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Mortgage Servicing and Loan Modifications: 11.2.7.5 Securities and Exchange Commission Documents

Publicly traded corporations must file periodic reports with the Securities and Exchange Commission (SEC).60 Entities that must file with the SEC also include the trusts that are frequently involved in the securitization process. Reports filed with the SEC include information about the financial viability of the company to pay a judgment. A report may reference state and federal enforcement actions involving the institution, including consent decrees setting these enforcement actions.

Mortgage Servicing and Loan Modifications: 11.2.7.6 Rating Agencies

Credit rating agencies provide opinions on the creditworthiness of particular companies, securities, or obligations. The growth of complex financial products in the mortgage market has meant that the rating agencies play a bigger role in this sector. As a result, the agencies collect a tremendous amount of data related to lenders, servicers, insurers, and other parties involved in mortgage transactions. This data includes both financial and operational information.

Mortgage Servicing and Loan Modifications: 11.3.2.1 Introduction

The evidentiary rules relating to the authentication of documents arise out of the requirement that evidence offered must be relevant to the matter in issue.95 A document offered to prove a fact can be relevant only if the document is actually what it purports to be.96 Some forms of documents are deemed to be sufficiently trustworthy on their face so as to be self-authenticating,97 while the authentication of other forms

Mortgage Servicing and Loan Modifications: 11.3.2.2 Authenticating Promissory Notes

Where negotiable notes are concerned, U.C.C. Article 3 will mostly be controlling on authentication issues. While most first mortgage notes on the Fannie/Freddie Uniform Instrument form are negotiable, other forms of notes such as those evidencing home equity lines of credit (HELOCs) and reverse mortgages, and notes on specialized note forms, are not negotiable and therefore different rules of evidentiary proof may apply.103

Mortgage Servicing and Loan Modifications: 11.3.2.3 Authenticating Security Instruments and Assignments

Mortgages, deeds of trust, and assignments of them are typically self-authenticating.122 However, mortgages, deeds of trust, and assignments, if offered as self-authenticating under Federal Rule of Evidence 902(8) must be “accompanied by a certificate of acknowledgment executed in the manner provided by law by a notary public or other officer authorized by law to take acknowledgments.”123 Generally, howev

Mortgage Servicing and Loan Modifications: 11.3.3 Authentication of Electronically Stored Information

Servicers’ lawyers, and often trial judges, tend to ignore the authentication requirements for electronically stored and electronically created loan records such as loan history documents and payoff calculations, and instead focus solely upon the business records exception to the hearsay rule in Fed. R. Evid. 803(6). It is a great mistake for homeowners’ lawyers to allow the authentication rules to be ignored as these rules provide some of the most viable opportunities for successful defenses of foreclosure cases.

Mortgage Servicing and Loan Modifications: 11.3.4 The Requirements for Personal Knowledge—Affidavits and Trial

A “personal knowledge” requirement applies to in-court testimony as well as to affidavits submitted in support of a written motion for judicial relief.147 “Affidavits asserting personal knowledge must include enough factual support to show that the declarant possesses that knowledge.”148 Virtually no servicer witness will have personal knowledge of the details of any loan, because that witness was not present at the loan closing and will have had no day-to-day involveme

Mortgage Servicing and Loan Modifications: 11.4.2.1 Overview

The most critical player in foreclosure defense cases is the mortgage loan owner. The owner is the party that has the right to enforce the note and foreclose on the mortgage or deed of trust.264 In some cases, the owner may be the entity that originated the loan.

Mortgage Servicing and Loan Modifications: 11.4.2.3.3 The Merrill doctrine as a limitation on liability of government agency loan owners

Special issues arise when a servicer acts on behalf of a loan owner that is a federal governmental entity. Most often, this occurs when one of the government-sponsored enterprises (GSEs), such as Fannie Mae or Freddie Mac, owns the borrower’s mortgage loan. In these situations, a court-created rule known as the Merrill doctrine may limit application of otherwise controlling agency principles.

Mortgage Servicing and Loan Modifications: 11.5.1.1b Standing

In foreclosure and mortgage servicing cases, homeowners may raise a combination of federal and state claims (e.g., RESPA, TILA, FDCPA, state UDAP and breach of contract). In addition to asserting a federal claim or diversity jurisdiction, borrowers wanting to maintain an action in federal court must demonstrate that an actual case or controversy exists.335 Standing is fundamental to this case or controversy requirement.

Mortgage Servicing and Loan Modifications: 11.5.1.3 Removal of Actions

When a case has been filed in state court, the defendant may remove the case to federal court if federal jurisdiction standards are satisfied and removal procedures are followed. The party seeking removal bears the burden of establishing federal jurisdiction, including Article III standing, and generally there is a presumption against removal jurisdiction.355 Standing is an essential element of the federal court’s subject matter jurisdiction.

Mortgage Servicing and Loan Modifications: 11.5.3 Personal Jurisdiction over Out-of-State Defendants

Given the rise of mortgage securitization, it is now very common for out-of-state entities to be involved in cases related to residential home mortgages. If the homeowner brings an affirmative action against out-of-state entities, the court must have personal jurisdiction over those defendants. For cases brought in both state and federal court, jurisdiction over out-of-state parties will be governed by the state long-arm statute.392 Courts must also determine whether exercise of jurisdiction satisfies due process requirements.

Home Foreclosures: 10.3.2.1 Generally

The process required to undo a completed foreclosure will depend on the foreclosure method used by the lender. If the foreclosure was conducted by power of sale, the foreclosed homeowner usually must initiate a suit to set aside or void the sale. Because foreclosure is entirely extra-judicial in most states that allow power of sale foreclosures, there is no existing action in which claims to invalidate the completed foreclosure can be raised.

Home Foreclosures: 17.4.2.2.2 Exercising the right of rescission

Rescission works through a sequential, three-step process.

First, the consumer sends written notice of rescission, which operates automatically to void the security interest in the real property and to eliminate the consumer’s obligation to pay the finance charges (even if accrued) and other charges. In the case of a foreclosure rescue scam, once a sale-leaseback transaction is deemed to be an equitable mortgage, the agreements underlying that transaction would be voided, including any fees or costs the homeowner agreed to pay.