Source Of Title

Abstractors and Title Examiners – are we Smarter than the Average Bear?

How many squares are there in the picture below?

Thanks to David Bloys, Title Guy out of Texas (posted on Source of Title) for this fun exercise.  David says that 96%  of the people who took this test failed it.  Well, as what I consider a reasonable title abstractor and examiner, I found it fun.  Didn’t take long. See if you can come up with the right answer.  If you want the number (or the answer by 1/4 1/4 of the public land survey) just contact me or feel free to post it!

How many Squares in this Pic

Silver spoons, not bootstraps

To hear some tell it, even around these parts, the rich make up a class so virtuous that we must not disturb the flower of their pure entrepreneurial creativity by ever taxing them an additional dime as we sink deeper and deeper into debt and consider cuts to programs for the the very old, the very young, and the very poor.  The rich, after all, are folks who pulled themselves up by their bootstraps, created jobs and wealth, and pay more than their fair share of taxes already.  If we asked them to pay more, it would only allow more freeloaders to lie around and watch cable TV all day.  Better to cut health care benefits to senior citizens than to ask these folks to pay a little more.  And anyone who thinks that it would be better for the rich to pay more tax is just envious and wants to be given things they haven’t earned.

That’s basically what I am hearing.

I see things differently.  The way I see it, for every self-made rich person, there is a rich person who  received their opportunity as a birthright, rather than by any extraordinary merit or effort of their own.  These folks were born with a silver spoon in their mouth.  This does not make them bad people, but let’s recognize that these folks have never laid a finger on a bootstrap.  They may run enterprises with famous names and have prestigious titles and rake in millions, but they did not build those enterprises themselves.  They may work hard, but it was their predecessors who did the heavy lifting.  It would be an error to generalize this class as “job creators” because many have created the same number of jobs as the lowliest Occupy Wall Street protester– that is to say, zero.  Some in fact grant themselves raises that would have paid the salaries of workers they laid off. 

We don’t have to look outside our own industry to see this, because all of these statements apply to the recent leaders of Stewart Title, a company with which we’re probably all familiar.

The Morrises, heirs to the founders of the company that is now Stewart Information Services Corporation, have owned or controlled Stewart for a very long time.  According to the history published on the company website, the company was founded in Texas by a man named Maco Stewart in 1893.  The first Morris involved in the company, William C. Morris, joined the company as a stenographer in 1897.  William C. Morris eventually married the Stewart’s sister in 1903, and in the early part of the 20th century, William became president of Stewart Title Company and executive vice president of Stewart Title Guaranty Company and was issued the first stock certificate of that company. 

For several decades, Morrises shared ownership of the company with generations of other heirs with the Stewart surname.   In 1950, when William Morris died as sitting president of Stewart Title, his ownership interest and control of the company passed to his sons, Carloss Morris and Stewart Morris Sr. 

By this time, while Stewarts still held a significant ownership interest in the company, it was Morrises who were leading the company.  Stewart Morris Sr. is credited with expanding the company from a Texas operation into a national company during the 1950s and 1960s.  Carloss Morris served as president of the company during this time and played an active role in the company as well.

In 1972, the company was taken public in an initial public stock offering by its owners– the Morris brothers (Carloss and Stewart Morris Sr.) and other heirs of the Stewart clan.  In the process, two kinds of shares were created– normal shares intended for the investing public (“Class A” shares), and special shares with powerful voting rights (“Class B” shares.).  The two classes of shares are nominally equal in equity value per share; however, the powerful voting rights of the Class B shares reserve control of the company for the holders. 

The Morris brothers and other Stewart heirs retained all of these Class B shares.  This allowed the Morrises and other Stewart heirs to cash out a vast amount of their equity in the company– the Class A shares now outnumber the Class B shares by a ratio of greater than 15 to 1– and yet retain firm control of the company, as the heirs have done ever since the company was taken public. 

The heirs in essence have had their cake and have eaten it too.  They have sold the majority of the company, received the cash, and yet can still control and operate the company almost as if they kept complete ownership of the company within the family.

How powerful is the control?  Well, for one thing, Stewart heirs– now all Morrises, as has been the case ever since Maco Stewart III sold Carloss and Stewart Morris Sr. his allotment of Class B shares in 1975– have the right to choose four of the nine members of the Board of Directors.  This is a sufficient number to give them an effective veto over any action by the Board of Directors, due to the way the company’s bylaws are drafted.  Here’s how it works:

The holders of our Class B Common Stock have the right to elect four of our nine directors. Pursuant to our by-laws, the vote of six directors is required to constitute an act by the Board of Directors. Accordingly, the affirmative vote of at least one of the directors elected by the holders of the Class B Common Stock is required for any action to be taken by the Board of Directors. The foregoing provision of our by-laws may not be amended or repealed without the affirmative vote of at least a majority of the outstanding shares of each class of our capital stock, voting as separate classes.

Stewart 2010 Annual report

As is their right, the Morrises have chosen friendly directors who will vote to install and keep Morrises in control of the company.  Often, the Morrises have chosen one or more of themselves as directors.

There have been a total of five CEOs at Stewart since they took full ownership of the Class B shares in 2005… and they have all been named Morris.  Carloss Morris and Stewart Morris, Sr. passed control of the company to their sons, Malcolm Morris and Stewart Morris Jr., and then this week, the reins were passed to Malcolm’s son Matt Morris.

The fact that operational control of the company remains in the control of the Morris family should not be a surprise to the company’s many shareholders.  Investors who do their due diligence are on full notice that this is a family company, run by Stewart heirs, and intended to be run by Stewart heirs.  In fact, this is explicitly stated in the company’s filings with the SEC, in explanation of the composition of the company’s top leadership… all Morrises:

In light of the Company’s long history as a family-managed business, the extensive experience of Malcolm S. Morris in the Company’s business, including his involvement in the day-to-day operations of the Company and implementation of its long-term strategy, and the balance provided by our appointment of Co-Chief Executive Officers [Malcolm Morris and Stewart Morris Jr.] and our use of an Executive Committee and a presiding director, we believe that our current leadership structure, including combining the roles of chief executive officer and chairman [Malcolm Morris was chairman], is the best way to ensure the long-term success of the Company.

Stewart proxy statement

Presumably, investors who put money in the Stewart want to keep the company a family-managed business.  At any rate, they don’t have the power to change it. 

