DEBT vs. Note: What is the difference?

 current trial court decisions are getting reversed because the courts are waking up to the reality of the rule of law. What they have been following is an off the books rule of “anything but a free house.”

the Courts may think they are saving the financial system, the economy and our society from disintegration, but in truth they are undermining all three.

A recent Yale Law Review article eviscerates the assumptions of a “free house” for the homeowners and destroys the myth that somehow that policy has saved the nation. Yale-In Defense of Free Houses 2016 03 23

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Like many other cases, current trial court decisions are getting reversed because the courts are waking up to the reality of the rule of law. What they have been following is an off the books rule of “anything but a free house.” A recent Yale Law Review Article eviscerates the assumptions of a free house for the homeowners and destroys the myth that somehow that policy has saved the nation.
The Trial Judges are making the assumption that there is an underlying debt and an underlying liability of the homeowner to make a payment to the parties in litigation even if the paperwork was found to be defective. Or worse, they are disregarding the rule of law altogether and ruling for the banks and servicers because of policy reasoning (a province exclusively reserved to the legislative branch of government and excluded from the judicial branch).

The key legal analysis goes back to basic contract law pounded into our heads in the first year of law school, to wit: the note is not the debt, it is evidence of the debt.” So if there is no debt and the homeowner challenges on that basis, the homeowner SHOULD win every time. The mistake made by pro se litigants and lawyers alike is that they cannot conceive of the notion of “there is no debt.” That’s because they don’t complete the sentence, to wit: There is no debt owed to the beneficiary or claimed beneficiary on the deed of trust (non judicial states) or there is no debt owed to the mortgagee or claimed mortgagee named in the mortgage.”

Basic contract law: an enforceable contract must contain three elements and a hidden fourth element. The three key elements without which there can be no enforcement are OFFER, ACCEPTANCE AND CONSIDERATION. The hidden fourth element is that contracts in violation of public policy are void.

In nearly all cases where there are claims of securitization and most where no such claims are brought forward (but still exist) they are missing consideration (i.e., PAYMENT) from the origination and/or acquisition of the loan. The DEBT was never created in favor of the party receiving documents.
The documents, including the note refer to a transaction in which the originator loaned money to the homeowner. This is nearly always NOT true. And the contract, even if it existed, is part of a larger plot to defraud both the borrowers and the investors in which the originators, brokers, servicers, Master Servicers and Trusts are the fraudsters.
These cases thus involve contracts to violate both laws and public policy — particularly those in which prior agreement is executed in which the parties to agree to create table funded loans as a pattern and practice — something which REG Z clearly says is PREDATORY PER SE.
Either predatory or predatory per se mean something or they don’t. But if they mean anything they set the bar such that parties who violate this provision cannot claim “clean hands.” And if the court of equity is being asked by the violators for the equitable remedy of foreclosure sale based upon, at best, dubious documentation (without proof of the debt or who owns the debt) then the availability of foreclosure should be barred.

Lawyers must meet this challenge head-on and stop pussy footing around. If the alleged loan was table funded, then there was never any completed loan contract. If the money came from a third party, then that third party has the right to the note and mortgage — if the note and mortgage are executed in favor of that third party or if the “originator” was in privity with the third party through contract. There is no other way.

BUT if the identified third party was just a conduit for a source of funds outside the circle of the originator and the party through whom the funds were sourced, then the homeowner owes the DEBT to someone else. What Wall Street banks did in its simplest form is to relieve the investors of money in such a way that the investors would see very little of it ever returned because the Wall Street banks had reached for and grabbed the holy grail of finance — selling financing for nonexistent entities and keeping the proceeds.

And the same logic then applies. If the FOURTH party was somehow in privity (contract) with the originator then the homeowner owes the debt to that fourth party. BUT unless the note and mortgage are properly delivered and executed in favor of the fourth party, neither the fourth party nor any agent or “servicer” for the fourth party can claim rights under the note and mortgage which should never have been released, delivered or recorded in the first place.

