Here… It…. Comes… (Foreclosuregate)


The Market Ticker: Here… It…. Comes… (Foreclosuregate)

When this entire Foreclosurefraud nonsense got going, and I started digging through documents from various parties, one of the striking findings I kept coming up with was that mortgages had not been timely transferred into the trusts that form the MBS in question.

REMIC law is extremely clear and has no exceptions or exclusions — you either get the actual documents into the trust on time or you can’t do it at all.  The reason is that these are pass-through instruments for tax purposes and widespread, indeed trivial fraud would be easy to commit if no such requirement was adhered to (you could substitute only “good” loans later on, you could stuff the trust with “bad” loans posthumeously to generate fake losses, etc.)

I had argued that given the apparent widespread failure to transfer mortgages into these trusts an attempt to later sue for foreclosure in the name of the trust (by the Servicer as a nominee or agent of the Trust, etc) was presumptively invalid because the alleged “owner” of the mortgage in fact was not the owner because they never took their ownership interest in a timely fashion and the law bars them from doing so at a later date.


In this appeal, the borrower contends the trial court erred by sustaining defendants’ demurrer as to all of his causes of action attacking the nonjudicial foreclosure.   We conclude that, although the borrower’s allegations are somewhat confusing and may contain contradictions, he nonetheless has stated a wrongful foreclosure claim under the lenient standards applied to demurrers.   We conclude that a borrower may challenge the securitized trust’s chain of ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust’s closing date.Transfers that violate the terms of the trust instrument are void under New York trust law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement.

We therefore reverse the judgment of dismissal and remand for further proceedings.

Oh oh….

And why did they take this position?  Right here, which is exactly the reason that I argued originally that this was a potentially fatal defect in these trusts:

Despite the foregoing cases, we will join those courts that have read the New York statute literally.   We recognize that a literal reading and application of the statute may not always be appropriate because, in some contexts, a literal reading might defeat the statutory purpose by harming, rather than protecting, the beneficiaries of the trust.   In this case, however, we believe applying the statute to void the attempted transfer is justified because it protects the beneficiaries of the WaMu Securitized Trust from the potential adverse tax consequence of the trust losing its status as a REMIC trust under the Internal Revenue Code. Because the literal interpretation furthers the statutory purpose, we join the position stated by a New York court approximately two months ago:  “Under New York Trust Law, every sale, conveyance or other act of the trustee in contravention of the trust is void.   EPTL § 7–2.4. Therefore, the acceptance of the note and mortgage by the trustee after the date the trust closed, would be void.”  (Wells Fargo Bank, N.A. v. Erobobo (Apr. 29, 2013) 39 Misc.3d 1220(A), 2013 WL 1831799, slip opn. p. 8;  see Levitin & Twomey, Mortgage Servicing, supra, 28 Yale J. on Reg. at p. 14, fn. 35 [under New York law, any transfer to the trust in contravention of the trust documents is void].)


Ratification by fiat of an untimely transfer into the trust forcibly voids the REMIC’s tax pass-through status by that same judicial fiat.

It is manifestly unjust to impose upon the holders of the certificates such a draconian outcome when the harm, if any, that accrues from being unable to foreclose properly falls upon the originators, servicers and their agents who failed to perform their duties according to law.

Now the game is afoot.

Original document here.

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6 Responses to “Here… It…. Comes… (Foreclosuregate)”
  1. bobhurt says:

    So, what if a foreclosure plaintiff shows up with a such a note (put into the trust after the closing date) ENDORSED IN BLANK? Doesn’t the UCC require that the holder (or holder’s agent) of a blank endorsed note may enforce it, NO MATTER WHAT? Doesn’t this make the “note entrusted past the closing date” argument just ANOTHER LOSING ARGUMENT? Haven’t numerous California courts deprecated the CA 5th District Glaski opinion by opining that the borrower, not injured by the PSA or assighment, and a non-party to either, has no court standing to enforce or dispute the Pooling and Servicing Agreement OR the assignment of the note?

  2. qny1 says:

    If you get a letter from a trust stating they own your note and mortgage, send it to the IRS to waive the trust’s tax exemption status. Watch how fast they settle with you. The Trusts cannot own notes or mortgages otherwise they have to pay taxes on it. Check out Overcoming Foreclosures by Norman L Sirak, Atty, published 2012. He died when he was preparing for a promotional tour of his book, what a coincidence. He was charging $1500 for a quiet title claim and his book explains how to do it yourself. Now attorneys are buying his book and want to charge people $15,000 and up for quiet titles. Mr. Sirak wrote the book for the people, go to his website and buy it directly so that his family receives the payment.

  3. macy says:

    What is the statutes of limitation regarding this?

  4. Hell NO, No more Bankster Bailouts! says:

    Bank of America is fighting the PUBLICATION of that Glaski case ruling here in CA.

    Even though the result in the Glaski case itself only causes the lower court to have to actually proceed with the case, Bank of America is fighting to keep this ruling from remaining PUBLISHED.

    Why are they fighting “PUBLICATION” so hard? Only PUBLISHED cases are easily cited by other cases as ‘case law’.

    Bank of America does not like having their ‘Gomes ruling’ here in CA squashed to the side and even trod into the mire and muck it slithered out of.

    • Hell NO, No more Bankster Bailouts! says:

      Correction, BOA has filed for a RE-HEARING. They are fighting the Glaski ruling with the ‘big guns’, even NY law firms.

      We need the big guns on our side to jump in on this one. In fact, given that the late transfers to the REMIC trusts INVALIDATE the beneficial tax status of the trust, per IRS code, the ‘big guns’ for the INVESTORS may ALSO want to fight against the BANKSTERS on this one.

      Quinn-Emmanuel attorneys, you guys paying attention? Any of the other INVESTOR’S-attorneys taking ‘note’?

      • neidermeyer says:

        Those bankster lawyahs will be needing more interns to help put out all the fires …

        BofA fails to end U.S. mortgage fraud lawsuit as trial nears

        NEW YORK, Aug 27 (Reuters) – The U.S. government lawsuit accusing Bank of America Corp of fraudulently selling toxic mortgage loans to Fannie Mae and Freddie Mac appears on track to go to trial next month after a judge rejected the bank’s bid to dismiss the case.

        In an order made public on Tuesday, U.S. District Judge Jed Rakoff in Manhattan said there are “genuine factual disputes” involving at least one of the government’s theories to warrant letting the case continue against the second-largest U.S. bank. He said he will explain his reasons in due course.

        Rakoff’s order clears the way for the case to proceed toward trial, which is scheduled for Sept. 23.

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