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Eaton – Dividing the Mortgage Loan and Affirming the Consequent

by Gregory M Lemelson

Background: A post Ibanez world

In January the Massachusetts supreme judicial court held in US Bank National Association vs. Antonio Ibanez that a note holder may not foreclose on a property in order to redeem a debt, if they are not also the holder of a valid mortgage (that is to say also with a valid assignment). We outlined the details of this case and its implications in our article “Ibanez – Denying the Antecedent, Suppressing the Evidence and one big fat Red Herring” on January 11th, 2011.

The issue before the SJC in Henrietta Eaton v. Federal National Mortgage Association and Green Tree Servicing, LLC is whether the assignee of a mortgage security alone (fraudulent assignments aside), without any direct or indirect interest in or claim to the underlying debt, can seek to recover the debt through foreclosure.

Oral arguments in the case were heard on Oct. 3rd, 2011.

It is important to note that in Ibanez, the SJC was not willing to overturn long standing legal principles simply because of recent “innovation” in the way banks chose to record their security interest in real property (e.g. MERS), or because of the extraordinary liability such a ruling would have on what basically amounted to four years of mostly illegal foreclosure activity in the Commonwealth.

The Ibanez article published last January predated Eaton by some ten months, and since the SJC reviewed Eaton “sua sponte”, there was no way to know at the time, that Eaton would make it all the way to the SJC, so the following comments taken from the article are perhaps prescient:

” It is possible that from the banks perspective an invalid assignment of the note is the more serious concern for the following reasons:

1. Without first having proper ownership of the debt, the bank can not initiate any collection activity, let alone foreclosure.

2. Notes (ownership of the debt asset), may be subject to further contention in bankruptcy proceedings where many creditors have a vested interest in the assets of a defunct mortgage lender, particularly since these notes are often sold in bankruptcy for a fraction of their face value.

3. The trusts that are supposed to contain the validly conveyed notes will in fact, not actually contain them (because they are not bearer paper), thus violating the representations and warranties made to investors who purchase these securities. Therefore, it is unsecured debt, and potentially, no debt at all upon which to collect payments.

6. Even if the notes obtain a valid conveyance, or confirmation of conveyance at a later date, it is still may be impossible to place them into the MBS’s:

a. It will have been longer than 90 days (the typical expiry period to transfer assets into the trust)

b. If it is a foreclosure matter, the loan is in default (the PSA’s do not allow for the addition of defaulted loans)

c. Any effort on the part of the trust to insert old or defaulted loans would jeopardize the trusts favorable REMIC status – thus further harming already impaired returns.”

As pointed out in the Ibanez article, clear title to the property is important. If the assignment of the mortgage is invalid, then there is a “cloud on title”. The banks recognizing this, brought Ibanez before the land court of their own volition in order to clear this “cloud on title”. One of the key mistakes counsel for Eaton made, perhaps in their effort to establish the more serious problem of legitimate possession of the note, was overlooking the validity of the Mortgage assignment, (still incredibly important) which, as with most securitized loans, was so clearly fraudulent (see Amicus brief of Marie McDonnell). Incidentally, this was of particular interest to the court during oral arguments, however, because the issue was never raised by Eaton’s counsel in its complaint, it could not be addressed by the court. Thus the opportunity to cite the authority of Crowley v. Adams 22 Mass. 582 (1917) which concerned the fraudulent conveyance of a mortgage without a note, was lost. Within the context of discussing the assignees knowledge of the fraud, the court held:

“[the assignee] should be held to have known as to each transaction, the possession of the note was essential to an enforceable mortgage, without which neither mortgage could be effectively foreclosed.” Id. at 585.

This was a error on the part of counsel, and eliminated a potential fifth source of authority in Eaton, as we wrote in January:

“1. If there must be a perfected interest in the mortgage (according to MA law) at the time of foreclosure, then how many foreclosures have taken place in Massachusetts with the same profile as Ibanez, and are thus invalid?

2. Clear title is important – In the statement of the case, the banks actually brought the complaint before the land court as independent actions in order to “remove a cloud on the title” – thus the banks recognize that such defects are a problem for future conveyance. All MA homeowners should be worried about the same (discussed further below).

3. To foreclose on a mortgage securing property in the commonwealth, one must be the holder of the mortgage. To be the holder of the mortgage, the bank must:

a. Be the original mortgagee

b. Be an assignee under a valid assignment of the mortgage

c. It is not sufficient to possess the mortgagor’s promissory note (bearer paper). Apparently most if not all securitized mortgages were endorsed in “blank”, in other words to the bearer.

4. The notice requirements set forth in G.L.c. 244, ss 14 unequivocally requires that the foreclosure notice must identify the present holder of the mortgage. This likely was not the case in past foreclosures in MA. For future foreclosure actions the question is can the real mortgage holder be found and will they cooperate in assigning the security interest?

5. Assignees of a mortgage must hold a written statement conveying the mortgage that satisfied the statute of Frauds or even the most basic elements of contractual requirements.

AG Coakley acknowledges that “the securitization regime was required to conform to state law prior to foreclosing, to ensure simply that legal ownership ‘caught up’ in order that the creditor foreclose legally in MA. The lenders, trustees and servicers could have done this, but apparently elected not to, perhaps on a ‘Massive Scale’ “Saying that they “could have done this” within the context of MA law is one thing, within the context of IRS tax code, or NY trust law, is another.”

Further the article points out that a holder of the mortgage without the note, really only holds the security instrument in trust for the debt holder (thus anticipating Eaton), as pointed out in the following taken from the Ibanez article:

“4. The holder of the mortgage holds the mortgage in trust for the purchaser of the note, who has an equitable right to obtain an assignment of the mortgage, which may be accomplished by filing an action in court and obtaining an equitable order of assignment. If the average MBS has 5,000 notes for example, then we have to assume 5000 separate actions would have to be filed in court to ensure they are truly “Mortgage Backed Securities”, and that is only if the REMIC status isn’t jeopardized by such a revelation or action.”

However, the impasse for banks is the fact, that even if the court recognizes the authority of MERS to assign the mortgage to the foreclosing entity (usually the servicer), the following conditions still must be met:

a) The assignment must still be a valid assignment (most are not)

b) There must also be a valid assignment of the note to establish who exactly owns the debt.

The vast majority of these loans were sold into securitization trusts and are merely endorsed “in blank” (if they can even be found in the trust at all). Most schedules attached to the trust documents include little or no information on the details of the particular loans (as was the case in Ibanez), or sometimes include the address of particular properties, but no information on the barrowers, or curiously the loan amounts. Other failures include post-dated or otherwise invalid notarizations, and fraudulent signatures etc., which are all suggestive of fraud.

Given this, to speak of Eaton merely as a question over the validity of MERS and its assignments is incorrect. Even if Eaton is not affirmed by the SJC, the issue of validly conveyed notes, remains of vital importance.

That having been said, we believe the Appellants chances of prevailing are precisely zero, or maybe less. Taken together with Ibanez, this means serious problems for the bond holders in these securitization trusts and their bank administrators. With all the nuance of every day speak we could muster, we think it is put best by saying just; some of the debt-servants might escape. That isn’t to say that all measures won’t be taken to try to prevent this outcome.


On contemporary Pheronic thinking and the Pyramids that debt-servants build

We believe that this situation lends itself to the possibility of violence, as tragic an outcome as that is and would be. On June 3rd, 2011 we published our follow up to the Ibanez article entitled simply “On the ethics of mortgage loan default“. Four days later, the Essex county registrar of deeds John O’Brian, who we quote in the article, stopped recording fraudulent mortgage assignments (which many if not most are). It seems logical that this would be a “wake-up” call to the average homeowner, particularly since other registrars are prepared to follow suit. With the registrar’s decision, it has become a fact that title may no longer be recordable and ownership is in question.  As it turns out, the homeowner who faithfully sends in monthly mortgage payments for years or decades (in an effort to “do the right thing”), may have no more clear ownership rights in the related property than a perfect stranger.

