Unconstitutionality of a Power of Sale


I have always said that the power of sale raises constitutional questions — namely, that no  person should be deprived of life, liberty or property without due process of law. The fiction is that you can waive that right by contract. That premise is questioned here. But in addition, this piece raises the stronger point that even if one were to conclude that it is possible to contract away your most basic constitutional rights (like agreeing to be a slave), the manner in which it is being applied in the era of securitized loans is clearly unconstitutional.

There is also the fiction that use of the power of sale is not state action and THAT evades the issue of constitutionality. The answer to that argument is that if there is no state action then there is no sale, there is no new owner, and there is no new deed. The proponents speciously argue that you can take one part of the foreclosure process out of the courts and call that private while the rest is state action rubber stamping a foreclosure sale without due process under a set of presumptions that in most cases no longer apply.

The arguments for judicial economy and waste of money that lay at the foundation of the statutes permitting non-judicial sale simply are not present anymore. The obvious identities of the proper parties, accounting for the entire transaction, and the inevitability of the foreclosure by default without any real meritorious defenses that existed when these statutes were passed, do not pass even the smell test in today’s environment.

But the court need not reach the constitutional question. It is also a matter of breach of contract, jurisdictional standing and procedural due process. Once the borrower OBJECTS to the sale on the grounds that he denies the default, or denies the default as to the pretender lender, or denies the standing of the would-be forecloser as a creditor at all, the question should be resolved in the courts with all the usual trappings of proper pleading by the party seeking affirmative relief (the one seeking foreclosure). The requirements of good faith pleading and joining issues to be tried according to the normal rules of evidence should apply.

As it stands now, the power of sale is being used as an end-run around the requirements that the borrower even owe anything, much less to the party seeking foreclosure.


REUBEN NIEVES: As an addendum to my prior comment on the unconstitutionality of a power of sale provision in a mortgage contract with respect to federally chartered bank corporations created for public and national purposes I am submitting my research to this site and invite any opposition or legal commentator to dispel or affirm my research

The issue is one of First Impression because the Supreme Court of the United States has never decided whether a federally chartered bank corporation created under an act of Congress to provide an important public and national purpose could use a non- judicial procedure that allows the taking of a property interest without a hearing thus violating the 5th Amendment. The Court, however, has made numerous decisions which would have been relevant in determining whether non-judicial procedures were applicable given the nature of these corporations. Though several appellate courts have had occasion to determine the constitutionality of non-judicial procedures in the form of a trustee sale provision, none have vetted the corporations seeking this remedy. The issue goes to the core of the nature of federally chartered corporations created under special law for public and national purposes. This issue deals with the right of these corporations to put such a provision in a contract and rests on whether the act of foreclosure is a governmental act or a proprietary act. It is an issue which, in the context of the current economic crisis and massive foreclosures, sweeps the breadth of this nation like a plague destroying families and communities as it spreads, swelling the homeless population in its wake. This issue involves a constitutional right affecting the lives of millions of families across this nation.
It would allow homeowner a level playing field with the banks to negotiate loan modification. If the bank had to take them to court, the homeowner could raise affirmative defenses and a right to a jury trial. I ask that you look at the arguments proffered in this letter to make your decision and that you act quickly.
To resolve the issue of the constitutionality of a trustee sale by National banks and federal savings associations , we must first identify the nature of the corporations . NATIONAL BANKS AND FEDERAL SAVINGS ASSOCIATIONS are federally chartered corporations created under acts of Congress (The Homeowner Loan Act (HOLA) and the National Bank Act(NBA) for a public and national purposes. In Conference of Federal Savings and Loan Associations et al v. Alan L. Stein et al. 604 F.2d 1256 (9th Circuit) (1979) the court related the history of HOLA and the reason for its’ creation:
The Home Owners’ Loan Act of 1933, 12 U.S.C. §§ 1461 Et seq. (HOLA), was the result of congressional dissatisfaction with state law and practice in the financing of home construction.
….. The Federal Home Loan Bank Board (the Bank Board) was created with extremely broad powers to promulgate rules and regulations. 12 U.S.C. § 1464(a) provides in part:
…[T]he Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as ‘Federal Savings and Loan Associations’ * * * and to issue charters therefore, giving primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States.” [bold added]

National banks and federal savings banks are agencies of the United States created to promote its fiscal policies. National banks and federal savings banks benefit by not paying state taxes, avoiding state predatory lending laws through the concept of Federal preemption, allowing them to export high interest for the credit card thus avoiding the state usury laws. Federal Savings banks also have the same benefits and are no less instrumentalities of the federal government than national banks whose purpose is to promote its fiscal policies. Alexander Hamilton argued that the Central Bank was necessary to the nation in cases of emergency such as the financing of war… Hamilton believed that there was a symbiotic relationship between agriculture, commerce, and manufacturing, and that progress in each of these sectors was necessary for America’s economic development. (In the Report of Credit II, Dec. 1790)

Non-judicial foreclosures have been the subject of a flurry of cases including the most current Apao v. San Diego Home Loans, Inc.,324 F3d 1091, Ninth Circuit (2002) a California corporation. Margaret Apao lost her home to a foreclosure and sale under Hawaii’s non-judicial foreclosure statute. The federal district court dismissed the complaint for failure to state a claim and that the sale was a purely private remedy. Apao appealed to the Ninth Circuit. The Ninth Circuit affirmed the district court’s decision on the grounds that previous decisions of appellate courts upheld the constitutionality of similar non-judicial procedures. The Ninth Circuit held in Apao that the case of Charmicor v. Deaner, 572 F2nd 694 “was controlling” although the consumers in Apao attempted to distinguish it. In Charmicor, the consumers claimed that the statute offended due process by failing to provide a pre-sale hearing and that it offends civil rights statutes and the equal protection clause by discriminating against appellant’s shareholders, who are black. The court in Charmicor noted that the “complaint failed to state a claim for relief under the civil rights statutes, because the record was utterly barren of any facts or allegations that could support a claim under the equal protection clause”, the Ninth Circuit affirmed. The court in these cases made no reference to several Supreme Court decisions which examined the nature of corporations created under an act of Congress and were content with the notion that Congress could adopt the local customs on debtor creditor relations without further analysis. The fact of the matter is that the issue should be determined under federal law.


In Easton v. Iowa,188 U.S.220 (1903) the Court said of national banks:
. . .[W]e cannot concur in the suggestions that national banks, in respect to the powers conferred upon them, are to be viewed as solely organized and operated for private gain.
The Court in Easton went on to say at 188 U.S. 220 at p. 230 that the principles enunciated in McCullough v Maryland, 17 U.S. 316(1819), and in Osborn v Bank of United States, 22 U.S.738 (1824), though expressed in respect to banks incorporated directly by acts of Congress, were still applicable to the later and present system of national banks. The Court cited with approval the holding of the latter as expressed by Chief Justice Marshall:
The bank is not considered as a private corporation whose principal object is individual trade and individual profit, but as a public corporation created for public and national purposes. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies having no political connection with the government, is admitted, but the bank is not such an individual or company. It was not created for its own sake or for private purposes. It has never been supposed that Congress could create such a corporation.[bold and italics added]

The court in Easton goes on to say:

‘National banks are instrumentalities of the Federal government, created for a public purpose, and as such necessarily subject to the paramount authority of the United States. It follows that an attempt by a state to define their duties or control the conduct of their affairs is absolutely void, wherever such attempted exercise of authority expressly conflicts with the laws of the United States, and either frustrates the purpose of the national legislation or impairs the efficiency of these agencies of the Federal government to discharge the duties for the performance of which they were enacted.

Our conclusions, upon principle and authority, are that Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations…[bold, underline and italics added]
In view of the holding in Osborn which Justice Marshall held that banks were public and not private bank corporations, which was approved and held applicable to later national bank corporations not directly created by Congress by the Supreme Court in Easton, why should we now consider national banks private corporations? And why not consider them “agencies of the Federal government” as referred to in Easton? And why should the same reasoning not apply to FEDERAL SAVINGS ASSOCIATIONS .
In Osborn at p. 22 U.S. 823 the court said of these national banks:
The charter of incorporation not only creates it, but gives it Every faculty which it possesses. The power to acquire rights of any description, to transact business of any description, to sue on those contracts, is given and measured by its charter, and that charter is a law of the United States. Take the case of a contract, which is put as the strongest against the Bank. . . [H]as this being a right to make this particular contract? .. . .[T]his question, too, depends entirely on a law of the United States [underline added]

The court in Osborn at p. 823, made it clear that federally chartered corporations created under acts of Congress could “. . .acquire no right, make no contract, bring no suit, which is not authorized by a law of the United States. It is not only itself the mere creature of law, but all its actions and all its rights are dependent on the same law”.[underline and bold added]
In an excerpt from Shoshone Mining Co. v. Rutter, 177 U.S. 505,509,510 ,citing Osborn, the court said:
A corporation has no powers and can incur no obligations except as authorized or provided for in its charter. Its power to do any act which it assumes to do, and its liability to any obligation which is sought to be cast upon it, depend upon its charter, and when such charter is given by one of the laws of the United States there is the primary question of the extent and meaning of that law;[underline & bold added]

In Runyan v. Lessee of Coster, 39 U .S. 122 , p. 129 (1840) the court Said:

…[T]hat a corporation “possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. That corporations created by statute must depend for their powers and the mode of exercising them, upon the true construction of the statute.
… The corporation must show that the law of its creation gave it authority to make such contracts.” . [underline and bold added]
Did the law of its creation (HOME OWNER LOAN ACT or NATIONAL BANK ACT ) give National banks and federal savings associations the right to make this contract with this provision?
Can it then be said that the provision in a mortgage contract requiring a mortgagor to transfer his rights to a trustee with a power of sale for the non-payment of a mortgage is authorized by the federal charter? Is this not the right to foreclose on an owner without resort to judicial process and a hearing? Is this not the right to deprive a person of procedural due process? We must then ask the question: Is the act of the national or federal savings association in foreclosing non-judicially within the scope of a law of Congress? Can the government by way of a federal charter authorize a right to a bank to do what it is forbidden to do itself? It is fundamentally clear that the government can impart no greater power through a charter than they possess themselves. The power to deny a person of procedural due process is denied to the government under the 5th Amendment and is equally denied to the banks. As John Locke said nearly 300 years ago: “…Nobody can transfer to another more power than he has in himself “ [John Locke, TWO TREATISE OF GOVERNMENT, BOOK II] The courts in Osborn and Shoshone and Runyan show us that the conduct of banks in pursuit of non-judicial foreclosures must be done under the authority of the federal charter which is a “law of the United States” and therefore “under color of federal law”. Thus National banks and federal savings associations Mortgage fsb could be considered a “governmental actor” like the assumption made by the First Circuit in Gerena v Puerto Rico Legal Services, Inc., 697 F. 2d 447(1st Cir. 1983)

If all the acts, rights and obligations of corporations with federal charters must be done under the authority of the federal charter and a law of the United States, including rights created in contract, how can Congress authorize a provision that it could not exercise itself? The provision can only be validated by what it represents and the constitutional implications it may give rise to. In United States v Grimaud, 220 U.S. 506 (1911) the Supreme Court decided that very issue and the court citing Justice Marshall at 220 US pg. 517 said.

It will not be contended that Congress can delegate to the courts, or to any other tribunals, powers which are strictly and exclusively legislative. But Congress may certainly delegate to others powers which the legislature may rightfully exercise itself. [underline bold & italics added]

As the Supreme Court said in Concord First Nat’l Bank v Hawkins 174 U.S. 364 p. 371:
The doctrine of ultra vires, by which a contract made by a corporation beyond the scope of corporate powers is unlawful and void and will not support an action, rests as the Court has often recognized and affirmed, upon three distinct grounds: the obligation of anyone contracting with a corporation to take notice of the legal limits of its powers, the interest of the stockholders not to be subject risks which they have never undertaken, and above all, the interest of the public that the corporation shall not transcend the powers conferred upon it by law.[bold added]
The powers of a corporation are express and incidental. Runyan at p. 129 supra. If Congress cannot confer the power to foreclose non judicially to National banks and federal savings associations then the provision is ultra vires and void.

In Federal Land Bank v. Bismarck Co. of St. Paul, 314
U. S. 95 (1941) the court was faced with determining
whether the lending functions were proprietary or governmental. The court said:
The argument that the lending functions of the federal land banks are proprietary, rather than governmental, misconceives the nature of the federal government with respect to every function which it performs. The federal government is one of delegated powers, and from that it necessarily follows that any constitutional exercise of its delegated powers is governmental. Graves v. New York ex rel. O’Keefe, 306 U. S. 466, 306 U. S. 477. It also follows that, when Congress constitutionally creates a corporation through which the federal government lawfully acts, the activities of such corporation are governmental. (cites)
As part of their general lending functions, the land banks are authorized to foreclose their mortgages and to purchase the real estate at the resulting sale. They are “instrumentalities of the federal government, engaged in the performance of an important governmental function.”(cites)
In Federal Land Bank v. Board of Kiowa County., 368 U.S. 146 the court said :

“the Federal Government performs no ‘proprietary’ functions. If the enabling Act is constitutional and if the instrumentality’s activity is within the authority granted by the Act, a governmental function is being performed.”
It is well settled that the enabling Act, Home Owner Loan Act (HOLA) is constitutional . Pittman v. Home Owners’ Loan Corp., 308 U. S. 21. Like federal land banks, the lending functions including foreclosures of federal savings assn’s/federal savings banks, such as National banks and federal savings associations Mortgage fsb, a federal instrumentality , should be treated as governmental just as the court in Bismarck held. Federal Land Bank v. Bismarck Co. of St. Paul, 314 U. S. 95, p. 102 (1941)
Can Congress divest itself of its identity with a corporation created and participated in for a public purpose sufficiently to allow the corporation to use a procedure that does not allow a hearing? That question was asked and answered in Lebron v National Railroad Passenger Corporation. 513 U.S. pgs 374, 375 when the court said:
c) There is a long history of corporations created and participated in by the United States for the achievement of governmental objectives. Like some other Government corporations, Amtrak’s authorizing statute provides that it “will not be an agency or establishment of the United States Government,” [cite]
(d) Although § 541 is assuredly dispositive of Amtrak’s governmental status for purposes of matters within Congress’s control–e. g., whether it is subject to statutes like the Administrative Procedure Act-and can even suffice to deprive it of all those inherent governmental powers and immunities that Congress has the power to eliminate-e. g., sovereign immunity from suit-it is not for Congress to make the final determination of Amtrak’s status as a Government entity for purposes of determining the constitutional rights of citizens affected by its actions. The Constitution constrains governmental action by whatever instruments or in whatever modes that action may be taken…
(e) Amtrak is an agency or instrumentality of the United States for the purpose of individual rights guaranteed against the Government by the Constitution. This conclusion accords with the public, judicial, and congressional understanding over the years that Government-created and -controlled corporations are part of the Government itself.(cites) ; A contrary holding would allow government to evade its most solemn constitutional obligations by simply resorting to the corporate form, Bank of United States v. Planters’ Bank of Georgia, 9 Wheat. 904, 907, 908 (other cites).
Like Amtrak, national banks and federal savings associations are federal instrumentalities and members in banking systems created for a public purposes and controlled by the director of The Office of Thrift Supervision and the director of the Comptroller of the currency. Like Amtrak it is not for Congress to make the final determination of the status of these corporations as government entities for purposes of determining the constitutional rights of citizens affected by its actions. Consumers are citizens whose constitutional rights are affected when non- judicial foreclosures are exercised by federally chartered corporations like National banks and federal savings associations . To paraphrase an old saying, “that with great power comes great obligations.” This is no less true when Congress confers enumerated and incidental powers on a corporation it creates for an important governmental function. It must follow that with the immunities from taxation and state laws that frustrate the activities of corporations for which an act of Congress was enacted, the constitutional obligations of the government must also attach. For as Justice Scalia said in Lebron, at p. 399:
But it does not contradict those statements to hold that a corporation is an agency of the Government for purposes of the constitutional obligations of Government rather than the “privileges of the government,” when the State has specifically created that corporation for the furtherance of governmental objectives, and not merely holds some shares but controls the operation of the corporation through its appointees.
In this case control of the operations is exercised by the director of the Office of Thrift Supervision and the director of the Office of the Comptroller of Currency independent federal regulatory agencies vested with plenary authority to administer the Home Owners’ Loan Act of 1933 (HOLA) and the National Bank Act, The Director of the OTS is appointed by the President, by and with the advice and consent of the senate. (12 USC §1462c) The Director of the Comptroller of the Currency is appointed by the President, by and with the advice and consent of the senate.(12 USC § 2) The issue of the government’s control over the operations of federal savings associations is clarified by the court in Fidelity Fed. S. & L. v. De la Cuesta, 458 U.S. 141 (1982) at p. 161 when the court said:
The broad language of § 5(a) expresses no limits on the Board’s authority to regulate the lending practices of federal savings and loans. As one court put it, “[I]t would have been difficult for Congress to give the Bank Board a broader mandate.” [cites] And Congress’ explicit delegation of jurisdiction over the “operation” of these institutions must empower the Board to issue regulations governing mortgage loan instruments.

