Attorneys Need To Name Them As Co-Defendants In Foreclosure Lawsuits

Steve Dibert, MFI-Miami

Over the past year, I’ve been writing about the shenanigans going on over at Michigan’s largest foreclosure mills, Trott & Trott and Orlans Associates in regards to robo-signing and notary fraud.  MFI-Miami has now discovered something that calls into question the legitimacy of every Fannie Mae and Freddie Mac foreclosure they have performed in the state of Michigan over the past five years.

You would think that with nearly 50 years of foreclosure and real estate law under their belts, both Linda Orlans and David Trott would know that how they conduct foreclosures on behalf of Fannie Mae and Freddie Mac appears to be illegal under Michigan law but then again, these are the same two law firms who have essentially written a foreclosure version of the Kama Sutra with the number of documents they have filed with Register of Deeds offices across Michigan containing the fraudulent signatures of Marshall Isaacs, Ellen Coon, Marcy Ford, and Kenneth Kurel.   Also, we shouldn’t forget the nearly $1.2 Billion in Michigan Real Estate Transfer Taxes they allegedly helped their clients defraud from Michigan school children by claiming Fannie Mae and Freddie Mac are government agencies.

The Con

“White collar crime is more brutal than violent crime. The actions of one or a few corrupt public officials and corrupt businessmen affect the livelihoods of thousands of people. Treat them with the same disdain as we do treat serial killers because white collar criminals are economic predators.”    -Sam Antar

A Foreclosure Mill lobbyist swooning a naive member of the Michigan Legislature

So how are two of the largest foreclosure mills in Michigan pulling off this never ending heist with an estimated value in the tens of millions of dollars a year?  More importantly, how are they doing it right under the noses of lawmakers and the public?

It’s simple, they use one of the oldest tricks in the book, vanity and they play both the public and Michigan politicians for suckers.    They fit the profile of a white collar criminal as former Ponzi Scheme Operator now whistleblower, Sam Antar describes in his blog, “White collar criminals use a combination of charm and deceit to achieve their objectives.” 

The foreclosure mills also bet on the fact that most people in Michigan won’t fight their foreclosures due of the cost involved with Michigan being a non-judicial foreclosure state.  Therefore, no one will notice what they were doing.

Both David Trott and Linda Orlans also took advantage of the political climate in Michigan.   One of the side affects of Michigan’s harsh term limit law  which caps House members to 3 2-year terms and  2 4-year terms for members of the Senate, is that every eight years all institutional memory is wiped clean.  This means there are no experience legislators who understand how to draft legislation.   So these elected officials turn to lobbyists.  That’s right, Lobbyists actually write the legislation for members of the Michigan Legislature and as David Trott has proven in the past, he is all to volunteer.

David Trott, Linda Orlans and to a lesser extent, Randall Miller, (whose sister coincidentally is Democratic State Representative Lisa Brown), have figured out how to influence decadent judges and the simple minded politicians of Michigan who are ignorant of the complexities of mortgage finance with “friendly visits”,campaign cash and trips.  Both Linda Orlans, David Trott and the attorneys in their firm have given over $100,000 to the Michigan Republican Party,  Michigan Attorney General Bill Schuette and Michigan Secretary of State Ruth Johnson. Last October, Ruth Johnson raised an estimated $50,000 at a fund raiser at Linda Orlans’ home after being informed of the notary fraud being perpetrated at Lind Orlans’ law firm.

Here’s a perfect example of the ignorance of the political leadership in the Michigan Legislature on the financial crisis.  Last May,  Republican House Banking Chair, Marty Knollenberg stated at public hearing with a MERS representative that he had no idea who or what MERS was.

Joe DiSano, a political consultant with Main Street Strategies in Lansing, Michigan puts it this way,

“In the post-term limit world, lawmakers are spoon fed  legislation by lobbyists.  The lobbyists write the legislation and even write the talking points for the legislators to sell the legislation to the public.

 The majority of State Senators and State Representatives in Lansing are morons with no clue to the damage they are doing.  Most of them have no idea they are getting played by lobbyists and special interests. What’s even more dangerous are the dozens who don’t care they are being manipulated.  

Many of these elected officials actually think lobbyists are their friends.”  

Here’s how these law firms conspire with the mortgage servicers who hire them to steal people’s homes.  First, there is a misconception that Fannie Mae and Freddie Mac hire these law firms to perform the foreclosures, they do not, the servicer hires them.  However, they do approve which law firms the servicer can retain.   As soon as the homeowner closes on his or her mortgage, the mortgage is recorded in the office of county Register of Deeds generally with MERS being named on the mortgage as the lender’s nominee.  The note is then sold to a Fannie Mae or a Freddie Mac investor off the books depending on which agency is insuring the debt.   The mortgage then stays in the name of the originating lender on record with the county Register of Deeds.

Once the mortgage servicer is ready to initiate the foreclosure,  the note is then temporarily assigned to the mortgage servicer from Fannie Mae or Freddie Mac because Faannie Mae and Freddie Mac guidelines forbid Fannie Mae and Freddie Mac from foreclosing in their own names.  Again, the assignment from Fannie Mae or Freddie Mac is done off the books with the mortgage being assigned from MERS to the current mortgage servicer showing MERS as the original mortgagee.

