Non-Traditional Mortgages Appeal to Hawaii’s Highest Court

hear-yeeThis Sunday The Foreclosure Hour shared the appellate process with listeners to help them better understand the complexity of the court system.

Last month (September 2016) the Hawaii Supreme Court heard attorney Gary Dubin argue on behalf of a Ewa Beach, Hawaii resident who was sued for foreclosure by “U.S. Bank National Association, as Trustee, in trust for the registered holders of MASTR Asset Backed Securities Trust 2005-NC1, Mortgage Pass-Through Certificates, Series 2005-NC1,” a securitized REMIC trust.

The Plaintiff, like so many others, claimed (and the lower Circuit Court penned in the Findings of Fact) it “is now the Holder of the Note.” Of course, there were the usual series of “after-the-fact” robo-signed assignments trying to establish the right to enforce, and an allonge dated “after-the-fact” signed in blank. Even a witness who was basically a computer jockey viewing screen shots with no personal knowledge of who or how the data was entered.  But in this case, there is a bit of a twist which, it appears, the Justices were picking up on as they asked astute questions about the procedure and the original (now bankrupt and liquidated) lender, New Century Mortgage Corporation.

Obviously, the higher courts have a broad introduction to all aspects of the law including screen_shot_2015-02-09_at_12-22-10_ambankruptcy and securities laws that tend to play a large part in today’s foreclosure securitization scheme. . . although it is not often argued well by foreclosure defense attorneys and certainly not by Pro Se litigants that barely understand why they are in foreclosure court to begin with as all they did was ask for a HAMP modification and were told by the servicer to stop making payments in order to apply. Suddenly, these homeowners could no longer make payments nor obtain a modification.

In this case, Gary Dubin ends Scene One by imparting his knowledge to the Justices that these are not traditional mortgages – these are non-traditional securitized mortgages and securities transactions. Its not an argument we hear in every case, but it did not appear to shock the Justices. It wouldn’t be surprising to find out that they had been waiting for someone to “name that tune.”

Gary returns in Scene Two with his rebuttle after the opposing counsel ducks several judicial punches. If you had to describe Dubin in one word it would be tenacious. As a character he has the fire and intuition of Superman, even at 78, the integrity of Roy Rogers and the charm of Gary Cooper and Richard Gere all rolled up into one – not to mention amazing recall and memory. He has always been considered dapper and debonair in his dress as well as his personality.

energizer-bunny-300x270Its Gary’s quick wit, good timing and sense of humor that has solidified his career. But it’s his drive to champion the underdog that keeps going like an EverReady battery.

The investigation of these new securities transactions and contractual agreements, disguised in faux mortgage and note covers, has taken almost 10 years of intense research to expose. The scheme was so cleverly designed that no one really understood what was happening . . .at first.

Now, with the Wells Fargo debacle opening thousands of unwanted and unknown accounts it becomes even more understandable how the banks could have duped homeowners while they wiped out the state and union pension and retirement accounts. “The scandal that hit Wells Fargo has revealed a number of things still wrong with our financial system and reminds Main Street participants that Wall Street continues to not play by the rules.” Why should mortgages be any different?

There are several exceptional points in this oral argument before the Hawaii Supreme Court. The homeowner’s standing may hinge on whether or not U.S. Bank as trustee is entitled to a deficiency judgment. And whether U.S. Bank as trustee is actually a bonafide “holder.”

animalhouse390Opposing counsel deployed a couple of cheap freshman tactics by trying to put in the record that the Justice agreed with his position on the homeowner’s lack of standing – which she sharply denied and corrected; and, then he rather disingenuously added in his last breath that the New Century Bankruptcy has recognized the assignments; however, it appears there have been no documents presented by the New Century bankruptcy court to substantiate that position. Obviously, young attorneys think what verbally gets on the record remains unchecked such as fictitious facts and false information and will sway the court in the final outcome.

You can listen to The Foreclosure Hour recording HERE and hear the discussion between Gary Dubin and Deadly Clear’s Virginia Parsons as they dissect some of the more significant issues, including “self-authenticating” notes, the validity of post bankruptcy Power of Attorneys (2005 POA), UCC Article 3 vs. UCC Article 9 (and BTW to claim “holder” rather than owner – it appears UCC 3-302 may be applicable?), the effect and role of the AOAO (apartment associations) – although listening to opposing counsel it felt as if the bank and the AOAO were in cahoots.

clarityAll in all –

  • false assignments,
  • robo-signers
  • allonges after-the-fact,
  • failure to obtain bankruptcy court approvals on old POAs made prior to the New Century bankruptcy,
  • the potential for deficiency judgments, and
  • securitized loan documents (securities transaction) still alleged to be part of a trust – not bought out by the servicer or the trustee (even though the trust PSA limits the responsibilities and duties of the trustee), . . . make these New Century cases ripe for dissection and clarification.

It’s doubtful that New Century Bankruptcy Court Judge Carey would ever have allowed or given an order allowing banks to create fraudulent and forged documents. Moreover, as Judge Carey has stated on more than one occasion:

“. . . [T]his Court has no jurisdiction to issue an injunction against non-debtor parties regarding loans in which the Debtors had no interest as of the commencement of the bankruptcy case. See Scott v. Aegis Mortgage Corp.(), 2008 WL 2150120, *5 (Bankr.D.Del. May 22, 2008) (A declaration as to the rights of parties under a mortgage that was transferred prior to the bankruptcy filing will not alter the debtors’ rights, liabilities, options or freedom of action because the debtors are no longer a party to it.). See also In re Resorts Int’l, Inc., 372 F.3d 154, 168-69 (3d Cir. 2004)(Post-confirmation, a bankruptcy court’s jurisdiction is limited to matters in which “there is a close nexus to the bankruptcy plan or a proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or administration of a confirmed plan or incorporated litigation trust agreement.”).”

What would it matter to the New Century Bankruptcy Court if the asset (loan) had been sold prior to the New Century petition for bankruptcy? If this is a January 1, 2005 trust – that was 2 years before New Century filed bankruptcy on April 2, 2007 – it was no longer an asset. This is merely logical.

And let’s face it, as the bankruptcy attorneys have discussed the bankruptcy rules and procedures – the 2005 POA would likely have been required to obtain bankruptcy trustee and court cheech-and-chong-are-making-a-new-movieapproval to continue – when have we ever seen any New Century bankruptcy court orders attached to these Power of Attorney(s)? So, for the opposing counsel to say the New Century bankruptcy court recognized these assignments – from where was he floating that statement? Crazy right?

The show has good insight into the Hawaii Supreme Court procedure and thoughtful nature of the Justices. They were prepared and you can tell there was a lot of thought given to this case. Mr. Dubin and his client were very fortunate that the Hawaii Supreme Court agreed to hear the arguments – now, its just a matter of wait and see what the Supremes’ decision(s) will be.

In case you missed the link – click HERE to listen to THE FORECLOSURE HOUR.


2 thoughts on “Non-Traditional Mortgages Appeal to Hawaii’s Highest Court

  1. The correct name of the former federal bankruptcy judge in the New Century Mortgage chapter 11 in Delaware is Judge Kevin Carey.

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