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
Carrie
I just learned that my original lender no longer exists. A news report said it was involved in an investigation and the findings warranted legal action for alleged HUD violations relating to a developer who defaulted on a $6M loan.

(MERS Sec/Treas) Hultman testified last week that MERS is the agent or nominee of the original lender.  Does it somehow create agency through its membership agreements? If so, should a power of attorney or like instrument be available somewhere, and should the borrower ask for it at some point in the lawsuit?

It seems to me if agency was created, then the original lender goes out of business (essentially dies), then MERS' right to act on behalf of the original lender ceases. Would it be the same as if a husband gave his wife power of attorney, then the husband died, and the power of attorney ceased at the moment of the husband's  death?

Quote 0 0
Ed Cage

Carrie wrote:
I just learned that my original lender no longer exists. A news report said it was involved in an investigation and the findings warranted legal action for alleged HUD violations relating to a developer who defaulted on a $6M loan.

(MERS Sec/Treas) Hultman testified last week that MERS is the agent or nominee of the original lender.  Does it somehow create agency through its membership agreements? If so, should a power of attorney or like instrument be available somewhere, and should the borrower ask for it at some point in the lawsuit?

It seems to me if agency was created, then the original lender goes out of business (essentially dies), then MERS' right to act on behalf of the original lender ceases. Would it be the same as if a husband gave his wife power of attorney, then the husband died, and the power of attorney ceased at the moment of the husband's  death?

Carrie this is not legal advice but the truth is thousands have hoped for some sort of "silver bullet" magical escape after their servicer or lender went out of business. (It's not an infrequent occurrence.) When a lender fails the corporate hull is scooped up by skilled hardball collectors with schemes and scams sometimes worse than what you originally had. I would advise you not to waste any money and minimal time if any on this semi-hopeless dream so many have pursued to no avail.

Ed Cage

ecagetx@gmail.com

 
Quote 0 0
Carrie
Thanks, Ed.

So the "assigns" would probably cover whomever has the loan now, I guess. I just wasn't sure how a MERS assignment before foreclosure would fair if the principal that allegedly authorized it to do so failed. I thought if the servicer couldn't prove ownership of the note and if the original lender is defunct, then the paper trail to prove standing to foreclose would be more difficult. I checked MERS and Fannie Mae for my loan. MERS says the investor doesn't want to be identified. Fannie Mae doesn't have the loan. So I'm not sure what is going on.

It's funny how quickly I gave up on the idea of silver bullets when I found this site! I WANT reality. I do better facing something head on. I fight better. I am not delinquent right now, so I don't have to get out the armor just yet, but if I don't find a job, I will need to know what I'm headed into, and I expect it to be the fight of my life.
Quote 0 0
Ed Cage

Carrie wrote:
Thanks, Ed.

So the "assigns" would probably cover whomever has the loan now, I guess. I just wasn't sure how a MERS assignment before foreclosure would fair if the principal that allegedly authorized it to do so failed. I thought if the servicer couldn't prove ownership of the note and if the original lender is defunct, then the paper trail to prove standing to foreclose would be more difficult. I checked MERS and Fannie Mae for my loan. MERS says the investor doesn't want to be identified. Fannie Mae doesn't have the loan. So I'm not sure what is going on.

It's funny how quickly I gave up on the idea of silver bullets when I found this site! I WANT reality. I do better facing something head on. I fight better. I am not delinquent right now, so I don't have to get out the armor just yet, but if I don't find a job, I will need to know what I'm headed into, and I expect it to be the fight of my life.

Carrie so glad to hear you are not delinquent. By all means stay current; falling behind invariably leads to a quagmire of new land mines. "Suspense accounts" and "Escrow accounts" are prime fertile ground for these hidden sophisticated scams to grow become worse using hundreds of creative new ways to cheat unsuspecting customers.

Ed Cage  |  ecagetx@gmail.com

  
Quote 0 0
The Equitable One
When I began I was looking for silver bullets too. I did so for a while. Heck, though I never really put forth the argument, I was looking into "vapor money" kind of arguments. Thankfully I wised up in time to keep that from being asserted.

There are a lot of interesting and creative theories floating about these days. They are just that - theories. Hanging your defense on one or more of them could end in someone having their hat handed to them in court. Some of these theories may eventually be articulately expressed and successfully argued, but as yet for most of them that hasn't happened.

