THE DEVIL IS IN THE DETAILS:
WHEN DID THE TRUST ACQUIRE THE NOTES AND MORTGAGES -
A STUDY OF 4,580 FLORIDA ASSIGNMENTS
BY LYNN E. SZYMONIAK, JUNE 5, 2011
In 2010, mortgage bankers involved with mortgage-backed securities
adopted a mantra: “The mortgage follows the note.” Tom Deutsch,
Executive Director of the American Securitization Forum (“ASF”),
appeared before the U.S. Senate Banking Committee, and in speeches
to mortgage bankers, to argue that $7 trillion dollars of securitized
mortgage debt was transferred in a legally sound matter.
The mantra became necessary as revelations piled up that mortgages
had not been assigned to mortgage-backed trusts in the manner
described in the trusts documents. The most important trust
document, the “Pooling and Servicing Agreement (“PSA”), spells out
in the definitions section that “mortgage file” documents include the
promissory note, the mortgage, a mortgage assignment and a title
insurance policy. The trusts promised investors that they would obtain
these documents for each loan in the pool of loans that make up the
The manner in which the trust acquires the documents is also set out –
usually in Section 2.01 of the PSA – which is usually titled
“Conveyances of Mortgages.” This section specifies that the note itself
should be the original note, indorsed to the trust or indorsed in blank.
This recognizes that the trust was not the original lender and there
were intervening owners of the note. The mortgage also needs to
reflect that the trust is the owner of the mortgage. While notes are
indorsed, usually on the last page of the note itself, mortgages are
assigned, most often in a separate document.
Many trust specify that the mortgage must be assigned to the trust.
Some trusts allowed the mortgage to be assigned “in blank” if such
assignment would be acceptable under the laws of the state where the
property was located. A mortgage assigned “in blank” means that the
name of the new owner, or assignee, is not specified. The name of the
entity acquiring the mortgage is the only item that may be left blank
on an assignment made “in blank.”
There were widespread problems with assignments in blank. In most
states, the question of the validity of a blank assignment was
In addition to the legal issue presented, there were massive technical
difficulties. On many assignments, other information was also left
blank – particularly the effective date of the assignment. Under the
terms of the PSA, assignments were to have been delivered to the
trust “in recordable form.” This meant that even assignments with the
assignee unspecified were supposed to have been signed and dated by
the prior owner so that only the name of the trust could be inserted
and the assignment filed if necessary.
Many trusts obtained assignments, in blank, signed by an officer of the
lender. A loan made by American Brokers Conduit, for example, was
signed by an officer of American Brokers Conduit and notarized in
Suffolk County, New York, where American Brokers Conduit was
located. On tens of thousands of mortgages, however, the lender was
not the mortgagee and, therefore, could not be the assignor. On these
loans, Mortgage Electronic Registration Systems, Inc. (“MERS”) was
identified as the mortgagee.
At some point, this problems appears to have been recognized on
many assignments. On these documents, where the name of the trust
has been hand-written into the document – an attempt has also been
made to change the name of the assignor so that the words “Mortgage
Electronic Registration Systems Incorporated as Nominee For” are
inserted (hand-written) above the name of the assignor. These
“Assignor-fixed” documents, however, are signed by an officer of the
Lender, not MERS, and the signer identifies himself/herself as an
officer of the Lender – not MERS.
On still other Assignments, the County and State where the document
was notarized was also left blank. When the documents were filed,
this information was also added – hand-written – to the document.
Instead of the place of notarization, however, the place where the
property was located was inserted. As a result, on many assignments,
the Notary stamp states that the Notary is qualified in Suffolk County,
New York (the location of American Home Mortgage) but the County
and State where the document was notarized are identified as, for
example, Lee County, Florida.
Many trusts did not require assignments for all loans in the asset pool.
Many trusts permitted MERS loans to simply be transferred on the
MERS system to the trust by the closing date of the trust. But even
with MERS loans, the mortgage assignments prepared by the servicers
from 2008 – 2011 (years after the closing dates of most of the trusts)
showed that the loans were still registered on the MERS system in the
names of the original lenders.