As the article “On the ethics of mortgage loan default” spread throughout the Internet with countless links and references, we were surprised to find comments that included (not unlike the allegory of the cave) the desire that the author “be shot“. We were equally surprised when the Hacktivist group “Anonymous” (which was not our target audience either) featured the article prominently in several of their sites.

shadows_on_the_wall_3It has been said “the rich rules over the poor, and the borrower is servant to the lender”. Perhaps in our Naiveté, we did not understand the sensitivity around the suggestion that a servant might want to be free one day. Nor did we recognize that the powerful human inclination to denial might elicit more than just a passive reaction.  Like the prisoner who is freed from the caveand comes to understand that the shadows on the wall do not make up reality at all – later puts their life in danger from those who remain in the cave. Yet, the source of the light is truth and intelligence and those who would act prudently must see it.

These implications give rise to powerful questions in the current context. One such question regards the difference between a debt and a moral obligation? Why do we confuse the two so often in our society? Such that those who seek forgiveness of debt, are made to feel as if they are violating a moral code, or a cultural taboo? Perhaps the explanation lies in a more clear definition of the two. A moral obligation is something that can be forgiven with some flexibility, there is hardly exactness involved.

A monetary debt on the other hand can be calculated with the accuracy and immutability of math and the relatedscience of accounting, and grown with the power of compounded interest, and therefore, in proper monetary debt, exist the possibility of subjugation in perpetuity, or at least for the entire natural life of the debtor.

Oddly, our society adds insult to injury in this failing of human civilization, and as if this dreadful revelation were not enough, adds on top of these accurately calculated and compounded financial obligations, the fallacy of a moral obligation, and in so doing the debt-servant is made to feel guilt regarding his moral character as well as his failure to pay.

When this sleight of hand is wedded to exhaustion (a pre-existing condition of many debt-servants), the odds of one actually fighting back against such a system, corrupt though it may be, are only minute. It must have been a genius who figured out that slavery with chains is inefficient. If a human could be conditioned to believe he is a free man, when he is not, and that already disillusioned he might be convinced that he is also a rich man, when he is not, then chains and their related complications are wholly unnecessary. All that is necessary then is to lower his idea of freedom and wealth substantially, and provide him with cut-rate imitations.

Under these circumstances, the average man would in fact work extraordinary hours, even if his paycheck was essentially diminished to less than zero by his existing debts (thus requiring him to take on new ones), and if by chance he was able to save, those funds too would be safely transferred to the hands of strangers (through “innovations” such as 401K’s, which could be convenient deducted from his paycheck electronically and instantly). These strangers are there to help the debt-servant loose what meager savings might be possible through sub-par investments (like internet stocks) which he never understood, but which is broker was always paid for trading.

Notably, this shell game can never be revealed to a debt-servant, because then he would understand that he is not really a free man, even though the real law is “…not on tablets of stone but on tablets of human hearts”, and yet this inclination of the heart is often resisted, even with violence. Nonetheless, In this law of the heart lies “a desire” which is so great that it over powers all other human constructs, including offensive debts.

In this respect, surely a few folks in Europe must have believed that the entire trade in chained slaves made the United States look like an economically and operationally primitive bunch – for the cost of that variety of servant is actually much higher, and had a far smaller pool of candidates, namely those with a particular tint to their skin. Yet, telling someone that they are inferior based merely on the color of their skin is a hard sell year after year. Conversely, telling someone they are free, when they have never tasted real freedom because they were born into debt, is easier to maintain, because it deals with more subtle issues, and the likelihood of confusion with moral obligation, and exploits the power of human denial.

The earliest evidence regarding market places and trade indicate that if you have something to sell that is of far lesser value than you are indicating, than it is wise to have the greatest physical distance possible between yourself and your counterpart – for in such a trade lies the inherent possibility of a violent reaction to the discovery on the part of the unsuspecting buyer, particularly when accurate accounts of credit and debt are kept and ruthlessly enforced. Some of the oldest recorded documents in history are of this variety; they are surprisingly, accounts of credit and debt. Perhaps human history is really a history of subjugation then. Cultural anthropologists are quite familiar with this idea of credit and debt in (even ancient) market places. It’s an old story. However, Americans are bread as consumers, not as economic or cultural anthropologist, because in that knowledge rests power, and power, by definition must belong to a coterie. For the greater the number of those subdued, the greater the power of the few who would subdue, just as with money, power deals only in transfers.

That is why the average American home owner is not allowed to have the true owner of their mortgage debts revealed – they are the counter party to an impolite deal. In these trades great profits were made, and in the pricing of the assets, great misrepresentations regarding intrinsic value. Wealth destruction therefore is a misleading expression in describing what happened; the accurate term is wealth transfer. During the housing “Pyramid” (this term is far more accurate than “bubble”, because it accurately describes an order) one of the greatest logical errors of all time was sold; that the intrinsic value of a home, which had within it the possibility of calculating (accurately) fair price was tied instead to a hyper speculative measure, that which is inherently impossible to price with any degree of accuracy, and which is immaterial; our notion of an ideal. As one might imagine, no price is too high to live an “ideal” – think of it as a seller’s paradise. After, a difficult stock market collapse, and an even more difficult terrorist attack, why would anyone be interested in mere stocks or bonds? After all the very place where these electronic slips are traded was very nearly destroyed. This new investment was allegedly concrete, and also patriotic. Americans were led to believe they had “…discovered a pearl of great value”, the only security whose price could never go down – it was like a “Dream”, like an “American Dream”.

However, when loan documents were to be signed a new broker suddenly appeared.  Without any forewarning, with a name that was not before heard, or with anyone who had actually seen him, or understood how he operated, he made a subtle but powerful arrival on the scene. His name is Mr. MERS, and he instituted even greater secrecy than stock brokers and fund managers. Few have seen his physical appearance, or pulled back the curtain, it’s uninteresting anyways, because Mr. MERS is nothing more than a relational database, which only a very small fraction of the world’s population have access to (even democratically elected bodies, such as county recorders have no such access). He brokers the movements of trillions of dollars in capital. He is a construct of your trading partner, and because of his existence, you can never have a “level playing field”, or hope of a fair trade. In this brave new world, the requisite distance that precedes a bad trade, is no longer a measure of geography, it is a piece of software.

With this surreptitious matrix of relational database fields safely in place, how are all those houses, like so many stone blocks cut by ancient hands, turned into a pyramid? The answer seems self-evident; through a pyramid scheme naturally.

How would a contemporary mass exodus from such bondage look? Just as Fannie Mae and Green Tree divided the essential components of their security, It might look like ordinary debt-servants parting and dividing a sea of concrete, and traversing the depth of high rise buildings in New York, just as “by faith the people passed through the Red Sea as on dry land”.

The people in New York are criticized for their lack of direction, the fact that they appear to be lost in a veritable desert – but they are free, and in their hearts live an almost child-like innocence that we should desire to have. After all, their predecessors spent a good deal more time lost, and through it discovered a greater revelation, one that would lay the foundation to ultimate answers.

The popular accounts promulgated by Adam Smith and the contemporary science of modern economics as we were made to understand them, rely on more than one myth regarding the engineering of debt, and its related instrument – money. These underlying misrepresentations give rise to the possibility of great abuses, for the very nature of trade, and all else which rests upon it is thus misunderstood.

