MERS MUST OWN OBLIGATION AND THE MORTGAGE TO FORECLOSE OR ASSIGN

MOST POPULAR ARTICLES

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

EDITOR’S NOTE: If the Pretender Lenders follow true to form they will (1) have MERS execute an assignment of BOTH the Mortgage (or Deed of Trust) and the Note and (2) create some documentation that appears to give MERS the ownership of the note, leaving open the questions of whether the note was physically delivered (a necessary element of transfer of ownership) and of course whether the Note was factually a correct statement of the terms of the deal between the actual lender (investor) and the borrower (homeowner).

(Remember that the note is only evidence of the transaction. The note is NOT the “obligation” which arises by operation of law, based upon a set of facts described in common law and statutes. Failure to recognize this simple fact learned by every law student in the first year of law school results in confusing decisions from trial and appellate courts, who assume that the note IS the obligation, not merely evidence of the transaction, subject, like all evidence to cross examination and rebuttal). Using the note as the basis for proceeding with foreclosure process or pleading, lenders get the benefit of presumptions that arise in favor of the party taking or seeking the position of “lender,” but they can (and should) be rebutted by the borrower with actual facts that constitute admissible evidence.

A further factual question that will arise as litigation matures in this growing body of law, is whether even physically delivery or proper execution of documents is sufficient, given MERS express disclaimer of any interest in the obligation, note or mortgage. Absent evidence to the contrary, Such a disclaimer should (and MUST) be taken at its word, to wit: rejection of the assignment of the obligation, note or mortgage.

The mistake being made here is that the courts are accepting the assignment as being complete merely upon presentation or even recording of the document. But the assignee must accept the assignment for the transaction dubbed “transfer” or “assignment” to reach legal completion — although such acceptance might be presumed. Thus an assignment of a mortgage that is purportedly in default raises the question of whether the assignee accepted the assignment and why a reasonable person would do such a thing. The absence of consideration adds to the argument that the assignment was never completed or was a fabrication whose creation was solely for the purpose of misleading the borrower and the court. 

Several Judges have mused over this contradiction, wherein the representation is that the assignee purchased the obligation knowing it was in purportedly default, that the security was impaired (having fallen in value sometimes by as much as 70%-80%),  and the ability of the borrower to pay any deficiency is either blocked by statute or by financial circumstances that make it highly unlikely that the new “creditor” would ever see one penny. 

The explanation for this anomaly creates and even worse scenario for the pretender lender, to wit: they offer that the obligation was shown on the books as performing and that the creditor was still getting paid because of the pooling and servicing agreement and credit enhancements. Thus the transfer, they argue, was properly accepted, even if it was beyond the cutoff date set forth in the Prospectus and PSA. But you can’t pick up one end of the stick without picking up the other end as well. If the credit/investor was still getting paid, then the obligation is (a) not in default or had a default cured and (b) not in the amount cited in the affidavit of indebtedness. 

This in turn raises the additional issue that is the crux of all foreclosures: may the servicer claim that it is an interested party in the foreclosure when it was not in privity with the borrower as to the contract rights expressed in the security instrument? Payments by the servicer along with a report to the actual creditor that the loan was still a performing loan would appear to defeat any claim of default.

The ensuing foreclosure in virtually all loans where there is a claim that the loan was “Securitized” presupposes a novel legal theory: that the servicer is somehow subrogated, at least ion part, to the rights of the creditor based upon the payments made “on borrower’s behalf” without borrower’s knowledge and without notification that the obligation to the creditor/investor has been corresponding reduced and that the borrower now has two creditors where there was only one creditor before the borrower stopped paying the servicer. 

The underlying theme here is that the Pretender Lenders, having no interest in the obligation, note or mortgage are fabricating, forging documents that create the appearance of an actual bona fide transaction for value, when no value or consideration was exchanged as recognized by law and the documents were created solely for the purpose of litigation or foreclosure proceedings — often without any notice to the real creditor, and often without any authority to proceed.

