Today, we are leaving the omnipresent and of course omnipotent lenders aside, and discussing the role of the servicer. Your servicer is no less omnipotent in any way. He does everything on behalf of much covered lenders. Servicer, as you may know, are not the lenders: they just service your loans. They also do an important job: they hide the real lenders from you. Servicers take out their cut and send the remaining payments to the lenders. This can be clarified better if you know the traditional role of the landlord and property manager. They keep and maintain all the record of the lenders and are accountable to them for this purpose. The property manager just manages the property, takes his cut, and sends the remaining amount along with the property audits and accounting to the landlord who generally is an absentee landlord. Again, your lenders may be in USA, somewhere in Bahamas or in southwest China. Most mortgage loans are pooled and sold to investors in the secondary market. This process is called securitization. Basically, it is little complex topic, and we may leave it for another discussion, but securitization is the root cause of our current financial problems. The loans are packaged, bundled and sold as security to various investors. Again, your servicer collects all the payments, maintain all necessary accounts, including escrow accounts for taxes, insurance, property taxes etc. The servicer receives a percentage of all this collection. The rights to service, mortgage loans can be sold and of course purchased.
Sometimes investors like Freddie Mac and Fannie Mae enters into this game with servicers to administer the mortgages. The servicers do not hold any interests in these loans which they service. You may have noticed that the servicers very intelligently and shrewdly hide the names of the lenders. There is a way to get the name of the lenders which probably only attorneys can do. Our office also can help in this regard. Oh yes, we make them disclose the names of your lenders. That is a specific job and only Nevada licensed attorney should handle it.
The original of any note sold to investors must be endorsed in blank and delivered to the investor’s document custodian. The servicer is assigned the mortgage. However, the servicer is then required to assign the mortgage to the investor, but this assignment is unrecorded. Thereafter the servicer will be the mortgagee of record to ensure all those legal notices which they continuously send to borrowers.
How to Challenge the Servicers Standing to Foreclose?
This is the most crucial question, and we are going to discuss it with little bit more details here. Okay, when a foreclosure action is initiated, the servicers’ standing to bring any action mostly depends on state statues and case laws. Here, comes the tricky part. It is common for servicers to file the foreclosure action through an investor or trust is the actual holder of note and mortgage. A challenge can be very successful from a borrower where state law clearly defines who is the holder of the note, and defines the mortgage as the real party in interest. Let us say in a state for strict foreclosure, the plaintiff must prove by a preponderance of evidence that it is the owners of the note and mortgage and the borrower defaulted on the note.
The servicer has only rights to collect mortgage payments from you. It cannot foreclose on you because this is not included or generally not included in the right of assignment from the lender to servicer. In Nicholson v. Washington Mutual the court, (2001 WL 1992418 (Tex. App. Aug. 32, 2001) (not designated for publication (deed of trust must be strictly construed. There was no authority in the deed of trust for the lender to delegate these tasks to the servicer. Some other courts have also found that the servicer has a pecuniary interest in the mortgage.
What should an Attorney Do?
The attorney (again a Nevada Licensed Attorney, not an attorney-affiliated or attorney-backed, what is this is a joke, we are not biased, we tell the truth) should examine the agreement between the servicers and holder to find out the contractual rights to foreclose, or to release the interest right. However, if the servicer brings an action under its name, without disclosing the true holder of the mortgage, the foreclosure may be delayed by court and it can be asked to identify the real party in interest. (in re Viencek, 273 B.R. 354 (Bankr. N.D.Y. 2002) delay granted by Court for servicer to amend proof of claim to identify actual creditor).
More later. How bout’ some discussion on MERS now? The servicers may have an economic interest, but MERS have none. MERS do not have any active interest and they don’ become holder of the loans. They do not have any beneficial interest in the mortgage. They are not trustee and can be nominee only, holding title to the mortgage and but not the note. Despite these shortcomings, MERS claims that they are the nominee of the lender and has the right to foreclose in their own name. They sometime commence foreclosures and later on will assign the mortgage to a servicer if the problem arises. Several courts have questioned their rights to foreclosue or have denied their right to foreclose.