Show me the mortgage papers’ spreading as foreclosure defense

[Murray Balkcom]

Show me the mortgage papers’ spreading
as foreclosure defense
Copyright © 2009 NYP Holdings Inc., Richard Wilner. All rights reserved.

WASHINGTON – March 2, 2009 – While the Obama administration battles to keep people from losing their homes, one Florida lawyer said she has a better answer to the toxic mortgage epidemic sweeping the country – fight back against the loan servicers and banks that are improperly pressing the foreclosure actions.

“The loan servicers bringing most of the foreclosure actions in the country don’t own the mortgages and have no standing to take away a person’s home,” said the lawyer, April Charney, who has stopped scores of foreclosure actions in Jacksonville, Fla., where she works as a Legal Aid lawyer.

In essence, Charney has forced scores of plaintiffs in foreclosure actions in Jacksonville to admit they don’t have legal ownership of the securitized mortgage they are trying to foreclose upon – stopping the home takeover battle in its tracks.

The strategy has spread virally around the country and now thousands of foreclosure lawsuits are sitting idly – in legal limbo.

“I have one case from 2004 where the bank has not returned to court and where my client now has deposited more money into a trust account than the house is worth,” Charney noted.

Charney has held seminars in Ohio, Oregon, South Carolina and throughout Florida to educate lawyers on how to implement the courtroom defense.

At least one Brooklyn judge, Arthur M. Schack, is already using the strategy himself in the courtroom. He told a reporter recently that he denies more foreclosures than he approves. Last summer, 13 of the 14 foreclosure actions that came before him were denied.

“I want to see the servicing agent’s power of attorney, I want to see all the paperwork before I approve it,” he said. “If the paperwork is garbage, I deny it. If you’re going to take away someone’s home, it should be done properly.”

The legal issue is that banks turn the mortgages into bonds, which are put into trusts, like collateralized debt obligations, or CDOs. The banks “sell” the CDOs the right to collect the revenue stream but, according to Charney, not the equity right to the property.

Charney notes that under the current set-up, the mortgage default hurts everyone – like a neighbor who could be a state worker whose pension fund money is invested with a hedge fund that has invested in a mortgage CDO.

“So far I’ve drafted about 1,500 lawyers into my army,” Charney said in a telephone interview last week. She is scheduled to hold her first New York seminar next month.

“Of course, I’m looking to educate them and have them use the same technique here,” she said. That should be sweet music to homeowners here who are facing a foreclosure action.

Charney said Washington has the resources to allow every mortgage holder the right to modify their mortgage – something that would definitely mute the criticism that the Obama plan rewards failure by allowing those who obtained mortgages they couldn’t afford to cut a deal for a lower monthly payment.

“Look, the same problem that banks are having with securitized mortgages is going to spread to defaults with car loans, credit card accounts and student loans – they are all securitized and the banks and loan servicers starting legal actions to collect on those defaulting loans will face the same issue proving ownership,” said Charney.

As for Obama’s $275 million mortgage plan, Charney said she has a better idea: “The U.S. government has to take over every one of these securitized loans and open up the mortgage modification plan to every American. That’s the only way we are going to get past this horrible thing,” said Charney, who has become, alongside a handful of other consumer advocate legal eagles, quite a cult personality for her pioneering courtroom foreclosure defense strategy.

Copyright © 2009 NYP Holdings Inc., Richard Wilner. All rights reserved.

[AAbsolute]

I hate to say it, but I think the Fed's should offer to purchase every loan originated before June 2006. BY June 2006 all buyers and banks knew or should have known about what was happening in real estate. Let the Fed's buy every loan out and use their enforcement powers to collect.