January 26, 2012, 2:04 PM EST

By Karen Gullo

Jan. 26 (Bloomberg) — Bank of America Corp. is impeding an investigation of its loan modification practices by negotiating settlements with borrowers who must agree to keep them secret and not criticize the bank in exchange for cash payments and loan relief, Arizona officials say.

The Arizona Attorney General’s office is asking a court to block those aspects of the settlements and require the bank to turn over all the agreements. The bank denies any wrongdoing.

One 2011 accord involving a borrower facing foreclosure who defaulted on a $253,142 mortgage included a $5,000 payment, plus $7,500 for legal fees, and the defaulted payments were waived and the loan was modified to a 40-year term with a 2 percent interest rate, court documents show. The terms of the original loan and the borrower’s complaint about the lender weren’t described in the documents.

The borrower “will remove and delete any online statements regarding this dispute, including, without limitation, postings on Facebook, Twitter and similar websites,” and not make any statements “that defame, disparage or in any way criticize” the bank’s reputation, practices or conduct, according to documents filed in state court in Phoenix. The borrower’s name and address were redacted.

Non-Disparagement

Bank of America attorneys argue that borrowers don’t have to sign the agreements to get a loan modification and deny that settlements hinder the state’s probe. Borrowers can be subpoenaed to disclose the accords, and the Charlotte, North Carolina-based bank won’t enforce the non-disparagement provision if they talk to investigators, the bank’s lawyers have said in court filings.

A hearing is set for Feb. 1 on the dispute.

Arizona Attorney General Thomas Horne, a Republican who took office last January, is investigating Bank of America as part of a 2010 lawsuit alleging customers of its Countrywide Financial mortgage unit were misled about requirements for loan modifications. The bank, which acquired Calabasas, California- based Countrywide in 2008, provided inaccurate and deceptive reasons for denying modification applications, according to the complaint. A similar suit was filed by Nevada.

The settlement agreements came to light as state investigators followed up on borrower complaints filed with the attorney general’s office. The office learned of 12 settlements while examining 1,900 complaints and when it attempted to contact the borrowers, Assistant Attorney General Carolyn Matthews said in Jan. 11 court filing.

Frequent Contact

Only four returned phone calls and none would provide a copy of the settlement, Matthews said. Some who signed the settlements had previously been in frequent contact with the attorney general’s office, according to court records.

Matthews contends that under the terms of the settlements, even if subpoenaed, borrowers can’t reveal any unflattering information about the bank. They couldn’t talk about misrepresentations the bank made about loan modifications, which is what the state is investigating, she said.

“These agreements have completely silenced even the most communicative consumers,” Matthews said in the filing. “The settlement agreement purposefully makes it impossible, legally and practically, for a consumer signing it to come forward, voluntarily and promptly, to provide evidence in this case.”

She asked a state judge to order Bank of America to notify borrowers who signed the agreements that they don’t have to adhere to the confidentiality and non-disparagement provisions.

Inappropriate Practices

Settlements with borrowers are more likely in cases in which the bank engaged in inappropriate practices, such as steering customers away from more affordable loans, or canceling a mortgage modification after a single payment went missing from a borrower who otherwise kept up with payments, said Patricia Garcia Duarte, chief executive officer of Neighborhood Housing Services of Phoenix Inc., which works with families facing foreclosure. Bank of America is a contributor to the organization, according to the group’s website.

Full article on bloomberg.com

The case is Arizona v. Countrywide Financial Corp. CV2010-033580, Arizona Superior Court, Maricopa County (Phoenix).

I attended the hearing in the Arizona Supreme Court in Hogan v. Washington Mutual and it was very interesting, to say the least.  You can watch it on the Arizona Supreme Court web site if you missed it.  More commentary later…

DEUTSCHE BANK NATIONAL TRUST v. BRUMBAUGH

2012 OK 3

Case Number: 109223

Decided: 01/17/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA

Cite as: 2012 OK 3, __ P.3d __

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

DEUTSCHE BANK NATIONAL TRUST, AS TRUSTEE FOR LONG BEACH MORTGAGE LOAN 2002-1, Plaintiff/Appellee,

v.

DENNIS BRUMBAUGH, Defendant/Appellant.

ON APPEAL FROM THE DISTRICT COURT OF TULSA COUNTY

HONORABLE LINDA G. MORRISSEY

DISTRICT JUDGE

¶0 The Plaintiff /Appellee, Deutsche Bank National Trust as Trustee for Long Beach Mortgage Loan 2002-1, filed this foreclosure action against the Defendant/Appellant, Dennis Brumbaugh. Plaintiff filed a motion for summary judgment which was granted by the trial court. Defendant contends there is not enough evidence to show Plaintiff has standing. Plaintiff asserts it is the holder of the note and has standing. We find there are material issues of fact that need to be determined and summary judgment is not appropriate.