Other of these, er, um, creative theories are being put forward by, how shall I say... wing nuts.

Be cautious, and try to hone your abilities to recognize the difference between solid argument, unproven theory, and wing nut theory.

This site is an excellent resource for that honing.

Quote 0 0
Carrie,
    You have raised an important issue, ie the "death of the original lender".
I have about a 100 cases I am working on in the State of Florida and I have
used the "Death Gamble" defense in many of them. I have never had an opposing attorney refute the argument and I have apparently stopped many
cases from proceeding by using this argument. It goes to the very heart of
the CAPACITY TO SUE RULE and the STANDING RULE.
     If the original lender no longer exists, and the Note and Mortgage were
never lawfully transferred, then there no longer exists a lawful entity to whom the debt is owed. I call this the "death gamble" defense from the translation of the French word "mort-gage" which means "death gamble" and is a fundamental characteristic of the contract.
     Mortgages are due on the death of either party. Normally it is the borrower who "dies" before ever paying off the loan. In such a situation,
the "heirs" must come up with money within a few months of the death
of the borrower or the lender can foreclose and take the equity of the dead
borrower. However the "death gamble" is a true bet, and if the lender "dies"
first, the borrower can end up owning the property free and clear by doing
a quiet title action (after defeating the foreclosure attempt by the pretender
lender who has no "equity" in the "gage" ie bet.)
Quote 0 0
Bill
1.  Before you get wrapped up in the "Death Gamble" defense I'd like to see some actual pleadings and case law from ANY jurisdiction that supports this THEORY.  The word Mortgage really means:

Mort:  Dead

gage:  Pledge

It is not a Death Gamble.  It is a Dead Pledge which comes from the the thoughts that the deal (mortgage) dies when the debt is paid or payment fails. 

Here is a better explanation:

http://www.thehistoryof.net/history-of-home-mortgages.html

I'd really be interested in seeing some pleadings, statutes, case law, anything in support of this. 

2.  I'm sure it would be common to find when a lender goes out of business they have debt.  Assets are sold off to pay these debts.  It would be very easy for the layman to realize that most assets of a business that goes under are sold. 

I think the most important point to look at when a lender goes under is can the pretend lender PROVE that the loan was sold to them and when.  If you search the forum you will find many threads that explain the importance of the proper ENDORSEMENT AND DELIVERY of promissory notes.  
Quote 0 0
Bill,
   With all due respect, you don't speak French or else you would understand
that a "gage" is not a "pledge" unless you consider a bet on 36 at the roulette table to be a "pledge". A pledge of what? It is a "bet" pure and simple. Once you put it up you can't take it down until the game is over.
The odds are always in favor of the "house" but once in a while a gambler
wins. A "mortgagor" is a death gambler, and right now many are winning
and the "house" is loosing.
    Just because your modern dictionary does not contain the original meaning
of a "gage" does not mean it is  not so. Check out the definition given in the
1968 version of Blacks Law Distionary. One meaning is "Wager" which means
a bet.

Quote 0 0
Bill
Mike H,
    I do not speak French.  But of course I do not live in France and I'm not subject to any of the laws of France.  

Here is what Wikipedia feels mortgage means:

http://en.wikipedia.org/wiki/Mortgage_law

Quote:

The word is a Law French term meaning "dead pledge," apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure.


As I previously posted I'm sure all the members here would love to read any of the cases:

Quote:

I have about a 100 cases I am working on in the State of Florida and I have
used the "Death Gamble" defense in many of them. I have never had an opposing attorney refute the argument and I have apparently stopped many
cases from proceeding by using this argument


But until then I think The Equitable One put it the most eloquently:

Quote:

Other of these, er, um, creative theories are being put forward by, how shall I say... wing nuts


Quote 0 0
William A. Roper, Jr.
It would seem to me to be appropriate to begin any discussion of the wingnut "death gamble" defense with an acknowledgment of the small shred of fact within the vast and vacuous nonsense.