With these many problems with the original mortgage assignments, it
is not surprising that the ASF began aggressively asserting that
mortgage assignments are not even necessary because of the common
law principle that “the mortgage follows the note.” The ASF reported
that 13 major law firms agreed with the ASF.
Lesser-paid, but more objective authorities, particularly Georgetown
Law Professor Adam Levitin, wrote an article/post, “The Big Fail,” after
the U.S. Bankruptcy Court decision for the District of New Jersey in
Kemp v. Countrywide Home Loans, Inc., where evidence was
presented that the note never was delivered to the trust. Professor
Levitin posited “failure to properly transfer the mortgage meant that
the mortgages were never actually securitized.”
The issue of mortgage assignments became increasingly important,
because of the widespread appearance of fraudulent and forged
mortgage assignments to mortgage-backed trusts, produced by over a
dozen mortgage servicing companies, from 2008 through 2011.
With the filing of these servicer-produced documents, the problem of
missing documents was transformed into a problem of fraudulent
documents. Moreover, these assignments not only call in to question
whether and when the trusts received the mortgages – they also call in
to question whether and when the trusts received the NOTES. Almost
all of these servicer-made assignments also purported to assign the
An examination was made of every assignment of mortgage filed in
three Florida counties, Hillsborough, Lee and St. Lucie, to six groups of
trusts: Bear Stearns, GSAMP, GSAA, Morgan Stanley, Structured Asset
Investment Loans (“SAIL”) and Structured Asset Mortgage
Investments (“SAMI”) trusts for a three-year period, 2008 – 2010.
Every Assignment of Mortgage also included the PROMISSORY NOTE in
the Assignment . The r e we r e no original documents
(contemporaneously dated to correspond to the trust closing dates) in
the 4,580 assignments filed in the three Florida counties. All of these
assignments were prepared by mortgage servicers years later.
When did the Bear Stearns, GSAMP, GSAA, Morgan Stanley, SAIL, and
SAMI trusts acquire the mortgages AND NOTES that were the pooled
assets of the trusts? According to these documents, in every case
where an effective date was stated, the mortgages AND NOTES were
not assigned to the trusts until several years after the closing dates of
A small percentage of these assignments state that the originals were
lost or destroyed, but do not state when this loss or destruction
occurred, other than “on or before…” a date that corresponds to the
filing of the foreclosure action. A small percentage also states that the
assignments took place “on or before” a certain date, leaving the
actual date unspecified.
Only a very few assignments state in the document title that the
assignment was an “Assignment of Mortgage and Promissory Note.”
Most do not mention the promissory note in the title of the document,
but include language in the mortgage assignment that specifically
states that the note is also being assigned.
Typically, the language regarding the promissory notes is included at
the end of the first paragraph on these assignments stated as follows:
"...together with the Note of Obligation described in said Mortgage(s),
and the money due and to become, due thereon, with interest therein
Another common version states, immediately after the legal
"...together with the Note and indebtedness secured thereby."
Still another version states, immediately after the legal description:
"Together with the note and each and every other obligation described
in said mortgage and the money due and to become due thereon."
A fourth version states:
"...together with the note of obligation described in said Mortgage(s),
and the money due and to become, due thereon, with interest as
There is also a version that claims attorney's fees:
"Together with any and all notes an obligations therein described or
referred to, the debt respectively secured thereby and all sums of
money due and to become due thereon, with interest thereon, and
attorney's fees and all other charges."
The DocX version states:
"...the following described mortgage, securing the payment of a
certain promissory note(s) for the sum listed below, together with all
rights therein and thereto, all liens created or secured thereby, all
obligations therein described, the money due and to become due
thereon with interest, and all rights accrued or to accrue under such
These documents show that the note followed the mortgage – and not
vice-versa. An examination of these assignments shows that the
parties to the transfer effectuated the transfer of the mortgages and
notes years after the trusts closed.
If the Trusts did not acquire these mortgages and notes until years
after the closing dates of the trusts, what was in those pools of loans
sold to investors? The trusts seem to have sold a list of loans
they intended to acquire.
