Egregious Manifestation

Good article in HuffPo called Foreclosures From Old Mortgages ‘Most Egregious Manifestation’ of Broken Housing Market.  An excerpt below:

More and more, homeowners say that mortgages they thought  were dead and buried are springing back to life, sometimes  haunting them all the way into foreclosure.
“It’s the most egregious manifestation of an industry that’s  seriously broken,” said Ira Rheingold, a lawyer who is the  executive director of the National Association of Consumer  Advocate.
Diane Thompson, an attorney with the National Consumer Law  Center, says she has defended hundreds of foreclosure cases, and  in nearly all of them, the homeowner was not in default. “The  record-keeping on the part of the mortgage servicers is not to  be trusted.”
The problems grew from a lot of sloppy recordkeeping that  began during the housing boom, when Wall Street built a  quick-and-dirty back-office operation to process mortgages  quickly so lenders could sell as many loans as possible. As the  loans were later sold to investors, and then resold around the  world, the back office system sidestepped crucial legal  procedures.
Now it’s becoming clear just how dysfunctional and,  according to several state attorneys general, how fraudulent the  whole system was.
Depositions from “affidavit slaves” depict a surreal,  assembly-line world in which the banks and their partner firms  hired hair stylists, fast-food kids and Wal-Mart floor workers,  paying them $10 a day, to pose as bank vice presidents,  assistant secretaries and corporate attorneys.
These “robosigners” became a national sensation in the fall  of 2010 when it was revealed that they faked titles, forged  documents and backdated affidavits so they could make up for the  bypassed procedures and foreclose on properties.
They passed around notary stamps as if they were salt. They  did all of this, they testified, without verifying a single word  in any of the documents – as is required by law.
And it was all done, they say, to foreclose on as many  homeowners as fast as possible.
No one collects statistics on wrongful foreclosures, or how  many people are facing the phantom mortgage debts. But as the  industry enters its fifth year of unwinding its mortgage morass,  consumer groups, homeowner attorneys and foreclosure-fraud  investigators say they are seeing more cases where people who  don’t owe the banks a dime are getting ensnared in the same hell  as those who have missed payments.
They add that such problems are likely to intensify. Former  industry employees have testified that they knowingly pushed  through foreclosures on the wrong people.
It all casts a pall over a housing market in worse condition  than it was during the Great Depression. By some estimates, 12.5  percent of U.S. homes with mortgages are either in foreclosure  or the loans are at least 30 days past due, representing about  $1 trillion in value.
“This is an epic problem that the economy hasn’t even begun  to digest,” said Florida foreclosure analyst Lisa Epstein.
In some cases, mortgages that were supposed to die off in a  refinancing are popping back up, while in others, the loans were  paid in full. Homeowners who pay off their houses through  bankruptcy programs are also falling prey.
So are homeowners who never even had a mortgage to begin  with.
Homeowners say the banks’ repo men sometimes even show up at  work. Banks also hector them with threatening letters and phone  calls. “It scared the hell out of him,” said a Houston lawyer  whose client was the target of such efforts. “He was absolutely  spooked,” lawyer Barry Brown said.
So was Shantell Curtis of Utah. She showed up at her  accountant’s office last year only to learn that she had been  sued for foreclosure on a house she had sold years before. Bank  of America reported the delinquency to credit bureaus, tarring  Curtis’s credit. It turned out the entire saga stemmed from a  bank coding error. The amount the bank falsely alleged Curtis  still owed on her mortgage? One dollar.
Vietnam vet Dwight Gaines fell behind on his payments on his  Birmingham, Alabama, home. Gaines paid off his entire mortgage,  plus all the fees and expenses he owed the bank in March 2010,  as a part of a Chapter 13 bankruptcy plan. But Bank of America  kept sending Gaines notices that he still owed $6,842.37. Nearly  two years later, Gaines is still fighting the bank in court.
“In my experience, if I had not sued Bank of America, they  would have eventually placed Mr. Gaines in foreclosure although  he had completely paid his mortgage,” said Gaines’ lawyer,  Wesley Phillips.
Bank of America spokewoman Jumana Bauwens said the bank is  working to resolve the Gaines situation. She also said that  “these situations pre-date a review of our foreclosure  procedures which took place in the fall of 2010. At the time, we  identified areas of our process that needed to be improved, and  we have been making those improvements.”
The reincarnating mortgage is only the latest development in  the megabanks’ mortgage debacle, a scandal that has made them  the target of a mounting pile of investigations and lawsuits.  Though a settlement with most of the U.S. attorneys general may  be imminent, a rogue group of AGs has peeled off to launch their  own investigations.
One of those AGs, New York’s Eric Schneiderman, is a part of  the U.S. Justice Department task force announced by President  Obama in his State of the Union address on Tuesday night.
Up until Obama’s announcement, the federal government’s  response to the alleged financial misconduct was in the form of  an independent review of the banks overseen by the federal  Office of the Comptroller of Currency. But critics have labeled  the OCC review as a farce rife with conflicts of interest.

Foreclosure Review on NY Times Blog

Foreclosures (NY Times)

When the housing boom began to cool in 2006, a chain of events was set in motion that was a disaster for millions of homeowners whose property has been seized by lenders, and for the lenders themselves. Millions of Americans have received foreclosure notices and tens of billions in real-estate assets have been written off as losses by banks.

What followed was a vicious circle. Foreclosures helped accelerate the fall of property values, helping to spur more foreclosures. The losses they created  brought the financial system to the brink of collapse in the fall of 2008. The steep recession that followed led to even greater homeowner delinquencies, as homeowners who lost their jobs often lost their homes. The program designed by the Obama administration to prevent foreclosures has helped only a small percentage of those it was designed for, particularly the unemployed.

