After I discovered that Unnamed was not even requiring the bank to come to its own foreclosure sale, I went back and thought about old cases. Of course, foreclosure had become a hot topic over the last couple of years, and we had stopped several sales from happening. I thought of several files where I had run up against Unnamed, and then other foreclosure files where I had the same set of issues with other banks and trustees.
What did all of this mean? If the trustees consistently ran the foreclosure sales wrong, there was the potential that all of those sales could be invalid. Unnamed was one of the largest foreclosure mills in Missouri; if their foreclosures were all tossed, it would mean thousands of properties in limbo. But it also meant that thousands of families had been wrongly displaced, taken from their homes by people who had no legal right to do so.
I had my client bring in all of his paperwork and began sorting through it. The banks on most home loans had the borrowers sign hundreds of papers: Affidavits stating that John P. Doe was the same as J.P. Doe and John Phillip Doe. Stupid stuff. Legal stuff. Stuff that would make a one-armed paper pusher very tired.
But I noticed another major flaw:
All of these Harvard-educated lawyers and Stanford MBAs had forgotten simple legal steps to creating the Deed of Trust and Note. Imagine that: The two most important documents, and it almost seemed like they were afterthoughts.
For example: Most of the Deeds of Trust came up with all kinds of different definitions: Lender means this, Note Holder means that. Understandable. That's something almost any good contract does. But these Deeds of Trust almost forget to mention the Power of Sale.
The Power of Sale is different from the Power of Love. It has nothing to do with Huey Lewis. It is different from the Power of Greyskull, and bears no resemblance to Power Station, the mid-80s "super group" featuring various hair-sprayed members of Duran-Duran and such. Simply put, it is the clause that allows the bank and a trustee to sell your home without going to court.
Mortgage documents are just contracts. You can put in there what you want. If you agree to wear orange shoes and green pants in exchange for a lower rate, well, have at it. ( N.B.: Banks won't go for this. I already tried.) And if your contract includes a Power of Sale, well, then there's a Power of Sale.
But that's an IF. If a mortgage lender does a crappy job in writing a Power of Sale, that's their fault. In legalese, we say, "Contracts are construed against the drafter." That's a fancy (and more tactful) way of saying, "They wrote the damned thing. If they screwed it up, it's their fault."
And to my great surprise, what I kept running into was that the writers of the standard Deeds of Trust treated the Power of Sale like their crazy drunk uncle. They barely mentioned it. In the main deeds of trust used by most big banks (called RESPA documents), the Power of Sale is mentioned a grand total of:
-- wait for it --
One time.
What? The whole purpose of having a Deed of Trust in a non-foreclosure state is to have the Power of Sale. It's Rosebud. It's what Willis was talking about. You want to be able to foreclose without having to go to court. That's the whole point. And yet, in the most important of the 12, 453 documents you were required to sign in order to close on your house, the most important feature gets ONE MENTION!
And it gets better. It says, "If the Lender invokes the power of sale".
Huh? Are you kidding me? Think about this:
The Lender is whoever originates the mortgage. Most of the time with the big banks, they held onto the loan for the time it takes to open a jar of pickles. Then they dropped it like it was hot, collected a nice fee, and then walked the heck away.
Maybe this doesn't sound big to you. But they understand that future people are potentially going to hold the note who aren't the Lender. They call them the Note Holder (inventive, I know). They know someone else may bug you to get the payment. They're called the Loan Servicer. There's a little language in one place that MIGHT go in the favor of the banks on this, saying that the agreement "benefits" others who are assigned, but that's weak stuff.
To show you how easy it would have been to correct this problem, watch this:
THE WAY THAT IT IS: "If the Lender invokes the power of sale".
THEY WAY THAT IT EASILY COULD HAVE BEEN: "If the Lender, the Note Holder, the Loan Servicer, or any other holder in due course invokes the power of sale".
Was that hard? No. Would you have signed it to get your house. Ummm ... yes. You would have admitted to masterminding Jimmy Hoffa's disappearance to get that house. You would have signed.
I was now of the opinion that each mortgage now had major flaws. Foreclosures were likely called by the wrong people, and were perhaps devoid of the power of sale for anyone but the lender.
This was getting fun.
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