There are many reasons to despair over the future of our fragile state in the US today. However, the Massachusetts Supreme Judicial Court is not one of those reasons. By upholding the rule of law, and observing the incredibly important, and notably democratic foundations of land recording practice in the commonwealth they serve as a beacon for the rest of the country to follow and impart hope. This comes at a time when such hope is in scarce supply. If it is God’s will, than the light of wisdom handed down from prior ages on this point will shine through the darkness that has been created by corrupt forces. We can only hope.


A Road Map for Homeowners: Four Authoritative Guidelines

In Massachusetts law there exists four authoritative guidelines by which property may be foreclosed upon in order to redeem a debt (Five if Crowley v. Adams is included from above). Incidentally division is not a problem for these four authorities, for they stand equally well alone as they do in combination as requirements to validly exercise the power of sale of real property. Both the spirit and the letter of these sources are echoed in laws of other states, and as such can be taken as fundamentally universal. They are as follows:


The Common Law and the problem of Division

In Summary Eaton dealt with the following three realities of long standing Massachusetts law:

1. The assignee of a mortgage with no claim to the underlying debt cannot foreclose.

2. A mortgage separated from the debt it secures has no value in and of itself; it can only be held in trust for the note holder (naked title)

3. The trust relationship implied for the benefit of the note holder does not empower a mortgage assignee to foreclose as a “fiduciary” at any time.

It should be offensive even to the casual observer that in the case of Eaton, as would be the case for most home owners today, a valid promissory note memorializing the debt was and is missing. Who held it at the time of the foreclosure, how they obtained it, and what relationship they had if any to the appellants was and is still unknown.

Although a photo copy of the note was produced with the typical “endorsement in blank” markings, the appellants provided no document or other information indicating when the note was endorsed or who held it either then or now. The required assignments between intermediaries were never produced. Interestingly neither of the defending entities offered any testimony or other evidence in either court action to resolve these all important questions or otherwise identify the holder of the note. However, they did concede, that it was not the foreclosing entity Green Tree, LLC.

Conceivably this is because they do not know, and they do not want to know, and maybe they would even like to forget. Perhaps the note it is evidence.

Not surprisingly counsel for the appellants, despite this revelation, argued that the whereabouts and history of the promissory note was “irrelevant” and that they were entitled to foreclose nonetheless.

After a careful review of the full history of the mortgage foreclosure law in Massachusetts, as well as the related statutes and appellate decisions, The Superior court didn’t exactly see it that way – determining that no decision had ever overturned the established common law rule that a mortgage assignee must hold the note in order to enforce it through foreclosure.

Needless to say, this is of great concern to the banks, as predicted in the Ibanez article (cited above). Given the audacity of their claims, we believe it is reasonable to assume these folks would, if given the opportunity “send an orphan into slavery or sell a friend”. It has been difficult and time consuming to discover that notes were sold multiple times into multiple trust, thus creating a out-and-out pyramid of securities, upon which even more derivatives could be sold. However, something even more simple and obvious has been taking place in broad daylight, something peculiar that has been overlooked – the awkward problem of entire houses being stolen, by folks who have categorically no financial interest or otherwise is the properties.

Since this is the direct opposite of “The American Dream”, possibly the moniker “the American Nightmare” is appropriate.

Taking a step back, it is awful to consider that GreenTree, LLC had no interest in the debt, no interest in holding the property pre or post foreclosure, and had no material interest in the entire affair whatsoever, and yet they were the entity which sought to foreclose (or steal). Does it not appear as Les Trois Perdants with GreenTree, LLC acting as a shill?

For centuries promissory notes and the mortgages securing their repayment were held or assigned together. The separation of these two instruments, until recently was an anomaly and exception. Albeit no longer an anomaly, but rather the general business practice of approximately the last ten years, the SJC reaffirmed in Ibanez, that a trust implied by operation of law gave the note holder the right to sue to obtain an equitable assignment of the mortgage(U.S. Bank v. Ibanez, 458 Mass. 637 (2011) – which implies surprising possibilities (e.g. every note allegedly held in every securitized pool, would have an individual and related suit to perfect it’s claim). Implications aside, the court’s ruling established nonetheless a method by which the note holder (the person to whom the debt is owed) could be empowered to collect payment.

Incidentally, long before the bifurcation of the notes and mortgages was ubiquitous, this operation of law was periodically challenged by mortgage assignees who believed that they, as “mortgagees” could simply foreclose in their own names. However, since the 19th century, and as pointed out above, the SJC has ruled otherwise. In a series of decisions it articulated the rule that a mortgagee who has no interest in the debt underlying the note cannot conduct a foreclosure, insisting instead that that right is reserved for a holder of a valid note along with a valid mortgage.

Green Tree, LLC and their Government handlers suggest that the parts of the whole, when taken independently have the properties of the whole. That is to say in this case, that since the mortgage contains the power to foreclose, the mortgage must have with it all the powers of the note – this proposition is patently wrong, and is the fallacy of Division. The instruments may function properly together, but have incomplete authority independently – and that is exactly what long standing statute (as outlined below) has upheld.

In Summary, Ibanez brought to light that banks holding only notes have only an unsecured debt – that is to say one that could be negotiated like any other. Eaton, on the other hand brings to our attention something of far greater importance; namely that a holder of a mortgage alone (even if validly assigned), without proper ownership of the underlying debt, has in fact nothing.

Call us speculators, but if SJC affirms the lower court’s decision we have a funny feeling more than one banks share price might be adversely affected.

In the end, suggesting independent authority of the mortgage, regardless of any concern for the note or the debt is just a bad argument – it’s not only “Division” it is also a great candidate for the “Non Sequitur” argument of the year award.


GreenTree, LLC – Affirming the Consequent

A thorough discussion of Massachusetts foreclosure law can be found in Howe v. Wilder, 77 Mass. 267 (1858). which resolved a foreclosure dispute by holding that a mortgagee, without the note, could not foreclose on the mortgage.

The court goes on to elaborate that because the party who would otherwise seek to foreclose was owed no debt, he cannot recover possession:

“For in pursuing such a suit [the party] has only the rights of a mortgagee, and is limited by the restriction imposed upon him…if nothing is found due to the plaintiff, it follows by necessary implication, from the provisions of the statute, that he can recover no judgment at all; none to have possession at common law, because that is expressly prohibited; and none under the statute, because where there is no condition to be performed, there can be no failure of performance, and no consequences can follow a contingency which in nature of things can never occur.”

Suggesting that by being an assignee of the mortgage, encompasses the right to foreclose is simply “Affirming the Consequent” and is just another logical fallacy.


MGL 244 § 14 and the Straw Man

Bifurcating the note and the mortgage was an extraordinary circumstance when the legislature decided the subject laws. At the time these laws were ameliorated there was no reason to explicitly delineate between the debt and the mortgage instrument securing it. To argue, as Green Tree has, that the term “Mortgagee” as used in MGL 244 § 14 means also “naked mortgagee”, (a mortgage holder not having any interest in the underlying debt) is a “Straw Man“. This suggestion overlooks the historical context in which the law was authored, the rise of the mortgage securitization industry, its related practices and the compulsory changes to recording which has taken place over the last decade. It is to overlook the privatization of land records that (as far as we know), no elected official or law maker had blessed beforehand.

If Green Tree’s argument were accurate, they would not assign the mortgages to third party servicers at all, and rather continue to foreclose in MERS name (more efficient) as had been the practice until several states supreme courts ruled against it, citing the fact that MERS had no economic interest in the mortgage, which is “but an incident to the note” or “a mere technical interest” (Wolcott v. Winchester) – this of course reaffirms the spirit of the law which Henrietta Eaton asserts in her complaint.

In particular the court stated that the assignee of a “naked Mortgage”:

“…must have known that the possession of the debt was essential to an effective mortgage, and that without it he could not maintain an action to foreclose the mortgage.” Wolcott v. Winchester, 81 Mass. 462 (1860)

Despite all of this, the bright idea of the securitization industry was to simply transfer the mortgage instrument to the servicer – a related party, sort of.

