Glossary Update: Conflict of Laws — UCC


Most states have adopted the Uniform Commercial Code without making any revisions. The UCC is an outgrowth of the Uniform Code arising from the Hague conventions. Thus the laws concerning indorsement, transfer, accommodation and assignment date back hundreds of years from common law from over 30 countries. Variance in application of these laws carries with it the probability of undermining the confidence that people will have in knowing that contractual obligations will be enforced and that they are protected by legal conventions that are accepted all over the world. In the context of the mortgage meltdown, the ONLY defensive positions that can be taken by those who would enforce securitized notes and mortgages, given the predatory practices employed and the failure to disclose the inflated pricing and valuation on both sides of the transaction — the investor who put up the money for the loan, and the borrower who signed the papers — is to run contrary to established law. An indorsement in blank generally means nothing without more. It does not convert the instrument to a bearer instrument. An accommodation indorsement fails to provide “cover” which is necessary for one to claim being a holder in due course. The following is an old treatise comparing laws from various jurisdictions. The inescapable conclusions are that the laws that were taught in law schools 100 years ago, 50 years ago and even 25 years ago are all the same. The only party capable of claiming the status of holder in due course is the investor who purchased certificates that gave him/her/it a share of a pool of assets which consisted of, in its purest form, a pool of notes and mortgages that were corrupted by the promise (unknown to the borrower or the investor) to apply payments to parties OTHER THAN the holder in due course. This has the obvious effect of separating the stream of revenue from the original obligor (and co-obligors acquired along the way) from the security instrument (the mortgage) which is a recorded document, as should be any assignment thereof. The parties holding the mortgage and the parties to whom the revenue stream is pledged are different, diverse, and in most cases unknown as they are dependent upon conditions subsequent that were undisclosed to either the borrower or the investor (overcollateralization of the asset backed securities, cross guarantees between tranches, insurance against loss, credit default swaps etc.). Hence the obligation was converted from a secured credit transaction to an unsecured unliquidated contingent contract obligation, subject to affirmative defenses and counterclaims, including the quieting of title, from the borrower. Conflict of Laws as to Bills and Notes

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