Law Commons^™

Dismissing Provenance: The Use Of Procedural Defenses To Bar Claims In Nazi-Looted Art And Securitized Mortgage Litigation, Christian J. Bromley

Christian J Bromley

The litigation surrounding an estimated 650,000 works looted by the Nazis in the Second World War and the millions of securitized mortgages foreclosed in the wake of the Great Recession converge on a fundamental legal principle: who really holds rightful title? Seemingly worlds apart, these separate yet remarkably similar forms of property challenge the American judiciary to allocate property rights between adversaries steadfast in their contention of rightful ownership. The legal fulcrum in this allocation often rests not on the equity or righteousness of either parties’ claim—whether museum versus heir or bank versus former homeowner—but instead on procedural defenses that …

Mortgage Foreclosure In Buckhead, Terika L. Haynes

Terika L Haynes

The purpose of the quantitative ex post facto study was to determine whether a relationship exists between home occupancy type, purchase price, residency duration, and the incidence of mortgage foreclosure of homeowners residing in single-family residential homes in the eight zip codes (30305, 30309, 30318, 30319, 30324, 30326, 30327, and 30342) within the Buckhead community, a high-income community located in Atlanta, Georgia. The possible relationships were explored and evaluated by conducting an archival analysis to examine the Georgia Public Notice Statewide Database of public foreclosure records, Fulton County Property Assessor records, and Fulton County tax data for 2009. The occupancy …

Show Me The Note Q&A, David J. Reiss, Bradley T. Borden

David J Reiss

This is a Q&A relating to an article, Show Me The Note, available at http://works.bepress.com/david_reiss/63/.

"Show Me The Note" refers to a defense that seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure.

Show Me The Note!, William K. Akina, David J. Reiss, Bradley T. Borden

David J Reiss

News outlets and foreclosure defense blogs have focused attention on the defense commonly referred to as "show me the note." This defense seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure.

The defense arose in two recent state supreme-court cases and is also being raised in lower courts throughout the country. It is not only important to individuals facing foreclosure but also for the mortgage industry and investors in mortgage-backed securities. In the aggregate, the body of law that develops as …

Ten Dollars For 10,736 Mortgages: Should Nominal Consideration Supersede Real Property Recording Law, John P. Hunt

John P Hunt

Our review of mortgage securitization transactions from 2005 to 2007 suggests that many intermediate mortgage transfers structured as promissory note sales involved the exchange of only nominal or other dubious consideration. The Uniform Commercial Code requires consideration “sufficient to support a simple contract” as a prerequisite for treatment of a transaction as a promissory note sale. Treatment as a sale triggers the Code’s “mortgage follows the note” provisions, which may protect transactions from claims that the mortgages involved are unenforceable, are vulnerable to competing claimants, or were never transferred in the first place. Mortgage securitization transactions are potentially exposed to …

Robo-Signers: The Legal Quagmire Of Invalid Residential Foreclosures Proceedings And The Resultant Potential Impact Upon Stakeholders, Pearson Liddell Jr.

Pearson Liddell Jr.

Press reports exposed a potentially virulent financial mishap in the mortgage industry wherein some of the largest mortgage companies used the same document processor to process foreclosure paperwork. These document processors, and others like them, who have come to be known as “robo-signers”, are alleged to have falsified documents to speedily effectuate foreclosures. Attorneys General in all fifty (50) states conducted an investigation and have recently reached a settlement with various financial institutions. In this process, one of the most prominent institutions in the mortgage recordation system, MERS, has had to reinvent itself as a result of the revelations. We …

Throw The Book At Them: Testing Mortgagor Remedies In Foreclosure Proceedings After U.S. Bank V. Ibanez, Claire Ward

Claire Alexis Ward

This article takes one state, Massachusetts, as its focus for a perspective on the residential mortgage foreclosure crisis. U.S. Bank v. Ibanez, in early 2011, signaled a changing tide which began to hold banks accountable for the shoddy practices they frequently used to foreclose. However, the promise of Ibanez was unfulfilled as successor cases failed to follow through with its vision. Mortgagor actions brought in the trial courts to prevent foreclosure have been unsuccessful with the elemental actions based in consumer protection, contract, and equity. However, this article proposes new and novel solutions to force banks to be held accountable …

