U.S. Senate Defeats Mortgage “Cram-Down” Provisions in S. 896

Senate Bill 896, with provisions similar to H.R. 1106 (Conyers, D-MI), went down to defeat today.

The legistlation Senator Dick Durbin (Durbin D-IL) referred to as: “The Helping Families Save Their Homes in Bankruptcy Act,” failed to garner enough votes in the Senate to stave off defeat.

The handwriting in the Senate may have been on the Wall for some weeks now. Durbin has been unable to convince large U.S. Banks to drop their opposition to its passage. The Mortgage Bankers Association and the American Bankers Association advanced strong opposition to both H.R. 1106 and S. 896.

Had S. 896 it passed, it would have moved forward with the following provisions. It would have operated by:

1) Eliminating a provision of the bankruptcy law that prohibits modifications to mortgage loans on a debtor's principal residence, so that primary mortgages are treated the same as vacation homes and family farms.
2) Extending the time frame debtors are allowed for repayment, in order to reduce monthly payments to make the mortgage more affordable.

3) Permitting bankruptcy judges to replace escalating variable interest rates with a new interest rate that will keep the mortgage affordable over the long term while also compensating creditors appropriately for risk.

4) Waiving the bankruptcy counseling requirement for families for whom foreclosure will soon commence, so that precious time is not lost as families fight to save their homes.
5) Ensuring lenders provide proper notice when assessing fees and allow judges to waive prepayment penalties.
6) Maintaining debtors' legal claims against predatory lenders while in bankruptcy.

Since S. 896 failed, a bankruptcy judge in a CH 13 or CH 7 proceeding still may not change personal residential home debt.

After the S. 896 failed to pass, Durbin indicated he intended to redraft and reintroduce similiar legislation in the future.

Hugh Wood
Atlanta, GA

& & &

WASHINGTON -- The Democratic-controlled Senate on Thursday defeated President Barack Obama's plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy.

A dozen Democrats joined Republicans in the 45-51 vote to scuttle the bill, which Obama had said was important to saving the economy and promised to push through Congress. But facing stiff opposition from banks, Obama did little to pressure lawmakers who worried it would encourage bankruptcy filings and spike interest rates.

"The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy," said Senate Republican Leader Mitch McConnell of Kentucky.


Democratic leaders lamented that they were powerless, with the 45 votes falling far short of the 60 to overcome procedural hurdles. The newest Democrat, Sen. Arlen Specter of Pennsylvania, voted against it.

"The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy," said Senate Majority Whip Dick Durbin of Illinois, who championed the bill and had spent weeks negotiating with financial lobbyists in a bid to strike a deal.

Obama long has backed the proposal to give debt-ridden individuals the option of asking a bankruptcy judge to reduce their mortgage payment. He cited that support last fall as he privately lobbied skeptical Democrats to back the $700 billion Wall Street bailout. And once he was president, he had promised, he would push for its passage.

In February, the newly inaugurated president included the proposal as the stick in a housing plan full of carrots for the banking industry. The broader rescue plan encouraged, but did not require, lenders to cut homeowners' monthly payments and refinance loans for individuals whose home's market value has sunk below what they owe.

The following month, the House passed the bankruptcy legislation along party lines in a 234-191 vote.

But the bankruptcy option got only a tepid endorsement from Treasury Secretary Timothy Geithner. As debate on the measure brewed, Geithner was pushing for the creation of a government-sponsored program that would rely on private investors to buy the risky mortgage-backed securities weighing down the market.

The forced easing, or "cram-down," of a mortgage by a bankruptcy judge would have likely introduced additional uncertainty for investors.

Congressional Democrats also questioned the merits.

"Do I want to have my rate go up so that somebody else might be able to cram down" their mortgage payment? asked Sen. Ben Nelson, D-Neb., who voted against the bill.

In recent days, as it became clear the bill would fail, the administration did little to counter the aggressive lobbying by banks fighting the bill.

Spokeswomen at the Treasury Department and White House did not respond to requests for comment, and absent from the debate was any statement of administration policy.

Obama supporters blamed the banks.

"There was a lot of fear-mongering," said Andrew Jakabovics, associate director for housing and economics at the Center for American Progress in Washington. "The banks put on a good show, saying, 'Hey, if you force us to take more losses, we're going to go out of business.'"

Indeed, the banking industry had a direct line to Capitol Hill. Officials from some of the biggest banks, including JP Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., as well as groups representing credit unions and community banks, negotiated for weeks with Durbin and other leading Senate Democrats.


Trying to win support, Durbin narrowed the provision substantially. The latest proposal would have restricted eligibility to homeowners already in foreclosure whose lender had not offered them better terms. Homes would also have to be worth less than $729,000 and apply to mortgage loans originated before 2009.

Durbin had offered the measure as an amendment to a housing bill aimed at easing the nation's credit crunch. That bill would guarantee bank deposits up to $250,000 through 2013.

The bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corp. from $30 billion to $100 billion. Increasing the FDIC's credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits.

The Senate is expected to vote on that measure next week. Durbin said he would try to restore the bankruptcy provision in conference with the House, although it was considered unlikely he would succeed.

"I'll be back," he said. "I'm not going to give up."

By ANNE FLAHERTY
The Associated Press
Thursday, April 30, 2009; 4:59 PM

& & &

Here is the full text of S. 896 (failed in Senate :: 04/30/2009)



111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 896CommentsClose CommentsPermalink

To prevent mortgage foreclosures and enhance mortgage credit availability.CommentsClose CommentsPermalink

IN THE SENATE OF THE UNITED STATESCommentsClose CommentsPermalink

April 24, 2009CommentsClose CommentsPermalink

Mr. DODD (for himself, Mr. DURBIN, and Mr. SCHUMER) introduced the following bill; which was read the first timeCommentsClose CommentsPermalink

April 27, 2009CommentsClose CommentsPermalink

Read the second time and placed on the calendarCommentsClose CommentsPermalink


A BILLCommentsClose CommentsPermalink

To prevent mortgage foreclosures and enhance mortgage credit availability.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as 'Helping Families Save Their Homes Act of 2009'.CommentsClose CommentsPermalink

(b) Table of Contents- The table of contents of this Act is the following:CommentsClose CommentsPermalink

Sec. 1. Short title; table of contents.CommentsClose CommentsPermalink

TITLE I--PREVENTION OF MORTGAGE FORECLOSURES
Sec. 101. FHA loan modification program.CommentsClose CommentsPermalink

Sec. 102. Mortgage modification data collecting and reporting.CommentsClose CommentsPermalink

TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITY
Sec. 201. Servicer safe harbor for mortgage loan modifications.CommentsClose CommentsPermalink

Sec. 202. Changes to HOPE for Homeowners Program.CommentsClose CommentsPermalink

Sec. 203. Requirements for FHA-approved mortgagees.CommentsClose CommentsPermalink

Sec. 204. Enhancement of liquidity and stability of insured depository institutions to ensure availability of credit and reduction of foreclosures.CommentsClose CommentsPermalink

Sec. 205. Application of GSE conforming loan limit to mortgages assisted with TARP funds.CommentsClose CommentsPermalink

Sec. 206. Mortgages on certain homes on leased land.CommentsClose CommentsPermalink

Sec. 207. Sense of Congress regarding mortgage revenue bond purchases.CommentsClose CommentsPermalink

TITLE III--MORTGAGE FRAUD
Sec. 301. Short title.CommentsClose CommentsPermalink

Sec. 302. Nationwide Mortgage Fraud Task Force.CommentsClose CommentsPermalink

TITLE IV--FORECLOSURE MORATORIUM PROVISIONS
Sec. 401. Sense of the Congress on foreclosures.CommentsClose CommentsPermalink

TITLE I--PREVENTION OF MORTGAGE FORECLOSURESCommentsClose CommentsPermalink

SEC. 101. FHA LOAN MODIFICATION PROGRAM.
(a) In General- Subsection (a) of section 204 of the National Housing Act (12 U.S.C. 1710(a)) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink

'(10) LOAN MODIFICATION PROGRAM-CommentsClose CommentsPermalink

'(A) AUTHORITY- The Secretary may carry out a program solely to encourage loan modifications for eligible delinquent mortgages through the payment of insurance benefits and assignment of the mortgage to the Secretary and the subsequent modification of the terms of the mortgage according to a loan modification approved by the mortgagee.CommentsClose CommentsPermalink

'(B) PAYMENT OF BENEFITS AND ASSIGNMENT- Under the program under this paragraph, the Secretary may pay insurance benefits for a mortgage, in the amount determined in accordance with paragraph (5)(A), without reduction for any amounts modified, but only upon the assignment, transfer, and delivery to the Secretary of all rights, interest, claims, evidence, and records with respect to the mortgage specified in clauses (i) through (iv) of paragraph (1)(A).CommentsClose CommentsPermalink

'(C) DISPOSITION- After modification of a mortgage pursuant to this paragraph, the Secretary may provide insurance under this title for the mortgage. The Secretary may subsequently--CommentsClose CommentsPermalink

'(i) re-assign the mortgage to the mortgagee under terms and conditions as are agreed to by the mortgagee and the Secretary;CommentsClose CommentsPermalink

'(ii) act as a Government National Mortgage Association issuer, or contract with an entity for such purpose, in order to pool the mortgage into a Government National Mortgage Association security; orCommentsClose CommentsPermalink

'(iii) re-sell the mortgage in accordance with any program that has been established for purchase by the Federal Government of mortgages insured under this title, and the Secretary may coordinate standards for interest rate reductions available for loan modification with interest rates established for such purchase.CommentsClose CommentsPermalink

'(D) LOAN SERVICING- In carrying out the program under this section, the Secretary may require the existing servicer of a mortgage assigned to the Secretary under the program to continue servicing the mortgage as an agent of the Secretary during the period that the Secretary acquires and holds the mortgage for the purpose of modifying the terms of the mortgage. If the mortgage is resold pursuant to subparagraph (C)(iii), the Secretary may provide for the existing servicer to continue to service the mortgage or may engage another entity to service the mortgage.'.CommentsClose CommentsPermalink

(b) Amendment to Partial Claim Authority- Paragraph (1) of section 230(b) of the National Housing Act (12 U.S.C. 1715u(b)(1)) is amended by striking '12 of the monthly mortgage payments' and inserting '30 percent of the unpaid principal balance of the mortgage'.CommentsClose CommentsPermalink

(c) Implementation- The Secretary of Housing and Urban Development may implement the amendments made by this section through notice or mortgagee letter.CommentsClose CommentsPermalink

SEC. 102. MORTGAGE MODIFICATION DATA COLLECTING AND REPORTING.
(a) Reporting Requirements- Not later than 120 days after the date of the enactment of this Act, and quarterly thereafter, the Comptroller of the Currency, in coordination with the Director of the Office of Thrift Supervision, shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Financial Services of the House of Representatives, and the Joint Economic Committee on the volume of mortgage modifications reported to the Office of the Comptroller of the Currency and the Office of Thrift Supervision, under the mortgage metrics program of each such Office, during the previous quarter, including the following:CommentsClose CommentsPermalink

(1) A copy of the data collection instrument currently used by the Office of the Comptroller of the Currency and the Office of Thrift Supervision to collect data on loan modifications.CommentsClose CommentsPermalink

(2) The total number of mortgage modifications resulting in each of the following:CommentsClose CommentsPermalink

(A) Additions of delinquent payments and fees to loan balances.CommentsClose CommentsPermalink

(B) Interest rate reductions and freezes.CommentsClose CommentsPermalink

(C) Term extensions.CommentsClose CommentsPermalink

(D) Reductions of principal.CommentsClose CommentsPermalink

(E) Deferrals of principal.CommentsClose CommentsPermalink

(F) Combinations of modifications described in subparagraph (A), (B), (C), (D), or (E).CommentsClose CommentsPermalink

(3) The total number of mortgage modifications in which the total monthly principal and interest payment resulted in the following:CommentsClose CommentsPermalink

(A) An increase.CommentsClose CommentsPermalink

(B) Remained the same.CommentsClose CommentsPermalink

(C) Decreased less than 10 percent.CommentsClose CommentsPermalink

(D) Decreased between 10 percent and 20 percent.CommentsClose CommentsPermalink

(E) Decreased 20 percent or more.CommentsClose CommentsPermalink

(4) The total number of loans that have been modified and then entered into default, where the loan modification resulted in--CommentsClose CommentsPermalink

(A) higher monthly payments by the homeowner;CommentsClose CommentsPermalink

(B) equivalent monthly payments by the homeowner;CommentsClose CommentsPermalink

(C) lower monthly payments by the homeowner of up to 10 percent;CommentsClose CommentsPermalink