If Eaton is not affirmed by the SJC, we might as well make Three Card Monte our national pastime and get rid of baseball altogether. In such a scenario handicapping the future of the US economy and the ability to affectively and profitably speculate in the CDS market will be “duck soup”.


The authority of the UCC codified at G.L.c. 106

Because the common law involves a great deal of common sense, it just so happens to be mirrored in the Uniform Commercial Code. In particular G.L.c. 106. Article 3 of the UCC governs the negotiation and enforcement of negotiable instruments, including promissory notes secured by mortgages. Section 3-301, like the common law, provides that one must hold a (valid) note in order to validly enforce it. This rule serves the purpose of protecting consumers and barrowers against the very real possibility of double liability created when a debt is enforced. As in the current matter, Green Tree, LLC or any other mere mortgagee (even if they could get a valid assignment), would have no power or authority to discharge the actual debt. Thus if the operation of law were in any other capacity than it currently is, the mortgagee could foreclose on a property, while the debtor would still be left with a valid debt outstanding to an entirely unrelated party.

This lends itself to the requirement for transparency. During the oral arguments before the SJC, one justice asked why it mattered if the homeowner knew to whom they owed their debt. The answer is that homeowners have an important role to play in the outcome of the final settlement and discharge of their debt, and are above all the most interested party in ensuring that their payments are in fact reducing the outstanding principle balance as they are made. Otherwise, they may as well be directed to make their payments to any random stranger. It is absurd to suggest that a debtor be required to simply make payments to anybody who asks for it. That is to suggest that he is not only a debtor-servant, but also a mindless sheep – then again, perhaps that is the desired outcome.

In fact the entire matter may only be possible in a non-judicial foreclosure state, for if it were a civil complaint for the collection of an amount due, than would the debt instrument itself not be scrutinized as a first priority in the proceedings? Perhaps small unimportant questions like who actually owns the debt and is bringing the action would be relevant under such circumstances.


The authority of loan contracts

In the end, the entire action by Fannie Mae and Green Tree, violates the very contract which is being disputed. Even if no other statues or laws had operated or ever existed, Eaton’s argument would survive on this one point alone – and Eaton is not unaccompanied – she stands with some 60 million other homeowners in the US with virtually identical contracts.

In the case of Eaton standard mortgage loan documents were used, and they essentially all look alike. The terms of Eaton’s mortgage contract, as with virtually all others, authorizes only the note holder to exercise the power of sale. The one concession Green Tree, LLC made was that they are not the note holder and have neither argued, nor provided evidentiary support for the claim, that a foreclosure by anyone other than the note holder was necessary (not that it would be possible).


A bitter Fruit: Double Liability

It has been said, “By their fruit you will recognize them. Do people pick grapes from thorn bushes, or figs from thistles?”. No, because “every good tree bears good fruit, but a bad tree bears bad fruit” . Is Green Tree’s lawyer actually advocating that homeowners should just rely on the banks and servicers to be “nice guys” and not go after the debtors twice? It is already known that certain elements in the industry were willing to sell the same note multiple times into multiple pools which given Burnett v. Pratt, 39 Mass. 556 (1839), presents interesting problems for RMBSinvestors, who were essentially their business partners. If the architects of these systems can sell the same note twice, to their own business partners and customers, why would they not try to also collect twice from their debt-servants, who rank many orders below business partners and real customers?

If the severity of compound interest is not enough, the result may be plan “B” – “doubling up” where needed.

If the fact that being named on a valid mortgage is not sufficient to authorize a foreclosure, than automatically the question becomes who holds the note? The answer to the latter question is a bit more serious, for in the answer lies a good deal more than the banks would like to reveal.

Does greed have rational limits? It does not and it cannot because greed is not rational to begin with. Since nobody knows how the foreclosing mortgagee would actually go about paying the note holder, are homeowners to rely on a system of document management (which usually involves an Iron Mountain truck, and a whole lot of paper shredding) to ensure that debt-servants are set free if they ever pay off their “debts”?

Did barrowers really sign up for that when they signed their mortgage and note? If not, when and where are the limits?


It’s only a matter of time

Homeowners must examine the assignments on their mortgages and notes. If a foreclosure is imminent, a preliminary injunction should be sought in order to have an opportunity to examine the documents thoroughly and also to give time to the SJC to issue its ruling – Jurisprudence matters. When the final Eaton ruling is taken together with Ibanez, there will be a sea change – it’s only a matter of time.

It seems reasonable that in a world where bandwidth intensive videos can be encoded and uploaded over a high speed 4G network from the New York Stock Exchange and on the Internet in 30 sec. using a smartphone with 64 gigs of memory (that can fit on a SanDisk card the size of your fingernail), and join billions of other files that have highly accurate GPS data embedded in their metadata, that finding a note for multiple six or seven figures debt and bringing it to court with you would really be no big deal – but apparently it is.

Foreclosures that took place before Ibanez, likely involve an assignment of the mortgage which is invalid because it would have been assigned post foreclosure (as was the common practice at the time), thus invalidating a huge number of existing foreclosures.

For foreclosures or those facing foreclosure in the post Ibanez era, than it is highly likely that the assignment of the mortgage is both invalid and fraudulent, as Mrs. McDonnell so accurately points out is endemic in most registry of deeds.  If it’s the note than that servicers intend to rely on, they may need to dream  up a new strategy, because those are all “missing” as we see in Eaton.  New strategies it seems are now in short supply.


A few more questions and thoughts

The “pump and dump” is as old as “market places” are. Whether it’s a street vendor in morocco extolling the virtues of his wares he wants to sell, or a the salesmen of shares in Netflix and Linkedin at impossiblele valuations – this “pump and dump” technique often is done with considerable misrepresentations, which result in artificially high prices for a time, and makes true price discovery impossible for buyers.

If you’re on the wrong side of the transfer, as a buyer of such stocks or bonds, you would have claims against the salesman – it’s called securities fraud. Now this ‘old time’ operation has been executed in the real estate market as well, and real estate, although most people don’t think of it this way, is also a security just like any other (it’s really not the American Dream, as has been sold – because as pointed out above, when something goes beyond the parameters of a mere security, to that of a “dream”, no price is too high). Just like stocks, these securities were pumped, and then dumped (but only after the related CDS’s were purchased by the architects).

What’s being described is an activity based on fraudulent misrepresentations, like most other such schemes. The “Pump” part involved a lot of paper shuffling, so that when the “dump” took place, the profiteers could not be easily identified. The same is true today. That is why debt-servants are not allowed to know their lender-masters – because it is the beginning of the paper trail, and as any certified fraud examiner will indicate, it all starts with the paper trail.

By focusing the attention of the court and the people on the intricacies of the letter of the law – even though they are wrong at that as well, the banks are taking attention away from the more obvious question, which is why? Why fight to interpret the law that way? That is the real question: Why. Why not produce the note. Why not reunite the note with the Mortgage?

Why would notes go missing? These are not credit card bills, they are documents outlining typically multi-six figure sums, or seven figure sums in some cases. Isn’t it logical that these documents would be kept in a safe place? And tracked? How could so many notes just disappear?

Why would the SJC and the American people at large not be alarmed by entities who foreclose on a property and yet have no idea who actually holds the debt?

The securitization process, in which so many notes were resold is subtle, but complex and riddled with a taxonomy that makes it as understandable as a foreign language to the casual observer. Yet, more careful scrutiny reveals that there is nothing even vaguely sophisticated about it’s operation.

The business of taking homes without any debt being owed is so obvious and simple so as to lend itself to denial. For example, one member of the SJC panel actually asked the attorney for Eaton why the barrower needed to know who owned the debt that they were paying? We thought maybe it was a joke – sadly it may not have been.

