ProTitleUSA Foreclosure Defense and Offense Blog

Title Industry Slow Down

alex@protitleusa.com (ProTitleUSA Title Search) — Wed, 08 Jan 2014 08:20:03 EST

Besides seasonal slow down during holidays, there is another factor that will impact the title industry. Its a new law (going in effect on 01/14/2014) that all lenders, servicers, trustees and title companies would have to comply with.

The CFPB amended Regulation Z, which implements the Truth in Lending Act (TILA). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implements section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated.

... a few words on regulation document.....What's interesting is that CFPB does not call for a title search as a tool to determine the debt of the borrower from the third party vendors, such as title companies, however I still believe that Title Search is most accurate and reliable tool to be used as a qualifier for a borrower. In my opinion, title abstractors will not see new requests on refis until many changes are implemented in the title industry for compliance to this rule. For example, new underwriting guidelines have to be put in place to qualify the borrower, new documents have to be generated for closing, new flows have to be considered as exit strategies by lenders, as the pre-payments on the loans are trimmed, Foreclosing attorneys have to rework their templates for Qualified Mortgage foreclosures, just to name a few changes....The main change would be a burden to the borrower to produce many documents per regulation to qualify for a loan and prove 43% debt to income ratio.

Title companies, attorneys, lenders had a year to prepare for a new regulation. I doubt that the many firms actually became compliant and have to hold or delay the business until the complete compliance is established.

ProTitleUSA is proud to support Nancy Becker, Montgomery County PA Recorder

alex@protitleusa.com (ProTitleUSA Title Search) — Thu, 15 Aug 2013 10:20:31 EST

As many of you know, Nancy Becker, Montgomery County PA Recorder is going after MERS for unpaid recording fees through the Federal Court in PA. Washington County recorder joined the case as well.

ProTitleUSA has agreed to help the case by providing our foreclosure defense services and products to Nancy's attorneys. I will keep you posted on the progress as much as allowable by disclosure.

Where is my loan? Who am I making payments to?

alex@protitleusa.com (ProTitleUSA Title Search) — Sun, 28 Apr 2013 21:26:23 EST

This is a question from many borrower’s who at one point took out a mortgage. This is a question that many recorders can not answer today. This is a question that can cause many claims without paying appropriate attention. At the same time, this is a question that only a few in the title industry are privileged to know the answer to. If you are a homeowner trying to find out why you are paying your mortgage to someone who is called as Servicers of your loan, it may cost you $100,000.00 yearly subscription and plenty of training to answer this question yourself.

Servicers operate per rules and guidelines defined by a document called Pooling and Servicing Agreement filed with SEC during formation of the securitized trust. One of the biggest problems with todays’ title work is a lack of understanding of securitization process and no connection of SEC filed document with mortgage related documents at the recorder’s office. In many cases, the mortgage is assigned into a servicer from the original lender per public records, while servicer never pays a dime for a note ( or a mortgage ) and only gets legal rights to initiate a foreclosure or execute a deed in lieu. The assignment of mortgage in fact hides the details of transaction (patches the chain of assignments) and makes the title clouded from the perspective of the mortgage transactions from origination to time of mortgage assignment.

Most of the assignments are from MERS serving solely as nominee for lenders to a servicers or trustees, but at the same time MERS is a shell system to track mortgages stating that it never owns a mortgage. MERS is supposed to be a transparent system to track all mortgage transactions but MERS is a first link in broken securitization system. MERS was formed to track the mortgage transfers and report the transactions to all interested parties, which is a great idea in theory. However, if the borrower tries to find out where the loan is under MERS tracking system by entering the name, address and SSN, the MERS Report will not give you much. You may get a report stating who servicer is, but not where the loan is securitized and any other related information on the transactions, especially the place where to find pooling and servicing agreement. The trustee, underwriter or issuer information is typically hidden within MERS, by stating that the information was hidden by request of the lender. Therefore, MERS system is only tracking and reporting for lender and not borrower. This is one item that certainly should be changed going forward and brought up to the attention of Consumer Financial Protection Bureau. Once the link between recorded mortgage and SEC is established, borrower may get access to all SEC based bi-laws, guidelines and servicing agreements for their specific mortgage. There will be no issues with mis- trusting the servicer collecting payments or trustee foreclosing on the property. At the same time, this approaches would force the originator disclose all of the information for the borrower, as well as, how to find it. If the loan is not acquired into the trust at the time or origination, borrower should be notified that there will be a letter from lender notifying where the loan is securitized and who the parties of the transaction are.