A very few of these Assignments seem to recognize the problem of the
Trust acquiring the mortgages and notes many years after the trust
closing dates and include the following language:
"Assignor hereby acknowledges that this assignment is being recorded
as a formality pursuant to the requirements set forth under § 701.02,
but that such be the intention of the parties herein that delivery of the
subject note and mortgage be established as evidenced by electronic
or physical delivery, of the note and mortgage and related documents
that such delivery occurred on occurred prior to date of any litigation,
hereto for, and that date be the delivery date has been established by
the expressed intention of the parties, herein."
(Note: this is the EXACT wording of the paragraph - despite what
appears to be obvious errors and nonsense.)
In Hillsborough County in 2008, 2009, and 2010, there were 641
Assignments to Bear Stearns Trusts; 298 Assignments to GSAMP
Trusts; 163 Assignments to GSAA Trusts; and 746 Assignments to
Morgan Stanley Trusts, 153 Assignments to SAIL Trusts; 429
Assignments to SAMI Trusts; or 2,430 Assignments total.
In Lee County in 2008, 2009, and 2010, there were 506 Assignments
to Bear Stearns Trusts; 203 Assignments to GSAMP Trusts; 188
Assignments to GSAA Trusts; 607 Assignments to Morgan Stanley
Trusts, 100 Assignments to SAIL Trusts; 373 Assignments to SAMI
Trusts; or 1,789 Assignments total.
In St. Lucie County in 2008, 2009, and 2010, there were 78
Assignments to Bear Stearns Trusts; 61 Assignments to GSAMP Trusts;
24 Assignments to GSAA Trusts; 161 Assignments to Morgan Stanley
Trusts, 11 Assignments to SAIL Trusts; 26 Assignments to SAMI
Trusts; or 361 Assignments total.
Courts will be deciding issues related to the assignments of mortgages
and notes for years to come.
Did servicers produce millions of assignments of mortgages and notes
to trusts with the effective dates of the assignments wrongly states –
usually by several years?
If the original documents were missing, did the trustees, document
custodians and accountants report to the Securities & Exchange
Commission that they had discovered a failure to comply with
Regulation AB, Item 1122(d)(4)(ii): ”Mortgage loan and related
documents are safeguarded as required by the transaction
agreements.” The transaction agreements, including the PSAs, almost
universally told investors that the mortgage documents – defined as
the indorsed note, the mortgage and the mortgage assignment –
would be safely kept in the fireproof vault of the document custodian.
Did the securitizers and subsequent trustees and custodians make
thousands of false statements to investors and the SEC about
obtaining and maintaining the loan documents?
Have foreclosures by trusts gone forward where the evidence of
ownership of the note, the mortgage or both has been manufactured
by the trusts or their agents?
What is the most equitable relief for investors and homeowners? The
recovery of the American economy rests on this answer.
Lynn E. Szymoniak, Esq.
Szymoniak Firm, P.A.
West Palm Beach, Florida
Summary of credentials:
1972 graduate of Bryn Mawr College; 1979 graduate of Villanova Law School; admitted to practice in Florida, Pennsylvania & Oklahoma; 11th Circuit Court of Appeals; former chair, Workers' Compensation Committee of the Tort & Insurance Practice Section of the American Bar Association; former partner, Adorno & Zeder, P.A., Miami, Florida; former Senior Counsel, National Council on Compensation Insurance, Boca Raton, Florida; founding member, South Carolina Task Force on Workers' Compensation Fraud; former co-chair, premium fraud subcommittee, Florida Task Force on Insurance; Editor, Fraud Digest.
Expert Witness for the Government in Insurance Fraud Matters:
U.S. v. Thomas D. King, 3:2006cr00212, Middle District of Florida; U.S. v. Donald E. Touchet, Richard E. Standridge and Robert J. Jennings, 3:2007cr00090, Middle District of Florida, 2008 WL 111306M; The People of the State of California v. Mitchell Zogob, Orange County, California; U.S. v. James Kernan, 5:2008cr00061, Northern District of New York.
