The failures to disclose material facts providing the real context of the “loans” deprived borrowers of choice between lenders and deprived them of the opportunity of bargaining for terms that were based upon the economic reality — that the main point of the loan origination was not the loan but rather the sale of unregistered securities. THAT is where the profit is and was and without that the loan would never have occurred. None of that profit was disclosed.
Contrary to popular myth quiet title is not a magic bullet.
It’s a good move only after you have destroyed the case against the homeowner and only if you direct it at only the parties who have made claims against the homeowner. So it’s really an action for a declaration from the court as to the rights and duties of the parties to the case.
You can’t file a case against potential creditors unless you do service by publication and that can be tricky. And you would need to prove convincingly that the mortgage should never have been recorded in the first place. Securitized mortgages are subject to possible reformation by the real parties in interest who paid value in exchange for ownership of the debt. And theoretically at least, they exist — even if they are currently legally unable to enforce the debt, note or mortgage.
And while I am at it, let me remind the reader again that the following terms are all different in that they all mean different things:
- Debt — a legal obligation defined by common law and the Uniform Commercial Code
- Note — a legal instrument which if facially valid creates a legal obligation separate and distinct from any debt
- Mortgage — a legal instrument which if facially valid creates a lien or encumbrance upon land as security for the performance of either (a) a debt or (b) a note or (c) both a debt and a note.
- Deed of trust — same as mortgage except that mortgage requires due process of judicial foreclosure whereas DOT is an agreement to skip judicial foreclosure. [My opinion, not accepted by anyone one the bench, is that as soon as the nonjudicial foreclosure becomes contested, the action MUST convert to judicial in order to satisfy due process. ]
- “Loan” means nothing. It is used in general references to mean something in relation to the above terms without ever being specified. However the loan agreement generally means the note, the mortgage, the disclosures and the Federal and State lending laws that are incorporated either expressly or by common law doctrine. The existence of a note and mortgage is generally regarded as raising the legal presumption that a loan of money has occurred between the named originator and the borrower. That is a rebuttable presumption that generally only occurs through discovery during litigation.
*
Here is the way to look at it from a legal perspective.
*
The mortgage or deed of trust generally expressly state that they secure the obligations stated in the note. And the note creates a liability even if there was no consideration. This liability (arising solely from execution of the note) can be defeated if you can reveal lack of consideration during litigation. But the problem is that most borrowers received a loan of money —- or received the benefits of payments on their behalf for example to prior “lenders”, sellers etc.
*
Technically speaking the mortgage or deed of trust does not state that it secures the debt. It says that it secures the obligations under the note. So theoretically if the debt is not owed to the “secured party” (“lender”) then it secures nothing and the people who advocate quiet title are right that this could mean the mortgage would be expunged from the title record or canceled or both. AND that in turn would mean that the mortgage should never have been recorded in the first place.
*
But in the real world, it is highly unlikely that — after receiving financial benefits under circumstances where the homeowner intended to use his or her house as collateral, that any judge would simply say that the mortgage or deed of trust was void ab initio (from the start).
*
More likely the judge would issue a declaration that the parties who were seeking to use the security instrument were not entitled to do so but that the mortgage could be subject to enforcement if it was the subject of reformation in which the right name was recited as mortgagee under a mortgage or the beneficiary under a deed of trust. So given the bias of courts, it seems very unlikely that full quiet title would be granted because it would quash the rights of unknown third parties who did actually pay value.
*
Which brings us to the hidden question. Although there were certainly people who paid value, what did they buy? If they (investors who bought certificates) didn’t buy the debt owed by the residential borrowers, then the fact that they paid value becomes irrelevant.
*
And so we next move onto the investment bank that sold them the certificates. The certificates essentially were IOUs. They could be described as bonds or notes. They represent an unsecured liability owed by the investment bank (dba an implied “trust”) to the investors who bought the certificates.
*
So investors did not buy any interest in the debt, note or mortgage and many times the indenture to the certificates expressly waives any such right, title or interest.
*
That leaves the investment bank posing as underwriter but actually acting as issuer of the certificates. So the money from sale of the certificates is the money of the investment bank.
*
Then through a variety of conduits, the investment bank puts just enough money on loan closing tables as is necessary to generate —at least on paper — the dollar liability that is owed by the investment bank to the investors. But the borrowers execute no documentation and receive no disclosures to the effect that the investment bank was the actual lender through table funding or otherwise.
*
This money is generally 20%-30% less than the amount of money paid by investors for the certificates. So right away the investment bank has received a yield spread premium of 20%-30% on invested dollars — which is realized only when the loan is closed. That YSP is never disclosed which makes virtually all loan closings materially deficient in disclosures. That Is compensation arising from the loan origination. It doesn’t exist but for the loan origination.
*
Back to our subject. So the investment bank does not get revealed nor is any note or mortgage or deed of trust executed in favor of the investment bank.
*
And there is the kicker. The originator whom we all know is not funding the loan is NOT an agent for the investment bank so this doesn’t even qualify as a table funded loan. The reason it is not an agent of the investment bank is that the investment bank has expressly created veils that prevent it from being named as the lender and therefore subject to Federal and State lending laws.
*
So the investment bank cannot claim to be the owner of the obligation or debt, nor can it plead for relief under the note and mortgage or deed of trust — unless it admits a scheme to violate Federal and State lending laws.
*
So the answer to that “problem” is that the investment bank uses veils (sham conduits) and “designates” sham entities to serve as claimant in foreclosures or, better yet for them, names nobody as designee but nonetheless states a name as though it was an entity like “US Bank, as trustee on behalf of the certificate holders of SASCO Trust 2006-1. ” Although US Bank exists, there is no legal entity that could be called “certificate holders of SASCO trust 2006-1” even though it sounds official.
*
Some analysts including myself had previously erroneously concluded at times that the note was split from the mortgage. It wasn’t. The ownership of the debt was split from the payment of value. Under all current black letter law that means that it is illegal for anyone to claim ownership of the debt.
*
BUT as I pointed out above, that still leaves open an action in equity in which the false or deficient loan origination documents could be reformed in a way that designates a party who may act as owner of the debt — but only after all the interests of all the stakeholders are taken into consideration.
*
This might include liability for disgorgement of undisclosed profits, among other things.
*
The failures to disclose deprived borrowers of choice between lenders and deprived them of the opportunity of bargaining for terms that were based upon the economic reality — that the main point of the loan origination was not the loan but rather the sale of unregistered securities. THAT is where the profit is and was and without that the loan would never have occurred. None of that profit was disclosed.
FREE REVIEW:
If you want to submit your registration form click on the following link and give us as much information as you can. CLICK HERE FOR REGISTRATION FORM. It is free, with no obligation and we keep all information private. The information you provide is not used for any purpose except for providing services you order or request from us.
In the meanwhile you can order any of the following:
FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. IN FACT, STATISTICS SHOW THAT MOST HOMEOWNERS FAIL TO PRESENT THEIR DEFENSE PROPERLY. EVEN THOSE THAT PRESENT THE DEFENSES PROPERLY LOSE, AT LEAST AT THE TRIAL COURT LEVEL, AT LEAST 1/3 OF THE TIME. IN ADDITION IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
Like this:
Like Loading...
Filed under: foreclosure | Tagged: debt, deedof trust, foreclosure defense, loan, Mortgage, note | 2 Comments »
