2001-2007 marked a period by which the housing bubble collapsed and an unprecedented selling and trading of mortgages not only in New Jersey but the country. The cause for the trading of the mortgages was to get toxic mortgages investments off of the bank’s investment portfolio. The banks understood that most of the new 80/20 and “exotic” mortgages would probably go into foreclosure and bring massive loss to the bank. Therefore, the banks sold them to other new mortgage companies held in trust and serviced by unknown third parties. For those who received sub-prime mortgages in this time period, your mortgage (either first or second) has probably already been assigned to another mortgage company or servicer. How does this happen, why does this happen and what does this mean to you.
Banks created an electronic data bases to assign mortgages electronically to expedite the selling and assigning of mortgages. MERS (mortgage electronic registration system) is one type of electronic system. The electronic servicing put the subprime mortgages in a data system in which approximately 27 banks are members. The data system quickly moves the mortgages without the cumbersome and voluminous documents which usually accompany the mortgages. Normally, legally, mortgage assignment documents that support the sale follow the assignment because it complies with both federal and state law. State law requires that the county where the property is located has the documents in the county court house. Real estate law requires and federal tax law has similar requirements. With the subprime meltdown and the electronic data base to moving assignments quickly between bank and servicer, a concern of fraud arose. Fraud is a concern because the entity, knowing that it is not the holder of the note, intentionally represents they have standing to foreclose or commence other legal actions.
What does this mean to you? Bankruptcy in New Jersey has exploded in the number of people filing chapter 7 and chapter 13 trying to prevent foreclosure. If you have a subprime mortgage that has been assigned to another servicer, lender or trustee, you need to confirm who the holder of your note is. ONLY the Holder of your note has legal authority to commence foreclosure actions. Only the Holder has standing in any court, and without standing cannot request anything from the court. Chapter 7 Bankruptcy and Chapter 13 bankruptcy can be especially helpful to uncover these issues and deal with them in federal court. A New Jersey bankruptcy attorney will be able to determine if the assignment is valid and perhaps expunge, reduce or reclassify the debt connected to your mortgage in bankruptcy court.
*Special thanks to Diane Rodriguez Certified Fraud Examiner