This would be to acknowledge the valid antecedent of mortuum together with vadio, gage or pledge to describe certain estates.  This is described by Sir William Blackstone within Book 2, Chapter 10 of his "Commentaries on the Laws of England" (1765-9) at pages 419-20 of Thomas M. Cooley's revised 3rd annotated edition published in 1884:


Given that Blackstone gives us the first comprehensive compendium of English common law, this would seem to be a good beginning.
Quote 0 0
William A. Roper, Jr.
I have often found it helpful to look up definitions in the rather ancient law dictionary published by John BOUVIER in 1856.  The full text is readily available online and it gives us the following definition of mortgage:

MORTGAGE, contracts, conveyancing.  Mortgages are of several kinds: as the concern the kind of property, mortgaged, they are mortgages of lands, tenements, and, hereditaments, or of goods and chattels; as they affect the title of the thing mortgaged, they are legal and equitable.

2. In equity all kinds of property; real or personal, which are capable of an absolute sale, may be the subject of a mortgage; rights in remainder and reversion, franchises, and choses in action, may, therefore, be mortgaged;  But a mere possibility or expectancy, as that of an heir, cannot. 2 Story, Eq. Jur. 1021; 4 Kent, Com. 144; 1 Powell, Mortg. 17, 23; 3 Meri. 667.

3. A legal mortgage of lands may be described to be a conveyance of lands, by a debtor to his creditor, as a pledge and security for the repayment of a sum of money borrowed, or performance of a covenant; 1 Watts, R. 140; with a proviso, that such conveyance shall be void on payment of the money and interest on a certain day, or the performance of such covenant by the time appointed, by which the conveyance of the land becomes absolute at law, yet the, mortgagor has an equity of redemption, that is, a right in equity on the performance of the agreement within a reasonable time, to call for a re-conveyance of the land.  Cruise, Dig. t. 15, c. 1, s. 11; 1 Pow. on Mortg. 4 a, n.; 2 Chip. 100; 1 Pet. R. 386; 2 Mason, 531; 13 Wend. 485; 5 Verm. 532; 1 Yeates, 579; 2 Pick. 211.

4. It is an universal rule in equity that once a mortgage, always a mortgage; 2 Cowen, R. 324; 1 Yeates, R. 584; every attempt, therefore, to defeat the equity of redemption, must fail.  See Equity of Redemption.

5. As to the form, such a mortgage must be in writing, when it is intended to convey the legal title.  1 Penna. R. 240.  It is either in one single deed which contains the whole contract - and which is the usual form - or, it is two separate instruments, the one containing an absolute conveyance, and the other a defeasance.  2 Johns. Ch. Rep. 189; 15 Johns. R. 555; 2 Greenl. R. 152; 12 Mass. 456; 7 Pick. 157; 3 Wend, 208; Addis. 357; 6 Watts, 405; 3 Watts, 188; 3 Fairf. 346; 7 Wend. 248.  But it may be observed in general, that whatever clauses or covenants there are in a conveyance, though they seem to import an absolute disposition or conditional purchase, yet if, upon the whole, it appears to have been the intention of the parties that such conveyance should be a mortgage only, or pass an estate redeemable, a court of equity will always so construe it.  Vern. 183, 268, 394; Prec Ch. 95; 1 Wash. R 126; 2 Mass. R. 493; 4 John. R. 186; 2 Cain. Er. 124.

6. As the money borrowed on mortgage is seldom paid on the day appointed, mortgages have now become entirely subject to the court of chancery, where it is an established rule that the mortgagee holds the estate merely as a pledge or security for the repayment of his money; therefore a mortgage is considered in equity as personal estate.

7. The mortgagor is held to be the real owner of the land, the debt being considered the principal, and the land the accessory; whenever the debt is discharged, the interest of the mortgagee in the lands determines of course, and he is looked on in equity as a trustee for the mortgagor.

8. An equitable mortgage of lands is one where the mortgagor does not convey regularly the land, but does some act by which he manifests his determination to bind the same for the security of a debt he owes.  An agreement in writing to transfer an estate as a security for the repayment of a sum of money borrowed, or even a deposit of title deeds, and a verbal agreement, will have the same effect of creating an equitable mortgage.  1 Rawle, Rep. 328; 5 Wheat. R. 284; 1 Cox's Rep. 211.  But in Pennsylvania there is no such a thing as an equitable mortgage.  3 P. S. R. 233.  Such an agreement will be carried into execution in equity against the mortgagor, or any one claiming under him with notice, either actual or constructive, of such deposit having been made.  1 Bro. C. C. 269; 2 Dick. 759; 2 Anstr. 427; 2 East, R. 486; 9 Ves. jr. 115; 11 Ves. jr. 398, 403; 12 Ves. jr. 6, 192; 1 John. Cas. 116; 2 John. Ch. R. 608; 2 Story, Eq. Jur. 1020. Miller, Eq. Mortg. passim.