At this point, just so there’s no misunderstanding: I have a problem with very little of this.  It’s evident that each generation of Morrises has paved the way for the next to take over the company, but I think most parents would have given the same opportunities to their children.  Every generation of Morrises who has taken over the top spot has apparently worked in various lesser roles in the company for many years, presumably preparing them for capable stewardship of the company in a leadership role. 

That being said, if you aspire in your career to be the top dog at Stewart, it’s a hell of an advantage to be named Morris!  If your name is Morris, you are apparently entitled to a shot at the top job and the power and prestige and seven-figure income that comes with it– even though your family only owns a tiny fraction of the equity in the company.  If your name is anything other than Morris, there appears to be a glass ceiling which you will not break through, no matter how hard you work. 

Also, if executive performance is measured by financial performance, then it’s hard to make a case that the last generation of Morris leadership was very successful.  Stewart’s stock price is near 15 year lows, falling below $10 a share. The stock has fallen from $53 at the height of the housing bubble– more than an 80% drop.  The stock pays a paltry dividend of 5 cents a share– little consolation for folks who have bought the stock within the past 15 years and seen no price appreciation. 

Much of this poor performance can be chalked up to events beyond the control of Stewart’s leadership.  But on several levels it has lagged when compared to its peers. Over the past five years, Stewart’s stock has underperformed all of its rivals.  Stewart’s claims ratio has been consistently higher than the average of its peers over the past several years, and its title business has been the least profitable of its peers coming out of the housing crisis.  So far this year, Stewart has been profitable, but only by a slim penny per share.  That’s an improvement over the significant losses for the past several years running, however.

The recent leadership of Stewart has not created jobs.  At the end of 2010, Stewart employed approximately 5700 people, according to its annual statement– down from 9900 at the end of 2005, and approximately the same amount of people employed by the company ten years ago.  Despite cutting another 120 employees last year– the fifth consecutive year cutting staff– the company raised the compensation of its dual CEOs, rationalizing the increase as necessary with the following statement:

[T]he Compensation Committee has historically employed a compensation philosophy of fairness, rather than focusing on retaining its Co-Chief Executive Officers. The Compensation Committee’s compensation philosophy is intended to maintain associate satisfaction and morale by assuring that the compensation of executive officers, particularly the Co-Chief Executive Officers, is not out of line with that of key employees and other associates. As a result of this focus on internal pay equity, in some years the compensation of one or more key employees has exceeded the compensation of our Co-Chief Executive Officers. The Compensation Committee believes that our historical compensation programs achieved the goal of fairness, even though it resulted in below-market compensation for our Co-Chief Executive Officers. However, in late 2009, in connection with its annual review of executive compensation, the Compensation Committee determined that the below-market compensation of our Co-Chief Executive Officers was potentially affecting our ability to attract top executive talent and retain our current key employees and was also creating wage compression issues internally. Because of these structural issues and in light of the management team’s successful implementation of certain strategic initiatives in 2009, the Compensation Committee recommended, and the board of directors approved, an increase in 2010 compensation for certain executives and key employees, including the Co-Chief Executive Officers.

There’s no explanation as to why a key employee could not be paid more than the CEOs if necessary, as was apparently done successfully before, which would seem to be an easy solution to any “wage compression issues”.  Could it possibly be that the CEOs just wanted raises?  Regardless, they got raises because some executive evidently wanted more money, while workers were being cut, the stock was declining, and the company was losing money. 

If the Occupy Wall Street protesters have an entitlement mentality, it appears they are not the only ones.

As for myself, I can honestly say I am not envious of the rich.  I am satisfied with what I have.  But it does bother me greatly that as a nation we are considering cuts to programs such as Medicare so that we can afford to keep taxes lower for rich people.

Will the Supreme Court hear the low title insurance claims rate card?

Once again, somebody who should know better is using the title insurance industry’s low claims rate compared to other types of insurance as evidence that something is wrong with the industry.  In this case, it’s one of  the lawyers responsible for bringing the RESPA class action lawsuit Edwards v. First American, which has gone all the way to the Supreme Court and will be heard later this month.

From the Cleveland Plain Dealer:

Edwards learned about the referral deal between First American and her title insurance company, Tower City Title Agency, through mail she received from lawyers at Cleveland’s Fair Housing Clinic, who discovered it during a previous court case. She agreed to act as plaintiff for a potential class-action lawsuit that could involve hundreds of thousands of people, according to clinic attorney Edward G. Kramer.

Kramer says First American bought shares of 184 businesses in 15 states to obtain exclusive referrals, as it did with Tower City. He described the title insurance business as “monopolistic,” with four firms, including First American, writing 90 percent of all policies. He said property and casualty insurers typically pay out two-thirds of the premiums they receive in claims, while title insurers pay out less than 5 percent of the premiums they receive.

“To me, that seems to be a fairly lucrative business,” Kramer said.

Cleveland Plain Dealer

Kramer’s observation that the business of title insurance underwriting has become concentrated in just a few firms is well taken.  But if he had looked into the history of the title insurance business, he would have seen that consolidation in the title industry has been accompanied by rising claims rates, not lower claims rates.  As I have noted before, several decades ago, before the title insurance business was consolidated into a few national firms, claims rates were much lower than they are now– as low as 2.5%.  The claims rates now– which aren’t below 5% as Kramer claims and have not been so for several years– are much higher than they used to be.

Using Kramer’s logic, consolidation and/or monopoly would lead to even lower claims rates over time.  That has clearly not happened.

It bears repeating:  Low claims rates in the title insurance industry would be a good thing– for everybody involved.  The lower, the better.  It would mean that title insurance premium dollars are being effectively used to find title problems and correct them before they become claims– which is exactly as it is supposed to be.  In a healthy, low claims rate environment, title underwriters would indeed be profitable, but they would have earned it, by insisting on and ensuring high standards of title work.

There is a connection between lack of competition in the title industry and claims rates, but Kramer has apparently missed it.  In the title industry of today, where businesses is locked up via non-competitive arrangements involving the referrers of title business, and the firms which are responsible for doing title work aren’t able to effectively compete on the merits of service, the quality of title work goes down, and claims rates go up.  In such an environment as exists today, premiums may go up, but the title business itself becomes less lucrative, as title income is siphoned off as unearned income by the referrers of title business.

