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Mortgage Servicing and Loan Modifications: 11.2.5.7 Transfer of Servicing Notice

Lenders are required at the time of application for most mortgage loans to disclose to each applicant whether the servicing of the loan may be assigned, sold, or transferred at any time during the term of the mortgage.49 If the servicing of a mortgage is transferred after the mortgage loan is made, both the former and the new servicer must notify the borrower in writing of the transfer.50 Since many servicing problems occur at or near the time of transfer of servicing, the information contained in t

Mortgage Servicing and Loan Modifications: 11.2.5.8 Bankruptcy Notices

If the borrower filed a chapter 13 bankruptcy case to cure a mortgage default after December 1, 2011, Bankruptcy Rules 3001 and 3002.1 require the servicer to disclose prepetition default fees and arrearage amounts on the initial proof of claim, send notices of any mortgage payment changes, send notices of any fees and expenses that are charged to the borrower’s account during the case, and file a response at the end of the case indicating whether the borrower has fully cured the default.51 This information produced during the bankruptcy case,

Mortgage Servicing and Loan Modifications: 11.2.6 Mortgage Transfer of Ownership Notices

When defending against a foreclosure or challenging servicing abuses it is important to know not only who the servicer is, but also who is the current owner of the mortgage. The identity of the current mortgage owner, however, may not always be apparent. Many mortgages today are assigned by the loan originator to a purchaser on the secondary market. Very often the mortgage owner at the time of foreclosure (or even shortly after the loan closing) is not the bank or mortgage company that originated the loan.

Mortgage Servicing and Loan Modifications: 11.2.7.1 Land Records

The mortgage or deed of trust and any related assignments should be available from the local land registry in-person or online. Local land records also can be checked to determine: the number of loans a particular lender made in that locality; the names and addresses of the affected homeowners; whether a lender has an unusually high number of foreclosures or is repeatedly flipping loans.

Mortgage Servicing and Loan Modifications: 11.2.7.2 Consumer Complaints

Through state freedom of information acts, records of consumer complaints to local consumer protection agencies, attorney general offices, and licensing divisions can be obtained to see whether similar complaints have been made about the potential defendants in the past. The Better Business Bureau should also be contacted for copies of any complaints.

Mortgage Servicing and Loan Modifications: 11.2.7.4 Corporate and Business Documents

Every state requires corporations and other businesses to file certain documents at the time the company begins operation in that state, and periodically thereafter. The filing typically consists of the articles of incorporation and annual reports. When dealing with corporations, this information is helpful to figure out who stands behind the corporation or business, in the event the corporate veil can be pierced or to sue these individuals separately.

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: 11.2.7.7 Other Lawsuits

Obtaining complete information about other lawsuits against the same defendants is not an easy or inexpensive task. On the bright side, the existence of lawsuits filed in federal courts can be found by using the Public Access to Court Electronic Records (PACER).61 This is an electronic public access service that allows users to obtain case information from federal courts.

Mortgage Servicing and Loan Modifications: 11.2.7.8 State Administrative Agencies

In recent years, state administrative agencies have taken increasing interest in the mortgage origination and servicing practices, especially where their licensees include industry actors such as brokers, mortgage companies, and foreclosure consultants. Some agencies post a substantial amount of helpful information online.

Mortgage Servicing and Loan Modifications: 11.2.8.2 Confidentiality/Protection Orders

Federal Rule of Civil Procedure 26(c)(1) governs protective orders and permits a court, for good cause, to issue an order to protect from public disclosure trade secrets or other confidential research, development, or commercial information, among other things. Without a protective order parties can disseminate materials produced in discovery.

Home Foreclosures: 2.2.3 The Primacy of the Note

Under most state laws, the party instituting a foreclosure must be a party with the right to enforce the promissory note that the borrower executed at loan origination.7 If the note is a negotiable instrument,8 the foreclosing entity can be required to present the original note or account for its absence.9 In judicial foreclosure jurisdictions, the complaint filed with the court should allege that the foreclosing party is entitled to enforce the note.

Home Foreclosures: 2.2.5.8.1 Introduction

The general rule is that in order to enforce a negotiable instrument, an entity must be a “holder” of the note in accordance with the UCC’s definition of that term.122 For both bearer paper and order paper, possession of the note containing the appropriate indorsement is an essential element of holder status.123 However, there are exceptions.

Home Foreclosures: 2.4.2.1 Generally

A note is nonnegotiable when it fails to meet one or more of the elements contained in Article 3.222 Often, a nonnegotiable note closely resembles a negotiable instrument.223 The question of whether a note is nonnegotiable is important because Article 3 of the UCC becomes irrelevant to the question of the right to enforce the note.224 For example, the presumption that the party in possession of a negotiable note indorsed in blank can enforce the re

Home Foreclosures: 3.3.3 Requirement to Be Current Assignee of the Security Instrument

Judicial foreclosures typically place a dual burden on the plaintiff. The plaintiff must establish that it has the right to enforce the note and that it is the current assignee of the mortgage. The requirement to show that it is the current assignee of the mortgage may present difficulties for the foreclosing plaintiff. For example, the plaintiff may find itself relying on assignments by parties who had no interest in the mortgage, untimely assignments, or improperly executed assignments, such as those resulting from misuse of the MERS signing authority.

Home Foreclosures: 3.4.1 Introduction

Non-judicial foreclosures are primarily creatures of state statutes. Although a boilerplate contract term purportedly signifies the borrower’s “consent” to the creditor’s use of the private power of sale remedy, the creditor may only exercise this contractual right in accordance with the terms of a state’s statute. In all jurisdictions in which foreclosure of a home by non-judicial procedures is allowed, a statute sets requirements for how the foreclosure must proceed.

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

Home Foreclosures: 2.2.5.4 Enforcement of Order Paper: A Party in Possession of a Properly Indorsed Note

A negotiable instrument payable to the order of an identified person is “order paper.”64 Such a note is sometimes referred to as “specially” indorsed. For effective negotiation of order paper, there must be a proper indorsement to a transferee plus delivery of the instrument to the designated transferee.65 If there were defects in either indorsement or delivery, the party seeking to enforce the note is not a “holder” of the instrument.66

Home Foreclosures: 3.3.7 Cure of Authority to Foreclose Defects After the Filing of the Complaint

Many courts have faced the question of how to treat lawsuits filed by parties who did not have authority to foreclose on the date the complaint was filed, but claimed to have obtained this authority at a later date, typically before the entry of judgment. Plaintiffs often point to post-filing assignments, transfers of notes, or substitution of parties as evidence that they corrected standing defects that existed when they filed the complaint. Because most courts view standing as a jurisdictional requirement, they focus on the plaintiff’s status as of the date the complaint was filed.

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

Home Foreclosures: 3.3.2 Requirement to Have Authority to Enforce the Note

Appellate courts in judicial foreclosure jurisdictions that have addressed the issue have consistently held that the plaintiff seeking to foreclose must be the party with authority to enforce the promissory note.48 There is little reason to expect that appellate courts in other judicial foreclosure states that have not yet addressed this question will decide any differently. There may be questions as to whether the foreclosing party must be the “owner” of the note as opposed to a party with the right to enforce the note under U.C.C.

Home Foreclosures: 3.6.3.1 Lenders’ Attempts to Prove Transfers of Notes and Mortgages Through Securitization Documents

In its Ibanez decision, the Massachusetts Supreme Judicial Court rejected two foreclosing trusts’ claims that they had proven the existence of mortgage assignments to them through the terms of various documents related to the formation of the trusts.336 The court noted that the trusts failed to include in the record any documents that clearly identified the mortgages in question as having been assigned to them.