Yet, we know that notes have been sold multiple times into multiple pools and trusts, thus creating multiple creditors.

Any consumer should want to know if there debt is actually going to be discharged, and in order to know this, they would have to know who the actual debt holder is.

These debts are not secured. They are negotiable. This week alone, there was talk of bankruptcy proceedings for Eastman Kodak and American Airlines, Friendly’s, after more than 80 years in business, including operating during the last depression, actually did file. As commercial entities, they will be allowed before, during and after bankruptcy to work with their creditors in a completely transparent way.

Why is the average American expressly forbidden this simple aspect of business dealing? Though they entered into such obligations at far greater disadvantage than their corporate cousins?

It is clear that by introducing multiple parties that there are conflicting incentives and interests. It was surprising that the SJC brought up inadvertently during the oral arguments that the lender may have contractually sold their rights to have any say whatsoever in negotiations with the debt holder.

It is now well established that the servicers have the greatest financial incentives to foreclose, and apparently answer to no one, perhaps not even the lender, who nobody appears to be able to find.

The following question regarding Green Tree, MERS and the Eaton case are worth asking:

– Why would they go to such great lengths to keep the “lender” or holder of the debt in “secret”? What is there to gain? Would it not be much more expeditious to just reunite the note with the mortgage and then foreclose?

– Foreclosing with just a mortgage used to be an anomaly? But now it is the rule – what changed? Why would lenders take such an extraordinary risk with trillions of dollars?

– Does the claim that the notes are “lost”, or “missing” seem credible in light of the extraordinary technological world we live in?

– Is the imbalance in power between the home buyer (as signer) and the lawyer (as author) of the contract important? 99% of home buyers had no clue what they were signing – their attorney’s didn’t understand the assignee aspect of MERS or how it functioned either.

– Why would the servicer hide the debt holder? Why go through all of this trouble? Is it because it is really the US government by proxy of Fannie and Freddie?

– Were the notes used in a pyramid scheme? Were they sold multiple times intentionally in order to accommodate increasing degrees of leverage that the derivatives market required to sustain itself?

– What is the size of the global derivatives market which rest (at least in part) upon RMBS securities?

– Are RMBS pools really “Dark Liquidity” or simply “Dark Pools” and is that why MERS is necessary?


A final note on reverse transfers

In the Commonwealth of Massachusetts servicers in possession of mortgages only (which is basically all of those who represent securitized notes) are barred by common law rule, by statute, by the Uniform Commercial Code, and by the terms of the mortgages themselves from conducting foreclosures. If they have already done so, those foreclosures are void. We believe these principles do and will extend beyond the commonwealth eventually to all of the US.

The reason the banks are fighting this is because there exists a very real fear that homeowners stuck with inflated debts, which are the equivalent to indentured servents, might actually gain some negotiating power to settle these debts, at prices which not only reflect the prudent risk management which should have taken place in prior years, but also the related and more realistic asset prices which should have prevailed at the time of the original transactions.

From a purely business point of view, the asset prices were inflated, and the average home buyer with a home loan vintage 2002-2007 had little or no choice in the setting of those prices. However, there is another group who did, and they were writing “loans” and selling them as fast as the CPU and the RAMM on MERS’ servers would allow them (thankfully cloud computing, with its superior ability to process data, and elastic memory and bandwidth wasn’t yet widely used).

Yet the securitization industry and their very elite and very wealthy captains are not having any of that – because it is a reverse transfer. To be a debt-servant is to be the servant of another man by force. Humans are not designed or built for that – that is a construct of an unfortunate human condition, which we should want to change.

How a mortgage payment can be made with fidelity every month into a authentic black hole, and the attendant psychology which enables this behavior is beyond the scope of this article. The Common Law, the MGL and UCC and even the contracts themselves make it clear though, if a mortgagor expects a discharge of the debt, they need to know who exactly they are paying.

Taking a step forward requires some courage, but less than those who have taken to the streets in NYBoston orother cities – they are doing really hard and courageous work. Not paying a mortgage in light of the a priori evidence cannot even qualify as an act of civil disobedience. The average homeowner and mortgagor is not called to such a high calling in this instance – they are merely called to follow the mundane laws of the land which have been set down for over 150 years. It is just simple prudence. It is the lack of denial, and a willingness to recognize the truth, no matter how unpleasant. Participation in the system as it is, while concurrently declining to examine the issues intelligently is not defensible.

Paradoxically the hand of the strong which moved to Divide (the notes) and Affirm (title interest) – when taken in God’s hands, has destroyed (the notes) and preserved (the legitimate ownership).

31 Responses

  1. Signed a contract for my home w East West mortgage company,(was not a can’t afford it buy), then loan went to Countrywide, then to BOA. The mortgage is in good standing. Just received notice, BOA transferring it to Green Tree Servicing LLC. My fear begins. GTS seems to have a bad reputation. If GTS does not have to follow mortgage servicing rules or bank capitol rules, what happens to the rules in my original mortgage note? BOA says nothing will change; however reading about these management companies especially GTS, I see fees coming at me. Because of the little I understand, I wonder if I am over-reacting or am I in for trouble? Thanks for a great article! It helped.C

  2. Well Ian…if the banks can do it?

  3. @Nora – I don’t know, prob none of us can, why the notes aren’t produced, but i have some educated guesses.
    Many loans were created by mortgage brokers, who sold the loans
    at closing (or before) to companies like boa, wf, als, cw, etc. The note had the name of the broker on it usually and was endorsed without recourse in blank or possibly to boa, wf, like that. Sometimes the original note and dot went in the ‘warehouse package’, which went to the source of the line of credit aka a warehouse line.
    Certified copies of the note and dot also went to the boa or wf or whomever along with the closed file – all the docs the borrower signs at closing. Those files end up with the servicer, I believe. So the servicer has the closed loan file with the copies of the note and dot. When they want to snarf a home, they produce (or might) those docs, the copies, and pawn them off as something else. Now, it may have changed in the last 10 years to leave the certification off the copy sets because that would tip a court, say, off that it was getting a copy of a copy. Dunno.
    In the mad rush to sell those loans down the line, the rest of the endorsements didn’t get done. Of this I’m sure. This would present a legal catch-22 for the banksters. Admit they weren’t done, or get the endorsements after the fact? Admitting they weren’t done leads to issues we all know about. Getting them later is a serious fraud, I would think, maybe including securities fraud. Some of the companies whose autographs are necessary are out of business.
    Some of the banksters appear willing to engage in that fraud and some dont’ and rely on network attorneys aka liars-for-hire to cover their tails with some bs upon bs.
    Some of those notes probably were actually lost. that gang was pretty darn sloppy (in this case it’s probably criminal) and probably figured they’d get around to the endorsements later if “needed”. Some of the lost notes have been reproduced with software and pawned off as originals.
    If an original is not produced, there is no way for a borrower to know if the alleged endorsements are on the back of his note or not. They could be endorsements on the back of John Brown’s note now used for Harry’s note. They are doing thousands if not millions of foreclosures. Getting endorsements even if all parties are still available takes time and money.
    My guess is some of them fabricate endorsements and some don’t. Some might even get them after the fact. As I said, I know they weren’t
    done generally. I just read a case where an employee of I forget who the heck it was actually executed two endorsements for different entities on the same note. Now that takes some kahunas. If they get away with it, we’re messed.

  4. I just want to know where all the original Notes went. Banks keep the paper checks processed against the funds on deposit in an account, so why weren’t the all-important Notes retained?

    According to the Fed Reserve’s own literature, the Notes are endorsed and deposited into a transaction account in the “borrower’s” name, thus expanding the supply of “money” which is lendable to other “borrowers”, in fractional reserve banking. In exchange for this bank “credit” the “borrowers” repay in money of exchange or hard cash. The nature of the money is effectively changed, then, from an electronic debit and credit to real cash.