Title searchers and statutory damages

Today, the United States Supreme Court heard oral arguments in the RESPA case Edwards v. First American, which I will be reading shortly.  At issue is not just RESPA; the broader issue is the power of Congress to enact laws which specify statutory damages, which relieve would-be plaintiffs of the burden of proving concrete and specific damages to themselves in cases where an entity has engaged in a practice which Congress has outlawed.  While I have some issues with the Edwards case in particular, I’d like to say thank you to those who have worked on Edwards’ behalf to try to prevent RESPA from being gutted– and argue one reason why title searchers in particular should care about the issue in the RESPA case.

I’m not a title searcher myself, but I think I’ve been around searchers long enough to understand the legitimate reason for the frustration of many title searchers over their (lack of) power to collect from non-paying clients or clients who fail to pay them on a portion of their bill.  The main gist of the frustration usually is the fact that the unpaid balance is too small for a lawsuit to make financial sense.  But that in no way means that the unpaid balances are insignificant to the searcher’s business.  In fact, if a searcher has the misfortune of being stiffed by several clients, the unpaid balances can add up to an amount that is material to whether they are profitable, or even whether they can afford to stay in business.

In many cases, Congress has passed laws providing groups, usually consumers, with rights to statutory damages– amounts established by law that may have only slight relation to a person’s actual, provable damages– from violators of certain laws, particularly laws where violations tend to spread small amounts of harm over large numbers of people.  In situations where these laws apply, consumers have incentive to pursue lawsuits where they would otherwise have little to no incentive because their damages would be too small to make it worthwhile.  In many instances, the situations where these laws apply are similar to the situation faced by title searchers in that the individual amounts of damage may be small, but the aggregate damage is large.

RESPA is such a consumer protection law.  In a RESPA decision in 2002, a judge in Georgia succinctly explained the purpose of laws like RESPA:

Consumer protection statutes like RESPA are designed to remedy and prevent harm arising from practices that injure many people but are not, in most instances, sufficiently damaging to outweigh the cost of litigation. Often, these statutes provide for a private right of action and attempt to encourage litigation by allowing “statutory damages.” Statutory damages relieve litigants of the burden of having to prove an exact measure of pecuniary harm arising from a violation of their rights under the statute. They also provide litigants with a bounty for acting in the public interest.

That last rationale for consumer protection laws may be off-putting for some, because we have been conditioned as a society to look down on “ambulance chasers” or people who sue for amounts that seem to exceed the damages they have suffered, and this has made us suspicious of trial lawyers and people who sue in general.  But the fact is that when a person sues someone who has violated the law, that person is helping to enforce that law, which provides a benefit to the public.  A law that is never enforced has no teeth and might as well not exist, and entities which are regulated by such a law can ignore it with impunity.

Consumer protection laws like RESPA are intended to align the incentive to sue with the public interest in private law enforcement.  In the case of RESPA, Congress set the damages in RESPA so that a plaintiff could collect an amount that could possibly be far in excess of the amount of damages to themselves that they could reasonably prove (an overcharge).  This was intentional, despite the claims of some RESPA opponents who are arguing that Congress intended only to assess damages based on the amount a person was overcharged.

It should be easy for title searchers to see how those who sue violators of the law are serving the public interest.  When a stiffed title searcher sues a deadbeat client, the deadbeat client has to endure the time, money, and hassle of defending the claim… or they have to pay the bill.  In either case, it takes resources away from the deadbeat to expand its business and to cheat more title searchers out of compensation for their hard work. 

In fact, searchers often recognize the public service of lawsuits against deadbeats.  When a searcher posts a message in our forums indicating that they have taken legal action against a deadbeat, the post usually garners a few “attaboys” or “attagirls”.  Any misgivings we have about litigiousness in general seems to be overcome by our recognition that by fighting the deadbeat, our fellow searcher not only fights for themselves, but for all of us.

It’s only too bad that there is no RESPA equivalent for title searchers!  If title searchers could sue deadbeats for three times the amount of their total bill, there would be a whole lot fewer deadbeats! 

The white collar criminal mentality

The white collar criminals who are attempting to profiteer from the foreclosure crisis are just like other white collar criminals… they just don’t get that they are criminals, just like pickpockets, burglars and muggers.

 

Geoffrey Goldman, an owner of a real estate investment business in upstate New York who was just  sentenced to 4 to 12 years in state prison this week for a fraudulent multi-million dollar foreclosure rescue scheme that caused many innocent victims to be foreclosed and evicted, seems to exemplify this mentality.

“I am a good person,” said Goldman at his sentencing, “and although I’ve committed crimes, I’m not a criminal.” 

Goldman’s victims would probably dispute that.

Goldman and his co-conspirators used a business owned by Goldman, Rivertown Investments, to defraud various lenders, homeowners, and title insurance companies. Co-conspirators acting on behalf of Rivertown allegedly lured distressed homeowners into signing title over to the company by promising to lease the homes back to the distressed homeowner, with a promise that the homeowner would be able to regain title in the future, and that equity built during the lease period would be saved for the homeowner.

Once Rivertown had title to the properties, straw buyers under the control of the scheme’s masterminds would purchase the properties from Rivertown, obtaining fraudulent mortgages with false statements inflating the straw buyers’ incomes to finance the sham transactions. The straw buyers would then quickly sign their deeds over to a holding company in Rivertown’s control. Griffon Title, a title company owned and controlled by Goldman, was used to facilitate the transactions involved in the scheme, concealing the true nature of the transactions from lenders, homeowners, and their title underwriter.

The scheme involved at least 105 properties in New York, Pennsylvania, and New Jersey between 2003 and 2008. Rivertown defaulted on its promises to many of the homeowners properties, resulting in numerous evictions and cases where willing homeowners were unable to repurchase their homes as promised.

Meanwhile, the co-conspirators used profits from the scheme to buy trips to Europe and the Caribbean, vehicles, jewelry, a wine locker, and gambling sprees at casinos. 

The crimes caused millions of dollars in losses to the victims, and untold stress and hardship.  But at his sentencing, Goldman had the gall to point out that some of the affected homeowners were able to live rent free in their homes as the mess was being sorted out– as if he was the only one not profiting from the situation.

I’m sure that Goldman truly believes that he is not a criminal… but he is deluding himself.  He stole far more money than most common thieves do in their criminal careers.

Enjoy your time in state accommodations, Mr. Goldman.  It sounds like you’ve earned it.

 

"Affiliated" does not mean "independent"

ALTA and the promoters of affiliated business arrangements seem to be a bit confused about the meaning of the word “independent.”

