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.
Articles |The FORUM |Law Library |Videos | Fraudsters & Co. |File Complaints |How they STEAL |Search MSFraud |Contact Us
Sandy
How long should it take for the servicer to retrieve the original note? I just learned that my servicer is waiting for the original note and mortgage to come from the document custodian before the law firm proceeds.



Quote 0 0
Bill

It depends if the Servicer needs to go to Staples to get more ink for their printer. 

Quote 0 0
William A. Roper, Jr.
Quote:
Sandy said:
How long should it take for the servicer to retrieve the original note?  I just learned that my servicer is waiting for the original note and mortgage to come from the document custodian before the law firm proceeds.


Sandy:

While I do not know the precise answer to your question, I can assure you that it really ought not take very long if the proper request is made.

The mortgage investor, the servicer and the institutional custodian are going to have some established procedures in place for requests, authorization and delivery.

Since the original promissory note, indorsed in blank is a bearer instrument, it is going to be handled and treated much like it was CASH.  The mortgage investor and institutional custodian is going to want the servicer to TAKE FULL RESPONSIBILITY for the security of this document.  And it seems likely that it would be sent either by insured registered U.S. Mail OR by overnight courier Federal Express, UPS or DHL.

More than two decades ago, I would send the promissory notes after origination to our investors by Federal Express.  But I never had to conduct a foreclosure as a Lender, so I have never been involved in this process myself.

The institutional custodian keeps the promissory notes in vaults and access is strictly limited.  No one goes in or out of the vaults with both authorization and logging of the visit, the reason for the access and materials introduced into or removed from the vault.  Typically, no single employee would be permitted unaccompanied access.  That is each bank employee entering the vault is likely to be accompanied by another employee.

See the deposition of Angela NOLAN, of JP Morgan Chase for some additional insight into the operation of an institutional custodian:


*

Several additional ancillary notes are probably also in order. 

First, note that the risks associated with removal of the promissory note from the vault and the protection of the note are near the heart of the reason why the servicers prefer to plead the COPY of the note obtained from the servicer's imaging system.  This copy is often unindorsed.  The servicer does NOT want the responsibility for the note.  Moreover, the written procedures of the major mortgage investors DO NOT REQUIRE THE SERVICER TO OBTAIN THE NOTE AND ACTUALLY DISCOURAGE IT.

Note this language from the FNMA Servicers' Guide (2010):
2010 Servicing Guide
Part VIII: Foreclosures, Conveyances and Claims, and Acquired Properties
VIII, Chapter 1: Foreclosures (10/31/08)
VIII, 102: Initiation of Foreclosure Proceedings (10/01/08)
". . .  In most cases, a servicer will have a copy of the mortgage note that it can use to begin the foreclosure process.  However, some jurisdictions require that the servicer produce the original note before or shortly after initiating foreclosure proceedings.  If Fannie Mae possesses the note through its designated document custodian, to obtain the note and any other custody documents that are needed, the servicer must submit a request to the designated document custodian's electronic release system.  If Fannie Mae possesses the note through a third-party document custodian designated by the servicer that has custody of those documents for Fannie Mae, to obtain the note and any other custody documents that are needed, the servicer must submit a Request for Release/Return of Documents (Form 2009) to Fannie Mae's document custodian. In either case, the servicer must specify whether the original note is required or whether the request is for a copy."
Second, since most foreclosure cases are usually WON without producing the note, the servicer will drag its feet in complying to avoid cost and inconvenience.  I suspect that in many instances the FORGE a copy of the note rather than obtaining the actual original from the vault.  This is quicker and easier than obtaining the original, the borrower and the court will rarely detect the difference and the risk of loss of the original is thereby avoided.  Since the servicer is engaged in other perjury ad forgery anyway, this evidence fabrication is merely an extension of the core business model of fraud.

Third, the servicer often doesn't really want you nor the court to see the actual promissory note.  Producing the original promissory note is problematic for at least two reasons, but NOT the reasons that the "produce the note" proponents would have you believe.  The original note may be INDORSED on the instrument.  This may reveal that the COPY of the instrument pleaded with the complaint or motion for summary judgment wasn't actually a true and correct copy of the original after all.  The original note may instead or also have an associated allonge.  But this may be a DIFFERENT allonge than has been produced in discovery and/or shown to the court.  