(D) lower monthly payments by the homeowner of between 10 percent to 20 percent; orCommentsClose CommentsPermalink

(E) lower monthly payments by the homeowner of more than 20 percent.CommentsClose CommentsPermalink

(b) Data Collection-CommentsClose CommentsPermalink

(1) REQUIRED-CommentsClose CommentsPermalink

(A) IN GENERAL- Not later than 60 days after the date of the enactment of this Act, the Comptroller of the Currency and the Director of the Office of Thrift Supervision, shall issue mortgage modification data collection and reporting requirements to institutions covered under the reporting requirement of the mortgage metrics program of the Comptroller or the Director.CommentsClose CommentsPermalink

(B) INCLUSIVENESS OF COLLECTIONS- The requirements under subparagraph (A) shall provide for the collection of all mortgage modification data needed by the Comptroller of the Currency and the Director of the Office of Thrift Supervision to fulfill the reporting requirements under subsection (a).CommentsClose CommentsPermalink

(2) REPORT- The Comptroller of the Currency shall report all requirements established under paragraph (1) to each committee receiving the report required under subsection (a).CommentsClose CommentsPermalink

TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITYCommentsClose CommentsPermalink

SEC. 201. SERVICER SAFE HARBOR FOR MORTGAGE LOAN MODIFICATIONS.
(a) Safe Harbor-CommentsClose CommentsPermalink

(1) LOAN MODIFICATIONS AND WORKOUT PLANS- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer that acts consistent with the duty set forth in section 129A(a) of Truth in Lending Act (15 U.S.C. 1639a) shall not be liable for entering into a loan modification, workout, or other loss mitigation plan, including, but not limited to, disposition, including any modification or refinancing undertaken pursuant to standard loan modification, sale, or disposition guidelines issued by the Secretary of the Treasury or his designee under the Emergency Economic Stabilization Act of 2008, with respect to any such mortgage that meets all of the criteria set forth in paragraph (2)(B) to--CommentsClose CommentsPermalink

(A) any person, based on that person's ownership of a residential mortgage loan or any interest in a pool of residential mortgage loans or in securities that distribute payments out of the principal, interest and other payments in loans on the pool;CommentsClose CommentsPermalink

(B) any person who is obligated pursuant to a derivatives instrument to make payments determined in reference to any loan or any interest referred to in subparagraph (A); orCommentsClose CommentsPermalink

(C) any person that insures any loan or any interest referred to in subparagraph (A) under any law or regulation of the United States or any law or regulation of any State or political subdivision of any State.CommentsClose CommentsPermalink

(2) ABILITY TO MODIFY MORTGAGES-CommentsClose CommentsPermalink

(A) ABILITY- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer--CommentsClose CommentsPermalink

(i) shall not be limited in the ability to modify mortgages, the number of mortgages that can be modified, the frequency of loan modifications, or the range of permissible modifications; andCommentsClose CommentsPermalink

(ii) shall not be obligated to repurchase loans from or otherwise make payments to the securitization vehicle on account of a modification, workout, or other loss mitigation plan for a residential mortgage or a class of residential mortgages that constitute a part or all of the mortgages in the securitization vehicle,CommentsClose CommentsPermalink

if any mortgage so modified meets all of the criteria set forth in subparagraph (B).CommentsClose CommentsPermalink

(B) CRITERIA- The criteria under this subparagraph with respect to a mortgage are as follows:CommentsClose CommentsPermalink

(i) Default on the payment of such mortgage has occurred or is reasonably foreseeable.CommentsClose CommentsPermalink

(ii) The property securing such mortgage is occupied by the mortgagor of such mortgage.CommentsClose CommentsPermalink

(iii) The servicer reasonably and in good faith believes that the anticipated recovery on the principal outstanding obligation of the mortgage under the particular modification or workout plan or other loss mitigation action will exceed, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage to be realized through foreclosure.CommentsClose CommentsPermalink

(3) APPLICABILITY- This subsection shall apply only with respect to modifications, workouts, and other loss mitigation plans initiated before January 1, 2012.CommentsClose CommentsPermalink

(b) Reporting- Each servicer that engages in loan modifications or workout plans subject to the safe harbor in subsection (a) shall report to the Secretary on a regular basis regarding the extent, scope and results of the servicer's modification activities. The Secretary shall prescribe regulations specifying the form, content, and timing of such reports.CommentsClose CommentsPermalink

(c) Definitions- For purposes of this section, the following definitions shall apply:CommentsClose CommentsPermalink

(1) SECRETARY- The term 'Secretary' means the Secretary of the Treasury.CommentsClose CommentsPermalink

(2) SECURITIZATION VEHICLE- The term 'securitization vehicle' means a trust, corporation, partnership, limited liability entity, special purpose entity, or other structure that--CommentsClose CommentsPermalink

(A) is the issuer, or is created by the issuer, of mortgage pass-through certificates, participation certificates, mortgage-backed securities, or other similar securities backed by a pool of assets that includes residential mortgage loans; andCommentsClose CommentsPermalink

(B) holds such mortgages.CommentsClose CommentsPermalink

SEC. 202. CHANGES TO HOPE FOR HOMEOWNERS PROGRAM.
(a) Program Changes- Section 257 of the National Housing Act (12 U.S.C. 1715z-23) is amended--CommentsClose CommentsPermalink

(1) in subsection (c)--CommentsClose CommentsPermalink

(A) in the heading for paragraph (1), by striking 'THE BOARD' and inserting 'SECRETARY';CommentsClose CommentsPermalink

(B) in paragraph (1), by striking 'Board' inserting 'Secretary, after consultation with the Board,'; andCommentsClose CommentsPermalink

(C) by adding after paragraph (2) the following:CommentsClose CommentsPermalink

'(3) DUTIES OF BOARD- The Board shall advise the Secretary regarding the establishment and implementation of the HOPE for Homeowners Program.'.CommentsClose CommentsPermalink

(2) by striking 'Board' each place such term appears in subsections (e), (h)(1), (h)(3), (j), (l), (n), (s)(3), and (v) and inserting 'Secretary';CommentsClose CommentsPermalink

(3) in subsection (e)--CommentsClose CommentsPermalink

(A) by striking paragraph (1) and inserting the following:CommentsClose CommentsPermalink

'(1) BORROWER CERTIFICATION-CommentsClose CommentsPermalink

'(A) NO INTENTIONAL DEFAULT OR FALSE INFORMATION- The mortgagor shall provide a certification to the Secretary that the mortgagor has not intentionally defaulted on the existing mortgage or mortgages and has not knowingly, or willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining the eligible mortgage to be insured and has not been convicted under Federal or State law for fraud during the 10-year period ending upon the insurance of the mortgage under this section.CommentsClose CommentsPermalink

'(B) LIABILITY FOR REPAYMENT- The mortgagor shall agree in writing that the mortgagor shall be liable to repay to the Secretary any direct financial benefit achieved from the reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made by the mortgagor in the certifications and documentation required under this paragraph, subject to the discretion of the Secretary.';CommentsClose CommentsPermalink

(B) in paragraph (4)(A), by striking '; subject to standards established by the Board under subparagraph (B),';CommentsClose CommentsPermalink

(C) in paragraph (7), by striking 'and provided that' and all that follows through 'new second lien' and inserting 'and except that the Secretary may, under such terms and conditions as the Secretary may establish, permit the establishment of a second lien on a property under an eligible mortgage to be insured, for the purpose of facilitating payment of closing or refinancing costs by a State or locality using funds provided under the HOME Investment Partnerships program under title II of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12721 et seq.) or the community development block grants program under title I of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 et seq.) or by a State or local housing finance agency';CommentsClose CommentsPermalink

(D) in paragraph (9)--CommentsClose CommentsPermalink

(i) by striking 'by procuring (A) an income tax return transcript of the income tax return of the mortgagor, or (B)' and inserting 'in accordance with procedures and standards that the Secretary shall establish, which may include requiring the mortgagee to procure'; andCommentsClose CommentsPermalink

(ii) by striking 'and by any other method, in accordance with procedures and standards that the Board shall establish';CommentsClose CommentsPermalink

(E) by striking subparagraph (10);CommentsClose CommentsPermalink

(F) in paragraph (11), by inserting before the period at the end the following: ', except that the Secretary may provide exceptions to such latter requirement (relating to present ownership interest) for any mortgagor who has inherited a property or for any mortgagor who has relocated to a new jurisdiction, and is in the process of trying to sell such property or has been unable to sell such property due to adverse market conditions';CommentsClose CommentsPermalink

(G) by redesignating paragraph (11) as paragraph (10); andCommentsClose CommentsPermalink

(H) by adding at the end:CommentsClose CommentsPermalink

'(11) BAN ON MILLIONAIRES- The mortgagor shall not have a net worth, as of the date the mortgagor first applies for a mortgage to be insured under the Program under this section, that exceeds $1,000,000.';CommentsClose CommentsPermalink

(4) in subsection (h)(2)--CommentsClose CommentsPermalink

(A) by striking 'The Board shall prohibit the Secretary from paying' and inserting 'The Secretary shall not pay'; andCommentsClose CommentsPermalink

(B) by inserting after the period at the end the following: 'In implementing this provision with respect to a failure by a mortgagor to make a first payment, the Secretary shall establish policies and timing of endorsements as consistent as is possible with endorsement policies established with respect to mortgages insured under section 203(b)';CommentsClose CommentsPermalink

(5) in subsection (i)--CommentsClose CommentsPermalink

(A) by inserting ', after weighing maximization of participation with consideration of collection of premiums,' after 'Secretary shall';CommentsClose CommentsPermalink

(B) in paragraph (1), by striking 'equal to 3 percent' and inserting 'not more than 2 percent'; andCommentsClose CommentsPermalink

(C) in paragraph (2), by striking 'equal to 1.5 percent' and inserting 'not more than 1 percent';CommentsClose CommentsPermalink

(6) in subsection (k)--CommentsClose CommentsPermalink

(A) by striking the subsection heading and inserting 'Exit Fee';CommentsClose CommentsPermalink

(B) in paragraph (1), in the matter preceding subparagraph (A), by striking 'such sale or refinancing' and inserting 'the mortgage being insured under this section'; andCommentsClose CommentsPermalink

(C) in paragraph (2), by striking 'and the mortgagor' and all that follows through the end and inserting 'may, upon any sale or disposition of the property to which the mortgage relates, be entitled to up to 50 percent of appreciation, up to the appraised value of the home at the time when the mortgage being refinanced under this section was originally made. The Secretary may share any amounts received under this paragraph with the holder of the eligible mortgage refinanced under this section.';CommentsClose CommentsPermalink

(7) in the heading for subsection (n), by striking 'the Board' and inserting 'Secretary';CommentsClose CommentsPermalink

(8) in subsection (p), by striking 'Under the direction of the Board, the' and inserting 'The';CommentsClose CommentsPermalink

(9) in subsection (s)--CommentsClose CommentsPermalink

(A) in the first sentence of paragraph (2), by striking 'Board of Directors of' and inserting 'Advisory Board for'; andCommentsClose CommentsPermalink

(B) in paragraph (3)(A)(ii), by striking 'subsection (e)(1)(B) and such other' and inserting 'such';CommentsClose CommentsPermalink

(10) in subsection (v), by inserting after the period at the end the following: 'The Secretary shall conform documents, forms, and procedures for mortgages insured under this section to those in place for mortgages insured under section 203(b) to the maximum extent possible consistent with the requirements of this section.'; andCommentsClose CommentsPermalink

(11) by adding at the end the following new subsections:CommentsClose CommentsPermalink

'(x) Payment to Existing Loan Servicer- The Secretary may establish a payment to the servicer of the existing senior mortgage for every loan insured under the HOPE for Homeowners Program in an amount, for each such loan, that does not exceed $1,000.CommentsClose CommentsPermalink

'(y) Auctions- The Secretary, with the concurrence of the Board, shall, if feasible, establish a structure and organize procedures for an auction to refinance eligible mortgages on a wholesale or bulk basis.'.CommentsClose CommentsPermalink

(b) Reducing TARP Funds To Offset Costs of Program Changes- Paragraph (3) of section 115(a) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5225) is amended by inserting ', as such amount is reduced by $2,316,000,000,' after '$700,000,000,000'.CommentsClose CommentsPermalink

SEC. 203. REQUIREMENTS FOR FHA-APPROVED MORTGAGEES.
(a) Mortgagee Review Board- Paragraph (2) of section 202(c) of the National Housing Act (12 U.S.C. 1708(c)) is amended--CommentsClose CommentsPermalink

