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Fighting foreclosures by pooling agreements

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The Tampa Tribune

Published: February 13, 2009

As many homeowners face foreclosure, they are frequently finding that their original lender is not the mortgagee seeking to foreclose. In many cases, homeowners are being sued by banks acting as trustees for something called a "pooling agreement." The trustee frequently is represented by a law firm that is handling foreclosures in bulk quantity; and it may be impossible to get an attorney speak with you in an attempt to resolve the matter. What can the homeowner do?

The first step in defending against foreclosure is to understand a little bit about pooling agreements. Traditionally, a borrower approached his or her bank and took out a home loan. The borrower made monthly payments to the bank and the bank serviced the loan. If the homeowner needed to talk with someone about the loan, he or she called the bank. The relationship was simple, and sometimes even personal.

Mayberry, however, has given way to Wall Street. Many original lenders sold their loans to an issuer that then sells mortgage-backed securities to investors. The process is called "securitization." The investors are entitled to a portion of the loan payments under the terms of a pooling agreement. The pooling agreement essentially creates a paper entity that sells the mortgage-backed securities to investors. Under this scenario, the lender no longer has the ability to alter the terms of the loan if the homeowner experiences financial distress and can no longer make the monthly payments. The trustee, usually a bank, represents the investors' interest. It is this trustee that many homeowners now find as the plaintiff seeking to foreclose the mortgage.

As with any lawsuit, it is vitally important for the homeowner to file and serve a response within 20 days of service of the foreclosure summons and complaint lest the homeowner find a default has been entered against them.

It is strongly recommended that the homeowner consult with an attorney in dealing with the foreclosure. There are several issues that might be raised in response to the lawsuit. First, because of the sheer volume of mortgages sold and collateralized, it is not uncommon for the original note to have been lost or destroyed. The burden lies with the plaintiff seeking to foreclose to reestablish the terms and conditions of the note.

Perhaps more importantly, the trustee must show that it has standing to bring the lawsuit. The trustee is not the original lender. It is not a party to the mortgage. The burden lies with the trustee to establish that the note and mortgage were properly assigned prior to the filing of the lawsuit.

An assignment of the note and mortgage dated subsequent to the filing of the lawsuit is grounds for dismissal of the foreclosure action. The trustee may be unable to produce the assignment, another basis to have the lawsuit dismissed. In some cases, the note and mortgage may have been assigned numerous times and the complete chain of ownership must be proved. If the trustee is unable to demonstrate that the mortgage has been properly assigned, the trustee lacks standing to bring the lawsuit. The public records maintained by the clerk of court for the county in which the property is located should also be checked to determine whether the transfers have been properly recorded.

Again, the trustee may lack standing to bring the lawsuit and the foreclosure may be subject to dismissal

Randall Love is an attorney with Randall J. Love & Associates, New Port Richey.

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