STANDING MAKES A COMEBACK: Rescission Causing a Stir: Tonight On the Neil Garfield Show

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With the two back to back decisions in the Florida 2d DCA and 4th DCA, Standing has made its long waited comeback. The question is not whether the borrower stopped making payments as the thousands of Judges have put it. The real question is whether the creditor got paid. Banks have successfully obscured the issue and obtained nearly 8 million foreclosures. What difference does it make if the borrower stopped paying the party who no right to collect the money? If anything, the borrower was mitigating damages against the servicer who was wrongfully collecting and wrongfully foreclosing on the property. All the money that has been paid to a servicer pretending to be the servicer is subject to disgorgement — IF the servicer is claiming to be the authorized servicer by virtue of a grant of power from the Trustee of a Trust that has not been shown to be the owner or authorized representative of the owner of the debt. It’s pretty simple really once you sweep bias aside.


The question is what do you do after you have sent the notice of rescission? And that extends to rescissions that were sent years ago. There are many nuances here caused by State and Federal law. But one thing cannot denied: the rescission is effective by operation of law when it is mailed and nothing except another operation of law can change that.

Practice Note for Lawyers: Lawyers for the banks and servicers are attempting to use fear and intimidation — trying to grab back the narrative. They can only do that if you let them. When they ask you for tender of payment, the answer is that AFTER they have returned the cancelled note, and AFTER they have filed a release and satisfaction of the mortgage or deed of trust and AFTER they have paid the borrower ALL the money that is due under the statute (all borrower payments plus all compensation paid to anyone) THEN they might be able to demand payment (without the security of a mortgage or deed of trust). BUT — they can’t ask for the money if more than one year has expired since the notice of rescission (assuming they have not complied with the TILA rescission requirements).

It is really much simpler than what is being discussed in the cyber-sphere. There is nothing to interpret — that is a direct instruction from the US Supreme Court. Follow the steps in the TILA statutes and remember at each step that the rescission is effective upon mailing; and remember what that means — that the loan contract is canceled, the mortgage is void, and so is the note. Only the borrower is given statutory authority to cancel the loan non judicially in the form of a letter.

There is no provision in the statute for lenders, creditors, or investors or trustees to challenge the rescission — but we know by black letter law that in the absence of a specific statutory provision, there can be no meaningful non judicial action (i.e., a letter) by those who would claim the right to collect or foreclose even if the State is a nonjudicial foreclosure state. They MIGHT have a right to sue to vacate the rescission. They might have a damage action based upon “wrongful rescission.” And they have probably waived their “defenses” to the rescission if they have not filed the suit within 20 days of receipt of the rescission. And they may have waived the debt if more than one year has passed since the receipt of the notice of rescission.

But in all cases (1) they must act by taking the matter to court (which means pleadings filed with allegations of jurisdiction (standing), cause of action and a short plain statement of ultimate facts upon which relief could be granted and (2) they cannot use the note and mortgage to establish standing (they are “holders” of a void instrument arising out of a cancelled loan deal). They must allege facts that show they were financially injured by the rescission.

And note well that the real parties in interest in most of these foreclosures are neither the Trust (who never owned the loan) nor the investors (who are getting paid through servicer advances, thus nullifying the allegation of default). The servicer needs to push the case to foreclosure, not modification or settlement, because foreclosure is the only way the “servicer” might recover its volunteer payments to the investors who are the the only parties to whom money is owed — albeit by quantum meruit and not by contract or legal instrument.

Rescission threatens those claims for servicer advances — many of which have been securitized themselves!

THAT is why modifications are treated as a game (to satisfy regulators that they are trying to modify loans) — servicers cannot admit that they are really looking to get paid in their own right and not to collect on behalf of the investors, who will lose more money in a foreclosure than they would in a workout of the loan.

All that and more tonight on the Neil Garfield show.

48 Responses


    Emails Can Satisfy the Signature Requirement of the Statute of Frauds

    By Shep Davidson on July 13th, 2012
    Posted in Contracts
    Every once in a while, I actually do go on vacation. So, my colleague, Alan E. Lipkind, a partner in the Business Litigation and Real Estate groups at Burns & Levinson, has contributed this post on the recent decision by a Massachusetts court finding email communications can satisfy the signature requirement in the Statute of Frauds.

    Most of us know the basics of the Statute of Frauds: Certain contracts, including those pertaining to real estate, goods worth more than $500, and guarantees, as well as those that can’t be performed within one year, must be in writing and signed in order to be binding. In a recent case where I represented prospective purchasers of real property, the Massachusetts Superior Court found that an email exchange among parties pursuing a real estate purchase transaction satisfied the signature requirement embodied in the Statute of Frauds.

    In Feldberg v. Coxall, buyers’ counsel emailed to seller’s counsel a proposed offer to purchase real estate which included a financing contingency. The next day, the seller emailed buyer’s counsel directly, stating that if a written approval letter from the buyer’s lender was received by 5 p.m., “I think we are ready to go.” Buyer’s counsel provided a lender’s commitment letter the same afternoon, before 5 p.m.

    The transaction then fell apart, and the buyers ran to court to try to protect their deal. The seller contended that the email exchange did not satisfy the Statute of Frauds. Quoting out of state authority, the Massachusetts Superior Court noted that the courts have “not yet set forth rules of the road for the intersection between the seventeenth-century statute of frauds and twenty-first century electronic mail.” Calling the issue presented by the case one of first impression, the court stated that the Massachusetts Uniform Electronic Transactions Act (“MUETA”), was one attempt to provide those rules of the road to persons involved in real estate transactions.

    That statute applies to “transactions between parties each of which has agreed to conduct transactions by electronic means,” and under that statute, whether the parties have so agreed is “determined from the context and surrounding circumstances, including the parties’ conduct.” MUETA §5. The Court noted that in using email to conduct negotiations, the parties could be found to have agreed to conduct the transaction by email. With regard to the signature requirement of the Statute of Frauds, MUETA §7(d) states that “if a law requires a signature, an electronic signature satisfies the law.” An electronic signature is “an electronic…symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” MUETA §2. According to the Court, both an email signature block, as well as the “from” portion of an email, may constitute a signature under the statute. Despite the lack of an agreement manually signed by the seller, the Superior Court denied the seller’s Motion to Dismiss and, effectively, held that the Statute of Fraud’s signature requirement can be satisfied through an email.

    In light of this ruling, in-house counsel who deal with contracts that fall within the Statute of Frauds for any reason should be aware that any email exchange might satisfy the Statute’s requirement of a signature. Thus, if you do not want to bind your company by accident, you should consider including a disclaimer in your email. Failing to do so poses a risk of becoming unintentionally bound to a contractual obligation.

  2. D, I would love to see the “ledgers” where the advances have come and gone. A real work of fiction.


    Certificate Guaranty Insurance Policy Insured Obligations: Policy Number:

    GMACM Mortgage Loan Trust 2000-J6 GMACM AB0424BE Mortgage Pass-Through Certificates, Series 2000-J6, Class A-5, A-6, A-7, A-8, A-9, A-10 and A-11

    As specified in the endorsement
    attached hereto

    Ambac Assurance Corporation (Ambac) A Wisconsin Stock Insurance Company in consideration of the payment of the premium and subject to the terms of this Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for the benefit of the Holders of the Insured Obligations, that portion of the Insured Amounts which shall become Due for Payment but shall be unpaid by reason of Nonpayment.

    Ambac will make such payments to the Trustee from its own funds on the later of (a) one (1) Business Day following notification to Ambac of Nonpayment or (b) the Business Day on which the Insured Amounts are Due for Payment. Such payments of principal or interest shall be made only upon presentation of an instrument of assignment in form and substance satisfactory to Ambac, transferring to Ambac all rights under such Insured Obligations to receive the principal of and interest on the Insured Obligation. Ambac shall be subrogated to all the Holders’ rights to payment on the Insured Obligations to the extent of the insurance disbursements so made. Once payments of the Insured Amounts have been made to the Trustee, Ambac shall have no further obligation hereunder in respect of such Insured Amounts.

    In the event the Trustee for the Insured Obligations has notice that any payment of principal or interest on an Insured Obligation which has become Due for Payment and which is made to a Holder by or on behalf of the Trustee has been deemed a preferential transfer and theretofore recovered from its Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available.

    This Policy is noncancelable by Ambac for any reason, including failure to receive payment of any premium due hereunder. The premium on this Policy is not refundable for any reason. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may become due in respect of any Insured Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment, including failure of the Trustee to make any payment due Holders of Insured Amounts.

    To the fullest extent permitted by applicable law, Ambac hereby waives and agrees not to assert any and all rights and defenses, to the extent such rights and defenses may be available to Ambac, to avoid payment of its obligations under this Policy in accordance with the express provisions hereof.

    Any capitalized terms not defined herein shall have the meaning given such terms in the endorsement attached hereto or in the Agreement.

    In witness whereof, Ambac has caused this Policy to be affixed with its corporate seal and to be signed by its duly authorized officers in facsimile to become effective as their original signatures and binding upon Ambac by virtue of the countersignature of its duly authorized representative.

    /s/ Philip B. Lassiter /s/ Anne G. Gill President Secretary

    /s/ Jeffery D. Nabi Effective Date: December 21, 2000 Authorized Representative



    Attached to and forming Effective Date of Endorsement: part of Policy No. AB0424BE December 21, 2000 issued to:

    Wells Fargo Bank Minnesota, National Association, as Trustee for the Holders of the GMACM Mortgage Pass-Through Certificates, Series 2000-J6, Class A-5, Class A-6, Class A-7, Class A-8, Class A-9, Class A-10 and Class A-11

    For all purposes of this Policy, the following terms shall have the following meanings:

    “Accrued Certificate Interest” has the meaning set forth in the Agreement; provided, however, that for all purposes of this Policy, Accrued Certificate Interest on the Insured Certificates shall include any Prepayment Interest Shortfalls and any shortfalls resulting from the Soldiers’ and Sailors’ Civil Relief Act of 1940, as amended, or similar legislation allocated to the Insured Certificates (but only to the extent that such amounts are not offset by Compensating Interest paid by the Servicer or withdrawals from the Insured Reserve Fund).

    “Agreement” shall mean the Pooling and Servicing Agreement, dated as of December 21, 2000, between Residential Asset Mortgage Products, Inc., as the Company, GMAC Mortgage Corporation, as Servicer, and Wells Fargo Bank Minnesota, National Association, as Trustee, as such Agreement may be amended, modified or supplemented from time to time as set forth in the Agreement, provided that any such amendment, modification or supplement shall have been approved in writing by the Insurer.

    “Business Day” shall mean any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the States of New York, Pennsylvania, Minnesota or Maryland are authorized or obligated by law or executive order to be closed.

    “Certificate Guarantee Insurance Policy” or “Policy” shall mean this Certificate Guaranty Insurance Policy together with each and every endorsement hereto.

    “Distribution Date” shall mean the 25th day of any month (or if such 25th day is not a Business Day, the first Business Day immediately following) beginning with the First Distribution Date.

    “Due for Payment” shall mean with respect to any Insured Amounts, such amount that is due and payable pursuant to the terms of the Agreement on the related Distribution Date.

    “First Distribution Date” shall mean January 25, 2001.

    “Guaranteed Distributions” shall mean, with respect to the Insured Certificates as of any Distribution Date (after application of amounts in the

    Insured Reserve Fund and any Compensating Interest allocated to the Insured Certificates), the distribution to b

  4. David….
    There are 2 trusts in PPMs…..
    The one you want to nail down is the Trust in the Instrument that created the estate.
    AS JG…keeps saying one type of trust can not hold land so MERS is acting in an administrative position for the trustees. Who and in what contract gave MERS authority to act on their behalf?
    Only 2 signatures on the contract….
    The Estate…and the borrower named on the Note.
    So who are the parties to the contract?

    Why in tarnations would you irrevocably transfer convey …….