(1) in subparagraph (E), by inserting 'and' after the semicolon;CommentsClose CommentsPermalink

(2) in subparagraph (F), by striking '; and' and inserting a period; andCommentsClose CommentsPermalink

(3) by striking subparagraph (G).CommentsClose CommentsPermalink

(b) Limitations on Participation and Mortgagee Approval and Use of Name- Section 202 of the National Housing Act (12 U.S.C. 1708) is amended--CommentsClose CommentsPermalink

(1) by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g), respectively;CommentsClose CommentsPermalink

(2) by inserting after subsection (c) the following new subsection:CommentsClose CommentsPermalink

'(d) Limitations on Participation in Origination and Mortgagee Approval-CommentsClose CommentsPermalink

'(1) REQUIREMENT- Any person or entity that is not approved by the Secretary to serve as a mortgagee, as such term is defined in subsection (c)(7), shall not participate in the origination of an FHA-insured loan except as authorized by the Secretary.CommentsClose CommentsPermalink

'(2) ELIGIBILITY FOR APPROVAL- In order to be eligible for approval by the Secretary, an applicant mortgagee shall not be, and shall not have any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the applicant mortgagee who is--CommentsClose CommentsPermalink

'(A) currently suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under part 24 or 25 of title 24 of the Code of Federal Regulations, or any successor regulations to such parts, or under similar provisions of any other Federal agency;CommentsClose CommentsPermalink

'(B) under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant's integrity, competence or fitness to meet the responsibilities of an approved mortgagee;CommentsClose CommentsPermalink

'(C) subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review;CommentsClose CommentsPermalink

'(D) engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;CommentsClose CommentsPermalink

'(E) convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry--CommentsClose CommentsPermalink

'(i) during the 7-year period preceding the date of the application for licensing and registration; orCommentsClose CommentsPermalink

'(ii) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;CommentsClose CommentsPermalink

'(F) in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of State law; orCommentsClose CommentsPermalink

'(G) in violation of any other requirement as established by the Secretary.CommentsClose CommentsPermalink

'(3) RULEMAKING AND IMPLEMENTATION- The Secretary shall conduct a rulemaking to carry out this subsection. The Secretary shall implement this subsection not later than the expiration of the 60-day period beginning upon the date of the enactment of this subsection by notice, mortgagee letter, or interim final regulations, which shall take effect upon issuance.'; andCommentsClose CommentsPermalink

(3) by adding at the end the following new subsection:CommentsClose CommentsPermalink

'(h) Use of Name- The Secretary shall, by regulation, require each mortgagee approved by the Secretary for participation in the FHA mortgage insurance programs of the Secretary--CommentsClose CommentsPermalink

'(1) to use the business name of the mortgagee that is registered with the Secretary in connection with such approval in all advertisements and promotional materials, as such terms are defined by the Secretary, relating to the business of such mortgagee in such mortgage insurance programs; andCommentsClose CommentsPermalink

'(2) to maintain copies of all such advertisements and promotional materials, in such form and for such period as the Secretary requires.'.CommentsClose CommentsPermalink

(c) Change of Status- The National Housing Act is amended by striking section 532 (12 U.S.C. 1735f-10) and inserting the following new section:CommentsClose CommentsPermalink

'SEC. 532. CHANGE OF MORTGAGEE STATUS.
'(a) Notification- Upon the occurrence of any action described in subsection (b), an approved mortgagee shall immediately submit to the Secretary, in writing, notification of such occurrence.CommentsClose CommentsPermalink

'(b) Actions- The actions described in this subsection are as follows:CommentsClose CommentsPermalink

'(1) The debarment, suspension of a Limited Denial of Participation (LDP), or application of other sanctions, fines, or penalties applied to the mortgagee or to any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the mortgagee pursuant to applicable provisions of State or Federal law.CommentsClose CommentsPermalink

'(2) The revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other similar declaration of ineligibility pursuant to State law.'.CommentsClose CommentsPermalink

(d) Civil Money Penalties- Section 536 of the National Housing Act (12 U.S.C. 1735f-14) is amended--CommentsClose CommentsPermalink

(1) in subsection (b)--CommentsClose CommentsPermalink

(A) in paragraph (1)--CommentsClose CommentsPermalink

(i) in the matter preceding subparagraph (A), by inserting 'or any of its owners, officers, or directors' after 'mortgagee or lender';CommentsClose CommentsPermalink

(ii) in subparagraph (H), by striking 'title I' and all that follows through 'Act of 1989)' and inserting 'title I or II'; andCommentsClose CommentsPermalink

(iii) by inserting after subparagraph (J) the following:CommentsClose CommentsPermalink

'(K) Violation of section 202(d) of this Act (12 U.S.C. 1708(d)).'; andCommentsClose CommentsPermalink

(B) in paragraph (2)--CommentsClose CommentsPermalink

(i) in subparagraph (B), by striking 'or' at the end;CommentsClose CommentsPermalink

(ii) in subparagraph (C), by striking the period at the end and inserting '; or'; andCommentsClose CommentsPermalink

(iii) by adding at the end the following new subparagraph:CommentsClose CommentsPermalink

'(D) causing or participating in any of the violations set forth in paragraph (1) of this subsection.'; andCommentsClose CommentsPermalink

(2) in subsection (g), by striking 'The term' and all that follows through the end of the sentence and inserting 'For purposes of this section, a person acts knowingly when a person has actual knowledge of acts or should have known of the acts.'.CommentsClose CommentsPermalink

(e) Expanded Review of FHA Mortgagee Applicants and Newly Approved Mortgagees- Not later than the expiration of the 3-month period beginning upon the date of the enactment of this Act, the Secretary of Housing and Urban Development shall--CommentsClose CommentsPermalink

(1) expand the existing process for reviewing new applicants for approval for participation in the mortgage insurance programs of the Secretary for mortgages on 1- to 4-family residences for the purpose of identifying applicants who represent a high risk to the Mutual Mortgage Insurance Fund; andCommentsClose CommentsPermalink

(2) implement procedures that, for mortgagees approved during the 12-month period ending upon such date of enactment--CommentsClose CommentsPermalink

(A) expand the number of mortgages originated by such mortgagees that are reviewed for compliance with applicable laws, regulations, and policies; andCommentsClose CommentsPermalink

(B) include a process for random reviews of such mortgagees and a process for reviews that is based on volume of mortgages originated by such mortgagees.CommentsClose CommentsPermalink

SEC. 204. ENHANCEMENT OF LIQUIDITY AND STABILITY OF INSURED DEPOSITORY INSTITUTIONS TO ENSURE AVAILABILITY OF CREDIT AND REDUCTION OF FORECLOSURES.
(a) Permanent Increase in Deposit Insurance-CommentsClose CommentsPermalink

(1) AMENDMENTS TO FEDERAL DEPOSIT INSURANCE ACT- Effective upon the date of the enactment of this Act, section 11(a) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is amended--CommentsClose CommentsPermalink

(A) in paragraph (1)(E), by striking '$100,000' and inserting '$250,000';CommentsClose CommentsPermalink

(B) in paragraph (1)(F)(i), by striking '2010' and inserting '2015';CommentsClose CommentsPermalink

(C) in subclause (I) of paragraph (1)(F)(i), by striking '$100,000' and inserting '$250,000';CommentsClose CommentsPermalink

(D) in subclause (II) of paragraph (1)(F)(i), by striking 'the calendar year preceding the date this subparagraph takes effect under the Federal Deposit Insurance Reform Act of 2005' and inserting 'calendar year 2008'; andCommentsClose CommentsPermalink

(E) in paragraph (3)(A), by striking ', except that $250,000 shall be substituted for $100,000 wherever such term appears in such paragraph'.CommentsClose CommentsPermalink

(2) AMENDMENT TO FEDERAL CREDIT UNION ACT- Section 207(k) of the Federal Credit Union Act (12 U.S.C. 1787(k)) is amended--CommentsClose CommentsPermalink

(A) in paragraph (3)--CommentsClose CommentsPermalink

(i) by striking the opening quotation mark before '$250,000';CommentsClose CommentsPermalink

(ii) by striking ', except that $250,000 shall be substituted for $100,000 wherever such term appears in such section'; andCommentsClose CommentsPermalink

(iii) by striking the closing quotation mark after the closing parenthesis; andCommentsClose CommentsPermalink

(B) in paragraph (5), by striking '$100,000' and inserting '$250,000'.CommentsClose CommentsPermalink

(3) REPEAL OF EESA PROVISION- Section 136 of the Emergency Economic Stabilization Act (12 U.S.C. 5241) is hereby repealed.CommentsClose CommentsPermalink

(b) Extension of Restoration Plan Period- Section 7(b)(3)(E)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(3)(E)(ii)) is amended by striking '5-year period' and inserting '8-year period'.CommentsClose CommentsPermalink

(c) FDIC and NCUA Borrowing Authority-CommentsClose CommentsPermalink

(1) FDIC- Section 14(a) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a)) is amended by striking '$30,000,000,000' and inserting '$100,000,000,000'.CommentsClose CommentsPermalink

(2) NCUA- Section 203(d)(1) of the Federal Credit Union Act (12 U.S.C. 1783(d)(1)) is amended by striking '$100,000,000' and inserting '$6,000,000,000'.CommentsClose CommentsPermalink

(d) Expanding Systemic Risk Special Assessments- Section 13(c)(4)(G)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)(G)(ii)) is amended to read as follows:CommentsClose CommentsPermalink

'(ii) REPAYMENT OF LOSS-CommentsClose CommentsPermalink

'(I) IN GENERAL- The Corporation shall recover the loss to the Deposit Insurance Fund arising from any action taken or assistance provided with respect to an insured depository institution under clause (i) from 1 or more special assessments on insured depository institutions, depository institution holding companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both, as the Corporation determines to be appropriate.CommentsClose CommentsPermalink

'(II) TREATMENT OF DEPOSITORY INSTITUTION HOLDING COMPANIES- For purposes of this clause, sections 7(c)(2) and 18(h) shall apply to depository institution holding companies as if they were insured depository institutions.CommentsClose CommentsPermalink

'(III) REGULATIONS- The Corporation shall prescribe such regulations as it deems necessary to implement this clause. In prescribing such regulations, defining terms, and setting the appropriate assessment rate or rates, the Corporation shall establish rates sufficient to cover the losses incurred as a result of the actions of the Corporation under clause (i) and shall consider: the types of entities that benefit from any action taken or assistance provided under this subparagraph; economic conditions, the effects on the industry, and such other factors as the Corporation deems appropriate and relevant to the action taken or the assistance provided. Any funds so collected that exceed actual losses shall be placed in the Deposit Insurance Fund.'.CommentsClose CommentsPermalink

(e) Establishment of a National Credit Union Share Insurance Fund Restoration Plan Period- Section 202(c)(2) of the Federal Credit Union Act (12 U.S.C. 1782(c)(2)) is amended by adding at the end the following new subparagraph:CommentsClose CommentsPermalink

'(D) FUND RESTORATION PLANS-CommentsClose CommentsPermalink

'(i) IN GENERAL- Whenever--CommentsClose CommentsPermalink

'(I) the Board projects that the equity ratio of the Fund will, within 6 months of such determination, fall below the minimum amount specified in subparagraph (C) for the designated equity ratio; orCommentsClose CommentsPermalink

'(II) the equity ratio of the Fund actually falls below the minimum amount specified in subparagraph (C) for the equity ratio without any determination under sub-clause (I) having been made,CommentsClose CommentsPermalink

the Board shall establish and implement a Share Insurance Fund restoration plan within 90 days that meets the requirements of clause (ii) and such other conditions as the Board determines to be appropriate.CommentsClose CommentsPermalink

'(ii) REQUIREMENTS OF RESTORATION PLAN- A Share Insurance Fund restoration plan meets the requirements of this clause if the plan provides that the equity ratio of the Fund will meet or exceed the minimum amount specified in subparagraph (C) for the designated equity ratio before the end of the 5-year period beginning upon the implementation of the plan (or such longer period as the Board may determine to be necessary due to extraordinary circumstances).CommentsClose CommentsPermalink

'(iii) TRANSPARENCY- Not more than 30 days after the Board establishes and implements a restoration plan under clause (i), the Board shall publish in the Federal Register a detailed analysis of the factors considered and the basis for the actions taken with regard to the plan.'.CommentsClose CommentsPermalink