ProTitleUSA has an engine for securitization searching today, it’s not perfect, but it works for 90% of the loans, where we can state which trust the loan is securitized. We can help to get the information on each individual loan and pull all securitization documents. This is important for due-diligence work on the foreclosure and foreclosure defense.

Can title be transferred or mortgage assigned to Fannie or Freddie?

alex@protitleusa.com (ProTitleUSA Title Search) — Mon, 08 Apr 2013 08:53:51 EST

After the financial crisis in 2007-2008, most of the loans were securitized through Fannie Mae (Fannie) and Freddie MAC (Freddie). Fannie and Freddie, although operate as a government backed enterprise, maintain the course and methods of a private and publicly traded company, focused on bottom line. Fannie and Freddie are one of the last resorts for securitization market, continuing to securitize loans in REMIC trusts through today. We see many foreclosure actions were Freddie or Fannie become an owner after the foreclosure sale. In the few states, we see assignments executed into Freddie and Fannie. Well, this does not make complete sense to me, or at least this requires massive curative work, here is why!

Fannie and Freddie securitized the (conforming) loans in the similar fashion as the public securitization, forming REMIC trusts for investors to buy certificates with Fannie and Freddie guarantee. Every trust they formed maintained REMIC Trust documents (which you can find on the Fannie/Freddie respective sites) that would define a scope of each REMIC trust formed; typically these documents are REMIC Prospectus and Prospectus Supplement and Servicing Agreement (called Offering Circular). Freddie and Fannie would be named as Issuer and Guarantor and Trustee to this Trust in the documents, while servicer would selected from the list of approved servicers by Fannie and Freddie for each trust. The problem I see is a poor disclosure of securitization in the title work, as in my opinion, the title should really say, “Fannie Mae as Trustee for Guaranteed REMIC Pass-Through Certificates Fannie Mae REMIC Trust 20XX-XX. If you study Prospectus document, investors are paid consideration in the form of offering proceeds. The investors are the beneficiaries of this Fannie Mae REMIC. According to the IRS a REMIC is a passive conduit and the beneficiaries cannot take active participation in the management of the assets. As the beneficiaries of a Trust, they may be able to enforce their rights only in equity.

Quite recently Fannie Mae stated to report on when the loan was purchased into the trust; typically it’s within 30 days after origination of the loan. This would constitute the note transfer into the trust and in my opinion requires an assignment execution into REMIC Trust.

We currently only see an assignment into the servicer during the foreclosure process kick off or assignment into Fannie/Freddie directly through Foreclosure Deed. Also, there is a popular instrument call “Assignment of Bid” in the foreclosure to Fannie or Freddie to “patch” the chain of title and avoid securitization disclosure.

Write me at alex@protitleusa.com if you have any questions or comments or just post the comment here.

"I was never a Robo-signer" - You are a Robo-signer and you just don't know it.

alex@protitleusa.com (ProTitleUSA Title Search) — Mon, 01 Apr 2013 09:14:50 EST

A clerk, paralegal, attorney or title officer/agent signing the assignments of mortgages in volume - Is this a Robo-signing? Its hard to say. How do you go about proving that the signor on these documents is a Robo-signer. Besides presenting signature and position mismatch on varies assignments, as well as, notary mis-acknowlegdements, there is another more scientific way to demonstrate if a signer is a Robo-signed documents.

New method: Count the number of assignments executed in the single day by finding these documents in all accessible counties/states, where the signor operated their business. I know it’s tough, costly and practically impossible, however it was done before. ProTitleUSA managed to perform this search and results were astonishing.