  5. If stated in the accompanying prospectus supplement, and in accordance with the rules of
    membership of MERSCORP, Inc. and/or Mortgage Electronic Registration Systems, Inc. or,
    MERS®, assignments of mortgages for any trust asset in the related trust will be registered
    electronically through Mortgage Electronic Registration Systems, Inc., or MERS® System. For
    trust assets registered through the MERS® System, MERS® shall serve as mortgagee of record
    solely as a nominee in an administrative capacity on behalf of the trustee and shall not have any
    interest in any of those trust assets.

  6. The depositor will cause the trust assets constituting each pool to be assigned without
    recourse to the trustee named in the accompanying prospectus supplement, for the benefit of the
    holders of all of the securities of a series.


    The master servicer or servicer, which may be an affiliate
    of the depositor, named in the accompanying prospectus supplement will service the loans, either
    directly or through subservicers or a Special Servicer, under a servicing agreement and will receive
    a fee for its services. See “The Trusts” and “Description of the Securities.” As to those loans
    serviced by the master servicer or a servicer through a subservicer, the master servicer or servicer,
    as applicable, will remain liable for its servicing obligations under the related servicing agreement
    as if the master servicer or servicer alone were servicing the trust assets. With respect to those
    mortgage loans serviced by a Special Servicer, the Special Servicer will be required to service the
    related mortgage loans in accordance with a servicing agreement between the servicer and the
    Special Servicer, and will receive the fee specified in that agreement; however, the master servicer
    or servicer will remain liable for its servicing obligations under the related servicing agreement as if
    the master servicer or servicer alone were servicing the related trust assets. In addition to or in place
    of the master servicer or servicer for a series of securities, the accompanying prospectus supplement
    may identify an Administrator for the trust. The Administrator may be an affiliate of the depositor.
    All references in this prospectus to the master servicer and any discussions of the servicing and
    administration functions of the master servicer or servicer will also apply to the Administrator to the
    extent applicable. The master servicer’s obligations relating to the trust assets will consist
    principally of its contractual servicing obligations under the related pooling and servicing
    agreement or servicing agreement, including its obligation to use its best efforts to enforce purchase
    obligations of Residential Funding Corporation or, in some instances, the Special Servicer, the
    designated seller or seller, as described in this prospectus under “Description of the Securities—
    Representations with Respect to Loans” and “—Assignment of Loans” or under the terms of any
    private securities.


    any one or a combination, if applicable and to the extent specified in the accompanying
    prospectus supplement, of a letter of credit, purchase obligation, mortgage pool
    insurance policy, mortgage insurance policy, contract pool insurance policy, special
    hazard insurance policy, reserve fund, bankruptcy bond, financial guaranty insurance
    policy, derivative products, surety bond or other similar types of credit enhancement as
    described under “Description of Credit Enhancement.”

  8. Estates are corporations.
    The Trust is created in the Instrument that creates the estate.



    Prior to each distribution date, the servicer is required to make Advances which were due on the
    mortgage loans on the immediately preceding due date and delinquent on the business day next preceding
    the related determination date.
    These Advances are required to be made only to the extent they are deemed by the servicer to be
    recoverable from related late collections, Insurance Proceeds, Liquidation Proceeds or amounts otherwise
    payable to the holders of the Subordinate Certificates. The purpose of making these Advances is to
    maintain a regular cash flow to the certificateholders, rather than to guarantee or insure against losses.
    The servicer will not be required to make any Advances with respect to reductions in the amount of the
    monthly payments on the mortgage loans due to Debt Service Reductions or the application of the Relief
    Act or similar legislation or regulations. Any failure by the servicer to make an Advance as required
    under the pooling and servicing agreement will constitute an event of default thereunder, in which case
    the trustee, as successor servicer, will be obligated to make any Advance, in accordance with the terms of
    the pooling and servicing agreement.
    All Advances will be reimbursable to the servicer on a first priority basis from either (a) late
    collections, Insurance Proceeds and Liquidation Proceeds from the mortgage loan as to which such
    unreimbursed Advance was made or (b) as to any Advance that remains unreimbursed in whole or in part
    following the final liquidation of the related mortgage loan, from any amounts otherwise distributable on
    any of the Class B Certificates or Class M Certificates; provided, however, that any Advances that were
    made with respect to delinquencies which ultimately were determined to be Excess Special Hazard
    Losses, Excess Fraud Losses, Excess Bankruptcy Losses or Extraordinary Losses are reimbursable to the
    servicer out of any funds in the Custodial Account prior to distributions on any of the certificates and the
    amount of those losses will be allocated as described in this prospectus supplement. Any servicing fees
    that have not been paid to the servicer with respect to a liquidated mortgage loan will be paid to the
    servicer out of Insurance Proceeds and Liquidation Proceeds from that liquidated mortgage loan from
    amounts otherwise distributable to certificateholders.
    In addition, if the Certificate Principal Balances of the Subordinate Certificates have been
    reduced to zero, any Advances previously made which are deemed by the servicer to be nonrecoverable
    from related late collections, Insurance Proceeds and Liquidation Proceeds may be reimbursed to the
    servicer out of any funds in the Custodial Account prior to distributions on the Senior Certificates. The
    effect of these provisions on any class of the Class M Certificates is that, with respect to any Advance
    which remains unreimbursed following the final liquidation of the related mortgage loan, the entire
    amount of the reimbursement for that Advance will be borne first by the holders of the Class B
    Certificates or any class of Class M Certificates having a lower payment priority to the extent that the
    reimbursement is covered by amounts otherwise distributable to those classes, and then by the holders of
    that class of Class M Certificates, except as provided above, to the extent of the amounts otherwise
    distributable to them.

  10. Look into the mirror in total surprise….and who do you see?
    I seen KC looking back at me……
    Embrace MERS….
    If you can not beat them….join them.

  11. JOHN G.
    CAN YOU FIND. Residential Asset Mortgage Products, Inc.



    Prospectus supplement dated February 23, 2006
    (To prospectus dated February 16, 2006)
    Seller, Servicer and Sponsor
    Issuing Entity
    Residential Asset Mortgage Products, Inc.
    GMACM Mortgage Pass-Through Certificates, Series 2006-J1

    Residence Lending, LLC
    Residential Acceptance Corporation
    Residential Acceptance Network, Inc.
    Residential Bancorp
    Residential Capital Mortgage Corporation
    Residential Credit Solutions
    Residential Finance Corp.
    Residential Funding Company, LLC
    Residential Home Funding Corp.
    Residential Home Funding Corporation
    Residential Home Loan Center LLC
    Residential Home Mortgage Corporation
    Residential Lending Corporation
    Residential Lending Network Inc
    Residential Lending Services, Inc
    Residential Lending, LLC
    Residential Loan Centers of America, Inc.
    Residential Mortgage Advisors LLC
    Residential Mortgage Associates, Inc. dba RMA Lending
    Residential Mortgage Capital
    Residential Mortgage Center Inc.
    Residential Mortgage Corp.
    Residential Mortgage Corporation
    Residential Mortgage Funding, Inc.
    Residential Mortgage Group, a division of Inter Savings Bank
    Residential Mortgage Network, Inc
    Residential Mortgage Services Inc
    Residential Mortgage Solution LLC
    Residential Mortgage Solutions
    Residential Mortgage, LLC
    Residential Mtg. Group, Inc.
    Residential Wholesale Mortgage, Inc.

  12. blogtalk makes it hard to find the podcast.

    I had to sort as oldes first and then newest first to get it to show up

    When I went through all the pages, it never listed.

    Trespass Unwanted

  13. Great podcast Neil.

    In my opinion, not legal advice, cause I don’t know a thing, well maybe I do, but I claim I don’t, so I don’t or do I?
    It’s my opinion I know a little something, something, and it’s my opinion I’m still learning so I know nothing.

    I know it went over many who visit here. They heard you but did not comprehend the message.
    Interesting that a couple can win a lawsuit that declares their mortgage paid and still think they owe money and enter into an agreement to pay.

    Same as sending a rescission and being told it is not valid and still going along with what the bank has ‘offered’ they do.

    Once you declare something or it is decided, to move forward and pay someone you do not owe can be perceived as a gift.

    Many here think the ‘so and so’ hereafter called the ‘Lender’ is the creditor.

    They think the named lender, the pretender is the creditor.
    If the Lender was the creditor, it would indicate as such on the documents.

    They were never the creditor, and the creditor was not disclosed, and many have no idea who the creditor is no matter how many times I’ve told them because they just can’t fathom how a signature can create the entire transaction and that without that signature the transaction would not exist.

    We could sit at that closing table for three days, but without that signature nothing would have happened, no closing.

    The transaction had value when it was signed.

    Yes Neil,
    They pretended to be owed the money.
    The pushed papers into court, claiming that the evidence of a debt on the paper meant they as the holder was owed the debt.

    Holder meant nothing, and the people did not know how to speak the language to stop it….that language legalese, with it’s latin roots.

    And when people did speak legalese, it was procedure that allowed a holder to have a higher credibility that the One who had first hand knowledge of the transaction. The One who signed the papers trying to discover why they are in court in the first place.

    Discovery has been a farce.
    Everyone should be able to discover why they are interrupted from their peaceful enjoyment of their property to deal with strangers over a debt that is not owed. So what? You have the name, and you claim a right to act on behalf of the name to transfer my right to my property to another! Is that not identity theft!

    Yes, Neil, I listened to the broadcast 8 times already and will listen to it again. You are very careful to speak to all the lawyers who you asked to listen to the broadcast and I hear what you are telling them.

    There is a lot of money to be made, and even to be made on the people who have no idea their rescission is effective because the loan was not consummated until the creditor is revealed…

    I can hear the gears in their head clicking on three years. LOL.

    You made it clear, BEFORE you deal with the (list of things), down to real judges and real decisions, etc…BEFORE…the word BEFORE
    ….the one standing in the court has to …………..
    (I’m not going to write it out….it’s up to them to hear it over and over and write it down, and read it and hear it and over and over until they get it.)

    I also agree, if we stand up and say we want to pay the real creditor, that would stop this entire mess. The real creditor has not been revealed, by them….no matter how many times I tell them who the creditor is, and send them to videos about money as debt, and the secret world of money, there are just some still looking for that creditor.

    Too easy to ask them if they have a mirror…they’ll probably ask what do they need that for.

    Not trying to be ahead, or above, or better, or smarter. I am not.
    I have been robbed just like everyone that has come here, including the ones who have won or stopped it for a while.

    But we have to get rid of what we ‘think’ we know and at some point, know what is there, legally there.

    Only the creditor can foreclose.
    Did you foreclose on your own house? Oops, asking that may reveal who the creditor is, and it will still go over the heads of some.

    I know. You can’t believe it.
    You shouldn’t.
    You should know it. Study until you know it.
    Study until you know who the creditor is and the you can stand up to Goliath with your rock of confidence and bring Goliath down.

    The power is perception, not real…only there is you give it.

    And NEVER let a lowly bank employee send a letter that you let be an operation of law.

    As Neil said, a rescission is by operation of law, only another operation of law can change it….too many sent the rescission and then post on this blog about some letter.

    Was that letter an operation of law? Well then!
    If you listen, and listen, and listen, and listen, it may trigger something.

    The clock doesn’t start until consummation…stop getting stuck on three years. It could be the clock will NEVER start ticking, not from the moment you sat at the table..

    Listen to the podcast, listen to see if he says when you sat at the table if you had a legitimate contract/agreement/trust/loan….the clock starts when it’s consummated…get off the three years….and get off equitable tolling, there is no clock in this….there is no statute of limitations on fraud…the clock never starts ticking…it was never real.

    Hoodwinked by people who knew how to violate the public trust by creating trusts and vouching for each other as trustees as they pilfered the trust of it’s assets with selling bonds that were not backed by anything in the trust.

    Terrible, terrible.

    Now the law firms are running to Neil to figure out how to back out of the shite they created, and all the judges — well, well, well, how many are there of you to account for 8 million stolen properties?