The elephant in the living room is the validity of the original documentation wherein the the note and mortgage are created specifically intending to withhold information from the borrower as to the source of funds, thus depriving the borrower (and the public, once recorded) of any knowledge as to the identity of the entity who could execute a release, conveyance or satisfaction of the debt and the lien.

It is basic black letter law that in order to have a perfected lien you must have some reasonable way to identify the property secured, the terms of the debt, and the identity of the parties to the transaction. In a loan transaction, if either side uses a nominee, then the principal must be disclosed or there are legal consequences. In this case (reported below), bifurcation of the obligation and the security instrument (mortgage) results in an unenforceable mortgage (i.e., no foreclosure permitted) which is not curable without getting a signature from the homeowner/borrower reflecting the full disclosure required by both common law and statutes (including the Truth in Lending Act).

NOTABLE QUOTES FROM THE CASE:

broad language “cannot overcome the requirement that the foreclosing party be both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, at the time the action is commenced.”

although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes.” The court determined that assignment of the notes was beyond MERS’ authority as nominee. Moreover, the record failed to show that the notes were physically delivered to MERS. Thus, because BoNY “merely stepped into the shoes of MERS,” BoNY had an interest only in the mortgages — not the notes — leaving BoNY without the power to foreclose.” (E.S.)

New York Appellate Court rejects validity of loan assignments by MERS

Jonathan C. Cross Author page » Stacey Trimmer Author page »

The New York Appellate Division, Second Department, has held that a lender does not have standing to commence a foreclosure action when the lender’s assignor was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but never actually held the underlying notes. Bank of New York v. Silverberg, 926 N.Y.S.2d 532 (2d Dep’t 2011). The court’s decision casts doubt on the validity of loan assignments executed by the Mortgage Electronic Registration System (“MERS”), and has significant ramifications for the foreclosure process in New York, suggesting that foreclosing lenders may have to present substantially more robust documentation concerning the mortgage note’s history of assignment and transfer.    

The Mortgage Agreements

In October 2006, Countrywide Home Loans, Inc. (“Countrywide”) allegedly loaned $450,000 to Stephen and Frederica Silverberg (“defendants”) to purchase residential real property. The mortgage named MERS as the mortgagee for purposes of recording, but stated that the underlying promissory note was in favor of Countrywide. The mortgage stated: “’MERS holds only legal title to the rights granted by the [defendants] . . . but, if necessary to comply with law or custom,” MERS had the right to foreclose and “to take any action required of [Countrywide].” Subsequently, in April 2007, the defendants allegedly signed a second mortgage on the same property, which again named MERS as the nominee and mortgagee of Countrywide, and executed a promissory note in Countrywide’s favor. The promissory note provided that Countrywide “may transfer this Note.”

In April 2007, the defendants signed a consolidation agreement which merged the two prior notes and mortgages into one loan obligation, once more naming MERS as nominee and mortgagee of Countrywide. While the consolidation agreement named Countrywide as the lender and note holder, Countrywide was not a party to this agreement. All of these agreements were recorded in the Suffolk County, New York Clerk’s office. In December 2007, the defendants allegedly defaulted on the consolidation agreement. On April 30, 2008, MERS assigned the consolidation agreement to the Bank of New York (“BoNY”), as trustee for a mortgage securitization vehicle, through a “corrected assignment of mortgage.”

Foreclosure Action

On May 6, 2008, BoNY brought a foreclosure action against defendants. The defendants moved to dismiss the complaint for lack of standing. The trial court denied the motion to dismiss because MERS assigned the mortgages, as nominee of Countrywide, to BoNY before the foreclosure action commenced. The defendants appealed this decision and set forth several arguments as to the plaintiff’s lack of standing: (i) MERS and Countrywide did not transfer or endorse the notes described in the consolidation agreement to plaintiff, in violation of the Uniform Commercial Code; (ii) MERS never had authority to assign the mortgages; (iii) the mortgages and notes were unenforceable because they were bifurcated; and (iv) the trial court should not have considered the “corrected assignment of mortgage” because it was not authenticated.