In National Banks the governments control was made clear in Easton when the court said:
Our conclusions, upon principle and authority, are that Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations…[bold, underline and italics added]

The history of national banking legislation has been “one of interpreting grants of both enumerated and incidental `powers’ to national banks” as well as federal savings associations[which include savings banks]. Bank of America et al v City of San Francisco et al 309 F.3d 551 (Ninth Circuit) (2002) Consider this hypothetical. The California legislature would makes a law that as a matter of public policy foreclosures of any kind will not be permitted on a homeowner’s primary residence. The OTS is charged with the supervision of the Home Owner Loan Act like the Office of the Controller of Currency is ”charged with supervision of the National Bank Act” NationsBank of N.C.N.A. v Variable Annuity Life Ins. Co. 513 U.S. 252, 256(1995) The OTS and the OCC would promulgate rules allowing the banks to foreclose on the homes that have defaulted and in concert with the banks claim that the power to foreclose was an incidental power of national banks and also federal savings banks and therefore would preempt state law. The State would challenge that decision in court. Both Acts are silent on the necessity of banks foreclosures to secure the residential property in the event of default. The Acts, however, do bestow upon banks the authority to exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as necessary to carry on the business of banking. . .”12 U.S.C.§24(Seventh). The OTS authority to preempt state laws affecting its lending practices lies in 12 cfr §560.2. Because these sections are not explicit on the limits of “incidental powers”, an inquiry as to whether the NBA or HOLA would support the use of either one or both methods of foreclosures (Judicial foreclosures and/or non-judicial foreclosure) would be necessary. The holding in United States v. Grimaud, 220 U.S. 506(1911) would apply. The NBA or HOLA could authorize the former but not the latter because the government could not exercise the power to foreclose non-judicially itself.
In Acron Investments, Inc. et al v Federal Savings and Loan Insurance Corporation , 363 F.2nd 236 (9th Circuit, 1966) the court was given the task of determining if the Federal Savings & Loan Insurance Corporation (FSLIC) was an “agency”. After reviewing all the relevant code sections the court concluded that the corporation was an “agency” under 28 USC 451 because the control of the government over the corporation was more than custodial or incidental. In Acron at paragraphs 27 & 28 the court said:
…[T]he Reviser’s Note under 18 U.S.C. § 6 states that “The phrase `corporation in which the United States has a proprietary interest’ is intended to include those governmental corporations in which stock is not actually issued, as well as those in which stock is owned by the United States. It excludes those corporations in which the interest of the Government is custodial or incidental.” (Emphasis added.) 28 …Since the control which Congress and the United States exercise over the Corporation is clearly more than “custodial or incidental,” it would appear that the Corporation fits within the definition of “agency” of 28 U.S.C. § 451 and thus within the terms of 28 U.S.C. § 1345. [bold added]
Under the Ninth Circuit’s own test national banks and federal savings associations are “agencies”. Any doubt as to government’s control over the “operations” as being “custodial or incidental” is dispelled in Fidelity Fed. S. & L. v. De la Cuesta, 458 U.S. 141 (1982) at p. 161 when the court said:
The broad language of § 5(a) expresses no limits on the Board’s authority to regulate the lending practices of federal savings and loans. As one court put it, “[I]t would have been difficult for Congress to give the Bank Board a broader mandate(cites) And Congress’ explicit delegation of jurisdiction over the “operation” of these institutions must empower the Board to issue regulations governing mortgage loan instruments

With respect to National Banks the holding in Easton would apply as the court said:
Our conclusions, upon principle and authority, are that Congress, having power to create a system of national banks, is the judge as to the extent of the powers which should be conferred upon such banks, and has the sole power to regulate and control the exercise of their operations…[bold, underline and italics added]

The subject corporations cited share a common heritage with National banks and federal savings associations. They are corporations federally chartered and created under acts of Congress for important public and national purposes for which the Supreme Court has ruled on that premise in a number of cases that their activities were governmental. Thus in Bismarck the Court ruled that the lending functions were governmental not proprietary; and that foreclosure was part of the general lending functions. In Lebron, the Court ruled that the corporation was part of the government for the purpose of determining its constitutional obligations toward the rights of citizens affected by its actions.
The Ninth Circuit and other appellate courts have yet to apply the settled principles enunciated by these Supreme Court cases which lead to one conclusion— that National banks and federal savings associations’ use of a Trustee Sales(non-judicial foreclosures) must be a governmental acts and a 5th amendment violation of due process.
Constitutional powers conferred on a corporation should not be used to produce an unconstitutional result. The fallacy is that state law cannot determine the manner of foreclosure, but federal law with respect to the corporations created under acts of Congress. And federal law cannot authorize a non-judicial foreclosure , nor can the Constitution allow it.
Respectfully submitted,

___________¬¬¬¬¬¬¬¬________ Date:___________, 2010
Reuben Nieves

61 Responses

  1. It has been awhile since I posted this analysis that outlines the unconstitutionality of a power of sale provision in a mortgage contract by federally chartered bank corporations created for public and national purposes. Although several appellate courts concluded that it was constitutional none have weighed the issue against several Supreme Court decisions, which, if the courts would have looked for guidance would have arrived at a different conclusion. There has also been but one law review that attempted to analyse the issue. The one that I have found was written in 1997 by Daniel E. Blegen attached:

    University of Arkansas ∙ School of Law ∙ Division of Agriculture
    NatAgLaw@uark.edu ∙ (479) 575-7646
    An Agricultural Law Research Article
    Constitutionality of Power of Sale Foreclosures
    By Federal Government Entities
    AgriBank FCB v. Cross Timbers Ranch
    Daniel E. Blegen
    Originally published in MISSOURI LAW REVIEW
    62 MO. L. REV. 425 (1997)
    The Constitutionality of Power of
    Sale Foreclosures by
    Federal Government Entities
    AgriBank FCB v. Cross Timbers Ranchl


