Foreclosure Fraud – BofA Disowns Its Own Lawyer’s Argument in Fumbled Mortgage Case

BofA Disowns Its Own Lawyer’s Argument in Fumbled Mortgage Case

To quell doubts about its mortgage unit’s handling of documents, Bank of America Corp. is distancing itself from … itself.

B of A now says that a senior litigation manager — who had 10 years’ experience working at Countrywide Home Loans Servicing LP — was out of her depth when she testified in a New Jersey courtroom about the unit’s document practices. The Charlotte company also says the local lawyer that represented it essentially fumbled the routine personal bankruptcy case.

There is no doubt that Kemp vs. Countrywide Home Loans was a spectacularly bungled defense — and its implications have caused an uproar in the world of mortgage securitizations.

In a series of unforced admissions, the B of A manager, Linda DeMartini, and Harold Kaplan, the company’s outside attorney, described how Countrywide had failed to adhere to the most rudimentary of securitization procedures, such as transferring the original promissory note to the trusts that had purchased the loans, as required under the pooling and servicing agreement.

Both DeMartini and Kaplan said it was standard practice for Countrywide to hold onto the original mortgage notes, which were stored in Simi Valley, Calif., despite securitization contracts that require the notes be physically transferred to sponsors, trustees or custodians.

“I mean, there’s no way I’m going to argue that there was a physical transfer,” Kaplan told Chief Judge Judith Wizmur of the U.S. Bankruptcy Court in New Jersey, in an August 2009 hearing. “They had the documents.”

Wizmur rejected Countrywide’s claim that it had standing to foreclose on the borrower, John T. Kemp, and in a Nov. 17 ruling excoriated Bank of America for its handling of the case.

At the heart of B of A’s bungled courtroom performance is a critical issue plaguing mortgage servicers and bond investors: whether Countrywide may still be holding onto a massive trove of untransferred mortgages and if so, what that means for the trusts that never received them.

For virtually everyone in the mortgage securitization business, the admissions in court (including DeMartini’s sworn testimony) have opened the door to further litigation by borrowers questioning every trust’s legal standing to foreclose.

You can catch the rest here…

Or you can read the Market Tickers take on it below…

BofA Tries to Disavow Its Own Testimony

This is cute:

B of A now says that a senior litigation manager — who had 10 years’ experience working at Countrywide Home Loans Servicing LP — was out of her depth when she testified in a New Jersey courtroom about the unit’s document practices. The Charlotte company also says the local lawyer that represented it essentially fumbled the routine personal bankruptcy case.

Of course it does.  After all, a Senior Litigation manager who “outs” the firm’s failure to perform as agreed, well, that might open them up to hundreds of billions of dollars (or more!) in putbacks.

I’d “disavow” that too.

In a series of unforced admissions, the B of A manager, Linda DeMartini, and Harold Kaplan, the company’s outside attorney, described how Countrywide had failed to adhere to the most rudimentary of securitization procedures, such as transferring the original promissory note to the trusts that had purchased the loans, as required under the pooling and servicing agreement.

“I mean, there’s no way I’m going to argue that there was a physical transfer,” Kaplan told Chief Judge Judith Wizmur of the U.S. Bankruptcy Court in New Jersey, in an August 2009 hearing. “They had the documents.”

 

smiley

I wrote about this case, incidentally, close to two weeks ago.

Of course this has resulted in somewhat of a panic reaction among various securitization folks.  As well it should.  While some argue this was sloppiness I think there’s something more to it as I’ve said since the beginning – you can’t audit what you don’t have – and thus this failure was damned convenient as a foil against claims that loans didn’t meet quality requirements and the trustee couldn’t be held to account for verification (nor could anyone else.)

“I don’t think anyone wants the trusts to be in essence incapable of performing their needed functions,” said Talcott Franklin, a Dallas attorney who represents a consortium of investors in mortgage-backed securities. “That’s not good for anyone.”

Of course it’s not good for those who lied and bamboozled.  It could be very good for those who bought this trash however, if they can successfully force the banks to eat the bad paper.

BofAs counsel in Washington doesn’t like this case, and has said:

Platt said no one should “try to extrapolate how trillions of dollars of loans are being handled based on one badly defended bankruptcy case.”

Oh really?

Ok, show us all the properly-endorsed and delivered notes.

