News & Events
1/14/2010 --- San Francisco, CA. In a groundbreaking ruling in Martinez v. America's Wholesale Lender, Judge William Alsup denied Bank of America and Bank of New York Mellon's Motion to Dismiss, ordering, instead Defendants to file a Motion Summary Judgment within two weeks, in which the Defendants prove their interest in Plaintiff's property and that they have properly conducted the alleged foreclosure sale complained of in Plaintiff's Complaint. It is the first such order to be handed down in California, outside of the Bankruptcy context.
1/11/2010 --- United States WALK AWAY FROM YOUR MORTGAGE! - by Roger Lowenstein for the New York Times
1/8/2010 --- New York, NY. Michael Patrick Rooney, Esq. was quoted in the New York Times in a write up on his case, Bagnarol vs. Wachovia Mortgage
1/1/2010 --- Sacramento, CA. Negative Amortization Loans Outlawed in California
[FROM THE WEB:]
Wall Street vs. Main Street: Courts Beginning to Side in Favor of Foreclosed Property Owners
By George W. Mantor
Print Article
RISMEDIA, October 27, 2009—Agents involved in foreclosures and short
sales may need to begin to disclose the possibility of serious property
transfer defects associated with these types of lender controlled sales.
If recent court decisions are any indication, we could be headed for an explosion of litigation in this area.
And now, Massachusetts Courts have revealed the possibility that
unlawful foreclosures, dating back to 1989, might be invalidated and
that buyers of foreclosed properties and short sales may have clouded
titles.
The implications are enormous for title companies, bankruptcy
attorneys, real estate agents, those facing foreclosure, and those who
have lost their homes.
The problem stems from the collision of two worlds. It illustrates
what can happen when the new world fails to acknowledge or understand
the old. It is change that takes place without the cooperation of all
affected parties.
Real property law has an ancient tradition. But, its laws and their
purpose are not always apparent to those who want to change those
traditions to benefit themselves.
In the case of maintaining a public chain of title to real property,
it was thought to be essential and generally required by the law.
For hundreds of years, no one ever thought of any reason to change it. It was thought to be part of the public good.
That is, until Wall Street saw the money making potential in credit derivatives.
Credit derivatives are packages of debts such as car loans, student
loans, credit card debts, and mortgage loans to name a few. These are
collected, rated according to their risk, and sold to investors around
the world.
One small problem; if you are going to bundle mortgages from every
county in the country, you would have to physically send someone to
every county recorder’s office on multiple occasions and pay multiple
recording fees. It was costly and cumbersome to those responsible for
affecting the recordings.
Their solution? Stop recording the assignments in public and track
them instead in an electronic data base that the major lenders would
operate through a cooperative entity. That entity is known as Mortgage
Electronic Registration Systems (MERS). In my opinion, not only did it
save them a fortune in county fees and manpower, it turned out to be a
cash cow.
Well, good for them, right? They figured out how to bring technology
to the process and were handsomely rewarded. Never mind that the cost
of maintaining a county recording system is paid, in part, by the
recording revenue. They still have to maintain the apparatus, but now
they aren’t receiving the revenue intended to maintain the system. Of
course, this comes at a time when many counties are struggling to
provide necessary services to their residents.
But, as with many new ideas, there are unintended consequences that
are now coming to light as state after state are enforcing basic
property rights. Consider these cases:
Massachusetts
On October 14, 2009, Judge Keith Long of the Massachusetts Land
Court said in his ruling, “The issues in this case are not merely
problems with paperwork or a matter of dotting i’s and crossing t’s.
Instead they lie at the heart of the protections given to homeowners
and borrowers by the Massachusetts legislature.”
He was referring to the industry practice of trading notes endorsed
in blank, in direct violation of securities law. Here is what he said
on that point; “The blank mortgage assignments they possessed
transferred nothing…in Massachusetts, a mortgage is a conveyance of
land. Nothing is conveyed unless and until it is validly conveyed. The
various agreements between the securitization entities stating that
each had a right to an assignment of the mortgage are not themselves an
assignment and they are certainly not in recordable form.”
Two years earlier, Judge Rosenthal in re Schwartz, found that there
was no evidence that the note itself was assigned and no evidence as to
who the current holder might be.