The confusion is really nothing new.  In a 1999 article, the Title Report quoted a past chairman of RESPRO who was ahead of his time in creatively redefining the meaning of the word.  “We see the independent agency market expanding,” said David Ginger, then president of regional underwriter Title Insurance Co. of America, which at the time derived 60% of its revenue from affiliated business.  “It’s just that you have a new definition of the independent agent – and it’s called the affiliated agent.”

According to the Merriam-Webster dictionary, the word “affiliated” means “closely associated with another, typically in a dependent or subordinate position”– nearly the polar opposite of independent.  An affiliated title agency is indeed an agency that is closely associated with another business in a dependent, subordinate position.  

When RESPRO and the beneficiaries of affiliated business refer to an affiliated title business as independent, they really mean dependent.  Let’s call this what it is– a lie. 

The lie is perpetuated today.  The same folks who have contributed to the erosion of independence in the title business mouth the word independent as if that is what they value.  J. H. on the Source of Title Forums recently brought up a letter to the CFPB in which current ALTA President Anne Anastasi– who has made her living off the creation of dependent, subordinate, affiliated title businesses– touted the value of the independent title agent as if all title business was conducted by independent agents.  “By acting as independent third parties to the transaction, the title industry ensures that  the underlying contractual obligations are executed as they are written,” Anastasi said. 

The truth is that the title industry has not ensured that title agents are independent third parties to the transaction.  Despite Anastasi’s claim that the independence of the title agent is “important,” affiliated title businesses– dependent and subordinate by definition– are widespread, thanks in part to Anastasi herself.

Inconvenient facts did not stop Anastasi however.  “An important aspect of the title insurance industry that should not be overlooked,” she says, “is that, at the settlement or  closing, title agents are the independent third party to the transaction whose only interest is to ensure the integrity of the transaction and the protection  of the consumer.”  It would be nice if this were always true, but thanks to the affiliated business arrangements, which Anastasi has promoted for decades, it is simply not.  In a transaction involving an affiliated title agency, the title agent is not an independent third party but rather is dependent and subordinate to another party that has a stake in the transaction, such as the realtor or the mortgage broker.

It’s an outrage that these so-called “leaders” like Anastasi would try to reclaim the label of “independent” for themselves after they sold out their independence.  Their attempt to debase the meaning of the word independent should be seen as a direct attack on those who maintained their integrity and really did try to “ensure the integrity of transactions” by remaining a true and independent third party. 

It’s really no surprise that someone with so little regard for the true independent title agent is ALTA’s president.  ALTA basically threw in the towel on the independence of the whole title industry a couple decades ago.  Since then, a once proud and independent organization has more or less become a stooge for the banking industry.  If the banks want it, ALTA will play along. 

That’s how we got stuck with MERS.  What independent title industry association would have laid down for something that was convenient for the banks but so legally questionable and of little benefit to the title industry?  It boggles the mind.  But no, rather than objecting to MERS, ALTA became complicit in MERS.  That disastrous entanglement continues to this day, reaching a new and distressing low earlier this year when the ALTA CEO Kurt Pfotenhauer- took on the role of MERS Chairman and served in both roles for a time– a fact that ALTA’s members had to find out on their own; ALTA was entirely silent.  In fact, ALTA really never has much of anything to say about MERS.  About the only time ALTA speaks up regarding MERS is when the banks get sued because of another MERS foreclosure gone bad.  Then ALTA obediently springs into action. 

Independent?  Some of the “leaders” of the title industry need to relearn the meaning of the word. 

The Coming Trainwreck in the Supreme Court for Independent Title Agencies

RESPA Section 8– the federal law that prohibits kickbacks and equivalent pay-for-referral arrangements between referrers of settlement service business and settlement service providers– is an immensely important law that is due for some attention for the sake of independent title businesses, among others.  But unfortunately, the two RESPA Section 8 cases are now pending before the Supreme Court aren’t the attention that is needed.

I’ve got to say that as someone who finds sham affiliated business arrangements repugnant: I hate both of these RESPA Section 8 Supreme Court cases.  Neither Edwards in Edwards v. First American, nor Freeman in Freeman v. Quicken Loans has a particularly compelling case in general.  What that means is that the Supreme Court can come down in favor of big business, like it almost always does, and nobody is going to feel like the plaintiffs got screwed. 

To drive home the point, let’s look at the cases individually for a moment.

In Edwards v. First American, First American’s alleged misdeed is that it bought a minority stake in a large title agency and in return got an agreement that the title agency would use First American as its sole underwriter, cutting out other underwriters that the title agency was using up to that point.  Edwards used this title agency in her transaction and later alleged that this arrangement was an illegal fee splitting arrangement under RESPA Section 8.

To me, First American’s business arrangement in Edwards is lacking a critical element that makes realtor or broker or other referrer controlled affiliated business arrangements repugnant… namely, an undue conflict of interest inherent in the ownership arrangement that would be likely to discourage sound title work.  Unlike referrer-owned affiliated business arrangements, there is essentially no additional conflict of interest between an agency and their underwriter introduced by a part ownership arrangement that would encourage lax title standards so that someone could get their fee or commission.  The underwriter would naturally share an agent’s interest in the integrity of title, whether they own all, part, or none of the business.  Similarly, the interests of the underwriter are more or less aligned with the agency, even if there is an exclusivity agreement.  If the agency insures a bad transaction, whoever underwrote that transaction is likely to be damaged, regardless of whether they insure all that agency’s transactions or only some of them. 

There’s nothing else about Edwards’ case that engenders any extraordinary sympathy.  She wasn’t overcharged, and there’s no allegation that her transaction was mishandled.  She hasn’t had a title claim on the property as far as I know, and there’s no reason to believe that First American wouldn’t have paid a valid claim under the terms of the policy.  Let me put it this way… if it was only about Edwards, I could sleep at night if she lost. 

Problem is, it’s not just about her issue, or this particular flavor of business arrangement.  And the impending danger is that an unfavorable Supreme Court ruling in this case is going to greatly damage the chances of those who would like to go after more harmful business practices that rob the title industry of independence to the detriment of the consumer.