Finally, note that I have repeatedly cautioned that it may be INADVISABLE to press a produce the note strategy right away.

Unless really threatened, the plaintiff in these cases will tend to instantly and quickly revert to forgery, perjury and other fraud on the court.  The foreclosure mills are so arrogant, corrupt and lazy that they feel entitled to engage in continued criminal activity for which they are never held accountable.

If you really stay on top of a produce the note defense, the plaintiff IS simply going to produce the note.  When this is DIFFERENT than the copy originally pleaded, this will be written off to a "paperwork error".  If you press right away, then the plaintiff will go to the original instead of forging an allonge to overcome the missing indorsement.

In my view, you are far better off conducting written discovery using a slow, systematic approach which BUILDS on the PRIOR written discovery.  You want to give the plaintiff an opportunity to LIE under oath in its discovery responses and to make further false statements to the court in its pleadings.

If you have in mind the goal of getting the case quickly dismissed on a motion to dismiss, this may prove to be the WORST possible strategy.  This is NOT to say that the motion to dismiss ought NOT be timely made.  But rather the Defendant will have the burden of proof on a motion to dismiss and very often for the purposes of deciding such a motion, the Plaintiff's allegations will be TAKEN AS TRUE.

By contrast, in the summary judgment proceeding, the movant (Plaintiff) will have the burden of proof and will have to show the court that there are NO ISSUES OF MATERIAL FACT IN DISPUTE.

So I would think LONG AND HARD before prematurely pressing for the original note.  In my view, rather than affording the defendant an effective defensive strategy, the produce the note approach is the SUREST WAY to quickly LOSE your case!

Carefully READ the deposition of Angela NOLAN.  You will find that the institutional custody business is every bit as precise and disciplined as the mortgage banking business is cavalier and dishonest!  Those who think that the promissory notes have all been shredded are out of their minds.  What is it that the people think the institutional custodian is being paid to do?  
Quote 0 0
Bill

But on a more serious note, I always felt time was your friend.  Let them take as long as they want.  I would be working on a discovery request asking for the details.  Who is the custodian, how did the custodian get the note, when did the custodian get the note, from whom did the custodian get the note, why did the custodian get the note ect...  William Roper might have some good ideas for a discovery request regarding this. 

Quote 0 0
Moose
Bill wrote:

But on a more serious note, I always felt time was your friend.  Let them take as long as they want.  I would be working on a discovery request asking for the details.  Who is the custodian, how did the custodian get the note, when did the custodian get the note, from whom did the custodian get the note, why did the custodian get the note ect...  William Roper might have some good ideas for a discovery request regarding this. 



Discovery rules vary by state - you may not have the luxury of delay through that process and plaintiff's counsel has played the game before many times. You have to watch the docket closely - do not rely on being served to know what is going on even if you have an attorney.

Again (redundant, isn't it?) this isn't legal advice, but each of those questions would be propounded in the very first round  - but keep in mind - there are limits in the rules as to the number of questions you can ask without first asking permission of the court to expand on them. Some questions might be more important than others.

The other thing you'll discover is they will almost always object to some things and it will require a hearing before the judge or magistrate to rule and issue an order for production.

Moose



Quote 0 0
William A. Roper, Jr.
Moose is certainly correct to remind us that one mustn't sit on one's hands as to discovery either!  Where the discovery period is strictly limited, the plaintiff will almost certainly try to run out this period where the case if effectively contested.

Since discovery rules and practice varies so widely from jurisdiction to jurisdiction, there is absolutely no one size fits all strategy to successful discovery!

As pointed out, in some places, the discovery period is finite and truncates on some date certain depending upon the type of case.  In other places, the discovery period ends based upon when the trial is scheduled.  And these are but two examples.

If a defendant hesitates and fails to conduct or complete discovery, the defendant may lack critical evidence necessary to defeat a motion for summary judgment.  On the other hand, propounding ALL of the questions immediately may telegraph the defendant's strategy and inform the plaintiff's responses and actions.

