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The Foreclosure Crisis: A Brief Historical Synopsis that Makes You Wonder: Who Really Holds Your Mortgage Note? Part II

The Foreclosure Crisis: A Brief Historical Synopsis that Makes You Wonder: Who Really Holds Your Mortgage Note? Part II

So now, if the banks haven't followed the proper procedure in transferring the Notes to these various trusts, do the MBS's now have legal standing to bring an action to foreclose? Legal standing is a concept in the law that requires that the plaintiff, in order to bring an action in a court of law seeking redress for some wrong or cause of action, must be able to establish that they are sufficiently affected by the matter at hand and that there must be a case or controversy that can be resolved by legal action. Historically, there are three requirements that demonstrate a plaintiff may have standing to bring a lawsuit: 1) there must be an actual injury in fact, which typically means that there exists a violation of some legally protected interest that has either occurred or is about to occur, but this injury cannot be conjectural, hypothetical, or speculative; (2) there must be a direct and causal relationship between the injury and the conduct which is being challenged, which means that the injury must be directly traced to the challenged action of the defendant, and that said action did not result from the independent action of some third party that is not before the court; and (3) there must exist a likelihood that the injury will be redressed by a favorable decision, and that the prospect of obtaining relief from the injury is not too speculative. Foreclosure cases across the Country have been dismissed by Courts because many of the foreclosing entities cannot prove that they have standing to bring the foreclosure complaint in a court of law. Well, you might say why, how is that possible?

During the mortgage and housing boom, as was explained in my previous blog, many of these banks and mortgage trusts cut corners, a lot of corners. From not properly recording the transfer in the affected land records office, to not properly transferring the note to the proper mortgage trust, to not properly endorsing the note on the signature lines provided, to not transferring the note at all, some foreclosing entities have not been able to produce the note proving that they have legal standing to bring the foreclosure action. Although under the note, there may have been a default by the borrower, ie. missed mortgage payments, not paying real estate taxes, or not maintaining their hazard insurance. These defaults would give the note holder the ability to bring the foreclosure action. The problem that exists is that in many of these cases, no one can figure who at this point in the chain actually holds the note. And if it cannot be ascertained who the legal owner of the note is, then that plaintiff cannot prove that they have standing to even bring the foreclosure action. In Maryland, it was quite common for a number of years to have a foreclosing attorney simply attach a lost note affidavit, explaining to the Court that they could not locate the note, but that the plaintiff was still, nonetheless, the proper party to bring the foreclosure action. In the wake of the robo-signing scandal and the bogus affidavit fallout, Judges have begun dismissing these actions for failing to prove that the filing plaintiff has standing. It gets worse. Some of these notes are being transferred to the MBS's either right before or right after the foreclosure actions are being filed. More alarming , however, is the fact that with a lot of these mortgages that were sold during the boom years, many of the notes did not transfer to the MBS within a certain legally required time frame, typically 90 days after settlement. If those notes did not transfer within the specified legal time frame, then the MBS's do not hold the note either. What a mess you say? Stay tuned for Part III, it still gets better.

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