Scholarly Takes on Fabricated Mortgage Assignments, Unlawful Foreclosures, the UCC’s Role in Foreclosure, and Hypocritical Brandishing of Credit Score Scarlet As

Campbell, James P, The Nexus of Fabricated Mortgage Loan Assignments and Unlawful Home Foreclosures. (June 1, 2013). Available at SSRN:

Who has the legal right to foreclose on your home? More importantly, who doesn’t? Unlawful foreclosures are not just financial crimes against individuals and families. At the eviction stage, they are crimes perpetrated together with the threat of violence. Five years after the 2008 economic implosion, it is clear to anyone with a shred of sensibility that many financial regulators have become Wall Street commodities to be bought and sold. If that were not the case, by now there would have been hundreds, if not thousands of arrests, convictions and imprisonments; just as there were in the aftermath of the Savings and Loan debacle in the early 1990’s. Twenty years hence, our leaders are benign at best and complicit at worst. This is a legal issue that has haunted the foreclosure crisis since it began in 2008. During the 1990s, U.S banking interests launched an all-out campaign to repeal many of the federal banking regulations which were enacted by Congress in the aftermath of the stock market crash of 1929. Bit by bit, those regulations were stripped away until finally, in 1999, Congress repealed what was arguably the single most important financial regulation born out of that financial crisis: The Glass-Steagall Act. This deregulation allowed the rapid return to the same casino-like behavior that characterized the financial industry in the 1920s. Although many foreclosures are legitimate, a large percentage of them which were started since 2008 involved fake or forged documentation, the most egregious of which are recorded mortgage assignments involving private label securitized trusts created between 2004 and early 2007. In 2013, such unlawful foreclosures continue to occur daily, on a massive scale, in every State of the Union.

Renuart, Elizabeth, Uneasy Intersections: The Right to Foreclose and the U.C.C. (August 26, 2013). Wake Forest Law Review, Vol. 48, No. 5, 2013; Albany Law School Research Paper No. 10 for 2013-2014. Available at SSRN:

This is a great paper and has been out for awhile, but she did some updates in 2014.  I particularly like her willingness to pick on Arizona where its decisions lacked logic, or betrayed a strange hypocrisy.  Dale Whitman has also done this in some of his UCC articles, though his pieces seem to have more of a bank bias, in that the shrewd scholar skews naive when discussing sketchy note transfers.

Historically, the practice of real property and foreclosure law was routine and noncontroversial. This legal landscape significantly altered during the spectacular growth of securitization deals involving trillions of dollars of residential mortgage loans. The National Conference of Commissioners on Uniform State Laws (NCCUSL) was a driving force behind one of these changes. It adopted amendments to Article 9 of the Uniform Commercial Code in 1998, at least in part, to facilitate securitization. These modifications included extending coverage to the sale of (not merely to a security interest in) promissory notes, declaring that the sale of the note also constitutes a sale of the mortgage without the need for a written assignment of the mortgage, and providing for automatic perfection of interests in both the note and the accompanying mortgage without the need to file.

Meanwhile, the behavior of a number of mortgage lending and securitization participants or their agents generated additional legal complications. Examples include the mishandling of loan notes and mortgages, the forging of indorsements or the submitting of fraudulent affidavits to courts in support of their purported right to foreclose, and the pressing of foreclosures without the necessary documentation.

Confusion about the roles of and intersections among Articles 3 and 9 of the UCC and the right to foreclose under state real property law followed in the wake of these changes. These misunderstandings spawned volumes of judicial rulings, many of which appear to be at odds with each other. In an effort to reduce the ensuing legal confusion about the intersections between the right to foreclose and the UCC, this Article provides a roadmap of the relevant rules in Articles 3 and 9 and the right to foreclose in state real property law. Further, it explores the tension developing over the last decade among Articles 3, 9, and the right-to-foreclose concept in state real property law.

This Article advances the literature concerned with the right to foreclose by categorizing recent state appellate court decisions that address this right by the type of analysis applied by those courts. The rulings from Arizona, California, and Georgia fall into one category and are the subject of special scrutiny because they dismiss the role of the UCC outright. Moreover, these three states have experienced some of the worst foreclosure rates in the nation and permit foreclosures to proceed nonjudicially. Hence, these decisions will affect a broad swath of homeowners in danger of losing their homes. The Article then applies statutory construction principles to determine whether those courts ruled out the UCC unnecessarily, proffering that foreclosure laws in those states could be harmonized with the UCC.

Finally, the Article concludes that where inconsistencies arise between the UCC and state real property law, applying statutory construction principles likely will result in creating a more uniform legal landscape throughout the nation, in protecting homeowners from unjustified foreclosures, and in reducing litigation costs and judicial resources in a distraught foreclosure system.

This NCLC paper is fascinating regarding the undeserved power of the “credit score” and its failure to distinguish between truly bad borrowers who will not pay back, and borrowers who suffered “trembles” due to medical issues, job loss, or predatory loans, but who generally are good credit risks.

Shockingly, she exposes how loan modifications (esecially in the early days) resulted in an AC credit report black mark, which was unncessary, fundamentally dishonest (suggesting that the borrower wasn’t paying as agreed, or where the borrower wasn’t even in a modification, but had inquired about one, and had triggered this AC scarlet letter, that could send their credit score tumbling by 100 points or more (with lasting effects of 7 years or more)  Disgraceful.

Also, she questions the legitimacy of using a credit score to make moral judgments about people, in the realm of job interviews and other questionable contexts.

Solving the Credit Conndrum by Chi Chi Wu

Click to access report-credit-conundrum-2013.pdf

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