    When loaning money, lenders often require that obligations be secured by
    a mortgage on real estate owned by the borrowers.2 In Missouri, the prevailing
    form of mortgage is the deed of trust3 with a power of sale4 provision.s Upon
    default,6 the trustee is allowed to sell the property without a judicial hearing? and
    1. 919 S.W.2d 263 (Mo. Ct. App. 1996).
    LAW § 1.1 (3d ed. 1994).
    There are many variations on a mortgage, but all involve the debtor, or mortgagor,
    giving the creditor, or mortgagee, an interest in the land which can be exercised if the
    mortgagor fails to repay the debt. Id. Generally, the debtor and creditor will execute a
    promissory note for the debt amount, and a mortgage on land as security for the debt. Id.
    3. A deed of trust is an alternative to a traditional mortgage which “normally
    involves a conveyance of the realty to a third person in trust to hold as security for the
    payment of the debt to the lender-note holder whose role is analogous to that of the
    mortgagee.” NELSON & WmTMAN, supra note 2, § 1.6.
    4. Upon default, a power of sale authorizes the mortgagee or a third party to sell
    the property at a public sale after varying amounts of notice. NELSON & WmTMAN, supra
    note 2, § 7.19. This method is allowed in over thirty jurisdictions. NELSON & WmTMAN,
    supra note 2, § 7.19 n.1.
    5. Mo. REv. STAT. §§ 443.290-443.410 (1994). For text and discussion of specific
    sections, see infra notes 7-8.
    6. Default has been defined as ”the omission or failure to … observe a promise or
    discharge an obligation ….” Bradbury v. Thomas, 27 P.2d 402, 405 (Cal. Ct. App.
    Default is often defined by the promissory note itself. If it is not defined in the
    note, however, the plain meaning is used. See, e.g., Derry Finance N.V. v. Christiana
    Companies, Inc., 797 F.2d 1210, 1213-14 (3d Cir. 1986) (plain meaning used instead of
    contextual interpretation because recourse note was plain on face); Chrysler Credit Corp.
    v. BJ.M., Jr., Inc., 834 F. Supp. 813, 831 (E.D. Pa. 1993) (since not defined in Article
    9 of the U.C.C., “default” given its plain meaning).
    7. The statute provides that the trustee may foreclose and sell the property pursuant
    to a valid power of sale provision in the mortgage or deed of trust, and does not require
    any hearing or other determination of the rights of the parties. MO. REv. STAT. § 443.290
    The foreclosure sale may be carried out in as few as twenty days, depending on the
    after giving only limited notice.s Because of the limited notice and opportunity
    to be heard required under the Missouri statute, which is similar to other states’
    power of sale statutes,9 borrowers often raise the issue of whether the statute
    violates the due process required under the FifthlO or Fourteenthll Amendments
    to the United States Constitution.
    The constitutionality of non-judicial power of sale foreclosures is well
    settled as applied to private lenders because of the lack of state or federal
    action. 12 The question becomes more difficult, however, when the lender is the
    federal government or a corporation formed by the federal govemment.13
    notice requirements for the particular county, and the mortgagor’s only recourse is to pay
    the entire amount due prior to the sale, or pay the amount due within a statutorily
    prescribed redemption period following the sale. Mo. REv. STAT. § 443.410 (1994).
    8. The notice section of the statute provides:
    The notice required by section 443.310 shall … be given by advertisement,
    inserted for at least twenty times, and continued to the day of the sale, in some
    daily newspaper, in counties having cities of fifty thousand inhabitants or
    more, and in all other counties such notice shall be given by advertisement in
    some weekly newspaper published in such county for four successive
    issues ….
    Mo. REv. STAT. § 443.320 (1994).
    This statute has been in existence in Missouri, in essentially its present form, since
    1885 with only minor changes relating to the population of the town within the county.
    In 1989, the section was rewritten, but the general notice requirement has not materially
    In addition to the publication requirements, the statute provides for individual
    notice by certified or registered mail, not less than 20 days before the sale, as follows:
    (1) To each person whose name and address is set forth in any such request
    recorded at least forty days prior to the scheduled date of sale; and
    (2) To the person shown by the records in the office of the recorder of deeds
    to be the owner of the property as of forty days prior to the scheduled date of
    foreclosure sale at the foreclosing mortgagee’s last known address for said
    record owner; and
    (3) To the mortgagor or grantor named in the deed of trust or mortgage at the
    foreclosing mortgagee’s last known address for said mortgagor or grantor.
    Mo. REV. STAT. § 443.325 (1994).
    The statute does not require that the individual to whom notice is to be sent actually
    receive the notice, however, as long as an attempt is made to get notice to him.
    9. Over thirty jurisdictions offer some form of power of sale foreclosure. NELSON
    & WHITMAN, supra note 2, § 7.19 n.1.
    10. “No person shall … be deprived of life, liberty, or property, without due
    process of Iaw …. ” U.S. CaNST. amend. V.
    11. “No state shall … deprive any person of life, liberty, or property, without due
    process of law …. “U.S. CaNST. amend. XIV, § 1, cI. 2.
    12. See infra notes 52-66 and accompanying text.
    13. Federal governmentally-formed corporations include the Federal National
    To date, courts have rarely addressed the issues raised when the government
    forecloses on a mortgage, primarily by failing to find sufficient federal action to
    raise a constitutional issue. 14 On the few occasions that courts have found
    sufficient federal government action, however, they have found that state power
    of sale statutes lack the due process required under the Constitution. IS
    While many governmentally-created lenders have escaped constitutional
    scrutiny by not being considered federal actors, there is a potential argument,
    based upon a recent decision by the United States Supreme Court,16 that the
    actions of at least some of those protected lenders should be considered federal
    actions. l
    ? To that end, the present case provides an opportunity to discuss the
    constitutional issues raised and the results the courts facing this issue have
    reached, while exploring a possible new approach to finding federal action.
    Allison Brothers, Inc., which later became Cross Timbers Ranch
    (hereinafter “Cross Timbers”),18 together with William E. Allison and Mallie A.
    Allison, in their personal capacity, executed a $500,000 promissory note in 1978
    to the Federal Land Bank of St. Louis, which later became AgriBank, FCB
    (hereinafter “AgriBank”)}9 A deed of trust on 3,736 acres of property in
    Hickory County, Missouri, secured the note.20 In the case of a default, the deed
    of trust contained a power of sale provision.21
    Mortgage Association (FNMA), the Government National Mortgage Association
    (GNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Farm Credit
    Banks (FCB), among others. These corporations will be discussed in detail infra, notes
    67-117 and accompanying text.
    This question also exists when a state government forecloses a mortgage through
    its various agencies. Many of the same issues would arise with state government lenders.
    For the purposes of this Note, however, the discussion will focus on federal government
    14. See infra Part III.B.
    15. See infra Part III.B.
    16. Lebron v. National R.R. Passengers Corp., 115 S. Ct. 961 (1995).
    17. See infra Part III.C.
    18. The record is not clear on the reasons for the change in name; however, the
    name change was not an issue in the appeal.
    19. AgriBank FCB v. Cross Timbers Ranch, Inc., 919 S.W.2d 263, 265 (Mo. Ct.
    20. Id.
    21. Id.
    428 MISSOURI LA W REVIEW [Vol. 62
    After Cross Timbers suffered financial problems, the note went into
    default.22 AgriBank offered to restructure the loan in February 1992;23 however,
    AgriBank limited the time for acceptance to March 1992.24 Cross Timbers did
    not file an application for restructuring during the time period set by AgriBank.25
    On May 21, 1992, one day prior to the date set for the original foreclosure
    sale, Cross Timbers filed for bankruptcy under Chapter 12 of the Bankruptcy
    Code,26 in the United States Bankruptcy Court for the Western District of
    Missouri,27 On February 11, 1993, the bankruptcy court granted AgriBank relief
    from the automatic stay28 and AgriBank began foreclosure proceedings29 under
    the power of sale clause in the deed oftrust.30
    On February 16, 1993, Cross Timbers applied for restructuring with
    AgriBank.31 AgriBank rejected the application because of the ongoing
    foreclosure proceedings.32
    Cross Timbers then appealed the relief from the stay to the United States
    District Court for the Western District of Missouri,33 On March 9, 1993,
    however, the bankruptcy court dismissed Cross Timbers’ bankruptcy
    proceedings under Chapter 12 because of Cross Timbers’ failure “to obtain
    22. Jd. at 266.
    23. The statute requires an offer to restructure for farm credit banks pursuant to
    their charter from the federal government:
    Not later than 45 days before any qualified lender begins foreclosure
    proceedings with respect to a loan outstanding to any borrower, the lender
    shall notify the borrower that the loan may be suitable for restructuring and
    that the lender will review any such suitable loan for restructuring ….
    12 U.S.C. § 2202a(b)(2) (1994).
    24. AgriBank FCB, 919 S.W.2d at 266.
    25. Jd.
    26. 11 U.S.C. §§ 1201-1231 (1994). Chapter 12 bankruptcy provides a specific
    opportunity for restructuring debts to family farmers.
    27. AgriBank FCB, 919 S.W.2d at 266.
    28. 11 U.S.C. § 362(a)(4), (d) (1994). An automatic stay is allowed on all
    proceedings regarding the property of a debtor to allow the bankruptcy trustee time to
    develop a plan for disposition of debts.
    29. Most states recognize either power of sale foreclosure, which does not require
    any type of hearing, or judicial foreclosure, which requires a determination of the parties’
    rights through a court proceeding. See generally NELSON & WmTMAN, supra note 2,
    §§ 7.11-7.30. Missouri allows both procedures and outlines the minimum requirements
    for a power of sale foreclosure by statute. Mo. REV. STAT. §§ 443.290-443.410 (1994).
    30. AgriBank FCB, 919 S.W.2d at 266.
    31. ld.
    32. ld.
    33. ld.
    confirmation of a reorganization plan.”34 This dismissal ended Cross Timbers’
    appeal from the earlier relief from the stay.35
    On the day the foreclosure sale was to occur, Cross Timbers again filed for
    bankruptcy, this time under Chapter 11.36 The trustee proceeded with the sale,
    even after notice of the bankruptcy was given to the trustee, and sold the
    property to AgriBank for $675,000.37 AgriBank asked the bankruptcy court to
    approve the foreclosure sale in order to finalize the sale.38 The bankruptcy court
    approved the entire sale, and on June 16, 1993, the trustee’s deed was recorded
    conveying title to AgriBank.39
    In November 1993, Cross Timbers filed a complaint in the United States
    District Court for the Western District of Missouri, seeking an order that
    AgriBank sell the property to Cross Timbers for the value of the property set by
    the bankruptcy court in the Chapter 12 proceeding.40 The United States district
    court denied the relief, and the Eighth Circuit Court of Appeals affirmed.41
    34. Jd.
    35. Jd. at 266 n.3.
    36. Jd. at 266. While Chapter 12 proceedings are available only for family fanners,
    Chapter 11 bankruptcy proceedings are available for corporate debtors as a method of
    reorganization. 11 V.S.C. §§ 1101-1174(1994).
    37. AgriBankFCB, 919 S.W.2d at 266. It is a common occurrence for the holder
    Of the note to also be the buyer at the foreclosure sale. NELSON & WHITMAN, supra note
    2, § 7.21.
    Many other issues arise because of this common occurrence, particularly if the
    property is sold for less than its fair market value, which would give the lender the debt
    owed and a gain when the property is re-sold by the lender. This is potentially a bigger
    issue because borrowers are often liable for any amount still due under the mortgage that
    was not covered by the foreclosure sale price; therefore, the lender could get the property
    for less than its value and still be able to sue the borrower for any deficiency. NELSON
    & WHITMAN, supra note 2, § 8.1.
    38. AgriBank FCB, 919 S.W.2d at 266.
    39. 1d. Normally, completing a foreclosure sale prior to the bankruptcy court
    relieving the creditor from the stay will render the title passed by the sale void, and
    possibly subject the mortgagee to damages and contempt of court. NELSON & WHITMAN,
    supra note 2, § 8.12. The Southern District Court of Appeals did not state the reason for
    the bankruptcy court’s decision in its opinion.
    40. AgriBank FCB, 919 S.W.2d at 266. The bankruptcy court set the properties
    value at $522,000.00. Jd. Cross Timbers was claiming that it had a ”’right of first
    refusal’ as the former owner of a property which had been foreclosed by a federal lending
    agency.” Jd. (citing 12 V.S.C.A. § 2219a(a) (1994».
    Cross Timbers also asked the court to review a decision by the Farm Credit
    Administration, which did not allow Cross Timbers to stop AgriBank from selling the
    property to a third party under the same provision. Jd.
    41. Jd.
    430 MISSOURI LAW REVIEW [Vol. 62
    In May 1994, AgriBank petitioned the Circuit Court in Hickory County,
    Missouri, for an injunction to prevent Cross Timbers and the Allisons from
    harvesting and selling crops growing on the property.42 In response, Cross
    Timbers filed a four-count counterclaim.43 Cross Timbers’ counterclaim was for
    a declaratory judgment:
    (1) that it had been deprived of its property without due process of law in a
    Non-judicial foreclosure and praying for cancellation of the trustee’s deed; (2)
    for wrongful foreclosure; (3) for specific performance of the statutory
    obligation of AgriBank to sell the property to Cross Timbers for the fair
    market value of $522,000.00; and (4) for compensatory and punitive
    AgriBank moved for summary judgment on the counterclaims, and the trial
    court granted its motion.45 The Missouri Court of Appeals for the Southern
    District affirmed the judgment.46
    In its opinion, the Missouri Court of Appeals for the Southern District
    addressed the issue of whether AgriBank violated the Fifth47 or Fourteenth48
    Amendments to the Constitution by using the Missouri non-judicial power of sale
    foreclosure statute.49 The court of appeals held that a power of sale foreclosure
    by a federal government entity, under a valid contractual provision, does not
    violate the Constitution.50 The court further held that, although AgriBank is a
    federally chartered government instrumentality, AgriBank is still not considered
    a federal government actor for Fifth Amendment purposes.51
    42. Id.
    43. Id.
    44. Id. at 267.
    45. Id.
    46. Id. at 273.
    47. See supra note 10.
    48. See supra note 11.
    49. AgriBank FeB, 919 S.W.2d at 268.
    50. Id.
    51. Id. at 269.
    A. Power of Sale as State Action
    The Missouri power of sale statuteS2 has been challenged as unconstitutional
    on its face on several occasions and has always been found to be constitutionaLS3
    Mortgagors argue that the power of sale statute violates procedural due process
    under the Fourteenth Amendment to the United States Constitution.s4 The
    specific problems that are challenged are the limited notice procedure and the
    lack of an opportunity to be heard.s6
    Before a court may determine if the statute provides sufficient notice and
    opportunity to be heard, however, the court must determine if the statute itself
    provides sufficient state action to require constitutional scrutiny.s7 The presence
    of state action is a constitutional prerequisite to a due process violation and
    courts have used a variety of tests to determine if state action exists.S8
    The two primary Missouri cases addressing the existence of state action are
    Federal National Mortgage Association v. Howlett,S9 and Federal National
    Mortgage Association v. Scott.60 In Howlett, the Missouri Supreme Court
    determined that state action is not implicated by Missouri’s power of sale statute
    52. Mo. REV. STAT. §§ 443.290-443.410 (1994). For text and discussion of
    specific sections, see supra notes 7-8.
    53. Courts have determined that the statute is constitutional and involves no state
    action as it is written and utilized by lenders. Additional problems arise when the lender
    foreclosing the mortgage is a state or federal actor. These problems are discussed infra
    Part m.B.
    54. See supra note 11.
    55. See infra note 102.
    56. See infra note 114.
    57. NELSON & WHITMAN, supra note 2, § 7.27.
    58. Among these tests, five are most often used: direct state action,
    encouragement, governmental function, judicial enforcement, and pervasiveness.
    NELSON & WHITMAN, supra note 2, § 7.27. See also Daniel K. Barklage, Constitutional
    Law-Mortgages-ExtrajudicialMortgage Foreclosure Not State Action, 41 Mo. L. REv.
    278,278-81 (1976).
    For the purposes ofthis Note, it is sufficient to note that these arguments have not
    been effective in Missouri to find state action inherent in the power of sale statute.
    Additionally, courts could find state action if a state actor conducts the foreclosure
    sale. NELSON & WHITMAN, supra note 2, § 7.27. This generally occurs when the county
    sheriff is called upon to conduct the sale because of the inability of the trustee to conduct
    the sale. In Missouri, this is a statutory alternative when the trustee is unwilling or
    unable to conduct the sale. Mo. REV. STAT. § 443.340 (1994).
    59. 521 S.W.2d 428 (Mo. 1975).
    60. 548 S.W.2d 545 (Mo. 1977).
    because the power of sale is a contractual right established between the parties
    by the deed of trust held on the land.61 Therefore, the Missouri Supreme Court
    held that the statute merely sets forth the minimum requirements for enforcing
    the private contractual right and does not amount to state action implicating the
    due process clause.62
    In Scott, the Missouri Supreme Court addressed the same issues previously
    raised in Howlett.63 In addition, the court considered the issue of whether the
    foreclosing entity, the Federal National Mortgage Association (FNMA), was
    subject to the constraints of the Fifth Amendment of the United States
    Constitution because of FNMA’s status as a federal government entity.64 The
    Missouri Supreme Court again applied the Howlett reasoning and held that the
    foreclosure “was pursuant to power expressly granted by [the deed of trust] and
    not to any power authorized or encouraged under state law.”65 In addition, the
    court held that FNMA was “not a federal instrumentality and that its action in
    foreclosing the deed of trust was not federal action, but was the action of a
    private individual.”66
    Therefore, the Missouri power of sale statute, even when utilized by a
    federal government entity, can safely be said not to implicate state action for
    Fourteenth Amendment purposes.
    B. Power o/Sale as Federal Government Action
    Primarily for public policy reasons, the federal government has established
    many of its own lenders.67 These governmentally-created lenders and mortgage
    61. Howlett, 521 S.W.2d at 432. See, e.g., Abrams v. Lakewood Park Cemetery
    Ass’n, 196 S.W.2d 278 (Mo. 1946); Adams v. Boyd, 58 S.W.2d 704 (Mo. 1933); Kelsay
    v. Farmers’ & Traders’ Bank, 65 S.W. 1007 (Mo. 1901); Spires v. Lawless, 493 S.W.2d
    65 (Mo. Ct. App. 1973).
    62. Howlett, 521 S.W.2d at 433. The court also indicated that “[u]nless the state
    law dictates the choice to be made by the party or in some way significantly interferes
    with the free exercise of that choice, the private conduct and state law are not subject to
    constitutional restraints under the fourteenth amendment.” Id. at 436 (quoting William
    M. Burke & David 1. Reber, State Action, Congressional Power and Creditors’ Rights:
    An Essay on the Fourteenth Amendment, 46 So. CAL. L. REV. 1003, 1106 (1973)).
    63. Scott, 548 S.W.2d at 548-49.
    64. Id. at 549.
    65. Id.
    66. Id.
    67. These lenders, such as the Government National Mortgage Association
    (GNMA), the Federal National Mortgage Association (FNMA), and the Federal Home
    Loan Mortgage Corporation (FHLMC) generally work in areas that the federal
    government thought would benefit from government involvement. Congress formed