Role of MERS

The Appellate Division first described the role of MERS in the mortgage process. Real estate mortgage participants created MERS in the 1990’s to “track ownership interests in residential mortgages.” MERS members subscribe to the MERS system for electronic processing and tracking of ownership and transfers of mortgages. As part of membership, members agree to appoint MERS as an agent for all mortgages registered with MERS. Further, in local county recording offices MERS is named the mortgagee of record. With the creation of MERS, banks were able to transfer mortgage interests more expeditiously and avoid the expense and inefficiency of recording each time a transfer occurs.

The Court’s Analysis

The Appellate Division presented the issue in the case as “whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS’s right to, or possession of, the actual underlying promissory note.” Generally, “in a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced.” The court noted that while a mortgage typically follows the assignment of a promissory note, the reverse is not true. A transfer of a mortgage does not automatically transfer the note, and the underlying debt will be a nullity if not transferred along with the mortgage.

First, the court rejected the defendants’ argument that BoNY did not own the notes and mortgages based on the failure to provide proof of recording the corrected assignment, because an assignment need not be in writing; physical delivery will also effectuate an assignment. The court then found, however, that the consolidation agreement did not give MERS authority to assign the notes. Specifically, “as ‘nominee,’ MERS’ authority was limited to only those powers which were specifically conferred to it and authorized by the lender . . . . Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes.” The court determined that assignment of the notes was beyond MERS’ authority as nominee. Moreover, the record failed to show that the notes were physically delivered to MERS. Thus, because BoNY “merely stepped into the shoes of MERS,” BoNY had an interest only in the mortgages — not the notes — leaving BoNY without the power to foreclose.

Furthermore, the court commented that its earlier decision in MERS v. Coakley, 41 N.Y.S.2d 622 (2d Dep’t 2007), holding that MERS’ standing to foreclose is limited to circumstances where MERS actually holds the note before a foreclosure action is commenced. In the BoNY case, MERS never held the note, and thus the court found that Coakley did not apply. Even though BoNY contended that the language in the first and second mortgages gave MERS the right to foreclose, the consolidation agreement superseded those mortgages. Either way, broad language “cannot overcome the requirement that the foreclosing party be both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, at the time the action is commenced.”

The court concluded that the corrected assignment was a nullity as MERS was never the lawful holder or assignee of the notes described in the consolidation agreement, and therefore did not have authority to assign the power to foreclose to plaintiff. Thus, plaintiff did not have standing to foreclose and the court granted defendants’ motion to dismiss.

Conclusion

The Appellate Division’s Silverberg decision may have broad implications for New York foreclosure practice. The decision suggests that, before commencing foreclosure proceedings, lenders must pay more careful attention to the documentation demonstrating that the entity bringing foreclosure proceedings holds the note and the mortgage in question. Where this documentation is arguably deficient, such deficiencies may often be curable, but where prior lenders in the chain of assignment have ceased to exist, or refuse to cooperate to remedy possible documentary deficiencies, the Appellate Division approach may significantly complicate efforts to foreclose on real property.

Other New York courts have upheld note assignments executed by MERS, and the Silverberg decision adds to a substantial body of conflicting authority regarding the question of MERS’ standing to bring foreclosure proceedings, and to assign mortgages and notes to entities that subsequently bring such proceedings. Compare In re Agard, 44 B.R. 231 (Bank. E.D.N.Y. 2011) (concluding that MERS lacks authority to assign mortgage notes) and LaSalle Bank N.A. v. Bouloute, 28 Misc. 3d 1227A (N.Y. Kings Co. 2010) (holding that a MERS assignee lacked standing to foreclose because MERS had limited agency powers) with Bank of New York v. Sachar, No. 0380904/2009 (N.Y. Bronx Co. 2011) (finding that MERS had broad power to assign mortgage and assignee took physical delivery of the note) and U.S. Bank v. Flynn, 27 Misc. 3d 802 (N.Y. Suffolk Co. 2010) (upholding MERS assignment of mortgage and note). Until the New York Court of Appeal, New York’s highest court, rules on these issues, the state of the law in New York concerning foreclosure standing is likely to remain unsettled.