Kansas
On August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court
likened MERS to a “straw man” and not a party of interest with the
right to foreclose.
“Indeed, in the event that a mortgage loan somehow separates
interests of the note and the deed of trust, with the deed of trust
lying with some independent entity, the mortgage may become
unenforceable. The practical effect of splitting the deed of trust from
the promissory note is to make it impossible for the holder of the note
to foreclose, unless the holder of the deed of trust is the agent of
the holder of the note. Without the agency relationship, the person
holding only the note lacks the power to foreclose in the event of a
default. The person holding only the deed of trust will never
experience a default because only the holder of the note is entitled to
payment of the underlying obligation. The mortgage loan becomes
ineffectual when the note holder did not hold the deed of trust.”
California
On October 21, 2008, Judge Samuel L. Bufford noted in his ruling
that California codified the principal in 1872 in Carpenter v. Longan:
“Given that ‘the debt is the principal thing and the mortgage an
accessory,’ the Supreme Court reasoned that as a corollary, ‘the
mortgage can have no separate existence. An assignment of the note
carries the mortgage with it, while an assignment of the latter alone
is a nullity.”
Nevada
On August 19th, 2008, Judge Linda B. Riegle concluded, “There is no
evidence that the named nominee is entitled to enforce the note or that
MERS is the agent of the note’s holder. Indeed, the evidence is to the
contrary, the note has been sold, and the named nominee no longer has
any interest in the note.”
Arkansas
On March 19, 2009 the Supreme Court of Arkansas found that MERS was
not the beneficiary under the deed of trust, although so designated in
the deed of trust, because it did not receive the payments on the
underlying debt.
Ohio
On October 31, 2007, U.S. District Judge Christopher Boyko dismissed
14 foreclosure actions and delivered a strong admonishment in a
footnote:
“Plaintiff’s ‘Judge, you just don’t understand how things work,’
argument reveals a condescending mindset and quasi-monopolistic system
where financial institutions have traditionally controlled, and still
control, the foreclosure process…There is no doubt that every decision
made by a financial institution in the foreclosure is driven by money.”
When you consider the origin of this problem, it is hard to
disagree. If the foreclosing entity didn’t loan the money, the original
note was sold, the location of the note is unknown, and it isn’t even
clear what would happen to the proceeds of the eventual sale of the
property to a new owner.
Until recently, MERS had succeeded in most foreclosure actions. In
non judicial foreclosure states like California, there is no judicial
review of the elements of a foreclosure. Unless the borrower files for
bankruptcy or brings a law suit against MERS alleging RESPA or TILA
violations, there is no opportunity for the borrower to challenge the
foreclosure.
In judicial foreclosure states, there is a law suit brought by the
party entitled to payment on the defaulted loan. Not the trust, but the
actual possessor in due course of the original note. It’s part judicial
procedure, part uniform commercial code and part ancient property law.
But, the securitization business is so complicated, intentionally
so, that defendants, most of their legal representation, and the judges
rarely considered the consequences to the real parties in interest.
This will continue until enough people understand the importance of the
actual note and its relationship to the property.
I believe many homes have been unlawfully foreclosed by entities not
entitled to anything. The former owners of these homes have rights that
will need to be addressed.
People who applied for mortgage modifications and received them may
have gotten approval from an unwitting bank employee with no authority
to change the underlying terms of the securities in the pools.
Many people bought these homes and have potential future claims. If
there is a cloud on title, the new owner is at risk of being unable to
sell or encumber the property. If the foreclosure were unlawful, the
borrower is entitled to their property. And, there is a very real
possibility that the true holder of the actual note, once and if ever
this mess is sorted out, could come forward with the actual note.
It isn’t important to only those in foreclosure. Those seeking loan
modifications, potential buyers of short sales and foreclosures and
those acting in a fiduciary capacity on their behalf, may soon be
demanding, “Show me the note.”
About the author: George W. Mantor is known as “The Real Estate
Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and
consumer education efforts. During a career that has spanned more than
three decades, he has amassed experience in new home and resale
residential real estate, resort marketing, and commercial and
investment property. He is currently the founder and president of The
Associates Financial Group, a real estate consulting firm.
