[BROKERDIRT] Due Process and private foreclosures

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Patrick Randolph (UMKC Dirt)

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Nov 22, 2011, 11:45:09 AM11/22/11

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________________________________________
From: Brian Rider [Brian...@forestargroup.com]

In non-judicial foreclosure states, there may not be an opportunity for the borrower to assert due process issues (at least based on federal constitutional law). See Barrera v. Security Building & Investment Corp., 519 F 2d 1166 (Fifth Cir. 1975) which says there is no "state action" to which the due process standards apply when the state merely recognizes the legal effect of the exercise of power of sale conferred in a contract (deed of trust in the case of Texas) between private parties. The Texas statute recognizes the power of sale between the parties and sets minimal process and notice standards, but does not itself grant the power to foreclose a deed of trust. This court distinguishes the Snidach case , 395 U. S. 337 (1968) where a Wisconsin statute allowed an ex parte seizure of wages, and in which due process issues could be raised.

Brian C. Rider, Senior Real Estate Counsel
Forestar (USA) Real Estate Group Inc.
6300 Bee Cave Road, Building Two, Suite 500
Austin, Texas 78746
512/433-5248 (phone)
512/433-5204 (fax)
brian...@forestargroup.com

-----Original Message-----
From: DIRT - Real Estate Lawyers Listserv [mailto:DI...@LISTSERV.UMKC.EDU] On Behalf Of Patrick Randolph (UMKC Dirt)
Sent: Monday, November 21, 2011 10:01 AM
To: DI...@LISTSERV.UMKC.EDU
Subject: [DIRT] Dale Whitman on April Charney: : NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

________________________________________
From: April Charney [April....@jaxlegalaid.org]

no, not limited to judicial foreclosure states. The issue in nonjudicial foreclosure states is for the courts with jurisdiction to declare the borrower's rights to avoid a nonjudicial foreclosure by an entity that has no legal status to access the privilege of using the nonjudicial foreclosure process. The borrower must be given access to due process to challenge the use of a nonjudicial foreclosure process and then the relief is an injunction, which is a statutory injunction under most states dec jt statutes and statutory injunctions are not common law injunctions and do not require showing of reliance, detriment, irreparable injury or invocation of public good. And, dec jt statutes allow for attorney's fees. And the illegal debt collection violations exist regardless of whether the state is judicial or no.

april....@jaxlegalaid.org
________________________________________
From: BROKERDIRT - Real Estate Brokers Discussion Group [BROKE...@LISTSERV.UMKC.EDU] on behalf of Patrick Randolph (UMKC Dirt) [di...@UMKC.EDU]
Sent: Friday, November 18, 2011 11:56 PM
To: BROKE...@LISTSERV.UMKC.EDU
Subject: [BROKERDIRT] Dale Whitman on April Charney: : NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

________________________________________
From: Burnside, Fred [fredbu...@dwt.com]

And thus limited to judicial foreclosure states, right? The minority, to be sure.

-----Original Message-----
From: DIRT - Real Estate Lawyers Listserv [mailto:DI...@LISTSERV.UMKC.EDU] On Behalf Of Patrick Randolph (UMKC Dirt)
Sent: Friday, November 18, 2011 11:30 AM
To: DI...@LISTSERV.UMKC.EDU
Subject: [DIRT] Dale Whitman on April Charney: : NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

________________________________________
From: April Charney [April....@jaxlegalaid.org]

the issue is not borrower's standing. the issue is whether there is admissible evidence presented to engage the subject matter jurisdiction of the court and to support a foreclosure judgment.

april....@jaxlegalaid.org
________________________________________
From: BROKERDIRT - Real Estate Brokers Discussion Group [BROKE...@LISTSERV.UMKC.EDU] on behalf of Patrick Randolph (UMKC Dirt) [di...@UMKC.EDU]
Sent: Thursday, November 17, 2011 5:22 PM
To: BROKE...@LISTSERV.UMKC.EDU
Subject: [BROKERDIRT] ] Dale Whitman on April Charney: : NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

________________________________
From: da...@danielpmarsh.com [da...@danielpmarsh.com]
Dan:

How did you get past the argument the borrower has no standing to enforce 'contracts' or assignments the borrower is no in privity with? This argument also is used to say borrower lacks standing to enforce the PSA--no privity.