9. A mortgage of goods is distinguishable from a mere pawn.  5 Verm. 532; 9 Wend. 80; 8 John. 96.  By a grant or conveyance of goods in gage or mortgage, the whole legal title passes conditionally to the mortgagee, and if not redeemed at the time stipulated, the title becomes absolute at law, though equity will interfere to compel a redemption.  But, in a pledge, a special property only passes to the pledgee, the general property remaining in the pledger.  There have been some cases of mortgages of chattels, which have been held valid without any actual possession in the mortgagee; but they stand upon very peculiar grounds and may be deemed exceptions to the general rule.  2 Pick. R. 607; 5 Pick. R. 59; 5 Johns. R. 261; Sed vide 12 Mass. R. 300; 4 Mass. R. 352; 6 Mass. R. 422; 15 Mass. R. 477; 5 S. & R. 275; 12 Wend. 277: 15 Wend. 212, 244; 1 Penn. 57. Vide, generally,, Powell on Mortgages; Cruise, Dig. tit. 15; Viner, Ab. h. t.; Bac. Ab. h. t., Com. Dig. h. t.; American Digests, generally, h. t.; New, York Rev. Stat. p. 2, c. 3; 9 Wend. 80; 9 Greenl. 79; 12 Wend. 61; 2 Wend. 296; 3 Cowen, 166; 9 Wend. 345; 12 Wend. 297; 5 Greenl. 96; 14 Pick. 497; 3 Wend. 348; 2 Hall, 63; 2 Leigh, 401; 15 Wend. 244; Bouv. Inst. Index, h. t.

10. It is proper to, observe that a conditional sale with the right to repurchase very nearly resembles a mortgage; but they are distinguishable.  It is said that if the debt remains, the transaction is a mortgage, but if the debt is extinguished by mutual agreement, or the money advanced is not loaned, but the grantor has a right to refund it in a given time, and have a reconveyance, this is a conditional sale.  2 Edw. R. 138; 2 Call, R. 354; 5 Gill & John. 82; 2 Yerg. R. 6; 6 Yerg. R. 96; 2 Sumner, R. 487; 1 Paige, R. 56; 2 Ball & Beat. 274.  In cases of doubt, however, courts of equity will always lean in favor of a mortgage.  7 Cranch, R. 237; 2 Desaus. 564.

11. According to the laws of Louisiana a mortgage is a right granted to the creditor over the property of his debtor, for the security of his debt, and gives him the power of having the property seized and sold in default of payment.  Civ. Code of Lo. art. 3245.

12. Mortgage is conventional, legal or judicial. 1st.  The conventional mortgage is a contract by which a person binds the whole of his property, or a portion of it only, in favor of another, to secure the execution of some engagement, but without divesting himself of the possession.  Civ. Code, art. 3257.

13. - 2d. Legal mortgage is that which is created by operation of law: this is also called tacit mortgage, because it is established by the law, without the aid of any agreement.  Art. 3279.  A few examples will show the nature of this mortgage.  Minors, persons interdicted, and absentees, "have a legal mortgage on the property of their tutors and curators, as a security for their administration; and the latter have a mortgage on the property of the former for advances which they have made.  The property of persons who, without being lawfully appointed curators or tutors of minors, &c., interfere with their property, is bound by a legal mortgage from the day on which the first act of interference was done.

14. - 3d. The judicial mortgage is that resulting from judgments, whether these be rendered on contested cases or by default, whether they be final or provisional, in favor of the person obtaining them. Art. 3289.

15. Mortgage, with respect to the manner in which it binds the property, is divided into general mortgage, or special mortgage.  General mortgage is that which binds all the property, present or future, of the debtor.  Special mortgage is that which binds only certain specified property. Art. 3255.

