http://voices.washingtonpost.com/political-economy/2010/11/bofa_official_countrywide_mort.html?hpid=news-col-blog
Linda DeMartini is a supervisor and operational team leader for the Litigation Management Department for BAC Home Loans Servicing L.P. In her testimony, according to the case file:
As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide's foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affIixed to the note. She testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents.
In a decision issued Nov. 16, Chief Judge Judith H. Wizmur of U.S. Bankruptcy Court of Camden, N.J., said that because the debt note was not transferred correctly it was not enforceable.
The decision raises questions about the ownership chain of the mortgage and the ability of certain parties to foreclose. The document transfer could be a violation of the pooling and
servicing agreement for the trusts that bought these loans, making them vulnerable to lawsuits.
In the wake of questions about lost, improperly prepared and transferred paperwork in foreclosures, the financial services industry has stood by its practices, saying that except for the "robo-signing" everything was done properly.
As Adam Levitin, an associate professor of law at Georgetown University, explained at a House Financial Services Committee hearing last week:
If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever.
Mike Konczal, who researches financial reform at the Roosevelt Institute, points out:
[In] New York trust law and the Pooling and Service Agreements there are very specific requirements to passing these notes down the chain. They are required to protect investors from both malfeasance, to avoid fraudulent transfer concerns, and to create 'bankruptcy remoteness' of that asset from the originator/sponsor.
Yves Smith, who blogs at Naked Capitalism, argues:
This is significant for two reasons: first, it points to pattern and practice, and not a mere isolated lapse. Second, Countrywide, the largest subprime originator, reported in SEC filings that it securitized 96% of the loans it originated.
New York Times reporter Gretchen Morgenson spoke with Larry Platt, outside counsel for Bank of America, to get the company's take on the testimony:
He said the New Jersey decision did not constitute a basis for broad mortgage repurchase requests. "We believe the loan was sold to the trust even if there wasn't an actual delivery of the note," he said. "The risk of repurchase is going to depend on the unenforceability of the loan and we think the loan is enforceable. We think this is an aberration; Countrywide's practice was to deliver the notes."
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