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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James
If a state has specific legal requirements as to the level of authority acceptable for executing instruments affecting real estate, and the original lender's signator on the indorsement in blank failed to meet such level of authority, would this void the indorsement? And if it did void the indorsement, would that make the note void or voidable?

Added to this, what if that original lender also failed to meet state licensing requirements at the time of closing? What would be the likely status of the note?

Would these failures be mere technicalities or would they be significant?


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William A. Roper, Jr.

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James said:

If a state has specific legal requirements as to the level of authority acceptable for executing instruments affecting real estate, and the original lender's signator on the indorsement in blank failed to meet such level of authority, would this void the indorsement?  And if it did void the indorsement, would that make the note void or voidable?

 
James:
 
The promissory note, as a negotiable instrument, is not usually an instrument affecting interests in real estate as those terms are usually defined in the statute of frauds.  Bear in mind that the very same law (UCC) that controls promissory note indorsements also covers indorsement of sight drafts -- checks -- which clear through the banking system every day.  What is necessary in your state to validly indorse a check?
 
Usually, all that is required is a valid signature and even an invalid signature seems to often do under the UCC.  Check the cases for your jurisdiction!
 
The validity of an indorsement would not typically affect the validity of the note AT ALL.  It would oly control who might be a valid holder with a right to enforce the instrument. 
 
An invalid indorsement would essentially never void an otherwise valid negotiable instrument.  Nor would it make such an instrument voidable.  But if the indorsement was invalid, it certainly could implicate the right of the person seeking to enforce the instrument to have standing to bring an action as the holder.

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James said:

Added to this, what if that original lender also failed to meet state licensing requirements at the time of closing? What would be the likely status of the note?



It is extremely UNLIKELY that state licensing laws would implicate the validity of an otherwise valid negotiable instrument.  But check the statutory language of the law in your jurisdiction and the cases relating to those licensing laws.

This issue has been discussed before in other threads.  It is most unproductive as a means of defense, EXCEPT perhaps to raise as an additional issue in a "clean hands" equitable defense.  Even so, usually the holder in due course immunity is usually going to preclude an effective assertion of this as something sinister by the mortgage investor obtaining the note without protest and not in default before the licensing issue is asserted or brought to its attention.

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James
I'll search for the other mentions of this on this site.

You said:

"But if the indorsement was invalid, it certainly could implicate the right of the person seeking to enforce the instrument to have standing to bring an action as the holder."

So, if the indorsement was invalid, thus, the service/holder had no standing to bring action, who would have standing? The original lender who employed the signator?

It also occurred to me that these same state requirements might apply to an assignment of mortgage. Would the failed authority of the signator have any effect on the mortgage?


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James
Mr. Roper, would you mind telling me the best way to search for cases in my state that relate to specific issues in this mortgage mess? I'm capable of researching certain matters, but I'm just learning the basics of the mortgage fraud. I guess I'm not asking the right questions or using the right keywords, as I am not finding much help.
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William A. Roper, Jr.

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James said:

So, if the indorsement was invalid, thus, the service/holder had no standing to bring action, who would have standing?  The original lender who employed the signator?


James: 

That is likely to depend upon the unique facts of the case.  If there was only a single, but invalid indorsement, then the instrument could NOT have been properly negotiated.

But a person of entity is a holder only if it is in possession of the instrument payable to that person, payable to bearer, indorsed in favor of that person by valid restrictive indorsement OR indorsed in blank.

If the originating Lender is no longer in possession of the instrument, it usually wouldn't be the holder either.  And this is especially the case where the originating Lender is a defunct and extinct corporation.

But there are provisions in the UCC for the enforcement of a lost instrument as well as enforcement by a valid transferee when the transferee can show that it acquired from a holder.

There are also special cases.

James, you seem to fail to appreciate that this area of commercial law occupies entire chapters of books on commerical law.

Asking anyone to write a custom exposition on this subject FOR YOU in respect of all possible facts is inherently an UNREASONABLE proposition.

Instead of asking us to explain all possible outcomes, it is more economic for you to DESCRIBE the situation you face.  You can do so in general terms.  Bear in mind that there are literally tens of thousands of foreclosures taking place at any given time.

We do NOT need to know your county or the mortgage amount.  And it may not even be critical to know the precise entities involved, though we might be able to help you more if these were included (which should be done ONLY if they are NOT uniquely identifying).

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James said:

It also occurred to me that these same state requirements might apply to an assignment of mortgage. Would the failed authority of the signator have any effect on the mortgage? 


How an assignment would be affected is almost totally a question of unique state law.  This is also discussed extensively elsewhere.  But again, your question is so generic that it defies an economic answer.