Freeman v. Quicken Loans is another loser.  Of all the cases that the Supreme Court could have chosen in order to clarify RESPA Section 8, Freeman has to be among the weakest and least relevant.  Freeman was charged a “loan discount fee” by Quicken Loans, but did not get a discount off of his interest rate.  I feel for the guy, but it’s simply not a particularly strong RESPA Section 8 case.  There’s no fee-splitting involved at all, no conflict of interest, no meat on the bone at all if you are concerned about kickback-like arrangements in the settlement service business.  In fact, it’s highly questionable that a loan discount fee is even a fee for a settlement service, considering that a federal appeals court has just ruled that it is not.  Yet who knows how the pro-big-business Supreme Court will use this case to put yet another brick in the wall against those of us who have an interest in preventing further undermining of RESPA Section 8.  

Neither case alleges kickbacks, sham affiliated business arrangements, or other schemes that involve paying out a portion of settlement service income in return for referrals– the core reason for a strong interpretation of RESPA Section 8.  But that won’t stop the Supreme Court from using these cases to render RESPA Section 8 even more toothless than it already is, to the benefit of all the dubious affiliated business arrangements that exist out there.

It really is a discouraging situation all around.  When I look at both these cases in the context of the previous pro-big-business decisions of this Supreme Court, it sure feels like the fix is in here.  It looks like the court has cherry-picked two weak RESPA Section 8 cases in order to issue pre-packaged rulings for the big guys, and I fully anticipate friendly rulings for affiliated business arrangements.  I do not blame the plaintiffs in these cases for pursuing their cases to the fullest extent (and Edwards actually won her appeal), but as an unintended consequence, I see nothing but bad news coming out of these Supreme Court cases, with ramifications far beyond the plaintiffs’ claims.  In my mind, the decisions in these cases are foregone conclusions and the only question is how deeply the Supreme Court will gut RESPA Section 8.  I hope I am wrong.

ALTA to Supreme Court: Controlled Business Arrangements "procompetitive".

Back in 1981, ALTA’s president testified under oath to Congress that controlled business arrangements were “the functional and economic equivalent of kickbacks” and that “controlled business arrangements will have a greater adverse impact on competition than kickbacks ever had.”

Now, ALTA is officially calling controlled business arrangements “procompetitive” in its amicus brief in the Supreme Court case Edwards v. First American.

Obviously, controlled business arrangements cannot possibly be both adverse to competition and procompetitive. So it is fair to ask ALTA: were you wrong then, or are you wrong now?

ALTA said in 1981:

In terms of the impact on consumers and the impact on other providers of title insurance services who do not offer such financial inducements but who seek to obtain business on the competitive merits of their products and services, these controlled business arrangements are the functional and economic equivalent of kickbacks… [B]ecause such controlled business arrangements have become more widespread than the payment of kickbacks ever was, controlled business arrangements will have a greater adverse impact on competition than kickbacks ever had.

ALTA then expanded on the negative consequences of the proliferation of controlled businesses:

When real estate professionals have a financial interest in the selection of a provider of title insurance services, they invariably steer their clients or customers to that provider, irrespective of the competitive merits of the services and rates offered by other title insurance providers in that market.

Because a controlled title insurance agency does not have to compete in the marketplace for its business– since it obtains its business by virtue of the ability of its owners to control the referrals of consumers– such an agency is subject to little or no competitive pressure to maintain the quality of its services or the reasonableness of its charges.

Title insurance companies or title insurance agencies that have not provided stock or other financial interests to real estate professionals who are in a position to make referrals or recommendations of the consumer’s business are placed at a serious competitive disadvantage– a disadvantage that cannot be overcome by offering the public better service or lower prices. Indeed, the very survival of these companies may be threatened.

Permitting such professionals to have financial or ownership interests in providers of title insurance services to which they refer business inevitably channels competition in a direction whereby title insurance entities seek to offer such professionals ever-increasing financial benefits; while this form of competition may serve the interests of real estate professionals, it clearly does not serve the interests of consumers.

The existence of controlled business arrangements in a particular market acts as a major deterrent to the entry of new title insurance companies or title insurance agencies into that market, since such potential entrants realize that they cannot expect to obtain business on the basis of the merits of their products and services, and cannot obtain business at all unless they are willing to offer controllers of business greater financial benefits than they are currently receiving.

A title insurance agency composed of or owned by real estate professionals is subject to serious conflicts of interest between the interests of its owners (e.g. a real estate broker in seeing the transaction consummated so as to earn a real estate brokerage fee), the interest of the consumer in being informed of all potential title problems that might threaten the use or enjoyment of the property he is purchasing, and the interest of the title insurance underwriter in insuring against prudent title risks only.

ALTA now says precisely the opposite:

Although in some instances all of the service
providers with whom a homebuyer interacts will be
independent businesses, in others those providers
may be related. For example, one service provider
such as a title insurer may have an ownership interest,
whole or partial, in another service provider such
as a closing company or real estate brokerage. Such
procompetitive arrangements are known in economics
and in antitrust law as “vertical integration” such
as when an auto company buys a parts company,
when a drug company buys a distributor, or when an
oil refiner runs its own service stations. These relationships
sometimes constitute “controlled” or “affiliated”
business arrangements

ALTA has totally changed its opinion of controlled business arrangements at some point and certainly appears to believe now that the views it expressed in 1981 were wrong. What was warned to be a harmful, anti-competitive business practice is now considered to be a beneficial, pro-competitive business practice. One would hope that such a change of mind was based on observed evidence in the decades since the emergence of controlled business in the title industry.

Let’s be clear: there is nothing wrong with ALTA changing its position per se. When John Maynard Keynes was accused by a critic of changing his position, Keynes famously responded, “When the facts change, I change my mind. What do you do, sir?”  If the facts about the title industry since the emergence of controlled business arrangements support a positive view of controlled business arrangements, then ALTA would be entirely correct to change its position.

Of course ALTA has never expressed any factual basis for its change in position.  So we are left to guess: what evidence could ALTA possibly have observed that contradict its views in 1981?

–Perhaps they believe that quality has improved?

If controlled business arrangements were procompetitive, we would expect title businesses to be vigorously competing on quality, encouraging improved workmanship, driving up standards, and forcing poor performers from the marketplace.

But instead, the evidence seems to indicate that just the opposite has occurred. Search standards have decreased substantially. In fact, we’ve learned that title insurance has been written on many transactions without any search whatsoever! The only thing that may have curbed that practice somewhat was a huge lawsuit, not competition.

Perhaps even stronger evidence of a decrease in standards and quality is in title claims. Forty years ago, before the passage of RESPA and the emergence of controlled business in the mid 1970s, title insurers paid about 2.5% of their income out on claims. Even in recent good times, the baseline for the claims ratio for the industry has been around twice that. More recently, it has been much worse than that.  In 2010, title insurers paid out nearly 12% of their income on claims— a more than fourfold increase in claims. If quality has improved, why are claims levels four to five times greater than they were before controlled business arrangements were widespread?

