Biden Joins NY Investigation into Validity of Mortgage Paperwork

Attorney General Beau Biden is joining the investigation started by NY AG Eric Schneiderman in looking at mortgage Trustee Banks Bank of New York Mellon and Deutsche Bank. These Trustee Banks did not originate or service loans, but were supposed to make sure that paperwork for mortgages was in order.

From Yves Smith:

As we have indicated in previous posts, trustee have potential major, current liability. While the statue of limitations has passed for securities fraud on pretty much all RMBS (the limit is usually three years; parties can sue for breach of contract, but the standards for proving fraud as opposed to a mere breach are much higher), that is NOT the case for trustees. They are required under the pooling and servicing agreement to provide annual certifications that they hold the trust assets in good order (this is the concept rather than the actual language). Clearly that is untrue if the notes are not in their possession or they never bothered to confirm, as they once did, that all the notes had been endorsed properly. Trustees can get that requirement waived if a deal has fewer than 50 investors, but even so, most trustees filed at least one annual certification in addition to the one at closing before applying for a waiver, and it seems likely that most deals had more than 50 investors.

The question of proper conveyance of mortgage paper has been a big question for some time. For awhile, it looked like the Iowa AG might get to the bottom of this AND possibly stop some of the foreclosure madness based on the sloppy way that mortgages were conveyed. As of now, the Iowa AG and his group of AGs look like they will settle this business for a few billion and let it get covered up rather than upend the apple cart. Focusing on Trustee Banks might provide an end run around the settlement. This investigation largely focuses on how the mortgages were securitized, a process that has rules about making sure that loan files are complete. And we know that many loan files were not.

The NYT article notes that Biden has joined for the Trustee Banks investigation, while the Yves Smith article (linking back to a Huff Post article) says that the NY AG is also looking at Bank of America. Don’t know if Biden is looking at BofA too. It may be that Biden is just looking at the Trustee Banks incorporated here, but I can’t be certain based on this info.

Maybe this will result in some perp walks or maybe these banks will need to be finally liable for the mess they created. I’m not holding my breath for this, but there is another way that the banks are being backed off part of the mortgage fraud — and that is by local Register of Deeds telling MERS that they will no longer accept robo-signed documents. There’s just a few counties that have invoked this — and apparently there are others looking to sue MERS for missed revenue from recording fees. Wonder if any of our local Register of Deeds offices are looking into any of these actions?