SEC. 205. APPLICATION OF GSE CONFORMING LOAN LIMIT TO MORTGAGES ASSISTED WITH TARP FUNDS.
In making any assistance available to prevent and mitigate foreclosures on residential properties, including any assistance for mortgage modifications, using any amounts made available to the Secretary of the Treasury under title I of the Emergency Economic Stabilization Act of 2008, the Secretary shall provide that the limitation on the maximum original principal obligation of a mortgage that may be modified, refinanced, made, guaranteed, insured, or otherwise assisted, using such amounts shall not be less than the dollar amount limitation on the maximum original principal obligation of a mortgage that may be purchased by the Federal Home Loan Mortgage Corporation that is in effect, at the time that the mortgage is modified, refinanced, made, guaranteed, insured, or otherwise assisted using such amounts, for the area in which the property involved in the transaction is located.CommentsClose CommentsPermalink

SEC. 206. MORTGAGES ON CERTAIN HOMES ON LEASED LAND.
Section 255(b)(4) of the National Housing Act (12 U.S.C. 1715z-20(b)(4)) is amended by striking subparagraph (B) and inserting:CommentsClose CommentsPermalink

'(B) under a lease that has a term that ends no earlier than the minimum number of years, as specified by the Secretary, beyond the actuarial life expectancy of the mortgagor or comortgagor, whichever is the later date.'.CommentsClose CommentsPermalink

SEC. 207. SENSE OF CONGRESS REGARDING MORTGAGE REVENUE BOND PURCHASES.
It is the sense of the Congress that the Secretary of the Treasury should use amounts made available in this Act to purchase mortgage revenue bonds for single-family housing issued through State housing finance agencies and through units of local government and agencies thereof.CommentsClose CommentsPermalink

TITLE III--MORTGAGE FRAUDCommentsClose CommentsPermalink

SEC. 301. SHORT TITLE.
This title may be cited as the 'Nationwide Mortgage Fraud Task Force Act of 2009'.CommentsClose CommentsPermalink

SEC. 302. NATIONWIDE MORTGAGE FRAUD TASK FORCE.
(a) Establishment- There is established in the Department of Justice the Nationwide Mortgage Fraud Task Force (hereinafter referred to in this section as the 'Task Force') to address mortgage fraud in the United States.CommentsClose CommentsPermalink

(b) Support- The Attorney General shall provide the Task Force with the appropriate staff, administrative support, and other resources necessary to carry out the duties of the Task Force.CommentsClose CommentsPermalink

(c) Executive Director- The Attorney General shall appoint one staff member provided to the Task Force to be the Executive Director of the Task Force and such Executive Director shall ensure that the duties of the Task Force are carried out.CommentsClose CommentsPermalink

(d) Branches- The Task Force shall establish, oversee, and direct branches in each of the 10 States determined by the Attorney General to have the highest concentration of mortgage fraud.CommentsClose CommentsPermalink

(e) Mandatory Functions- The Task Force, including the branches of the Task Force established under subsection (d), shall--CommentsClose CommentsPermalink

(1) establish coordinating entities, and solicit the voluntary participation of Federal, State, and local law enforcement and prosecutorial agencies in such entities, to organize initiatives to address mortgage fraud, including initiatives to enforce State mortgage fraud laws and other related Federal and State laws;CommentsClose CommentsPermalink

(2) provide training to Federal, State, and local law enforcement and prosecutorial agencies with respect to mortgage fraud, including related Federal and State laws;CommentsClose CommentsPermalink

(3) collect and disseminate data with respect to mortgage fraud, including Federal, State, and local data relating to mortgage fraud investigations and prosecutions; andCommentsClose CommentsPermalink

(4) perform other functions determined by the Attorney General to enhance the detection of, prevention of, and response to mortgage fraud in the United States.CommentsClose CommentsPermalink

(f) Optional Functions- The Task Force, including the branches of the Task Force established under subsection (d), may--CommentsClose CommentsPermalink

(1) initiate and coordinate Federal mortgage fraud investigations and, through the coordinating entities established under subsection (e), State and local mortgage fraud investigations;CommentsClose CommentsPermalink

(2) establish a toll-free hotline for--CommentsClose CommentsPermalink

(A) reporting mortgage fraud;CommentsClose CommentsPermalink

(B) providing the public with access to information and resources with respect to mortgage fraud; andCommentsClose CommentsPermalink

(C) directing reports of mortgage fraud to the appropriate Federal, State, and local law enforcement and prosecutorial agency, including to the appropriate branch of the Task Force established under subsection (d);CommentsClose CommentsPermalink

(3) create a database with respect to suspensions and revocations of mortgage industry licenses and certifications to facilitate the sharing of such information by States;CommentsClose CommentsPermalink

(4) make recommendations with respect to the need for and resources available to provide the equipment and training necessary for the Task Force to combat mortgage fraud; andCommentsClose CommentsPermalink

(5) propose legislation to Federal, State, and local legislative bodies with respect to the elimination and prevention of mortgage fraud, including measures to address mortgage loan procedures and property appraiser practices that provide opportunities for mortgage fraud.CommentsClose CommentsPermalink

(g) Definition- In this section, the term 'mortgage fraud' means a material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan.CommentsClose CommentsPermalink

TITLE IV--FORECLOSURE MORATORIUM PROVISIONSCommentsClose CommentsPermalink

SEC. 401. SENSE OF THE CONGRESS ON FORECLOSURES.
(a) In General- It is the sense of the Congress that mortgage holders, institutions, and mortgage servicers should not initiate a foreclosure proceeding or a foreclosure sale on any homeowner until the foreclosure mitigation provisions, like the Hope for Homeowners program, as required under title II, and the President's 'Homeowner Affordability and Stability Plan' have been implemented and determined to be operational by the Secretary of Housing and Urban Development and the Secretary of the Treasury.CommentsClose CommentsPermalink

(b) Scope of Moratorium- The foreclosure moratorium referred to in subsection (a) should apply only for first mortgages secured by the owner's principal dwelling.CommentsClose CommentsPermalink

(c) FHA-Regulated Loan Modification Agreements- If a mortgage holder, institution, or mortgage servicer to which subsection (a) applies reaches a loan modification agreement with a homeowner under the auspices of the Federal Housing Administration before any plan referred to in such subsection takes effect, subsection (a) shall cease to apply to such institution as of the effective date of the loan modification agreement.CommentsClose CommentsPermalink

(d) Duty of Consumer to Maintain Property- Any homeowner for whose benefit any foreclosure proceeding or sale is barred under subsection (a) from being instituted, continued , or consummated with respect to any homeowner mortgage should not, with respect to any property securing such mortgage, destroy, damage, or impair such property, allow the property to deteriorate, or commit waste on the property.CommentsClose CommentsPermalink

(e) Duty of Consumer to Respond to Reasonable Inquiries- Any homeowner for whose benefit any foreclosure proceeding or sale is barred under subsection (a) from being instituted, continued, or consummated with respect to any homeowner mortgage should respond to reasonable inquiries from a creditor or servicer during the period during which such foreclosure proceeding or sale is barred.CommentsClose CommentsPermalink

Calendar No. 52CommentsClose CommentsPermalink

111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 896CommentsClose CommentsPermalink

A BILL


& & &


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068

Georgia HB 233 Ad Valorem Tax Freeze Is A Bad Idea

HB 233 is dead man walking legislation.

For those who do not know, the 2009 Georgia General Assembly passed an ad valorem property tax freeze and sent the Bill (HB 233) [1] to the Governor. HB 233 creates a new Georgia Tax Statute, OCGA Sec. 48-5B-1. It proposes to freeze all statewide property assessments for two (2) years on all Georgia real property.

HB 233 is a bad legislation for following reasons. First, it shifts the burden of taxation from commercial properties to residential properties and from existing owners to new owners. Second, HB 233 is facially unconstitutional. It violates the uniformity provision of the 1983 Georgia Constitution.

1. HB 233 Shifts the Burden of Property Taxation to New Owners

While the General Assembly seeks tax relief, it has only passed legislation that shifts burdens of taxation from existing Georgia owners to those new owners and new business that choose to move to Georgia [or choose not move to Georgia after they read HB 233].

A common misconception regarding property tax relief is that assessment
caps lower or limit the growth in property tax. They do neither. They
simply shift the burden and institutionalize unfair and unequal treatment
among owners of comparable properties. There is significant scientific and
anecdotal evidence of the failure of these policies. Some of the problems [associated with assessment caps are]: Assessment caps tend to be anti-competitive by taxing new entrants more heavily than current owners. The benefit accrues to those owners of rapidly appreciating property and shifts the burden to those owning slower appreciating property (and owners of property decreasing in value). [Assessment caps] provide the largest tax break to upper-income homeowners and provide little or no tax relief to low-income homeowners. Assessment caps tend to be regressive. [Assessment caps] eliminate "uniformity" from the property tax system. That is, huge disparities in effective taxes are created among comparable property owners. It is inevitably and irrefutably unfair and inequitable. Millage rates rise and new fees are born to make up for the revenue lost through artificial manipulation of individually assessed property values and the total tax digest. Unequal taxation distorts the decision making process of buyers and sellers and thereby reduces economic growth as transactions don't occur or occur at reduced prices. [2]

2. HB 233 is Facially Unconstitutional

In facial violation of the uniformity clause of the 1983 Georgia Constitution, the same property, of the same class for the same purpose receives two (2) completely different assessments under new OCGA Sec. 48-5B-1.

We know that HB 233 is unconstitutional for a reason not apparent from the language of the passed House Bill. The General Assembly spent the entire 2009 session fighting over the passage of a properly drafted assessment freeze bill, HR1 (later SB1). HR1 provided for a proper Amendment to the Georgia Constitution.

HR1 provided for a statewide assessment freeze, which then allowed values to rise (approximately 3% per year, or thereabouts); the First Reader Summary read:

A RESOLUTION proposing an amendment to the Constitution so as to freeze the valuation of residential and nonresidential real property except for certain adjustments; to provide for ratification of certain exemptions and assessment freezes which were previously enacted; to provide for applicability; to provide for the submission of this amendment for ratification or rejection; and for other purposes. HR1. [3]

Political in-fighting or the failure of its backers to obtain the necessary two-thirds vote in both the House and Senate doomed HR1. Instead of going home with no tax freeze, certain members of the General Assembly deemed it better to pass the hopelessly flawed HB 233 than return home with no progress on containing local property tax increases.

As far back at the Georgia Constitution of 1877, the following phrase has been part of every Georgia Constitution: "[A]ll taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax." Art. VII, Sec. I, Para III, Georgia Const. (1983). [Uniformity; classification of property; assessment of agricultural land; utilities.] Because HB 233 sets up non-uniform taxation for identical property it runs afoul of this provision of the Georgia Constitution. See also, Benson-Corwin, Inc. v. Cobb County School District, et. al., 239 Ga. 199, 236 S.E.2d 361 (1977). [4]

A modification of the "uniformity," clause in the Constitution requires a constitutional amendment and amending the Constitution is no easy matter. Article X of the 1983 Georgia Constitution provides the only method(s) by which it may be amended. Skipping the bizarre statewide Constitutional Convention method, the Constitution may be amended by a Proposal to amend the Constitution passed by two-thirds of both the House and Senate. The passed conformed proposal (after formal review and lengthy publishing on a statewide basis) is presented to the people for a vote in a regular election. If a majority approves the Amendment is shall become part of the Constitution on the date specified in the Proposal. [5]

HB 233 has none of the trappings of a Constitutional Amendment. It is a mere naked House Bill holding no more than 50 percent passage in both the House and Senate. Since it seeks by its terms to modify a significant clause of the 1983 Georgia Constitution and yet it was not created in conformity with Article X of the current Constitution, it is, well - a nullity. Or, at least, a Court should so find it to be a nullity.

As painful as the new 2008-2009 Depression is, it would be better - over the long haul - to allow market forces to run their course on the correction of real property taxes than to inject an artificial ad valorem tax freeze into the system. Like an inverted version of "rent control," nothing good will come out in the long haul from "tax control."

