Meet New Century Mortgage Corp., Zombie

New Century Mortgage Corporation, a big subprime lender that went belly up in 2007, fraudulently continues to execute mortgage and foreclosure related documents. These documents are another slice of the ongoing robosigning by all the big players in the banking industry. One place to see New Century in action is the Dallas County, Texas land records, accessible here.

Since January 1, 2008 New Century has recorded over 1500 documents in Dallas such as assignments of deeds of trust (deeds of trust are essentially mortgages) and statements that a loan has been paid off. In 2011 alone New Century has recorded 157 documents. Those documents include assignments to securitization trusts, the trustees of which include Bank of America, Deutsche Bank, HSBC, US Bank and Wells Fargo. New Century also apparently assigned deeds of trust, along with the underlying notes, Bank of America Home Loans Servicing.

Most of the assignments are deeply problematic. For example, in 2011 BofA, Deutsche, HSBC, and US Bank all received deeds of trust from New Century via MERS acting as New Century’s nominee. As part of New Century’s bankruptcy, however, it repudiated MERS’s contract, denying MERS the right to be its nominee in March, 2008. Note, New Century isn’t the only bankrupt lender to repudiate a MERS contract. Fieldstone Mortgage repudiated MERS too; check out exhibit 11 of this lawsuit.

Not that all the assignments are done by MERS. This 2011 one has a Rita Garcia signing as New Century’s vice president to assign a deed of trust to Deutsche. How is Ms. Garcia a VP of a defunct company? Similarly, many are done by servicers as attorneys-in-fact for New Century. I wonder if the documents creating the attorneys-in-fact relationship are still valid. I mean, how could they be?

Or consider the basic fact that companies in bankruptcy aren’t supposed to transfer assets without the bankruptcy court’s permission. Did the court bless any of these assignments? What about the assignments like this 2011 one to BofA Servicing, which also claims to transfer a note worth $201,600?

That assignment is particularly odd, going as it does from New Century to the servicer. New Century loans were frequently securitized, as the assignments to the trusts reflect. Was this loan securitized? If so, the assignment should be done by the trustee, not New Century. If the loan wasn’t securitized, then it really is an attempt to transfer property directly out of the bankrupt company’s estate.

Speaking of securitizations, the trusts that issue the mortgage backed securities are supposed to stop receiving property after a certain date in order to qualify for special tax treatment. Almost all of these assignments claim to transfer the deeds of trust (and sometimes notes) long after the trusts’ closing date. How can the trust take those deeds of trust now? In the case of the assignments that include the notes, is it the trust’s position that prior to now it did not have the note? Surely not.

Working on a forthcoming article for Fortune.com, I reached out to BofA, Deutsche Bank, US Bank and Wells for comment on a number of issues including these New Century assignments. None addressed the New Century issue directly, however Wells did say

“It is common for time to elapse between the date that a Securitization Trust closes and the date that a mortgage assignment is executed. Mortgage assignments are generally not completed until needed and the foreclosure process can often take up to several years to complete.”

That’s interesting for two reasons. First, it implies the mortgages/deeds of trust were never transferred as part of the securitization process. I mean, if the trust properly took ownership of the mortgage during the securitization, what does it need a belated assignment for? Why not just give the court proof the transfer occurred in a timely way?

It’s true that many securitization contracts—pooling and servicing agreements—did not require the loan files to contain assignments of mortgage for MERS loans, and so perhaps none of those loans have timely assignments. But just because the contracts didn’t require them doesn’t mean they weren’t necessary. For example, the Massachusetts Supreme Court pointed out that blank assignments of deeds of trust, which were also a standard securitization practice, didn’t comply with Massachusetts law.

The second reason Wells’s statement about assignments of mortgage being created on demand is interesting is that the Dallas County records also have hints that perhaps, in a vault somewhere, timely mortgage assignments by New Century might exist. For example, this New Century assignment of a note and deed of trust to a Morgan Stanley securitization trust, Deutsche Bank Trustee, looks good. Sure, it’s recorded in 2011, but looks like it was properly created and executed in 2003. There’s nothing wrong with recording a document late.

It’s a little unclear to me if this New Century assignment is fine, since it obviously was done in blank and filled in years later. That is, Bank of America hadn’t choked on Countrywide when it was signed and notarized and yet Bank of America as successor to Countrywide is the assignee. Did the assignment happen when the document was signed, or filled in? Moreover, if the loan was securitized, it seems wrong to fill in the servicer’s name. Presumably that blank should be filled by the trust’s name, and then the trustee should do a new assignment to the servicer.

In any case this assignment like the Deutsche one suggests that somewhere at least some New Century loans have assignments signed by New Century back when New Century existed. So why all the out of time ones? Do most New Century loans not have these timely assignments, in blank or otherwise? Maybe; this lawsuit makes New Century sound so reckless perhaps the documents generally don’t exist. But perhaps the servicers creating and recording these documents don’t know. Perhaps the servicers are just refusing to spend the money to see what if anything is in the document custodian’s vault.

Please note, a new company bought the New Century brand out of the bankruptcy liquidation, but as it makes clear on its “Legal” page, that company has no connection to or power over the old company’s loans. The documents being recorded in Dallas are not done by the new New Century.

Updates 7-22-11

Two updates. First, I neglected to give Max Gardner credit for teaching me about the repudiation of MERS contracts and giving me the rejection by New Century and the lawsuit and exhibits relating to Fieldstone Mortgage’s similar MERS repudiation.

Second, after reading my post on New Century, attorney J. Arthur Roberts forwarded me some documents from one of his cases that deals with the same issue in a different context.

Roberts’s bankruptcy client had a loan and a MERS deed of trust with Sea Breeze Financial Services. Citimortgage filed a motion for relief from the automatic stay—essentially seeking the court’s permission to proceed with foreclosure—but the motion didn’t attach a note endorsed to Citi and it didn’t include an assignment either. After Roberts pointed that out, the Court told Citi to try again.

Citi did, and supplemented the filing with a new version of the note, endorsed by allonge, and an assignment that claimed it transferred the deed of trust and the note on August 16, 2010. (Link is to the note, allonge and assignment.) The assignment is very odd in that MERS is signing but not as the nominee for anyone. Presumably, however, MERS is acting as nominee for Sea Breeze. And that created another problem, as Roberts pointed out: Sea Breeze had gone out of business—filed dissolution papers—nine months earlier. Want to bet Citi or its contractor made the assignment, and presumably the allonge? The judge agreed with Roberts and told Citi to try a third time. We’ll see what Citi comes up with next.

 

 

4 Comments

more info on September 10, 2014 at 8:34 pm.

Enjoyed your information. Very good ideas.

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