So instead of attacking the assignment right away, in several posts, Mr. Roper has encouraged defendant to get the plaintiff to wrap its arms around the forged assignment. 


This third suggested interrogatory and associated request for production give the plaintiff an initial opportunity to perjure itself in respect of the forged assignment and other documents used in the case.


In other posts, he encourages defendants to present the assignment to the plaintiff and ask that the plaintiff authenticate the assignment and even admit that they are relying upon it.


Of particular importance is keeping the first discovery request very short.  The foreclosure mill is going to stonewall.  Where does a defendant want to be in asking the corut to compel an answer?  Is it better to be standing in front of the Judge with a short list of compelling questions the answers to which a defendant is clearly entitled?  Or is the defendant better off with a twenty page list of wingnut questions which can be quickly determined to be unnecessary


A defendant presenting one of Texas' suggested discovery requests or one of the many documents linked by Ann is likely to find that the court will NEVER grant a motion to compel and might even enter a protective order.  The appellate courts will almost uniformly uphold the trial court's discovery decisions and will most certainly do so where the defendant has shot himself in the foot by presenting an unfocused and lengthy discovery request which drifts into wingnut land.    

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John Lewis

Totally in agreement with you re William A Roper Jr post on discovery strategy.  As a matter in fact, in my own preparation for when I do get serviced, my discovery is ready to go right along with my Motion to Extend Time.


Also, agree with you re Ann's suggested discovery - way to burdensome and without a well defined strategy or a defined end result?  But, that’s not to say Ann’s input is not appreciated.


Also, I really appreciate the extended analyis you provided as to the Roper “rationale” for the use of his suggested discovery ~ that too is much appreciated.


Re Texas: I quote from the thread:


“MI Court of Appeals Shuts Down MERS in Michigan: Residential Funding LLC v. Saurman”


Texas: 07/20/2011 stated in part: “It has been noted that in the past William A. Roper Jr. and I did not see eye to eye, but his offering of advice to deal with the courts should be heeded.”


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Also, I really appreciate the extended analysis you provided as to the Roper
“rationale” for the use of his suggested discovery ~ that too is much appreciated.


John, I think that Mr. Roper sets forth his rationale pretty clearly across a wide variety of posts.  For example, take a look at his post in the thread "Remedies for a Wrongful Foreclosure":


If you were to have immediately interposed a defense based upon a produce the note strategy, the plaintiff just goes to the vaults of the institutional custodian and obtains the original promissory note.  THEN YOU LOSE.


By contrast, a BETTER STRATEGY is to allow the plaintiff to wrap its arms  around its own defective evidence, an often UNINDORSED COPY of the promissory note and a forged assignment.  Let then bring in a perjured affidavit.  Basically, you WANT them to plead the forged and perjured evidence rather than quickly wisening up and getting truthful evidence.  Only AFTER they are committed, do you want to show the falsity of this


The persistent premise underlying Mr. Roper's defensive strategies is that it is not the securitization that was defective, but rather the foreclosure mills and servicers are taking shortcuts in foreclosure to include forgery, evidence fabrication and perjury.  They do this routinely when they think that the defendant is ignorant, unrepresented and not paying attention.  Then they stop and shift strategies, becoming more cautious and careful when a borrower seems to be smart and/or well represented.


Mr. Roper gives a lot of examples that support his model of foreclosure mill behavior.  He has been at this far longer than swindlers like Neil Garfield, who has been shown to have plagiarized some of Mr. Roper's early research, which Mr. Garfield then sells to unsuspecting borrowers presenting the material without proper attribution as his own work.


I recall that there were some other suggestions about discovery by Mr. Roper that need to be found and resurrected with a renewal of those threads.  You and George have done a good job resurrecting some of those older threads. 


Unfortunately, in trying to set forth his explanations, Mr. Roper was continuously distracted by the self-serving posts of various swindlers like Mike H. and Chris Dix.  It is easy to see why Mr. Roper became bored when the MS Fraud site administrators removed several threads to which he had devoted energy exposing the fraudsters.  That was really disgraceful!

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