Here are two different assignments on Fannie Mae files MFI-Miami has worked on.  One is allegedly signed by celebrity robo-signer Marshall Isaacs of Orlans Associates assigning the mortgage from MERS to GMAC Mortgage so GMAC could initiate a foreclosure.  The original mortgagee on this particular file was actually Quicken Loans.  The other assignment is done by lessor known robo-signer Marcy Ford of Trott & Trott. This assignment shows the assignment being assigned to BAC Home Loan Servicing, LP from MERS.  The original mortgagee on this file was also Quicken Loans.  Notice there is no mention of Fannie Mae’s name anywhere on either one of these assignments.

Fannie Mae Article Scans

Fannie Mae and Freddie Mac guidelines specifically say that Fannie Mae and Freddie Mac are the owners of the respective notes regardless if it’s in their respective portfolio or not.  Unlike most Mortgage Backed Securities which have separate Trustees and Insurance Providers, Fannie Mae and Freddie Mac act fulfills both responsibilities.  Therefore, both Fannie Mae and Freddie Mac contend that if they insure it, they are considered the owner.

As you can see below, Fannie Mae and Freddie Mac specifically instructs the servicer’s attorney to assign  the mortgage into the name of the servicer.  Fannie Mae and Freddie Mac guidelines specifically say that the mortgage is to be assigned into the servicer’s name and that both Fannie Mae and Freddie Mac will assign “Temporary Ownership” of the note to the servicer.

On May 23, 2008 Fannie Mae published Fannie Mae Announcement 8-12, reaffirming Fannie Mae’s policy.

Fannie Mae Note Holder Notice 2008

Freddie Mac has a similar policy as stated in Freddie Mac Guideline 66.17:

The Servicer must instruct the foreclosure counsel or trustee to process the foreclosure in the Servicer’s name.

If an assignment of the Security Instrument to Freddie Mac has been recorded, then the Security Instrument must be assigned back to the Servicer before the foreclosure counsel or trustee files the first legal action. Refer to Section 66.18 for an explanation of first legal action.

To have the Security Instrument assigned back to the Servicer, the Servicer must submit a completed assignment with Form 105, Multipurpose Loan Servicing Transmittal, to Freddie Mac (see Directory 9). Freddie Mac will execute the assignment and return it to the Servicer within seven Business Days of receiving the documents.

If the Servicer is foreclosing on a Mortgage registered with the Mortgage Electronic Registration Systems Inc. (MERS), the Servicer must prepare an assignment of the Security Instrument from MERS to the Servicer and instruct the foreclosure counsel or trustee to foreclose in the Servicer’s name and take title in Freddie Mac’s name according to the requirements of Section 66.54. The Servicer must record the prepared assignment where required by State law. State mandated recordings are non-reimbursable by Freddie Mac, are not considered part of the Freddie Mac allowable attorney fees and must not be billed to the Borrower.

At the Sheriff’s Sale, an Affidavit of Purchaser and the Sheriff’s Deed is recorded showing Fannie Mae or Freddie Mac purchasing the mortgage from the Mortgage Servicer for the outstanding balance of the mortgage.  Below is an example of a what one looks like and again this is the handiwork of celebrity Robo-signer Marshall Isaacs and yes, he claims all three of the signatures on this foreclosure sale are his.

Fannie Mae Article Scans2

In this case, neither the Livingston County Register of Deeds or the Livingston County Treasurer have any record of a check in the amount of $444,446.97 to Livingston County or any record of this amount being exchanged between GMAC Mortgage and Fannie Mae.

Show Me The Money

The first time I heard an attorney argue my, “Show me the money!”  argument to a judge at a Fannie Mae eviction hearing I almost crapped my pants.  The homeowner’s attorney started channeling his inner Jerry Maguire and actually said, “Show me the money!” and repeated it.  The Northern Michigan judge, who was presiding over the case, almost began shouting it with him as the attorney from Orlans Associates looked like one of those people after they had their heart pulled from their chest by Mola Ram in Indiana Jones and the Temple of Doom.

“You have to understand why things work on a starship.”-Admiral James  T. Kirk

Here’s why “Show me the money!” is important but before you can use it you need to understand how mortgage lending works and how foreclosures work in Michigan.  You need to remember, if the foreclosure mill is unable to show a transaction took place between Fannie Mae or Freddie Mac and the Servicer who is foreclosing as an owner the debt reverts back to the foreclosing party. So if Fannie Mae or Freddie Mac didn’t pay as stated on the Sheriff’s Deed, that means…? Anyone? Anyone? Bueller? It means Fannie Mae  or Freddie Mac has been the holder of both the mortgage and the note all long.  

Foreclosure mills will respond to this argument by saying, “Our client is the servicer and under Michigan law, we can foreclose as a servicer.”

Everything the attorney for the foreclosure mill is arguing may be true but in foreclosure mill fashion, he’s leaving out one key detail, their client isn’t foreclosing as a servicer, they’re foreclosing as an owner of the debt.  There is a  huge difference between being the mortgage servicer and the mortgagee and this is where an understanding how the system works comes into play.