MERS OPERATION SHUT DOWN IN KANSAS
September 19, 2009--- A 3 judge appellate court panel in Kansas ruled that a mortgage industry practice of separating a mortgage related loan (a/k/a/, the "note") from its deed of trust (the "mortgage") renders the mortgage unenforceable, thereby ruling out froeclosure as a remedy to breach of the note.
Legally, this is because the party who is entitled under one document absolutely needs to be entitled under the other document for the transaction to work. A Note is a promise of one party to pay back another party the principal balance, at intervals over time, with interest. When the note is backed by a mortgage, there is a second document - a deed of trust recorded at the County Recorder's Office- that gives the lender the right to sell the home (foreclosure) if you default on the note. Obviously, if you are not the person entitled to payment on the note, it makes no sense for you to sell someones house --- you are not out money because the person has not breached any relationship with you, and you are not entitled to payment under the note, anyway.
Despite the simplicity of this transactional device, 90% of the country's lenders were convinced by a Delaware Corporation called Mortgage Electronic Registration Systems, Inc., which is headquartered in Virginia, to name MERS the beneficiary under the mortgage, while naming the lender the beneficiary under the note. Thus, from the beginning, there was never an effective mortgage on the home!
To the author, it seems like the remedy is for the banks to go after MERS --- or their own counsel --- for ever having let them do this in the first place, but you can see how it would be an easy sell. After all, by registering with MERS, and following its instructions, Lenders could save MILLIONS in transfer fees at county recorder offices across the country by not having to assign the deed of trust every time they sold, repackaged, chopped up, or otherwise disposed of a loan in the heyday of the secondary mortgage market.
If other courts catch on, and follow what is actually very simple, very OLD law, then over 60 million mortgages could be deemed unenforceable across the United States. Would it be a travesty? Probably not. After all, who was the more sophisticated party in this transaction? The consumer or the bank? Whose idea was it to use MERS? The consumer or the bank? Who had 100s of lawyers on retainer to write terms that would result in negative amortization, unlimited interest rate provisions, and certain foreclosure? The consumer or the bank?
- California Homeowners Have Another Weapon against MERS: The Revenue and Tax Code
In a related item, California homeowners should seek to have their deeds of trust voided by a judge where ever MERS was named beneficiary, but was not registered to conduct business in California as a foreign entity.This covers, roughly, the span from 2004-on. (There is presently an in-state registration for Mortgage Electronic Registration Systems, Inc., but the owner is totally unrelated to the VA based company.)
Under Revenue and Tax Code 23304 and 23305a, any contract entered into by an unregistered foreign corporation is voidable at the other party's option, through a request for adjudication. The matter is well settled in White Dragon Productions, Inc. v. Performance Guarantees, Inc. (1987) 196 Cal. App.3d 163, and Perkins MFG. Co. v Clinton Const. Co. of California (1930) 211 Cal. 228 [ a Supereme Court Opinion decided under Corp. Code 5900 et seq., RTC 22304's predecessor.]
Of course, MERS claims that it falls under an exception to the rule, which is carved for out-of-state mortgage companies. On its face, the argument is convincing, but if you look a little deeper, you find that MERS was never a mortgage company! They never loaned a cent, they were never entitled to a cent, and they were simply a glorified record keeping company for banks. Hence, they are no more a mortgage company than a bank's lawfirm, accountant, or logistics contractor.
California homeowners should seek to void any MERS-related Deed of Trust as part of their suits against the banks.
FEDERAL JUDGE ORDERS FORECLOSURE SALE STOPPED BECAUSE
LOAN DOCUMENTS NOT IN SPANISH
Mr. Jose Perez negotiated a home loan in Spanish but all
of his loan documents were in English. "It is unfair, illegal and violates
the most basic notions of decency and fair dealing" argued Mark Potter of
the law firm Potter Handy, LLP. The argument was well received. After hearing
the evidence, United States District Judge Thomas J. Whelan ordered U.S. Bank
to halt any attempt "from foreclosing upon or transferring ownership"
of Mr.
Perez's family home.
Under the Foreign Language Contract Act, if a loan is
negotiated in Spanish then the terms of the contract must be provided to the
borrower in Spanish.