Lecturer and author on Mortgage Fraud Issues, including:
Lack of standing by banks attempting to foreclose; fraudulent assignments prepared by document mills; false statements regarding lost notes; the many failings of securitized trusts; the complicity of foreclosure law firms; title insurance issues in mortgage fraud.
Lecturer on workers' compensation issues for:
FBI; major insurance companies; the Premium Audit Advisory Service; the National Association of Manufacturers; Kansas Department of Labor; Massachusetts State Attorneys Office; Risk and Insurance Management Society; South Carolina Department of Consumer Affairs; Staff Leasing Association; West Virginia Department of Labor; Council on Education in Management; South Carolina Association of Counties.
Clients have included:
Alliance of American Insurers; Bankers Insurance Group; Companion Property & Casualty Insurance; Capital City Insurance Company; Fireman's Fund Insurance Company; First Commercial Insurance Company; Liberty Mutual Insurance Company; Risk Transfer Holdings; the South Carolina Department of Insurance; Sunz Insurance Company and Travelers Insurance.
Liberty Mutual Insurance Co. v. Employee Resource Management, Inc., 176 F.Supp.2d 510, D.S.C., March 29, 2001; Liberty Mutual Insurance Company v. M.C.K., Inc., 815 N.E.2d 644, 62 Mass.App.Ct. 1103.
- An Officer of Too Many Banks (January, 2010), Fraud Digest.
- Compare These Signatures (January, 2010), Fraud Digest.
- Too Many Jobs (January, 2010), Fraud Digest.
- Deutsche Bank National Trust Company and Foreclosure Document Mills (January, 2010), Fraud Digest.
- Bridge Painters Case Study (March, 2009), presented to South Carolina Public Risk Management Association.
- Workers' Compensation "Bust-Out" Schemes (2008), Fraud Digest.
- Regulation of Employee Leasing Companies to Prevent Insurance Fraud (2007).
- Federal Criminal Prosecutions of Employment Practices in 2007, Fraud Digest.
- Developments in the Prosecution of Staff Leasing Fraud (2005).
- A Picasso, A Porsche and Box Seats To the Mighty Ducks (How $3 Billion In Payroll Was Covered By Sham Insurance) (2005).
- The Burgeoning Business of Phony Insurance (2004).
- Physician/Felon: Federal and State Prosecutions of Doctors (2004).
- Top Twenty Employee Leasing Convictions, Ranked By Prison Term (2002), Mealy's Litigation Reporter.
- 101 Persons of Interest in Staffing Companies (2002).
- Using Experience Rating Date To Prove Insurance Premium Fraud (2000), focusFraud, Massachusetts Insurance Fraud Bureau.
- Recent Developments in Workers Compensation Law (1999)(with Lori Lovgren & Michael Camilleri), Tort and Insurance Law Journal.
- Alcoholism: The Rights of Employees and Employers (1990), Legal Insight.
- Employee Leasing Issues As Observed By NCCI (1989).
My interest is in workers' compensation issues, particularly in preserving the fairness of the system.
Workers' compensation insurance companies are frequently the targets of insurance fraud schemes, including:
- Misclassification of payroll into incorrect, lower-rated codes;
- Misclassification of employees as independent contractors;
- Unreported cash payroll;
- Experience modification avoidance;
- Phantom sub-contractor payments;
- Staged-accident schemes;
- Undisclosed policy sharing/piggy-backing; and
- Unauthorized issuance of policies and certificates of insurance.
Employers/policyholders are frequently the targets of abusive insurance practices, including:
- Transfer of payroll into higher-rated codes after the policy expires;
- Application of an incorrect experience modification factor;
- Excessive rates through abuses of the rating systems, especially Loss Cost Multipliers;
- Charges for taxes and assessments not allowed under insurance regulations;
- Failure to investigate possibly fraudulent claims;
- Failure to pay claims and provide workplace safety services required by the policy and by state laws;
- Selling of unlicensed, worthless "alternative" insurance products.