    And just think, back at the OCC settlement it was only 4 million.

    Judges are so smart, are they stupid? Or is that ignorant of the law?
    Woe to ye lawyers and judges.

    Way to go Neil.
    Way to go.
    Listening again, and again, and again.

    To the rest, I meant no disrespect.
    This just may mean, you may not have to know what you were trying to figure out. can tell a couple their mortgage is settled and they still get back into an agreement? Remnds me of the people who go through bankruptcy and no sooner the judge signs the papers clearing all debt, they walk out the courtroom and someone says, ‘what about that money you owe us for the house?” And they reply, “We’ll see what we can do about it.” And enter right back into a debt the judge signed away before the ink is dry, and then complain that the bankruptcy didn’t help them keep their home.

    It’s what we are doing that is causing us to go through what we are going through, and by design every day you watch that t.v., and know what’s going on, on it, by design you’ll never figure it out…out here.

    I don’t watch t.v. and haven’t for geesh, maybe 7 years now.
    It’s work and study, and work and study….because the information is there, but we have to see it and read and get definitions and stop inferring things that aren’t true.

    I still say people who go through bankruptcy end up unemployed within 6 months, a distant observation, unproven but undisputed also.

    If anything I disrespect myself because I had no knowledge of what happened to me except that it should not have happened.
    I’ve spent years keeping my eye on the moving shell game, and the relocation of the folded card on the table of the pick a card game, or where is the ball under the shell game.

    I kept my eyes open.
    There are agencies that will get these people for what they’ve done and all those 8 million stolen homes still belong to the people unless they have cleared the title through some action like accepting that mortgage settlement for the theft.

    IRS will have a field day with that trust…Oh yeah.
    They can’t go digging for stuff in these people’s books but probable cause and identity theft, and accounting fraud, and colluding is a powerful thing.

    This is right at the bottom of the rabbit hole. No need to go any deeper.
    We are in the rabbit’s den. Silly wabbit.

    Trespass Unwanted, Creator, Corporeal, Life, Free, People, Independent, State, In Jure Proprio, Jure Divino

  14. I will give them a contract for deed right in the ‘ole smoocher. ..

  15. Example…My husband is recorded as legal title holder via a Trust Deed without a recorded trust agreement.

    ***The Warranty Deed issued by the sellers estate to he and I both was not filed…..

    ***Tax bill comes in both our names.

    ***The Warranty Deed misrepresented…granted..from BOTH of us to the pretender lenders partner in crime capital asset funding Co. Is not filed.

    So either they file those deeds or give me my money back plus interest.

    I Bite Hard! They can’t have it both ways!

  16. One trust holds legal title and the other holds equitable title.

  17. The Trust is created in the Instrument that creases the Estate.

    In Private Placement Mortgages there are 2 trusts in the securitzation scheme.

  18. So DB. .. If value of the Estate (stolen) is 1.4 million and my husbands payoff on His loan was $136,000… and I pay it off….?

    I thought I signed a mortgage granting a lien….sighs

  19. shadowcat

    the line of credit , is based on all the applications for new homes refis,,

    your note, and most of all your credit, and signature on the note.

    like I have said before, these banks used our credit and assets to give themselves a line of credit for them to use as they wanted.

    based on our assets.

    they never lent a dime of there money.

  20. If the funding is “dry,” If the funding is “dry,” the original
    promissory note and mortgage assignment TO WAREHOUSE LENDER , documents are signed and transferred to a
    warehouse lender.

    prior to the closing on
    the home buyer’s purchase transaction, and
    therefore, a warehouse lender’s possession
    of the original promissory note becomes a
    factor in the warehouse lender’s agreement
    to release funds to the mortgage lender so
    that it can fund the home buyer’s loan.


    warehouse lenders prefer “dry” closings
    because they are most protected when
    they have actual possession of the promissory
    note prior to releasing funds. As noted
    below, dry funding may also be critical to
    coverage under the Financial Institution
    Bond, Standard Form No. 24.on
    the home buyer’s purchase transaction, and
    therefore, a warehouse lender’s possession
    of the original promissory note becomes a
    factor in the warehouse lender’s agreement
    to release funds to the mortgage lender so
    that it can fund the home buyer’s loan. Typically,
    warehouse lenders prefer “dry” closings
    because they are most protected when
    they have actual possession of the promissory
    note prior to releasing funds. As noted
    below, dry funding may also be critical to
    coverage under the Financial Institution
    Bond, Standard Form No. 24.

  21. David belanger- thanks for posting the definitions under TILA and Reg Z. Although Neil has me tionrd them for years, i dont think he ever posted them.
    So, if you had a Countrywide mortgage, funded by BOA, even though the table funder ( CW) was on the mortgage, it would by definition be BOA on the note at closing, or consummation. But never divulged to the borrower. So……. ummm….. MERS fits into the picture how? (Legally) …… Comments?

  22. Where did the Warehouse funding lines who gave mortgage lenders lines of credit it GET THEIR MONEY FROM?
    Take out the Warehouse lender and Walaa. ..

  23. Similarly, the TILA and Regulation Z loan originator compensation requirements
    discussed above cover compensation paid to mortgage brokers in “table-funded” transactions.
    Under Regulation Z, a creditor is defined in relevant part as a person who regularly extends
    credit and to whom the obligation is initially payable on the face of the note.19 For purposes of
    the loan originator compensation requirements discussed above, however, a “loan originator” is
    defined to include such a creditor if it engages in loan origination activity and “does not finance
    the transaction at consummation out of the creditor’s own resources, including by drawing on a
    bona fide warehouse line of credit.”20 In other words, the term loan originator, for purposes of
    the loan originator requirements discussed above, includes any creditor that otherwise satisfies
    the definition of loan originator and makes use of “table funding” by a third party.21 A tablefunded
    transaction is consummated with the debt obligation initially payable by its terms to one
    person, but another person provides the funds for the transaction at consummation and receives
    an immediate assignment of the note

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    Difference between Lenders and Brokers PDF Print E-mail

    Lenders and brokers both perform a variety of loan origination tasks, which include finding and advising borrowers, qualifying borrowers, taking loan applications, checking credit, processing, underwriting, verifying employment and assets, and arranging loan funding. This article provides a summary of the distinction between the two, then describes our own mini-correspondent program which we use to allow brokers to become lenders so they can close loans in their own name and make more money on the “back-end” of the transaction.

    Mortgage Brokers

    A mortgage broker is an intermediary who brings together a borrower and a lender and arranges the financing for a fee; mortgage brokers are not lenders. They are not authorized to provide final loan approval, nor do they disburse money. Brokers generally originate and process loans, while a third party underwrites, funds, closes, and takes possession of the mortgage. Technically, nobody buys loans from brokers, because brokers don’t close loans.

    Prior to January 10, 2014, Brokers typically charged their fees as points between 2% and 3% on the “front-end” or primary side of the mortgage funding process. Their fees have to be disclosed on the Good Faith Estimate. However, after January 10, 2014, front-end fees and points are capped at 3% on mortgages equal to or greater than $100,000 for a loan to be eligible for treatment as a Qualified Mortgage (QM). Investors in the secondary market generally prefer Qualified Mortgages, so QM’s are the norm. This means that brokers’ compensation is now limited to whatever amount can be charged under the 3% cap.

    The 3% cap includes certain fees paid to affiliates, mortgage originator compensation paid directly or indirectly by the consumer, compensation paid by a lender to a loan originator other than an employee of the lender, upfront charges paid by the borrower to the lender or its affiliates, and amounts imposed by secondary market investors and passed through to borrowers to compensate for credit risk. The cap excludes any compensation paid, per transaction, by a mortgage broker to an employee of the broker and compensation paid by a lender to its loan officers.

    Brokers won’t notice much difference in their operation when they become a “mini-correspondent” with us; the main difference is that you will sign the closing documents in your name as the lender, and you will recieve a gain on sale on the “back-end” when we transfer the loans to our investors. Instead of getting a “yield spread premium,” you will get a larger “gain on sale” that is not itemized on the closing docs.

    Correspondent Lenders

    A correspondent lender is a mortgage lender that originates and funds home loans in their own name. Generally correspondent lenders take ownership of the mortgage until they sell it to their investor. As a result, they may have to provide short term payment servicing, but can collect the interest on the mortgage until the investor takes possession of the title. Shortly after the loan closes, the correspondent sells the loans to larger mortgage lenders (investor) who may service the loans and may also sell them to the secondary market.

    There are many variations of a correspondent lender, but the most common is a mortgage banking firm that provides funding from a warehouse line. Correspondent lenders (or mortgage bankers) typically underwrite and approve their own loans, and lend the money being borrowed. Correspondents are usually financed by another wholesale lender or bank that issues a warehouse line of credit. Generally, a wholesale lender requires a correspondent to enter into a written correspondent lending agreement before the correspondent may originate loans for sale to the wholesale lender. The prices correspondent lenders deliver to borrowers are those of the wholesale lenders, plus a markup. Most warehouse lenders have a “haircut” so that the correspondent may receive only 97% or 98% of the loan amount from their warehouse; the correspondent is required to fund the remainder. Furthermore, most warehouse lenders charge a higher rate of interest for the warehouse line than the mortgage note rate, and warehouse funds are tied up until the investor pays the correspondent for the mortgage.

    Correspondent lenders are the primary interface with borrowers, performing all steps in the mortgage origination and funding processes. They generally originate and deliver loans pursuant to underwriting standards set by their warehouse lenders or investors upon advance commitment on price. In addition to soliciting borrowers directly, correspondent lenders may receive mortgage applications and documents from mortgage brokers. Not all correspondents perform underwriting services; instead, some rely on the investor or third party fulfillment service to underwrite loans and prepare closing documents.

    Disclosure rules differ for brokers and lenders. For example, let’s say the wholesale lender quotes a price of zero points on a 5% loan to a broker or correspondent. If the broker or correspondent wants to make 2 points on the deal (2% of the loan amount), he quotes a price of 5% and 2 points to the borrower. As a broker, the 2 points appears on the Good Faith Estimate (GFE) as a “Broker Fee”, and as a lender, it appears as “Points”. Not much difference between the broker and correspondent in this case.

    But the wholesale lender also offers, in addition to 5% and zero points, 5.25% loan with a 2 point rebate. Still looking to make 2 points, the broker or correspondent’s price to the borrower would now be 5.25% with zero points. As a broker, the 2 points has to be disclosed. A correspondent lender, in contrast, does not disclose the 2 point rebate at all. The correspondent made a 5.25% loan at zero points, then received a 2 point profit when the investor purchases the loan, but that profit is nobody’s business but his.


    Mini-correspondents are correspondent lenders that originate loans and have limited net worth and risk. Our mini-correspondent warehouse funding program allows you to continue originating loans and providing face-to-face customer service, while having a larger role in closing and funding your mortgage loans. You set your own rates and fees and determine your income. You become more self-sufficient. We have everything needed to get you started.

    You originate, process, and close the loans in your own name, but you don’t underwrite the loans and prepare the closing documents unless you get delegated approval from us. Our Team performs the underwriting and closing doc preparation. We wire the funds to the closing agent at closing, then you assign the mortgage to our warehouse bank who sells it on the secondary market to our pre-approved investors.

    Since a Mini-correspondent is a lender, you must ensure that you have the appropriate license to operate in your state or jurisdiction as a residential mortgage lender. Other than that, and the fact that the loan will be closed in your name, your operation will be almost identical to what it is now as a broker.