Moose's point about the plaintiff objecting to discovery and the necessity of obtaining a court order to compel is also well stated.  And accordingly, you need to very carefully craft and focus your discovery with the expectation that a hearing on a motion to compel may be required and that you may need to persuade the judge.

If you ask overly broad, intrusive or ill-focused questions, you could LOSE the support of the court.  This is one reason that I would tend to start by asking a smaller number of questions that can almost never sustain a valid objection.  If the defendant engages in discovery abuse and refuses to answer, you then have a fairly strong basis to obtain the first order to compel.

Syndicating questions, in small numbers across more than one defendant is also a useful strategy in some situations.

*

Where the discovery period is of a fixed duration and the plaintiff asks for more time to respond, one approach (when permitted by the rules) would be to enter into a written agreement to extend the time to answer the discovery, but also extending the close of the discovery period.  The court is generally going to want the parties to cooperate with one another in discovery, to include some reasonable extensions of time to respond.

READ THE RULES.  READ THE CASES FOR YOUR JURISDICTION RELATING TO THE RULES.  FIND A GOOD BOOK ON DISCOVERY AT YOUR LOCAL LAW LIBRARY.  GET COUNSEL FROM AN EXPERIENCED ATTORNEY.
Quote 0 0
William A. Roper, Jr.
The guidance within the Freddie Mac Seller/Servicers' Guide relating to obtaining the original note from the institutional custodian appears within:

Single-Family Seller/Servicer Guide, Volume 2
Chs. 64-69: Servicing Nonperforming Mortgages
Chapter 66: Foreclosure
66.20: Obtaining the original Note (11/15/10)
Title: 66.20: Obtaining the original Note (11/15/10)

"66.20: Obtaining the original Note (11/15/10)

If the original Note is needed to perform the foreclosure, you must request the Note from the Document Custodian holding the Note by submitting to the Document Custodian a completed Form 1036, Request for Release of Documents, or an electronic or system-generated version of the form (or, in the case of the Designated Custodian, a copy of the electronically generated 1036 Release Receipt Report) in accordance with the requirements of Section 18.4(e).

If there is a full or partial reinstatement of the Mortgage, you must return the Note with either the original Form 1036 or a copy.

For foreclosures referred to designated counsel, if you fail to provide the above information in a timely manner as required by the designated counsel, the designated counsel may request the Note from the Document Custodian holding the Note by submitting to the Document Custodian a completed Form 1036DC, Designated Counsel’s Request for Release of Documents. The designated counsel may contact you to identify the Document Custodian holding the Note, and you must cooperate in providing the necessary information. In addition, you must pay any release fees and expenses required by the Document Custodian."

Quote 0 0
Sandy
Mr. Roper,

I can see what you mean about pushing the "produce the note" issue. But in my case, the plaintiff lawyer answered and included a statement that they are waiting on the original note from the document custodian. Maybe my state requires the original, I'm not sure. The plaintiff's document was filed over a month ago.

Now my homeowner association, which was named as a defendant, just entered the case.  I disputed HOA fees for three years because the association was not active. They sued me, but the case was dismissed. Is it likely that I will face the HOA in court again too? I realize this is off topic for this forum, so if it isn't appropriate, please excuse me and ignore this question.

Quote 0 0
ka
Mr. Roper gave some helpful explanations about the process by which servicers obtain the original note from institutional custodians within this thread.  Mr. Roper's response answers a question posed to me via e-mail from a Forum participant.

The process is often documented within the PSA for private trusts.

Very often, answers to questions can be found amongst prior posts simply by searching the Forum.

Quote 0 0
John Lewis

+1000 ka

Quote 0 0

Bank of America is claiming that its subsidiary RECON Trust was the custodian of my promissory note, from the inception of the loan until present.

I know that Freddie Mac is the record investor of my note. Why would Freddie have a policy that the note to be endorsed in blank from the pretender lender to Freddie, and then let the pretender lender keep the document?

Anyone have any thoughts or questions?

Joe T.
Quote 0 0
Texas
Joe Testa

ESIGN UETA Transferable Record

Quote 0 0
Write a reply...