Wizmur’s ruling is being scrutinized by lawyers for borrowers seeking to stall repossessions as a way to press lenders to modify their debt. Attorneys for homeowners have already won cases by calling into doubt the legitimacy of affidavits used to take back properties.
“If this is correct, many, many, many foreclosures already occurred in which this plaintiff didn’t have the note,” said Bruce Levitt, the South Orange, New Jersey, attorney representing Kemp. “This could affect thousands or hundreds of thousands of loans.”
Giving notes to the trustees after the fact isn’t a solution because the rules governing trusts, enforced by New York trust law, require that assets are in place by a specified closing date, said O. Max Gardner III, a Shelby, North Carolina, bankruptcy litigator. The notes also can’t be transferred to the trust without first being conveyed through a chain of interim entities, he said.
“If they do an end run and directly deliver it to the trust, that would violate all the documents they filed with the SEC under oath as to what they did,” Gardner said.