The End Of Mortgage Securitization? Electronic Registration As A Threat To Bankruptcy Remotenes, John P. Hunt, Richard Stanton, Nancy Wallace

John P Hunt

A central tenet of asset securitization in the United States—that assets are bankruptcy remote from their sponsors—may be threatened by innovations in the transfer of mortgage loans from the loan-originators (sponsors) to the legal entities that own the mortgage pools (the Special Purpose Vehicles (SPVs)). The major legal argument advanced in the paper is that because the mortgage is an interest in real property, the bankruptcy-remoteness rules applicable to real property, including § 544(a)(3) of the Bankruptcy Code, create a risk to the bankruptcy remoteness of mortgage transactions unless proper recording occurs. We review the traditional mortgage transfer process and …

Community Collateral Damage: A Question Of Priorities, Andrea J. Boyack

Andrea J Boyack

Today’s soaring mortgage default rate and the uncertainty and delay associated with mortgage foreclosure proceedings threatens to cause financial tragedies of the commons in condominiums and homeowner associations across the country. Assessment defaults in privately governed communities result in an inequitable allocation of upkeep costs, and current law provides no way to prevent this spillover effect. But the collateral damages caused by delayed foreclosures and insufficient recoveries can be minimized by gradually increasing the priority position of the association lien.

In a majority of states, association liens are completely subordinate to the first mortgage lien. At foreclosure of the mortgage …

Mers: Creating Efficiencies Or Clouding Titles? Examining Challenges To The Mortgage Electronic Registration System, Christian Carson

Christian Carson

The Mortgage Electronic Registration System has recently come under fire amidst the recent foreclosure crisis. Since MERS is mortgagee of record to more than 60 million mortgages in the United States, the question as to whether it has standing to foreclose on defaulted loans presents a hurdle to the speedy recovery of the housing market.

It is likely that the MERS framework is a sound one that complies with longstanding principles of property and agency law. Examination of the controlling Supreme Court case Carpenter v. Longan and Restatement commentary reveals that a separation of the mortgage and the note does …

Obeying The Letter And Violating The Spirit, Jeffrey Martin

Jeffrey Martin

Tens of millions of home mortgage loans, with a face value running into the trillions of dollars, may not be collectable. Furthermore, the owners of those homes may not be able to get clear title in the event that they pay off the mortgage. The Mortgage Electronic Recordation System is a foundational piece of the modern American mortgage system, and is thus at the base of the financial system as a whole. This system has come under substantial legal challenges in recent years. In some forums MERS has prevailed; in others it has not. The uncertainty surrounding transfers of interests …

Community Collateral Damage: A Question Of Priorities, Andrea J. Boyack

Andrea J Boyack

Today’s soaring mortgage default rate and the uncertainty and delay associated with mortgage foreclosure proceedings threatens to cause financial tragedies of the commons in condominiums and homeowner associations across the country. Assessment defaults in privately governed communities result in an inequitable allocation of upkeep costs, and current law provides no way to prevent this spillover effect. But the collateral damages caused by delayed foreclosures and insufficient recoveries can be minimized by gradually increasing the priority position of the association lien.

In a majority of states, association liens are completely subordinate to the first mortgage lien. At foreclosure of the mortgage …

Lessons In Price Stability From The U.S. Real Estate Market Collapse, Andrea J. Boyack

Andrea J Boyack

The U.S. residential housing market collapse illustrates the consequences of ignoring risk while funding mortgage borrowing. Collateral over-valuation was a foundational piece of the crisis. Over the past few decades, secondary markets, securitization, policy and psychology increased the flow of funds into real estate. At the same time, financial market segmentation divorced risk from reward. Increased mortgage capital availability, unmitigated by proper risk allocation, led to real estate price inflation. Social trends and government policies exacerbated both the mortgage capital over-supply and the risk-valuation disconnect.