    GNMA and FNMA with the intent to “provide stability in the secondary market for
    holders often must foreclose on the property on which they hold mortgages.68
    When these mortgages include a power of sale clause, the governmentally
    created lenders will foreclose using the power of sale statute of the state in which
    the mortgage was created.69
    By utilizing a power of sale clause, these governmentally-created lenders
    are often challenged as violating the Due Process Clause of the Fifth
    Amendment to the United States Constitution70 based upon their status as federal
    government actors.71 For ease of analysis, these entities can be divided into three
    categories: direct instrumentalities, federally-owned corporations, and federally chartered
    Direct instrumentalities of the federal government include such
    governmental agencies as the Veterans Administration (VA), the Farmers Home
    Administration (FmHA), and the Federal Housing Administration (FHA). These
    agencies share the common trait of direct control by the federal government.72
    residential mortgages … [and] promote access to mortgage credit throughout the
    nation ….n 12 U.S.C. § 1716 (1994).
    The purpose behind FHLMC was essentially the same as for FNMA. Act of Oct.
    28, 1992, Pub. L. No. 102-550, § 1382(a), 106 Stat. 3672, 4002 (1992). See generally
    NELSON & WHITMAN, supra note 2, § 11.
    68. NELSON & WHITMAN, supra note 2, § 7.28.
    69. The power of sale clause may be in a mortgage purchased by the lender or it
    may be in the form used by the lender. The standard form used by most governmentally
    created lenders includes a power of sale clause in the states which allow non-judicial
    In addition, the Multifamily Mortgage Foreclosure Act of 1981 allows power of
    sale foreclosure on certain properties held as security by the Secretary of Housing and
    Urban Development. 12 U.S.C. §§ 3701-3717 (1994). See generally NELSON &
    WHITMAN, supra note 2, § 7.19.
    70. See supra note 10.
    71. Essentially identical arguments can be used in regard to state-owned lenders
    when attempting to find a violation of the Fourteenth Amendment.
    This same argument was discussed and rejected by the Missouri Supreme Court in
    Federal National Mortgage Association v. Scott, 548 S.W.2d 545, 548-49 (Mo. 1977).
    See supra notes 63-66 and accompanying text.
    72. These federal government agencies are part of the cabinet-level agencies, so
    their actions are actions of the federal government. The Veterans Administration, now
    Department of Veterans Affairs, is controlled by the Secretary of Veterans Affairs. 38
    U.S.C § 301 (1994). The Farmers Home Administration is under the direction of the
    Department of Agriculture. 7 U.S.\C. § 1981 (1994). The Federal Housing
    Administration is under the direction of the Federal Housing Commissioner, who is an
    Assistant Secretary of Housing and Urban Development. 42 U.S.C. § 3533 (1994).
    434 MISSOURI LA W REVIEW [Vol. 62
    Courts have found these and similar agencies to be federal government actors for
    Fifth Amendment due process purposes.73
    The courts have reached different conclusions as to federal action, however,
    when the entity is a federally-owned or federally-chartered corporation.
    Federally-owned corporations include lenders such as the Government National
    Mortgage Association (GNMA), as well as other corporations that may
    incidentally hold and foreclose a mortgage such as the Federal Deposit Insurance
    Corporation (FDIC), which often forecloses on mortgages held by failed banks.74
    Courts have split with regard to Fifth Amendment requirements of
    federally-owned corporations. A federal district court has found the FDIC to be
    the federal government for Fifth Amendment purposes when foreclosing
    Other federally-owned corporations, however, have not been treated as the
    federal government for Fifth Amendment purposes. Most notably, the Eighth
    Circuit held that the GNMA was not the federal government for Fifth
    Amendment purposes when foreclosing a mortgage under the Missouri power
    of sale statute.76 The court determined that GNMA was acting as a private
    corporation because there was not a “sufficiently close nexus between the
    73. NELSON & WHITMAN, supra note 2, § 7.28. Instrumentalities such as the VA
    and FmHA, that make direct home loans to the individuals they serve, will often be
    required to foreclose on the mortgage. Id. In addition, the constitutionality of
    foreclosures by other direct government instrumentalities has been tested using due
    process standards. See, e.g., Johnson v. United States Dep’t of Agric., 734 F.2d 774
    (11th Cir. 1984); Federal Deposit Ins. Corp. v. Morrison, 568 F. Supp. 1240 (N.D. Ala.
    1983), rev ‘d on other grounds, 747 F.2d 610 (11th Cir. 1984), reh ‘g denied, 763 F.2d
    419 (1985); Matzke v. Block, 564 F. Supp. 1157 (D. Kan. 1983), aff’d in part, rev’d in
    part, 732 F.2d 799 (10th Cir. 1984); Rickerv. United States, 434 F. Supp. 1251 (D. Me.
    1976); United States v. Ford, 551 F. Supp. 1101 (N.D. Miss. 1982); Rau v. Cavenaugh,
    500 F. Supp. 204 (D.S.D. 1980).
    74. NELSON & WHITMAN, supra note 2, § 7.28.
    75. Morrison, 568 F. Supp. at 1245. In Morrison, the Federal District Court for
    the Northern District of Alabama determined that the FDIC was the same as the federal
    government for purposes of Fifth Amendment due process. Morrison, 568 F. Supp. at
    It is interesting to note that the district court in Morrison originally seemed to
    decide the issue by declaring that the actions under the Alabama statute were governed
    by a Fourteenth Amendment state action analysis. Id. at 1244-45. Less than two weeks
    later, however, the court issued an addendum to its opinion which declared that the
    correct reasoning for its opinion was under the Fifth Amendment because the FDIC was
    a federal agency and that the Fourteenth Amendment analysis should be considered dicta.
    Id. at 1246. The court then stated that “[t]he broader issue shall await another day,
    another case, and perhaps another court.” Id.
    76. Warren v. Government Nat’! Mortgage Ass’n, 611 F.2d 1229 (8th Cir.), cert.
    denied, 449 U.S. 847 (1980).
    government regulations and the challenged activity specifically at issue so that
    the challenged activity itself may be fairly treated as truly that of the federal
    government directly.”77
    Federally chartered corporations that hold mortgages include many of the
    lenders that the government has set up to serve specific needs. While all of the
    federally chartered corporations were started by the federal government, they are
    all established as private corporations with essentially the same rights and
    protections that private corporations enjoy.18 In addition, many of the federally
    chartered corporations also enjoy special status, such as exemption from taxes19
    and original jurisdiction in federal courts.80 In addition, the government retains
    the right to change the corporations and the statutes that control them.81
    Among these federally chartered lenders are the Federal National Mortgage
    Association,82 the Federal Land Banks (now Farm Credit Banks or FCBs),83 and
    the Federal Home Loan Mortgage Corporation (FHLMC).84
    FNMA was established to serve the secondary mortgage market.85 While
    originally federally-owned, FNMA was restructured in 1968 as a private
    77. Id at 1234.
    78. Congress gave all three federally-chartered corporations discussed in the text
    the general power to perform many essential corporate functions. The powers are set
    forth at: 12 U.S.C. § 2013 (1994) (Farm Credit Banks); 12 U.S.C. § 1452(c) (1994)
    (Federal Home Loan Mortgage Corporation); and 12 U.S.C. § 1723a(a) (1994) (Federal
    National Mortgage Association).
    79. All three corporations discussed are exempt from “Federal, State, municipal,
    and local taxation” under federal statute. Farm Credit Banks’ exemption is in 12 U.S.C.
    § 2023 (1994), the Federal Home Loan Mortgage Corporation exemption is in 12 U.S.C.
    § 1452(e) (1994), and the Federal National Mortgage Association exemption is in 12
    U.S.C. § 1723a(c) (1994).
    80. FHLMC is given original jurisdiction under 28 U.S.C. §§ 1345, 1442, which
    provide for original jurisdiction in the district courts of the United States for officers and
    agencies of the United States. 12 U.S.C. § 1452(f) (1994).
    81. In fact, in 1987, the section of the United States Code that establishes the
    Federal Land Bank (FLB) system was restructured in an effort to save the Federal Land
    Bank system. The change in the statute allowed the merger of the FLB and the Federal
    Intermediate Credit Bank within each Federal Land Bank region. The resulting bank
    after the merger would be a Farm Credit Bank (FCB). It was the result of one of these
    mergers that formed the bank in the case at issue, AgriBank FCB.
    82. 12 U.S.C. § 1717 (1994).
    83. 12 U.S.C. § 2011 (1994).
    84. 12 U.S.C. § 1452 (1994).
    85. The secondary mortgage markets entities are able to buy outstanding mortgages
    from local lending institutions to allow the local institutions to lend the money to a
    different borrower. FNMA and FHMLC were both established to service this secondary
    mortgage market. See generally NELSON & WHITMAN, supra note 2, § 11.3.
    corporation traded on the open market.86 FNMA is now owned entirely by the
    private sector,87 but the board of directors is partially appointed by the President
    of the United States.88
    On several occasions, actions by FNMA have been determined not to be
    actions by the federal government for Fifth Amendment purposes.89 In Northrip
    v. Federal National Mortgage Association, the Sixth Circuit Court of Appeals
    determined that FNMA’s actions in foreclosing a mortgage were not federal
    government actions under the Fifth Amendment because, even though there is
    some government involvement in FNMA’s activities, ”there is not a ‘sufficiently
    close nexus’ between the state and the challenged act of foreclosure.”9o In
    Federal National Mortgage Association v. Scott,91 the Missouri Supreme Court
    held that the actions of FNMA in foreclosing the deed of trust were the same as
    actions of a private individual.92
    The Farm Credit Bank system was started by the federal government and
    a federal statute controls the actions of the banks;93 however, the farmers that the
    banks serve now own the banks.94 The banks do enjoy many special advantages
    of being closely connected with the government, including an exemption from
    taxation.95 The Farm Credit Banks have also not been found to be the federal
    government for Fifth Amendment purposes.96
    The Federal Home Loan Mortgage Corporation (FHLMC) is similar to
    FNMA in that it buys mortgages on the secondary market.97 The FHLMC was
    established in 1970 with the purpose of serving the secondary market for both
    86. In 1968, Congress changed the status of FNMA to a private corporation whose
    sole purpose was to buy and sell mortgages in the secondary mortgage market. 12 U.S.C.
    § 1717 (1994). The change resulted by splitting FNMA into FNMA and the Government
    National Mortgage Association (GNMA). Id. See generally NELSON & WHITMAN, supra
    note 2, § 11.3.
    87. 12 U.S.C. § 1718 (1994).
    88. Five of fifteen directors are appointed by the President with no consent of the
    Senate required. 12 U.S.C. § 1723a(b) (1994).
    89. Northrip v. Federal Nat’l Mortgage Ass’n, 527 F.2d 23,30-31 (6th Cir. 1975);
    Federal Nat’l Mortgage Ass’n v. Scott, 548 S.W.2d 545, 549 (Mo. 1977).
    90. Northrip, 527 F.2d at 30-33.
    91. 548 S.W.2d 545 (Mo. 1977).
    92. Id. at 549. For a more complete discussion, see supra notes 63-66 and
    accompanying text.
    93. 12 U.S.C § 2011 (1994).
    94. 12 U.S.C. § 2011 (1994); DeLaigle v. Federal Land Bank of Columbia, 568 F.
    Supp. 1432, 1439 (S.D. Ga. 1983).
    95. 12 U.S.C § 2023 (1994).
    96. DeLaigle, 568 F. Supp. at 1439; AgriBank FCB v. Cross Timbers Ranch, 919
    S.W.2d 263, 269 (Mo. Ct. App. 1996).
    97. See supra note 85.
    federally insured and conventional mortgages.98 After several changes in 1992,99
    the stock is now owned by the public and is freely transferable and the
    President of the United States appoints five of the eighteen directors. 101 The
    actions of FHLMC also have not been found to be federal government action for
    Fifth Amendment purposes.
    On the few occasions when courts have determined that federal action
    existed, courts have determined that the power of sale statutes are
    constitutionally deficient in both the notice and opportunity to be heard
    requirements. 102 Courts thus far have allowed the government lenders to use the
    statutory power of sale foreclosure process, provided they make the changes in
    their policies that are necessary to remedy the due process problems. l03
    To cure the limited notice defects, the court in Ricker v. United States104
    required the Farmers Home Administration to comply with the constitutional
    standard for notice set forth in Mullane v. Central Hanover Bank,105 when
    foreclosing a mortgage using the Maine power of sale statute. 106
    Interestingly, while the court in Federal Deposit Insurance Corporation v.
    Morrison l07 found federal action, it held that the limited notice in the Alabama
    statute did not violate Morrison’s due process rights because it was a contractual
    provision. 108 The court determined that the mortgagor’s rights under Alabama
    law only existed until the mortgagee exercised the power of sale, therefore it “is
    impossible that this foreclosure infringed on [mortgagor’s] right.”I09 No other
    98. NELSON & WHITMAN, supra note 2, § 7.28.
    99. Act of Oct. 28, 1992, Pub. L. No. 102-550, § 1382(a), 106 Stat. 3672,4002
    100. 12 U.S.C. § 1453(a) (1994).
    101. 12 U.S.C. § 1452(a)(2)(A) (1994).
    102. See, e.g., Mennonite Bd. Of Missions v. Adams, 462 U.S. 791 (1983) (notice
    by advertisement was not constitutionally sufficient); Federal Deposit Ins. Corp. v.
    Morrison, 568 F. Supp. 1240 (N.D. Ala. 1983), rev’d on other grounds, 747 F.2d 610
    (lIth Cir. 1984) (promissory note, which did not include provision for notice to
    mortgagor, was not constitutionally sufficient). See generally NELSON & WHITMAN,
    supra note 2, §§ 7.24-7.25. For additional cases, see infra note 114.
    103. See NELSON & WHITMAN, supra note 2, § 7.25. See also United States v.
    Ford, 551 F. Supp. 1101 (N.D. Miss. 1982) (FmHA administrative hearing procedure
    sufficient to supplement state power of sale statute).
    104. 417 F. Supp. 133 (D. Me. 1976).
    105. 339 U.S. 306 (1950). The Supreme Court in Mullane required notice
    “reasonably calculated … to apprise interested parties ….” Id. at 314.
    106. Ricker, 417 F. Supp at 138.
    107. 747 F.2d 610 (lIth Cir. 1984), reh ‘g denied, 763 F.2d 419 (lIth Cir.), cert.
    denied, 474 U.S. 1019 (1985).
    108. Id. at 615.
    109. Id.
    438 MISSOURI LA W REVIEW [Vol. 62
    court has followed this reasoning, and the reasoning has been attacked directly
    by the Fifth Circuit. 110
    Several courts have held that providing constitutionally sufficient notice in
    excess of the notice required by the power of sale statutes could cure the due
    process defects inherent in the statutes.11 I The United States Supreme Court has
    held in a non-mortgage context, however, that if the notice is not directed by the
    statute it cannot be corrected by supplying greater notice. IIZ This holding has not
    yet been extended to the mortgage context; thus, for the present, lenders should
    safely be able to cure defects by providing notice consistent with Mullane. 113
    The lack of an opportunity to be heard has been addressed by several courts
    that have held power of sale statutes to be deficient. I 14 Ricker addressed the lack
    of an opportunity to be heard and determined that the Fifth Amendment requires
    “a hearing at which [mortgagors] could challenge both the legal right of the
    [mortgagee] to foreclose and the propriety of the decision to do SO.”115 To cure
    the lack of a hearing, the court in United States v. Forcf 16 allowed the Farmers
    Home Administration to use an administrative appeals process. I 17
    110. Davis Oil Co. v. Mills, 873 F.2d 774, 786 (5th Cir. 1989).
    Ill. See, e.g., Laughlin v. Walters, 718 F.2d 513, 515 (1st Cir. 1983); United
    Companies Fin. Corp. v. Mellon Fin. Servo Corp. No.7, 922 F.2d 270, 271 (5th Cir.
    1991); Fitzgerald V. Cleland, 498 F. Supp. 341, 349 (D. Me. 1980), affdinpart, vacated
    in part 650 F.2d 360 (1st. Cir. 1981); United States v. Ford, 551 F. Supp. 1101 (N.D.
    Miss. 1982); United States V. White, 429 F. Supp. 1245, 1253 (N.D. Miss. 1977);
    Production Credit Ass’n V. Williamson, 755 P.2d 56,58 (N.M. 1988).
    But cj Lehner V. United States, 685 F.2d 1187, 1190 (9th Cir. 1982), cert. denied,
    460 U.S. 1039 (1983); Johnson v. United States Dep’t of Agric., 734 F.2d 774, 782 (lIth
    Cir. 1984).
    112. Wuchter v. Puzziotti, 276 U.S. 13,24 (1928).
    113. See generally NELSON & WHITMAN, supra note 2, § 7.24.
    114. See, e.g., Rickerv. United States, 417 F. Supp. 133 (D. Me. 1976); Gamerv.
    Tri-State Dev. Co., 382 F. Supp. 377 (E.D. Mich. 1974); Northrip V. Federal Nat’l
    Mortgage Ass’n, 372 F. Supp. 594 (E. D. Mich. 1974), rev’d on other grounds, 527 F.2d
    23 (6th Cir. 1975); Turner V. Blackburn, 389 F. Supp. 1250 (W.o. N.C. 1975); Valley
    Dev. at Vail V. Warder, 557 P.2d 1180 (Co. 1976). See generally NELSON & WHITMAN,
    supra note 2, § 7.25.
    115. Ricker, 417 F. Supp. at 139.
    116. 551 F. Supp. 1101 (N.D. Miss. 1982).
    117. Id. at 1105.
    C. New Developments: Federal Government Corporations
    as Federal Actors
    Since the infancy of the United States, the federal government has
    established many private corporations. 118 The first private corporation
    established was the Bank of the United States, I 19 and the federal government has
    been establishing private corporations to achieve the goals of the federal
    government ever since that time.120 As with the mortgage lenders discussed
    above, courts have declared that many other similar federal government
    corporations are not the federal government for constitutional purposes.121
    In 1995, however, the United States Supreme Court broadened the
    definition of what constitutes a federal actor. In Lebron v. National Railroad
    Passenger Corporation,122 Justice Scalia, in an 8-1majority opinion held that
    Amtrak was a federal government actor for First Amendment purposes.l23
    Lebron involved an artist who rented billboard space in Penn Station from
    118. The power of the federal government to form corporations comes from the
    Necessary and Proper Clause of the Constitution. U.S. CONST. art. I, § 8, cI. 18. A.
    Michael Froomkin, Reinventing the Government Corporation, 1995 U. ILL. L. REV. 543,
    119. Lebron v. National R.R. Passenger Corp., 115 S. Ct. 961, 968 (1995).
    Congress created the Bank of the United States by the Act of Feb. 25,1791, ch. 10, I
    Stat. 191 (1791). Lebron, 115 S. Ct. at 968.
    120. Froomkin, supra note 118, at 557-59. The list of federal government
    corporations includes, among others, the United State Enrichment Corporation, the
    Corporation for National and Community Service (AmeriCorps), the Legal Services
    Corporation, the Tennessee Valley Authority, the National Endowment for Democracy,
    the Commodity Credit Corporation, and the Student Loan Marketing Association (Sallie
    Mae). Froomkin, supra note 118, at 546,550.
    121. Ronald J. Krotosxynski, Jr., Back to the Briarpatch: An Argument in Favor
    ofConstitutional Meta-Analysis in State Action Determinations, 94 MICH. L. REV. 302,
    306 (1995); see, e.g., Morin v. Consolidated Rail Corp., 810 F.2d 720,722-23 (7th Cir.
    1987) (Conrail is not a state actor because it is a corporation.); Anderson v. National RR.
    Passenger Corp., 754 F.2d 202, 204-05 (7th Cir. 1984) (Amtrak is not a state actor
    because ofits corporate form.); Network Project v. Corporation for Pub. Broad., 4 Media
    L. Rep. (BNA) 2399, 2403-08 (D.D.C. 1979) (Corporation for Public Broadcasting is not
    a state actor.).
    122. 115 S. Ct. 961 (1995).
    123. [d. Justice Scalia stated:
    We hold that where, as here, the Government creates a corporation by special
    law, for the furtherance of governmental objectives, and retains for itself
    permanent authority to appoint a majority of the directors of that corporation,
    the corporation is part of the Government for purposes of the First
    [d. at 974-75.
    Amtrak,124 only to have Amtrak rescind the contract after reviewing the proposed
    billboard. 125 Lebron sued Amtrak for violating his First Amendment rights. 126
    The district court held that Amtrak was a government actor and granted
    Lebron an injunction. 127 The Second Circuit reversed the district court 128 and