REVERSED AND REMANDED WITH INSTRUCTIONS

Phillip A. Taylor, TAYLOR & ASSOCIATES, Broken Arrow, Oklahoma, for Defendant/Appellant.

Ray E. Zschiesche, PHILLIPS MURRAH P.C., Oklahoma City, Oklahoma, for Plaintiff/Appellee.

COMBS, J.

FACTS

¶1 This is an appeal from a foreclosure action initiated by Appellee, Deutsche Bank National Trust As Trustee for Long Beach Mortgage Loan 2002-1 (Appellee) against Appellant Dennis Brumbaugh (Appellant) and others. Appellant and his wife, Debra Brumbaugh, (Brumbaughs) executed a note and mortgage with Long Beach Mortgage Company on February 27, 2002. On December 27, 2006, the Brumbaughs entered into a loan modification agreement with U.S. Bank, N.A., successor trustee to Wachovia Bank, N.A. (formerly known as First Union National Bank), as Trustee for Long Beach Mortgage Loan Trust 2002-1, Asset Backed Certificates, Series 2002-1 in trust for the benefit of the Certificateholders. On July 20, 2007, the Brumbaughs divorced, and in 2008, Debra Brumbaugh executed a quitclaim deed to Dennis Brumbaugh.

¶2 Appellant defaulted on the note in January 2009, and Appellee filed its petition for foreclosure on June 2, 2009. Attached to the petition was a copy of the note, mortgage, loan modification agreement, and copies of statements of judgments and liens by other entities. Appellee claims it is the present holder of the note and mortgage having received due assignment through mesne assignments of record or conveyance via mortgage servicing transfer. The Appellant answered, denying Appellee owns any interest in the note and mortgage, and the copies attached to the petition were not the same as those he signed. He claims Appellee lacked capacity to sue and the trial court lacks jurisdiction over the subject matter. He also denied being in default and asserted the Appellee/servicing agent caused the alleged default.

¶3 On April 1, 2010, Appellee filed a motion for summary judgment. Attached to the motion was an affidavit from an employee of JP Morgan Chase Bank (Chase) as the servicing agent for Appellee. The affidavit states the Appellee is the current owner and holder of the original note, mortgage, and the modification agreements. However, there is no mention of when Appellee became the holder.

¶4 Appellant asserts in his response to the motion for summary judgment that Appellee failed to prove the affiant is a competent witness and no documentation was presented that connects Appellant to Appellee. The note attached to the petition and the motion did not show it had been negotiated to any other party including Appellee. Negotiation requires transfer of possession of the instrument and its indorsement by the holder. 12A O.S. 2001, § 3-201(b). He asserts because there is no indorsement whatsoever by Long Beach Mortgage Company attached to the petition and motion for summary judgment, Appellee cannot be the holder of the note. Therefore, Appellant asserts Appellee cannot be the real party in interest. However, in Appellee’s reply to Appellant’s response to the motion for summary judgment and at the hearing, a copy of the note with a blank, undated indorsement signed by Long Beach Mortgage Company was attached and presented.

¶5 Appellee asserts that even if negotiation of the note was at issue, Appellee has possession of the note and that satisfies the “negotiation” requirements of 12A O.S. 2001, § 3-201. Further, the Chase affiant has personal knowledge because he reviewed and examined the account files and Chase is the servicing agent for Appellee. Appellee further asserts, it has the original note and mortgage, and is therefore, the real party in interest.

¶6 The trial court reviewed the note presented at the hearing and agreed with Appellee that Appellee was the holder of the note because it had possession of the note and it was indorsed in blank. The court granted summary judgment in favor of Appellee on January 27, 2011.

STANDARD OF REVIEW

¶7 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 621 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶8 The Uniform Commercial Code adopted in Oklahoma, 12A O.S. 2001, § 1-101 et seq., defines who is a “person entitled to enforce” the note (instrument).1 A “person entitled to enforce” the note requires possession of the note with a very limited exception.2 It will be either one who is a “holder” of the note or a “nonholder in possession of the note who has the rights of a holder.”3

¶9 Appellee must demonstrate it is a person entitled to enforce the note. It must provide evidence it has possession of the note either by being a holder or a nonholder in possession who has the rights of a holder. Appellee attached to its Reply to Defendant’s Response to Plaintiff’s Motion for Summary Judgment a copy of the note with a blank indorsement from Long Beach Mortgage Company. Appellee states this allonge4 was inadvertently omitted from the copy of the note that was attached to its Motion for Summary Judgment. However, this allonge was not attached to the Petition for Foreclosure of Mortgage. Appellee is trying to establish it is a “holder” of the note. Evidence establishing when Appellee became a person entitled to enforce the note must show Appellee was a person entitled to enforce the note prior to filing its cause of action for foreclosure.