The Dodd-Frank Act inadequately addresses the underlying asset valuation problem. Federal regulation may support market …

Underwater And Not Walking Away: Shame, Fear And The Social Management Of The Housing Crisis, Brent T. White

Brent T. White

Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations - and to ignore market and …

The Case For "Cramdown": Eliminating The Practical And Ideological Barriers To Pure Mortgage Modification, Peter J. Leo

Peter J Leo

This article was prepared for a seminar in Consumer Protection. The article makes the case that Congress should modify the Bankruptcy Code to allow for judicial modification of home mortgages on a bankrupt’s principal residence as a means of combating the foreclosure crisis. The article examines two different proposals originally published in the Minnesota Law Review and the Yale Journal on Regulation, examines some of the deficiencies in those proposals, and concludes that “cramdown” will be a more effective means of keeping consumers in their homes.

Simultaneous Distress Of Residential Developers And Their Secured Lenders: An Analysis Of Bankruptcy & Bank Regulation, Sarah P. Woo

Sarah P Woo

With falling home prices and home foreclosures currently acknowledged as a severe problem in the U.S., more attention needs to be paid to the contributing phenomenon of residential developers undergoing liquidation, which has left behind a trail of partially-completed or abandoned properties. In order to understand this phenomenon, we analyzed 222 residential developers that filed Chapter 11 bankruptcy petitions between November 2007 and December 2008. We find that only a very small proportion of these developers, as compared to previous similar large studies, confirmed a reorganization plan. Most cases ended in liquidations. In the sample, 72.5% of the cases showed …

Can More (Foreclosure) Be Less (Harmful)? A Closer Look At Exclusivity Agreements, Ittai Paldor

Ittai Paldor

Exclusive dealing agreements, agreements whereby a firm commits to purchasing exclusively from or selling exclusively to another firm, have both pro- and anti- competitive effects. Their legality is therefore determined on a case-by-case basis under the rule of reason. Within the framework of the rule of reason, the share of the market foreclosed by the agreements is a key (although in no way the sole) element of the analysis. The prevailing view is that, all else equal, the larger the market share foreclosed – the greater the competitive danger posed by exclusivity. In the following I suggest that a careful …

Workout-Driven Exchanges, Brad Borden, Todd D. Keator

Bradley T. Borden

Market forces in a depressed real estate market often lead to foreclosures, which may generate taxable gain to the debtor. Some foreclosure sales may qualify for Section 1031 nonrecognition, if the debtor properly structures the disposition. This Article discusses structures that help foreclosure transactions qualify for Section 1031 nonrecogntion. The Article also discusses the application of Section 1038 to recquisitions of exchanger-financed relinquished property.

Misbehavior And Mistake In Bankruptcy Mortgage Claims, Katherine Porter

Katherine Porter

The greatest fear of many families in serious financial trouble is that they will lose their homes. Bankruptcy offers a last chance for families to save their homes by halting a foreclosure and by repaying any default on their mortgage loans over a period of years. Mortgage companies participate in bankruptcy by filing claims with the court for the amount of the mortgage debt. To retain their homes bankruptcy debtors must pay these amounts. This process is well-established and, until now, uncontroversial. The assumption is that the protective elements of the federal bankruptcy shield vulnerable homeowners from harm.

This Article …

The Law And Economics Of Subprime Lending, Todd J. Zywicki

Todd J. Zywicki

The collapse of the subprime mortgage market has led to calls for greater regulation to protect homeowners from unwittingly trapping themselves in high-cost loans that lead to foreclosure, bankruptcy, or other financial problems. Weighed against this catastrophe are the benefits that have accrued to millions of American families who have been able to become homeowners who otherwise would not have access to mortgage credit. Although the bust of the subprime mortgage market has resulted in high levels of foreclosures and even problems on Wall Street, the boom generated unprecedented levels of homeownership, especially among young, low-income, and minority borrowers, putting …