    held that Amtrak was not a federal government actor for First Amendment
    purposes.129 The United States Supreme Court accepted certiorari on the case, 130
    reversed the court of appeals holding on federal action, and remanded for a
    determination of the First Amendment claim. l3I
    In Lebron, the Supreme Court established a two-prong test for determining
    if a federal government corporation is a federal government actor for purposes
    of evaluating federal action. The first prong considers the extent to which the
    corporation was formed for the furtherance of governmental objectives, which
    Amtrak satisfied based upon the purpose given by Congress in the legislation
    that created Amtrak. ’32 The second prong involves the extent to which the
    federal government retains control over the corporation’s efforts to achieve its
    objectives, which Amtrak satisfied because of the structure of its board of
    directors. 133
    124. [d. at 963. Lebron was a creator of billboards that involved public
    commentary. [d. In this particular case, he had rented a particularly large billboard in
    Penn Station in New York City. [d. The proposed billboard was a commentary on the
    Coors family, of the Coors brewing company, and their involvement with right-wing
    political causes. [d. at 964.
    125. The vice president of Amtrak disapproved of the advertisement and rejected
    the proposed advertisement using the policy of the former owner of Penn Station, which
    Amtrak inherited when it purchased the property, “that it will not al10w political
    advertising on the [S]pectacular sign.” [d. at 964.
    126. [d.
    127. [d.
    128. Lebron v. National R.R. Passenger Corp., 12 F.3d 388 (2d Cir. 1993).
    129. The court of appeals held that Amtrak was not a government entity because
    the legislation creating Amtrak specifically said that it was not. [d. at 390. The Court
    also held that the federal government was not “so involved in Amtrak that the latter’s
    decisions could be considered federal action.” [d. at 391-92.
    130.511 U.S. 1105(1994).
    131. Lebanon v. National R.R. Passenger Corp., 115 S. Ct. 961, 975 (1995).
    132. [d. at 974. Congress established Amtrak in 1970 “in order to avert the
    threatened extinction of passenger trains in the United States.” [d. at 967. The act which
    established Amtrak stated that “‘the public convenience and necessity require the
    continuance and improvement’ of railroad passenger service.” [d. (citing Rail Passenger
    Service Act of 1970, § 101, 84 Stat. 1328 (1970)).
    133. [d. Six of the eight directors not named by the board itself are appointed by
    the President of the United States. [d. at 973. The court also noted that “it is established
    and organized under federal law . . . under the direction and control of federal
    government appointees.” ld. at 974.
    Following the Supreme Court’s decision in Lebron, several courts have
    further defined the requirements for a finding of federal action by a federal
    government corporation. 134 The Ninth Circuit, in American Bankers Mortgage
    Corporation v. Federal Home Loan Mortgage Corporation,13S applied the
    Lebron test in a Fifth Amendment due process analysis. 136 The court held that
    while FHLMC qualified under the governmental objectives prong of the Lebron
    test,137 it failed the governmental control prong of the test. 138 FHLMC failed the
    “control” prong because “[t]he current governance structure of Freddie Mac
    affords the government far less control over that corporation’s operations than
    it had over Amtrak’s operations in Lebron.”139 Specifically, the court pointed to
    the fact that the government appoints fewer than one-third of the FHLMC
    directors, and that the FHLMC has issued much more stock than Amtrak.140
    In a later case, the Ninth Circuit utilized the Lebron analysis to determine
    if the American National Red Cross (hereinafter “Red Cross”) qualified as an
    instrumentality of the United States government under the Religious Freedom
    Restoration Act. 141 The court determined that the Red Cross was not a
    governmental actor under the Lebron test. 142 The Ninth Circuit, under what it
    now refers to as a “structural” analysis or “government entity” test, held that the
    Red Cross satisfied the first prong of the Lebron test. 143 The court held,
    134. American Bankers Mortgage Corp. v. Federal Home Loan Mortgage Corp.,
    75 F.3d 1401 (9th Cir.), cert. denied, 117 S. Ct. 58 (1996); Hall v. American Nat’l Red
    Cross, 86 F.3d 919 (9th Cir.), cert. denied, 117 S. Ct. 516 (1996); Clark v. County of
    Placer, 923 F. Supp. 1278 (E.D. Cal. 1996).
    135. 75 F.3d 1401 (9th Cir. 1996). American Bankers involved a mortgage
    banking corporation that had been servicing mortgages for FHLMC. Id. at 1404. After
    an audit found that American Bankers Mortgage Corporation (ABM) had failed to
    comply with FHLMC’s requirements, FHLMC terminated its relationship with ABM.
    Id. at 1405. Following this termination, ABM sued FHLMC alleging a violation of its
    Fifth Amendment due process rights and several other state law claims. Id.
    136. Id. at 1406.
    137. Id. at 1406-07.
    138. Id. at 1407-09.
    139. Id. at 1408.
    140. Id. at 1407.
    141. Hall v. American Nat’l Red Cross, 86 F.3d 919 (9th Cir. 1996).
    142. Id. at 921-22. Hall involved a challenge to an action by the Red Cross
    denying Hall certification as a HIV/AIDS instructor because of his inability to “separate
    his religious convictions from his Red Cross duties.” Id. at 920. Hall sued under the
    Religious Freedom Restoration Act, which allows suit against “a branch, department,
    agency, instrumentality, and official … of the United States ….” Id. at 920-21 (citing
    42 U.S.C. § 2000bb-2 (1994)). The act did not define “instrumentality,” so the court was
    trying to determine if the Red Cross qualified by using the Lebron test.
    143. Hall, 86 F.3d at 921. The Red Cross began as a private corporation, but was
    442 MISSOURI LA W REVIEW [Vol. 62
    however, that the Red Cross failed the second prong because “the government
    has not retained permanent authority to appoint the majority of the Red Cross
    governing board.”144
    The Lebron test was extended again in Clark v. County of Placer. 14S In
    Clark, the district court examined a civil rights claim under 42 U.S.C. § 1983,
    which arose against the Placer County Fair Association (PCFAy46 after a female
    race car driver was discriminated against at the race track. 147 The PCFA satisfied
    the first prong of the Lebron test because of statutory requirements that the
    profits be used for maintenance of public property. 148 The second prong, while
    more difficult, was also satisfied because of the control the county exerts over
    the PCFA, 149 Interestingly, the extent of control of financial matters made up for
    the fact that none of the directors were appointed by the county. ISO The court
    also noted that policy concerns should resolve “close questions of this nature in
    favor of a finding of state action.”ls,
    The Lebron test, however, has yet to be applied to an actual power of sale
    foreclosure by a federal government corporation. The readiness of the courts to
    extend the test to new situations, however, foreshadows a willingness to utilize
    the test in foreclosure situations.
    In the instant case, the Missouri Court of Appeals for the Southern District
    determined that the Fifth Amendment due process rights of Cross Timbers were
    not violated. 152 First, the court determined that the statute itself did not violate
    reorganized by the government to serve what were seen as important governmental
    objectives. Id.
    144. Hall, 86 F.3d at 922.
    145. 923 F. Supp. 1278 (E.D. Cal. 1996).
    146. Id. at 1280. The PCFA was created to run the county fairgrounds, which are
    on land owned by the county. Id. California statutes require that the county of Placer
    control the PCFA budget and that the county succeed the PCFA if it was to dissolve. Id.
    at 1281. In addition, the county requires that it approve all contracts for racing events.
    147. Id. at 1281.
    148. Id. at 1284.
    149. Id. The court determined that the restriction on PCFA’s autonomy, combined
    with the county oversight over financial matters of the corporation was enough control
    to satisfy the second prong. Id.
    150. Id.
    151. Id.
    152. AgriBank FCB v. Cross Timbers Ranch, Inc., 919 S.W. 2d 263, 269 (Mo. Ct.
    Cross Timbers’ due process rights under the Fourteenth Amendment. IS3 The
    court held that the parties had the right to enter into a contract that specified
    power of sale foreclosure as the remedy and that exercising the power of sale
    during foreclosure is not “principally derived from statute nor otherwise granted
    by the state.”154
    The court further noted that wholly-owned federal entities do not implicate
    Fifth Amendment protections when they take advantage of the Missouri
    statutes.155 Additionally, the court stated that AgriBank is a Farm Credit Bank,156
    and may not be an agent of the federal government for purposes of the Fifth
    Amendment.157 Further, the court stated that AgriBank’s status was not
    important because the foreclosure involved the power of sale provision of a deed
    of trust that is valid under Missouri law and there is no requirement for a hearing
    before a foreclosure sale. 15s
    Therefore, the court concluded that there was no violation of Cross
    Timbers’ due process rights because the statute did not implicate state action
    under the Fourteenth Amendment,159 AgriBank was not sufficiently connected
    to the federal government for a violation of the Fifth Amendment, 160 and even
    if it had been a federal actor, the foreclosure was a valid exercise of the Missouri
    power of sale statute and was therefore constitutional. 161
    Because of the nature of Farm Credit Banks,162 the Southern District Court
    of Appeals’ decision in this case is probably correct. The rationale behind its
    holding, however, may no longer be valid.
    153. ld. at 268.
    154. ld. at 268. Additionally, the fact that the parties may use the courts to enforce
    their respective rights does not “involve significant governmental activity” that would
    implicate constitutional rights. ld.
    155. ld. (citing Warren v. Government Nat’l Mortgage Ass’n, 611 F.2d 1229, 1232
    (8th Cir. 1980)). The court noted that there must be a “sufficiently close nexus between
    the [government] and the challenged action of the regulated entity so that the action of
    the latter may be fairly treated as that of the [government] itself.” ld.
    156. For a discussion, see supra notes 93-96 and accompanying text.
    157. AgriBank FeB, 919 S.W.2d at 269 (citing Hill v. Farm Credit Bank, 726
    F. Supp. 1201, 1208 (E.D. Mo. 1989)).
    158. ld.
    159. ld. at 268.
    160. ld.
    161. ld. at 269.
    162. See supra notes 93-96 and accompanying text.
    444 MISSOURI LA W REVIEW [Vol. 62
    It seems apparent from the Supreme Court’s holding in Lebron that the
    issue of the constitutionality of non -judicial foreclosures by federal government
    corporations is less clear today than ever before. If courts are willing to expand
    the holding in Lebron to other constitutional rights, as they appear ready to dO,163
    it is only a matter of time before the courts are forced to apply the analysis to
    federal government lenders. Applying this new test, which is arguably broader
    than prior tests, could certainly change the treatment of a large number of
    borrowers in the mortgage market.
    The two-part test in Lebronl64 could potentially bring many government
    lenders under the auspices of federal government action for Fifth Amendment
    purposes. This test is a distinct departure from the “nexus” test that was
    followed in Cross Timbers,165 Warren,166 and Northrip.’67 The Lebron test has
    little to do with the activity in question and, instead, is concerned with the
    relationship of the corporation to the government.
    Farm Credit Banks, such as AgriBank, would almost certainly not be
    considered federal actors under the Lebron analysis. This is particularly likely
    in light of the Ninth Circuit decision in American Bankers, 168 which held that
    FHLMC failed the second prong of the test. 169 The first prong, furtherance of
    governmental objectives, should be satisfied based on the language of the statute
    that establishes the Farm Credit Banks.170
    The second prong is decidedly more difficult. The structure of Farm Credit
    Banks, being owned by the farmers they serve and with no directors appointed
    by the federal government, is almost certainly not enough control to satisfy the
    163. See supra notes 135-51 and accompanying text.
    164. See supra notes 132-33 and accompanying text.
    165. AgriBank FeB, 919 S.W.2d at 268.
    166. Warren v. Government Nat’l Mortgage Ass’n, 611 F.2d 1229, 1232 (8th Cir.
    167. Northrip v. Federal Nat’l Mortgage Ass’n, 527 F.2d 23,30-31 (6th Cir. 1975).
    168. American Bankers Mortgage Gov’t Corp. v. Federal Home Loan Mortgage
    Corp., 75 F.3d 1401 (9th Cir. 1996). For a discussion of American Bankers, see supra
    notes 135-40 and accompanying text.
    169. Jd. at 1407-09.
    170. The statute creating the Farm Credit System states:
    (a) It is declared to be the policy of the Congress, recognizing that a
    prosperous, productive agriculture is essential to a free nation and recognizing
    the growing need for credit in rural areas, that the farmer-owned cooperative
    Farm Credit System be designed to accomplish the objective of improving the
    income and well-being of American farmers and ranchers by furnishing
    sound, adequate, and constructive credit and closely related services to them,
    their cooperatives, and to selected farm-related businesses necessary for
    efficient farm operations.
    12 U.S.C § 200 1(a) (1994) (emphasis added).
    Lebron test. For that reason, as will be the case with many federal government
    corporations, Farm Credit Banks will probably not be considered federal actors
    for Fifth Amendment purposes.
    This reasoning should also hold for FNMA and FHLMC. Both FNMA and
    FHLMC will satisfy the first prong of the test, because they were both formed
    by the government to further governmental objectives. 171 The second prong,
    however, is probably not met by either FNMA or FHLMC. FNMA is entirely
    owned by the private sector172 and has only a minority of directors appointed by
    the government.173 FHLMC is also owned by the private sectorl74 and also has
    only a minority of directors appointed by the government.175 In addition,
    FHLMC has already been held not to satisfy the Lebron test in American
    Bankers. 176
    That does not mean, however, that other governmentally chartered lenders
    will escape the constitutional requirements as easily. The Government National
    Mortgage Association, for example, may now be subject to Fifth Amendment
    scrutiny where it had not been prior to Lebron.177 GNMA’s status as a wholly owned
    governmental corporation,178 like Amtrak and the Federal Deposit
    Insurance Corporation, makes GNMA a likely candidate for governmental actor
    If the Lebron test were used to analyze the facts in Warren, for example, it
    is likely that the court would reach a different result. The first prong of the test
    would easily be satisfied by the declaration of purpose in the statute.179
    As for the second prong, when Congress partitioned GNMA and FNMA in
    1968, GNMA stayed with the government when FNMA was established as a
    private corporation. 180 As part of the government, GNMA is controlled by the
    Secretary of Housing and Urban Development.18l Therefore, if the Lebron test
    171. Both were formed to support the secondary mortgage market, thereby making
    more money available to lend to home buyers. See supra note 85 and accompanying
    172. 12 U.S.C. § 1718(a) (1994).
    173. Five out of eighteen directors are appointed by the President of the United
    States. 12 U.S.C. § 1723(b) (1994).
    174. 12 U.S.C. § 1453 (1994).
    175. 12 U.S.C. § 1452(a) (1994).
    176. See supra notes 135-40 and accompanying text.
    177. Warren v. Government Nat’l Mortgage Ass’n, 611 F.2d 1229, 1234 (8th Cir.
    178. See 31 U.S.C § 9101 (1994).
    179. 12 U.S.C. § 1716 (1994). See supra note 67. GNMA and FNMA share the
    same statutory home, and therefore share the same statement of purpose.
    180. 12 U.S.C. § 1716(b) (1994).
    181. 12 U.S.C. § 1723(a) (1994). The Secretary of Housing and Urban
    Development has all of the power that a board of directors would have, such as the ability
    is to be extended beyond the First Amendment,182 GNMA is certain to be
    considered a federal actor for Fifth Amendment purposes, thereby invalidating
    This conclusion would raise many policy problems. Government lenders
    are generally either the lenders of last resort or exist to assist private lenders in
    making more loans to home buyers. 183
    The added expenditures involved in an extended process of foreclosure may
    make the process too costly to justify the policy objectives of creating these
    lenders. If the government decides that these lenders are no longer cost-effective
    and elects to stop using them, its goal of providing access to home ownership
    will not be achieved. If government lenders are not in the secondary market
    buying mortgages and providing capital to lenders to make more loans, the
    availability of home loans will likely decrease.
    The added foreclosure requirements will also provide a windfall to
    borrowers. When a borrower receives a loan from a private lender who is
    allowed to use non-judicial foreclosure, the loan costs less than when the lender
    is required to go through the expense of a judicial foreclosure. When this same
    loan is purchased by a government lender, the borrower has the advantage of a
    judicial-foreclosure requirement without the added cost in the loan.
    When acting as lenders of last resort, government lenders handle more
    mortgages likely to go into default than do private lenders. 184 If government
    lenders were required to go. through the much longer process of judicial
    foreclosure, less credit-worthy borrowers would be allowed to retain their
    property longer than borrowers that were able to borrow using traditional
    lenders. This puts less credit-worthy borrowers in a better position and gives
    them more chances to stop the foreclosure process. On the other hand, perhaps
    this would help to achieve the goals of government lenders by giving these
    borrowers a better chance to remedy their financial problems.
    Many of the ramifications, however, depend on what the courts require
    federal government lenders to do in an effort to remedy the due process
    problems inherent in most power of sale statutes. If courts continue to limit their
    holdings to requiring additional noticel85 and an administrative hearing, 186 the
    actual effect of the Lebron test could be negligible. If the courts refuse to allow
    government lenders to use any form of non-judicial foreclosure, however, the
    to adopt bylaws. Id GNMA is run by a president, who is appointed by the President of
    the United States with the advice and consent of the Senate. Id
    182. As the court seemed willing to do, based upon the decisions in American
    Bankers and Hall. See supra notes 134-44 and accompanying text.
    183. See supra note 67.
    184. See generally NELSON & WHITMAN, supra note 2, § 11.3.
    185. See supra notes 103-13.
    186. See supra notes 114-17.
    results could be devastating on the mortgage industry. Governmental lenders
    would be less able to operate in the secondary market, causing the cash flow in
    the primary mortgage market to slow.
    In its decision in Cross Timbers, the Missouri Court of Appeals for the
    Southern District continued to perpetuate the standard for finding federal action
    that was likely overruled by the United States Supreme Court in Lebron.
    While the decision reached by the court of appeals is arguably the correct
    result, it seems clear that the decision was reached on the wrong grounds. The
    correct analysis for finding federal action by federal government corporations is
    now the Lebron standard. This represents a distinct change in the analysis used
    to determine federal government action for Fifth Amendment purposes and a
    probable change in the requirements to be employed by federal government
    corporations as they foreclose mortgages.
    Whether added due process requirements are a change for the better is yet
    to be seen. So long as courts continue to allow federal government actors to cure
    defects in notice and hearing requirements by added regulation, the end result
    should not change policy to a great extent. If courts begin to require that federal
    government actors use judicial foreclosure, however, the results could be
    devastating to the mortgage industry.