In short, without BOTH the money trial and the paper trail being synchronized there is no loan contract. And that means there is no valid note or mortgage which are then VOID ab initio. Can the real source of funds collect? Yes of course, but they do not own a claim that is secured by a mortgage or deed of trust. And they cannot use the note as direct evidence of the debt. This has always been the law. Ironically, nearly all “borrowers” would gladly execute notes and mortgages with the real investors that would be fully enforceable and would represent workouts that would protect both the investor and the borrower. But in order to do that, the banks and servicers in the false securitization industry must be benched and a new group of entities employed directly by investors must arise.


As stated in the recent Yale Law Review article, document defects do not occur as a result of any action or fault of the alleged borrower and there is no reason not to apply the rule of law to any situation, much less one in which a party can lose their personal residence.

The theory of anything except a free house for the homeowner is full of holes that are amply challenged in the Yale Law Review article. As the authors point out, the trial judges may think they are saving the financial system, the economy and our society from disintegration, but in truth they are undermining all three.

See Yale-In Defense of Free Houses 2016 03 23

22 Responses

  1. Reblogged this on California Freelance Paralegal.

  2. There are no Trusts
    There are no Escrows

    You need to make your claim for your property PUBLIC.
    You need to take care of your duties.

    FCs are for Abandonment
    Unclaimed property escheats

    State Your Claim

  3. Agnes: We are here to assist all needing pro se litigation assistance. But please don’t wait until the default is well underway or suit is tiled.
    Call us at 818.453.3585 ask for Steve or Sara.

    Side bar issue: We’ve been preaching this “debt” issue for years just as Neil has. If the banks can’t prove they OWN the note….they have no right to foreclose because the rights attendant to the Note allow for foreclosures, not the deed of trust/mortgage standing alone which is only a lien on the property to mitigate damages if the Note is not paid.

  4. can anyone help my son who is facing foreclosure after losing his job?

  5. It may not be an over exaggeration if one says that it was not only just the judges but some foreclosure “defense” attorneys working in legal aid services as well were not in favor of people bringing actions defending illegal foreclosures even though they may be getting federal funds for foreclosure prevention ! It is good to know that judges are now becoming in favor of home owners.

    When we see emotions taking over intellect among many American people, the deterioration of a civilized society is already there without banks and insurance companies going out of businesses.

    People need a home to a have job and education. Having a home must be constitutional right in America.

  6. The Judges have a financial interest So they’re the ones who are ruling a Free House for themselves

    Of course the above are all allegations


  7. Its the fees boss … Its the Fees!

    Shadowbanksters gets to keep the money from selling servicing rights. Even if they don’t provide the Estate those services….you know….like foreclosing.

    Shadowcat wanted to pay Shadowbanksters off the principal of her husbands note….. But Shadowbanksters wanted “Total Cost” of a 30 year loan, Shadowcats Mortgage.
    Nice Shadowbanksters kindly offer Shadowcat a refinance of her “Total Cost” Mortgage at a much lower interest rate.

    Is it snowing in Hell yet?
    Keep the Heat turned Up!

    Wouldn’t they just love an admission I am a borrower?
    Now why would they want that?

    Gee…..perhaps I will apply for a loan modification, you know… An Admission of my unknown debt to an unknown party.

    NOT!!!!! Sign Nuttin! !!!

  8. A good Judge is a recused Judge

    Felony and obstruction of justice charges is next.

    Do your homework this is not legal advivce

    Check if attorney who claims to represent the Junk Trust has written agreement with Junk Trust