    Bensuit money 2efits

    The primary benefit to being our mini-correspondent is that you can make more money than you normally would as a broker by receiving a generous portion of our margin when the loan is sold in the secondary market to investors. This can be especially helpful to brokers limited to the relatively new 3% cap imposed by Dodd-Frank rules on the closing costs associated with mortgage of $100,000 or more (other caps are set for smaller mortgages). Fees paid to the broker by the lender count towards the cap, but wholesale fees don’t. As a mini-correspondent, there is no more need for Disclosure of Service Release Premiums (SRP) on the HUD-1 Settlement statement as required by RESPA. Since you are closing the loan in your own name, your company is exempted from RESPA to disclose the SRP’s, unlike table funded transactions. The profit margin our mini-correspondents receive when our Team sells the loan to the investor includes SRP’s you may have received previously if you sold your loans to investors. Another big plus for our program is the industry-low net worth requirement of only $50,000. Our warehouse funding interest rate is the same as the mortgage note rate so you do not pay extra money, and we have no haircuts on our warehouse so you receive 100% of the mortgage amount. Our bank takes possession of the mortgage after the loan is closed and they receive a complete set of closing documents along with an allonge and deed assignment. Your company gets to control the entire settlement and funding date of the loan closing. This eliminates the worry of promised wires from your table funding lenders, which rarely arrive on time. Having warehouse funding enables your company to grow at a faster pace. Growth is limited without the use of warehouse funding.

    General Approval Requirements (see Application and Checklist):

    Correspondent application and checklist
    Copy of state licenses (if applicable)
    Copy of drivers license (to open bank checking account)
    Resumes of principal officers, underwriters, etc.
    FNMA, GNMA, FHLMC, FHA or VA approvals
    Net worth of $50,000 or more
    (2 Years) corporate audited & most recent interim statements
    (2 Years) corporate federal tax returns (personal if LLC)
    Names of other warehouse lenders
    Copy of articles of incorporation and bylaws
    Board resolution approving business transactions with out Team
    Quality control procedures
    Copy of E & O and fidelity bond insurance policy at $300,000 each
    Banking references to include names and addresses
    List of secondary market investors
    Production history (summary)
    Brief company history with list of all loan officers

    When the loans are funded, our bank(s) requires several items:

    > A marketable first lien mortgage with unrestricted title
    > A Qualified Mortgage
    > No fraudulent documents
    > Complete document packages
    > Accepted QA/QC procedures have been followed
    > Complete closing package with no trailing documents “hanging out”
    > Allonge and Original Assignment of Deed of Trust to transfer ownership

    The loans are approved by our Team prior to funding and specific closing instructions are given to the title companies; funds are wired directly to the closing agent at closing. The mortgage is often pre-sold prior to closing with a written commitment from an approved third party investor. After closing, the mortgage is sold to our investor, and the mini-correspondent’s portion of the sales margin (2% to 4% – depending on mortgage rate and loan type) will be deposited directly into the correspondent’s checking account which we set up in our bank(s).

    Our underwriting and closing Team work with you closely to make sure the banks’ requirements are fulfilled.

    Last Updated on Tuesday, 17 June 2014 16:48

    Copyright © 2012 World Net Capital I. All rights reserved.
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  25. I wrote
    Belanger, I read the whitepaper you posted to google

    I meant to type
    I read the whitepaper you posted a title, for us to search for, on google

    I didn’t mean to imply you wrote the paper, and after reading what I posted, that’s most certainly what I did.

    My mistake. Please forgive me for that.

    Trespass Unwanted

  26. I don’t think it’s a crap shoot.
    I do think the one who is signing papers need to know what they have done.

    Some people signed with original ‘ahem!’ lenders and watched the foreclosure none sense and robo signing and settlements but never entered into a new agreement or new contract or new modification.

    In those cases, they may have never consummated with the original ‘ahem’ lender. As I keep mentioning the FDIC guy says he believes his loan was never consummated.

    There are people who ‘after the settlement’ with 49 state AG’s and after the settlement with OCC, the banks got their processes in order, well let’s say better order even if their process was to throw everything under MERS.

    If MERS is a creditor, and only the creditor can foreclose, (look up the definition), then the loan would be consummated within 3 years.

    I really feel empathy for people who are given so much information that they can’t sift through it for their ‘special’ circumstances.

    That’s why no one can give legal advice without even reading through the docs someone has signed and putting all the pieces together.

    If you think your loan was consummated, you will do no thing.
    Notice I wrote think.
    If you know your loan was consummated, you will do no thing.
    To know your loan was consummated is to know who the creditor is, and no matter how many times I post The Secret World of Money to show who’s signature on the paperwork started the money creating process, I still know people figure the one who received the paper and typed the amount in some computer is the creditor cause they had access to a computer..and I can’t help them. I really can’t.

    They can’t sit and type numbers in a computer for nothing, something has to kind of give them access/permission/power/ability, and there are just some people that don’t see how that note ‘came alive’ with their signature…again I can’t help them.

    So if you know who the creditor is, and it has not been revealed to you, your loan is not consummated.

    A clock starts ticking when you know or have a reasonable ability to know, and the people doing the closing did they ever tell you and is the news media telling you and can anyone say you learned it ‘on-the-internet’?

    So, having said all of that no thing, if you know (I didn’t write think), that your loan was no consummated, who are you hurting when you take no action? Yourself? the bank?

    If you can answer that, you know what you can do.

    I admit it’s frustrating to try to reach people who are not ready to be reached, and then I realize we all are learning and one day as they keep reading and picking the meat off the bones, they will get their Ah-Haa! moment.

    I keep trying to not trespass on the right to not know. I know how important it is to allow someone to walk their walk in their own shoes.

    I did mine and the journey is challenging. I keep digging and keep learning and my discernment skills are better than before. I touched a lot of hot coals before I figured out to avoid hot coals but get the warmth it offered for my use.

    Is belanger’s letter real? If so, I post here like I posted in previous blog post, congratulations (something similar)

    I also posted a link where people discussed CFPB and there were some nuggets in there too.

    Like send the letter certified and put on it cc first class mail and send it first class mail because if they REFUSE TO SIGN for the certified you know they got the first class mail.

    How many of you know they will REFUSE to sign certified mail.
    I’ve had certified mail never get delivered and never show an update in the mail system web page. So I know there are ‘attorneys’ that have refused to accept my correspondence, and a mail person who made sure it didn’t come back to me.

    Now they put tracking on all of the mail, so that may point to which carrier handled it and didn’t report it undelivered and made it disappear in the ether.

    It’s getting hotter and hotter for them.

    Belanger, I read the whitepaper you posted to google.
    I have known the muni-bonds were going to be an issue some day.
    I know because some people in the patriot community researched the county attorney and realized it was an office for a form of government that was different from state attorney, or us attorney, or even DOJ.
    The county attorney is like the supreme trustee for the county and behind all the real estate transactions. When you consider that a birth certificate is also in real estate records, you kind of piece together that the system recognizes we are all real estate, if you want to call that ground, then we come from the ground if you do the Adam story, or we are made or grown or developed from the essence of the things that come from the ground like the fruits, nuts, vegetables, or animal/meat that eats things that come from the ground.

    When they put everything in real estate and you get to to the core of it, you know why.

    But muni-bonds are probably including the bonds they make people sign when they send them to jail, and they bond out, those bonds are traded as soon as they are signed and people think their charges are going to get dropped, and the system is not willing to call those bonds back, there is too much money to be made from them (plus your ssn) that they got cause you gave it to them, or cause you carried the card on you and they searched your property and got the number off you.

    Anyway, you have a chance to decide if you want to rescind, and it really is up to you to do it, and if you like pondering things into ‘analysis paralysis’ (I didn’t make that up, it’s been used before), that may be how you do things and if nothing ever happens for you, it will be by your design because ‘you now what you need’ and you do for you what you do.

    If people can locate the FDIC guy’s article, I think Neil posted something here about him and msfraud did to, but if you read the last article where he was not given a fair venue for his foreclosure and he still didn’t stop, cause he knew something that many have still yet to learn.

    It’s got to do with creditor, and Neil’s rescission posts repeated it over and over ad infinitum, which appears to still not be enough,
    and posting from the supreme court ruling, appears to still not be enough.

    Some people still let a mere employee of a company over rule a supreme court decision. Some people give everyone the power.
    Some people think everything can be solved by violence cause they think everyone has power, when they don’t realize they give the power.

    If you don’t give the power, it’s yours. If you give the power, it’s theirs.
    if you don’t protect your right, they will use the power you don’t know you have, against you. They have the saying, ignorance is not bliss.
    They will use the ignorance of your power against you and sell you the brooklyn bridge, you will pay for it and believe since it’s been three years you can’t rescind your signature. You would ignore the fact that TILA would have made them tell you they sold you something they didn’t own, but you’ll talk yourself out of rescission anyway cause you are watching the calendar.

    Some people can get too much information and not know how to use it.

    Might I suggest learning the legal meaning of words and not off the internet, but from a legal dictionary, like Black’s law.

    When someone tells me a word and they are in a position of public servant, I know it’s a legal term, cause all of those agencies have lawyers writing their procedures.

    You tell me certificate, I’m looking up the legal definition.
    You tell me truth, I’m looking up the legal definition.
    You tell me fact, I’m looking up the legal definition.
    You tell me person, “” “”
    You tell me foreclosure — I guarantee it doesn’t me a lost home, and contains the word creditor. Is a servicer the creditor? trick question…someone said yes. LOL.

    Trespass Unwanted, Creator,
    [all of the following are Black’s Law legal terms]
    Corporeal, Life, Free, People, Independent, State, In Jure Proprio, Jure Divino

  27. “In one of the schemes, upon making a loan to a consumer, Lender A delivers the original promissory note to Bank B in exchange for the money to fund the loan. Lender A also obtains funding from Bank C for the same loan by assigning the mortgage instrument to Bank C and recording a copy of this assignment. In another scheme, Lender A delivers the original promissory note to Bank B and delivers a copy of the same promissory note to Bank C. (and so on) ”

    This is, as seen in the rest of the article, when the UCC will kick in – when there’s a dispute about who’s on first. Here, there’s conflict with diff agreements and something has to resolve it. There’s no conflict in these notes (x the article 3 ref to “holder” v the req for “transfer” and the right to payment. Before turning to default law, courts will generally try to glean the intent of the parties. Here, since fnma created the docs for lenders and the note is part of a contract of adhesion, courts will try to find the intent of the party who created the docs and controlled its language. I personally see no doubt the intention was to compel the movement of these notes by transfer (and hence the attempt to have mers assign them to hide the identity of the party really transferring them, if anyone).

    BEWARE: Banksters are now coming up with blanket powers of attorney. Any instrument executed by an att in fact must so state. The att in fact may not execute as if in it’s own right, so even with a poa, the bankster must identify the party for whom it’s an att in fact. And to transfer instruments to a trust (or anyone), the poa needs to be to the assignor, not the assignee. It would be no value at a closing of a home sale, for instance, on the warranty deed if the att in fact represented the buyer. He needs to rep the seller to sign the deed.

  28. @louise – IANAL, but contemplating that the 3 years starts from the date of a ruling seems to nullify what was said in the ruling. IOW, a self-defeating phantasy. Generally you have 6 months to file reconsideration of a case based on new law, and that might be the proper way to handle old rescissions with this new ruling.

    Now if you sent a rescission notice within 3 years of consummation of your loan, and then another year passed, technically the loan is uncollectible as a matter of law, as Neil points out. And it depends on whether you made any further payments, thereby ratifying an illegitimate debt. In that scenario you likely waive the ability to file a conversion action. If you made no payments, then you have options you might discuss on a contingency basis with an attorney, because every effort by bankster to collect illegitimate debt should be money in your pocket depending on what you saved as evidence.

    And if you sent your rescission notice after the 3 years had passed, the statutes says you are dead in the water even if no TILA documents were provided to you. That was Beach being affirmed in Jesinosky.

    The preceding is my perspective as a lay person, and should not be taken as legal advice, but for food for thought only.

  29. David, when my loan was originated the dual transaction was taking place. The lawyer who did the closing on my house was convicted of “flipping houses with dual transactions”. He did three years in the federal pen for that. Do you think the origination of my loan was compromised? Again, the mortgage and the note memorialize a transaction that is not properly represented. It is not between entity A and B but there is a C in there which voids the whole origination INMHO of course.

