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“Appellants contend that the note necessarily accompanies an assignment of the mortgage. Actually, it is the converse that is true; the mortgage is incident to the obligation which it secures and ‘goes with [ownership of] the note.’ Hill v. Favour, 52 Ariz. 561, 568, 84 P.2d 575, 578 (1938).”




This refers to the impact of Article 9 to the transfer of security interests in real estate incident to the sale of promissory notes, as brought home perfectly by the extremely timely March 29, 2011, Draft Report of the Permanent Editorial Board on the UCC Rules Applicable to the Assignment of Mortgage Notes and to the Ownership and Enforcement of Those Notes and the Mortgages Securing Them (the “Report”), a copy of which is attached hereto.

Being the Holder of the Note does not carry the security interest with it. Article 9 of the UCC governs in cases involving the sale of Notes [it is actually the debt or the Loan that is sold, while the Note is only evidence of the debt] secured by real estate. These Article 9 provisions cannot be avoided under any circumstances as it trumps all other law and agreements between the parties.

The Report makes it clear that OWNERSHIP OF THE NOTE AND LOAN is required to have a security interest. It specifically states that there is no security interest unless the party purchased the Loan from the party that previously owned it, and that this sale was made pursuant to a special writing that stated that the purchase of the Note included the security interest in real estate represented by the deed of trust. THERE IS A SPECIFIC PROVISION PERTAINING TO THE RECORDING OF DOCUMENTS NECESSARY TO FORECLOSE IN NON- JUDICIAL FORECLOSURE STATES.

The Report makes it clear that OWNERSHIP OF THE NOTE AND LOAN is required to have a security interest. It specifically states that there is no security interest unless the party purchased the Loan from the party that previously owned it, and that this sale was made pursuant to a special writing that stated that the purchase of the Note included the security interest in real estate represented by the deed of trust.

ARS § 47-9607(b)(1), governs the ability to hold a non-judicial foreclosure, and it precisely defines the necessary documents to be recorded. The Claimant cannot record the necessary affidavit, without perjury, unless it purchased the loan and security interest from the party that owned it. It cannot record the “security agreement,” without supreme fabrication of documents, unless there was a real purchase contract with a separate entity from whom it paid value for the purpose of purchasing the Loan and security interest in the DOT. And that other party had to be the party that owned the Loan and security interest at the time of purchase.

In order to execute the Affidavit in § 47-9607(b)(2), Claimant must purchased the Loan for value from the party that owned it previously, pursuant to 47-9203(b). Both the “Security Agreement” and the Affidavit had to have been recorded prior to posting the Notice of Trustee Sale. The required § 47-9607(b) writings were not recorded. Therefore, Claimant has no right to foreclosure non-judicially.

Pursuant to ARS § 47-9203(b)(UCC 9-203(b)), in order for Claimant as purchaser of the Note, regardless of whether it is negotiable or non-negotiable, to obtain the security interest in the Property and the right to enforce the security interest, three criteria must be met for the security interest contained in the DOT to attach: 1) value must have been paid for the Note; 2) the party from whom Claimant purchased the Note must have had ownership interests in the Loan and DOT rights; and 3) the party that sold the Note to Claimant must have provided an authenticated writing that provided assurances that the selling party owned the Note and DOT rights. See ARS §§ 47-9203(b)(3)(A)-(B). When reading 47-9203(b),

Eisele v. Kowal, 465 P.2d 605, 609 11 Ariz.App. 468 (Ariz. App., 1970). The often cited rule or law that the security interest follows the note needs clarification. The meaning of the rule is not that the security interest follows the “holdership” status of the note. It follows ownership of the loan, or the note, of which the note is evidence. This principal is codified at ARS § 33-817.

Assignment of mortgage without ownership of the underlying debt evidenced by the note is a mere nullity, or vice versa, is a mere nullity. See among others, Hill v. Favour, 52 Ariz. 561, 568, 84 P.2d 575, 578 (1938); First Nat. Bank of Saco v. Vagg, 65 Mont. 34, 212 P. 509, 510 (1922); Cornish v. Woolverton, 32 Mont. 456, 81 P. 4, 108 Am. St. Rep. 598; Jones on Mortgages (7th Ed.) 805, p. 274; 27 Cyc. 1286; Nagle v. Macy, 9 Cal. 426; Jackson v. Blodget, 5 Cow. (N.Y.) [202], 205; Jackson v. Willard, 4 Johns. ((N.Y.) 41; Schleef v. Purdy, 107 Or. 71, 214 P. 137, 140; Carpenter v. Longan, 16 Wall. 271, 21 L. Ed. 313; Missouri Real Estate & Loan Co v. Gibson, 282 Mo. 75, 220 S.W. 675; Webb v. Hoselton, 4 Neb. 308, 19 Am. Rep. 638; Miller v. Berry, 19 S.D. 625, 104 N.W. 311. And it is certain that any action purported performed by a MERS agent is a mere nullity.