In June 2011, evidence emerged of the first break homeowners have caught since the crisis began: a sharp slowdown in the rate of foreclosure filings and of repossessions.

The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts. But the slowdown also stems from the evidence that emerged in the fall of 2010 of sloppy recordkeeping, cut corners and possible fraud.

Revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and GMAC Mortgage to temporarily halt foreclosures in many states. In October 2010, all 50 state attorneys general announced that they would investigate foreclosure practices. The nation’s largest electronic mortgage tracking system, MERS, has been criticized for losing documents and other sloppy practices and JPMorgan Chase announced that it no longer used the service.

Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007, according to court documents, analysts and interviews. Now those missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights.

In early 2011, the attorneys general and the newly created Consumer Financial Protection Bureau began pressing for a settlement that would involve banks paying penalties of up to $20 billion, and for steps drastically alter the foreclosure process and give the government sweeping authority over how mortgage servicers deal with millions of Americans in danger of losing their homes.

The banks have resisted the proposed settlement, and the attorneys general group began to fracture in 2011, with some in Republican states dropping out, and others, including the attorneys general of New York and Delaware, launching new investigations into how banks handled the bundling of mortgages into the securities that led to billions in losses.

In January 2012, Obama administration officials said they were close to a deal that could be worth about $25 billion, depending on how many states sign up, with up to $17 billion of that used to reduce principal for homeowners facing foreclosure. Another portion would be set aside for homeowners who have been the victim of improper foreclosure practices, with about 750,000 families receiving about $1,800 each.

In addition to disagreements over the total amount, negotiations have been held up over the question of how much latitude authorities would have in pursuing investigations into mortgage abuses before the housing bubble burst in 2007. The banks are pushing for a broad release from future claims, but several attorneys general, including prominent figures like Eric Schneiderman of New York and Martha Coakley of Massachusetts, have demanded a tougher line on the banks, saying that the settlement could prevent them from investigating broader claims.

Read More…

The courts have also become more aggressive about challenging foreclosures. In January 2011, Massachusetts’s top court voided the seizure of two homes by Wells Fargo & Company and US Bancorp after the banks failed to show that they held the mortgages at the time of the foreclosures, and courts in several states are considering similar cases.


The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.

Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to dealwith the foreclosure process.

The revelations about the sloppy paperwork emboldened homeowners and law enforcement officials in many states to challenge notarizations — including those by so-called robo-signers,’ employees who approved hundreds of documents in a day — and to question whether lenders rightfully hold the notes underlying foreclosed properties. Evictions were expected to slow sharply — good news for many homeowners. But at the same time, the freezes further disrupted an already shaky housing market.

As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed. In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.

The swelling outcry over fast-and-loose foreclosures thrust the Obama administration back into the uncomfortable position of sheltering the banking industry from the demands of an angry public. While Mr. Obama did block a law passed by Congress that was seen as unintentionally making it easier to speed up foreclosures, his aides spoke out against calls from many Democrats for a national freeze on evictions, fearing that a moratorium could hurt still-shaky banks.

The Three Waves

Overall, there have been three distinct waves in foreclosures. The initial spike involved speculators who gave up property because of plunging real estate prices, and the secondary shock centered on borrowers whose introductory interest rates expired and were reset higher. The third wave represents standard mortgages, known as prime, written to people who had decent credit ratings, but who have lost their jobs in the economic downturn and are facing the loss of homes they had considered safe.

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. said in 2009 that it expected that 60 percent of the mortgage defaults that year would be set off primarily by unemployment, up from 29 percent in 2008.

The slowdown in evictions may give such borrowers time to accumulate some capital or more leverage in settlement talks with their lender. Some analysts said that could conceivably help the housing market get back on its feet, by ending the undermining effect of a steady stream of foreclose houses going up for sale. Others, however, worried that blocking sales in an already weak market would drive prices down even further, continuing a spiral that has been deeply destructive to banks and communities.

A Mess Years in the Making

Interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials.

Almost overnight, what had been a factorylike business that relied on workers with high school educations to process monthly payments needed to come up with a custom-made operation that could solve the problems of individual homeowners.

To make matters worse, the banks had few financial incentives to invest in their servicing operations, several former executives said. A mortgage generates an annual fee equal to only about 0.25 percent of the loan’s total value, or about $500 a year on a typical $200,000 mortgage. That revenue evaporates once a loan becomes delinquent, while the cost of a foreclosure can easily reach $2,500 and devour the meager profits generated from handling healthy loans.

And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids,” walk-in hires who often barely knew what a mortgage was.

At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage. And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.

BoA is Impeding Investigation Says Arizona Attorney General’s Office

Full Bloomberg article here.

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.


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


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

Oklahoma Supreme Court –Fresh Off Press

This new Oklahoma Supreme Court decision (Jan. 17, 2011) should be provided as supplemental authority to our Arizona Supreme Court, hearing oral argument on Tuesday on whether the note should matter at all in a foreclosure action (in Arizona, non-judicial, in Oklahoma, judicial, but of course in Hogan, the plaintiff brought the dispute over the non-judicial foreclosure into a judicial forum, which should implicate standing, and authority is always implicated).


2012 OK 3

Case Number: 109223

Decided: 01/17/2012


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




DENNIS BRUMBAUGH, Defendant/Appellant.




¶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.


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

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



¶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.


¶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.


¶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.


¶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).


¶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.



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)).

First You Have to Understand the Problem….

Attorney Thomas Cox has written a memorandum raising pertinent point about the efficacy of touting a federal foreclosure standard without first under standing the problem, including the causes and ramifications of the foreclosure machine right now.  78835024-Thomas-A-Cox-Memo-for-ULC-Study-Committee.  One interesting nugget that resonated:

(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.