–Perhaps ALTA has access to data that indicates that controlled business arrangements produce better work than independents and that independent businesses contribute more to the high claims rates than controlled businesses?

It’s doubtful that ALTA has such data– if they do, I’ve never found it, and I have looked. But even if it were true that independent businesses were performing worse on quality than controlled businesses, it does not really contradict ALTA’s prediction in 1981. ALTA’s statements then express a belief that controlled business arrangements would disincentivize quality of work at both the controlled businesses themselves and at independent businesses as well.

 The controlled business is less focused on quality because it doesn’t need to be; the independent is less focused on quality because his business does not benefit from having high standards.

–Finally, perhaps all this supposedly procompetitive controlled business has driven down prices?

In the early 70s, a buyer could expect to pay around $3.50 per $1000 on average for title insurance for both the lender and himself. Today, according to data from bankrate.com, the nationwide average is more like $8 per $1000. In jurisdictions where title insurers have to ask permission to change their rates, they have been asking for rate increases for the most part in recent years.
 

 

Maybe “vertical integration” is beneficial in the auto industry. Maybe cars are of better quality now than they were 40 years ago because automakers can buy their parts suppliers. But ALTA does not represent the auto industry; it represents the land title industry, or at least it claims to do so. In this industry, we have higher prices and lower quality in the era of “vertical integration”.

The bottom line is this: virtually every negative effect predicted by ALTA in 1981 is now manifesting itself. 

How to get repeat business if you’re a title insurer in Indiana

If a title company overcharged customers for title insurance, what might be an appropriate penalty? My thought would be that if there was clear overcharging, forcing the offending company to refund the customers the amount of the overcharge would be appropriate.  If the overcharge was less blatant, a simple fine might suffice.  If no overcharge was apparent, then there should be no penalty at all, of course.

In Indiana however, the penalty for overcharging customers appears to be that the government will help the offending company win repeat business:

Indiana Department of Insurance (IDOI) Commissioner Stephen W. Robertson announced on June 22 a regulatory settlement with Stewart Title Guaranty Company that could provide discounts to up to 173,900 consumers over the next three years.

 http://www.kokomoperspective.com/…

The Department has been investigating title insurance companies doing
business in Indiana for overcharging home buyers when title insurance
was purchased.  Consumers should check with their title insurance agent to find out more.

This is the first resolution with any of the title insurance companies and provides an additional 15-percent discount to previous customers of Stewart Title.  Customers who purchased title insurance from Stewart for a residential purchase or refinance during the last ten years will be eligible for the discount for future title insurance policies. 

Yep that’s right– if you were overcharged by Stewart for title insurance in Indiana, your remedy is to get it back next time from Stewart, via a government-administered discount program.

The insurance commissioner touts this settlement as a win for overcharged consumers:

“It was the Department’s due diligence and Stewart’s willingness to come to the table, discuss the scope of the issue, and reach a resolution that made it possible for a timely and fair settlement for thousands of Hoosiers who previously purchased title insurance from Stewart.” said Robertson. 

How could this settlement possibly be fair for consumers?  Either they were overcharged or they weren’t.  If they were overcharged, the only fair thing would be for them to get a refund.  If they were not overcharged, they aren’t entitled to anything.  As it stands now, the only way to get any remedy at all from a company that allegedly overcharged you is to do more business with that company!  (And this leaves aside the fact that unless an affected consumer plans to buy real estate in the next three years, this settlement provides no remedy at all.)

 

I’m imagining former Stewart customers shopping for title insurance before and after this settlement–

Before the settlement:

“Title insurance?  I don’t care, whoever you think is best is fine with me.”

OR

“I want anybody but Stewart for title insurance.  They overcharged me last time.”

 

After the settlement:

“I gotta go with Stewart.  I get a 15% discount.”

 

So how exactly is this a penalty for Stewart?  If I was Stewart’s competitors, I wouldn’t be too happy about this settlement.  Stewart now has an edge in garnering repeat business from these 173,900 customers, thanks to the government running a de facto promotion for them. 

On the other hand, Stewart’s competitors will likely be rushing to the settlement table to reach similar agreements.

 

 

MERS IS BEING HAD BY ITS MEMBERS

This material deals with MERS’ obligation to record an assignment in the land records when the beneficial interest in a note is transferred to a non-MERS member, and the fact that this isn’t being done. It also addresses the utter lack of reliability of the MERS computer system and how MERS is being used by its members.

I believe MERS has really stepped in it.
In his declaration, William Hultman, a ‘real’ MERS’ corporate officer and not a straw one, in “Mitchell”, the well known Nevada case, (dkt No. 74 in the bk court, 07-16226, and again as an exhibit in the Mitchell appeal by MERS to the District Court), stated that when the note is transferred to a non-MERS’ member, MERS is compelled by the terms of its membership contract to record an assignment of the deed of trust to that non-MERS’ member in the land records. Hultman declaration p.1:25-27 and p.2:1-3:

“AS LONG AS THE SALE OF THE NOTE INVOLVES A MEMBER OF MERS, MERS REMAINS THE BENEFICIARY OF RECORD ON THE DEED OF TRUST AND CONTINUES TO ACT AS NOMINEE FOR THE NEW BENEFICIAL OWNER.

IF A MEMBER IS NO LONGER INVOLVED WITH THE LOAN AFTER IT IS SOLD (read note sold to non-MERS member such as a trust – sic), AN ASSIGNMENT OF THE LIEN FROM MERS TO THE NON-MERS MEMBER IS RECORDED IN THE COUNTY WHERE THE PROPERTY IS LOCATED, AND THE MORTGAGE LOAN IS DEACTIVATED FROM THE MERS SYSTEM. “

Commentator: This provision is in fact found in MERS’ contract. It isn’t happening, though, so Mr. Hultman recites only that which should be done, but isn’t.

The reason it must be done is because MERS no longer has nominee or beneficiary status ( pick one) and cannot act for the non-MERS member (assuming arguendo it could in the first place). In other words, they are at that point ‘toast’ pursuant to MERS’ own contract, and probably also would be toast as a matter of law for reasons outside this discussion.