¶10 Appellant argues Appellee does not have standing to bring this foreclosure action. The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).

¶11 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.5 Being a person entitled to enforce the note is an essential requirement to initiate a foreclosure lawsuit. In the present case, there is a question of fact as to when Appellee became a holder, and thus, a person entitled to enforce the note. Therefore, summary judgment is not appropriate. If Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party. We reverse the granting of summary judgment by the trial court and remand back for further determinations as to when Appellee acquired its interest in the note.

CONCLUSION

¶12 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit, showing the history of the note, so the defendant is duly apprised of the rights of the plaintiff. This is accomplished by establishing that the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. 12A O.S. 2001, § 3-301. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or loan modification, or insulate them from foreclosure proceedings based on proven delinquency. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶13 CONCUR: TAYLOR (This Court’s decision in no way releases or exonerates the debt owed by the defendants on this home.), C.J., KAUGER (joins Taylor, C.J.), WATT, WINCHESTER (joins Taylor, C.J.), EDMONDSON, REIF, COMBS, GURICH (joins Taylor, C.J.), JJ.

¶14 RECUSED: COLBERT, V.C.J.

FOOTNOTES

1 12A O.S. 2001, § 3-301.

2 A person who is not reasonably able to obtain possession of the note because it was lost, destroyed, in the wrongful possession of another, or it is paid or accepted by mistake. 12A O.S. 2001, § 3-301.

3 A holder is a person in possession of the note that is payable either to bearer (blank indorsement) or to an identified person (special indorsement) that is the person in possession. 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205. A “nonholder in possession who has the rights of a holder” is a person in possession of the note but the note was not indorsed by the previous holder; special indorsement or blank indorsement. No negotiation has occurred because the person now in possession did not become a holder by lack of the note being indorsed as mentioned. An example would be when a sale of notes in bulk is made by the holder to a transferee and the holder is transferring the right to enforce the notes even though there has been no negotiation. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)). Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, § 3-203(b). Some jurisdictions have held that without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011).

4According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

5 This opinion occurred prior to the enactment of the UCC and as explained in footnote 3 of this opinion, the person entitled to enforce the note in almost all situations is required to be in possession of the note and therefore if the owner of the note is not in possession of the note it is not a person entitled to enforce the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

(4) Judicial Errors

A perhaps small,but nevertheless disturbingly substantial,

number of judges continue to believe that the nation’s financial institutions

will not lie to or deceive them, or that their lawyers will not try to cheat the

judicial system and that all foreclosure defense lawyers are being obstructive

in insisting upon competent and adequate proof of the right to foreclose.

Manyof these judges disparagingly accuse foreclosure defense lawyers of

seeking a “free house” for their clients and conclude that when a homeowner

is indebted on a mortgage loan, judgment should be entered for any plaintiff

asserting the right to enforce it without regard to normal standards of evidence

and proof. Thus, the decisions of these judges will often conflict with the

decisions of those judges who truly review and honestly decide each case

on its merits and who are willing to recognize when parties enforcing mortgages

present false, misleading or insufficient evidence. This disparity in judicial

attitude in judicial foreclosures accounts for much of the inconsistency in

evidentiary rulings complained of by FHFA.

Occupy Boulder

I wonder if it’s the same people behind the Occuppella choir that Martin Andelman posted:

http://mandelman.ml-implode.com/2012/01/im-sorry-bankers-but-you-really-do-deserve-it-so-merry-christmas/

These were some dedicated people, I can tell you that.  They had a little tent city amidst the snow and the sub-freezing temps.

National Mortgage News Article Here

Investors holding at least $800 million of secured bonds in Residential Capital Corp. have organized in the event the mortgage firm’s parent company, Ally Financial, throws the company into bankruptcy.

The investor group is being represented by the law firm of White & Case. In a statement issued Monday, the firm said, “Ally, Ally Bank and Rescap are too intertwined to be easily unwound.  A forced Rescap filing would be a big mistake and create significant litigation against Ally.”

A spokeswoman for Ally had no comment on the action.

ResCap, which operates under the trade name GMAC Mortgage, ranks fourth among residential lenders, and fifth among servicers, according to figures compiled by National Mortgage News and the Quarterly Data Report.

Ally Financial, a bank holding company, is majority owned by the U.S. government. A bankruptcy filing might prove embarrassing to the White House, but the Obama Administration did throw General Motors – which once controlled GMAC and its affiliates – into bankruptcy only to see the automaker’s fortunes revive.