ProTitleUSA selected a random date to find all assignments in few selected states where the signer was licensed to operate. After 2 weeks worth of research and finding searchers who can (or willing) examine the documents in the county records by recording date and instrument type only, we came up with book/page or instrument references to 115 assignments signed by same individual in a given day. Do the math: This would translate to around 1 assignment signed every 5 minutes in 8 working hours (without bathroom breaks).

To execute an assignment properly, the signor has to:

1. Review the property address

2. Borrower names

3. Originating Lender

4. Prior mortgage references and dates of the original mortgage

5. Chain of Assignment on the current title work

6. Assignor name

7. Violation of Pooling and Servicing Agreement by Assignor, if any

8. Presence of Power of Attorney if signed as Attorney-in-Fact

9. Corporate resolution for MERS or any other institution signed for

10. Assignee Name

11. For assignment to a Trustee for a Trust, verify Trust existence

After signor's review and signature, the notary should

1. Acknowledge the ID of the signer or see corp resolution to verify the signor’s authority to sign

2. Stamp and co-sign the document

3. Make an entry in the notary ledger

Can everything above be done in 5 minutes per assignment, I doubt it. Therefore, corners would need to be cut to maintain a pipeline of signing documents. This method to Robo-signer exposure would be an interesting twist in foreclosure court, where the Plaintiff (the trustee) would need to open up the corporate methods (assignment pipeline) used to show that the above is feasible.

Robo-signer today may be a clerk of the law firm tasked with signing the documents and reviewing them to be in the recordable format, but never review them using the review criteria above. Robo-signer would only know their work-flow and never would think to look “outside of the box”. Your opinion is greatly appreciated , do leave a comment.

Should Securitization become a part of the Title Exam? SEC vs Title Violations

alex@protitleusa.com (ProTitleUSA Title Search) — Thu, 21 Mar 2013 20:30:36 EST

There are a number of new court cases where securitization issues are pointed out and Plaintiff’s standing is under heavy scrutiny. I will not explain the securitization theory in this blog, instead, offer a simplified view of the issue through the title search example. Let’s say the loan originated by Washington Mutual in 12/2006 (non-MERS loan) and the foreclosing party is “Bank of America in the capacity of Trustee for XYZ Mortgage Backed Securities Trust 2007-1”. Per county records, there is an assignment of mortgage from Washington Mutual to “Bank of America in the capacity of Trustee for XYZ Mortgage Backed Securities Trust 2007-1” recorded in 2012. On the surface, you would not see any issues with this assignment document; however looking deeper at the securitization of the loan we may find a number of inconsistencies or violations of securities law that are not a part of any checks by recorder or title examiner or notary.

Documents to be tied to the Title work. Let me touch only on the few items....Typically there are 2 main SEC (Securities and Exchange Commission) filed documents that would describe the roles and responsibility of each party involved in securitization of this loan for a given trust: Prospectus and Pooling and Servicing Agreement (PSA). PSA would define a time lines on when the assignments have to be executed after the trust cut-off (closing) date (when all loans / notes are transferred under the trust entity and the interest is being paid out to certificate holders). Typically, the document states that Trustee has 90 days from the cut-off date of the trust to record all necessary assignments of mortgage (in PSA referred as cure timeline). Clearly, you can see that this is a first violation of our example. PSA requires all assignments to be filed within 90 days (say Q1 of 2007), while the recorded assignment is filed 2 years later in 2009, most likely at the time of foreclosure kick-off or loan liquidation from the trust. How to you avoid this violation in the future?

My recommendation is to enforce Trustees to present to County Recorder a signed affidavit before assignment recording that the assignment of mortgage complies with securities law and in particular complies with Trust’s PSA and Prospectus documents. Going one step further, one may provide references to Prospectus and PSA documents were the loan is securitize in the affidavit. …(taking about transparency for loans, something Congress and Senate were debating for some time…). We can argue if this affidavit should be a recorded as an exhibit to an assignment.

