Max Gardner on the Legal Implications of In re Veal

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Max Gardner on the Legal Implications of In re Veal
Today, June 19, 2011, 1 hour ago | Editor
Max’s comments on In re Veal:

The remarkable aspect of the Veal decision is that the Bankruptcy
Appellate Panel discusses almost every issue that comes into play when
an alleged secured residential mortgage creditor is seeking to assert
a claim or secure relief in a consumer’s Chapter 13 bankruptcy case.
For example, the Court discusses the issues of Constitutional
standing, prudential standing, the real party in interest issue, the
relationship of both Articles 3 and 9 of the Uniform Commercial Code
to the sale and transfer of mortgage notes, and then brings all of
these theories together under the central concept of who is the
“person entitled to enforce the note.”

The Court also applies some basic evidentiary rules to the facts of
this case and dismisses as it should have the argument that by listing
American Home on the sworn schedules the debtors some how admitted
that American Home was the “party or the designated agent of the party
entitled to enforce the note.”  And, the truly bizarre aspect of the
evidence presented by American Home, was that its attorneys believe
that an unauthenticated and non-sworn letter would withstand any type
of evidentiary objection.

The legal implications of the decision arise out to the fact that the
Court held that the Servicer (American Home) failed to prove that it
held any legal rights to even file a sworn proof of claim for the
party “entitled to enforce the note.”  The Court also noted that the
contested case created by the Veals’ filing of an Objection to the
proof of claim could result in a binding final decision on whether or
not the party entitled to enforce the note held or did not hold a
“secured claim” in bankruptcy or outside of the bankruptcy case.  The
legal impact of a successful objection by the Veals would be to turn
this claim from a loan secured by a mortgage on their home to a
general unsecured claim that might not even be allowable in their
bankruptcy case.  The lack of evidence submitted by American Home in
this case is appalling to say the least but typical of what is
normally filed by mortgage servicers in consumer bankruptcy cases.

The truly extraordinary thing about the decision, however, is that the
the motion for relief from the bankruptcy case so as to proceed with a
state court foreclosure was not filed by the mortgage servicer but by
the mortgage-backed securitized trust that allegedly held and owned
the Veals’ mortgage note (Wells Fargo Bank, N.A., as Trustee for
Option One Mortgage Loan Trust 2006-3 Asset-Backed Certificates,
Series 2006-3).  And, in reversing the Bankruptcy Courts order
granting such relief, the Appellate Panel held that the Trust had
failed to provide even minimal proof that it was the “person entitled
to enforce the note” and therefore did not have standing to seek
relief from the bankruptcy case.

The legal representation provided to the Veals in this case by Joe
Volin and his law firm demonstrated a high level of knowledge in the
complex law of mortgage securitization as well as a solid understating
of the rules of evidence and standing in federal court proceedings.
It is not an easy proposition to secure the reversal of a bankruptcy
court ruling on an objection to proof of claim and it is rare to
secure a reversal of a relief from stay ruling in the same case.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |