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Saturday, November 20, 2010

"Countrywide Routinely Failed to Send Key Docs to MBS Trustees"

Kate Berry of American Banker reports that B of A may have run into some new trouble regarding documentation that "could complicate attempts by the company to foreclose on soured loans" (via email from David Cay Johnston):

Countrywide Routinely Failed to Send Key Docs to MBS Trustees, B of A Employee Says, by Kate Berry, American Banker: Countrywide, the mortgage giant that's now part of Bank of America Corp., routinely didn't bother to transfer essential documents for loans sold to investors, an employee testified.
The testimony — which a New Jersey bankruptcy judge cited in dismissing a B of A claim against a debtor — could complicate attempts by the company to foreclose on soured loans that Countrywide originated...
The B of A employee's admission that the lender customarily held on to promissory notes could also undermine the industry's position that document transfers to securitization trusts are fundamentally sound.
O. Max Gardner, a North Carolina consumer bankruptcy lawyer who was not involved in the case, called the testimony "a major problem" for B of A, which acquired Countrywide ... in 2008. "These original notes were supposed to be transferred and delivered all the way up the line and for this witness to admit they were never transferred is pretty amazing," Gardner said. "I've never see this admitted anywhere." ...
Linda DeMartini, a supervisor and operational team leader in B of A's litigation management department, testified that "the original note never left the possession of Countrywide"... DeMartini "testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents"...
Whether a servicer or investor has the standing to foreclose on a borrower has become a major issue... Adam Levitin, an associate law professor at Georgetown University, said in Congressional testimony Nov. 16 that ... "If the notes and mortgages were not transferred to the trust, then the trust lacks standing to foreclose"...

    Posted by on Saturday, November 20, 2010 at 09:13 AM in Economics, Housing | Permalink  Comments (25)


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