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Excellent summary of Ibanez decision

If you're a mortgage holder, or if you're a lawyer for mortgage holders, read this carefully:

The banks want us to believe that they all lost the notes with the assignments on the back… they all lost them… all at the same time.  As I mentioned above and took directly from the court documents by the way, the banks brought in HUNDREDS of pages of supposed documentation to prove that the trusts did in fact hold the notes at the time of the foreclosure… that’s HUNDREDS OF PAGES… but not one assigned note, and not even one schedule of the loans supposedly assigned to the trust trying to foreclose.

And remember, the bankers had plenty of time here… once they lost in the lower court, they filed motions to vacate and were given more time to bring in the proper paperwork.  And this case went all the way to the Massachusetts Supreme Court, so it’s not like that happens in a hurry.

In the end, the banks tried the argument… everybody’s doing it, so why can’t we do it too.  My mother heard this argument from me once.  I was seven years old.  She didn’t buy it, and I never tried it again. The court’s response was to say:

“… the legal principles and requirements we set forth are well established in our case law and our statutes.  All that has changed is the (banks’) apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.”

Why can’t the banks just show up with the note assigned to the trust, as they are legally required, when they foreclose?  Because they all lost them?  Is that the story from the world’s largest banks… that they’re all having problems losing stuff?  It was a mass misplacement?

The question, of course, is what happens next?  What happens if the bank cannot establish that a note was assigned to a trust that now wants to foreclose?  Does the amount owed become an unsecured debt, dischargeable in bankruptcy?  And if the trust does not hold the note because it wasn’t ever assigned, who owns it?  And where is it, damn it?

A lot of people say that the homeowners shouldn’t get their homes free and clear under any circumstances.  They say that in buying the homes in the first place, they gambled and lost… and therefore should lose their homes that they now can’t refinance and therefore can’t afford.  But, according to that way of thinking, why shouldn’t they be able to discharge the debt that’s no longer secured by the mortgage… it would seem that they gambled and won.  Gambling, one should remember, cuts both ways, does it not?

The thing is… I asked a good friend of mine who is a fairly senior level executive at a major bank, although not one of those mentioned here, and he said that he can’t imagine the banks losing the notes.  He explains that the truck pulls up at his bank every day to take documents such as the notes in question to Iron Mountain, where they are expertly stored in a salt mine, of all places.  And if you think Iron Mountain lost them, visit and get back to me on that.

So, perhaps the banks didn’t lose the notes in question… perhaps they just don’t want to show them to anyone in court because when the judges flip them over to look at the back they will find that they were NEVER ASSIGNED to the trusts as the REMIC RULES REQUIRED.

And then the investors would be something just shy of pleased that they were sold empty securities… to be specific, mortgage-backed securities without the mortgage-backed part.  And if notes weren’t assigned to the tax-exempt REMIC trusts… well, then someone would owe quite a bit in back taxes, now wouldn’t someone?  Maybe even some penalties and interest too?  I would think so.

Now, that might be a reason not to want to show up with the actual note, wouldn’t you think?

Or… maybe the largest banks in the world… the ones that make me sign, have two firms of I.D. and leave a fingerprint just to cash a check for $5… all lost them.  At the same time.  Maybe… it could happen… I guess.

On some other planet, perhaps, but not here on Earth… not a chance in the world.

So, in other words -- my head is spinning just a little here -- the banks didn't "lose" the paperwork, they've still got it, but they don't want to show it, and so we either get no paperwork, or fake paperwork. And ultimately, the banks would rather let the houses go than face the tax fraud liabilities on REMIC? Is that what the post says? These people are as twisty as corkscrews!

Of course, the question on everyone’s mind is… so, who owns the loans and who gets to foreclose, because the idea that no one does is enough to make many people run screaming from the room. I’m not so sure… like I said earlier in this article, if they gambled and lost, which is why many would say that they lost their homes to begin with, why couldn’t they also have gambled and won?

What I hear from most of the people on the banking side of this decision is that there’s nothing to worry about, but the bankers are simply not credible in such matters, for reasons that I think are both obvious and abundant. This side also seems to have some belief that “Congress” will somehow act and make this whole nightmare go away… and to that I can only say… I don’t think so.

What would they do to “act”? Pass a law saying you don’t have to pay attention to any of the other laws governing such transfers of property? It’s a neat idea, if you’re maybe six years old, but I just don’t see the investors going along. I mean, if the banks are allowed to just say which loans were assigned to the securitized trusts and which weren’t… well, do you think they’ll say the good loans were assigned, or would they just take out the trash and say the bad loans were assigned? Ignoring the entire assignment/chain-of-title issue just isn’t going to be something that one can just legislate away, in my view.

Remember, Congress may not care about homeowners, but they are somewhat beholden to pension plans, insurance companies, hedge funds, and sovereign wealth funds, and those are the investors we’re talking about here, right?

So, now it’s a question of when the next shoe will fall, and there are plenty of such shoes hovering around out there looking like they might drop at any moment. And one has to wonder why the investors aren’t already suing the bankers for selling them mortgage-backed securities without the mortgage-backed parts. ....

The poster's bottom line, which is, of course, not legal advice:

We’re in a river, people, not a lake. Homeowners should do everything they can to hang on as long as they can… the water we’re standing in today is not the water we’ll find ourselves in tomorrow. Or, in other words, if you don’t like the weather in New England… wait a minute.

Temperamentally, that's what I'd try to do anyhow. IANAL, of course!

NOTE The poster also cites this massive called shot from 2009, when Ibanez was decided in the lower courts:

The core issue has to do with filings that banks are required to make any time they sell a mortgage to a new investor… filings they neglected in hundreds of thousands if not millions of instances, as mortgages changed hands more times than the penny I have in my pocket. Judge Long ruled that a bank cannot foreclose on a home unless it can present the documents that show who owned the mortgage each time the loan changed hands.

The judge also said that fixing the documents after the fact, which is what Wells Fargo and U.S. Bank did in the case he was ruling on [it's the cover-up that gets you], isn’t kosher, and I can’t believe that Wells or U.S. Bank would think that fixing things after the fact would be okay.

Well, that puts matters in a nutshell, eh? So who could have made the decision that this was OK? Well, whoever signed off on the contract with MERS. That would be at the executive level. Making all the mortgage mess -- ding! -- accounting control fraud.

UPDATE And speaking of Iron Mountain....

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Jeff W's picture
Submitted by Jeff W on

Sheer magnitude vitiates?

Is that like A single death is a tragedy; a million deaths is a statistic?

I don't get it.