    Banks are record keepers, financial fiddlers, and paperwork lovers. It just can’t be possible that the Notes are lost. There must be a step in the process that explains why all or most of the Notes aren’t around. Any time you demand presentment, the banks refuse. Chase sent me six photocopies of it, when I demanded to see the original six times. Somebody explain to me how they can photocopy it, if they don’t have it, and if they don’t have it, what happened to it.

    I found a stamped endorsement on one copy…perhaps that’s what they are trying to hide by not allowing “borrowers” to see the original. They don’t want the cows in the herd to know they’ve been milked. The Notes are not at all lost, but information the “borrowers” could use against them exists on the face of the Note, so the banks are keeping prying eyes away. This still doesn’t explain why they don’t reunite the Notes and DOTs to do a legitimate foreclosure, if the Notes exist.

    Does anyone know for certain about the Notes?

  5. DE is asking for 10k per violation from MERS plus restitution for homeowners damaged by their garbage. I’ve no doubt MERS has no money to collect at this date. They knew this was coming and ditched the dough….probably always did. But if pierce corporate veil, can go after others, including its former president who is off drinking mojitos on some tropical isle.
    This is a golden opportunity to commandeer “MERS” when it tries to settle. NO! The only viable settlement starts with turning their alleged records over to the people of the United States of America and our local county recorders. New jobs for years and MERS and its cronies can pay for them all.


    complaint is after the press release in this document

  7. “The issue before the SJC in Henrietta Eaton v. Federal National Mortgage Association and Green Tree Servicing, LLC is whether the assignee of a mortgage security alone (fraudulent assignments aside), without any direct or indirect interest in or claim to the underlying debt, can seek to recover the debt through foreclosure.”

    Is the United States just Candid Camera or Larry, Curly, and Moe + Criminals (aka MERS and Co. including WS) now? That is the most asinine question i have ever heard and I can’t believe it’s actually being argued. One might just as well ask if 4 – 1 = 2. This is just nuts. A collateral instrument without the debt evidenced by the note is and always will be a worthless piece of paper. Further, you eejits at WF and FNMA, if one party owns the note and another has the stinking assignment of the collateral instrument – the dot -, the stinking loan is in fact BIFURCATED and the note is UNsecured. Duh. How did this case get up to MA’s highest
    court? Oh, I know. It’s the home of the guy who asked what a note has to do with foreclosure. Sorry, dudamus, but you asked for it with that
    Lenders lobbied years ago for the deed of trust in lieu of a “mortgage”
    document so they could ‘skip’ judicial foreclosure. Non-judicial f/c didn’t exist prior to the deed of trust with its “trustee”, now known as a collection agency for the alleged lender for an alleged default. It was the lenders who wanted a note and collateral instrument as separate instruments. Now suck it up. Dang – I know I’m going off here, but this is crazy.



    This is the most kick-xxx, right–on assault on MERS to come down the pike and I am digging the hell out of it. It was filed just today by the state of Delaware against Mers and posted by dinsfla.

    Mr. G, Mr. G, Mr. G – LOOK! Please, puh-lease do a post on this with some highlights from the complaint for all of us who have suffered at the hands of the MERS-American-home-stealing-supreme-enabler-monster-machine-killer-of-all-things-goodandjust-RICO-perps. That’s the printable version of what may be abbreviated as rat-bastard *!*&%^$!*.
    Oh, a perp-walk for MERS! Be still my heart! Some of the readers may even be able to ‘borrow’ some of the language for their own cases. The guys who wrote this are definitely hip to MERS and Co.’s bullshyt. Yahoo! Yippy kai-yeah, you know

    BTW, a certain someone sent the MA SC (Eaton) some eye-opening material today…..the first of many such missives to the judiciary. If you would like your local judges on my new mailing list, post the names and addresses here. Hope you don’t mind, Mr. G.


  9. You should read this if you are defaulted in credit card debt and a home mortgage:

    You must connect the dots and look up words you do not understand——that is a must, so give yourself time///////////////

  10. @Faith,

    this is called Presentment:

    under California Commercial Code Section 3502(a)(1):
    (a) Dishonor of a note is governed by the following rules:
    (1) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment. (emphasis added).
    In addition, the Code states: “Upon demand of the person to whom presentment is made, the person making presentment must: (1) exhibit the instrument. (See California Commercial Code Section 3501(B)(2)(a)). This means the original note, with endorsements and allonges (if any) must be presented upon demand of the borrower/obligor, which is hereby made as discussed below.

  11. [QUOTE]
    As to origination fraud, which the banksters believe they are about to delete en masse with the help of the state AGs, the DOJ, and Obama himself, what about the original sin? What about the undeniable fact that millions of borrowers were set up as undisclosed investors with undeniable possessory rights to the profits generated from what they were told were home loans, but were actually sophisticated investment contracts? We are/were the originators of securities with all of the liability and none of the profits. Here comes that line again… heads they win…tails we lose. Oh really? I don’t think it’s going to work out that way.

    How long will the populace take this crap before rightfully re-occupying the crumbling republic? Banksters….do everyone a favor and jump you ****ers….otherwise you’ll share a fate with that of lawless dictators. It won’t be pretty and your gated compounds will be grossly insufficient to guard against the awakened masses. The term securities will take on a whole new meaning for each and every one of you. From billionaires to gutter rats, mansions to drain pipes. Schadenfreude on a scale never before witnessed. It couldn’t happen to a more deserving group.

    Hear HEAR!!! I second that motion! All in favor say aye!

  12. Grateful Slave by Paine’s Torch
    Copyright 1993 ZENO Press, All Rights Reserved

    I am a grateful slave.
    My master is a good man.
    He gives me food, shelter, work and other things.
    All he requires in return is that I obey him.
    I am told he has the power to control my life.
    I look up to him, and wish that I were so powerful.

    My master must understand the world better than I,
    because he was chosen by many others for his respected position.
    I sometimes complain, but fear I cannot live without his help.
    He is a good man.

    My master protects my money from theft, before and after he takes half of it.
    Before taking his half, he says only he can protect my money.
    After taking it, he says it is still mine.
    When he spends my money, he says I own the things he has bought.
    I don’t understand this, but I believe him.
    He is a good man.

    I need my master for protection, because others would hurt me.
    Or, they would take my money and use it for themselves.
    My master is better than them:
    When my master takes my money, I still own it.
    The things he buys are mine.
    I cannot sell them, or decide how they are used, but they are mine.
    My master tells me so, and I believe him.
    He is a good man.

    My master provides free education for my children.
    He teaches them to respect and obey him and all future masters they will have.
    He says they are being taught well; learning things they will need to know in the future.
    I believe him.
    He is a good man.

    My master cares about other masters, who don’t have good slaves.
    He makes me contribute to their support.
    I don’t understand why slaves must work for more than one master, but my master says it is necessary.
    I believe him.
    He is a good man.

    Other slaves ask my master for some of my money.
    Since he is good to them as he is to me, he agrees.
    This means he must take more of my money; but he says this is good for me.
    I ask my master why it would not be better to let each of us keep our own money.
    He says it is because he knows what is best for each of us.
    We believe him.
    He is a good man.

    My master tells me:
    Evil masters in other places are not as good as he; they threaten our comfortable lifestyle and peace.
    So, he sends my children to fight the slaves of evil masters.
    I mourn their deaths, but my master says it is necessary.
    He gives me medals for their sacrifice, and I believe him.
    He is a good man.