    After the foreclosure, if you have not capitulated, comes an unlawful detainer action. If the non judicial foreclosure is unconstitutional under the 5th amendment also known as a Bivens claim, then the unlawful detainer is a malicious abuse of process and a claim under 42 US 1943. The unlawful detainer is a device used by the bank to complete the deprivation of property without due process. It’s use was never intended to complete a violation of procedural due process.

    The unlawful detainer could not have been maintained without the non judicial foreclosure. Two events but one transaction.

    If you do intend to challenge the constitutionality of the state unlawful detainer action it would be as an “as applied challenge” under 42 US 1983.

    1. Get a lawyer
    2. pay filing fee’s
    3. Join the US Government as defendant with the regulatory agency and the director in the individual capacity
    The regulatory agencies have authority to issue cease and desist order to its member banks ordering them to cease using the power of sale provisions. You might be able to seek a petition for a wri

  2. To edgetrader plus,

    You need to read my analysis of August 25th, 2010 very carefully. National banks and federal savings associations are instrumentalities of the United States. As such, their activities are governmental. Certainly some rights or powers of the federal government may be delegated to other tribunals. But those rights, or powers must be of a character that the goverment can exercise itself. That specific right pr power (THE RIGHT TO FORECLOSE WITHOUT A HEARING) cannot be exercised by the federal government and therefore cannot be authorized by the federal government. Read again Lebron v National Passenger Railway where Justice Scalia held Amtrak to the same standard as the federal government with respect to the 1st Amendment right. When such corporations are created by Congress for public and national purposes not only do the priveleges attach but also THE OBLIGATIONS OF GOVERNMENT vis a vis the obligation of notice and a hearing guaranteed by the 5th Amendment.

  3. Monday 30 August 2010


    My understanding in reading mortgages is that federal law will apply to the extent that it does not violate state law. States are still sovereign, and state laws trump federal, in that regard.

    The federal government is limited to the 10 square miles in DC, plus possessions, like Puerto Rico, Guam, Virgin Islands, forts, magazines, etc.

    However, the federal gov’t has taken over, much like a tapeworm consuming its host, the organic united States, and 14th Amendment federal citizens have no clue what the federal gov’t has done, dictated by international moneychangers. That is as far as I will go on that topic.


  4. To Edgetraderplus,

    Thanks from responding back. My point was simply that regardless of whether the state had non judicial foreclosure as opposed to non judicial foreclosure was irrelevant to my analysis. My view is that federal law–NOT STATE LAW determines the manner of foreclosure and that there is such a close nexus between the activity of foreclosure to the government that the exercise of the power of sale provision by the banks constitute a violation of the 5th Amendment.

  5. Monday 30 august 2010


    If I were off point because you were discussing non-judical foreclosures, I should apologize for my previous response because I did miss that point,
    and I have been delinquent in not responding sooner.

    I have respect for those who do research and homework when addressing any legal issue, and I
    have no experience with non-judicial foreclosures.


  6. To Gwen Carranchini

    Send me an email at reuben.nieves@yahoo.com or call me at 916 247 6260. I have more research that you might use.

  7. Excellent writing and good research. Now if we can just get the power that be to read and listen. Keep up the good work Reuben!

  8. Saturday 28 August 2010

    Not sure if this will help anyone in a non-judicial state.


  9. Saturday 28 August 2010

    >For the most part, they forget their Oath after they assume office

    That may be true and is of no consequence until the challenge is made that they prove they took the Constitutionally required oath BEFORE assuming the “office” of “attorney.

    Anyone can contact the Secretary of State and get a copy, [certified, if you want to make it a court document], and compare it to the required oath. A few changed words here, a few words there, or any omitted, means it is NOT the oath required, therefore, no office.

    Remember, the California Code says, or used to say if it has not been changed, “this oath only…”

    No one can challenge any actions taken PRIOR to making a demand of proof, but one can disqualify any attorney AND judge, before either takes any step in your case.

    It is important to remember, if anyone wants to use this, that the challenge must occur the very first time the opposition makes contact.

    Just another quiver in the arsenal of attack.

    Th “BAR” association is like any other dues-paying organization, like a plumber’s or electrition’s union. Read your State’s Compiled Statutes. There may be something like the [State] Attorney Act, and in its provisions, it may state that each attorney, prior to assuming the role, must take the folloing oath which is transcribed on the license and signed, or words to that affect.

    I once subpoenaed a town’s district attorney to bring his license to court, in a traffic case. When I was called, on the sceduled court date, the judge said, “Oh, this case was dismissed.”

    It does not work in the city of Chicago, for I have tried, and the judge dances around the issue, finally saying, “I am not going to require him to show his license. You can check with the ARDC, [Attorney Registration and Disciplinary Committee], and they will tell you he is licensed as required by the Illinois Supreme Court. This issue is done!”

    At no time, does the judge ever admit a physical license, with the oath of office on it, exists. Yet, each judge does have an oath of office on file with the Secretary of State, just no attorney, and judges used to be attornies.

    Off topic, a little bit, but one can use it in a foreclosure case. I believe it can be used in Illinois, but I do not know the right argument to make against a judge in standing my ground. I do know they are uncoimfortable with the issue.

  10. Friday 27 August 2010

    I should add my experience in using this, even from distant Illinois. I learned about it from someone who lives in California, and he perfected the art of using it to disqualify every attorney/judge who crossed his path.

    I sent several demands to my loan originator for proof that they were in fact my lender, and they loaned actual money, before I would start making payments. Eventually, I heard back from their Senior Investigative Attorney, and she called my demands both frivolous and irrelevant

    I immediately shot back and told her I wanted to see how relevant and frivolous SHE was. I told her that she was not a lawful attorney for not having the proper oath of office, and unless she could prove otherwise, don’t bother me.

    She never responded, and no one else ever followed up.

  11. For the most part, they forget their Oath after they assume office.

  12. Friday 27 August 2010

    Thank you, Reuben. Saves me from having to find it.


    6067. Oath. Every person on his admission shall take an oath
    to support the Constitution of the United States and the
    Constitution of the State of California, and faithfully to
    discharge the duties of any attorney at law to the best of his
    knowledge and ability. A certificate of the oath shall be
    indorsed upon his license.
    (Added by Stats. 1939, c 34. p. 354, Sec. 1.)

    28 USCS 453:

    Solemn Oath of Justices and Judges

    Each justice or judge of the United States shall take the following oath

    or affirmation before performing the duties of his office:



    SEC. 3. Members of the Legislature, and all public officers and
    employees, executive, legislative, and judicial, except such inferior
    officers and employees as may be by law exempted, shall, before they
    enter upon the duties of their respective offices, take and
    subscribe the following oath or affirmation:

    “I, ______, do solemnly swear (or affirm) that I will support
    and defend the Constitution of the United States and the Consti-
    tution of the State of California against all enemies, foreign
    and domestic; that I will bear true faith and allegiance to the
    Constitution of the United States and the Constitution of the
    State of California; that I take this obligation freely, without

    any mental reservation or purpose of evasion; and that I will
    well and faithfully discharge the duties upon which I am about
    to enter.
    “And I do further swear (or affirm) that I do not advocate,
    am I a member of any party or organization, political or other-
    wise, that now advocates the overthrow of the Government of the
    United States or of the State of California by force or violence

    or other unlawful means; that within the five years immediately
    preceding the taking of this oath (or affirmation) I have not
    been a member of any party or organization, political or other-
    wise, that advocated the overthrow of the Government of the
    United States or of the State of California by force or violence

    or other unlawful means except as follows:

    (If no affiliations, write in the words “No Exceptions”)
    and that during such time as I hold the office of ______________

    ________________________________ I will not advocate nor become
    (name of office)
    a member of any party or organization, political or otherwise,
    that advocates the overthrow of the Government of the United
    States or of the State of California by force or violence or
    other unlawful means.”

    And no other oath, declaration, or test, shall be required as a
    qualification for any public office or employment.
    “Public officer and employee” includes every officer and employee
    of the State, including the University of California, every county,
    city, city and county, district, and authority, including any
    department, division, bureau, board, commission, agency, or
    instrumentality of any of the foregoing.


    “I, ________, do solemnly swear (or affirm) that I will administer justice

    without respect to persons, and do equal right to the poor and to the

    rich, and that I will faithfully and impartially discharge and perform

    all the duties incumbent upon me as ________ under the Constitution and

    laws of the United States. So help me God.”

    NOTE: There are no attorneys licensed in California. When asked,
    none can produce a certificate. At best, an attorney can only
    produce his Bar membership card (privately issued by the
    Bar Association) and a letter of acknowledgement from the state
    supreme court.

    The California Bar Association was incorporated in 1903.
    According to the incorporation papers, the corporation would
    exist for 50 years. In 1953 the corporation ceased to exist.
    The Bar Association now does not officially exist in California.
    It operates as a chapter of the national organization, probably
    as a common law association. The California Secretary of State
    does not have any record of the Association since 1953. Any
    corporation is required to register with the Secretary of
    State, even municipal and non-profit corporations. The
    Association has not done so since 1953.



  14. Friday 27 August 2010

    The comment from Dying Truth reminds me about the status of California lawyers. Here is an interesting wrinkle for those of you in California. Not living in California, I do not have the requisite Code to reference handy, but here goes:

    The very first step every California attorney takes before becoming one is a specific oath of office as required by the California State Constitution, and THAT SPECIFIC OATH ONLY.

    If you look at the oath of office that each attorney takes, you will find it is similar, BUT IT IS NOT THE OATH AS REQUIRED BY THE CONSTITUTION!

    My point?

    Next time anyone is served anything from a California attorney, challenge the fact that such person is really an attorney by demanding to see if he/she has the proper oath of office on file.

    No oath…NO OFFICE. The person is acting solely in a de facto capacity that is subject to challenge AT THE FIRST CONTACT. No challenge, then you waive the right, and said de facto attorney is accepted for the duration of the case.

    Now, if you want, you can take this one step further. Did you know that no sitting judge has taken the Constitutionally required oath of office, either?

    Heh, heh….

  15. Like the Old Saying goes in California Attorneys are a Crime a Dozen

  16. Dear Neil,

    Can you direct me to an attorney that can help if only to join me in convincing the city of Sacramento or the State of California to take the lead and send a letter demanding the Office of Thrift Supervision and The Office of the Comptroller of the Currency to issue a “cease and desist” order to it’s member banks from using a power of sale provision against homeowners which would force the banks into courts to foreclose and allow the homeowners affirmative defenses and a jury trial. If the agencies would fail to comply to seek a writ of mandamus and a preliminary injunction based on my research. I am still waiting for the City of Sacramento to respond to my proposal as well as the State Attorney General. A proposal like mine needs the concerted voice of the people and those attorneys with the credentials for the city and the state to acknowledge the validity of my research.

  17. ian
    get with it!! not too late

    file your Proof of Claim right now….form B10

    folks have had success even filing just B10….some getting informal discovery. other homeowners getting settlements…

    go here to read instructions on B10 etc.


    a couple of homeowner victims just filed B10 in last few months

    email me at carra2009@gmail.com

  18. Good Work Reuben,
    But you have to know what the other side of the coin looks like if you want to take it head on. Judges used to side for the people once upon a time, why don’t they anymore, what would THEY lose if they did, and what could have influence on their descisions? Also what people might want to consider in regards to constitutionality after the Gramm-Leach-Bliley Act, maybe the judiciary was trying to pick the lesser of two evils while at the same time keeping their newfound moneymaker. Just look at California on the first is to really start a nonjudicial foreclosure process and probably the most successful at it, also the largest pension in the world, no coincidence. Once it’s made abundantly clear that it is no longer a mystery, then we will finally be able to argue the question of constitutionality. Until then they’re all going to think we’re just clueless. By circumventing the need for a judicial process they avoid any conflict of interest, it really is that simple and that should be the heart of every constitutional argument on the subject, because it’s the one that they decided it would be more vulnerable as opposed to not having a judicial process at all.

  19. Abby- just saw your posts regarding New Century-has the timeframe for filing adversarial proceedings passed? I thought it had- if not too late, I will post an email address. Thanks, I enjoy your input.

  20. To bert

    also go here to read some notes on converstations recently with the New Century bankruptcy trustee and how the bkr trustee is actually signing the assignments.

    there is a tad discussion on the New Century repurchasing.

    keep in mind that New Century Mortgage had two methods of doing business: one was to use wholesale lenders to fund loans that they’d place into a pool and sell to companies such as Chase or Morgan Stanley etc. in huge mega deals nearly worth a billion dollars

    the second was that they’d do their own securitization on a pool of mortgages.


  21. To Bert
    you probably also should go to PACER and look for the New Century TRS Holdings, Inc (covers all the New Century entities) and review the thousands of documents.

    In some cases, the bkr trustee and/or Judge Carey had some blanket POAs issued.

    I found one where they newly appointed temp CEO Holly Etlin signed a POA and made it effective several years prior…..to a point when the real original CEO was still in charge of the company New Century.

    GO HERE to see it


  22. To bert
    did you know that some homeowner/borrowers have filed
    Adversary Proceedings up in Delaware against New Century in their Bankrupcty case?

    we know of at least one homeowner who is in settlement discussons now

    time is of essence if you are interested in doing anything against New Century or Home123 up in their bankruptcy case

    Walter Hackett, esq is in southern california
    search for his website

    an Adversary Proceeding is a lawsuit within a bankruptcy

    be sure to discuss with your attorney

  23. 100 MILLION DOLLAR LAWSUIT AGAINST BANK OF AMERICA !!!!! http://www.kpho.com/news/24764554/detail.html

  24. Hello “gwen caranchini” ! What state are you in? Mo. ?

  25. Leave it up to the government and the banksters to create this constitutional mess. This is exactly what they plan. Problem, Reaction, Solution = Mass Control,
    Less Freedom at our cost. They risk nothing!

    Rate: 1 Flag

    * Email

    Click “Submit Abuse” if you feel this post is inappropriate. Explain why below if you wish.


    Unscrupulous foreclosure mill activities are more criminally exploitive than what becomes reported –not only in Florida. Appalling collection abuses have resulted in mill lawyers (or their affiliates) obtaining ownership of fraudulently foreclosed properties via purported bids at “simulated” auctions. Certain fraudulently auctioned properties become “flipped” illegally to Freddie Mac. Some mill lawyers file into court records fee-making pleadings (summary judgments, etc) when Freddie Mac is not party to cases, and they bill $$$$ fees pretending to represent Freddie Mac. As manifest throughout my http://www.lawgrace.org website, mills have cooperation and applause of federal and state courts.

