Foreclosure Defense: The Defense of PAYMENT

Thus the fund is present for payment and controlled by the combined entities of the entire single transaction. A default by the borrower is actually therefore impossible under the scheme of securitization as it was implemented. 

The fact that the borrower has not made a payment to the mortgage service provider has typically been accepted as prima facie proof that the mortgage is at least technically in default. But what if payment HAS been made by the borrower or by a third party? PAYMENT is an absolute defense and completely removes the ability of anyone to take any action in collection of the debt because the debt is not due.

Consider this latest entry to Garfield’s Glossary:

THIRD PARTY PAYMENT: (Foreclosure Defense: “PAYMENT”)

A basic defense to any foreclosure action or any action on a debt, whether evidenced by a note, security agreement or otherwise is PAYMENT. It is entirely possible and in fact probable that the ultimate party to whom payment was to be made actually received the payment from a third party, or a portion of the payment, or has a claim for the payment from a third party.

This third party obligation, taking the entire transaction as one single transaction arises from the sale, assignment, aggregating, re-assignment, sale, or transfer to an investment banker or entity created by an investment banker and in turn sold to an investor in pieces as an asset backed security (ABS).

Presumably the investor who purchased an asset backed security which was backed in small part by YOUR mortgage and note and the balance backed by (a) other mortgages and notes, and possibly other portfolios of obligations which may or may not have been mortgages and notes, (b) insurance from the rating agency, (c) insurance from an insurer against the risk of default, (d) insurance from the investment banker, (e) insurance from the mortgage broker, (f) insurance from the appraiser of the house, (g) insurance from the “lender”, (h) lender liability for buy back or guarantee of payment and potentially other third party entities who did make payment or who will make payment curing the borrower’s alleged default or nullifying the alleged default altogether.

The transfer of risk allocation sought by securitization, cross indemnity agreements, guarantees, ratings, insurance and “buy-back arrangements, convert the payment allegedly due from borrower as part of a larger option Ponzi scheme.

Using the Countrywide model which can be seen buried deep within their filings with the SEC, one can see that the proceeds of the sale of the ABS can be used to make the payments.

Thus the fund is present for payment and controlled by the combined entities of the entire single transaction. A default by the borrower is actually therefore impossible under the scheme of securitization as it was implemented.

The reality is that the underwriting standards for loaning money were dropped, along with even the escrow account for insurance and taxes in some cases, so that the loan would qualify for for closing at closing, even if it would later NOT qualify knowing the inflated value of the home, and the likelihood of increases in payments beyond the financial capacity of the borrower.

The gap created between what the borrower could actually pay and what the loan terms demanded was made up by the “option” quality referred to above  through insurance and other terms between the multiple players in the chain of title for the mortgage, note, risk of loss and right to payment (all of which was separated out into different entities — none of whom qualified as a lender or as an entity with a right to do business in the state where the property was situated or the state where the loan was originated.) (see LENDER).

 

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