Dan Marsh

Sent from my Verizon Wireless BlackBerry ________________________________
From: "Patrick Randolph (UMKC Dirt)" <di...@UMKC.EDU>
Sender: DIRT - Real Estate Lawyers Listserv <DI...@LISTSERV.UMKC.EDU>
Date: Thu, 17 Nov 2011 13:43:39 -0600
To: <DI...@LISTSERV.UMKC.EDU>
ReplyTo: DIRT - Real Estate Lawyers Listserv <DI...@LISTSERV.UMKC.EDU>
Subject: [DIRT] FW: [DIRT] FW: [DIRT] Dale Whitman on April Charney: : NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

________________________________
From: d...@jmglawoffices.com [d...@jmglawoffices.com]

If I may, let me ad to this. First, I note that I have litigated these issues and represent borrowers, so you know my bent. As I have parsed it, the borrower argument is in stages:

1. The PSA controls. The UCC does not apply because the parties contracted around it as is expressly allowed by the UCC.

2. The PSA provides many details for the transfer of the notes, etc. These have not been met. I have done discovery on trusts and can affirm that I have not seen even one that did it right.

3. The trustee/anyone cannot transfer the notes or anything else in violation of the PSA. Such acts are void. This is where I have not been able to complete the argument. Despite the quoted text of the NY trust law, my research has concluded with such ultra vires acts are voidable, not necessarily void -- a big difference.

4. Because the transfer is void, or even if voidable, who can "void" it. Borrowers argue that the note is really "feral" as April puts it. Or, more practically, it can be enforced only by the originating entity which is now gone, in many cases. So, no one can enforce the note. (I ignore for this analysis the problems of the assignment of the mortgage deed of trust).

The issues that then arise are:
1. If the trust conduct is voidable only, who can do that? Only the benes? What right does the borrower have to enforce the PSA?

2. The borrowers are not the IRS.

3. What about equity? Equitable mortgages are available in many jurisdictions. The borrower took the money -- in many cases undisputed. So.....

Dan Mulligan
Jenkins Mulligan & Gabriel LLP

On Nov 17, 2011, at 9:12 AM, "Patrick Randolph (UMKC Dirt)" <di...@UMKC.EDU<mailto:di...@UMKC.EDU>> wrote:

________________________________
From: pgz...@gmail.com<mailto:pgz...@gmail.com> [pgz...@gmail.com<mailto:pgz...@gmail.com>] On Behalf Of Pablo Gonzalez Zepeda, Esq.
This short email seeks to address Mr. Whitman's point of permitting a trust to cure previous defaults. Note, I don't know the breadth of Mr. Whitman's and Ms. Charney's debate. But we're interested in whatever counterpoints anyone may have since admitted PSA violations are currently being litigated across our great nation (on both sides of the transaction: investor/homeowner) and marred in controversy.

To my knowledge, most PSAs include a section entitled "Delivery of Mortgage Loan Documents" where the trustee has the obligation to "review, or cause to be reviewed, each mortgage file within ninety days after the closing date" of the trust. So, most PSA dictate the cure period and how to cure the defect. The typical language is as follows: "If the trustee . . during the process of reviewing the mortgage files, finds any documents constituting a part of a mortgage file that is not executed . . . or that any mortgage loan does not conform to the requirement above . . . If, however, . . .the applicable responsible party has not caused the defect to be remedied, the applicable responsible party will be required to either (a) substitute a Substitute Mortgage Loan for the defective mortgage loan . . or (b) repurchase the defective mortgage loan."

Accordingly, the PSA does not afford a trustee the ability to cure defects or defaults at his/her discretion. The Restatement of the Law, Second, Trusts, Section 187 explains "the exercise of a [trustee] power is discretionary except to the extent to which its exercise is required by the terms of the trust or by the principles of law applicable to the duties of trustee." Section 185 explains "where by the terms of the trust it is provided that in the administration of the trust the trustee shall do certain acts . . . it is ordinarily his duty to comply with such directions and he is ordinarily liable if he fails to do so."

I believe April correctly argues that a trust cannot commit the ultra vires act of enforcing loan documents that the trust does not own or that are defective. To be sure, a trust cannot take ownership or hold a note and mortgage in violation of its trust documents. See In the Matter of the Application of Edward Cummings, 184 NYS 404 (NY App Div 1920) (holding that trusts are sacred and that trustees cannot violate the express terms thereof, if such terms are incorporated in the instrument creating the trust). NY Civil Practice: EPTL P 7-2.4(2) (stating that "a cardinal principle of the law of trusts is that the instrument under which the trustee acts is the charter of his rights and he must act in administering the trust in accordance with its terms").

