Friday, April 1, 2011

Naked Capitalism: Alabama Judge Sides With Homeowners in Foreclosure Case, Based on Bank's Non-Compliance of PSA

In Alabama they do both judicial and non-judicial foreclosures, though primarily non-judicial (according to this site).

Naked Capitalism (4/1/2011) reports that a judge in Alabama overturned the foreclosure action "based on the failure of the trust to comply with the terms of the pooling & servicing agreement".

So it matters after all? At least in Alabama? That these TBTF national banks, as loan originator, aggregator, servicer, trustee of the REMIC and trustee of the trustee of the REMIC (usually their affiliated company or 100% subsidiary), cannot ignore the PSA that they themselves had created and supposedly signed, according to the law of New York State, and never bothered to follow by actually properly transferring all the mortgages with proper endorsement within the time-frame as specified in the PSA? Really? I mean really?

From Naked Capitalism (4/1/2011; emphasis added):

Alabama Judge Accepts New York Trust Theory, Dismisses Foreclosure Action for Failure to Comply With Pooling and Servicing Agreement

Paul Jackson has been forced to eat a bit of crow. A judge in Alabama in a case called Horace v. LaSalle overturned a foreclosure action based on the failure of the trust to comply with the terms of the pooling & servicing agreement. As you see, the judge ruled that the borrower can assert rights under the Pooling and Servicing agreement as a third party beneficiary and that he was “surprised to the point of astonishment” that the trust had not complied with the terms of its PSA.

The ruling in favor of the borrower endorses an argument we have made since last year on this blog, that the pooling and servicing agreement stipulated a specific set of transfers be undertaken to convey the borrower note (the IOU) to the securitization trust within a specified time frame. New York trust law was chosen to govern the trusts precisely because it is unforgiving; any act not specifically stipulated by the governing documents is deemed to be a “void act” and has no legal force. So if a the parties to a securitization failed to convey a note to the trust within the stipulated timetable, retroactive fixes don’t work. In this case, the note had been endorsed by the originator, Encore, but not by the later parties in the securitization chain as required in the pooling and servicing agreement.

See the order and more at the link.

I have no idea how the State AGs or the federal regulators are going to "fix" the mess which starts with loan origination and securitization to sale of the certificates to servicing to foreclosure process, all of which, as far I have figured, are null and void.

Here's the vid I made some time ago about the whole process and post on Youtube. There are still so many homes going to foreclosure, and in more than half the states (non-judicial states) homeowners, even if when they do know about the fraudulent securitization that could invalidate the foreclosure, don't have recourse unless they can afford to hire a real estate attorney (who may or may not know much about securitization).

I wanted to create the sequel to this video, explaining the foreclosure fraud part. But alas, Xtranormal decided to charge users to create the vid. Oh well.


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