Trustee Roles and Responsibility Title vs. PSA: I will only point out the most important issue in the Pooling and Servicing Agreement relating to Trustee. (If you have some free time, you can read the 700+ page PSA document yourself)

Per Pooling and Servicing Agreement: Trustee has no right, title or interest in assets of the Trust (notes)
Per Pooling and Servicing Agreement: Trustee cannot act outside the scope of the PSA
Per Pooling and Servicing Agreement: Trustee not liable for Certificates or mortgage loans and is accountable for the use of, or application of funds by servicer.
Per Prospectus: Trustee exchanges certificates of no pre-existing value for notes of intrinsic value

After the Foreclosure is final and there is no bidders for the property at the sheriff’s sale, Trustee assumes the title ownership per Sheriff’s Deed, however PSA does not allow for the Trustee to take Title or interest to the property. How do you reconcile the PSA securities law and Title documents in this case?

In my opinion, the additional process has to be put in place to transfer the note from Trustee to foreclosing institution, investor or otherwise the legal entity that does not follow securities law under PSA. Additional assignment has to be executed as well. Of course, the problem is much deeper then that, but for the sake of discussion and additional assignment would address the PSA violation. (I will purposely leave Servicer discussion for later time. )

Hopefully, this article will trigger reaction on how to fix some of securitization and title inconsistencies, rather then playing the blame game. There are TONS of issues in the title work today; I want to get to the point of purity, transparency and clarity to avoid any future claims and problems.

Fraudulent use of Scanned Notary Stamps and/or Signatures, is it possible?

alex@protitleusa.com (ProTitleUSA Title Search) — Thu, 14 Mar 2013 11:49:57 EST

Can Robo-signed documents be completely done in an Abobe Photoshop with scanned notary stamps and scanned signatures?

We are all used to the idea of robo-signing being a process of signing and notarizing a stack of documents in a single day without any review of its content, similar to DocX pipeline operation of signing mortgage related documents.

If we would only look at the efficiency of the signing pipeline (for now, bypassing legal aspects of signing the documents), there is a better cost effective way for signing and notarizing the documents. With the age of digital recording, the document has to be presented in the recordable format, which means that the document has to have all attributes for the recorder to record the document in the county records. These attributes are broken down in parts, just like a document itself can be sliced into multiple elements. Documents would consist of parts that are constantly repeated, such as, authorized signatures and notary stamps and notary signatures.

Let’s now imagine a work flow that would combine the different elements of the document to create new documents using Photoshop. For example, authorized signor “Joe Smith” would always be on the Assignment of Mortgage document as VP of MERS paired together with notary “Jane Smith”, which would conveniently be located off the first page of the assignment. Additionally, there is also the notary acknowledgement testifying that the signor is an authorized signed under the perjury of the law. All of these elements can easily combined on the alonge or the 2^nd page of the assignment.

You can clearly see the economic benefit of preparing the assignments with signatures through Adobe Photoshop. It would take 2 people (signer and notary) to go though 100 paper assignments in 1 day, while photo shop approach would most likely triple the productivity at the lower cost. I know it’s not legal and fraudulent and possibility only my theory.

Evidence. I struggled with the thought in the beginning, but a few times I stumbled on some documents that really back up this theory. For example, Notary stamp distortion carrying through a number of documents. In other words, the notary stamp was scanned initially with some distortion and the same scanned version used in other documents as well. See Image 1. I don’t think the actual notary stamp is that damaged to make it into distorted shape. Some documents we stumbled on have an interchanged notary portion with different signature portion. In other words, the notary acknowledgement was testifying for one signor, while the signature states a different name and signature. See Image 2.

Proof. How do you find out whether the assignment was prepared and signed correctly and legally? My initial thought is to file for request for production of the notary ledger copy to verify that every notarization was entered as an entry in the ledger in for every document notarized. If the assignments were photo shopped, the notary ledger / log most likely do not exist, nor is Notary aware of which documents are being notarized.

I welcome all comments on my theory. I suspect that majority of document are correctly prepared, signed and notarized…How do you catch those who bypass in-person notarization?