If not, the borrower can cancel the loan. But U.S. Bank
argued that it merely bought the loan and had nothing to do with the making of
the loan.
Judge Whelan rejected the argument and held,
"rescission is effective against any assignee" and "it would be
entirely inconsistent" with the Foreign Language Contract Act "to
allow the assignee to ignore the Rescission Notice and foreclose on the
Property."
U.S. Bank also argues that it is unfair that Mr. Perez is
cancelling the loan more than three years after it was made. But Mr. Potter notes
that most of his Spanish speaking clients are unaware that they have a legal
right to have their contracts in Spanish. "How can you fault a
hard-working family man for not knowing that his rights were violated and that
he had a right to cancel?" Judge Whelan also criticized U.S. Bank's
attempt to "penalize" Mr.Perez for "attempting to meet his financial
responsibilities before filing suit" and found no problem with the fact
that Mr. Perez "delayed in filing the litigation until he could no longer
afford the upwardly adjusting monthly payments."
"This is a tremendous step in the right
direction" claimed Mr. Potter. The Foreign Language Contract Act was
passed to protect Spanish speakers from being taken advantage of. "You
don't get to negotiate a loan in Spanish and then plop a bunch of English
documents in front of a borrower to sign. You have a right to know what you are
signing and to have a copy in the language you negotiated in."
California State Bar Ethics Alert Released
02/12/2009 - SAN FRANCISCO - The California Bar, in response to a tidal wave of recent calls to the ethics hotline asking for information on potential agreements between REALTORS(R) and attorneys working together to help distressed homeowners, released an ethics opinion warning against the dangers of such practices.
Among other violations, potential for illegal fee splitting, breach of fiduciary duty, and aiding in the unauthorized practice of law are admonished against in the report. Read it here:
http://calbar.ca.gov/calbar/pdfs/ethics/Ethics-Alert-Foreclosure.pdf
California Foreclosures and Defaults up in 2008, according to a Recent Report
1/12/2009 - SAN FRANCISCO - According to a January 7 2009 article at sfgate.com, California foreclosures and defaults were still on the rise in 2008.
"The number of scheduled foreclosure sales and defaults in core areas of
Northern and Southern California exceeded a half million during 2008,
up 132 percent from the previous year, according to a report by Default
Research Inc." says the article.
The most striking increase was in Northern California, where foreclosures rose 180% in the counties of Alameda, Contra Costa, San Francisco, and Solano. The last quarter saw a slight decrease in NODs, but the change is likely due to a legal technicality.
"The decline, however, may largely reflect a procedural change in
California's foreclosure process that took effect in September, which
requires lenders to contact homeowners 30 days before filing a notice
of default. In addition, many industry observers expect another wave of
foreclosures this year propelled by rising job losses, continued
declines in home values and higher monthly payments on mortgages that
had interest rates go up."
** Editorial Note: In my experience, the banks and Trustees remain non-compliant with the new laws. My gues is that the slow-down
Massachusetts Supreme Court Rules Subprime Loans Illegal Per Se
12/12/2008 -- A recent ruling from the Massachusetts Supreme court upholds a ruling by a lower court against Fremont Investment and Loan. Under the ruling, over 2,700 foreclosures were stopped, after being deemed "structurally unfair" by the court.
The ruling follows a similar stay against Option One Mortgage, regarding 8000 subprime loans.
The ruling is a win for consumer protection nation wide, as attorneys and homeowners alike fight to stop foreclosures and right the greatest fraud in human history; "making loans the lenders knew or should have known that borrowers couldn't repay." - Gary Klein.
** Editorial: In my opinion, the scheme was designed intentionally to lead to default, in order to support massive real estate take-overs by investors who set the loans up to fail in order to get title to properties they gambled would increase in equity. When the market fell through the floor, the American people were left holding the bag. - MPR
Website Expansion
August 30, 2008 -- Michael Rooney Law Office is pleased to open several new pages on our website, including FREE Legal Articles, EB5 Immigration, San Francisco Bay Area Divorce Attorney, and Bay Area Contract/Transactional Attorney page. Please browse all the pages on our site to learn more.
Has the Foreclosure Buyer’s Agent Bond Requirement Been Lifted?
