By Ryan C. Wood
We can all agree that the mortgage meltdown was horrible and there is a lot of blame to throw around. In the aftermath of every disaster whether financial or natural there are unsavory people out there to try and make a buck. Just ask all the people who paid contractors to help them rebuild after hurricane Katrina who were ripped off. The mortgage meltdown was no different. Of course the mortgage meltdown was a boon for bankruptcy lawyers, but everything we do is by federal court order with layers upon layers of oversight.
The first wave of crooks were the loan modification companies and some attorneys. Many were taking large upfront retainers and providing little to nothing for the thousands of dollars they accepted. The California legislature finally tried to put a stop to the fleecing of desperate homeowners in 2009 when California Senate Bill 94 was passed and took effect October 11, 2009. I can tell you from firsthand experience it took another two years or more for homeowners to be aware of the new law and for mortgage modification companies to stop taking upfront fees. Then once the California State Bar started disbarring attorneys who continued to accept upfront fees the crooks stopped. Then loan modification companies/attorneys started to create new categories of services like pre-litigation education fees to try and skirt this new law. I believe that unethical practice has stopped as well.
Back to your mortgage and what happens when it is sold or transferred to another entity. It is very common for a note or deed of trust to be transferred or sold to another party before you make the final payment. This does not mean you no longer legally owe the money pursuant to the original note. This was another scam some attorneys used to bilk thousands and thousands of dollars from unsuspecting homeowners who could no longer make their mortgage payments.
Many lawsuits were filed in state court to attempt to stop foreclosures under the Securitization Theory. Almost all notes or deeds of trust recorded have provisions that they can be transferred or sold without notice to the borrower. The original note, deed of trust or loan contract is distinct and separate from any securities transaction. In In re Nordeen, decided by the Bankruptcy Appellate Panel for the Ninth Circuit, Case No. NV-12-1441-DKiCo, the panel does an excellent job explaining the difference between entering into the mortgage or deed of trust versus the transfer or assignment of the security interest as a securities transaction. As the Bankruptcy Appellate Panel correctly points out, if all of the payments are made pursuant to the mortgage or deed of trust the borrower may never ever know who ends up owning the note. Again, all the lawsuits regarding the Securitization Theory popped up once the mortgage meltdown began. It is just unfortunate that some attorneys and bankruptcy attorneys chose to use this theory in failed attempts to stop foreclosures and take thousands of dollars from desperate homeowners. So if you believe there is an issue regarding the assignment or transfer of your mortgage to another party be careful. This issue has now been litigated thoroughly and you had better have grounds that the original mortgage, deed of trust or loan is defective on its face.