The first important thing to recognize and remember here is that when a note is transferred to a non-MERS member, MERS embers are by its own contract and very likely as a matter of law toast, and MERS members are also compelled to record an assignment of the deed of trust in the land records.

MERS contract did not address "reestablishment" of its nominee /beneficiary status once the note left a/the/any MERS’ member. The truth must be that they neglected to even consider the matter for the formation of the membership contract, and thus did not (if they could) provide for such an event: They did not provide, nor perhaps could they have, for ‘re-establishment’ of MERS’ (alleged) nominee / beneficiary status when the note’s ownership returned (if ever) to a MERS’ member. What does this mean? It means MERS alleged status is extinguished forever when the note no longer is owned by a member.
(The note probably never has returned to any MERS’ member in the first place once it has ‘left’, but that’s another story.)

The same William Hultman made another declaration in In re Walker, 10-21656, October 21, 2010, BK Court, Eastern Division, CA at Sacramento (apparently he’s been assigned this task)

The declaration.is troubling. Really. It is full of half-truths if not lies. Hultman declaration, P. 2:8-11:

“WHEN THE BENEFICIAL INTEREST IN THE LOAN IS SOLD, THE PROMISSORY NOTE IS STILL NEGOTIATED PURSUANT TO THE UNIFORM SECURITY CODE, BUT MERS MEMBERS ARE OBLIGATED TO NOTIFY MERS OF THE TRANSFER SO THAT IT CAN BE ELECTRONICALLY TRACKED ON THE MERS SYSTEM.”

Commentator: Yes, that’s probably how it’s supposed to work, but because MERS is no more than a computer system and a contract, and does no diligence, MERS has no way of knowing if proper entries are made by its members or not.

Declaration at P. 2:20-23:

‘THE MERS TERMS AND CONDITIONS ……PROVIDE THAT ‘MERS SHALL AT ALL TIMES COMPLY WITH THE INSTRUCTIONS OF THE HOLDER OF MORTGAGE PROMISSORY NOTES’.”

Commentator: “MERS shall ..comply”? MERS per se doesn’t comply with anything. It’s REAL officers and computer-techies do nothing. They make no entries of transfers of notes, they prepare and execute no documents. It is only MERS’ members who make entries and only the straw officers at its members or those members’ foreclosure mills who actually prepare and execute assignments of deeds of trust (and even to themselves), and this is generally based on what those members have and have not entered into the computer system. But WHO WOULD KNOW WHAT IS ENTERED AND WHAT IS NOT AND IF IT’S ACCURATE AND COMPLETE? MERS has no way to know if the members are entering the transfers of notes to non-MERS’ members, or even to other MERS’ members. Whether the members are or are not making these entries is downright suspect. Regardless, no evidence is ever submitted to address the accuracy of MERS’ ‘records’, i.e., its members entries. Nor unfortunately have I seen this particular issued addressed by an opponent. MERS records are simply not reliable. Nor then are the alleged assignments done by its members just on that score.

So, again, at least if a transfer to a non-MERS member has not been entered by say, Wells Fargo, B of A, etal, the member (who was to record the transfer to a non-MERS member on the MERS system or even to another member, but didn’t) is pretty much free to assert any position they choose, standing on what is merely ALLEGED to be (or perhaps hiding) on the MERS’ computer system. WHO WOULD KNOW? Because there is no diligence, NO ONE would.

And the only ‘ledgers’ I have seen (not MERS’ computer records, but the docs which supposedly identify the loans in a trust) which purport to demonstrate that a particular note went into a particular trust don’t do much more than identify the loan by a zip code and a loan amount. (Can you imagine running your business with ‘records’ like this?)

More Walker declaration:

“AS OF THE DATE OF THE ORIGINATION OF THE NOTE AND DEED OF TRUST, Bayrock Mortgage was a MERS member, and pursuant to the MERS’ rule of membership, Rule 2, Section 5, Bayrock Mortgage appointed MERS to act as its agent to hold the deed of trust as nominee on Bayrock’s behalf. ……… Bayrock subsequently transferred the note to EMC. As of the date the note was transferred , EMC was a MERS member……..EMC subsequently transferred the note to Citibank……as of the date the note was transferred to Citibank, Citibank was a MERS member…..On March 5, 2010, MERS executed an assignment of the deed of trust to Citibank.”

Commentator: The date of the assignment of the deed of trust to Citibank is the only date mentioned by Mr. Hultman in regard to transfers. Does he not know the others? He then attached an alleged copy of Bayrock’s membership dated January 2007. The note and deed of trust were dated November of 2006!

Mr. Hultman’s declaration is first of all hearsay. He has no personal knowledge of the ‘facts’ he alleges. Further, while some rules allow testimony, essentially, by way of declarations, there are also rules in place to object to declarations. For instance, declarations do not give an opponent an opportunity to examine the declarant……a declaration cannot be cross-examined.

This is one of the reasons it is so very difficult for pro se litigants. They can very easily get lost in the sea of rules of evidence and a lack of knowledge of the rules of procedure can be fatal. . The attorneys who get ‘this stuff’ and the rules mostly work for the other team and they are privy to any number of missives to manipulate the court and the opposition, including the “White Paper”. It’s my opinion a lot of them are liars for hire, and apparently they are all part of the MERS’ attorney-network.

As to Mr. Hultman’s allegation that the ‘”note was transferred to Citibank” No, it wasn’t, not the beneficial interest, anyway. The note was transferred to the trust (well in essence should have been), a non-MERS member for which Citibank alleged it was the trustee. I don’t believe at that time any evidence was submitted to support a finding that the Walker note was in fact in the trust. And, Citibank may have been a MERS member, but some may argue “Citibank as Trustee” is not a member since there is no entity called ‘Citibank as Trustee’, and at any rate, the trustee does not have the beneficial interest in the note.. If anyone, it is the trust, a non-MERS member. (I say ‘if anyone’ in deference to some people’s thought that the note is destroyed by the conversion to securities.)

But a big problem here, of course, is that Bayrock was in fact not a MERS member on the date the loan was originated. WHO WOULD (NORMALLY) KNOW? IT’S ALSO SAD BUT TRUE THAT MERS BEING NAMED ON THE DEED OF TRUST IS IN FACT NOT EVIDENCE OF THE / ANY LENDER’S MEMBERSHIP IN MERS.