BY MICHAEL PATRICK ROONEY, ESQ/BROKER, SAN FRANCISCO March 31, 2008 -- The California Supreme court's recent denial of certiorari in Schweitzer v. Westminster Investments (2007) 157 Cal. App.4th 1195 does not have as dramatic and wide-sweeping an effect on the California Home Sales Contract Act (Cal Civil Code Section 1695 et seq.) as California REALTORS(R) might hope.
The California Home Equity Sales Contract Act was enacted to protect defaulting homeowners from being negotiated out of their homes by slick talking foreclosure consultants representing investors. The terms of the act required that in order to represent an investor in a foreclosure equity purchase of a 1-4 unit primary residence in default, you had to have a license and put up a bond twice the amount of the fair market value of the property.
The catch? No insurers in the state offered the required bond, effectively making it illegal for licensees to represent foreclosure investors.
In Schweitzer, a REALTOR(R) did just that, and was slapped with a seller lawsuit on the basis that he failed to post the bond. At the California Appellate court in the Fourth Appellate District, Division 1, the bond requirement was found to be unconstitutionally vague and the court found for the REALTOR(R).
On March 26, 2008, the California State Supreme Court denied review of the case - effectively telling the plaintiff to go away and leaving the ruling undisturbed.
What does it all mean? Can REALTORS(R) start taking on the lucrative business of representing foreclosure investors everywhere? Not so fast.
For one thing, the Court's denial of review is NOT the same as upholding the decision. In fact, all the ruling actually means is that in the Fourt Appellate District that lower courts will be prevented from following the legislation as drafted due to controlling precedent.
The Fourth Appellate court retains the power to go back on its own decision. Not to mention, in all five other jurisdictions in the state, the Home Equity Sales Contract Act is still controlling.
Likely the reason the Supreme Court did not hear the case is that currently, there are no conflicting appellate court decisions on the issue. Supreme Courts are in the business of resolving conflicts among departments on the lower level, rather than spending time on undisputed matters of first impression. In short, the fight is far from over.
However, if you are a REALTOR(R) who finds yourself in this position, you have now been given a great defense, with all of the arguments already written for you and an influential appellate decision to boot.
In the long run, if the Supreme Court does rule the law unconstitutional as drafted, the legislature will know the reason is that bond requirement is too vague. The legislature is perfectly capable of going back to the drawing board, making a clearer bond requirement, and passing it all over again.
Therefore, if I was a REALTOR(R) (which I am) and I wanted to stay as far as possible on this side of the law (which I do) I'd still steer clear of accepting this kind of representation (which I plan to) - at least until the bonds are offered by an insurance company in our state (which they're not).
To find out more about licensee Consumer Protection in relation to foreclosure deals, contact Michael Rooney or visit http://mikerooneylaw.com/seminar.aspx. Mr. Rooney, a dually licensed attorney and real estate broker teaches a DRE-approved three credit hour consumer protection continuing education seminar called "Foreclosure Fictions and Facts." "Now that there has been an update on one of the laws I cover in my course," says Rooney, "I'll have to petition the DRE to let me revise my course materials for future seminars."
About Michael Rooney Law Office
Michael Rooney Law Office is a San Francisco law firm specializing in litigation, real property, estates and trusts, and business consulting. Learn more at http://mikerooneylaw.com.
Contact:
By Michael Patrick Rooney, Attorney/Broker, M.B.A
Michael Rooney Law Office
580 California Street
16th Floor
San Francisco, CA 94104
T (415) 533-0282 | F (415) 704-3321
Website: http://mikerooneylaw.com/seminar.aspx
Mike@mikerooneylaw.com
###
Attorney/Broker Helps REALTORS® Avoid Lawsuits Through Consumer Protection Training
All real estate licensees in the State of California are required by the Department of Real Estate to take fourty-five hours of continuing education in real estate every four years. Eighteen of those hours are required to be in Consumer Protection.
March 17, 2008 -- “The importance of the consumer protection courses is not to be overlooked, especially in today’s market, where record numbers of REALTORS® and mortgage brokers are being sued for fraud and violation of their agency duty” says Mr. Rooney.