31 Responses

  1. anyone in Va doing pro se against foreclosure?? Esp agaisnt Bank of America/ Bank of New York?
    Please email me ASAP
    Kelsunicorn34@aol.com

  2. […] MERS MUST OWN OBLIGATION AND THE MORTGAGE TO FORECLOSE OR ASSIGN Posted on September 18, 2011 by Neil Garfield […]

  3. MERS recently recorded (locally) an assignment of the mortgage to the Bank of New York Mellon (nearly 6 years after the original mortgage), but did not assign the note. From my understanding, both the mortgage and note must be assigned. How can I challenge the legitimacy of the assignment and possibly get it removed from the public record?

  4. MERS- (Virginia property) on my deed of trust says nominee and beneficiary. Foreclosed on 12/2008. Filed in county clerk office Appointment of Substitue Trustee, MERS removes trustee then appoints debt collector to be substitute trustee. Can MERS remove a trustee? what are the responsiblity of a trustee? does anyone know?

  5. How about TRANSPARENCY AND PROOF OF DEBT OWED!

  6. @anon – what part of bk reform would have made disclosing the creditor simpler?

  7. joann

    Yes — I am not an attorney. I have finance background that does not qualify me to give legal advise. And, nothing here that I say should be construed as legal advise — I have said this many times. However, been researching for years.

    The distinction here is between equitable and legal title – and, most importantly — debt collection — secured versus unsecured. Thus, it involves the “assignment” of collection rights — not NOTES as codified by the UCC (largely standard among states). .

    Courts have been in dark as to debt collection for years — thanks to Deregulation by repeal of Depression-era laws separating banking, insurance and brokerage activities (Gramm-Leach Bliley Act in 1999 – signed by Pres. Bush Sr.) and by the Commodity Futures Modernization Act of 2000 – signed by everyone’s favorite — Bill Clinton).(his good looks concealed).

    Once we had Deregulation — all records — not available. Why would any Pres. or Congress pass through such bill against the peoples rights?? They did — lobbying extreme. They thought it was good for the economy??? Do not think so — as now evidenced.

    We have few laws consumer protection laws against these monster bills — one being the FDCPA and — the TILA Amendment of May 2009 — passed by Congress — for the Congressional Intent to disclose the Creditor to homeowners/borrowers. FDCPA is tossed around in courts — but, TILA Amendment is yet to be plead in courts.

    Once someone else pays your debt — that party can hold you responsible (despite fact that they collect insurance — thus, duplicate collection). But, this is because we are dealing with debt collection — and deregulation — unsupported by divulged documentation. Problem is – joann — that debt collection to charged-off debt is NOT secured debt — should be easily able to go to BK and get discharged (or restructured if you choose). Because of deregulation, however, available information as to the current creditor and charge-off — is SIMPLY not available. So, borrowers/homeowners go into court fighting false creditor — with no published information as to the real creditor — due to, of course, deregulation.

    And, if you pay that false creditor — or negotiate with that false creditor — you still owe to the undisclosed creditor. All of which — should have — and could have been — discharged in BK.

    Congress voted down BK reform twice — which would have made disclosure of creditor easy — why??? lobbying — And, lobbying by who??? financial services debt buyers — protected identify — by DEREGULATION.

    As if Congress has not destroyed America enough — by giving away of American jobs and industry —

    Politics — donations — that is the culprit.

    And, America sits and waits to a return to normalcy. Not anytime soon. Hold onto your hats. Every 40 years — cycle.

  8. joann,

    you said: “contacting many attorneys I could not afford I realize many homeowners may be better off with no attorney than one who doesn’t get it or one who works for the other side or one who pretends he gets it but leads you down a modification – bankruptcy – you signed it didn’t you – path even if well intentioned or if uneducated about securitization and the state’s title laws or unwilling to go there for any reason.
    “This made think of a quote I heard from Randy Kelton (I think that’s the name): “Sue them–good suit, bad suit, doesn’t matter. Sue them.” I have been pro se for a year and a half now and have gotten some stunning admissions from the defendants, including that MERS never held or owned my note, and that they couldn’t assign the note, even though the assignment they filed said that it assigned the note.