16. The following objects are alone susceptible of mortgage:  1. Immovables, subject to alienation, and their accessories considered likewise as immovable.  2. The usufruct of the same description of property with its accessories during the time of its duration.  3. Slave's.  4. Ships and other vessels. Art. 3256.

http://www.constitution.org/bouv/bouvier_m.htm

Quote 0 0
William A. Roper, Jr.
The Second Edition of Black's Law Dictionary gives us this insight and explanation:
MORTGAGE.  An estate created by a
conveyance absolute in its form, but intended
to secure the performance of some act, such
as the payment of money, and the like, by the
grantor or some other person, and to become
void if the act is performed agreeably to the
terms prescribed at the time of making such
conveyance.  1 Washb. Real Prop. *475.

A conditional conveyance of land, designed
as a security for the payment of money, the
fulfillment of some contract, or the performance
of some act, and to be void upon such
payment, fulfillment, or performance.  Mitchell
v. Burnham, 44 Me. 299.

A debt by specialty, secured by a pledge of
lands, of which the legal ownership is vested
in the creditor, but of which, in equity, the
debtor and those claiming under him remain
the actual owners, until debarred by judicial
sentence or their own laches.  Coote, Mortg. 1.

The foregoing definitions are applicable to
the common-law conception of a mortgage.
But in many states in modern times, it is
regarded as a mere lien, and not as creating
a title or estate.  It is a pledge or security
of particular property for the payment of a
debt or the performance of some other obligation
whatever form the transaction may
take, but is not now regarded as a conveyance
in effect, though it may be cast in the
form of a conveyance.  See Muth v. Goddard,
28 Mont 237, 72 Pac. 621, 98 Am. S t Rep.
553; Johnson v. Robinson, 68 Tex. 399, 4 S.
W. 625; In re McConnell's Estate, 74 Cal.
217, 15 Pac. 746; Killebrew v. Hines, 104 N.
C. 182, 10 S. E. 159, 17 Am. St. Rep. 672. To
the same purport are also the following statutory
definitions:

Mortgage is a right granted to the creditor
over the property of the debtor for the secur
i ty of his debt, and gives him the power of
having the property seized and sold in default
of payment.  Civ. Code La. a r t 3278.

Mortgage is a contract by which specific
property is hypothecated for the performance
.of an act, without the necessity of a change
of possession.  Civ. Code Cal. § 2920.

"A Law Dictionary, 2nd ed.", by Henry Campbell Black (St. Paul, MN: West Publishing, 1910), p.793

There are additional entries for mortgage in conjunction with a second modifying word on pp. 793-4.

*

While standing fast on these rather fundamental definitions, we shall await the identification of cases which might suggest the discharge of indebtedness and lien by death.  I rather expect this to be a long wait.

Quote 0 0
William A. Roper, Jr.
In my immediate preceding posts, I have set forth the definitions of mortgage which have come down to us through the centuries.  Blackstone does not purport to create law by his Commentaries, but rather to enunciate and articulate the common law as it then existed.

In his muddled analysis rendering a mortgage as a death gamble, Mike H. fails to appreciate and distinguish another rather fundamental element of the law of property which could (but in modern application does NOT) render a mortgage grant a life interest.

To understand this distinction, we may turn again to Blackstone and to his discussion of various estates.  A key distinction as to the estate acquired by a deed of conveyance is whether the grant is of an interest in fee or whether the grant is merely that of a life estate.

Suppose that SMITH grants a deed to JONES and by his deed simply grants the property Blackacre to JONES without otherwise specifying the nature of the interest granted.  Under the common law, this would be assumed to be a grant of a life interest in the estate.  In order for a grant to be in fee, the grant would need to name not only JONES, but to further specify that the grant was to "JONES and his heirs forever".  Failing to identify JONES' heirs in the grant would imply only a life estate and the land would then revert to SMITH upon JONES' death.