    Through falsified Bankruptcy Court pleadings, some foreclosure mill lawyers wrongfully, illegally impede homeowners’ restructuring debts, and discovery of the actual owners of mortgage notes. Such lawyers file falsified bankruptcy “Lift Stay” motions in names of either defunct lenders or lenders with no ownership of property notes. To the contrary, bankruptcy “lift stays” should not be granted where there’s no “standing” since “ranking” and “secured debt” factors come into play. False bankruptcy pleadings not only help illegal property repossessions, any other creditors whom debtors owe, becomes deprived wrongfully of entitled shares of proceeds from those auction frauds; and ILLEGITIMATE “deficiency judgments” ; and third party debt-buyers seeking money after unfairly low bids resulted in large debt balances are also problems.

    Plus, foreclosure mills work in concert with Wells Fargo. Among other things, Wells Fargo has tax advantage from fraudulent foreclosure proceedings after placing distressed homeowners’ names / social security numbers on false IRS (acquisition) form 1099-A’s, even when no lawful “acquisition” of properties occurred; such homeowners wrongfully become forced to explain these turn of events to the IRS after surprise receipts of tax bills.

    People who think that people who can no longer afford their mortgage should pack up and move out, ignore that it is unjust to render people homeless by use of intentional, dishonest, illegal foreclosure proceedings. Foreclosure mill illegalities like Attorney David J. Stern’s actually accounts for “illegal foreclosures” and “Tent Cities” which could be Anyplace, USA. Consider: Former homeowners Lawrence and Linda Elin, gave up their home after becoming victims of Bernie Madoff. (Former Wells Fargo executive Cheronda Guyton held parties after the Elins moved out; and astonishingly, “Collin Equities” permitted Guyton personal, free access to that home. A foreclosure auction had not occurred which made “Collin” proprietor of property that supposedly ‘went back’ to Wells Fargo (how did Collin get it?) The point being, it is possible that the Elins unwittingly aided a foreclosure fraud which displaced them –people unknowingly do it all the time! These situations are salient reasons why foreclosure fraud (on farmers, businesses, as well as residences) MUST be investigated;” it can cripple peoples’ abilities to move forward with their lives for a very long time –and the cloaked perpetrators are often millionaires; those perpetrators are as bad as, or worse than Bernie Madoff.

    Because it is imperative to expose the variations of noxious foreclosure shams; and I have been offering / pleading that My True Story (with Prima Facie proof!) be used in Case Study about deceptive foreclosures and judicial biases. I have not relished all my personal costs in almost 5 years of trying to tell the story (my own, as well as others) of how the judicial system is being utilized by the banking industry (knowingly and unknowingly, because sometimes the lenders don’t know the foreclosure mills are handing them dirty titles) to devastate people whose circumstances causes them difficulty with repaying debts. **SEE this entire article with resource links @ http://www.lawgrace.org/2010/08/14/foreclosure-mills-judicial-fraud-consumer-exploitation-government-shams/

  27. To Bill Kay,

    My email is reuben.nieves@yahoo.com
    My phone is 916 247 6260

  28. Interesting article.

    The injustice of “power of sale”/non-judicial foreclosure is of course that the would-be foreclosers don’t have to actually prove ANYTHING. In my case, as in many others, I’m sure, the bank said I was in default, without proof. The bank (posing as MERS) assigned the DOT/note to itself, without proof that MERS/the bank had the power to do so.

    In a non-judicial state, the bank can just decide to steal your house by putting it up for sale without having to prove anything to anybody–unless you challenge them.

    My case is moving forward. My servicer has already admitted they don’t hold the note now and didn’t hold it at the time they tried to foreclose. They said Fannie Mae holds the note and held it at the time the servicer (posing as MERS) tried to foreclose. I’ve since added Fannie and MERS as defendants, and Fannie “admits” it holds the note now, despite an assignment on record at the county courthouse saying my servicer holds the note.

    If Fannie really holds the Note, why don’t they just show it? Why didn’t they just make it an exhibit to their answer to my complaint? I’m guessing because they can’t. I’m sure they’ll print up a fake one at some point after stonewalling on discovery.

    But I’m not going to let Fannie get away with just SAYING they hold the Note, they’re gonna have to PROVE it. Because if they don’t “produce the Note,” then the copies of the Note I’ve been given by the servicer will have to serve as the evidence of the obligation. And that’s a problem for Fannie, because the Note I have has no indorsements or allonges, meaning that Fannie doesn’t hold anything except a big bag of fraud.

  29. Reuben’s statement concerning the court’s predetermined defeat of pro se litigants, along with Neil Garfield’s thoughts concerning the impossibility of a pro se where complicated trusts are concerned, pretty much blows out what little candlelight we the people, undefended, were reading the laws by.

    However, while a lot of talk on this site is devoted to foreclosure defense, and a lot of the folks who post here are in fact attorneys fighting the good fight, there are a lot of us “paupers” here, just plain folk who are holding out hope that a little ray of justice will come their way.

    One of the rays that would seem elementary in these times would be an understanding that the simplest of measures would be in place to make sure that the innocent weren’t being taken advantage of. A panel of retired judges, or even pro bono seated judges or seasoned lawyers, could look over the documentation as to standing, blatant fraud, etc. No proof, there’s the door.

    No one, no matter how rich or poor, strong or weak, should be up against a system so skewed towards those that possess special knowledge, secret handshakes, or simply have deeper pockets.

    Legal standing should be a given before entering the court. And fraud should be sniffed out by those who have the nose for it. Then, if the creditor’s have a reasonable case, have at it. I’d turn over my property peacefully to proof positive. It’s the knowing that fraud is being perped from the bottom to the top in courts around the nation that goes against everything this country stands for.

  30. Rueben,

    I agree with you 100%.

    My contact info is posted in one of the comments below.

    I work with a powerful firm that may be able to help. I can’t post their name in my posts by they are frequently mentioned by Neil.

    We are wrapping up a big case and the soonest I’ll be able to put your case on the table would be mid September.

    If you want to pursue this, please let me know. By the way, this firm is fighting for the principals and are not looking to gouge the homeowners. Just need to cover their costs.

    Also Greg Bryl, Esq gets an honorable mention here. His contact info is in the second comment.

  31. Rueben,

    Looks like you were providing an answer to my statement:
    I want all the options afforded a person who cannot afford to fight this fraud. I do not want the remedy the privileged and educated can pay for and fight for, I want the pauper’s remedy.

    I appreciate that insight to the lack of remedy for those that are
    “in forma pauperis” ………….yet you mentioned “pro se”

    does it make a difference if they are
    “in forma pauperis” “sui juris”

    Here are some definitions for those lacking a legal dictionary. I find that our ‘free’ education gave us less to work with than we thought. Their system does not use our words the same way. It means one thing to those of us with the ‘free’ education and it means something else to those that ‘know’ and created the ‘game’ for which we are missing the rules through lack of knowledge.

    the “ae” in personae are enjoined (back to back) in the legal dictionary and are really one character, but this keyboard has no special character keys for me to enjoin those two letters as one

    Black’s Law 5th Edition —

    (Note: the legal definition of “person” in most definitions – is why I steer clear of these two immediately following)

    pro se – For himself; in his own behalf; in person. Appearing for oneself, as in the case of one who does not retain a lawyer and appears for himself in court

    in forma pauperis – In the character r manner of a pauper. Describes permission given to a poor person (ie indigent) to proceed without liability for court fees or costs.

    [Note: I like these below because they don’t mention “person”, and they use the term ‘one’. All is one. (They, that created the game, know this. We forgot, that’s why we treat each other as if we are separate beings and not connected. We are. We are One.)]

    sui juris – Of his own right; possessing full social and civil rights; not under any legal disability, or the power of another, or guardianship. Having capacity to manage one’s own affairs,; not under legal disability to act for one’s self.

    in propria persona – In one’s own proper person. It was formerly a rule in pleading that pleas to the jurisdiction of the court must be plead ‘in propria persona’, because if pleaded by attorney they admit the jurisdiction, as an attorney is an officer of the court, and he is presumed to plead after having obtained leave, which admits jurisdiction. See pro se

    person – In general usage, a human being (ie natural person), though by statue term may include a firm, labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.

    persona – In the civil law, character in virtue of which certain rights belong to a man and certain duties are imposed upon him. Thus one man may unite many characters (personae), as, for example, the characters of father and son, of master and servant.

    (and for the above persona definition – I will add the characters of Creator and creation)

    Light and Love,
    at arm’s length,
    Trespass Unwanted, sui juris in propria persona

  32. To Bill Kay,

    There is a sad truth about the Justice system. If you are in forma pauperis pro se litigant–YOU HAVE LOST no matter how much your cause merits. Good faith belief in the justice system is not the currency used in the courts. You need money and a lawyer. As far as the Supreme Court, you can hit every marker necessary to make your petition cert-worthy and you still will not be granted certiorari. Courts are made up of attornies who take offense at non attorney who did not pay thousands of dollars for their license. Remember the scarecrow in the Wizard of Oz? Until he got that paper certificate he didn’t have a brain. I did research for two attorney. What I gave them they took to the court and got the credit. On my own I am shown the exit door.

  33. MR Garfield . looking for a good attorney in LA california.My loan was funded in 2006 by new century mortgage. new century sold there loans to nc capital april 1 2007 and then file bk april 2 2007.MERS filed a bogus assignment of deed of trust as nomanee for new century may 2008 (fraud)I filed a complaint with the state of texas regarding the assignment that was noterized in texas stating under the laws of california.the state of texas told the notory to send her book page and how do she know the guy who signed the bogus assignment.she sent a affidavis stating the person who signed the bogus assignment had authority however the state sent me a copy of that authority agreement and it did not have signing authority until 9-15-2009. the assignment was signed 5-12-2008 which MERS did not have a right to sign anything.i had to file bk to keep these pretender lendrs from taking my home.asc filed a dec with the federal bk court they ACQUIRED servicing rights 6-30-2006.However my house was not completed it was stix and i did not own it (Lie)AMERICAN SERVICING COMPANY ATTORNEY PITE DUNCON LLC ALSO SENT A BALLOON NOTE IN 2009 WITH MERS MIN NUMBER HOWEVER 2010 THERE WAS NO LOAN ARE MIN NUMBER(FRAUD ON THE COURT) I CHECKED THE MIN NUMBER AND THERE WAS ANOTHER LENDER THAN MOVANTS CLAIM (FRAUD)I HAVE ALL THESE DOCUMENTS I WOULD LIKE TO POST ON LINE AND THE MERS MIN NUMBER CHECK BERT

  34. @Reuben Nieves

    Question: Are you planning an appeal to Supreme Court?

  35. Reuben Nieves,
    Question, can a N.A. bank acquire those powers by being ‘merged and into’ with a non N.A. bank?
    Thus by that phrase, would they be a successor and assign for or of the non N.A. bank and have the power of sale right the non N.A. bank had stated the Deed of Trusts the non N.A. bank created in a nonjudicial states prior to the merger?

    at arm’s length,
    Trespass Unwanted, sui juris in propria persona

  36. This is a GREAT piece of work

    It is about Discovery.

    When a homeowners discovers that they still hold title to their property because an entity was exercising a right it did not have, or it’s representatives were misrepresenting standing it did not possess, or exercising a power that could not be conveyed to them by their client; then the ‘sale’ is void ab initio and should not have to be challenged. Just by noticing a court of that case, it should be reversed. No out of pocket expenses to the one harmed, and filing fee and expenses paid by the party that committed the violation.

    I want all the options afforded a person who cannot afford to fight this fraud. I do not want the remedy the privileged and educated can pay for and fight for, I want the pauper’s remedy.

    Isn’t the National Charter responsible for the information they give their representatives (ie law firms) that lead to the dispossession of real property owners?

    The supreme court said if attorneys are acting as debt collectors they have a duty to not violate federal statutes in general? or was that just for FDCPA?

    Who is the party that should be pursued? National Associations who may or may not have the rights conveyed to them in their charter, yet hired a law firm to go after property? Law firms and foreclosure mills for ignoring the fact that the Nationally chartered banks cannot convey to them the power of sale, the right to nonjudicial foreclosure, and other rights and powers, they do not themselves have,( just like Congress cannot convey rights and powers to the bank that it doesn’t have)?

    Do we pursue judges for granting evictions in non-judicial foreclosure states when, by protest, a homeowner comes to court to dispute the eviction stating fraud?

    Shouldn’t the judges be required to reverse their decision when informed they rubber stamped an eviction or foreclosure for a party who lacked the rights and/or powers exercised by their representatives when they chose to sue for the eviction or foreclosure?

    Everyone deserves a remedy.
    I like your 5th Amendment or 14th Amendment due process claim section. Need to know how to use it.

    “no person should be deprived of life, liberty or property without due process of law”…

    My Deed of Trust in the definition section had a definition of “Lender” and “Trustee” but it also defined “Borrower” and after my name it called me ‘a single person’. So by identification I should not have been deprived of life, liberty, or property without due process of law, by any of the provisions in that Deed of Trust, even in a nonjudicial state. And where the provisions in the Deed violates that right, that part is null and void even if the the remaining provisions are still in effect.

    I like where this is going.

    at arm’s length,
    Trespass Unwanted, sui juris in propria persona







  39. if we are relying on the constitution the judge will most probably throw you out of the court house.

    we need to keep it simple otherwise good luck

    co-mingling of funds is in my opinion the best defense.

    keep it simple st—d




  40. There are certain points EDGETRADERPlUS makes that should be addressed and shows his misunderstanding of the point I am addressing. First, I am not addressing judicial foreclosures but non judicial foreclosures which is represented in my research through the “power of sale” provision where the bank can sell your property without going to court.

    Second, I am fully aware of the Contract clause” EDGETRADERPLUS believes that that the Contract Clause is a complete defense. That is not so. I refer to the Supreme Court in Hudson County Water Co v McCarter, 209 U.S. 349 (1908) where a water company contracted to sell water outside the boundary of the state in spite of a state statute forbidding such a transfer of water. Justice Oliver Wendell Holmes said in his opinion:
    “One whose rights are subject to state restrictions cannot remove them from the power of the state by making a contract about them, and a contract illegal when made—such as one for diverting water from the state—is not within the protection of the contract clause of the Constitution”
    Are we now to assume that the rights of the bank that would otherwise be subject to the restrictions of the 5th Amendment due process clause can remove those restrictions by making a contract about it. Like the contract in McCarter, the contract illegal when made is not with the protection of the contract clause.
    But regardless the contract clause would not apply anyway. The contract clause , U.S. Const. Art. I. sec. 10 says, “No State shall pass any Law impairing the Obligation of Contracts” The 5th Amendment is a restriction constraining the Government(and it’s instrumentalities) The 5th Amendment is not the State. National Banks and federal savings associations are instrumentalities of the federal government.
    Thirdly, EDGETRADER PLUS refers to one of my cases Bismarck when the court concluded that the lending functions were governmental and not proprietary; and, that foreclosure was part of the general lending functions inferring that there is a mystery of what the lending functions mean. Yes it does mean a mortgage contract.
    EDGETRADER PLUS echoes an old quote: “Ignorance of the law is no excuse.” But it is not my ignorance but of those who have not done their homework with reference to the powers that these banks are given by Congress. Their powers are enumerated and incidental. They are powers given to the banks under the “Supremacy Clause” and the “Necessary and Proper Clause” of the Constitution. The power to foreclose non judicially is not a power that Congress can confer on the banks. Nor can they enlarge their power by putting it in a contract. Whatever the assume to do must be authorized by a law of the United States. Tell me what law of the United States can authorize such a right?

  41. thank you edgetraderplus

    Two Constitutions

    American history we were spoon fed for a reason.
    Now it is time we cast off the blinders ,reclaim our liberty from those that would steal it from and too enslave sleeping men.
    Pelatiah Webster …..this man was [and still is] impressive , his sense of expression & comprehension of the situation , an ABSOLUTE Patriot !!