    Good masters sometimes have to kill evil masters, and their slaves.
    This is necessary to preserve our way of life; to show others that our version of slavery is the best.
    I asked my master:
    Why do evil masters’ slaves have to be killed, along with their evil master?
    He said: “Because they carry out his evil deeds.”
    “Besides, they could never learn our system; they have been indoctrinated to believe that only their master is good.”
    My master knows what is best.
    He protects me and my children.
    He is a good man.

    My master lets me vote for a new master, every few years.
    I cannot vote to have no master, but he generously lets me choose between two candidates he has selected.
    I eagerly wait until election day, since voting allows me to forget that I am a slave.
    Until then, my current master tells me what to do.
    I accept this.
    It has always been so, and I would not change tradition.
    My master is a good man.

    At the last election, about half the slaves were allowed to vote.
    The other half had broken rules set by the master, or were not thought by him to be fit.
    Those who break the rules should know better than to disobey!
    Those not considered fit should gratefully accept the master chosen for them by others.
    It is right, because we have always done it this way.
    My master is a good man.

    There were two candidates.
    One received a majority of the vote – about one-fourth of the slave population.
    I asked why the new master can rule over all the slaves, if he only received votes from one-fourth of them?
    My master said: “Because some wise masters long ago did it that way.”
    “Besides, you are the slaves; and we are the master.”
    I did not understand his answer, but I believed him.
    My master knows what is best for me.
    He is a good man.

    Some slaves have evil masters.
    They take more than half of their slaves’ money and are chosen by only one-tenth, rather than one-fourth, of their slaves.
    My master says they are different from him.
    I believe him.
    He is a good man.

    I asked if I could ever become a master, instead of a slave.
    My master said, “Yes, anything is possible.”
    “But first you must pledge allegiance to your present master, and promise not to abandon the system that made you a slave.”
    I am encouraged by this possibility.
    My master is a good man.

    He tells me slaves are the real masters, because they can vote for their masters.
    I do not understand this, but I believe him.
    He is a good man; who lives for no other purpose than to make his slaves happy.

    I asked if I could be neither a master nor a slave.
    My master said, “No, you must be one or the other.”
    “There are not other choices.”
    I believe him.
    He knows best.
    He is a good man.

    I asked my master how our system is different, from those evil masters.
    He said: “In our system, masters work for the slaves.”
    No longer confused, I am beginning to accept his logic.
    Now I see it!
    Slaves are in control of their masters, because they can choose new masters every few years.
    When the masters appear to control the slaves in between elections, it is all a grand delusion!
    In reality, they are carrying out the slaves’ desires.
    For if this were not so, they would not have been chosen in the last election.
    How clear it is to me now!
    I shall never doubt the system again.
    My master is a good man.

  13. So we dispute the debt. Ask for original wet ink note to see in person
    within a certain time frame. No copies allowed.
    Of course it does not happen.
    Foreclosure stopped in its tracks because foreclosure mill does not want to be sued.
    What can we do with the credit reporting agencies?
    The reported debt is false.

  14. And yes ENRAGED…………..I am telling you to stay away from the banks……………………….and even if you pay it off in a week, these scum suck’in pigs will still make money off of you somehow……….

  15. Banks issuing credit cards and home loans are nothing more than marketing companies and receive a monthly fee for servicing the credit cards and home loans……………

    all thanks to Securitization…………..

    sorry, you have been took, you have been Securitized,
    so you can be traded in the secondary market.

    You have been traded like cattle, that means your hard work every week goes to fund a security instrument on Wall Street,

    and if you don’t pay, why the scum bags called debt collectors and lawyer/debt collectors are let loose on you………..

    and thanks to debt collector lobbying efforts five years ago, they changed the bankruptcy laws so that if you make 50k per year, doesn’t matter how much debt you have, why you go on a 5 year repayment plan to be a debt slave for 5 years……………paying off pretender lenders the whole time,,,,,,,,,,,,since everything is securitized.

    Welcome to the NEW AMERICA………….yehaw, immigrants are you sure you what to come here and get took?

  16. I know it’s a long read:

    The “Lender” named in the Note and Deed of Trust or Mortgage (e.g. Washington Mutual, Indymac, Countrywide, etc) did not fund the transaction, and therefore was not really the “Lender” at all. They acted only as a “Nominal Lender”, named in the Note only to facilitate the creation of a Deed of Trust or Mortgage to secure the Note as an alleged “Loan”, when it was not a “Loan”, but rather the receptacle for an Asset-Backed Investment Security. Frank J. Fabozzi and Vinod Kothari, in their book “Introduction to Securitization” state on page 5 “The asset securitization process transforms a pool of assets into one or more securities that are referred to as Asset-Backed Securities.”
    The ramifications of this process are that there was no “loan” funded by the “Nominal Lender”. In fact, it can be alleged in court that the “Nominal Lender” was paid in full, plus a commission. Also, the Deed of Trust or Mortgage can’t secure an Asset-Backed Investment Security or a Financial Asset directly purchased by a Trust (Security), and the Homeowner was tricked into thinking he was a “Borrower” of a “Loan”, when he was actually a Seller of a Note to a Securitization Trust or SPV. The Trust or SPV had no right to a Deed of Trust or Mortgage to a purchased Note that was not evidence of a debt or obligation – it can’t be a Secured Transaction covered under UCC 9,when it’s an Investment Security covered under UCC 8. The “Nominal Lender” shouldn’t be able to foreclose on an asset in an Investment Security with an invalid Deed of Trust or Mortgage, fraudulently procured under the guise of a “Loan”, when it wasn’t a Loan, but rather the “Purchase of a Note” into an Asset-Backed Investment Security, and the “nominal Lender” was paid in full, plus a commission for something it did not fund.
    Can a “nominal Lender” that didn’t fund the transaction, but rather fraudulently allowed its name to be put on a Note and Deed of Trust or Mortgage to trick a Homeowner into signing a Deed of Trust or Mortgage to secure an Investment Security, assign a Beneficial Right it never had to another Beneficiary?
    WaMu almost never Assigns the Deed of Trust or Mortgage, but forecloses directly or through Chase, its new owner.
    WaMu is the Servicer, and Trust wording also calls it the Originator, but the Trustee for the Trust or SPV purchased the Notes directly – WaMu did not fund the loan.
    The Trust was fully formed before the purchase, and its Trustee wired the funds into escrow. The originator almost never funds directly to sell it.
    Fraud can be alleged that the Borrower was tricked into believing it was a loan to procure a Deed of Trust or Mortgage, and the true nature of the Transaction was not disclosed.
    Fraud can also be alleged (after research) that the Pool Insurance paid the Investors after multiple Defaults and Foreclosures. If they were paid, why the foreclosure?
    Further, fraud can be alleged that the Deed of Trust (UCC 9) is invalid for an Investment Security/Commercial Paper (UCC 8) (you can’t have both). A foreclosure is improper, and should be voidable.
    The direct purchase of the Note by the Trustee for the Trust or SPV appears to violate the procedures specified in FAS 140 – “Statement of Financial Accounting Standards 140” by the Financial Accounting Standards Board (FASB).
    The Bank signs a Mortgage Loan Purchase Agreement with a Representative of the Trust and/or SPV, yet the Bank doesn’t fund the purchase of the note, and can’t sell what it hasn’t bought.
    The Pooling and Servicing Agreement clarifies all the fine points they don’t want you to know. The Assignment and Assumption Agreement clarifies further.
    Credit Enhancement is used to sweeten securitization trusts. Trusts containing Sub-Prime Notes usually have Pool Insurance to cover Defaults and foreclosure. If enough Notes go into Default and Foreclosure, the Insurance pays off the Investors. The Servicer usually continues to foreclose, even though the investors were paid poff.
    Other insurance is often procured for fraud arising in the origination process – if you win for fraud, they can collect that insurance, as well.
    Indymac was foreclosing itself, but now it often forecloses through either OneWest Bank, its new owner, or through Deutsche Bank, trustee for the Asset-Backed Security.