Blackstone explains this in Book 2, Chapter 7 "Of Freehold Estates of Inheritance":


The word "heirs" is necessary in the grant or donation, in order to make a fee, or inheritance.  For if land be given to a man forever, or to him and his assigns forever, this vests in him but an estate for life (u)  This very great nicety about the insertion of the word "heirs" in all feoffments and grants, in order to vest a fee, is plainly a relic of the feudal strictness; by which we may remember (w) it was required, that the form of the donation should be punctually pursued; or that, as Cragg (x) expresses it in the words of Baldus, "donationes sint strcti juris, ne quis plus donasse praesumatur quam in donatione expresserit."  And therefore, as the personal abilities of the donee were originally supposed to be the only inducements to the gift, the donee's estte in the land extended only to his own person, and subsisted no longer than his life, unless the donor, by an express provision in the grant, gave it a longer continuance, and extended it also to his heirs.  But this rule is now softened by many exceptions. (y).

[at pages 107-8 of the original and pp. 283-4 of the cited annptated reference.]
The Latin quoted translates "gifts should be of strict construction, lest anyone may be presumed to have given more than is described in the gift."  (This, of course, would be more applicable in the instance of a gift or devise than of a sale.)

 Blackstone further explains and clarifies:
"In grants of lands to sole corporations and their successors, the word "successors" supplies the place of "heirs", for as heirs take from the ancestor, so doth the successor from the predecessor.  . . .  But, in a grant of lands to a corporation aggregate, the word "successors" is not necessary, though usually inserted:  for, albeit such simple grant be strictly only an estate for life, yet, as that corporation never dies such estate for life is perpetual, or equivalent to a fee-simple, and therefore the allows it to be one. (a)"
 It should probably be here also noted that the specification within the grant that the grantee is to include the grantee's assigns is also purposeful.  Blackstone explains:
"Afterwards a man seems to have been at liberty to part with all his own acquisitions, if he had previously purchased to him and his assigns by name; but, if his assigns were not specified in the purchase deed, he was not empowered to aliene . . ."
So, in defense of Mike H.'s premise regarding a death gamble, it would appear to me that under the traditional English common law as expressed by Blackstone (leaving aside the statutory enactments and case holdings in American states during the past two centuries), should the original mortgage grant be to a person or a corporation, without identification of "heirs" or "successors" within such grant, that the grant very well might be correctly described as a life estate during the lifetime of the grantee.  And if the grant omitted mention of assigns, the grant might not be assignable!

And so, one might very well find particular fact situations where a grant which failed to properly specify that the mortgage grant was to be to "SMITH, his heirs, executors, administrator, successors and assigns" such grant might very well be found to be limited in some way either to a life estate during the lifetime of the grantee and/or conditions and unalienable.

*

Now, as a practical matter let us look at the actual instruments typically used in modern commerce.

The Fannie Mae uniform instruments are generally available for downloading and viewing from:


Exemplary is this language appearing within Paragraph/Covenant 13 of the Florida uniform instrument:

"13.  Joint and Several Liability; Co-signers; Successors and Assigns Bound.   Borrower covenants and agrees that Borrower’s obligations and liability shall be joint and several.  However, any Borrower who co-signs this Security Instrument but does not execute the Note (a “co-signer”): (a) is co-signing this Security Instrument only to mortgage, grant and convey the co-signer’s interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that Lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the co-signer’s consent. 

Subject to the provisions of Section 18, any Successor in Interest of Borrower who assumes Borrower’s obligations under this Security Instrument in writing, and is approved by Lender, shall obtain all of Borrower’s rights and benefits under this Security Instrument.  Borrower shall not be released from Borrower’s obligations and liability under this Security Instrument unless Lender agrees to such release in writing.  The covenants and agreements of this Security Instrument shall bind (except as provided in Section 20) and benefit the successors and assigns of Lender.  [emphasis added]"
*

By contrast, scrutiny of the promissory note is usually devoid of this language.  We do not inherit debts from our ancestors, but the estate might owe such debt and we might inherit land subject to the repayment of such debt.

The Fannie Mae notes can be generally found here:

https://www.efanniemae.com/sf/formsdocs/documents/notes/

*

The studious, reading the law in conjunction with the facts unique to a particular case might very well conclude that where a borrower made a mortgage grant without specifying that the grant and covenants thereto were to be applicable to the successors and assigns of the grantee, such a mortgage might, in fact, be a "death gamble" as described by Mike H.

As a practical matter, the instruments used by both the GSEs and the subprime industry were generally standardized.  This is not to say that someone might not have made a mistake and omitted the successors and assigns language in some arcane circumstance.  So it is probably a good idea to carefully scrutinize the express language of your instruments, and particularly any modification agreements (which are inherently less uniform).