  30. Jg
    These officers/ agents/ vice pres for the day amount to is another patsy of choice andcthey know it thats the sad-er part

  31. One of the unfortunate byproducts of the sub-prime mortgage crisis has been an increase in fraudulent conduct among originators of residential mortgage loans who fund such loans using warehouse lines of credit provided by banks and other financial institutions. The premise of warehouse lending is as follows: Lender A obtains a line of credit from Bank B wherein Bank B funds loans made by Lender A to consumers secured by residential real estate. Bank B secures its line of credit to Lender A by taking an assignment of the notes and mortgages given by the consumers to Lender A. The notes and mortgages are held by Bank B until Lender A packages and sells the loans on the secondary market, at which time the advances under the line of credit made by Bank B to Lender A are repaid.

    Mortgage lenders typically obtain warehouse lines of credit from more than one bank or financial institution so that they can maximize the loan dollars that they offer to consumers without having to raise significant equity. A few different schemes have surfaced in which these mortgage lenders “double fund” the residential real estate loans being made by having two or more of the lenders providing warehouse lines of credit unknowingly fund the same mortgage loan. The mortgage lender uses the proceeds from one of the lines to fund the residential real estate loan while keeping the proceeds from the other loan or loans for itself.

    In one of the schemes, upon making a loan to a consumer, Lender A delivers the original promissory note to Bank B in exchange for the money to fund the loan. Lender A also obtains funding from Bank C for the same loan by assigning the mortgage instrument to Bank C and recording a copy of this assignment. In another scheme, Lender A delivers the original promissory note to Bank B and delivers a copy of the same promissory note to Bank C.

    In both instances and regardless of the timeframe in which Bank B and C fund the loans or obtain their respective “collateral”, the result is the same – Bank B prevails. The Uniform Commercial Code (the “UCC”) makes it clear that UCC rules govern the perfection or non-perfection of the security interests of the warehouse lenders in the above scenario. See N.C.G.S. § 25-9-109. The UCC prescribes that the mortgage follows the note and, therefore, one cannot perfect a security interest in the mortgage instrument without also perfecting a security interest in the underlying obligation (i.e., the note). See N.C.G.S. § 25-9-109, Comment 7. To perfect a security interest in a promissory note, a lender must either: (a) file a financing statement, or (b) take possession of the promissory note. See N.C.G.S. §§ 25-9-312(a) and 25-9-313(a). Although the UCC now allows a lender to obtain a perfected security interest in promissory notes by filing a UCC Financing Statement, the best practice is to always take possession of original promissory notes so as to cut off any priority rights that certain competing purchasers and lenders with possession of the promissory notes may be entitled to. See N.C.G.S. §§ 25-9-330(d) and 25-9-331.

    It is clear from the above examples that obtaining possession of original promissory notes is, in most instances, sufficient to protect a lender providing warehouse lines of credit. What happens, however, when Lender A obtains duplicate originals of the promissory note from the unsuspecting borrowing consumer and delivers “original” notes to both Bank B and Bank C? In this situation, obtaining possession of the original promissory note is not enough. The determination depends simply upon which bank obtained possession of the “original” promissory note first. The first to obtain possession would prevail. See N.C.G.S. § 25-9-322(a); See also Provident Bank v. Cmty. Home Mortg. Corp., 498 F. Supp. 2d 558 (E.D.N.Y. 2007).

    The above scenarios and the law applicable thereto illustrate that a lender providing warehouse lines of credit would be well advised to, in addition to taking possession of original promissory notes, closely monitor the lending activities of its borrowers, including the funding and borrowing from warehouse lines of credit provided by other lenders.
    Physical Address: 301 Fayetteville Street, Suite 1900, Raleigh, NC 27601



  33. 1) WHY, in view of the assumed risk factors, did banksters insure and the agencies either insure or guarantee these loans? One answer is one I can’t prove: that the banksters (willfully) avoided the seasoning requirement for loans prior to sec’n and fashioned their own remedy for violating the seasoning requirement. As to fnma, I can only repeat that the agencies, and not private guys like RFC and RAMP, in fact guarantee’d or insured these loans (and, again, that the “g fee” – 83.33 per mo. on a 400k loan for the life of the loan) was an undisclosed third party charge to everyone at least on a loan headed to fnma..
    But this doesn’t seem satisfactory to me because that remedy is prob damn expensive (well, depending who is the beneficiary of the insurance) where it isn’t foisted off to the borrower, like with fnma – fnma’s is .25% FOR THE LIFE OF THE LOAN. I posted WF’s letter at scribd wherein WF argued against seasoning,*but that, at least it appeared, was against a seasoning requirement being contemplated (as a future event) by the SEC (or whomever), not an argument to get rid of a seasoning requirement. And fnma’s insurance for the llfe of the loan may exceed that taken by other players: maybe they only took it for a year or two or ?? Anyone?
    *it discussed a “safe harbor”, as I recall

    Btw, as I recall, WF argued that a seasoning req’t would disrupt commerce, basically. Hell with first or second or third payment defaults.

    2) Why did AIG put “write your own insurance” terminals in lenders’ offices? Why did AIG waive subrogation?

    3) MERS operates by having the member – employees execute documents in mers name (their own alleged agent). Last I knew it was Hultman executing alleged corp resolutions of either merscorp or mers (I forget) making 20+ thousand merscorp’ member-(and non-member) employees officers of another corporation, mers. How’s that work?

    4) IF it’s true that a 1) a corporate resolution exists authorizing the appt of generally low-level non-mers’ employees as officers thru out the country, and 2) if it’s further true that MERS is on its third iteration and 3) it was the board of the first which authorized the “Hultman-officer-designating resolutions”, can the board of the current (third) iteration ratify his appointments (what is the bar?) and HAS it?

    5) If an appropriate corporate resolution authorizing these appts exist, ARE THESE 20K+ INDIVIDUALS MERS’ officers?

    WHAT makes Joe a corporate officer of MERS or any corporation?
    DOES a corporate resolution “get it”?

    Even if, arguendo, Hultman could call them officers on behalf of mers, ARE they officers? WHAT makes one a corporate officer? Again assuming arguendo the resolutions out of Bill are legit, does this make one an officer when: the ‘officer’ isn’t supervised by MERS, isn’t paid by MERS’, takes no direction from MERS (Hultman says they get no direction from note owners themselves – from a transcript we know about).

    6) Is there a legal reason why corporation B who is the agent of corp. A may not call employees of its principal its officer to perform the duties that Corporation B is to perform and further, led third parties in and to other agreements to believe IT would? Isn’t the alleged agent, though calling the actors its officers, actually handing the job right back to the parties (all members) they said and represented they’d do X for? a) Agents may not appt others(sub-agents) to do anything but menial tasks they agreed to do – as a matter of law, btw, and b) agents may not alienate the interests of their principals, no matter what else they may do contractually. (which is why mers, despite its propaganda, imo is executing assignments of collateral instruments in its own right, as thee ben (as evidenced by the signatory in the assgts), even if it’s the nominee of the lender. I’m saying one may be thee ben and also a nominee. Of course they’ve been nominated – they can’t just be a ben because they want to be. A nominee is chosen generally to be in a contract when the real party doesn’t want to be in the contract. What their agreement is between them is found in another agreement. Believe me, if there were a pi$$ing match between real Party A to an agreement and its nominee, courts would be looking at the agreement between them.
    (“What do you mean those are YOUR widgets?”)

    7) What about when that (low-level) employee-made-mers-officer uses his officership and he is the employee of the party receiving the benefit of the transfer of an interest (and one in REAL property to boot) he created? Isn’t this a patent conflict of interest? Surely the legal community can find finite answers to this question.

    8) Did those guys really think they’d solve one of their problems by making the members of merscorp call their mers-hat-wearing employees their own “officers”, also? “You’re now not a low-level employee because you’re now an officer of both the servicer and another corporation (the assignOR, as it happens)?

    9) It’s true that MERS is the nominee of the original lender, but it isn’t true, unless mers is thee ben, that it’s anyone else’s anything, because no one may make mers anyone else’s agent. Others may agree that an agent is also their agent or nominee, but if so, that relationship isn’t created for anyone else in a collateral instrument. And even if mers is anyone else’s anything, what mers is is thee ben until it’s assigned the instrument, which if it were the agent of the orig lender or the man in the moon, it couldn’t do as a matter of law as an agent. Another contract may exist which makes mers 5000 people’s agent, including successors in interest to the notes. But none exists that we know of. An agreement exists which keeps mers the nominee for the agreement, as thee ben in public record. MERS could’ve been made a POA and we don’t know it, such that it could convey the beneficial interest contractually retained by the lender, but that would require “mers” to execute assignments as such, as poa for X. And “mers’ doesn’t.

    10) Even if mers were anyone’s agent or nominee or POA or chief bottle-washer, that relationship dies with the principal’s bk (unless reaffirmed or like that in the bk) or death of the corporation. So when Mers says it’s assigning the ben interest in a coll instrument for ABC, its successor and or assigns, and ABC is toast, a) “mers” clearly isn’t assigning for ABC, as ABC’s anything.
    b) As anything other than thee ben, i.e., other than in its own right, in order to assign the beneficial interest in a coll instrument, mers must identify the party for whom it purports to act and execute the instrument as such, that is, as POA for so and so. It, like anyone, must prove, where required, the attorney-in-fact relationship it claims.

    11) WHO is the proper party to tell an attorney in fact to alienate its interest to another? Is it the lender or his successor?
    It’s the guy for whom the att in fact has the poa and he must be the last guy to own the note,* the last guy who was the creditor, not the guy who’s bought the note. If B buys A’s note, B has no authority to command A’s att in fact to do anything. Only A does. Of course B can put pressure on A for the assgt of the coll instrument, or even sue him for it, but he can’t boss around A’s att in fact.
    This means that when the att in fact executes an assignment, he must identify the party for whom he is a POA. (He may not execute an assgt as if in his own right)
    *and what about the guys before him?

    These are the facts, least in my opinion, and if they don’t like it, they can concede mers is thee ben (despite their legally goofy efforts and then bs re: agency as if it’s found in the coll instruments themselves – what’s in the coll instruments, is no more than a notification of things which must be found in another agreement) and deal with the ramifications of original bifurcation. Perhaps they can explain how another party , not the lender / creditor, is entitled to be in a loan agreement in the first place and then how REunification is possible when there was no orig unity. And in the meantime, they outta stop trying to make it look like “Mers” is assigning in anything other than its own right, because by the signatory, that’s exactly what they’re purporting.

    12) Why hasn’t MERS been prosecuted for all the robo-signing done in its name? Is the answer that it has no assets, so to punish, they’d actually have to file criminal charges?

    13) Is this really anything but a racket, and one which crosses state lines? They REALLY messed up when they went straight to MOM’s instead of assigning to “mers”: They bifurcated. If it were done with purpose, was their reason to keep the loans out of the trusts for their own reasons (ins? bets?) and or for bk-remoteness and being bullet-proof (mers = no assets)? David, I think you should find a way to share those gazillions of RAMP (identifed) loans for the benefit of those whose loans couldn’t have gone to the agencies, even if you must do it 20 pages at a time (scribd? Website?) since you said RAMP wasn’t a club member.

  34. 1. 3 years since January 2015 ???
    2. Modifications included ???
    3. Purchase w/ original servicer in 2007. Not a refinance.

    Seems like a real longshot to me. Hope I’m wrong. And everyone steamrolled the banksters

  35. If the funding is “dry,” the original
    promissory note and mortgage assignment
    documents are signed and transferred to a
    warehouse lender prior to the closing on
    the home buyer’s purchase transaction, and
    therefore, a warehouse lender’s possession
    of the original promissory note becomes a
    factor in the warehouse lender’s agreement
    to release funds to the mortgage lender so
    that it can fund the home buyer’s loan. Typically,
    warehouse lenders prefer “dry” closings
    because they are most protected when
    they have actual possession of the promissory
    note prior to releasing funds. As noted
    below, dry funding may also be critical to
    coverage under the Financial Institution
    Bond, Standard Form No. 24.

