MERS and Securitization in MERS and Securitization in Contested - PowerPoint PPT Presentation

Presenting a live 90 ‐ minute webinar with interactive Q&A MERS and Securitization in MERS and Securitization in Contested Foreclosure Litigation Overcoming Challenges to MERS, Standing and "Show Me the Note" Attacks THURS DAY, JANUARY 24, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: T d ’ f l f Andrew K. S tutzman, Partner, Stradley Ronon Stevens & Young , Philadelphia Joseph J. Patry, Attorney, Blank Rome , Washington, D.C. Gregory S Gregory S . Korman, Partner, Katten Muchin Rosenman , Los Angeles . Korman, Partner, Katten Muchin Rosenman , Los Angeles John R. Chiles, Partner, Burr & Forman , Ft. Lauderdale, Fla. Katrina Christakis, Partner, Grady Pilgrim Christakis Bell , Chicago The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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MERS AND SECURITIZATION IN CONTESTED FORECLOSURE LITIGATION Overcoming Challenges to MERS, Standing and “Show Me the Note” Attacks ANDREW K. STUTZMAN Sponsored by the Legal Webinar Group of Strafford Publications Publications Thursday, January 24, 2013 1:00 p.m. Eastern Time / 12:00 p.m. Central Time / 11:00 a.m. Mountain Time / 10:00 a.m. Pacific Time

THREE WAYS IN WHICH A PERSON MAY QUALIFY AS THE “PERSON TO ENFORCE THE NOTE” UNDER THE UCC 1, by being its holder ( i.e. , in possession of the note where the note is 1 b b i it h ld ( i i i f th t h th t i payable to the person or is payable to bearer); See UCC § 1201 (definition of “holder”), § 3201 (manner of negotiation). This determination requires physical examination not only of the face of the note but also of any p y y y indorsements. 2, by being a nonholder in possession who has the rights of a holder. See UCC §§ 3203, 3301(2). This method of becoming a person with a right to enforce a note arises when a party obtains possession of a note by means of a “transfer,” rather than a “negotiation.” See In re Veal, 450 B.R. 897, 911 (9 th Cir. BAP 2011) (comparing UCC § 3-201 (definition of negotiation) with UCC § 3-203(a) (definition of transfer)) UCC § 3 203(a) (definition of transfer)). 3, if the note has been destroyed or is lost or is in the wrongful possession of an unknown person or a person that cannot be found, by establishing that the person was formerly in possession of the note with the right to enforce p y p g when the loss of possession occurred (and the loss was not a result of a transfer of lawful seizure). See UCC § 3309. Stradley Ronon Stevens & Young, LLP 6

ARGUMENT: NON-MONETARY OBLIGATIONS VOID NEGOTIABLE INSTRUMENT STATUS NEGOTIABLE INSTRUMENT STATUS AND THEREFORE DISPLACE UCC HOLDER STATUS Debtor asserts that her non-monetary obligation to give the note holder D bt t th t h t bli ti t i th t h ld notice of a prepayment of principal strips the Note of its status as a negotiable instrument: (1) the requirement in UCC § 3104(a)(3) that the Note impose no obligation (1) the requirement in UCC § 3104(a)(3) that the Note impose no obligation or undertaking on the Debtor other than the payment of money, and (2) Paragraph 4 of the Note, which provides that in the event the Debtor makes a prepayment of principal (which is authorized by the Note), the makes a prepayment of principal (which is authorized by the Note), the Debtor must “tell the Note Holder in writing that [she is] doing so.” In re Walker, 466 B.R. 271 (E.D. of Pa., Bky. 2012) Stradley Ronon Stevens & Young, LLP 7

ARGUMENT REJECTED: THE NOTE IS A NEGOTIABLE INSTRUMENT AND SUBJECT THE NOTE IS A NEGOTIABLE INSTRUMENT AND SUBJECT TO UCC ENFORCEMENT BY ITS HOLDER “Th “The right of prepayment is a voluntary option that [Debtors] may elect to i ht f t i l t ti th t [D bt ] l t t exercise solely at their discretion. Indeed, such an allowance confers a benefit, not a burden, upon [Debtors], who can freely choose to decline the opportunity who can freely choose to decline the opportunity. The fact that [Debtors] must notify the lender in the event they opt for prepayment imposes no additional liability on them and is not a condition placed on defendants' promise to pay. placed on defendants promise to pay. Rather, notification is simply a requirement of the exercise of the right of prepayment which, as noted, defendants are free to reject. This requirement does not render the note in issue non-negotiable ” This requirement does not render the note in issue non-negotiable. In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012). See also Summers v. Pennymac Corp., 2012 WL 5944943 (N.D. TX). Stradley Ronon Stevens & Young, LLP 8

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ARGUMENT: TRUST LAW OVERRIDES UCC AND PSA WAS BREACHED AND PSA WAS BREACHED THEREBY RENDERING ASSIGNMENT VOID Regardless of the UCC, the Pooling and Servicing Agreement (PSA) and R dl f th UCC th P li d S i i A t (PSA) d New York trust law govern the holder’s rights in the note. Application of the PSA and New York trust law compels the conclusion that the holder has no rights in the note the holder has no rights in the note. In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012) Stradley Ronon Stevens & Young, LLP 10

ARGUMENT: TRUST LAW OVERRIDES UCC AND PSA WAS BREACHED AND PSA WAS BREACHED THEREBY RENDERING ASSIGNMENT VOID “Based on the foundational premise that the PSA and New York law, rather “B d th f d ti l i th t th PSA d N Y k l th than the UCC, control, the Debtor then asserts that the transfer of the Note to BNYM was not carried out in conformity with the requirements of the PSA, and that the lack of compliance with the PSA requires the disallowance of p q the Proof of Claim. Stated concisely, the Debtor contends that the Trust “never has, and never can own [the Note and that] ... [by] violating its own Pooling and Service Agreement, [the Trust] has prevented itself from ever having an enforceable right to [the Note and the Mortgage].’” In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012) Stradley Ronon Stevens & Young, LLP 11

ARGUMENT: TRUST LAW OVERRIDES UCC AND PSA WAS BREACHED AND PSA WAS BREACHED THEREBY RENDERING ASSIGNMENT VOID 1, the PSA is the document that established the Trust; 1 th PSA i th d t th t t bli h d th T t 2, the Trust is governed by New York law; 3, for an asset to become an asset of the Trust it must have been transferred to the Trust in conformity with the requirements of the PSA; 4, the PSA provides the only manner in which assets may be transferred to the Trust; 5, the Trust received possession of the indorsed Note no earlier January 6, 2009, thirty-seven (37) days after the Trust's “closing date;” 6, due to the tardy delivery of the Note to the Trust, the Note was not t transferred to the Trust in compliance with the PSA, rendering the purported f d t th T t i li ith th PSA d i th t d transfer ineffective under applicable New York law. In re Walker, 466 B.R. 271 (Bankr.E.D.Pa. 2012) Stradley Ronon Stevens & Young, LLP 12