    24 Jan. 1786 2 .Pelatiah Webster, Remarks on the Address of Sixteen Members of the Assembly of Pennsylvania,.

    “On the whole matter there is no end of the extravagancies of the human fancy, which are commonly dictated by poignant feelings, disordered passions, or affecting interests; but I could wish my fellow-citizens, in the matter of vast importance before us, would divest themselves of bias, passion, and little personal or local interests, and consider the great subject with that dignity of reason and independence of sentiment, which national interests ever require. I have here given my sentiments with the most unbiased freedom, and hope they will be received with the most candid attention and unbiased discussion, by the states in which I live, and in which I expect to leave my children.
    I will conclude with one observation, which I take to be very capital, viz: that the distresses and oppressions both of nations and individuals often arise from the powers of government being too limited in their principle, too indeterminate in their definition, or too lax in their execution, and of course the safety of the citizens depends much on full and definite powers of government, and an effectual execution of them.

  42. Vegasdude,

    If you’d like, you can email me at providencegroup@ymail.com or call 702-355-6163.

    We would like to know as many good people as possible for our network.

    As far as appeals, my friend Ronald Williams’s appeal is in front of the 9th circuit partly on FDCPA.

    I look forward to hearing from you.

  43. Two Constitutions? Copngrats to actor Jon Voight for his support of the Tea Party.
    Lif , Liberty and the persuit of Happiness. One of the framers of the Constitution questioned Property Rights instead of the right to happiness. I heard he was told that there was no right to happiness without property rights. The super super Rich don’t care if it is CDOs or any scam as long as they can make money.
    Racine, Wi.


    Florida’s AG , Bill McCollum , lost his primary fight for candidate for governor yesterday. In 4 short months he will be out of a job as a new AG will be in place also.. He has recently started actions that are very much in our favor and I think we should encourage him to go out with a bang. We could get the entire foreclosure backlog in our state cleared out with the simple expediant of requiring that FS1.110b (where the lawyers have to certify the documents are true and valid and the evidence they present is true) be observed 100% of the time.


  45. Bill Kay:

    No, my initials are not C.G.

    I don’t believe we’ve met. I take it you’re in Vegas. If you’re fighting a foreclosure here, I sympathize. This must be the absolute MOST CORRUPT and WORST place to try to find justice. But hey…..that’s why we have appellate courts.

    One case I know of was dismissed by a “specialist” judge in Federal Court, one Gloria M. Navarro. The case was “reassigned” to her after a hearing was scheduled on the Motion to Dismiss by the Defendants (the foreclosing entities). She not only dismissed the action, she vacated the hearing which would have included oral arguments by counsel! She obviously didn’t want to hear any supportive discussion about the facts raised in the Plaintiff’s papers. She also, in the first paragraph of her opinion/decision, stated that “nowhere in Plaintiff’s Complaint or other papers does he challenge the default…..” In this case, the default is challenged on just about every page of every document! But, as I always say, a bad dismissal makes for a good appeal.

    You can look up the case on PACER. US Dist. Ct. for the District of Nevada – Case No. 2:09-cv-02406-GMN-RJJ. Joyner vs. Bank of America Home Loans et al.

    It is really disheartening that judges like this are brought in solely to destroy meritorious cases, and they seem to have a knack for finding case law which states the exact opposite of other case law which supports the laws requiring foreclosing parties to have and prove their authority, to be the creditor, to own and hold the loan instruments, to prevent attempts to collect a debt twice, etc.

    Almost makes me long for the old “wild west” days where occasionally a bad judge was found swinging in the wind from their chamber window. Judges today seem to be truly godless, cold-hearted enforcement arms of the status quo, incapable of “getting the message.”

  46. boots,

    There is an excellent new Supreme Court ruling regarding FDCPA:

    You may find it helpful in your battle

  47. vegasdude are your initials C.G?

    Do I know you?

  48. here’s my opinion on this non-foreclosure matter since i am in ca and pursuing my case in federal court. by the time homeowners defaulted on their loan, the loan servicer would hired a “debt collector’ or third party to collect a defaulted arrear. The “debt collector’ will then recorded a Notice of Default and it will tell you how much you pay in order to reinstate the arrears and sometimes the stupid “deb collectors” will signed as an agent of beneficiary of a loan servicer. study your notice of default. if homeowners will not object or sent a debt validation to dispute the amount of the arrears, within 30 days upon receiving the notice of default . if the homeowners will not cure the default, then the “debt collectors” become a pretender trustee by recording a substitution of trustee, sometimes the debt collector will fabricated the “subs of trustee’ and signed their names in behalf of MERS or the lenders on your deed of trust or the loan servicer name. then by virtue of recorded “subs” the debt collector becomes a”substituted trustee” and could record” a notice of trustee sale as trustee on homeowners deed of trust and could conduct a non- judicial foreclosure to sale on the property. so here’s the argument ” a debt collector becomes a “subs” when homeowners failed to cure the default. that’s why here in california you would notice that the NOD was recorded first before the the “subs” recorded why? because this debt collectors purpose is just to collect a debt and if you fail to cure the default then they becomes a “subs”. is this legal of course no. in Ca you have to follow the Ca civil code 2924 et seq. in order to affect the notice of default , the “subs’ will be recorded first. you always include FDCPA and Ca Rosenthal Act in your complaint. you always cite the case of Wilson v. Draper & Goldberg, PLLC Fourth Circuit opinion and the Second Circuit in re Alibrandi v. Financial Resource. i am also a pro se and my case case was dismissed with prejudice on Fraud, wrongful foreclosure, quite title, and for declaratory relief against MERS & Quality but i i was allowed to amend my FDCPA & Rosenthal Act against Aurora & Mccarthy & holthus.. but i was able to filed my motion for reconsideration and it was granted. now MERS & Quality is not off the hook yet, because they have to file an opposition to the motion. If this case will go forward i have already a chart to compare how t this ” “fraud” started by manufacturing those documents in order to foreclosed. see all your NOD there is a disclosure that stated they are attempting to collect a debt bla bla bla , it means they are a debt collector under the FDCPA Act and if they recorded a “subs” as a trustee. then the are in violations of FDCPA for misrepresentation that they are only a trustee and have no interest in the foreclose property. thats a bull because their being a subs is to hide from any legal consequence. their main purpose is to collect a ‘debt’ and if they have a disclosure that they are a debt collector then they cannot at the same time a “subs trustee”.

  49. After exhausting more than $600,000.00 worth of legal expenses and court costs fighting the countless unlawful attempts to foreclose on a home the banks admitted under oath they did not own – the appellate and Supreme Court repeatedly DENIED the homeowner’s right to a plenary appeal because now – he can no longer afford to pay the court fees. The court also ignored the appellant’s “Affidavit of Inability to Pay Costs” that includes as an exhibit showing he is receiving food stamps.

    You have to read it to believe it…


  50. edgetraderplus:

    Without getting too far off topic…..

    Would you mind posting a link to this “second” federal Constitution, “modeled” after the organic one?

    Also, could you explain how such a document became lawfully ratified in order to supersede the first?

  51. Wednesday 25 August 2010


    The article was not talking about exceptions, and their ain’t a court in this country that would call a contract for murder, illegal from the outset, enforceable.

    The remainder of your response then leaves the realm of contracts under discussion to cite opinions re surrounding circulmstances. Certainly, there are contracts that can be challenged, for a variety of reasons, but none of which have to deal with the Constitution, or the misguided notion that a contract waives rights, as the lead article states.

    This is not to say I may disagree with some of the sentiments expressed, but sentiments are of a different cloth in court and will not hold up against arguments of law and procedure, and that is the point of my response.

    Many like to bandy about the Constitutionality of this or that, but fail to relalize the organic constitution is virtually inoperable in all courts of law, except those of Article III, and I doubt anyone here would now how to invoke an Article III court of jurisdiction.

    There is also a federal constitution, modeled after the organinc one, but without any constraints on the Federal corporate governmnet, as the organic constitution placed LIMITS on the Federal government. Does anyone see any limits to which the corporate federal government will not go? How many even know there are two different constitutions?

  52. We should look at the intent of power of sale in a contract. It was not intended to allow a slick maneuver by someone calling themselves a “trustee” who got an insurance agency to record transfer of deed upon sale to guy who paid “cash” hsbc credit bid? Power of sale is to be ” guarded with jealousy” ha sure

  53. I see good points in the article by Mr. Nieves, and in edgetraderplus’ response. But there are always exceptions. Contracts can be proven to be “unconscionable.” For example, say I contract with you to murder someone, and in the contract it says I must be held free of liability. I don’t think the “limited liability” clause in that contract would hold up.

    Neither should the “power of sale” clause be considered “inviolate” due to lack of full disclosure. Even worse, the “power of sale” is executed by parties who usually sold, assigned or transferred their interests in the loan. A mortgage loan still consists of two instruments: the Note, and the Mortgage, or Deed of Trust. When they are separated, they are no longer enforceable. The power of sale is, technically, an “enforcement” on the Deed of Trust, but without being tied to the obligation (Note), the beneficiary on the Deed of Trust suffered no “default” upon which to base its power of sale. See Restatement (3rd) of Property (Mortgages), cited by Judge Linda Reigle in In Re Joshua & Stephanie Mitchell, Nevada Bankruptcy Case No. BK-S-07-16226-LBR.

    All securitized mortgages have separated the Notes from the Deeds of Trust, in that the payments made by the borrowers were paid to certificateholders as “returns on investments” instead of being applied towards “interest” and “principal” as stated on the loan docs. It is only by using illegal “off-balance sheet” accounting methods that the servicers make it appear as though the payments were applied to the mortgage “interest” and “principal,” but since the beneficiary on the Deed of Trust is not the party receiving the monies, the mortgage is not paid in this fashion. If it were, then what interest in the whole transaction remains for the beneficiary? None. (This is why I think it’s always a good idea to send that “Letter of Objection to the Trustee” regarding filing the satisfaction of the mortgage….because it’s usually true.)

    I would like to add that it’s a real pleasure to read and discuss these very important issues with the great minds who contribute on this Blog. Many thanks to Neil Garfield for putting this together and providing his wealth of knowledge and tireless truth-seeking efforts.

  54. My home was stoln outfrom under me thru power of sale here in az. I had a suitin district court bank had default judgment entered refusing to defend yet the attorney for foreclosure mill executed this knowingly aiding and abetting fraud since they had been served. Ian hassled out of my home by threat of eviction and notes left on my door by reo ” power realtor” telling me to pack and leave. This stuff is implicated in itself and nor understanding court jurisdiction rules of civil procedure and being scared to death of being thrown out on the street curbside I left . This was indeed a wrongful foreclosure. It eats at my soul. Power of sale.

  55. Wednesday 25 August 2010

    It helps to know what the law is or what the Constitution says before making such statements. Here are the opening lines starting this article:

    >”I have always said that the power of sale raises constitutional questions — namely, that no person should be deprived of life, liberty or property without due process of law.”

    Frankly, I do not understand your point of all the “research” you present or the “conclusions” [for they are not law] you draw from them? Does the “fact” that you have always said this thus make it true?

    One has to know what due process means and how the courts apply due process. It is the” right to be heard,” and anyone in foreclosure in front of a judge is being given the right to be heard.

    The second part of due process is “to be heard in a meaningful way.” Anyone in foreclosure in front of a judge has every opportunity to present themselves and their case, fulfilling the right to be heard in a meaningful way. How anyone uses of misuses that right may be a different issue.

    Mr Nieves will have to clarify his point to explain how due process rights are being denied.

    Next line in the article:

    >”The fiction is that you can waive that right by contract….”

    Say what?!

    What is the fiction? Where in any form of jurisprudence does it say anyone can “waive that right by contract?”

    Have you even read the Constitution? Do you even know what it says about contracts, one of the most important issues of concern by the founding fathers?

    U.S. Const. Art. I, § 10 – No State shall pass anyLaw impairing the Obligation of Contracts.

    Can it be any simpler? No one, not even the judiciary, can interfere with or impair the obligation of contracts.
    How, in any way shape or form is there a waiver of rights when entering a contract? The only fiction appears to be your conviction of a mistaken belief.

    Quite the opposite. Contracts, once entered, are considered inviolate.

    Here is a sentence from your “CONCLUSION:”

    >”Thus in Bismarck the Court ruled that the lending functions were governmental not proprietary…”

    What exactly are the specific “lending functions” to which you refer? Are you “infering” that lending functions means a mortgage contract? One would have to know the specifics, and I doubt that you do.

    Here is another quote from the first sentence of the last paragraph:

    >”Constitutional powers conferred on a corporation should not be used to produce an unconstitutional result.”

    Not to burst any bubbles, NO corporation has any “Constitutional powers conferred” upon them. All corporations exist by statutory law. Statutory law is not any part of the Constitution.

    What I did not see in your article was this:

    “Ignorance of the law is no excuse.”

    From my point of view, what you present is dangerous for its lack of proven content, and because it appeals to the “heart” of mistaken “beliefs” about reality. A belief about reality does not mean the belief is right.
    Look to any religion to see how ardently people “argue” and “defend to the death” their BELIEFS about what they think their religion means, and does not each religion think theirs is “right?”

  56. I learn more and more every day from this website.
    Someday my brain may explode.
    Thank you all for the education.







  59. Great
    Would the same apply to a judicial state like Wisconsin?
    Stan Putra
    Racine Wi

  60. TRO Granted in a post-salecase in VA (a power-of-sale state).
    Homeowner was in the process of modifying his loan, when the bank foreclosed on him anyway. Servicer Central Mortgage Co. appointed a Substitute Trustee to act on its behalf. But the sale, which went to the “noteholder,” resulted in a transfer of the house to HSBC Bank, not the entity on whose behalf the Sub Trustee was acting (Central).
    H challenged the sale and made two arguments: first, sale is fraudulent and otherwise improper b/c HSBC did not appoint a Sub Trustee and b/c there was no evidence (even by recitation) of its ownership of the note, nor did it make a cash bid and deposit.
    Second, H alleged violations of his right to cure the default and interference of his right to cure in the form of the bank inducing him to do nothing but wait for a loan mod decision.

    The judge did not reach the technical defense of HSBC’s lack of standing/right-to-enforce, but did see a problem with H’s right to cure. The most significant thing was the H was able to show that his financial situation had improved in the meantime (since the start of the loan mod negotiations) to the point that he could really pay, even without a mod. Thus, we argued that this was a “classic” case where the homeowner (H) should not be losing the house.

    P.S. In the vein of what Matt Weidner is doing, I am soon going to share some pleadings addressing a Securitization Trust’s incapacity to acquire any rights in the note, whether via an allonge or otherwise.

    Keep up the fight!

  61. A wonderful analysis and basis of a brief. I will raise this and see what happens. Before my lender foreclosed I filed a qt and tro action along with fraud and lender liability claims in mo a nonjudicial state. They have told the judge they will not foreclose at this point so the tro has not come into play nor have I had to raise defenses to a foreclosure –yet. I believe the reason they have not attempted to foreclose is they don’t have the note in question and the ctrs in mo have been pretty adamant they better have the note in hand or foreclosure will not be allowed . I believe my note was table funded by Aegis in 2006 and then put in a Countrywide MLMI trust. I escaped foreclosure in 2008 by paying the note current but my Chain of Title is screwed up. BOA suddenly got the note in 2010 after I completed Hamp requirements with Wilshrie and then stated i had to start HAMP over–they refused to take any more payments. I filed suit and we are in a “stay” situation as they have attempted to remove and I have filed a remand based upon blatant lies to the court and lack of sub matter jur on the QT action under Mo. 503.080. I have 30 plus years of heavy duty trial exp so I am holding them at bay but it will be interesting to see what happens yet. Thsi gives me another arrow in my quiver! I do get it as I did civil rights law and it was heavily constitutionally oriented. Thanks for an EXCELLENT POST.

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