Why are these lawsuits being filed? “Because the plaintiffs feel that the licensees didn’t act in their best interests. One of the reasons we even have licensing requirements is so that people can feel like they can trust the person who is on their side. They think: the State of California gave this person a license, so there must be a reason to trust him,” says Mr. Rooney.
“The problem during the subprime mortgage frenzy was that agents, brokers, and banks alike failed to stop people from making the worst decision of their lives. The clients feel like they were led astray by a person more concerned with a commission than about them. That’s the very heart of agency law right there. You have to make clear to your client: you are entering very dangerous terrirory. That’s why you are the professional and they are the client, so that you can tell them what you know is best.”
A full listing of DRE-approved courses, by course type and topic, as well as the new regulations and continuing education requirements can be found at: http://www.dre.ca.gov.
For additional information, contact Michael Rooney or visit: http://mikerooneylaw.com/seminar.aspx.
About Michael Rooney Law Office:
Michael Rooney Law Office is a San Francisco Law Practice specializing in litigation, negotiation, real estate, and defense.
Contact:
By Michael Patrick Rooney, Attorney/Broker, M.B.A
Michael Rooney Law Office
580 California Street
16th Floor
San Francisco, CA 94104
T (415) 533-0282 | F (415) 704-3321
Website: http://mikerooneylaw.com/seminar.aspx
Mike@mikerooneylaw.com
###
Special Appearance Attorney Market Expands to Northern California
Litigation attorneys know how critical time can be. A cottage industry in the litigation field which has gotten a lot of attention in recent months is the special appearance attorney. Special appearance attorneys are licensees who make court appearances on behalf of other attorneys on a contract basis.
BY MICHAEL ROONEY SAN FRANCISCO April 1, 2008 -- Under California Law, an attorney may make a general appearance in the place of another attorney on a special basis, without making a general appearance in the case themselves. This allows an attorney who cannot be present at the hearing personally to retain status as general counsel, make an appearance, and avoid being sanctioned all at the same time. A good relationship with a specially appearing attorney can be a boon for large firms and solo practitioners alike.
However, until recently, most of California’s special appearance firms have been located in Southern California, though they operate in distant venues through relationships with attorneys in other jurisdictions. Often, the hiring attorney has no idea who will make the appearance for them, and does not communicate directly with the specially appearing attorney.
“The industry has been dominated by firms in Los Angeles County. It just doesn’t make sense that a Northern California law firm (or a SoCal firm for that matter) would hire a Southern California firm to make an appearance in the Bay Area” according to litigation attorney Michael Patrick Rooney, whose webpage http://mikerooneylaw.com/specialappearances.aspx has sprung to the #1 spot on Google’s natural results (unpaid) search engine listings for search terms “San Francisco Special Appearance Attorney,” as well as several other related search terms.
The move is expected to benefit attorneys from all parts of the state who need a special court appearance but prefer to know who they are dealing with when sending someone to appear in their case. “My hope is that it starts a new trend in the special appearance sector, of attorneys working directly with other attorneys, rather than going through an agency, which can cause complications and may be unethical to your clients, who must approve special counsel and have a right that you know who is working on their case.”
For additional information, contact Michael Rooney or visit: http://mikerooneylaw.com/default.aspx.
About Michael Rooney Law Office:
Michael Rooney Law Office is a San Francisco Law Practice specializing in litigation, negotiation, real estate, and defense.
For more information, contact:
Michael Rooney
Michael Rooney Law Office
580 California Street
16th Floor
San Francisco, CA 94104
T (415) 533-0282 | F (415) 704-3321
Website: http://mikerooneylaw.com/specialappearances.aspx
Mike@mikerooneylaw.com
###
2/22/2008:
Michael Rooney was proud to receive the honor of recognition by the AIDS Legal Referral Panel (ALRP) for valuable contribution to the panel. Michael Rooney Law Office handles pro bono and "low" bono cases as part of our continuing initiative to provide community service to the people of the San Francisco Bay Area.
2/19/2008:
Our continuing education course, Foreclosure Fictions and Facts was granted final course offering approval by the DRE. Refer all the Bay Area REALTORS(R) you know to get 3 of their 18 mandatory consumer protection credit hours with us, while learning interesting 'Fictions and Facts' about the biggest news of the day - the forecloure meltdown.