18 Responses

  1. […] UCC ARTICLE 9 EXPLAINED: YOU MUST … – Livinglies’s Weblog – Sep 07, 2011  · Livinglies’s Weblog. … This refers to the impact of Article 9 to the transfer of security interests in real estate incident … Foreclosure Defense: … […]

  2. I once read that if the original creditor sells the loan the obligation to the original creditor is satisfied. True?

  3. One more from Levitin’s letter:

    “While the substance of the Draft Report does not veer into the enforcement of mortgages, the titling of the Draft Report furthers the problem that the Report is only addressing note enforcement,
    while giving the impression that enforceability of the note decides the enforceability of the mortgage.
    Given that the real issue of import is the enforcement of the mortgage, not the note, it is fundamentally misleading for the PEB to issue a report about the enforcement of the note. While the ability to enforce the note is usually required to enforce the mortgage, 5 a report that only addresses note enforcement is inherently misleading because it fails to address the ultimate question—whether a party has a right to deprive a family of its home.”

    I linked it. I hope everyone will take the time to read the whole thing. It’s very informative.

  4. From Letter to Permanent Editorial Board from Prof Adam Levitin et al:

    “In the remainder of this letter, we address several particular concerns with the Draft Report:
    (1) that the Draft Report is misleading because enforcement of mortgage notes other than through mortgage foreclosure is virtually meaningless; (2) the Draft Report is misleading because it focuses
    solely on the UCC issues when consideration of supplementary, contradictory, or superseding federal bankruptcy law, state procedural law, evidentiary law, real property law, trust law, and agency law
    might produce different outcomes; and (3) the Draft Report fails to recognize that UCC 9-203(g) may not be effective to transfer real property in TITLE THEORY STATES. (my emphasis)

    To read entire letter:

    And by the way, Professor Levitin, I’ve been waiting for 3 years now for a response to my email asking you to weigh in on the legislative history of the deed of trust(!)

  5. .@anonymous – you said:

    “At this point, loan is charged-off with only collection rights remaining.”

    I just don’t get this. How can there be any collection rights remaining on a debt which has been written-off? If I owed you 100 dollars and didn’t pay and you wrote it off, what is there to sell? If you took the write-off, which results in a tax-deduction, and then you sell my debt nonetheless, what? Do you recapture whatever you get $$ when you sell to a debt collector? Can you write it off in 2011 for the tax benefit and then claim the sale of the collection rights in another tax year by waiting til that next tax year to sell what you’ve already written off? I’ve never heard of expensing something but then selling it nonetheless. Now if you sold the collection rights to my 100.00 debt for 40.00 and expensed the difference, well, that would make sense. Is this what you mean?

  6. carie

    Subprime “loans” were ALL refinances — not new purchases. However, some new purchases used “exotic” terms — that are also extremely questionable.

    My focus –has always been — the subprime “refinances” — or not an actual refinance — as now coming to light.

  7. as far as the “no funding”, etc.


    What about NEW purchases—NOT refinances—are they unsecured debt from false default also?


  9. Compare the CA AG to let’s say the NY AG or even the NV AG. We know what your game is.

    This is what happens when as a FD attorney, you throw a wrench into the machine. Mitchell Stein is one of the very few CA attorney’s that has the balls to sue judges.

  10. This is extremely off-topic but very newsworthy for CA and FL residents:

    “On August 17, 2011 California Attorney General Kamala Harris grossly violated plaintiffs’ civil rights by seizing their legal files and denying them the right to the legal counsel of their choice. She did so under the cover of secrecy without any public airing of the facts, without proper court approval, without naming plaintiffs in her suit, without naming the LLP in her suit, and thus without allowing either plaintiffs or their counsel or any court a chance to respond. She did so based on an inadequate investigation and cited demonstrably false accusations against attorney Mitchell J. Stein. And she did so at the behest of Bank of America, whose attorneys are deeply alarmed by the substantive progress Mr. Stein has achieved in the plaintiffs’ mass joinder cases against the bank, to the point that these attorneys have – in the utmost example of governmental corruption — funneled money to the Defendants in order to persuade Harris to make this unprecedented move.”


