The banks’ foreclosure filings are starting to lose credibility. The Vermont Supreme Court just forced US Bank to start over if it wants to foreclose on Christine Kimball. Why? Well, in a very matter of fact, unanimous decision, the Court concluded that U.S. Bank’s proof of standing (proof that it had the right to foreclose) was so unreliable that the trial court legitimately rejected it. US Bank’s documents just didn’t add up. That’s not surprising, since the documents are classic examples of robosigned documents and their meaninglessness.
When US Bank filed its foreclosure suit on January 12, 2009, it claimed it had standing because the Kimball mortgage and note had been assigned to it a week earlier by MERS as nominee for Accredited Home Lenders, the lender on the note. That MERS assignment was signed by none other than infamous robosigner Jeffrey Stefan, who for this document claimed the titles “Duly Authorized Agent and Vice President of MERS”. US Bank’s complaint included the assignment and a copy of the Kimball note with an undated assignment in blank from Accredited on an allonge.
Six months later, Kimball received two letters contradicting US Bank’s claims. First, Kimball’s mortgage servicer, Homecomings Financial sent a letter that saying that GMAC was taking over servicing her mortgage. Second, GMAC sent a letter not only confirming the change but noting that it was servicing the mortgage on behalf of Residential Funding Corporation,not US Bank.
After Kimball pointed out the contradiction to the court, US Bank tried again. The bank produced a new version of the Kimball note, a copy specifically endorsed Accredited to Residential to US Bank and supported by an affidavit signed by…Jeffrey Stephan as “Limited Signing Officer for GMAC.” However, as the Supreme Court noted, at the time US Bank made no claim in the affidavit or otherwise as to when those endorsements were made. The trial court found the evidence that US Bank had the note prior to starting the foreclosure inadequate and dismissed the foreclosure.
In November, 2009 US Bank asked the court to reconsider, admitting that its filings had “created ‘confusion’” by submitting an “outdated copy of the note prior to its transfer to [US Bank]” and a mortgage assignment that claimed to assign the note too. But, US Bank claimed, it now had the properly endorsed original, so, really, who cared? US Bank supported its motion with an affidavit from a Scott Zeitz, litigation analyst for GMAC claiming that the two endorsements had happened in September 2005, a few months after the loan had originally been made. Not only did this not make sense because of Residential’s claim of ownership as late as June 2009, but US Bank failed to explain how Zeitz could have the personal knowledge of the facts necessary to swear out the affidavit, given that GMAC entered the picture four years after the events he was attesting to.
US Bank’s claim that the original note had been endorsed to it since 2005 and thus when US Bank filed the foreclosure in January, 2009 may be an artifact of the securitization process. US Bank is almost always involved in foreclosures because it is the trustee for a mortgage securities trust, and the homeowner’s attorney, Grace Pazdan of Vermont Legal Aid confirmed the loan was securitized. Since the loan was made in June, 2005, September 2005 is probably when US Bank believes the loan was securitized. Many securitization contracts accepted loans endorsed in blank from the loan originator, in this case Accredited, and without a mortgage assignment, so long as the loan was a MERS loan, which this was. As a result, even if the securitization was performed correctly, an easy paper trail documenting what happened is missing, particularly since the blank Accredited endorsement is undated. Enter the robosigning of documents.
That said, I imagine it’s possible that the Kimball loan was not securitized; again, if it was, why did GMAC claim Residential owned it four years later? I mean, who was GMAC going to give Kimball’s payments to? Who was Homecomings Financial, the prior servicer, giving Kimball’s payments to? What a mess.
Back to the Kimball opinion: After everything else had failed, US Bank told the trial court, in essence, ‘look, whatever mess we made of the papers before, we’ve got a properly endorsed note now. Can we please now add ourselves to the complaint as proper party?’ The trial judge rejected that request too. The Vermont Supreme Court, after laying bare all the problems with US Bank’s filings, notes the trial judge had every right to reject the request, and upheld the decision forcing US Bank to start over if it wants to foreclose.
In response to US Bank’s complaint that starting over would be wasteful, the Court let US Bank have it:
“While we are sympathetic to the desire to avoid wasteful and duplicative litigation, the source of the unnecessary proceedings in this case was not an overly wooden application of the rules, but US Bank’s failure to abide by them. It is neither irrational nor wasteful to expect the foreclosing party be actually in possession of its claimed interest in the note and have the proper supporting documentation in hand when filing suit. Nor is it irrationally demanding to expect the foreclosing party to provide adequate, satisfying proof…What should have been here a straightforward, if not summary, proceeding under the rules was rendered inefficient by US Bank’s failure to marshal its case before compelling the homeowner and the court to waste time and resources, twice, by responding to what could not be proven.”
And to underscore its frustration with US Bank, the Court ordered the trial court to consider awarding Vermont Legal Aid fees for all the time Pazdan spent dealing with US Bank’s papers.
Pazdan commented: “Vermont Legal Aid is pleased with the Court’s ruling. For years, we have argued that homeowners and their families should not, and legally cannot, be displaced from their homes without reliable evidence that the bank seeking to foreclose actually owns an interest in the home. This opinion affirms our belief that national financial institutions are not above the law, and must, like all other litigants, prove their case to get the relief they seek from the court.”