    Diligent study, tenacity, and common sense will get you very far–that has been my experience to date. It ain’t the size of the dog in the fight, it’s the size of the fight in the dog. If anything, the hardest part of this has been the 2+ years of motions, interrogatories, etc. It’s like screaming into a void–no feedback, no idea how the court will ultimately rule. Just doing it anyway. I have no plans to give in now–we already told them to piss off at the settlement conference. And I’m going to appeal whatever the judge decides if it’s unfavorable to me–that’s what they’d do, after all. Because the evidence I have amassed is more than enough proof to support my allegations.

  9. This is what ANONYMOUS wrote a while back:

    “The Depositor owns the Trust — and while the Trust was performing – the Depositor, on behalf of the Trust would be the party to bring the action. However, these Trusts have now been brought back on parent corp. (to Depositor) balance sheets because the Trusts as “off-balance sheet” SPVs — have been effectively dissolved. The only tranche holders to remnants of the Trusts is the US Government or the Depositor (parent) itself. Of course, you should be preparing to demonstrate that the loan was not validly conveyed to any Trust (which they were not). Do this by requesting the Mortgage Schedule which should accompany the Mortgage Loan Purchase Agreement (MLPA) — and the MLPA cannot be an “intent” to sell — it must be validly executed and notarized (we know about those notaries). And, importantly, if MLPA and Mortgage Schedule can be proven, servicer must prove that all default payments have been paid to the trust on borrower’s behalf. If not, loan has been removed from the Trust with collection rights sold/swapped to a Third Party.”

    My Pooling And Servicing Agreement has no Mortgage Schedule and no MLPA.

  10. *******IS THERE A ATTORNEY IN CONNECTICUT AS NEIL WOULD SAY ‘GETS IT”**********\

    IM NOT INTERESTED IN A MOD IM INTERESTED IN FIGHTING BACK JUST GOT TIED UP IN THE KRAMER & KASLOW MESS NO HELP THERE……. IF YOU KNOW A ATTORNEY WHO UNDERSTANDS NEIL, WORKS IN CT OR ANYONE ONE THAT COULD HELP ME WITH MOTIONS I’M NOT AFRAID TO LEARN AND I WILL GO INTO COURT

    ATTORNEYS OR PARA LEGALS IN CONNECTICUT PLEASE CONTACT DNEILANDER@SBCGLOBAL.NET

  11. IS THERE THERE A NEIL GARFIELD ATTORNEY IN CONNECTICUT

    MEANING ONE THAT “GETS IT” PLEASE CONTACT ME DNEILANDER@SBCGLOBAL.NET

  12. zurenarth and ANONYMOUS

    zurenarth asked ANONYMOUS:

    “Can you explain this some more? This doesn’t sound right to me. If a borrower doesn’t have an agreement with a third party that advanced payments, how can the borrower be in default to that third party?”

    This is my question also. First the borrower did not sign any agreement to borrow money from the servicer or other third party or pay the money back to the servicer or other – secured or unsecured. Borrower agreed to nothing verbally or in writing. It is not on any documents they are privy to. Second, the average homeowner is completely unaware of these behind the scenes tranactions over which they have absolutly no knowledge, or control or ability to authorize or be be involved with in any way. Third if an anonymous party (no pun intended) chooses to pay my “lender” it constitutes a gift to me. Thank you very much.

    ANONYMOUS this is not a challenge – it’s a question. Actually wish you could be my attorney even if you aren’t an attorney. Can’t afford one anyway but on same page with you and Neil – and Carie – and many others – fine distinctions aside – even if important. Very hard for pro se to put it all together in a way that will be taken seriously by judge even if you can talk an attorney into a review of your pro se case and explain it all to him. Working on this though and so far so good. After contacting many attorneys I could not afford I realize many homeowners may be better off with no attorney than one who doesn’t get it or one who works for the other side or one who pretends he gets it but leads you down a modification – bankruptcy – you signed it didn’t you – path even if well intentioned or if uneducated about securitization and the state’s title laws or unwilling to go there for any reason.