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James said:

Mr. Roper, would you mind telling me the best way to search for cases in my state that relate to specific issues in this mortgage mess? I'm capable of researching certain matters, but I'm just learning the basics of the mortgage fraud. I guess I'm not asking the right questions or using the right keywords, as I am not finding much help.

James:

As far as I can tell, you haven't identified your state yet.  Why don't you sketch out enough facts that we have at least some concept of the situation you face.

Your questions continue to lack sufficient specifics to be actionable in terms of analysis or help.
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James
Mr. Roper, I won't bother you any more with my questions, I'm sure I can find more than enough to read on this and other sites. I realize you are extremely busy providing as much as you do for this site.

I will keep trying to search for myself about the questions I asked. I've searched and read a lot about the commercial code, but you and others usually write with better clarity than what I've read, which is mostly from legal sites good for lawyers.


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Bill

James wrote:
If a state has specific legal requirements as to the level of authority acceptable for executing instruments affecting real estate, and the original lender's signator on the endorsement in blank failed to meet such level of authority, would this void the indorsement? And if it did void the indorsement, would that make the note void or voidable?

Added to this, what if that original lender also failed to meet state licensing requirements at the time of closing? What would be the likely status of the note?

Would these failures be mere technicalities or would they be significant?


The way I'm reading the first part of your question is that the originator of the note endorsed the note but you are challenging this because you don't like WHO (which officer) endorsed the note. 

I have not seen a requirement that a certain officer or executive HAS to be the one that endorsed a note.  To the contrary, the UCC which governs negotiable instruments allows endorsements to be binding even when they are executed by employees WITHOUT AUTHORITY to do the endorsement.  Please make sure you are reading the statute correctly if you feel it requires a certain officer of a company to endorse a note. 

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Bill

§ 3-405. EMPLOYER'S RESPONSIBILITY FOR FRAUDULENT INDORSEMENT BY EMPLOYEE.

  • (a) In this section:
    • (1) "Employee" includes an independent contractor and employee of an independent contractor retained by the employer.
    • (2) "Fraudulent indorsement" means (i) in the case of an instrument payable to the employer, a forged indorsement purporting to be that of the employer, or (ii) in the case of an instrument with respect to which the employer is the issuer, a forged indorsement purporting to be that of the person identified as payee.
    • (3) "Responsibility" with respect to instruments means authority (i) to sign or indorse instruments on behalf of the employer, (ii) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (iii) to prepare or process instruments for issue in the name of the employer, (iv) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (v) to control the disposition of instruments to be issued in the name of the employer, or (vi) to act otherwise with respect to instruments in a responsible capacity. "Responsibility" does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.
  • (b) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent indorsement of the instrument, the indorsement is effective as the indorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
  • (c) Under subsection (b), an indorsement is made in the name of the person to whom an instrument is payable if (i) it is made in a name substantially similar to the name of that person or (ii) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.

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Adam
James wrote:
Mr. Roper, would you mind telling me the best way to search for cases in my state that relate to specific issues in this mortgage mess? I'm capable of researching certain matters, but I'm just learning the basics of the mortgage fraud. I guess I'm not asking the right questions or using the right keywords, as I am not finding much help.


Online Sources of Law -  Information from Mr Roper..


I also remember reading a post by Mr Roper that explained how to search using the different sites.. But I cant remember what thread that was in..

Hope this helps..
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New Virginia Law
Apparently, this went into effect in Virginia on July 1, 2011:

Va 55-59.5 (C) - A nominee of a grantee, mortgage or beneficiary for a deed of trust or mortgage has no authority to request that the trustee or any sub trustee proceed with any sale of the property and the trustee or any sub trustee shall not proceed with any such sale upon the request of the nominee .

Va 55-59.6 - Foreclosure, civil penalty for fraud
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Texas
Alas, let us not forget the passage of the 2004 Check 21 Act, Truncation.

Example, write a check at Walmart, from the time the check leaves your check book until the time it enters the stores check scanner, it is a negotiable instrument governed by UCC Article 3. Once the check is scanned into the stores computer system, it now falls under the Check 21 Act, scanning truncates the negotiability of the check and the electronic image is then transmitted to the paying bank for collection.

The Check 21 Act was passed as E-SIGN (2000) & UETA (1999) both excluded items governed by UCC Article 3 & 9 and as such the financial institutions did not have legal laws in place to deal with electronic checking, therefore Check 21 Act.

Any thoughts as how E-Sign & UETA apply to Mortgage Notes and Security Instruments?

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TheEquitableOne
That is a bating question Texas. Hows about you just share your ideas with us directly.
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Bill

TheEquitableOne wrote:
That is a bating question Texas. Hows about you just share your ideas with us directly.


He posted a little about it in other posts.
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