Ally had hoped to take ResCap/GMAC public last year but eventually scuttled the idea. ResCap/GMAC receives funding for its mortgage business from Ally.

In a recent SEC filing discussing its registration of demand notes, Ally mentions “risk factors” associated with the company but does not mention a potential bankruptcy filing for ResCap/GMAC

By ERIC MORATH

WASHINGTON—Federal Reserve Gov. Sarah Bloom Raskin called upon mortgage servicers to fix their “sloppy and deceptive practices,” part of the Fed’s push for more forceful government action to fix the broken housing market.

It is important “that the severe misconduct that has been uncovered in the mortgage servicing sector be addressed through intensified public enforcement of the law as part of the overarching effort to rebuild our damaged communities and neighborhoods,” Ms. Raskin told a conference of the Association of American Law Schools.

Problems with mortgage servicers, including forged promissory notes, erroneous fees and illegal foreclosure actions, hamper the ability of the courts and the markets to deal with the massive inventory of foreclosed homes, she said

AG Coakley’s lawsuit isn’t delaying the foreclosure process in Massachusetts. The law is delaying the process. Cases such as Ibanez and Bevilacqua, ruling that banks must prove ownership before foreclosing have all made their way to the Massachusetts Supreme Judicial Court.

Foreclosures are ruining the economy on their own, not the backlog of foreclosure cases. Foreclosures cost hundreds of thousands of dollars, break up communities, threaten public safety, destroy property values, and are the cause of mental and physical illness. The editorial is intentionally misleading by putting this on Coakley, who is quite simply doing her job by following the law.

Recently, Danny Schecter wrote a piece for Al Jazeera English, titled, “The year’s top story is not getting coverage” in which he chastised the American press for their shoddy coverage of the financial crisis and those culpable in creating it:

“… The barely exposed chain of criminality that started in some salon of securitization and then rippled across the world, bringing down countries and economies. It has its origins in Wall Street, where three industries colluded as a cabal to sell fraudulent sub-prime loans and then transfer fees and foreclosures from poor and middle class Americans to themselves.” 

The WSJ editors (the piece had no byline) seem to think that in order for things to get better, we should excuse the big banks from breaking the law and wreaking havoc on American families. Maybe we should excuse murderers and bank robbers as well, because their mothers would miss them.

LOS ANGELES – A federal judge issued a ruling this morning suggesting that the statute of limitations may have expired on NCUA’s claims that Wall Street banks sold mortgage-backed securities they knew were faulty to corporate credit unions, potentially rendering NCUA suits filed earlier this year moot.

In a preliminary ruling filed in U.S. District Court, Judge George Wu said NCUA claims in a suit brought against RBS Securities for the sale of $1.2 billion of MBS to WesCorp FCU  are “insufficient thus far to demonstrate compliance with at least the applicable federal statute of limitations.”

The Judge’s ruling jeopardizes billions of dollars in claims brought by NCUA in five separate suits against Wall Street banks for the failure of WesCorp and four other corporates.

Wu, the same judge who dismissed NCUA’s civil claims against WesCorp directors earlier this year, said the relevant statute of limitations in such tort cases is three years from the time of the purchase of the securities, some of which were bought as early as 2005, and the clock began running even before NCUA took the one-time $34 billion corporate under conservatorship in March 2009. NCUA , which brought the suit in July as liquidating agent for WesCorp, has argued the clock on the statute of limitations should not start running until then.

NCUA’s argument that the clock did not begin until it took WesCorp under conservatorship is “misdirected,” wrote the Judge. “the correct question is whether the three-year period expired before (NCUA) filed this lawsuit.”

In fact, RBS argues that WesCorp should have known of the claims long before the NCUA take over. “Defendants assert that it is clear that WesCorp, had it been diligent, could have known about the basis for its claims (to the extent those claims have any basis) long enough ago that the applicable statutes of limitation would have run before (NCUA) implemented the conservatorship,” wrote Judge Wu.

“Ultimately,” wrote Judge Wu,“with respect to most claims, the defendants’ explanations for why WesCorp should have known of these particular claims earlier is insufficiently persuasive for purposes of ruling as a matter of law, at least at this stage, that the statutes of limitation have run.”

This morning’s ruling casts also doubt on four other suits brought by NCUA against Wall Street banks for their sale of faulty MBS to failed corporate, including U.S. Central FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution FCU, as well as WesCorp.  Defendants in the other suits include JP Morgan Chase, Goldman Sachs, Wachovia Securities ( now a unit of Wells Fargo), and numerous other Wall Street banking subsidiaries.

Judge Wu has asked NCUA and RBS to file supplemental briefs to bolster the cases and indicated he will issue a ruling on the RBS motion to dismiss in early 2012.