  17. @E Tolle,

    For those that do not understand what you are talking about,,,,,,,,,,,that would newbies who come to this site;;;;;;;;;;;;;;

    here is a nice explanation

    The Homeowner expects to be a “Borrower” that will receive a “Loan” from the Bank.
    If the Bank funded the loan and then sold it, it would still be a loan that was sold,
    but the Bank does not fund it – the wire comes directly from the Bank for the Trustee of the SPV and Securitization Trust.
    Lehman Brothers arranged for investors to purchase certificates in the Trust in advance, and arranged for the Trust and SPV to purchase Financial Assets from each Homeowner direclty. The Bank gets a commission as a finder’s fee, but the bank never funded the loan. either the Trust nor SPV was a bank, so Usury may apply. In all cases, the Homeowner was tricked into believing the Bank funded a Loan, when the Bank just was paid a commission for finding a Homewoner willing to sell the Note, which was a Financial Asset when acquired by a Trust or Commercial Paper when acquuired by an SPV. The Bank’s Commission was also for the Bank to allow its name to be on the Note and Deed of Trust/Mortgage, and often to act as Servicer to get montly fees.
    The Homeowner was never told the truth about who funded the transaction, because a Deed of Trust would not normally be allowed for a Financial Asset purchased by a Securitization Trust (a Security covered by Security Laws), or a Commercial Paper which is covered by the Uniform Commercial Code Division (UCC) 8, whereas Secured Transactions with a Deed of Trust are covered under UCC 9. The biggest question is:
    Was it Fraudulent Misrepresentation to lie to the Homeowner?

    This question is one you need to discuss with your lawyer.
    Was this a setup that the Bank, SPV, and Trust knew was doomed to fail?

    Lenders know that Loans with Balloon Payments, Adjustable Rates, Interest Only Periods, and Negative Amortization are Doomed to Default.
    These kinds of loans are less secure that fixed rate loans. Lehman Brothers, the Banks, and other Lenders KNEW THIS.
    Does it make you angry that they were betting you’d default?

    Most Prospectuses for the Trusts outline your probable default time, and use “Credit Enhancement” like Pool Insurance to offset losses by Default and Foreclosure.
    Did the Investors in the Trust get paid by Default Insurance? Then why do you still owe?

    AIG was bailed out, so Default Insurance could continue to be paid?

  18. As to origination fraud, which the banksters believe they are about to delete en masse with the help of the state AGs, the DOJ, and Obama himself, what about the original sin? What about the undeniable fact that millions of borrowers were set up as undisclosed investors with undeniable possessory rights to the profits generated from what they were told were home loans, but were actually sophisticated investment contracts? We are/were the originators of securities with all of the liability and none of the profits. Here comes that line again… heads they win…tails we lose. Oh really? I don’t think it’s going to work out that way.

    How long will the populace take this crap before rightfully re-occupying the crumbling republic? Banksters….do everyone a favor and jump you ****ers….otherwise you’ll share a fate with that of lawless dictators. It won’t be pretty and your gated compounds will be grossly insufficient to guard against the awakened masses. The term securities will take on a whole new meaning for each and every one of you. From billionaires to gutter rats, mansions to drain pipes. Schadenfreude on a scale never before witnessed. It couldn’t happen to a more deserving group.

  19. State AG’s are not working for the borrowers. They are trying to keep the BONDHOLDERS’ WORLD from turning upside-down. They are holding TONS of evidence; they’re called COURT RECORDS!
    The mortgage bonds are worthless.

  20. Carie, you mentioned fraud at origination, it is more than curious to note that the 46 state AG “settlement” mentions specifically that the banks will be absolved of origination fraud. This was first mentioned within the last week. That in and of itself is very telling, considering that there are 1001 other types of fraud involved here. Origination fraud would necessarily include purchase money mortgages, whereby a borrower initially acquired a home, and, as you and ANONYMOUS have repeatedly pointed out, “refinancings”, where the borrower paid 8-15,000 dollars or more in points,fees,etc. to get a couple of grand back at closing, with the 8-15,000 dollars going right into the pockets of the debt collector/broker as the “principal” of the refi was non-existent. Additionally, the “Satisfaction of Mortgage” is fraudulent, as there was no mortgage, the mortgages being paid off by PMI, MBIA,AMBAC, MGIC, ASSURED GUARANTY, RADIAN,and others. Following the first harvest of payments, the banks proceeded to again be reimbursed by the Fed via Maiden Lane I,II,III, now stuck with their nonmortgage-backed securities, and further reimbursed for “losses” by TARP, TALF, and a host of other half-baked govt. programs.

  21. I think the Eaton case is important. It was heard on Oct 3 if I get that correctly – anyone – how long does it usually take for a ruling to occur? Does it get scheduled in advance or just happen when the judge gets around to it? When is a decision likely to get announced?

  22. […] Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND Livinglies’s Weblog […]

  23. I think the Eaton case is important. It was heard on Oct 3 if I get that correctly – anyone – how long does it usually take for a ruling to occur? Does it get scheduled in advance or just happen when the judge gets around to it. When is a decision likely to get announced?

  24. from above article:

    “Why would they go to such great lengths to keep the “lender” or holder of the debt in “secret”? What is there to gain? Would it not be much more expeditious to just reunite the note with the mortgage and then foreclose?”

    “How a mortgage payment can be made with fidelity every month into a authentic black hole, and the attendant psychology which enables this behavior is beyond the scope of this article. The Common Law, the MGL and UCC and even the contracts themselves make it clear though, if a mortgagor expects a discharge of the debt, they need to know who exactly they are paying…”

    Hmmm…because NO mortgage…NO actual funding…manufactured false default, etc…multiple unsecured manufactured “debts”…everything our friend ANONYMOUS has been saying. All the craziness makes sense when you understand that there was FRAUD AT ORIGINATION. When you START with fraud—where else can you go but MORE and MORE fraud???

    In this clip from the Dylan Ratigan show yesterday, just count how many times Bill Black uses the word “fraud”…

  25. Cubed:

    Outrage upon outrage…..

  26. “What does this “Act” mean for America? This is the establishment’s attempt to begin the push for a cashless society! OK, so why should I be worried about moving into a cashless society you ask? There is a great deal to be worried about if this becomes the new law of the land… This one act alone will give ALL control of your purchaing power to the central banks. ”

  27. Interesting that the foreclosing parties seem to assert that, in “non-judicial” Massacusetts, courts can ignore note “holder” status, and soley focus on what entity is the “mortgagee.” (In this case the “assignment of mortgage” was essentially “stipulated” as being valid.) They have argued that UCC 3 does NOT govern foreclosure actions and that therefore the courts need not be concerned with the whereabouts of the note.

    Then, in judicial states, the same parties argue the opposite: that it is all somehow irrelevant what entity is named as “mortgagee” or even if a valid assignment exists. In contrast to what is argued in Massachusetts, they allege to courts that UCC-3 implicitly grants the authority to foreclose to whatever party claims to be the “holder” of the note, even if that party is not the mortgagee or has stolen the note, as some have pointed out on this blog.


    you better read this link———-

  29. Chris- Great idea! You will have to serve yourself papers, it might have to be an arms’ length transaction, so you will have to go to the halloween store and get a fake arm. First, though, file an assignment of mortgage from the current assignee/mortgagee/trust/foreclosure mill/lender/owner/benificiary/etc to yourself, making sure to backdate the assignment by several years, and get it notarized by someone, anyone, down at the local bar. Now you’re set.

  30. This is probably a stupid question: Can I foreclose on my own property? Let’s say I found out the servicer has defaulted on their PSA, could I use this to foreclose on them, on my behalf as a legal third party to the contract and the default being the servicer? Just asking.

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