    Have very detailed documentation from title co, county recorder, and all SEC securitization files and docs (my loan identified) down to the cusip. Even have current investor reports (not record of loan level servicer payments though or other loan level accounting or proof it is still in the trust – loan group is still in trust still though even though many tranches gone). More than one refinance by the same “lender” here. Paying attention to what you and others say…. The challenge is getting the judge to back up a demand for discovery of the money trail from origination. Paper chain of title should reflect the money chain of title – that is my point of view. Neither exist or will not be proven by parties who have their reasons for not disclosing it- that’s also what I now think. So let them come into court and prove it before foreclosing on my home or receiving my payments anymore. No modification is even possible by pretenders. I know I could still lose all. Time for people to take a stand.

    Has anyone even investors ever seen a sample of an actual assignment from the Depositor to a trust and what it actually says. That may be an urban legend. I would like to see one.

  13. “If you do not have a house payment to exempt your income you will not pass the means test.”

    Big deal if you don’t pass the means test. There are other ways around it. Its a test and only a test. If trustee is okay with the circumstances, then the issue is settled.

  14. @ A MAN

    Replying to your other post, the defendant will claim you have no injury for the court to get involved since your account has been credited in the past.

    get off this kind of pleading it does not work!

  15. @ A MAN,

    If you finally get a job, the judgement creditor will garnish your wages. Remember, Judgements are be renewed until paid or discharged in BK. If you do not have a house payment to exempt your income you will not pass the means test. Beware!

  16. Who’s on first???
    What?….
    seems any rules can be changed
    if you can understand all this
    I for one shake your hand…

    I can not.

  17. @Tim Yeah they can get attorneys fees from who? From somebody who just lost everything?

  18. @Tim this is not a future issue this is a past issue. Where did my payments go? Am I paying off my loan or am I paying off somebody elses loan. I can not sell my home if I do not know who my creditor is? I can not plan my present or my future. This is also an IRS issue? What are my deductions on interest? etc…… There are multiple present issues involved.

    Be Strong and Courageous.

  19. @ A MAN

    You will have your lawsuit quickly dismissed since the courts will not (in their words) waist “judicial resources on possibly future problems.” Then, you will face the defendant’s motion for attorney fee’s.

  20. This can then apply with people who are underwater and are current on their loans.

    And yes your honor I have been sending QWR etc.. for the past few years and not getting answers. Which is against the law.

    AGAIN A REAL ESTATE ATTORNEY AND GOOD TITLE COMPANY (WE CAN HIRE OUR OWN TITLE COMPANIES) CAN DO THE RESEARCH AND PROVE THAT THE CHAIN OF TITLE IS BROKEN OR LUMINAQ)

    NEVER AGAIN

  21. The Bottom line Where are my payments going? or Where did my Downpayment and past payments go? If the chain of title and note are unknown so how do I know my payments are going to the right place? How do I know that when I make my last payment I will get clear title.

    This is why the Creditor is the only one who could initiate a foreclosure.

    This should be the only issue in a lawsuit.

    I am not an attorney and the technical issues should be dealt with by an attorney. This is my opinion.

    NEVER AGAIN

    IF THE ONLY WAY TO GET QUIET TITLE IS TO PAY OFF THE LOAN THEN THERE SHOULD BE A BOND POSTED BY THE BORROWER THAT SHOULD TAKE CARE OF THE ISSUE.

  22. […] Livinglies’s Weblog Filed Under: Foreclosure Law News, Foreclosure News Tagged With: crisis, foreclosure, […]

  23. QUOTE From Mr. Garfields Text-

    “The elephant in the living room is the validity of the original documentation wherein the the note and mortgage are created specifically intending to withhold information from the borrower as to the source of funds, thus depriving the borrower (and the public, once recorded) of any knowledge as to the identity of the entity who could execute a release, conveyance or satisfaction of the debt and the lien.”

    If a Loan Servicer tells you in writing…8 different times…there are 6 different names of the claimed owner of your loan, which are all differnt legal entitites, not related, is NEGLIGENCE on there part and or Intentional Misrepresentation…How can a borrower know who they can negotiate with.

