I have been telling you about the document mills which “create” paperwork to support foreclosures.

Sometimes the paperwork is created by an employee of the loan servicer, signing on behalf of the “assignor” of the loan, even though the employee doesn’t actually work for the assignor, it works for the assignee or for a servicer employed be the assignee. Sometimes the paperwork is created by an employee of the law firm hired by the assignee, but signed as if by an employee of the assignor.

Apparently, the person signing and claiming to be an employee of the assignor doesn’t actually see the loan documents she is purporting to assign, or even have personal knowledge of whether the entity she is purporting to assign from ever had the loan in the first place.

In fact, that led to two different banks trying to foreclose on the same mortgage in Florida.

Now, a judge in Brooklyn, who has previously questioned this practice, has dismissed a foreclosure action “with prejudice” because the assignment was signed by an attorney from the law firm hired by the bank to do the foreclosure:

New York Judge Arthur Schack has dismissed another foreclosure case, this time with prejudice, as a result of an illegal MERS assignment which was “executed” by an attorney in the office of counsel for the Plaintiff, finding that the alleged assignment violated the New York Rules of Professional Conduct as doing so was a conflict of interest.

The Plaintiff was US Bank, N.A. as Trustee for the SG Mortgage Securities Asset-Backed Certificates, Series 2006-FRE2. The original lender was Fremont Investment and Loan. The purported Assigment of Mortgage (which did not assign the Note at all) was executed by a New York attorney as “Assistant Secretary and Vice-President” of MERS. As this attorney, signing for the assignor, listed her business address as that of the law office of the Plaintiff’s counsel (Steven J. Baum P.C.), which represented the assignee US Bank as Trustee, the Court found this to be a conflict of interest in violation of 22 NYCRR sec. 1200.0 Rules of Professional Conduct. Judge Schack dismissed US Bank’s foreclosure action with prejudice and cancelled the Lis Pendens.

[emphasis added].

In law, a case can be dismissed two ways: one is without prejudice,  which means that the plaintiff can bring a new case on the same matter up until the statute of limitations runs out; the other way, “with prejudice” means that the plaintiff can never bring that case again (unless an appeals court overturns the with prejudice designation). It’s like those spy thriller movies when assassins are told to terminate a target with extreme prejudice, a/k/a kill the target. To dismiss a case with prejudice kills the case.

This is bad news for banks and securitized mortgage trusts with sloppy paperwork, which I’m told pretty much describes most of those mortgage backed security trusts.

So, judges in Florida are getting clued in. Judges in Massachusetts are getting clued in. Judges in the great state of New York (OK, I’m a bit biased) are doing the heavy lifting on figuring this out. How about the rest of you? Got any cases in your home state that we should know about? Are judges in your home state starting to understand that foreclosures should be carefully scrutinized and not rubber stamped?

Let us know in the comments.

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

I have been telling you about the document mills which “create” paperwork to support foreclosures.

Sometimes the paperwork is created by an employee of the loan servicer, signing on behalf of the “assignor” of the loan, even though the employee doesn’t actually work for the assignor, it works for the assignee or for a servicer employed be the assignee. Sometimes the paperwork is created by an employee of the law firm hired by the assignee, but signed as if by an employee of the assignor.

Apparently, the person signing and claiming to be an employee of the assignor doesn’t actually see the loan documents she is purporting to assign, or even have personal knowledge of whether the entity she is purporting to assign from ever had the loan in the first place.

In fact, that led to two different banks trying to foreclose on the same mortgage in Florida.

Now, a judge in Brooklyn, who has previously questioned this practice, has dismissed a foreclosure action “with prejudice” because the assignment was signed by an attorney from the law firm hired by the bank to do the foreclosure.

New York Judge Arthur Schack has dismissed another foreclosure case, this time with prejudice, as a result of an illegal MERS assignment which was “executed” by an attorney in the office of counsel for the Plaintiff, finding that the alleged assignment violated the New York Rules of Professional Conduct as doing so was a conflict of interest.

The Plaintiff was US Bank, N.A. as Trustee for the SG Mortgage Securities Asset-Backed Certificates, Series 2006-FRE2. The original lender was Fremont Investment and Loan. The purported Assigment of Mortgage (which did not assign the Note at all) was executed by a New York attorney as “Assistant Secretary and Vice-President” of MERS. As this attorney, signing for the assignor, listed her business address as that of the law office of the Plaintiff’s counsel (Steven J. Baum P.C.), which represented the assignee US Bank as Trustee, the Court found this to be a conflict of interest in violation of 22 NYCRR sec. 1200.0 Rules of Professional Conduct. Judge Schack dismissed US Bank’s foreclosure action with prejudice and cancelled the Lis Pendens.

[emphasis added].

In law, a case can be dismissed two ways: one is without prejudice,  which means that the plaintiff can bring a new case on the same matter up until the statute of limitations runs out; the other way, “with prejudice” means that the plaintiff can never bring that case again (unless an appeals court overturns the with prejudice designation). It’s like those spy thriller movies when assassins are told to terminate a target with extreme prejudice, a/k/a kill the target. To dismiss a case with prejudice kills the case.

This is bad news for banks and securitized mortgage trusts with sloppy paperwork, which I’m told pretty much describes most of those mortgage backed security trusts.

So, judges in Florida are getting clued in. Judges in Massachusetts are getting clued in. Judges in the great state of New York (OK, I’m a bit biased) are doing the heavy lifting on figuring this out. How about the rest of you? Got any cases in your home state that we should know about? Are judges in your home state starting to understand that foreclosures should be carefully scrutinized and not rubber stamped?

Let us know in the comments.

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

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.