DS News

DS News January 2021

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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Page 42 of 99

41 indicating that the note is being assigned to MERS is prohibited in Assignments out of MERS." » Confirming whether one can plead "holder" varies on jurisdiction. » Proving "control" of the eNote: » is is where the authoritative copy comes in and can sometimes be supplemented by the "summary information sheet" describing the bank as the "Controller" of eNote and proving possession. » Proving and providing the transferable record, and to whom the eNote/eMortgage has been transferred » Knowing Your State Law: Whether the applicable jurisdiction allows for same/how it differs from the ESIGN Act and UETA and knowing the requirements. Items to consider from a bankruptcy perspective for when handling same: » Original Documents: In bankruptcy proceedings, there is no requirement for the creditor to produce the original documents in order to evidence standing. In the event the creditor files a Motion for Relief from the Automatic Stay, the creditor must prove standing by showing is has the legal right to bring about the proceeding. » To do this, there must be a note endorsed to the "Action in the Name of " (AITNO) or blank as well as the chain of assignment of mortgages. In addition, if state law requires perfection of the mortgage or deed of trust, a recorded copy must be attached. More importantly, compared to judicial foreclosure proceedings in most states, there is no need to produce the originals in bankruptcy court. » Challenging State Court Rulings: As is sometimes the case, a borrower who lost in state court (i.e., had a foreclosure judgment entered) attempts to challenge the state court's decision to issue the judgment by arguing the creditor lacked standing and or that the borrower never signed the note and mortgage. Similarly, the borrower may also argue that the creditor failed to produce the "original" note. is may be more common with eNotes and mortgages due to the electronic signatures and lack of any "original." » Fortunately, the Rooker-Feldman doctrine prevents this. is doctrine bars lower courts from undertaking appellate review of state court decisions. D.C. Court of Appeals v. Feldman, 460 U.S. 462, 462, 103 S. Ct. 1303, 1304, 75 L. Ed. 2d 206 (1983); see also Rooker v. Fid. Tr. Co., 263 U.S. 413, 414, 44 S. Ct. 149, 149, 68 L. Ed. 362 (1923). » e following requirements must be met for the Rooker-Feldman doctrine to apply: (1) the federal plaintiff lost in state court; (2) the plaintiff complains of injuries caused by the state-court judgments; (3) those judgments were rendered before the federal suit was filed; and (4) the plaintiff is inviting the district court to review and reject the state-court judgments. Exxon Mobil v. Saudi Basic Industries Corporation, 544 U.S. 280, 284, 125 S. Ct. 1517, 1521-22, 161 L.ed.2d 454 (2005). If applicable, the federal court lacks subject-matter jurisdiction over the federal plaintiff 's claims and the claims must be dismissed. » is means that a borrower who files bankruptcy after the entry of the entry of a foreclosure judgment but prior to a sale (as is most commonly the case) will not be able to re-litigate any issues raised in the state court regarding the eNote and mortgage. In other words, the bankruptcy court does not act as an appellate court for state court decisions. In this new world we live in, it is important to take a moment and research the applicable laws/cases in your jurisdiction on how best to handle same. THE LEGAL TECHNICALITIES— ADMISSION OF ENOTE RECORDS AS EVIDENCE AT TRIAL While the use of the eNote has exploded in the first quarter of 2020, unfortunately, the same cannot be said for the use of eNotes at trial, which continue to be problematic throughout the litigation process. It is important to recognize the differences between the admissibility of a "wet-ink" Note and an eNote, as a failure to properly admit the electronic records into evidence will prove a fatal flaw to the plaintiff 's case. Most courts throughout the nation are plodding in their adoption and reliance upon technology and electronic records. e most conventional judges are insistent upon seeing, touching, and verifying the "wet-ink" Note, to prove the existence of the financial obligation and the plaintiff 's standing to commence the subject foreclosure action. Reliance upon electronic records, including the eNote and the proof of transfer and ownership, is a clear departure from the standards imposed by the courts for countless years. However, relevant case law and state-specific statutes clearly allow for the admission of such exhibits into evidence, and the reliance upon such exhibits to prove a plaintiff 's entitlement to judgment. To prove the existence of the loan and standing in a case involving an eNote, the plaintiff must produce and admit the eNote and the MERS registry records at the time of trial. ese documents should also be exchanged, if requested, during the discovery process to avoid the possibility of evidentiary preclusion at the time of trial. All such documents should be admitted as business records at the time of trial despite the possibility/likelihood that such "transferable records" were not created by the current plaintiff nor the current loan servicer. Transferable records are governed by 15 U.S.C.S. 7021, which defines a transferable record as an electronic record that: » would be a note under Article 3 of the Uniform Commercial Code if the electronic record were in writing; » the issuer of the electronic record expressly has agreed is a transferable record; and » relates to a loan secured by real property. It further states that a transferable record may be executed using an electronic signature. Subsection (b) of 15 U.S.C.S. 7021 states that "a person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or

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