Countrywide Incompetence Invalidates Foreclosures?


Inquiring minds are once again gazing at the real estate crisis problem that just won’t go away…the idea that traditional (re: legal) operating procedures have not been followed by the mortgage industry calling into question whether the lien holders have the right to foreclose:

Of far bigger importance is the possibility that the trustees for the mortgage-backed securities they created never secured the assets from the originators. If the notes never transferred to the trust, there’s no way to retroactively do that now; the trusts are governed by very specific pooling at servicing agreements that for the most part give the trust 90 days to transfer all the required assets. You cannot transfer the loan after it’s slipped into default, 3 or 4 years after setting up the trust. It violates the laws and contracts under which the investors purchased the securities.

Further we now have actual evidence of this:

Now we have documented evidence, beyond anecdote, that Countrywide, one of the largest subprime lenders, which securitized almost all of the loans they made, never sent the notes to the trust. In a deposition provided to a US Bankruptcy Court in the District of New Jersey, Linda DeMartini, a supervisor for Bank of America Home Loans (BofA bought Countrywide in 2008), admitted that the original notes never transferred from Countrywide into the trusts.

The new allonge was signed by Sharon Mason, Vice President of Countrywide Home Loans, Inc., in the Bankruptcy Risk Litigation Management Department. Linda DeMartini, a supervisor and operational team leader for the Litigation Management Department for BAC Home Loans Servicing L.P. (“BAC Servicing” V testified that the new allonge was prepared in anticipation of this litigation, and that it was signed several weeks before the trial by Sharon Mason.)

As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide’s foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affixed to the note. She testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents.

(An allonge is a slip of paper appended to a mortgage agreement, which gives room for signatures that function as an endorsement of the document.)

So, originally the mortgage companies “broke the law” by tearing the mortgage into two pieces…ownership of the note and financial interest. To have standing in court, an entity must be able to prove both. Then as the notes were bought and sold, it was found that these mortgage companies never re-registered the ownership in the counties where the real property is located. Now, we find out that the mortgage companies didn’t even perform their own contractually required paperwork.

That’s three strikes! When did life get a re-set button, for that matter?

Regulators should move in, take over the offending companies, do what’s needed and then wind down operations. Oh, and before leaving the regulators should go through all paperwork to find the fraudsters and also make the executives forfeit all remuneration. They don’t deserve anything for the lack of institutional control.

By the way, the former executives at Countrywide (along with other companies’) should also be barred for life from any and all real estate related business. They also should be barred from any high level executive position in business.

If anyone would like to find the Countrywide execs all you have to do if look for a certain company ‘buying’ foreclosure and pre-foreclosed real estate in California. Yep, that is right. The same people who profited by giving us this real estate disaster are now profiting from their earlier work.

In other words, the regulators should do just enough to keep the system from completely imploding.

For those who think this is too tough, then why didn’t BP get a second chance?

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