The next big problem in Walker for MERS is that the beneficial interest in the note has been transferred to a non-MERS member, the trust, yet no assignment of the deed of trust was recorded in the land records at the time of the transfer. MERS’ attorneys are fond of reciting certain state statutes alleging recordation is not necessary. Yet, by the terms of its own contract, MERS knows its members are to record assignments under certain circumstances. Further, as I have previously stated, some if not all states – I really don’t know which, one should read one’s own state statutes regarding recordation – have statutes which provide that an unrecorded interest in real property is ONLY binding on the parties to that unrecorded interest (such as NRS 111.315). This means that an unrecorded interest is not binding on the homeowner, who is a third party, and NOT a party to the instrument which created that interest in the homeowner’s property. If it’s not binding on the homeowner, an unrecorded assignment is surely not enforceable against the homeowner.

Mr. Hultman stated that the assignment was done “pursuant to the MERS contract”, which must be MERS-speak for “because the beneficial interest in the note had been transferred to a non-MERS member and an assignment should have been recorded in the land records and wasn’t.” Mr. Hultman’s actual words are not quite a lie, but they are nonetheless dishonest. He does not tell the court of this mandate. He does not want the court to know of the non-MERS members’ interest in the chain of the note’s ownership. This information appears to have been willfully kept from the court, the argument was framed in a manner to willfully mislead the court, and the intent to do so can be found in the words used and those not used.. This non-MERS member ramification is one of the reasons MERS and its members fight discovery so vehemently. It’s also the real reason MERS elected not to disclose the names of the note owners in “Mitchell”. They claimed it was a ‘test’ case. Not. This didn’t really cost them much in the big picture. MERS was simply denied relief from stay in Nevada bankruptcy court. No problem. Right after a collective yawn, different mauraders went in with their bogus assignments.

There are multiple discussions of the final disposition of In re Walker online, fyi.

It is an outrage and nothing short that MERS’ straw officers purport to “assign the note” along with the deed of trust in many of the assignments. Since this is entirely impossible, it is also a violation of state recording laws because a false instrument has been submitted for recordation. A false instrument is also being submitted to the court. If the courts ever get this, and it doesn’t shock their conscience, I don’t know what would.

So now we know that when the beneficial interest in the note goes to a non-MERS member, an assignment of the deed of trust must be recorded in the land records and MERS may no longer act as nominee,or beneficiary, or agent, or whatever they are calling themselves today. But then, when a member deems it a necessary part of its taking someone’s home, the member’s straw officer executes an assignment to its employer or to another MERS member in the name of MERS. BUT THEY CAN’T, because MERS is FOREVER TOAST since MERS’ status canNOT be re-established.

Therein lies the REAL RUB for MERS and its members: their contract does not provide for MERS’ re-establishment, so when a member either gets or alleges possession of the note endorsed usually in blank, or even to itself AFTER the note has been owned by a non-MERS member (Trust), they are ‘messed’, because there is no re-establishment of MERS’ (alleged ) status in the deed of trust. Perhaps the realization of MERS’ loss of status and the subsequent failure of re-establishment of that (alleged) status came too late, and by then, a zillion foreclosures had been done in MERS’ name by the straw officers/ member-employees or foreclosure millhouses. MERS did not provide for re-establishment in its contract with its members, (nor perhaps could they have as a matter of law). MERS and its members know this now if they didn’t.

IF MERS started out ‘straight’, if it had been created in good faith (which some of us think is dubious), it is actually now a pawn, as its members have gotten way out of control, starting with NOT making the entries into the MERS’ system when notes are transferred. Theories on why these entries were and are not made as well as why the deed of trust assignments were then not recorded abound, from sloppiness to the most brazen of criminalities.

Even if MERS did have beneficiary /nominee status or w/e,

when the NOTE GOES TO A NON-MERS MEMBER, THE TRUTH IS, THE DEED OF TRUST ASSIGNMENT SHOULD AND MUST BE EXECUTED CONCURRENTLY (which is how it was done in the ‘old’ days).

Why? Because otherwise MERS’ members are without authority since MERS MEMBERS MAY ONLY ACT IN MERS’ NAME WHEN THE BENEFICIAL INTEREST IN THE NOTE IS IN A MERS’ MEMBER. Once it isn’t, the member may not act in MERS name and thus may no longer even purport to assign a deed of trust.

One might next consider the matter of bifurcation of the note and deed of trust. It may be that the the bifurcation argument only works IF MERS IS actually the beneficiary / nominee on a deed of trust, because then argument is reasonably made that the note and dot are actually bifurcated, and certainly when the beneficial interest in the note is in a non-MERS’ member. That may not be true if a dot follows the note. BUT, then, significantly, if the dot follows the note and the note is securitized or otherwise with a non-MERS member, then MERS is/was still TOAST and an assignment should have been recorded to the non-MERS member and the loan should have been de-activated from MERS’ computer system. .

This would be true at least for every single loan where the beneficial interest in the note is held or was held in the chain by one or more non-MERS-member-Trusts.
The significance of this cannot be underscored, the fact that MERS is TOAST and also that MERS straw officers (assuming arguendo MERS ever had any authority to assign a deed of trust and that’s a big assumption) must record an assignment in the land records when the note is transferred to a non-MERS’ member, and the ramifications of this. As I understand MERS’ membership contract, the only time a member is actually authorized to execute an assignment is when the beneficial interest in the note is transferred to a non-MERS member.

Bottom Line:

MERS has been divested of its alleged status in the deeds of trust by the transfers of the beneficial interest in the notes to non-MERS’ members. MERS overlooked this circumstance in their contracts and the (alleged) status which was lost was not and cannot be re-established.

It’s possible they may not have realized this until many, many foreclosures had been done under color of their (alleged) status in the deeds of trust. Mr. Hultman’s declarations, however, points to their knowledge that what they are doing was and is wrong.

I have come to believe one must approach MERS, etal’s pleadings as a criminal defense attorney would. One must know the rules of evidence in order to accomplish this.

Entries were not made and assignments were not recorded when they should have been. MERS’ alleged status in the deeds of trust cannot be re-established once lost. MERScannot control the actions of its members. The tail is wagging the dog. The members have carte blanche whether by design or as an unforeseen consequence. MERScorp created a monster, MERS is being had by its members (and so are we), and short of litigation against its own members for the next millennium, MERS is helpless to stop it. MERS then in my opinion has chosen to knowingly participate in an errant and unlawful course of action to cover up the wrongful foreclosures which it knows has already occurred and for which there is no curing the "deficiencies", and that course is to continue the charade. ‘ 

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