I mean, if there’s one badly-defended case and one instance where someone blew it (or statistically speaking, it’s just “one” or “a handful” out of these tens of millions of loans) then it should be trivially-easy to demonstrate to the public, the MBS holders and the courts that 99.99% of all the notes were properly endorsed and are properly residing in a custodian’s care bearing all the original endorsements and allonges that were executed at the proper times and before the certifications from the trustees were made.

Right?

So why haven’t you done it, since that would end this debate immediately?

There is little doubt that Countrywide was supposed to provide the physical note for Kemp’s loan to the trust that purchased it, known as CWABS-2006-8.

In the Securities and Exchange Commission filing for that specific securitization, Countrywide and Bank of New York Mellon both attested that at the time of the trust’s formation in 2006, “the Trustee has received … the original Mortgage Note … or, if the original Mortgage Note has been lost or destroyed and not replaced, an original lost note affidavit.”

They all have this sort of language in the PSAs.  That’s the problem that we’re all trying to get our arms around.  The language is there but it appears that in point of fact basically none of the notes in these private-label securities were properly endorsed over.

Lawyers argue that trustees do not have to take physical possession of the notes if there are contracts and other documents showing proof of transfer.

“As a matter of law, the note doesn’t have to be delivered to the trust, it can be delivered to an agent,” said Platt, who nevertheless acknowledged that the pooling and service agreement in this case did not allow for such delivery.

The UCC permits this but the contract controls and every private-label PSA I’ve reviewed requires physical delivery of either the original note or a lost-note affidavit and for each they must be properly-endorsed into the trust.

Again: If there’s evidence that these notes were properly-endorsed as a matter of policy and fact and there are only a handful of “mistakes” then produce the proof and those of us who don’t believe you will be more than happy to admit that you’re right.

Until you do I will continue to maintain that I believe you’re full of crap and are obfuscating and playing games for one reason and one reason only – you’re trying to hide the truth from investors, regulators and law enforcement, all of whom would otherwise have an excellent case that you’ve committed both civil and criminal securities fraud, and if forced to unwind these transactions your institutions would be forced to recognize their own insolvency.

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4closureFraud.org

Comments
4 Responses to “Foreclosure Fraud – BofA Disowns Its Own Lawyer’s Argument in Fumbled Mortgage Case”
  1. RAMONA says:

    THATS just it, the banksters have taken all the easy to grab homes, now they are working on anyone who just mentions needing help, modification, etc. most of those have equity in their homes and have put 20% down ontheir homes. so after the banksters are finished stealing those homes who do you think will be next? as THOMASJEFFERSON SAID..UNTIL ALL THE CHILDREN ARE IN THE STREETS

  2. Steve&BC says:

    I’ve been dealing with two “lost” mortgages since May of this year.., and getting absolutely nowhere. The problem, which I think is a huge National problem, is that I am NOT in foreclosure and my mortgages have been lost to slicing and dicing derivatives and no longer exist.

    The prime suspect is Fannie Mae. Fannie claims to own both of my mortgages but refuses to provide any documentation proving such ownership. Fannie tells me to contact the mortgages servers (Chase & BofA) and the banks tell me to contact Fannie. I have, several times. It is clear if my mortgages were still in existence Fannie Mae, and the banks, would have provided proof of ownership – willingly – long ago. The resulting proof of ownwership would hve negated any doubt. But no, just the opposite has occurred.

    My situation has received dismissive recogntion from the numerous governmental agencies I have contacted. The reason – I think – is because I’m NOT in forcloure. I’m not in that group of people who possess the immediate leverage of a foreclosure (which establishes a put-up or shut-up situation), therefore I hvve no victim standing. However, I beleive my situation is more sinister than foreclosure because Fannie and the banks have knowledge my mortgaes no longer exsist and fraudulently take my monthly mortgage payments.

    Just how many thousands of unsuspecting homeowners think they are paying-down their mortgages when in reality they are not. Seems criminal to me..

    Input welcomed…

    • RAMONA says:

      The central bank is an institution of the most deadly hostility existing against the Principles and forms of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will grow up homeless on the continent their Fathers conquered. The Issuing power of money should be taking from the banks and restored to Congress and the people to whom it belongs.” ~Thomas Jefferson

  3. John Anderson says:

    ” I know you heard what I said, what you don’t understand is what I said is not what I meant ”
    Richard Nixon.

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