  11. This was also nicely articulated by Judge Todd in NJ — Bank of New York v Michael Raftogainis. Judge Todd demanded that the “bank” demonstrate how it owns the note and mortgage. PSAs claim notes are are sold to trusts by Mortgage Loan Purchase Agreements with accompanying Mortgage Schedule. There are several problems with this including– 1) I have never seen a validly executed MLPA — that is not just an “Intent” to sell — and properly notarized. 2) Mortgage Schedules — if available — are rarely updated to demonstrate removal from trusts by repurchase or delinquency. 3) 90 days to convey to REMIC trust – with valid execution. .
    And, according to Todd — under UCC Article 9 — possession alone is not enough — there must be conveyance in order to have possession.

    Further, trusts have been torn apart with waterfall structure dismantled. The May 2009 TILA Amendment — with accompanying Federal Reserve Opinion (now law) –demands identification of the creditor. The Opinion states that security pass-through investors are NOT the creditor. At most, certificate holders to trust may possibly be considered creditor — and those certificate holders are limited in number. By the Amendment, the creditor with the largest positional interest — must identify itself as the creditor — that is most always the security underwriter (actually parent corp.).

    But, trusts are only for current cash pass-through. If servicer does not advance cash payments, loans are “swapped-out” of the trust — via swaps or third party contract. Servicer determines when loan is deemed non-collectible — at which point servicer stops advances. Derivatives and contracts are NOT part of the trust. At this point, loan is charged-off with only collection rights remaining.

    Of course, all this assumes that loan was not in default at origination — which subprime “refinances” were. That is, by fabricated GSE default/non-compliance. . .

  12. This is specifically for Arizona and possibly for other states depending upon their state statutes and case law. The general tone of the article might be misleading in that regard.

  13. Fraud as a Business Model by Janet Ravakoli




    While what Janet writes is good, it still cracks me up that none of these write-ups ever get into the actual codes, UCC’s, FDCPA’s and all other such things related court wise. They are all about the financial pro’s playing games with themselves and yet at the bottom the American or global citizen (consumer) is fooked.

    It’s like you got all these chess boards all over the globe, and the kings, knights, bishop’s are all playing this game or create a game, and, of course, it involves the pawns. And the kings, knights, bishop’s screw-up and a few get their heads put on a pike, but the pawns get screwed and never ever get made whole again. And of course it’s all about money or credit.

  14. Massachusetts will be a pretty clean state after this is done because I think there will be no one left to screw people out of their property, yea it’s that deep……Try to sell my property off to the”highest” bidder, your going to owe me 3 times ALL the fraudulent mortgages, notes,assignments ect. And that should really “CooK” your retirement ye.

  15. so, If a slime ball “forclosure” atty tries to put a fabricated “agreement” on record that is clearly fraud due to it being pulled from a deed registry in another county no less and dated in 2004 when all the other”fabrications” were in 2007 and 2008 to try to claim property he deserves to pay up……got it!

  16. is this law similiar to the law holding that if a party purchases a Title Deed from a party who is not the owner, the purchaser has not gotten Title ?(for example from a Forged Deed)

  17. Can Neil Garfield or someone with knowledge please explain what happens when debtor files Chapter 7 after foreclosure, but before the sale and bankruptcy discharges the debt (judgment). The Bank does not file motion for relief of stay and sells the house after the discharge in the Court Clerk (Florida) to satisfy the judgment. What judgment? I thought that the Bank only had to repossess the house and put it on sale in the market. If it has a lien perfected of course.

    If someone could provide an explanation or indicate where I can learn more about this matter I would greatly apreciate it. I’ve been searching for months and can’t find an answer.

    This type of information would also help in the filing of a Quiet Title. in which the pretender lender, left only with a mortgage after chapter 7 discharge, in my opinion, should follow a different procedure to have access of the house. Unfortunately this happened to me almost two years ago and I am still fighting to get my house back.
    Thank You

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