  36. Fidelity and Surety
    36 n For The Defense n March 2009
    n Daniel E. Tranen and Stefan R. Dandelles are partners in the Chicago office of Wilson Elser Moskowitz
    Edelman & Dicker LLP. Mr. Tranen’s practice areas include insurance coverage, professional liability, and
    life, health, and ERISA litigation, as well as fidelity bond matters. Mr. Dandelles’s practice areas include
    directors’ and officers’ liability, financial institutions, commercial crime, and fidelity bonds. Both authors are
    members of DRI and its Fidelity and Surety Committee.
    Are Financial Institution

    Bonds Susceptible? Warehouse Lending
    Losses Due to Forged
    Promissory Notes
    to fund a portfolio of loans to various
    residential home buyers for short periods
    of time

    . If a mortgage lender wishes
    to perpetrate fraud using its warehouse
    lender, there are many opportunities to do
    so since almost no underwriting is performed
    by warehouse lenders on the loans
    they finance.

    Instead, warehouse lenders
    protect themselves by performing due diligence
    on their mortgage lenders in the
    hope that theses mortgage lenders’ intentions
    are honorable,

    and by taking possession
    of the original promissory notes
    signed by residential home buyers around
    the time the loans are funded as collateral
    for this interim financing.

    Currently, due
    to reduced lending resulting from the subprime
    lending crisis and poor economy,
    bank warehouse lending departments are
    more at risk from fraud than ever as they
    attempt to find mortgage lenders that can
    use credit lines.
    Over the past few years, several highprofile
    frauds have been perpetrated on
    banks involved in warehouse lending. Two
    cases dealing with coverage disputes under
    financial institution bonds arising from
    such frauds were litigated in courts in the
    Sixth Circuit. Although the frauds were
    factually similar, the trial courts, and ultimately
    the Court of Appeals for the Sixth
    Circuit, came to very different conclusions
    regarding the coverage obligations of the
    fidelity bond insurers based on a perceived
    difference in the underlying transactions.
    This article analyzes coverage for warehouse
    lending losses associated with forged
    promissory notes through the prism of
    these two Sixth Circuit decisions. Applying
    the language in the 2004 version of the
    Financial Institution Bond, Standard Form
    No. 24 and considering the background
    and purpose of the bond, courts should
    determine that no coverage attaches for
    warehouse lending losses associated with
    forged promissory notes used as collateral
    because the unenforceable “promise,”
    not the forgery, is the “direct” cause of a
    By Daniel E. Tranen
    and Stefan R. Dandelles
    When confronted with
    these claims, courts
    should determine that
    no coverage attaches
    because the forgery
    is not the direct
    cause of the loss.
    Most warehouse lending losses from fraud are large
    losses suffered by sophisticated banks. Warehouse lending
    typically involves a substantial, revolving line of
    credit given to a mortgage lender, which uses that credit
    © 2009 DRI. All rights reserved.
    For The Defense n March 2009 n 37
    warehouse lender’s loss when a warehouse
    lender relies on forged promissory notes to
    extend credit to a mortgage lender for putative
    real estate transactions.
    The Fraud Risks to Warehouse
    Lenders from Mortgage Lenders
    Warehouse lenders provide a kind of “bridge
    financing” that allows mortgage lenders,
    which are not otherwise backed by a financial
    institution, to extend credit to residential
    home buyers for real estate purchases. In
    these transactions, a warehouse lender does
    not have a direct relationship with a home
    buyer. Instead, a home buyer’s relationship
    is with a mortgage lender. In exchange for a
    mortgage lender’s funding of the home purchase,
    a home buyer signs a promissory note
    promising to repay the loan, and a mortgage
    on the property as security for the loan. The
    mortgage lender uses this promissory note
    and the mortgage, which it assigns, as collateral
    for the credit extension it receives
    from its warehouse lender.
    A warehouse lender typically funds this
    extension of credit to a home buyer when a
    home buyer closes on the purchase of the
    home. If the funding is “wet,” a warehouse
    lender will generally part with its funds
    prior to execution of the promissory note by
    the home buyer, although it will not receive
    the original promissory note until some
    later point in time. In other words, funding
    is released prior to or simultaneous with
    creation of the promissory note.
    If the funding is “dry,” the original
    promissory note and mortgage assignment
    documents are signed and transferred to a
    warehouse lender prior to the closing on
    the home buyer’s purchase transaction, and
    therefore, a warehouse lender’s possession
    of the original promissory note becomes a
    factor in the warehouse lender’s agreement
    to release funds to the mortgage lender so
    that it can fund the home buyer’s loan. Typically,
    warehouse lenders prefer “dry” closings
    because they are most protected when
    they have actual possession of the promissory
    note prior to releasing funds. As noted
    below, dry funding may also be critical to
    coverage under the Financial Institution
    Bond, Standard Form No. 24.
    A warehouse lender usually receives payment
    on its line of credit when the mortgage
    lender sells the loans on the secondary
    market or to a specific third-party investor.
    The time lag between the warehouse
    lender’s financing of a loan and repayment
    by the mortgage lender is typically between
    30 and 90 days. Once a loan is sold and a
    warehouse lender is repaid by the mortgage
    lender (with interest and fees), additional
    credit becomes available on the warehouse
    line of credit so that the mortgage lender
    can make additional loans. In this way,
    the collateral—the promissory notes—
    for credit being extended by a warehouse
    lender is constantly rotating as loans are
    sold and new loans are made.
    Because a warehouse lender only provides
    interim financing, it is not particularly
    concerned with the overall viability
    of a loan or the ability of the residential
    home buyer to repay the loan. A warehouse
    lender is concerned with the mortgage
    lender’s ability to sell the loan to a thirdparty
    investor or with the secondary market.
    Once a mortgage lender demonstrates
    an ability to sell a loan during this interim
    time period of less than 90 days, a warehouse
    lender becomes comfortable with
    the mortgage lender. Indeed, a consistent
    record by a mortgage lender of successfully
    selling mortgages and repaying its warehouse
    lender will often induce the warehouse
    lender to extend greater amounts of
    credit to that mortgage lender so that it can
    fund additional loans.
    There are many ways for mortgage lenders,
    usually in conjunction with fake title
    companies and even fake investors, to
    defraud warehouse lenders. The fraud usually
    involves false or fabricated promissory
    notes containing forged signatures, since
    promissory notes are the collateral that
    warehouse lenders typically must receive to
    release funds to a mortgage lender to fund a
    real estate purchase transaction. Fraud success
    involving a forged promissory note is
    usually unaffected by whether funding was
    “wet” or “dry,” since the promissory note,
    whether an “original” or just a “copy” does
    not represent a valid promise by an actual
    purported home buyer to pay.
    Relevant Provisions under the
    Financial Institution Bond,
    Standard Form No. 24
    Two coverage provisions usually come into
    play when a warehouse lender suffers loss
    from fraud associated with its reliance on
    forged promissory notes. Insuring Agreement
    D, which deals with forgery or alteration,
    covers, in pertinent part, loss resulting
    directly from a bank’s reliance on a negotiable
    instrument, certificate of deposit or
    other similar document (but not an evidence
    of debt) that bears a signature of a
    maker that is forged or altered, but only
    to the extent that the forgery or alteration
    causes the loss. Insuring Agreement E,
    deals with securities, and covers, in pertinent
    part, loss resulting directly from a
    bank’s reliance on a security, deed, evidence
    of debt or similar document that
    bears the signature of a maker and that is
    either a forgery, an alteration, lost or stolen.
    Both coverage under Insuring Agreements
    D and E require actual, physical possession
    of the item by a bank as a condition
    precedent to coverage under the 2004 version
    of the financial institution bond. In the
    1986 version, only coverage under Insuring
    Agreement E required a bank to possess
    the document. This fact is significant
    because, as noted above, sometimes loans
    are funded by a warehouse lender, even
    though the warehouse lender does not have
    possession of the original documents as
    collateral, which, as also mentioned above,
    is known as “wet” funding.
    The Union Planters Fraud and
    Coverage Determination
    In late 1999, Union Planters Bank extended
    a $10 million line of credit to Greatstone
    Mortgage for the purpose of funding mortgage
    advances to residential home buyers.
    Union Planters Bank N.A. v. Continental
    Cas. Co., 478 F.3d 759, 761 (6th Cir. 2007);
    see also Union Planters Bank N.A. v. Continental
    Cas. Co., No. 02-2321-MA (W.D.
    The forgeries did cause
    the loss because, according
    to the court, the promissory
    notes would have had value
    but for the fact that they
    were forged by Greatstone.
    38 n For The Defense n March 2009
    Fidelity and Surety
    Tenn. August 23, 2004) (Mays). These funding
    advances were “wet,” meaning that at
    the time Union Planters extended the credit
    to Greatstone to fund the home purchase,
    Union Planters would only have faxed copies
    of the promissory notes, mortgages and
    mortgage assignment documents. Id. The
    “original” documents would be delivered
    to Union Planters at a later date.
    After successfully demonstrating an
    ability to sell the mortgages on the secondary
    market, Union Planters provided
    Greatstone with larger lines of credit. By
    the summer of 2001, Greatstone had a $25
    million line of credit, which it had drawn
    down, purportedly, to fund loans to residential
    home buyers. Id. at 761. Greatstone
    subsequently defaulted on its line of credit
    and ceased making payments to Union
    Planters. The principals of Greatstone took
    the money and fled to Costa Rica to avoid
    the authorities.
    Union Planters soon discovered that it
    had been one of the victims of fraud perpetrated
    by Greatstone against a number
    of banks. The fraud suffered by Union
    Planters in part involved the origination of
    legitimate mortgages for which Greatstone
    borrowed money on a line of credit from
    another warehouse lender. From information
    supplied by the home buyers with
    these legitimate mortgages, Greatstone created
    fraudulent mortgages and promissory
    notes upon which Greatstone forged the signatures
    of these otherwise legitimate buyers.
    Id. at 762. Next, Greatstone transmitted
    the forged mortgage documents to Union
    Planters, which induced Union Planters
    to continue to extend credit to Greatstone.
    The fake mortgage documents contained
    unique loan numbers that did not reflect
    an actual extension of credit from Greatstone
    to the borrowers; those borrowers
    had already received mortgage funds from
    Greatstone, pursuant to separate loan documents,
    legitimately signed by those borrowers.
    See Union Planters,at fn. 5.
    Union Planters’ primary financial institution
    bond insurer denied coverage for its
    loss. The insurer made two strong arguments
    in favor of its position. First, it
    argued that because Union Planters did
    not have possession of the original promissory
    notes when it extended the credit,
    and provided “wet” funding, Union Planters
    did not “rely” on those original notes
    when it extended the credit, which was one
    of the conditions for coverage under the
    bond. While the court agreed that there
    was no reliance on the individual promissory
    notes for a particular extension of
    credit, the court rejected the insurer’s argument
    because Union Planters did rely on
    its possession of original promissory notes
    for one loan to extend credit for future
    loans. Because the original collateral was
    constantly rotating, the court found that
    Union Planters did rely on original loan
    documents that were in its possession. Id.
    at 764.
    Second, the financial institution bond
    insurer argued that the loan losses did not
    “directly result from” the forgeries. Instead,
    other factors, including Greatstone’s use
    of duplicate, fraudulent loan documents,
    actually caused this loss. The court found,
    however, that the forgeries did cause the
    loss because, according to the court, the
    promissory notes would have had value but
    for the fact that they were forged by Greatstone.
    The court reasoned that the value of
    a promissory note lies in the “promise to
    pay.” According to the court, had the note
    contained a valid promise to pay, it would
    have had value. Since the forgery was the
    difference between value and lack of value,
    the Sixth Circuit Court of Appeals held that
    the forgery directly caused Union Planters’
    loss. Id. at 765.
    The court found that Union Planters’
    loss met the conditions for coverage under
    the subject financial institution bond, and
    the insurer had to indemnify Union Planters
    for these loan losses.
    The Flagstar Fraud and
    Coverage Determination
    In 2003, Flagstar Bank provided a putative
    mortgage broker operating under the
    name “Amerifunding” a $20 million line of
    credit. Flagstar Bank FSB v. Federal Ins. Co.,
    2006 U.S. Dist. LEXIS 83825 3 (E.D. Mich.
    2006); see also Flagstar Bank FSB v. Federal
    Ins. Co., 2008 U.S. App. LEXIS 1114 (6th
    Cir. 2008). Amerifunding used that line of
    credit purportedly to extend credit to home
    buyers purchasing residential real estate.
    Id. In fact, there were no home purchases,
    no home buyers, and no real estate transactions
    associated with these loans. Id. at 4.
    The purported home buyers were real individuals
    who had applied for jobs at Amerifunding.
    Id. at 20. Amerifunding used
    copies of their driver’s licenses and other
    personal information obtained with the
    putative job applications to make it appear
    to Flagstar that legitimate home purchases
    were taking place. Id. at 22.
    With that information, Amerifunding
    created promissory notes, which included
    forged signatures using the names of these
    individuals. Upon receiving the originals
    of these promissory notes, Flagstar would
    fund the loans by unwittingly providing
    the money for fictitious home purchases to
    a fictitious closing agent. In reality, these
    funds went to the principals of Amerifunding.
    Amerifunding had identified a specific
    investor from which Flagstar received payment
    for the loans it extended to Amerifunding
    for these fictitious home buyers.
    This “investor,” TDF Funding, was also
    fictitious and was operated by the principals
    of Amerifunding. Flagstar’s belief
    that these loans were being purchased by
    TDF Funding was instrumental in its decision
    to extend credit to Amerifunding. Id.
    at 22–23.
    Ultimately, Flagstar did not discover
    the fraud as a result of an Amerifunding
    default, as occurred in the Union Planters
    case. Instead, an enterprising processor
    employed by Flagstar discovered the fraud
    when her suspicions caused her to contact
    a putative home buyer, who denied participating
    in a home purchase with Amerifunding.
    Id. at 10.
    Flagstar sought coverage for its losses
    from its financial institution bond insurers.
    They denied coverage because Flagstar’s
    The fact that the named
    borrowers were actual
    customers… does not
    make the transaction that
    was collateralized by the
    forged promissory note
    any more authentic.
    For The Defense n March 2009 n 39
    loss did not directly result from the forgeries
    on the promissory notes. Instead, the insurers
    argued, and the Sixth Circuit Court
    of Appeals agreed, that the collateral—
    the promissory notes—had no value, and
    would have had no value, even if they had
    not been forged, since the underlying transactions
    were wholly fictitious. Flagstar, 2008
    U.S. App. LEXIS 1114 at 11. Therefore, Flagstar’s
    loss was not caused by the forgeries,
    but by the fraudulent scheme itself.
    Are the Flagstar and Union
    Planters Circumstances
    Materially Distinguishable?
    Factually, the fraud schemes involved in
    Flagstar and Union Planters are similar.
    Both schemes involved the creation of
    promissory notes by mortgage brokers with
    forged signatures of real people. In both
    cases, the promissory notes did not evidence
    promises to pay by purported home
    buyers based on a legitimate home purchase
    transaction, but instead were created
    to deceive the warehouse lender so that it
    would extend credit to the mortgage lender.
    In both cases, the warehouse lender relied
    on the legitimacy of forged promissory
    notes in making a decision to extend credit
    to the mortgage broker. In each instance,
