Naked Capitalism | U.S. Bank v. Congress – Appeals Court Reverses Decision on Chain of Title Case, Ruling Hinges on Question of Bogus Allonges

Alabama Appeals Court Reverses Decision on Chain of Title Case, Ruling Hinges on Question of Bogus Allonges

In a unanimous decision, the Alabama Court of Civil Appeals reversed a lower court decision on a foreclosure case, U.S. Bank v. Congress and remanded the case to trial court.

We’d flagged this case as important because to our knowledge, it was the first to argue what we call the New York trust theory, namely, that the election to use New York law in the overwhelming majority of mortgage securitizations meant that the parties to the securitization could operate only as stipulated in the pooling and servicing agreement that created that particular deal. Over 100 years of precedents in New York have produced well settled case law that deems actions outside what the trustee is specifically authorized to do as “void acts” having no legal force. The rigidity of New York trust has serious implications for mortgage securitizations. The PSAs required that the notes (the borrower IOUs) be transferred to the trust in a very specific fashion (endorsed with wet ink signatures through a particular set of parties) before a cut-off date, which typically was no later than 90 days after the trust closing. The problem is, as we’ve described in numerous posts, that there appears to have been massive disregard in the securitization for complying with the contractual requirements that they established and appear to have complied with, at least in the early years of the securitization industry. It’s difficult to know when the breakdown occurred, but it appears that well before 2004-2005, many subprime originators quit bothering with the nerdy task of endorsing notes and completing assignments as the PSAs required; they seemed to take the position they could do that right before foreclosure. Indeed, that’s kosher if the note has not been securitized, but as indicated above, it is a no-go with a New York trust. There is no legal way to remedy the problem after the fact.

The solution in the Congress case appears to have been a practice that has since become troublingly become common: a fabricated allonge. An allonge is an attachment to a note that is so firmly affixed that it can’t travel separately. The fact that a note was submitted to the court in the Congress case and an allonge that fixed all the problems appeared magically, on the eve of trial, looked highly sus. The allonge also contained signatures that looked less than legitimate: they were digitized (remember, signatures as supposed to be wet ink) and some were shrunk to fit signature lines. These issues were raised at trial by Congress’s attorneys, but the fact that the magic allonge appeared the Thursday evening before Memorial Day weekend 2011 when the trial was set for Tuesday morning meant, among other things, that defense counsel was put on the back foot (for instance, how do you find and engage a signature expert on such short notice? Answer, you can’t).

Rest here…

Copy of the opinion below…

~

4closureFraud.org

~

Alabama Appeals Court Ruling U.S. Bank v. Congress June 8, 2011

Comments
6 Responses to “Naked Capitalism | U.S. Bank v. Congress – Appeals Court Reverses Decision on Chain of Title Case, Ruling Hinges on Question of Bogus Allonges”
  1. goi says:

    Some have ‘won’ their house FREE & CLEAR (I did..) Here’s the court order: http://www.scribd.com/doc/90184879/I-Won-my-House-FREE-CLEAR-Here-s-HOW
    Other have ‘lost’ their house [I did: lost rental houses] In these cases I was ‘self represented’ (ProSe/ProPer/SuiJuris/Etc)
    If we all got ‘free houses’: it would destroy the crunched economy we now have. However, banks/lenders should not be allowed to violate the same laws they lobbied to enact.
    Hence: if someone bought their house ‘no-down’ and now whine because it went down in value OR if someone used their house as an ATM to get a new boat/car/vacation/etc: They should ‘lose the house’.
    There are those who paid a down payment and kept equity. To those I say: don’t let the bank cheat you…!!!

    • To Tell The Truth says:

      Good for you and Understand how you feel about the others…but in reconsidering, they had the right to use their equity to do what they want with..it was theirs…they are being foreclosed for the same reasons as the majority…and their loans are also paid off…after all. the equity we were told was considered forced savings…and those who still had their equity like me have none…so we need to have care when we consider the plight of others…

    • To Tell The Truth says:

      Actually, I think if the homeowners, not the investors of the second homes, would get their homes free and clear it would improve the economy substantially!!! They would now use their energies to create jobs and spend what they still have injecting money into the economy to keep it going. The banksters will then have to do banking properly and all this nonsense would stop with the fraud or most of it anyway…however, since the banksters got themselves in a riptide, this wont happen…the fraud is too far reaching and more exposure is yet to come.

  2. goi says:

    Some have ‘won’ their house FREE & CLEAR (I did..) Here’s the court order: http://www.scribd.com/doc/90184879/I-Won-my-House-FREE-CLEAR-Here-s-HOW

    Other have ‘lost’ their house [I did: lost rental houses] In these cases I was ‘self represented’ (ProSe/ProPer/SuiJuris/Etc)

    If we all got ‘free houses’: it would destroy the crunched economy we now have. However, banks/lenders should not be allowed to violate the same laws they lobbied to enact.

    Hence: if someone bought their house ‘no-down’ and now whine becuase it went down in value OR if someone used their house as an ATM to get a new boat/car/vacation/etc: They should ‘lose the house’.

    There are those who paid a down payment and kept equity. To those I say: don’t let the bank cheat you…!!!

  3. Pamela Edwards says:

    I hope they kick the crap out of US Bank.They tried to enter my home into the securitization 4 years after the original loan(not with them).They still got my house and nobody’s ever done anything.I got evicted and when I brought all of this to Judges attention was told to bad thats the way its done.I got a heart attack out of all this.I say let all the banks fail.

  4. The first illegal securitized loan scheme was a GNMAE loan pool in 1978. Since then, it appears that virtually none of the securitizations followed the procedures set forth in the P.S.A.’s If anyone knows of a case where a securitization was done according to the documents, I don’t know about it and haven’t seen it but would like to. In reviewing hundreds of securitization documents, I have never seen one done properly and according to the procedures in the PSA agreement and related documents. For example, as discussed above certain documents were to be executed within 90 days. Have you ever heard of a “bank” that can do anything right in 90 days when they are dealing with billions of dollars in transactions? I haven’t.
    Michael

Leave a Reply

Your email address will not be published. Required fields are marked *