Hugh Wood
Atlanta, GA



[1]

A BILL TO BE ENTITLED
AN ACT

To amend Title 48 of the Official Code of Georgia Annotated, related to revenue and taxation, so as to provide for a moratorium period during which valuation increases of property shall be limited; to provide for legislative findings; to provide for the authority for this Act; to provide for procedures, conditions, limitations, and exclusions; to provide for applicability; to provide for related matters; to provide for an effective date; to provide for automatic repeal; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

SECTION 1.
Title 48 of the Official Code of Georgia Annotated, related to revenue and taxation, is amended by adding a new chapter to read as follows:

"CHAPTER 5B

48-5B-1.
(a) The General Assembly finds that the citizens and property owners of this state are experiencing a crisis in the reduction of value of tangible property of unprecedented magnitude and that it is in the best interests of this state that immediate action be taken to secure the economic stability of all Georgians. This crisis is having a devastating effect on the economy of the State of Georgia, and this Code section is enacted in order to provide for more effective regulation and management of the finance and fiscal administration of the state and pursuant to and in furtherance of the provisions of Article III, Section IX, Paragraph II(c) of the Constitution and other provisions of the Constitution.
(b) In recognition of the emergency situation and fiscal conditions set forth in subsection (a) of this Code section and pursuant to the authority specified in subsection (a) of this Code section, for taxable years beginning on or after January 1, 2009, and continuing only until the Sunday immediately preceding the second Monday in January, 2011, a moratorium is declared on all increases in the assessed value of all classes of all subjects of property which are subject to ad valorem taxation property except as specifically permitted under this Code section. The rate of increase of the assessed value of property for county, county school district, municipal, or independent school district ad valorem tax purposes shall not exceed from one taxable year to the succeeding taxable year 0 percent except as otherwise permitted in this Code section.
(c) The limitations of this Code section shall not apply to the correction by local tax officials, pursuant to Chapter 5 of this title, of any manifest, factual error or omission in the valuation of property. The limitations of this Code section shall take effect on January 1, 2010, for any county which performed or had performed on its behalf a comprehensive county-wide revaluation of all properties in the county in 2008 or any county which in 2009 was under contract prior to February 28, 2009, to have performed on its behalf a comprehensive county-wide revaluation of all properties in the county.
(d) Nothing in this Code section shall be construed to prohibit the assessed value of property from decreasing.
(e) If property or interests therein are sold or transferred, the assessed value of such property for ad valorem tax purposes shall not exceed the most recent value established under subsection (b) of this Code section.
(f) Additions or improvements to property shall be valued for ad valorem tax purposes at their fair market value and shall be added to the owner's valuation amount under this subsection.
(g) If property is rezoned, subdivided, or combined with other property at the request of the owner of such property and the use of such property is changed to conform with the use authorized or caused by such rezoning, subdivision, or combination with other property, such property shall be valued for ad valorem tax purposes at its fair market value.
(h) Nothing in this Code section shall be construed to alter or affect in any manner the authority granted to the General Assembly under Article VII, Section II, Paragraph II of the Constitution to enact homestead exemptions.
(i) The provisions of this chapter shall not apply to real property in any county for which a local constitutional amendment has been continued in force and effect as part of the Constitution which imposes millage rate limitations regarding ad valorem property taxes with respect to real property in such county or county school district unless such local constitutional amendment is repealed.
(j) During the period of time in which this Code section is in effect, the commissioner shall continue to examine and review county tax digests as required under this chapter; provided, however, that, in the event a deficiency in the tax digest of a county is attributable directly to the limitations required by this Code section, no penalties shall be levied against such county regarding such deficiency.
(k) This chapter shall be repealed in its entirety on the second Monday in January, 2011."


SECTION 2.
This Act shall become effective upon its approval by the Governor or upon its becoming law without such approval.


SECTION 3.
All laws and parts of laws in conflict with this Act are repealed.

& & &

[2]

Georgia Association of Property Tax Professional, Inc., Controlling Property Taxes Through Proven Legislation: Assessment Limits versus Revenue Limits. Revised Jan. 2009.

& & &

[3]

HR1

The House Committee on Rules offers the following substitute to HR 1:


A RESOLUTION


Proposing an amendment to the Constitution so as to limit valuation increases of real property; to provide for procedures, conditions, and limitations; to provide for ratification of prior and enactment of new exemptions and assessment freezes; to provide for applicability; to provide for the submission of this amendment for ratification or rejection; and for other purposes.


BE IT RESOLVED BY THE GENERAL ASSEMBLY OF GEORGIA:


SECTION 1.
Article VII, Section I of the Constitution is amended by revising Paragraph III and by adding a new Paragraph to read as follows:
"Paragraph III. Uniformity Applicability of uniformity; exceptions; classification of property; assessment of agricultural land; conservation use; timber; utilities. (a) All taxes shall be levied and collected under general laws and for public purposes only. Except as otherwise provided in subparagraphs (b), (c), (d), (e), and (f) of this Paragraph and Paragraph IV of this section, all taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.
(b)(1) Except as otherwise provided in this subparagraph (b) Paragraph, classes of subjects for taxation of property shall consist of real property, other tangible property, and one or more classes of intangible personal property including money; provided, however, that any taxation of intangible personal property may be repealed by general law without approval in a referendum effective for all taxable years beginning on or after January 1, 1996.
(2) Subject to the conditions and limitations specified by law, each of the following types of property may be classified as a separate class of property for ad valorem property tax purposes, and different rates, methods, and assessment dates may be provided for such properties:
(A) Trailers.;
(B) Mobile homes other than those mobile homes which qualify the owner of the home for a homestead exemption from ad valorem taxation.; and
(C) Heavy-duty equipment motor vehicles owned by nonresidents and operated in this state.
(3) Motor vehicles may be classified as a separate class of property for ad valorem property tax purposes, and such class may be divided into separate subclasses for ad valorem purposes. The General Assembly may provide by general law for the ad valorem taxation of motor vehicles, including, but not limited to, providing for different rates, methods, assessment dates, and taxpayer liability for such class and for each of its subclasses, and need not provide for uniformity of taxation with other classes of property or between or within its subclasses. The General Assembly may also determine what portion of any ad valorem tax on motor vehicles shall be retained by the state. As used in this subparagraph, the term 'motor vehicles' means all vehicles which are self-propelled.
(c) Tangible real property, but no more than 2,000 acres of any single property owner, which is devoted to bona fide agricultural purposes shall be assessed for ad valorem taxation purposes at 75 percent of the value which other tangible real property is assessed. No property shall be entitled to receive the preferential assessment provided for in this subparagraph if the property which would otherwise receive such assessment would result in any person who has a beneficial interest in such property, including any interest in the nature of stock ownership, receiving the benefit of such preferential assessment as to more than 2,000 acres. No property shall be entitled to receive the preferential assessment provided for in this subparagraph unless the conditions set out below are met:
(1) The property must shall be owned by:
(A)(i) One or more natural or naturalized citizens;
(ii) An estate of which the devisee or heirs are one or more natural or naturalized citizens; or
(iii) A trust of which the beneficiaries are one or more natural or naturalized citizens; or
(B) A family-owned farm corporation, the controlling interest of which is owned by individuals related to each other within the fourth degree of civil reckoning, or which is owned by an estate of which the devisee or heirs are one or more natural or naturalized citizens, or which is owned by a trust of which the beneficiaries are one or more natural or naturalized citizens, and such corporation derived 80 percent or more of its gross income from bona fide agricultural pursuits within this state within the year immediately preceding the year in which eligibility is sought.;
(2) The General Assembly shall provide by law:
(A) For a definition of the term 'bona fide agricultural purposes,' but such term shall include timber production; and
(B) For additional minimum conditions of eligibility which such properties must meet in order to qualify for the preferential assessment provided for herein, including, but not limited to, the requirement that the owner be required to enter into a covenant with the appropriate taxing authorities to maintain the use of the properties in bona fide agricultural purposes for a period of not less than ten years and for appropriate penalties for the breach of any such covenant.
(3) In addition to the specific conditions set forth in this subparagraph (c), the General Assembly may place further restrictions upon, but may not relax, the conditions of eligibility for the preferential assessment provided for herein.; and
(4) Property under this subparagraph (c) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(d)(1) The General Assembly shall be authorized by general law to establish as a separate class of property for ad valorem tax purposes any tangible real property which is listed in the National Register of Historic Places or in a state historic register authorized by general law. For such purposes, the General Assembly is shall be authorized by general law to establish a program by which certain properties within such class may be assessed for taxes at different rates or valuations in order to encourage the preservation of such historic properties and to assist in the revitalization of historic areas. Property under this subparagraph (d) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(2) The General Assembly shall be authorized by general law to establish as a separate class of property for ad valorem tax purposes any tangible real property on which there have been releases of hazardous waste, constituents, or substances into the environment. For such purposes, the General Assembly is shall be authorized by general law to establish a program by which certain properties within such class may be assessed for taxes at different rates or valuations in order to encourage the cleanup, reuse, and redevelopment of such properties and to assist in the revitalization thereof by encouraging remedial action. Property under this subparagraph (d) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(e) The General Assembly shall provide by general law:
(1) For the definition and methods of assessment and taxation, such methods to include a formula based on current use, annual productivity, and real property sales data, of: 'bona fide conservation use property,' to include bona fide agricultural and timber land not to exceed 2,000 acres of a single owner; and 'bona fide residential transitional property,' to include private single-family residential owner occupied property located in transitional developing areas not to exceed five acres of any single owner. Such methods of assessment and taxation shall be subject to the following conditions:
(A) A property owner desiring the benefit of such methods of assessment and taxation shall be required to enter into a covenant to continue the property in bona fide conservation use or bona fide residential transitional use; and
(B) A breach of such covenant within ten years shall result in a recapture of the tax savings resulting from such methods of assessment and taxation and may result in other appropriate penalties;
(2) That standing timber shall be assessed only once, and such assessment shall be made following its harvest or sale and on the basis of its fair market value at the time of harvest or sale. Said assessment shall be two and one-half times the assessed percentage of value fixed by law for other real property taxed under the uniformity provisions of subparagraph (a) of this Paragraph but in no event greater than its fair market value; and for a method of temporary supplementation of the property tax digest of any county if the implementation of this method of taxing timber reduces the tax digest by more than 20 percent, such supplemental assessed value to be assigned to the properties otherwise benefiting from such method of taxing timber; and
(3) Property under this subparagraph (e) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(f)(1) The General Assembly shall provide by general law for the definition and methods of assessment and taxation, such methods to include a formula based on current use, annual productivity, and real property sales data, of 'forest land conservation use property' to include only forest land each tract of which exceeds 200 acres of a qualified owner. Such methods of assessment and taxation shall be subject to the following conditions:
(A) A qualified owner shall consist of any individual or individuals or any entity registered to do business in this state;
(B) A qualified owner desiring the benefit of such methods of assessment and taxation shall be required to enter into a covenant to continue the property in forest land use;
(C) All contiguous forest land conservation use property of an owner within a county for which forest land conservation use assessment is sought under this subparagraph shall be in a single covenant;
(D) A breach of such covenant within 15 years shall result in a recapture of the tax savings resulting from such methods of assessment and taxation and may result in other appropriate penalties; and
(E) The General Assembly may provide by general law for a limited exception to the 200 acre requirement in the case of a transfer of ownership of all or a part of the forest land conservation use property during a covenant period to another owner qualified to enter into an original forest land conservation use covenant if the original covenant is continued by both such acquiring owner and the transferor for the remainder of the term, in which event no breach of the covenant shall be deemed to have occurred even if the total size of a tract from which the transfer was made is reduced below 200 acres.
(2) No portion of an otherwise eligible tract of forest land conservation use property shall be entitled to receive simultaneously special assessment and taxation under this subparagraph and either subparagraph (c) or (e) of this Paragraph.
(3)(A) The General Assembly shall appropriate an amount for assistance grants to counties, municipalities, and county and independent school districts to offset revenue loss attributable to the implementation of this subparagraph. Such grants shall be made in such manner and shall be subject to such procedures as may be specified by general law.
(B) If the forest land conservation use property is located in a county, municipality, or county or independent school district where forest land conservation use value causes an ad valorem tax revenue reduction of 3 percent or less due to the implementation of this subparagraph, in each taxable year in which such reduction occurs, the assistance grants to the county, each municipality located therein, and the county or independent school districts located therein shall be in an amount equal to 50 percent of the amount of such reduction.
(C) If the forest land conservation use property is located in a county, municipality, or county or independent school district where forest land conservation use value causes an ad valorem tax revenue reduction of more than 3 percent due to the implementation of this subparagraph, in each taxable year in which such reduction occurs, the assistance grants to the county, each municipality located therein, and the county or independent school districts located therein shall be as follows:
(i) For the first 3 percent of such reduction amount, in an amount equal to 50 percent of the amount of such reduction; and
(ii) For the remainder of such reduction amount, in an amount equal to 100 percent of the amount of such remaining reduction amount.
(4) Such revenue reduction shall be calculated by utilizing forest land fair market value. For purposes of this subparagraph, forest land fair market value means the 2008 fair market value of the forest land. Such 2008 valuation may increase from one taxable year to the next by a rate equal to the percentage change in the price index for gross output of state and local government from the prior year to the current year as defined by the National Income and Product Accounts and determined by the United States Bureau of Economic Analysis and indicated by the Price Index for Government Consumption Expenditures and General Government Gross Output (Table 3.10.4). Such revenue reduction shall be determined by subtracting the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year and the resulting amount shall be multiplied by the millage rate of the county, municipality, or county or independent school district.
(5) For purposes of this subparagraph, the forest land conservation use value shall not include the value of the standing timber located on forest land conservation use property.
(6) Property under this subparagraph (f) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(g) The General Assembly may provide for a different method and time of returns, assessments, payment, and collection of ad valorem taxes of public utilities, but not on a greater assessed percentage of value or at a higher rate of taxation than other properties, except that property provided for in subparagraph (c), (d), (e), or (f) of this Paragraph. Property under this subparagraph (g) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
Paragraph IV. Limitations on assessed value increases for real property. (a)(1) Except as otherwise provided in this Paragraph, the rate of increase of the assessed value of real property for state, county, municipal, or educational ad valorem tax purposes shall not exceed an aggregate of 9 percent for each three-year period of successive ownership and, except as provided in this subparagraph, shall not exceed from one taxable year to the succeeding taxable year the lesser of 3 percent or the percent change in the rate of economic inflation on individual taxpayers as determined by the state revenue commissioner. For such purpose, the state revenue commissioner may use the Consumer Price Index for all urban consumers published by the Bureau of Labor Statistics of the United States Department of Labor and any other reliable economic indicator determined by the state revenue commissioner or such other designee as specified by general law to be appropriate. Within such three-year period, such 3 percent limitation shall operate in a cumulative manner so if an increase in one year is less than 3 percent, the 3 percent cap for the next succeeding year shall be increased by an amount equal to the difference in the actual percentage increase in the preceding year and 3 percent. Nothing in this Paragraph shall be construed to prohibit the assessed value of property from decreasing.
(2) If real property or interests therein are sold or transferred, such real property shall be valued for ad valorem tax purposes in an amount not to exceed fair market value. Substantial additions or improvements to such real property shall be valued for ad valorem tax purposes at their fair market value and shall be added to the owner's valuation amount under this subparagraph.
(3) In addition to any general law authorizing error or omission correction by local tax officials, the state revenue commissioner shall be authorized to correct any manifest, factual error or omission in the valuation of real property.
(b) The General Assembly shall be authorized by general law to further define and implement the provisions of this Paragraph, including, but not limited to:
(1) The establishment of classes or subclasses of real property and methods of assessment and taxation, including percentage limitations applicable thereto;
(2) The definition of a sale or transfer of real property or interests therein under subparagraph (a)(2) of this Paragraph IV;
(3) Other circumstances that shall require a revaluation of the real property, including, but not limited to, rezoning;
(4) The timing of the reassessments as a result of sale, transfer, additions, or improvements and the establishment of phase-in periods of assessment increases due to sales or transfers of property at such rate or rates and in such manner as determined by general law; and
(5) The definition and methods of determining fair market value as applied to nonresidential real property under subparagraph (a)(2) of this Paragraph, such methods may include, but shall not be limited to, a formula based on current use, annual revenue, and real property sales data.
(c) The General Assembly shall be authorized to provide by local or general law for base year assessed value homestead exemptions that freeze the assessment of property with respect to any or all ad valorem taxes. Any local or general law providing for base year assessed value homestead exemptions that freeze the assessment of property with respect to any or all ad valorem taxes enacted prior to January 1, 2011, shall be ratified expressly; provided, however, that such ratification shall not be interpreted to imply that such laws were invalid at the time they became law. The provisions of this Paragraph shall not apply to any homestead's ad valorem taxes which are the subject of any such general or local law exemption unless such general law or local law is repealed. In the event of such repeal, the initial valuation amount of the homestead property for purposes of this Paragraph shall be the taxable value of such property established as the initial base year assessed value of such property; provided, however, that in the case of an adjusted base year assessed value homestead exemption, the initial valuation amount of the homestead property for purposes of this Paragraph shall be the taxable value of the property established as the most recent adjusted base year assessed value applicable to such property.
(d) This Paragraph shall not apply to homestead real property in any county or consolidated government for which a local constitutional amendment has been continued in force and effect as part of this Constitution which freezes ad valorem property taxes with respect to such homestead real property unless such local constitutional amendment is repealed. In the event of such repeal, the initial valuation amount of each parcel of homestead real property shall be the most recent taxable value of such parcel as established under such local constitutional amendment.
(e) This Paragraph shall not apply to real property in any county for which a local constitutional amendment has been continued in force and effect as part of this Constitution which imposes millage rate limitations regarding ad valorem property taxes with respect to real property in such county or county school district unless such local constitutional amendment is repealed.
(f) The General Assembly shall be authorized to provide for procedures to discontinue the limitations under this Paragraph conditioned upon approval by a majority of the qualified electors residing within the limits of a county voting in a referendum thereon which shall discontinue such limitations for ad valorem taxes for such county and each municipality and each county or independent school system located in such county."


