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House in Foreclosure? Make Banks Put Up or Shut Up

foreclosureI’ve said it before and I will say it again: If you are being foreclosed on, DEMAND in court, that the bank or entity trying to foreclose on your house produce the original “blue ink signature” mortgage documents and promissory note and that they produce each and every piece of paper showing the various transfers of those documents from the original lender to the entity trying to take your house away.

The possibility that the entity foreclosing on you does not have the legal right to do so IS VERY REAL. Do not just lay down and play dead.  I’ve already told you that many mortgage deeds were split from the debt (the promissory note) and that may, in some states, cancel the ability to take the house. I’ve also told you that some, maybe many, mortgage documents got lost in the vortex that is MERS. Now, it seems that even without MERS, some mortgages just got lost.

The NYTimes is reporting

Starting in late 2007, Deutsche Bank invested $1.2 billion in a mortgage financing vehicle known as Ocala Funding; alongside it was BNP Paribas, a French bank that put $481 million into the same vehicle.

Ocala issued short-term notes and from the proceeds, bought mortgages that it could promptly sell to Freddie Mac, the government-sponsored enterprise. Bank of America was trustee, collateral agent, custodian and depository agent to Ocala — its back office, in essence.


But there were a couple of problems with the set-up: the company writing the mortgages funneling through Ocala was Taylor Bean & Whitaker, a lender that filed for bankruptcy last August. And to make its loans, Taylor Bean used money from Colonial Bank, a Montgomery, Ala., institution that also went belly-up. The Federal Deposit Insurance Corporation took over Colonial in August.

Sorting through the wreckage of those related failures has generated more questions than answers so far. Taylor Bean was shut down by the Federal Housing Administration, citing possible mortgage fraud. According to people briefed by those winding down Taylor Bean’s operations, who requested anonymity in order to preserve professional relationships, there are signs that the company sold some of its loans to more than one buyer. Lawyers representing Taylor Bean did not return phone calls seeking comment.

In any event, Ocala says mortgages worth more than half a billion dollars are missing. And the F.D.I.C. is withholding the release of mortgages worth hundreds of billions held at Colonial that Ocala investors say are theirs. The government contends that it is not clear that Bank of America — as a representative for Ocala — paid for them.

Yep, Ocala THINKS it owns a bunch of mortgages, it’s got the names of people and the address of the house, and the block and lot number and everything. What is apparently doesn’t have—is any right to foreclose on those houses. Good news, perhaps, for those people whose houses are in that deal. It will be years before that case is sorted out, and until then, nobody will know who actually owns the mortgage or the right to foreclose. So, if your mortgage is in that pool, you might have a roof over your head and some breathing room to maybe get your finances in order as the economy improves.

But only if you stand up for yourself in the foreclosure proceeding. And what if your mortgage doesn’t happen to be in that rather large pool?

People familiar with the mortgage machine’s innards say problems were industrywide. [emphasis added]

“If you look at the way these structures were built up, there were supposed to be safeguards at every step to make sure all these things were done properly,” said O. Max Gardner III, a lawyer in Shelby, N.C., who represents financially troubled consumers. “When you see so many problems across the country with the total inability to produce the documents, then it really makes you wonder: did they really do this?”

So, everybody, in every mortgage pool ought to be putting the foreclosing entities to the test. Make ‘em put up or shut up. You never know what you might find.

Disclaimer: Nothing in this post should be construed as giving legal advice. Everyone’s facts and circumstances are different, each case turns on its own unique facts, and laws vary from state to state. Consult with a qualified attorney familiar with the foreclosure law in your state.

[Earlier posts in this series and related links at Kouril’s Foreclosure Fraud Resources]

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Cynthia Kouril

Cynthia Kouril

Cynthia Kouril is a former Special Assistant United States Attorney in the Southern District of New York under several different U.S. Attorneys, former counsel to the Inspector General for the N.Y.C. Department of Environmental Protection where she investigated threats to the New York City water supply and other environmental crimes, as well as public corruption and fraud against the government, former Examining Attorney at the N.Y.C. Department of Investigation and former Capital Construction Counsel at New York City Parks and Recreation.
She is now in private practice with a colleague whom she met while at the USA Attorney's Office. Ms. Kouril is a member of the Steering Committee, National Committeewoman and Regional Coordinator for the New York Democratic Lawyers Council, a member of the Program Committee of the Federal Bar Council and a member of the Election Law Committee at the Association of the Bar of the City of New York. She is active in several other Bar Associations.
Most important of all, she is a soccer mom.