    WHAT CLAIMS COULD BE MADE IN A LAWSUIT?

  24. zurenarrh

    You are correct -with any debt collection — if the creditor is not identified (original to current) — you do not owe the debt to anyone. . Cannot pay anyone you do not owe. Cannot not emphasize enough — if wrong party is identified– you are never credited for paying — money just goes into a “Rabbit Hole.” And, with subprime refinance — these were just mods of already classified (default) debt — thus, not Notes at — unsecured. In fact, with any charge-off — unsecured debt.

    Reading testimony from former default service processor in NJ — in Re Mortgage Foreclosures (March testimony) — as soon as “loan” goes into default — the servicer outsources to a default servicer. Thus, no servicer can even testify to information — hearsay — and, default servicer testimony is also hearsay — because where did they get info from? Do you really think default servicer advanced any payments?? NO.

    The most you get from any debt collection is who THEY think is the original creditor — (not necessarily the original creditor – as you state) — but, you will get no where near as to identify of the current creditor. Fannie does not operate as a trustee — Fannie may have been an “investor” — but questionable — as to current creditor. Although Fannie/Freddie may currently be having trouble disposing of charge-off collection rights — due to volume and market crisis — F/F easily did so in past.

  25. @marie – it kind of does, but you have to get into court first. that’s the issue in non-judicial – you have to bring the bank into court rather than the other way around. the other issue you suggest is that it doesn’t necessarily apply outside of the jurisdiction of where the case was heard. be careful – too often cases are discussed without a disclaimer that they really only apply within their own states

  26. From ANONYMOUS—re. Brian Davies case:

    “Brian Davies attorneys claim 2 “facts” that are simply not correct — 1) that somehow “investors” funded the mortgage loan and 2) that if someone else is making payments on the loan the borrower is not in default.

    First, “certificate purchasers” are the banks themselves (security underwriters), and they only purchase a “pro-rata” share to a “pool” of cash flows —- that is all — they are NOT the mortgagee/creditor—the trust is assigned the loans from which the pass-through cash flows are derived—it is the DEPOSITOR (subsidiary), that owns the collections rights (they are not mortgage loans), and the Trust itself. The “certificate purchasers” (the bank security underwriters (another subsidiary) themselves) then repackage the certificates to “pro-rata” cash flows into CDOs that are marketed to security investors — who are also never the mortgagee/creditor. According to all PSAs — there must be a documented valid sale of the “loans”, with supporting Mortgage Schedule to the Depositor in order for any Trust to be valid. There was never any valid sale of loans — and the loans were never actually loans — they were collection rights.

    Second, since the “loan” refinances (subprime/alt-a), and jumbo new purchases were non-compliant and non-performing manufactured defaults, no funding at all was necessary (except for the cash-out for the loans). The warehouse lines of credit never actually transferred any actual cash for funding. These lines of credit were simply “credit lines” that the “Depositor” would provide to their correspondent lenders. Once the “loan” refinance origination was completed the Depositor would then reverse the “credit” owed by the correspondent (originator). This never involved any actual deposit of cash proceeds —- the “funding” payoff check is never “deposited” into any bank account. The check is routed to a security derivative clearing house — who then simply cancels the credit-line transaction.

    Third, it is not productive to state that since someone else was actually making payments on the “loan”, “albeit” not the borrower, that the loan is not in default. Courts do not care about this — they only care if the borrower is in default. However, if the actual party does not come forward claiming that the debt is owed to them, and the actual party cannot prove how they came to own the collection rights — borrower does not owe the debt to anyone. That party is never going to able to demonstrate that collection rights belong to them because they would have to divulge the above fraudulent process and that the “mortgage loan” from onset was not a mortgage but, instead, collection rights. This admission would also mean that the “debt” is unsecured and can be discharged in BK.”

  27. ANONYMOUS,
    You said: “When anyone advances payments on another party’s behalf — this does NOT mean the borrower is not in default –they are in default to the party that advanced the payments.”