SECTION 2.
The above proposed amendment to the Constitution shall be published and submitted as provided in Article X, Section I, Paragraph II of the Constitution. The ballot submitting the above proposed amendment shall have written or printed thereon the following:
"( ) YES


( ) NO
Shall property taxes in Georgia be reformed by limiting increases of the value of real property through an amendment to the Constitution of Georgia?"
All persons desiring to vote in favor of ratifying the proposed amendment shall vote "Yes." All persons desiring to vote against ratifying the proposed amendment shall vote "No." If such amendment shall be ratified as provided in said Paragraph of the Constitution, it shall become a part of the Constitution of this state.


[4]


GEORGIA CONSTITUTION
Article VII. TAXATION AND FINANCE
Section I. POWER OF TAXATION
Current through 2004
Paragraph III. Uniformity; classification of property; assessment of agricultural land; utilities.
(a) All taxes shall be levied and collected under general laws and for public purposes only. Except as otherwise provided in subparagraphs (b), (c), (d), and (e), all taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.


& & &

236 S.E.2d 361 (Ga. 1977)
239 Ga. 199
BENSON-CORWIN, INC.
v.
COBB COUNTY SCHOOL DISTRICT et al.
No. 32247.
Supreme Court of Georgia.
June 8, 1977
Page 362
[239 Ga. 201] Downey, Cleveland & Moore, Lynn A. Downey, Joseph C. Parker, Marietta, for appellant.
Richard H. Still, Jr., Awtrey, Parker, Risse, Mangerie & Brantley, Dana L. Jackel, Bentley & Schindelar, Fred D. Bentley, Sr., Marietta, for appellees.
[239 Ga. 199] INGRAM, Justice.
Appellant's property was annexed into the City of Marietta from the unincorporated area of Cobb County. [239 Ga. 200] Thereafter, the assessed value of appellant's property was increased by the county and this caused an increase in appellant's tax liability for the retirement of Cobb County School bonds. Appellant brought suit in Cobb Superior Court for a temporary and permanent injunction to prevent the appellees from collecting a school bond tax on its property at a valuation higher than the assessed valuation of appellant's property at the time it was annexed by the City of Marietta. This appeal follows the trial court's denial of appellant's prayers for injunctive relief. We affirm as we find no error.
At trial appellant stipulated: that its property is within the Cobb County school district; that it is subject to taxation for the purpose of retiring Cobb County school bonds issued prior to the annexation of its property into the City of Marietta; and, that the assessed value placed on its property is completely fair.
Thus, the only question for decision is whether the trial court erred in not freezing the assessed value of appellant's property, for purposes of the county school bond tax, at its assessed value when it was annexed into the city. We agree with the trial court that to grant appellant the relief requested would contravene the constitutional rule of uniformity in taxation which exists in this State.
Article VII, Sec. I, Par. III of the Constitution of Georgia of 1976 (Code Ann. § 2-4603) provides in part that, "All taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. Classes of subjects for taxation of property shall consist of tangible property and one or more classes of intangible personal property including money."
Under this constitutional provision all real and personal tangible property, except "motor vehicles, including trailers," and "mobile homes, other than those mobile homes which qualify the owner thereof for the homestead property tax exemption under Georgia law," constitutes a single class of property and must be assessed and taxed alike. See Griggs v. Greene, 230 Ga. 257, 258(2), 197 S.E.2d 116 (1973); Hutchins et al. v. Howard et al., 211 Ga. 830(2), 89 S.E.2d 183 (1955).
Code Ann. § 92-5701 (Ga.L.1909, p. 72) provides that, [239 Ga. 201] "(a)ll property shall be returned for taxation at its fair market value."
To freeze the assessed value of appellant's property at an amount obviously below its fair market value would also obfuscate the application of Art. VIII, Sec. VII, Par. I of our Constitution (Code Ann. § 2-5501) which provides in part that, "(t)he fiscal authority of each county shall annually levy a school tax for the support and maintenance of education, not greater than twenty mills per dollar as certified to it by the county board of education, upon the assessed value of all taxable property within the county located outside any independent school system or area school district therein." The "assessed value" referred to in the Constitution is the correctly assessed fair market value. See Board of Commissioners of Newton County v. Allgood, 234 Ga. 9, 17(7), 214 S.E.2d 522 (1976).
Judgment affirmed.
All the Justices concur.

& & &

[5]

ARTICLE X.
AMENDMENTS TO THE CONSTITUTION

SECTION I.
CONSTITUTION, HOW AMENDED
Paragraph I. Proposals to amend the Constitution; new Constitution. Amendments to this Constitution or a new Constitution may be proposed by the General Assembly or by a constitutional convention, as provided in this article. Only amendments which are of general and uniform applicability throughout the state shall be proposed, passed, or submitted to the people.
Paragraph II. Proposals by the General Assembly; submission to the people. A proposal by the General Assembly to amend this Constitution or to provide for a new Constitution shall originate as a resolution in either the Senate or the House of Representatives and, if approved by two-thirds of the members to which each house is entitled in a roll-call vote entered on their respective journals, shall be submitted to the electors of the entire state at the next general election which is held in the even-numbered years. A summary of such proposal shall be prepared by the Attorney General, the Legislative Counsel, and the Secretary of State and shall be published in the official organ of each county and, if deemed advisable by the "Constitutional Amendments Publication Board," in not more than 20 other newspapers in the state designated by such board which meet the qualifications for being selected as the official organ of a county. Said board shall be composed of the Governor, the Lieutenant Governor, and the Speaker of the House of Representatives. Such summary shall be published once each week for three consecutive weeks immediately preceding the day of the general election at which such proposal is to be submitted. The language to be used in submitting a proposed amendment or a new Constitution shall be in such words as the General Assembly may provide in the resolution or, in the absence thereof, in such language as the Governor may prescribe. A copy of the entire proposed amendment or of a new Constitution shall be filed in the office of the judge of the probate court of each county and shall be available for public inspection; and the summary of the proposal shall so indicate. The General Assembly is hereby authorized to provide by law for additional matters relative to the publication and distribution of proposed amendments and summaries not in conflict with the provisions of this Paragraph.
If such proposal is ratified by a majority of the electors qualified to vote for members of the General Assembly voting thereon in such general election, such proposal shall become a part of this Constitution or shall become a new Constitution, as the case may be. Any proposal so approved shall take effect as provided in Paragraph VI of this article. When more than one amendment is submitted at the same time, they shall be so submitted as to enable the electors to vote on each amendment separately, provided that one or more new articles or related changes in one or more articles may be submitted as a single amendment.

& & &

END


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100Fax: 404-633-0068

Mere Mortgage Servicer Lacks Standing to Lift Automatic Stay

Foreclosure just got a bit uglier and more costly for (large nonlocal) mortgage banks.

The Federal Bankruptcy Court in the Eastern District of Washington sent a Servicer Packing on a routine Motion to Lift Stay. For a “bank,” or its agent to lose a routine Motion to Lift Stay is unusual -- indeed. In re: PETER A. JACOBSON and MARIA E. JACOBSON, Debtors, UBSC WDWA, Bankruptcy Case No. 08-45120 (Entered on Docket Mar. 06, 2009) (“Jacobson”)

The Jacobson Court denied UBS, AG’s Motion to Lift the Stay on the basis of Lack of Standing and lack of a Real Party in Interest.

The cast of characters in Jacobson (which is common in mortgage lending these days) borders on the comical:

Enter Stage Left:

UBS, AG: A large Multinational Swiss Bank appeared as “Servicer” of the Note; UBS appeared to represent ACT Properties, LLC.

ACT Properties, LLC :: An Alleged Assignee of the Trust Deed holding an unrecorded Assignment.

Castle Point Mortgage, Inc., Elkridge, Maryland: The Original Lender. This lender held the paper for approximately the same amount of time as the Inflationary Period associated with the Big Bang (somewhere between 10–36 seconds and 10–32 seconds after the Signing of the Note and Trust Deed).

MERS: The beneficiary,” identified in the Jacobsons’ Deed of Trust. MERS is “a separate corporation, "solely as nominee for lender and lender's successors and assigns."

Wells Fargo: A subsidiary of Wells Fargo apparently held the “original” Note via, “ Wells Fargo Document Custody "has possession" of the original note in Minneapolis, Minnesota.”

Bankruptcy Specialist: A declarant, perhaps an employee of Wells Fargo Document Custody, who testified from Irvine, California that “someone” in Minnesota is in possession of the original Note.

UBS’s Lawyer appeared electronically from San Diego, California.

Jacobsons appeared, initially, in person.

After describing the cast of characters and their parts in the bankruptcy drama, the Court proceeded to find that the Movant Bank did not have and could not have standing to bring the motion. The Court pointed out that Movant, UBS, AG, stated that it was a mere servicer, but it failed to assert that it had any beneficial interest in the Note and Deed of Trust. Thus, the Court concluded that Movant’s stated authority was woefully lacking.

The Court wrote:

UBS AG's records [show it to be] “servicing agent for ACT Properties"

But even if all of the deficiencies were overlooked or resolved in UBS AG’s favor, one emerges from the syntactical fog into an impassable swamp.

The declaration of someone in California, apparently based on business records, and perhaps predating his employer becoming servicing agent, is that Jacobson's note secured by the deed of trust is in "the possession" of a separate entity in Minnesota.

Assuming the exhibits to the motion are authentic and are the same as those intended to have been attached to the declaration, the note is indorsed in blank. Without more, that and possession (rather than mere custody) suggests that Wells Fargo is the holder of the note.

[Nothing in the]

record establish UBS AG's authority to enforce the Debtors' note, for whomever holds it; and thus to foreclose the deed of trust. The declaration states that UBS AG is "servicing agent," a term with no uniform meaning, and no definition cited.

At a minimum, there must be an unambiguous representation or declaration setting forth the servicer's authority from the present holder of the note to collect on the note and enforce the deed of trust. If questioned, the servicer must be able to produce and authenticate that authority.

UBS AG has not shown that it has standing to bring the motion for relief from stay or authority to act for whomever does.

V. CONCLUSION

As the motion was not brought In the name of the real party in interest, nor has standing to bring it been established, it will be

DENIED.


Philip H Brandt
United States Bankruptcy Judge

Jacobson, Supra [The Complete Opinion is listed below]


While MERS is only referred to in one footnote on page 13 of the opinion, the “nominee” assignment model may not survive “Jacobson,” type scrutiny.

If Bankruptcy Courts begin holding Banks to strict proof concerning the location of the original Note and Trust Deed and requiring the same be moved into evidence (or strictly accounted or) prior to proceeding with a routine Lift the Stay Motion, the entire LENDER, MERS, SERVICER triad may be in serious trouble.

On any given day at any given time, most folk have no idea who holds the Trust Deed and/or the Note. If these questions become routine in Lift the Stay Motions and in other ancillary court proceedings, watch for an unraveling of MERS Nominee system.

Hugh Wood
Atlanta, GA



& & &

Entered on Docket Mar. 06, 2009
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON
FOR PUBLICATION

In re: No.08-45120
PETER A. JACOBSON and

DECISION ON RELIEF FROM STAY
MARIA E. JACOBSON,
Debtors.

Before the court is a motion for relief from the automatic stay of
§ 362(a)1 to enforce a deed of trust on the Debtors' residence. As it was neither brought in the name of the real party in interest, nor by anyone with standing, the motion for relief from stay will be DENIED.

I.

History

Attached to the motion of "UBS AG, as servicing agent for ACT Properties, LLC ("Movant")" (docket no. 31) are unauthenticated copies of:

Page 1


1. The adjustable rate note purportedly executed on November 2009 in Elkridge, Maryland, by Debtors in favor of Castle Point Mortgage, Inc., which bears an undated "without recourse" indorsement in blank by someone identified as "VP/CFO";

2. A barely-legible copy of Debtors' deed of trust in favor of Castle Point Mortgage (as "lender"); the beneficiary is identified as Mortgage Electronic Registration Systems, Inc.("MERS"), a separate corporation, "solely as nominee for lender and lender's successors and assigns," with an adjustable rate rider (executed in Pierce County, Washington, on the same day as the note, according to the acknowledgment);

3. An apparently unrecorded "Assignment of Mortgage" to ACT Properties, LLC, referencing the deed of trust by parties, date, and recording number, executed by a director of MERS in December of 2008, according to the acknowledgment; and,

4. Debtors' real property and secured claims schedules (A and D, respectively, the latter identifying the secured creditor as "UBS").

The motion notes Debtors' bankruptcy petition, filed 7 October 2008, the attendant automatic stay, and goes on to recount the history of the loan, including its transfer "to Movant," stating that Wells Fargo Document Custody "has possession" of the original note in Minneapolis, Minnesota. The narrative continues with Debtors' default and the commencement of non-judicial foreclosure proceedings, with sale set for 17 October 2008, (presumably by a predecessor in interest of ACT

Properties, since it was pre-assignment; the foreclosing party is not identified). The Debtors' filing automatically stayed the foreclosure, § 362(a); the motion indicates no foreclosure activity is pending. There follows a calculation of the amounts due and lack of equity, and sketchy argument that the Movant is entitled to relief under § 362(d)(1) for lack of adequate protection.

The motion is supported by the declaration of a "bankruptcy specialist" (docket no. 32) which parrots the narrative set forth in the motion (or perhaps it is the other way around - the text respecting the history of the transaction and documentation is virtually identical, and both make the same mistake regarding the date the deed of trust was executed they both state that the deed of trust was executed 8 December 2006, while the acknowledgment shows it as 14 November 2006). Declarant, too, declares that Wells Fargo Document Custody "has possession" of the original note in Minnesota, and indicates that true copies of the note, deed of trust, and assignment are attached, but there are no exhibits to the filed declaration. The declaration was executed in Irvine, California.

No evidence is provided, nor is any assertion even made, regarding UBS AG's authority to act for the holder of the note, beyond the unelaborated statements that it is "servicing agent for ACT Properties, LLC" in the motion, and "servicing agent for ACT Properties, LLC, its successors and/or assigns" in the declaration.

Nor do the papers disclose what kind of an entity "UBS AG" is. "AG" may indicate a corporate entity from Germany, Switzerland, Liechtenstein, Austria, or perhaps elsewhere, and UBS is a major Swiss financial institution. See Nelson D. Schwartz, For Swiss banks, an Uncomfortable Spotlight, Int'l Herald Tribune, March 4, 2009,2 and UBS AG: a Short History.

This latter point became significant when Debtors, pro se (although they have counsel), filed their Motion to Dismiss Movant's Motion for Relief from Stay (docket no. 44), the thrust of which is that UBS transferred the security in the real property to the Central Bank of Switzerland in return for approximately $220,000, and referencing numerous press and internet accounts respecting the Swiss bank. Debtors do not explicate how they reach the conclusion, from news stories about the handling of toxic assets in the banking systems of this country and Switzerland, that UBS AG (or UBS AG, which only claims to service the loan for another holder) was paid an amount approximating the default alleged in the motion. That said, they raise a standing question.

UBS AG's counsel, while located in San Diego, California, is admitted to practice in this district and electronically filed the motion and supporting papers. He continued the motion once and then confirmed the motion for hearing two days prior to the calendar, also via the court's electronic filing system. A local practitioner whose


Page 4


role in the case was not disclosed in the docket appeared for UBS AG at the continued hearing; Debtor Peter Jacobson appeared pro se.

II. Jurisdiction

This is a core proceeding within this court's jurisdiction. 28 U.S.C. §§ 1334(a) and (b), and 157(a) and (b)(2)(G); GR 7, 1.01, Local Rules, W.D. Washington.

III. Issues

A.

Appearances

Were the parties properly represented at hearing?

B. Real Party in Interest

Is a "servicing agent" the real party in interest in whose name a relief from stay motion may be brought?

C. Standing

Does UBS AG or Movant have standing to seek relief from stay to enforce Debtors' deed of trust?

IV. Analysis

A. Appearances

Debtors were and still are represented by counsel in this case. Although they filed their response to the motion pro se, they indicate having informed counsel of their intent to file their response. I infer counsel declined to argue their position. Nevertheless, because I have an independent duty to determine jurisdiction, see part IV.C. below, the question is before me, and Mr. Jacobson appeared at the hearing.

GR 2(g)(1) permits the court to hear represented individuals, even though their counsel is not present:

Whenever a party has appeared by attorney, he cannot thereafter appear or act in his own behalf in the cause, or take any step therein; provided, that the court may in its discretion hear a party in open court, notwithstanding the fact that he has appeared, or is represented by attorney.

Respecting Movants' representation at the hearing, Rule 9010(b) provides that:

[a]n attorney appearing for a party in a case under the Code shall file a notice of appearance with the attorney's name, office address and telephone number, unless the attorney's appearance is otherwise noted in the record.

(emphasis added). In other words, an attorney must first file a notice of appearance containing the data specified in Rule 9010(b) to represent a party in a hearing.

In addition to Rule 9010(b), a local rule of the U.S. District Court for the Western District of Washington, which applies via LBR 9029-2,4 requires:

An attorney eligible to appear may enter an appearance in a civil case by signing any pleading or other paper described in Rule 5(a), Federal Rules of Civil Procedure, filed by or on

Page 6

GR 2(h). No formal notice of appearance is required so long as the new attorney has somehow made his or her involvement in the case known prior to the hearing, such as by signing and filing pleadings.

But once counsel has appeared, GR 2(g)(3) provides:

The authority and duty of attorneys of record shall continue until there shall be a substitution of some other attorney of record, except as herein otherwise expressly provided, and shall continue after final judgment for all proper purposes.

And GR 2(g)(2)(B):

Where there has simply been a change or addition of counsel within the same law firm, an order of substitution is not required; the new attorney will file a Notice of Appearance and the withdrawing attorney will file a Notice of Withdrawal. However, where there is a change in counsel that effects a termination of one law office and the appearance of a new law office, the substitution must be effected . . . which requires leave of court.


And, of course, corporations must be represented by counsel in federal court. See Rowland v. California Men's Colony, 506 U.S. 194, 1201-02 (1993).


The careful reader will have noticed that none of the foregoing rules directly address the situation where the original attorney continues as counsel of record, but another lawyer, not of the same firm, joins for some portion of the representation. But, read together, the requirement of corporate representation and the continuing role of counsel of record preclude interloping counsel. For other attorneys not part of the same firm as record counsel to represent a party, something must be done of record. Customarily, this is accomplished by filing a


Page 7


notice of association, and it is common when lead counsel is distant and the use of local counsel for particular matters in the case will promote efficiency, or the new counsel provides particular expertise. Once the notice of association is served and filed, all parties to the case are aware of the changed representation, and associated counsel receives notice directly of events and filings in the case.

The practice of undisclosed "appearance attorneys" creates problems - other parties (and the court) are sandbagged, and the Debtor, trustee, other creditors, and counsel cannot readily communicate regarding scheduling or substance. In addition to the ramifications of this practice, explored in In re Wright, 290 B.R. 145 (Bankr. C.D. Cal. 2003); Hon. Jim D. Pappas, Simple Solution = Big Problem, 46 The [Idaho] Advocate 31 (Oct. 2003); and Neil M. Berman, Judge, This is Not My Case . . ., Norton Bankr. L. Adviser 3 (May 2004), the lack of formal association could raise questions about the informally-appearing attorney's authority to speak for, and make judicial admissions on behalf of, the client (the contrary suggestion would not be a promising argument).

While this defect is not dispositive, clarity of representation on the record is important to judicial economy and the orderly representation of other parties. So I will require, absent emergency or significant hardship, formal notice of association to be filed not later than the confirmation of the hearing. And there is no remedy for self-inflicted harm - law firms undertaking distant representations must be prepared to appear or timely associate local counsel who will. As corporations must be represented by counsel in federal court, the

Page 8


consequence of not having counsel of record at hearing will be that that party's position may be deemed without merit. See LBR 9013-1(e)(1).5 This is the flip side of Woody Allen's observation that "Eighty per cent of success is showing up" - if you (or your counsel of record if you are a corporate entity) don't, your chance of success approaches zero.

In short, henceforth only counsel of record or individuals representing themselves will be heard

B. Real Party in Interest

The moving party here is UBS AG, which claims only to be a servicer for the holder of the note. It neither asserts beneficial interest in the note, nor that it could enforce the note in its own right. As noted in In re Hwang, 396 B.R. 757, 766-67 (Bankr. C.D. Cal 2008), Rule 4001 makes stay relief a contested matter by providing that Rule 9014 governs. That rule in turn applies Rule 7017, imposing FRCP's requirement that actions be prosecuted in the name of the real party interest.

Page 9


[t]he right to enforce a note on behalf of a noteholder does not convert the noteholder's agent into a real party in interest. "As a general rule, a person who is an attorney-in-fact or an agent solely for the purpose of bringing suit is viewed as a nominal rather than a real party in interest and will be required to litigate in the name of his principal rather than in his own name."

Hwang, 396 B.R. at 767, quoting 6A Wright, Miller & Kane, Federal Practice and Procedure:
Civil 2d § 1553.

The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced. Even if a servicer or agent has authority to bring the motion on behalf of the holder, it is the holder, rather than the servicer, which must be the moving party, and so identified in the papers and in the electronic docketing done by the moving party's counsel.

It follows that orders granting relief from stay must do so to the holder of the obligation to be enforced - not the servicer or others, or the collective "Movant," as in the proposed order UBS AG submitted. Of course, setting forth that the holder may act through agents, or may later assign or transfer the interest, e.g., "ACT Properties, LLC, and its agents, successors, and assigns," is appropriate.

Page 10


If UBS AG'S motion had merit, the standing deficiency could be cured by joinder, as FRCP 17(a)(3),8 applicable via Rules 9014 and 7017, allows. As will be seen, joinder would not salvage this motion.


C. Standing.


UBS AG has submitted no evidence that it is authorized to act for whomever holds the note. That deficiency puts its standing in question, See In re Parrish, 326 B.R. 708, 720-21 (Bankr. N.D. Ohio 2005), and I have an independent duty to determine whether I have jurisdiction over matters that come before me. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990). I must therefore determine whether UBS AG (or Movant} has standing to seek relief from stay.


1. Law: For a federal court to have jurisdiction, the litigant must have constitutional standing, which requires an injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief. United Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544, 551 (1996).

[T]he question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. Standing doctrine embraces several judicially self-imposed limits on the exercise of federal

Page 11



jurisdiction, such as the general prohibition on a litigant's raising another person's legal rights . . . . Typically . . . the standing inquiry requires careful judicial examination of a complaint's allegations to ascertain whether the particular plaintiff is entitled to an adjudication of the particular claims asserted.

Allen v. Wright, 468 U.S. 737, 750-52 (1984) (citations omitted). Constitutional standing, predicated on the "case or controversy" requirement of Article III of the Constitution, is a threshold jurisdictional requirement, and cannot be waived. Pershing Park Villas Homeowners Ass'n v. United Pacific Ins. Co., 219 F.3d 895, 899-900 (9th Cir. 2000).

A litigant must also have "prudential standing," which stems from rules of practice limiting the exercise of federal jurisdiction to further considerations such as orderly management of the judicial system. Pershing Park, 219 F.3d at 899-900; In re Godon, 275 B.R. 555, 1564-565 (Bankr. E.D. Cal. 2002) (citing Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541-42 (1986).

Generally, a party without the legal right under applicable substantive law to enforce the obligation at issue, or pursuing an interest outside those protected by the law invoked or abstract questions more appropriately addressed legislatively, lacks prudential standing. Doran v. 7-Eleven, Inc., 524 F.3d 1034, 1044 (9th Cir. 2008).

Under the Bankruptcy Code, a party seeking relief from stay must establish entitlement to that relief. § 362(d); see In re Hayes, 2393 B.R. 259, 266-267 (Bankr. D. Mass. 2008). Foreclosure agents and servicers do not automatically have standing, In re Scott, 376 B.R. 285,

Page 12





290 (Bankr. D. Idaho 2007); Hwang, 396 B.R. at 767, and must show authority to act for the party which does.

In Washington, only the holder of the obligation secured by the deed of trust is entitled to foreclose. RCW 61.24.005(2) defines "beneficiary" under a deed of trust as the holder of the instrument or document evidencing the obligations secured by the deed of trust. See also Fidelity & Deposit Co. Of Maryland v. Ticor Title Ins. Co., 88 Wash. App. 64, 943 P.2d 710 (1997). Having an assignment of the deed of trust is not sufficient, id. at 68-69, because the security follows the obligation secured, rather than the other way around. This principle is neither new nor unique to Washington:

[T]ransfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.

Carpenter v. Longan, 83 U.S. 271, 275 (1872).

It follows that, to have standing, UBS AG must establish its authority to act for the holder of Debtors' note.

2. Evidence: Some courts require a party moving for stay relief to provide admissible evidence tracing the identity of the various holders and servicers of the mortgage or deed of trust in question, and the holders of the note evidencing the underlying obligation. See Hayes, 393 B.R. at 269; and Parrish, 326 B.R. at 720-21. I need not here go so far, because UBS AG's proof neither shows who presently holds Debtors' note nor its own authority.

Page 13


While business records may provide the necessary proof, this exception to the hearsay rule requires that the records (1) be made at or near the time by, or from information transmitted by, a person with knowledge; (2) pursuant to a regular practice of the business activity; (3) kept in the course of regularly conducted business activity; and (4) the source, method, or circumstances of preparation must not indicate lack of trustworthiness. These elements must be established by the testimony of a custodian or other qualified witness, and the documents must be authenticated. In re Vinhnee, 336 B.R. 437, 444 (9th Cir. BAP 2005). Specifically, "the record being proffered must be shown to continue to be an accurate representation of the record that originally was created." Id.; FRE 901(a). A declarant authenticating business

Page 14



records must be qualified. The bare assertion that one works for the company and is familiar with its recordkeeping procedures is not sufficient: "there needs to be enough information presented to demonstrate that the person is sufficiently knowledgeable about the subject of the testimony." Vinhnee, 336 B.R. at 448 (citation omitted). The testimony must contain information warranting the conclusion that the proffered records are what they purport to be. Id.

The only evidence UBS AG has submitted is the declaration of one of its bankruptcy specialists. The initial paragraph of the declaration reads:

I am employed as a Bankruptcy Specialist by UBS AG, as servicing agent for ACT Properties LLC, its successors and/or assigns ("Movant"). In this capacity, I am one of the custodians of the books, records, files and banking records of Movant, as those books, records, files and banking records pertain to the loans and extensions of credit by Movant to Peter A. Jacobson and Maria E. Jacobson ("Debtors"). I have personally worked on said books, records, files and banking records and, as to the following facts, I know them to be true of my own knowledge or I have gained knowledge of them from the Movant's business records, which were made at or about the time of the events which were recorded, and which are maintained in the ordinary course of Movant's business.

Declaration in Support . . . (docket no. 32).


One hopes the declarant is not as unsure of his own identity as this imprecision suggests: is he employed as a bankruptcy specialist by UBS AG only in its capacity as servicing agent for ACT Properties? Or for a successor or assignee of ACT? Or is he a bankruptcy specialist for UBS AG and its successors and/or assigns?
Is he one of the custodians of "the books, records, files and banking records" of all of these

Page 15


entities? And since the motion must be brought in the name of the real party in interest; i.e., the present holder of Debtors' note, what is the relevance of a possible future successor or assignee? Or if the antecedent of "successors and/or assigns" is UBS AG, how does declarant know he will be employed by whomever it is, or have access to its records?

Setting aside for the moment that no business records are actually proffered - the declarant recounts his conclusions, from whatever records he consulted, and we are told that he is one of the custodians, that he works on those records, that they were made at or about the time of the events recorded, and that they are maintained in the ordinary course of Movant's business. While that formulaic recitation attempts to satisfy FRE 901(a), it would not withstand an objection to admissibility: there is nothing meaningful regarding the declarant's qualifications to authenticate business records, or the reliability of those records in this instance.

That reliability is questionable, given obvious errors, such as the date the Debtors executed the deed of trust and the assertion of a loan or extension of credit "by Movant" to the Jacobsons - the lender (and the payee of their note) was Castle Point Mortgage, Inc., not included in either of the compositions of "Movant" set forth in UBS AG's papers. And which of the matters he recounts are things he knows to be true of his own knowledge, and which did he gain from someone's business records? More fundamentally, ACT Properties was assigned the deed of trust just days before the motion was filed. Why should credence be given to

Page 16


UBS AG's records "as servicing agent for ACT Properties" respecting anything before that assignment?

But even if all of the deficiencies were overlooked or resolved in Movant's favor, one emerges from the syntactical fog into an impassable swamp. The declaration of someone in California, apparently based on business records, and perhaps predating his employer becoming servicing agent,
is that Debtor's note secured by the deed of trust is in "the possession" of a separate entity in Minnesota.

Assuming the exhibits to the motion are authentic and are the same as those intended to have been attached to the declaration, the note is indorsed in blank. Without more, that and possession (rather than mere custody) suggests that Wells Fargo is the holder of the note. RCW 62A.3-20113 and 3-30114. Nothing

Page 17


in the record establishes on whose behalf (if other than its own) Wells Fargo Document Custody possesses the note; that (and verification of current possession and present ability to produce the original, if required) would have to come from Wells Fargo. Nor does anything in the record establish UBS AG's authority to enforce the Debtors' note, for whomever holds it; and thus to foreclose the deed of trust. The declaration states that UBS AG is "servicing agent," a term with no uniform meaning, and no definition cited.
At a minimum, there must be an unambiguous representation or declaration setting forth the servicer's authority from the present holder of the note to collect on the note and enforce the deed of trust. If questioned, the servicer must be able to produce and authenticate that authority.

UBS AG has not shown that it has standing to bring the motion for relief from stay or authority to act for whomever does.

V. CONCLUSION

As the motion was not brought In the name of the real party in interest, nor has standing to bring it been established, it will be

DENIED.

END OF DECISION


Philip H Brandt
United States Bankruptcy Judge

Page 18











Footnotes Page 1


Absent contrary indication, all "Code," chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub. L. 109-8, 119 Stat. 23. "Rule" references are to the Federal Rules of Bankruptcy Procedure, and "FRCP" and "FRE" references to the Federal Rules of Civil Procedure and the Federal Rules of Evidence, respectively. "GR" references are to the Local Rules, U.S. District Court, W.D. Washington, and "LBR" to the Local Bankruptcy Rules, W.D. Washington. "RCW" references are to the Revised Code of Washington.





Footnotes Page 4
___________________

available at: http://www.iht.com/articles/2009/03/04/business/04swiss.php (last visited 4 March 2009) available at:http://www.ubs.com/1/e/about/history/a_short_history.html?isPopup=yes (last visited 5 March 2009).



Footnotes Page 6


Which provides:

The Local Rules of the United States District Court for the Western District of Washington (herein "Local Rules W.D. Wash.") are rules of the United States Bankruptcy Court for the Western District of Washington, except as they may be inconsistent with Title 11, United States Code (herein "Bankruptcy Code"), the Federal Rules of Bankruptcy Procedure, or these Local Bankruptcy Rules. behalf
of the party the attorney represents, or by filing a Notice
of Appearance.



Footnotes Page 9

Which provides: [A]ppearance is required at all scheduled hearings. Failure to appear at the date and time appointed for hearing may be deemed by the court to be an admission that the motion, or the opposition to the motion, as the case may be, is without merit. Quoted in Thomas J. Peters and Robert H. Waterman, In Search of Excellence, Harper & Row 1982, at 119. Which provides in (a)(1): An action must be prosecuted in the name of the real party in interest. . . .


Footnotes Page 11

Which provides:

The court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action.

After ratification, joinder, or substitution, the action proceeds as if it had been originally commenced by the real party in interest.

Footnotes Page 13

Which renders problematic the identification of MERS "solely as nominee . . ." as the beneficiary of Jacobsons' deed of trust.


Footnotes Page 14


FRE 803(6) provides: Records of Regularly Conducted Activity.-A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person wit knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness, or by certification that complies with Rule 902(11), Rule 902(12), or a statute permitting certification, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. The term "business" as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

Which provides:

The requirement of authentication or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a


Footnotes Page 15

finding that the matter in question is what its proponent claims.


Footnotes Page 17

So in both the motion (at 3:11) and in the declaration (at 4). Which provides: (a) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder. (b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone. Which provides: "Person entitled to enforce" an instrument means(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to RCW 62A.3-309 or 62A.3-418(d). A person may be a person entitled to enforce the instrument even though the person is



Footnotes Page 18

not the owner of the instrument or is in wrongful possession of the instrument.

END