If the servicer is foreclosing as the servicer, the advertisements prior to Sheriff’s sale and the Sheriff’s Deed have to reflect they are the servicer by saying, “BAC Home Loan Servicing, LP, GMAC Mortgage or whomever the servicer is, on behalf of Fannie Mae or Freddie Mac” and that would comply with Michigan law but they are not doing it that way.

As the alleged owner of the debt, the servicer/acting mortgagee is required to show a chain of ownership of the mortgage as stipulated in MCL 600.3204(3), the Michigan statute the governs how foreclosures in Michigan are conducted.  Michigan law assumes the the mortgagee and the note holder are one in the same because as any title attorney will tell you, you can’t separate the mortgage and the note:

“If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.”

The foreclosure mills wants to give the appearance of complying with this statute by assigning the mortgage to the servicer from MERS and by stating that MERS is the original mortgagee in the mortgage assignment.  However, they never once record or disclose that Fannie Mae or Freddie Mac had an ownership interest.  They are essentially blurring the line of who actually has the legal authority to foreclose.

Attorney Jason Jenkinson of the Northern Michigan Law Center puts it this way,

“I believe that the banks involved, as well as Fannie Mae and Freddie Mac, have purposely blurred the lines between the note owners, note holders, mortgage servicers, and every other player involved in the process in order to foreclose on Americans as quickly as possible.”

What most people don’t realize is that foreclosure mills are more like car dealerships than they are law firms because they make their money on the volume of cases they close not the cases they litigate.  Matter of fact, they lose money on cases they are forced to litigate because they low ball their legal fees to mortgage servicers.  This is why I always encourage my clients to fight their foreclosures especially if they live in the northern two-thirds of the state.

In their mad rush for profit and pushing cases out the door, foreclosure mills like Orlans and Trott & Trott violated one of the basic rules of mortgage lending that they teach you in Mortgage 101.  You can’t separate the mortgage and the note.

For those of you who may not know this, a note is a contract whereby a party makes a promise to pay a sum of money to another party under specific terms. The note has virtually nothing to do with the property itself and mortgage is the document that attaches the note to the property in a form of a lien. remember a mortgage in and of itself is NOT a promise to pay but it does give the lender the right to take the property if the borrower goes into default and doesn’t pay under the terms of the note.

As they prepare to foreclose, the foreclosure mills as the attorneys for the mortgage servicers attempt to re-join the mortgage and the note.  This where it begins to get complicated to the point that it becomes almost impossible to do.  Most Fannie Mae and Freddie Mac loans during the boom years were written by corespondent lenders and lenders who are no longer in business.

What are Corespondent Lenders? Correspondent Lenders are essentially mortgage brokers who are able to close a loan using their name as the lender.   They generally have a line of credit with a major lender to help fund the loan and were allowed to hide certain fees including Yield Spread Premiums.  These mortgages were generally recorded in the county Register of Deeds with the Correspondent Lender named as the mortgagee with MERS listed as their nominee.  The problem is that within a 24 month period after the market collapsed in 2007, nearly 95% of the Correspondent Lenders in Michigan closed their doors.  When this happened, MERS lost all rights to act as their nominee.

 ”Show Me The Money!” scares foreclosure mills like Trott & Trott and Orlans Associates because it exposes them to major legal liability since they not only represent both the servicer and Fannie Mae or Freddie Mac, they also filed the paperwork.

As soon as it is proven that Fannie Mae and Freddie Mac has been an owner of the mortgage and the note from origination through the Sheriff’s sale, the mortgage assignments assigning the mortgage from MERS to the mortgage servicer giving the servicer ownership would be considered fraudulent because Michigan law assumes mortgagee is also the holder of the note.  As are the affidavits associated with the Sheriff’s sale.

In the event a judge determines that the mortgage and note were separated and not re-attached properly, he or she could rule that the only party with authority to foreclose would be the originating lender.  There is a 75% chance the originating lender was decimated in the chaos of the financial apocalypse.  This then opens the door for the homeowner to make  to make a strong argument for a quiet title action.

 This Organization Does Not Tolerate Failure

The cool thing about this weekend being a long weekend for people who work in finance is I get to watch the really good James Bond movies with Sean Connery.   While watching “You Only Live Twice” on BBC America, I realized that Fannie Mae and Freddie Mac treat the attorneys for their servicers like Ernst Blofeld treats his SPECTRE agents.  When they succeed, they get to live.  When they fail, they get eliminated.   Don’t believe me? Ask Steven Baum, Marc Ben-Ezra or David Stern.

David Trott and Linda Orlans are not too big to be brought down.  They may believe they are invincible but with more and more judges siding with homeowners in foreclosure cases and the multiple class action lawsuits being brought because of their clients’ failure to pay the Michigan Real Estate Transfer Tax, David Trott and Linda Orlans are allowing Fannie Mae and Freddie Mac to keep getting punched in the jaw.  It’s only a matter of time before Fannie Mae and Freddie Mac decides to put them in the tank filled with the man-eating mutant piranha.