While the Equitable One and Bill have called upon Mike H. to identify cases in support of his unusual theories, I would sound a different challenge:  Show us a recorded mortgage which fails to grant the rights to successors and assigns!

But I would NOT expect to find any silver bullets in a death gamble defense and asserting such a defense is most likely to eviscerate a defendant's credibility with a court!
Quote 0 0
Moose
Mike H wrote:
Carrie,
    You have raised an important issue, ie the "death of the original lender".
...
     Mortgages are due on the death of either party. ...


Mortgages are not due on the death or either party - Trusts don't "die."  And there is no such thing as a "death" of a mortgage. Notes and mortgages are assets with a present value and a future value and are fungible in the sense they can be sold, traded, exchanged or assigned as long as the Trust filing allows it.

Original lenders have failed by the hundreds but their demise has nothing to do with securitized loans they originated then sold into REMIC trusts. Those did not magically become due when the lender was acquired or liquidated.

Moose
Quote 0 0
William A. Roper, Jr.
Quote:
Moose said:
Mortgages are not due on the death or either party - Trusts don't "die."


While I would expressly AGREE with what Moose has just posted, I also want to distinguish and elaborate one aspect of this assertion.

Residential mortgage instruments routinely in use in this country do NOT contain ANY provision accelerating or making the balance due upon the death of either party, NOR forgiving or extinguishing the indebtedness or lien.

But most residential mortgages DO have a due on transfer clause within the mortgage or deed of trust, which absolutely CAN come into play in the instance where the death of one or more borrower results in a transfer of ownership of the property, though these provisions can be circumscribed by state statute and case law.

This covenant is usually cast as a right to accelerate upon transfer at the election of the Lender.

The provision of the most common Fannie Mae Florida instrument (Form 3010) is exemplary.  It reads at Paragraph/Covenant 18:
18.  Transfer of the Property or a Beneficial Interest in Borrower.  As used in this Section 18, “Interest in the Property” means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to a purchaser.

If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument.  [emphasis added]  However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law.

If Lender exercises this option, Lender shall give Borrower notice of acceleration.  The notice shall provide a period of not less than 30 days from the date the notice is given in accordance with Section 15 within which Borrower must pay all sums secured by this Security Instrument.  If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.
*

Whether the instrument is subject to acceleration upon a transfer arising out of the mortgagor's death may very well be a matter not only of the state's restrictive laws, but also on the form of ownership of the subject property and grant of the mortgage.

For example, in many places a husband and wife might own a residential property as tenants by the entirety and others might co-own property as tenants in common with a right of survivorship.  In such instances, the death of one party may vest full ownership in the other co-owner, which very well may NOT be a transfer at all.  A state law might similarly distinguish between the passing of property by intestacy, by Will where an executor takes charge of the estate and by Will in a court supervised administration and nuances of law may very well distinguish when a transfer occurs as well as WHETHER a particular change in ownership is subject to such a due on transfer provision.

This is a sufficiently complex area of the law, with widely varying outcomes, that anyone contemplating a purchase would be very well advised to consult a qualified real estate and/or probate attorney for assistance in what may very well prove to be advance estate planning and those faced with the ownership of a property after the death of a mortgagor should consult an experienced attorney with knowledge of probate and real estate law right away.

As a practical matter, most Lenders and/or servicers are fairly unlikely to seek to accelerate and enforce the due on transfer provision UNLESS the monthly payments stop and the death comes to the attention of the Lender.  When payments are timely made, the Lender and/or servicer is actually rather UNLIKELY to make much inquiry.

This might be a very good reason for executors, administrators, and heirs to reach a rapid and amicable agreed resolution/settlement of probate especially when the subject property has a value well in excess of the mortgage balance, though admittedly other issues, disharmony and disagreements can and do intrude sometimes precipitating default.  

Moose's core assertion that the death of a party doesn't accelerate the balance and make the mortgage due is mostly right, but transfers of interests brought about by the death can and sometimes do trigger the due on sale provisions in some jurisdictions!

CONSULT A LAWYER!

NOTE:  I am NOT an attorney and this is NOT LEGAL ADVICE!
Quote 0 0
Write a reply...