The law of New York regarding acts of trustees in contravention of trust makes clear that "if the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this Article and by any other provision of law, is void. NY CLS EPTL Section 7-2.4 (2011)

Therefore, I would agree that homeowner's have the right to contest the trust's standing (i.e. the trustee does not have the authority to enforce loan documents that is does not own or hold). To analogize, the argument can be compared with challenging a law that Congress did not have the enumerated powers to enact. If the act or law is deemed unconstitutional, Congress may proceed only by abiding by the constitution or amending the constitution.

Pat responds: The use of the term that such and such "will" happen as a consequence of a default does not necessarily mean that the party protected by such language may not waive it and permit a later cure. This is a contract, not a regulation.

On Tue, Nov 15, 2011 at 7:04 PM, Patrick Randolph (UMKC Dirt) <di...@umkc.edu<mailto:di...@umkc.edu>> wrote:
________________________________________
From: Whitman, Dale [Whit...@missouri.edu<mailto:Whit...@missouri.edu>]
I must confess that I didn't have the patience to wade through these depos in order to evaluate whether MERS properly delegated signing authority to the various corporate officers. Perhaps April is correct that no adequate delegations were made.

However, I can't make any sense at all of her other assertions, to the effect that the principals (mortgage originators or intermediate holders -- so-called depositors) could not make, or authorize MERS to make, assignments except during the 90-day startup period of the securitized trust.

It is true that the PSAs required assignments to be made, and notes to be delivered, during the startup period. It is also true that in many cases this was not done; the notes were not delivered until later (if at all), and the assignments were not made until later. So what? April's argument seems to be that if I am contractually obligated to execute and deliver certain documents during time period A, and I fail to do so, I can't later execute and deliver them during time period B. But why not? Why can't I cure my previous default by doing later what I should have done earlier?

I understand that April believes the late delivery of the documents throws the trust's compliance with the REMIC rules into question. I don't think she is correct on this point, but even if she is, and if the trust's tax status is in jeopardy, it's still a trust and it still has the documents. Hence, it can still enforce them by foreclosing the mortgage or suing on the note. I don't understand why the fact that the documents were delivered to the trust late provides any defense whatever to the trust's foreclosure of the mortgages.

Dale

Dale A. Whitman
Professor of Law Emeritus
University of Missouri-Columbia
whit...@missouri.edu<mailto:whit...@missouri.edu>
(Office) 573-884-0946<tel:573-884-0946>
(Mobile) 573-356-9371<tel:573-356-9371>

-----Original Message-----
From: DIRT - Real Estate Lawyers Listserv [mailto:DI...@LISTSERV.UMKC.EDU<mailto:DI...@LISTSERV.UMKC.EDU>] On Behalf Of Patrick Randolph (UMKC Dirt)
Sent: Monday, November 14, 2011 10:31 PM
To: DI...@LISTSERV.UMKC.EDU<mailto:DI...@LISTSERV.UMKC.EDU>
Subject: [DIRT] FW: NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

________________________________________
From: April Charney [April....@jaxlegalaid.org<mailto:April....@jaxlegalaid.org>]
Sent: Monday, November 14, 2011 10:37 AM
To: UMKC Broker Dirt
Subject: NO AUTHORITY FOR MERS SIGNERS - SUPPORT FOR STATEMENT - hultman/lps depo materials

I got quite a few emails asking me for the authority for the above statement. The below email and attachments are the response to all these emails.

Please read the depos and the applicable mers membership rules.

Neither MERS nor merscorp ever performed the corporate actions or gave authority or documentation needed to give the mers VP Bill Hultman the corp authority to appoint a single signer; the signers were required to be officers of the mers member corp; the signer had to be appointed in their official capacity, not personal, and mers' signers would only have the power that the principal had (as mers is only a nominee), the principal being the originating lender who was contractually bound to execute the docs required by the psa only and exclusively within the start up term of the trust. And there is no capacity or authority for any of the signer activity that we are dealing with, surrogate or otherwise, after the closing date of each REMIC trust.

april....@jaxlegalaid.org<mailto:april....@jaxlegalaid.org>

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Regards,

Pablo Gonzalez Zepeda

Dadeland Towers South
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Penthouse Five
Miami, Florida 33156
Telephone: (305) 670-5885
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