    Can you explain this some more? This doesn’t sound right to me. If a borrower doesn’t have an agreement with a third party that advanced payments, how can the borrower be in default to that third party? I am facing this situation with Fannie Mae–they tell investors in their prospectuses that they will advance payment even if the borrowers don’t pay. This is not agreement between me and security investors, this is an agreement between Fannie Mae and security investors. Neil has talked about this before, mentioning that when such payments are promised, the trustee of the trust–i.e., Fannie Mae in this case–becomes an undisclosed (to the borrower) co-obligor on the receivable.

    To me, this is the “crux of the biscuit”: the security investors would likely not have bought MBS in the volume and with the fervor they did had they not been assured that they’d be paid whether borrowers made payments or not. However, in my note, I didn’t “promise to pay” anyone but the Noteholder–the party who has taken the note by transfer AND is entitled to receive payments due under the note. In my mind, if Fannie is the party that has taken the note by transfer while the security investors are entitled to receive the payments due, then neither Fannie nor the security investors are the Note holder as defined in the note.

    So how am I responsible to pay back Fannie Mae for money they may have advanced without my consent or knowledge? Can Fannie Mae bind me to a contract to which I am not a party? Fannie would of course say they could–they say that anything they do is legal, even when it clearly isn’t. The attorney for Fannie Mae asked me why I shouldn’t have to pay Fannie back if they essentially made my payments for me. I told him because I was not a party to that agreement, that Fannie decided to that all on their own.

  28. Well Neil — hats off to you — you are getting closer and closer. And, you now understand that “security investors” are not the creditor — and that is despite whether or not servicer advanced payments to securities trustee.

    But, your “Catch 22” scenario — is right on point — did servicer advance payments or not? Only ledgers will tell — and both servicers and securities trustees MUST have those ledgers. Because if they did not advance as required by PSA — then the “security investor” argument as creditor is immediately quashed — even without application of TILA Amendment as to defined Creditor. If they did advance — then loan not in default — but then have to apply — security investors are not the creditor. When anyone advances payments on another party’s behalf — this does NOT mean the borrower is not in default –they are in default to the party that advanced the payments. Of course, servicers rarely act on their own behalf — they act on behalf of someone else — the current “investor/creditor.” — And, that is why the creditor definition must be introduced.

    Courts that continue to apply antiquated law to subprime securitization — otherwise called — the advent of fraud — are simply not “educated.” They need to educated. And, if not plead properly — court will “simplify” for its own convenience. .

    Now — why the need for such secrecy at closings and by MERS as “nominee.” A reason for this — and that is why you have to have all “loan” accounting prior to the “refinance” in question. Due to passage of time and discovery difficulties —this can be a problem ascertaining — but, not impossible — and is definitely — available. .
    Once you get this Neil — you will have nailed it.

    FRAUD — BEGETS Fraud .

  29. None of this applies in nonjudicial jurisdictions

    In Virginia ANYONE in possession of the note endorsed in blank can enforce it. Assignments are irrelevant as the mortgage follows the note. That’s what the “growing body of law” says in Virginia.

    This law of one state doesn’t help in nonjudicial states, where, as in Virginia, the legal trend is reactionary and totally creditor friendly

  30. Re: NeedCaseLaw:

    Sorry, you’re dead wrong. Read Carpenter v. Longan 83 U.S. 271(1872) and the myriad of other cases since. The “note” is mere evidence of the debt…not THE debt.

    “The mortgage can have no separate existence. When the note is paid the mortgage expires. It cannot survive for a moment the debt which the note represents. This dependent and incidental relation is the controlling consideration, and takes the case out of the rule applied to choses in action, where no such relation of dependence exists. Accessorium non ducit, sequitur principale.”

  31. There is a serious mis-statement in the above: ” The court noted that while a mortgage typically follows the assignment of a promissory note, the reverse is not true. A transfer of a mortgage does not automatically transfer the note, and the underlying debt will be a nullity if not transferred along with the mortgage.” This is not what the court said and not true: the debt will stand on its own merits; what becomes a nullity is the security – the mortgage or deed of trust.

Leave a Reply

%d bloggers like this: