The following is a summary of a Foreclosure Defense “white paper” currently being presented by Amstar Litigation all over the country as part of an effort to improve the quality and the quantity of legal representation that is available to US homeowners that are in financial distress.

A. History

1. Remember your neighborhood savings and loan?

a. Banks used to make and then service mortgage loans until their maturity

b. Banks attracted deposits from the local market

c. Banks were intimately familiar with real estate conditions in their market

d. Banks used to include savings and loan associations and even building and loan associations

2. Over time, mortgages gradually became commoditized

a. Competitive pressure from regional and eventually national money center banks

b. Establishment of standardized underwriting guidelines

c. Introduction of credit scores and loan servicing companies

d. Bundles of mortgages began to be sold into the financial markets

e. The mortgage business became much more than simply making a loan and holding it to maturity

3. Increasing liquidity in the financial markets and demand for more and different securities eventually caused mortgages to be securitized

a. Track record of traded, bundled mortgages attracted Wall Street interest

b. Development of various exotic structures and securities made securitization of mortgage loans possible

c. Wall Street’s growing familiarity with the product made the use of more and more exotic structures not only possible but necessary to remain competitive

d. The result – the home and the homeowner wound up a million miles away from the loan holder – in fact, in many cases the loan no longer existed in a recognizable form!

B. Where The Process Usually Breaks Down

a. Where’s the note? – Because of the sheer volume of mortgage loan transactions, turmoil and turnover in the financial industry, trading in mortgage loans, and the frequency with which Master and Special Servicer obligations are exchanged, it is no wonder that some estimates run as high as 25%-50% of the number of original notes and mortgages that have been destroyed or otherwise can’t be produced.

b. At the end of the day, foreclosure is a suit on a Note – everyone has gotten so comfortable paying variously named service companies for so many years that they tend to lose sight of the fact that they are making payments on a secured promissory note. It is fundamental to the plaintiff’s claim then that he be able to prove that he is the owner of the note and, in a foreclosure proceeding, of the underlying mortgage that he claims gives rise to his right to take title to the defendant’s property

c. From the discussion of all of the activity involved in the mortgage loan securitization process, you can see that proving ownership of the note and mortgage is no small task. Ordinarily you are entitled to see an original of the Note properly endorsed and a clear chain of title transferring the mortgage from the Originator to the Plaintiff

d. Failing to produce the original note or a satisfactory explanation for its absence, or failure to demonstrate a clear chain of title to the mortgage can be fatal to the plaintiff’s case. Raising the issue will, at worst, serve to delay the foreclosure for a substantial period of time

e. Frequent practice of “backdating” assignments with “effective as of” language, while possibly being effective to work an “equitable transfer” sufficient for some purposes of state law, can be fatal when used by a securitized trust which requires that there have been a “true sale” to the trust (“SPV”) during the transfer period identified in the appropriate PSA. Attempt to invoke the notion of an “equitable transfer” can cause the underlying trust to run afoul of the applicable REMIC requirements and state trust law.

f. How much do I owe you? – Every borrower sued on a Note is entitled to a life of loan history, showing each payment of principal and interest, and any other charges, during the life of the loan. The suit on a Note must be for a sum certain and it is only by this sort of reconciliation that the sum certain can be established

g. Because of ownership changes, changes in the identity of the entities servicing various loans, and transfers of the note itself, it is often difficult if not impossible for the Plaintiff to produce this kind of an accounting

h. While a failure to timely produce a loan life history is not likely to have the same catastrophic consequences for the Plaintiff as a failure to produce the note or demonstrate title to the mortgage, it can oftentimes seriously delay and otherwise hinder the timely prosecution of the plaintiff’s case

i. What does the Pooling and Servicing Agreement say? Every securitized mortgage loan (pretty much every mortgage loan no longer held by its Originator), is held in trust and serviced by one or more servicing agents, typically referred to at the Master Servicer (pre-default) and the Special Servicer (post- default) pursuant to the terms of a Pooling and Servicing Agreement

j. Your client, as the maker of a note and mortgage administered under the terms of a particular Pooling and Servicing Agreement, is a third party beneficiary of that Agreement

k. The Pooling and Servicing Agreement applicable to your client usually may be obtained from the Master Servicer or better, in the case of public securitizations, from the SEC’s website at SEC.gov. In discovery, you should be sure to identify all of the Pooling and Servicing Agreements to which your client’s loan may have been subject during the life of the loan. There may be a lot more than one