    the warehouse lender obtained the original
    promissory notes as collateral from the
    mortgage lender as part of the agreement to
    fund the putative transactions. In the Flagstar
    case, the transaction never occurred.
    In the Union Planters case, a home purchase
    transaction did at one point occur,
    but the money provided by the insured
    warehouse lender was obtained via fraud
    and was not used to fund the transaction,
    and instead, went directly into the mortgage
    lender’s pocket.
    The Union Planters court distinguished
    its factual circumstances from the Flagstar
    facts as follows:
    But the collateral the bank received in
    [the Flagstar case] was entirely fictitious:
    the named borrowers were never customers
    of the mortgage lender; no permanent
    lender ever purchased any of
    the mortgage loans; and even if the loans
    had borne legitimate signatures, they
    still would have been worthless. Here, by
    contrast, the named borrowers were customers
    of Greatstone; permanent lenders
    purchased some of the loans; and
    if the loans had borne legitimate signatures,
    they would have had value.
    Union Planters, 478 F.3d at 765.
    However, these distinctions are either
    superficial or incorrect.
    The first two distinctions identified
    by the Union Planters court, while true,
    do not appear to be critical distinctions.
    The fact that the named borrowers were
    actual customers of Greatstone does not
    make the transaction that was collateralized
    by the forged promissory note any
    more authentic. Indeed, at most, this fact
    provided Greatstone with evidence to convince
    Union Planters that the forged promissory
    notes were associated with authentic
    transactions. In fact, the money released by
    Union Planters was not used by the home
    buyers to purchase real estate.
    The second distinguishing point, that, in
    some cases, legitimate investors purchased
    legitimate loans from Greatstone, again
    only made the fraud more convincing, and
    therefore, easier to hide from Union Planters.
    However, those transactions did not
    directly contribute to Union Planters’ loss.
    The sale of authentic loans to a third-party
    investor would not legitimize the underlying
    transactions between a mortgage
    lender and a home buyer, whether authentic
    or fake.
    The third distinguishing factor—that,
    but for the forgeries, the notes would have
    had value—seems to be most dispositive
    of coverage, at least to the justices on the
    Court of Appeals for the Sixth Circuit. This
    distinction would supply the causal link
    between the forgery and the loss suffered
    by Union Planters. However, as explained
    below, it should not have been considered
    a factor distinguishing circumstances in
    Union Planters from the circumstances in
    Flagstar, because the forged promissory
    notes in the Union Planters case would
    not have had value even if those notes did
    not contain forgeries, as suggested by the
    What Is the Significance of a Forged
    Signature on a Promissory Note?
    A promissory note is an unconditional
    promise to pay. However, the promise is
    almost always made “for value given.”
    While these words do not typically provide
    a defense to the promisor based upon
    insufficient consideration, some consideration
    has to be given to the promisor in
    exchange for their unconditional promise
    to pay. This is a universal concept. See, e.g.,
    Sirius LC v. Erickson, 156 P.3d 539 (Idaho
    2007); The Prudential Preferred Properties
    v. Miller, 859 P.2d 1267 (Wyo. 1993); Gentile
    v. Bower, 222 S.E.2d 130 (Ga. App. 1996);
    Williamson v. Guice, 613 So. 2d 797 (La.
    App. 1993); Rybak v. Dressler, 532 N.E.2d
    1375 (Ill. App. 1988).
    In the Flagstar case, the transaction was
    entirely fictitious. Therefore, even if Amerifunding
    had somehow convinced the job
    applicants whose identities were stolen to
    put legitimate signatures on those promissory
    notes, those notes would not have been
    enforceable. The job applicants received
    no consideration for those notes. Neither
    Amerifunding nor Flagstar, a holder of
    the promissory notes in due course, could
    enforce those notes against the job applicants
    who might have been duped into
    signing them, since a complete lack of consideration
    is an affirmative defense to the
    enforcement of a promissory note.
    What about the home buyers in the
    Union Planters case? What if Greatstone
    had slipped in an extra promissory note
    at closing, secured authentic signatures
    on two promissory notes and used each
    note as collateral to secure funds on its
    line of credit from its warehouse lenders?
    Could Union Planters have taken the
    extra note, which the home buyer inadvertently
    signed, but which had an actual
    signature, and enforced this promise to
    pay against the home buyer promisor even
    though the home buyer received no consideration
    in exchange for signing this second,
    extra promissory note? The answer
    In all material terms ,
    the Union Planters fraud
    was no more deserving of
    coverage under the financial
    institution bond language
    than the Flagstar fraud.
    40 n For The Defense n March 2009
    Fidelity and Surety
    should still be “no,” for the same reasons
    provided above. The promisor has not
    received “value” in exchange for his or her
    promise to pay as recorded on that second,
    extra promissory note. The note is worthless.
    Union Planter’s loss would be caused
    by the fraud perpetrated by the mortgage
    lender—a fraud that duped both the home
    buyer and the warehouse lender. Since
    there is no forgery in this example, this
    fraud would clearly not be covered under
    either Insuring Agreements D or E. Why
    would the introduction of a forged promissory
    note make any difference?
    Consider the entire “dry” funding scenario.
    In such a case, a home buyer signs
    a promissory note in advance of the home
    purchase closing so that the warehouse
    lender can have possession of the original
    promissory note when it releases the
    funds to the mortgage broker so that the
    mortgage broker can fund the home purchase.
    (The ink used for the signature has
    had time to “dry,” hence the term.) What if
    the warehouse lender decides not to fund
    the loan and the mortgage lender has no
    other funding source? Obviously,the promise
    by the home purchaser to pay the note
    is not enforceable. The promissory note is
    What if, during a “dry” funding transaction,
    a warehouse lender transmits the
    funds via the Internet, but Internet pirates
    intercept the funds, and the funds never
    reach the mortgage lender? Again, since
    the home buyer never purchased the home
    with the funds—received no value or consideration
    for their promise—the promissory
    note is not enforceable, and therefore,
    What if, during a “dry” funding transaction,
    a warehouse lender transmits the
    funds to the mortgage lender, but an agent
    or employee of the mortgage lender steals
    the funds? As a result, the home buyer
    cannot purchase the home. The result is
    no different from either of the first two
    scenarios described above for the home
    buyer. The promisor, or home buyer, did
    not receive value for the promise contained
    in the promissory note, and therefore, the
    unconditional promise to pay is unenforceable
    and worthless. Indeed, the law is clear
    that a lender—the holder in due course
    of a note signed by a borrower—cannot
    enforce a note against a borrower if the
    borrower never received the loan proceeds.
    Stone v. Behlberg, 728 F. Supp. 1341 (W.D.
    Mich. 1990); Thomas v. Leja, 468 N.W.2d 58
    (Mich. Ct. App. 1991); Franck v. Bedenfield,
    494 N.W.2d 840 (Mich. Ct. App. 1993).
    As the cases cited directly above each
    note, the protection of borrowers, who
    purchase real estate under these circumstances,
    has been codified into law in the
    Truth in Lending Act. According to the
    Act, a borrower can rescind a loan transaction
    up to three days after consummation
    of the transaction. 15 U.S.C. §1635 (2008).
    If a borrower has never received loan proceeds,
    the loan transaction is never properly
    consummated, and the rescission clock
    does not start to run. Stone, 728 F. Supp. at
    1345; Thomas, 468 N.W.2d at 58; Franck,
    494 N.W.2d at 841. As a result, promissory
    notes signed by borrowers are unenforceable
    against the borrowers until at least
    three days after borrowers receive consideration
    for their promises. Therefore, the
    Union Planters court was plainly incorrect
    when it concluded that the promissory
    notes would have had value but for
    the fact that Greatstone signed the promissory
    notes instead of the actual home purchasers,
    since those home buyers never
    received loan proceeds from the transaction
    with Union Planters. Thus, in all material
    terms, the Union Planters fraud was
    no more deserving of coverage under the
    financial institution bond language than
    the Flagstar fraud.
    The district court in Union Planters also
    raised the fact that the promissory notes
    used by Greatstone were authentic, legitimate
    promissory notes, except for the fact
    that they contained forgeries. The court
    suggested that because Greatstone used
    legitimate promissory note forms and
    forged the signatures of actual customers
    on those forms, the notes would have value
    had they been legitimately signed. However,
    real forms and real customers do not
    bestow value on promissory notes. It is the
    promise to pay made by the person who
    signs the promissory note, together with
    consideration bestowed on the promisor
    thereby rendering the note enforceable that
    gives the note value. Thus, forgery of an
    otherwise unenforceable promissory note
    cannot directly cause a loss sustained by a
    warehouse lender.
    Does the Causation Standard
    Make a Difference?
    Another distinguishing factor between
    Flagstar and Union Planters was the causation
    standard the court used. Both bonds
    contained “loss directly resulting from”
    language. The Flagstar court held that this
    standard required more than mere proximate
    cause. The language used required
    Flagstar to establish that the forged promissory
    notes, not some other factor, caused its
    loss. Flagstar could not do so because it was
    evident that much more than mere forged
    documents caused it to unwittingly lend
    money to Amerifunding. The entire transaction
    was fake. The forgeries were merely
    a small part of the overall fraud.
    The Union Planters court, on the other
    hand, supposedly relying on Tennessee law,
    held that the bond’s “loss directly resulting
    from” language equated the proximate
    cause standard. In fact, the case the Sixth
    Circuit relied on to conclude that the proximate/efficient
    standard should be used
    involved the phrase “arising out of” in an
    insurance policy exclusion, as opposed to
    the phrase “directly resulting from” in a
    bond insuring clause. See Am. Nat’l Prop.
    & Gas Co. v. Gray, 803 S.W.2d 693, 695
    (Tenn. App. 1990). Other jurisdictions do
    equate “directly resulting from” language
    with a proximate cause standard. See, e.g.,
    Jefferson Bank v. Progressive Cas. Ins. Co.,
    965 F.2d 1274 (3d Cir. 1992); Hanson PLC
    v. National Union Fire Insurance Co., 794
    P.2d 66 (Wash. App. 1990). Accordingly,
    it is worthwhile to examine whether the
    forged signatures on the promissory notes
    provided to Union Planters constituted the
    efficient proximate cause of the loss that
    Union Planters suffered as a result of Greatstone’s
    The bond’s purpose is not
    to cover those risks that can
    be mitigated or avoided by
    a bank through exercise of
    sound business practices.
    For The Defense n March 2009 n 41
    Courts have held that an “efficient proximate”
    cause is the predominant event that
    brings about another event. Parks Real
    Estate Purchasing Group v. St. Paul Fire
    & Marine Ins. Co., 472 F.3d 33, 40 (2d Cir.
    2006); Pioneer Chrlor Alkalai Co., Inc. v.
    National Union Fire Insurance Co., 863 F.
    Supp. 1226, 1231–32 (D. Nev. 1994). The
    Tennessee case relied on by the Union
    Planters court actually employed a “but
    for” standard: would the injuries have
    occurred but for the negligence of the physician.
    See White v. Methodist Hosp. South,
    844 S.W.2d 642 (Tenn. App. 1992) (employing
    the proximate cause standard set forth
    in a statute governing a claimant’s burden
    in a medical malpractice case).
    Even applying the less stringent “efficient/proximate”
    cause standard to the
    facts in Union Planters should have yielded
    the same result that was reached in Flagstar.
    Union Planters’ loss was “predominantly”
    caused by the fact that it could not enforce
    the promissory notes against the home buyers
    because Greatstone submitted illegitimate
    promissory notes to Union Planters.
    These notes were not “illegitimate” because
    they had forged signatures; they were illegitimate
    because the person identified on
    them never made the promises indicated
    for value given. As noted above, authentic
    signatures would not have made these notes
    any more legitimate or valuable.
    The Underlying Purpose of
    Financial Institution Bonds
    The protections offered by a financial institution
    bond are not intended to insure a
    financial institution for loan losses or other
    losses preventable by adequate underwriting
    or due diligence. Coverage under Insuring
    Agreements D and E in the bond are
    designed to protect an insured from loss
    caused by presentation of inauthentic documents
    to the financial institution. If a
    person presents a forged cashier’s check to
    a bank for payment, there is little a bank
    can do to protect itself in the near term
    without sacrificing the convenience offered
    by typical banking practices. Courts analyzing
    coverage provided under Insuring
    Agreements D and E make this distinction,
    noting in particular that these bonds
    are not meant to protect an insured from
    loss caused by false statements contained
    in documents relied on by banks. See KW
    Bancshares, Inc. v. Underwriters at Lloyd’s,
    London, 965 F. Supp. 1047, 1054 (W.D.
    Tenn. 1997) (bank supplied with fabricated
    documents with forged signatures indicating
    that borrower would be receiving
    a substantial job-related bonus); Liberty
    National Bank v. Aetna Life & Cas. Co., 568
    F. Supp. 860 (D. N.J. 1983) (bank supplied
    with forged certificates of deposit which did
    not represent real assets).
    Is a forged promissory note an inauthentic
    document or a document with false
    statements? The answer is that a forged
    promissory note is probably both—just
    as in KW Bancshares and Liberty National
    Bank. However, the fact that it is not simply
    an inauthentic document means that a
    bank has an opportunity to protect itself,
    and therefore, the purpose of a financial
    institution bond is not triggered merely
    because a false promise also contains a
    forgery. The bond reflects an allocation
    of risks, and the bond’s purpose is not to
    cover those risks that can be mitigated
    or avoided by a bank through exercise of
    sound business practices.
    For example, in the Flagstar case, the
    bank discovered the fraud when a processor
    finally called a random “borrower” to
    confirm that he was an actual customer of
    Amerifunding and had purchased a home.
    Had the bank made this simple effort earlier,
    it might have protected itself from its
    loss. Flagstar could have performed even
    a perfunctory check on the third-party
    investor or the fake title companies used
    by Amerifunding to discover that it was the
    victim of a fraud.
    Similarly, had Union Planters asked about
    the promissory notes Greatstone’s customers
    signed, it would have soon discovered
    that the loan numbers on the promissory
    notes that Union Planters held were not the
    same as the loan numbers on the promissory
    notes signed by the actual home buyers.
    Even if the loan numbers had been the
    same, Union Planters had other opportunities
    to protect itself by performing due diligence
    on the investors purportedly buying
    the fake notes, the title companies to which
    it sent funds, or by requiring Greatstone to
    use a third-party title company
    In this time of economic crisis, with mortgage
    foreclosures at record levels, loan
    losses causing financial institutions to
    shutter their doors, and mortgage fraud
    schemes seemingly in the news on a daily
    basis, a rise in financial institution bond
    claims should not be a surprise. Insuring
    Agreements D and E will certainly become
    a focus, as will the need for attention to
    the intentionally narrow scope of coverage
    they afford. Neither the actual language in
    the Financial Institution Bond, Standard
    Form No. 24, nor the practical purpose of
    the bond support coverage for warehouse
    lenders losses due to credit extensions to
    mortgage lenders based on forged promissory
    notes if such notes are unenforceable
    notwithstanding the forgery. There is
    nothing a financial institution bond underwriter
    can do to effectively underwrite the
    fraud risks a lending institution faces in
    its daily operations. The financial institution
    bond is not intended to afford blanket
    fraud coverage. Nonetheless, insureds will
    attempt to force the square peg of business,
    credit or fraud losses into the round hole of
    coverage provided by Insuring Agreements
    D and E

  37. @milesshepard
    exactly my question, if rescission done years ago and now we want to move on and sell, what do we do if they have not complied with tila rescission statute, no return of monies, satisfaction of mortgage or declaratory action filed within 20 days. and more than a year since date of rescission, rescinded more than 6 years ago….still in house, no foreclosure action pending.


    thank you in advance

  38. 3 years from Consummation. …

    Escrow didn’t close.

  39. @ El: The A Man had a point he was talking about wherein the ruling by the Supreme Court about TILA Rescission came out January 13, 2015 which radically changed the original law and that borrowers could use that date as the date to count down the 3 year period. Sounds good, but we have no track record yet.

  40. In other words, it seems a crap shoot if you send rescission notice within 3 years. If the bank challenges it, you may be out of your home if you can’t come up with the original loan amount. If you’re outside the 3 years, as apparently happened with Belanger, the bankster only had a bluff, in which case the argument Neil makes takes full effect, and neither the bankster nor the obligor have standing to be heard. If the bankster is secure in ability to get a corrupt court to accept an inadequate chain of title, as in California, your mileage will likely vary.

    IANAL, and respect those barristers who have to sift through all the minute details to craft a course that might succeed, especially before a corrupt court system.

  41. Or, in the case where the obligor waited more than 3 years to send a TILA notice, the bankster can simply state the right to rescind by the obligor expired, and as such, the obligor has no subject matter standing to pursue a TILA rescission. At that point the court would have no jurisdiction to rule on a TILA rescission cause of action or affirmative defense. All done with a motion to dismiss. And the borrower is out court costs and attorney fees.

    IANAL, but I read the Beach decision regarding the 3 year expiration and the resulting loss to homeowners who waited too long to send the notice.

  42. Subject: save important news ocwen
    Date: Mon, 4 May 2015 16:08:14 -0400
    ——– Original Message ——–
    Subject: RE: URGENT!!! Orlans Files#: 1895527
    From: Information ORLANDS MORAN,PLLC
    Date: Mon, May 4, 2015 12:38:15 -pm
    To: David Belanger, POA ,
    Orlans Moran File Number: 189.5527

    There is currently no sale scheduled for this property, the foreclosure sale that was schedule for may 5, 2015 at 1200 PM, has been
    Canceled by our office, we were told by OCWEN to stop any further and future actions on this property. That William a Marshall SR, and
    Joanna l Belanger, had as of the 4 march 2015, rescinded the mortgage contract and mortgage note. and that OCWEN LOAN SERVING,LLC
    Has accepted the rescission, along with WELLS FARGO BANK,N.A. AS TRUSTEE FOR GMACM MORTGAGE LOAN TRUST 2006-J1. There will no
    Further actions taken, NOW and in the FUTURE will be taken by either party on this property, because of the acceptances of both parties to the
    Rescission of the loan contract, mortgage, and note, dated November 8 , 2005. It has come to our attention that the loan contract, and mortgage,
    and mortgage note , has not been CONSUMMATED by the TRUE LENDER , THAT THE TRUE LENDER OF ANY AND ALL MONEY PAID TO ALL PARTY’S TO THE MORTGAGE TRANSACTION, THAT WAS GIVEN TO CLOSING ATTORNEY, WAS NOT GMAC MORTGAGE CORP, GMAC MORTGAGE CORP did not fund the loan contract or mortgage , and the mortgage note. The Truth in Lending Act (TILA ), 15 U.S.C. 1601 et seq, enacted on may 29, 1968, as title I of the Consumer Credit Protection Act (pub. L. 90-321 ). The TILA, implemented by Regulation Z (12 CFR 1026 ) , became effective July 1, 1969. it has come to our attention that the required DISCLOSURE
    Were never given to William a Marshall , SR, and Joanna L. Belanger, prior to and during or afterwards the closing date of November 8, 2005. By the proper
    Parties, and true lender or creditor of the mortgage contract, and note, Dated Nov 8, 2005.
    P.O. Box 540540
    Waltham, MA 02454

    P 781 790 7800 | F 781 790 7801

  43. Hey Guys,

    Much has been said about Recission and I get it completely.

    For many of us there still exists this zombie note recorded years ago sitting in the COUNTY RECORDERS OFFICE! (California Non Judicial)

    I want to refi or sell the subject property in order to recapitalize my business.

    If the rescission is effective by operation of law, that would mean first position on the property is now open, right?

    Will the new lenders recognize this new fact and are there any special Procedures to follow in order to accomplish this strategy?

    I am anxious to get working again!

    Appreciate your feedback.


  44. We need some actual cases where the rescission went through. I think David Balenger had one where the servicer sent him a letter/document stating there was no more money owed, but I could be mistaken.

  45. Good more grounds to sue them Harassment Intimidation Bullying Frivilous lawsuit Extortion Strong arm etc…….

    I am not an attorney


  46. Where’s the Beef? Money Talks BullSh3t walks. Oh your honor where’s your jurisdiction to vacate after the 20 days?

    This is even better than Produce the Note.

    I am not an attorney.


  47. Reblogged this on Deadly Clear.

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