  9. This article ALMOST gets it. My understanding of the loan process from what I know of both the publication called “Modern Money Mechanics”, as well as the issues raised in the 1968 case called “The Credit River Decision” is that there is only one source of funds in any loan. That source of funds IS NOT the originator—nor is it any third or fourth party. The source of funds is actually the alleged borrower him or her self. The “borrower” gets no money at all…the borrow gets spendable credits put into his account, in the amount of the face value of the note—which is itself–a negotiable instrument given its value solely from the signature of the “borrower” and is worth more to the bank, than its actual face value. The bank loans nothing, risks nothing, invests nothing, and puts nothing up as lawful consideration. The bank can suffer no loss, even if the “borrower” never pays back a single red cent. Then, the bank can LITERALLY STEAL people’s homes out from under them. Too few people are still understanding or focusing on this aspect of the fraud and OUTRIGHT THEFT committed by the alleged lenders. There is a HUGE difference between the debt obligation you rightfully have if you borrow pre-existing funds from a private individual–and the ALLEGED debt obligation when you take a “loan” from a bank. And, it is a HUGE problem for society as a whole, as well as for all individuals—that most people–including judges and attorneys–still make the fallacious assumption that there is no difference between these two things.

  10. “Quiet Time”

    What? Your Not My Mom! Prove It!!!


    My Cookie Jars

    Shadowcat … #1
    Shadowbanksters. .. ZERO

  11. Imagine this ..
    All the money borrowers & Granters/Settlors/Trustors put out on legal the System defending their Rights had gone into making purchases of Real assets & goods …….
    And All the Settlement Funds put back into purchasing power creating jobs instead of the System?
    And all the physical harm caused by stress defending yourself against false claims that went into the medical System instead of purchasing power?
    Emphasis on Who Profits…those behind the SYSTEMS.

    Then theirs the Slander of Titles in the Public…..
    The harm to credit …..


    Get White Out …..&

    Follow Cleaning Instructions Carefully

  12. Grins …
    Embrace MERS!
    If you can’t beat them join them.


  13. Yes, the mainstream media has made all the homeowners and debtors into the bad guy and the deadbeat. Nobody purchased their home knowing MERS would be in the contract (trashes chain of title); and nobody purchased their home thinking that the transaction was with outside entities not included in the contract.

  14. Good points Neil. We just need to get things ramped up all across the country so the people gain the power and not the reverse. All these lenders are not following the very settlements they agreed to and they have turkeys like Eric Green in charge of the “henhouse” on the supposed epic settlement between Eric Holder who was head of the USDOJ before Loretta Lynch- who does not understand or does not care about compliance and were the supposed $17 Billion Dollars has gone. I suspect in the pockets of the attorneys, Congress and pet projects of the Obama Administration and I am sure Eric Green has gotten rich at what cost to all of us property owners. Keep up the great work and Semper Fi to us ALL. Back to the good ole basics of a government of the people, by the people and more importantly FOR the people which all our so called leaders have forgotten. Like I have said all along with my simple view – they should have bailed out the homeowners with out money with two stipulations 1) pay off your mortgage and 2) buy a car.


    Sent from my MetroPCS 4G Android device

  16. Its just a matter of days before they go public and expose the metals price minuplations …..

  17. K.I.S.S. …
    FOLLOW The RULE OF LAW, period.

  18. Not sure of the year but I think it was 1933 when the Gov seized all the citizens gold DIRT Cheap … Then Imploded the Price Sky High and took the Billions in Profit (back then was alto of $$$)…. They created and deposited those funds into … THE STABILIZATION FUND .
    You All know who the Major Players are, Dusche Bank another Lehman. But much much Bigger…the implosion will rock if not decimate the Banksters. In Progress …. Stay Tuned.

  19. Reblogged this on UZA – people's courts, forums, & tribunals and commented:
    Thank you for this update; here in Southern Africa our courts have yet to acknowledge there is a separate note; in peace

  20. I have to agree with Yale. The only thing they’ve done is entered into race to the bottom. “CRASH” .
    A Dime … Lowest domination in Silver Trade prior 63 when it was still 90% pure.
    Now Greed Goes for Copper & Nickel too…..Total Systematic Collapse.

    Where is Me Gold?
    Reset That!

  21. What the articles forgets is; they also securitize the advances for the default payments made to the pool. The servicer keeps all of that money before the certificate holders get a dime. That is why they have to foreclose… can’t be happy until they have bled out every last dime.

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