Securities, Notes and the Illusion of Enforceability

By William Hudson

State Court judges are missing the point- the paperwork is all an illusion in a majority of cases. Instead of being concerned that the bank is filing photoshopped, forged and robosigned documents into the court record, they are more concerned if the homeowner has paid. This is despite the fact that every large Bank in the country has been fined for foreclosure “irregularities”. Too many State judges are refusing to follow basic contract law or scrutinize the documents presented. Presumptions favor the banks in cases where there is hard evidence of fraud. It is now known that due to securitization that the vast majority of mortgage notes and assignments are created-on-demand to provide the impression that the note is valid. You would think that in light of this information that more judges would be concerned that the note is even enforceable.

Former FDIC Chairperson Sheila Bair  wrote a book in 2013 entitled Bull By the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself. Bair provides some interesting information on Mortgage Backed Securities she refers to as Non-Traditional Mortgages (NTMs). Non-traditional mortgages are not traditional mortgages as advertised to borrowers but security contracts. It was not disclosed to the homeowner that investors would be engaging in financial deals that would net them millions of dollars off a single loan. Most homeowners would not have agreed to have their signature and identity used to make millions of dollars for investors while they shouldered the risk. The homeowner’s risk includes taking out a “loan” on a home that is artificially inflated because of false economic factors and an inflated appraisal. Furthermore homeowners were not told that the originator on their note did not lend them a dime and would be paid more to foreclose on the homeowner than service the loan. Most homeowners would have preferred to live in a cardboard box than agree to these terms.

The promissory notes that were issued in these transactions are not worth the ink on the paper. According to Bair the loans were never properly assigned to the trusts, the trusts are empty and the bank is engaging in fraud to create the illusion of ownership. The lending practices that Ms. Bair claimed were “predatory” in 2001 had become “mainstream among most major mortgage lenders” by 2006. By repealing Glass-Steagall in 1999 the banks were allowed to run amok with very little regulation (if any) and little to no oversight. Here we are 17 years later and Congress hasn’t bothered to worry much about what the banks have done- and won’t until the economy implodes and their own home values and retirement funds plummet.

Along with the repeal of Glass-Steagall Congress passed the Electronic Signatures in Global and National Commerce Act otherwise known as E-Sign in 2000. This law effectively allows your signature on any document to be transferred electronically- if you give your “explicit agreement and authorization”. If you gave your explicit agreement was considered the consumer protection “safe harbor” provision that made it into E-Sign and UETA. E-Sign is the federal version of the state ratified Uniform Electronic Transactions Act (UETA). Homeowners were never notified about E-Sign and UETA when they signed their mortgage loans and did not receive a disclosure notifying them that their agreement to electronic transfers of the loan was necessary. It was kept a secret because most of us, understanding the value of our signature, would not have agreed to such a contract especially with the rise of digital fraud.

In order to securitize loan documents they needed to be electronically transferable but the homeowner was not advised about this little “fun fact”. Failure to obtain explicit agreement from the homeowner for electronic transfers does not nullify the underlying contracts – but it does bring up questions about the contract under state law. Homeowners were under the impression that they are obtaining a traditional mortgage when behind the scenes it had already been designated as a securities instrument.  Congratulations! As a homeowner you just signed a negotiable instrument that was “intended” to be whisked away and materially altered into a securities certificate under UCC Article 8 – but you didn’t know it. Too bad- so sad!

It appears that these promissory notes were designed to be transferred and negotiated under UCC Article 8 – not Article 3.  Article 8 governs documents in addition to “securities” and covers all financial assets including securities, as well as any property held by a securities intermediary for another person if it is agreed to be treated as a financial asset. The borrower is entitled to have access to the authoritative copy. And it appears courts in the past have felt that only the originals can provide sufficient warranty and clarification.

Since Glass-Steagall was repealed in 1999 the banking and financial industries have been defrauding homeowners and the public with a process that is such a clusterbomb that no one can decipher who paid who, when, why, and how. The courts who for hundreds of years relied on a set of laws based on consummation, transfers and validity are now lost. If they look to the Uniform Commercial Code they quickly find that the contracts are not enforceable because there were no actual disclosures of who was lending the funds to the originator (consummation), there was no meeting of the minds, and that the owner had issued a security with no disclosure- to his or her own detriment. Although securitization is legal, it was not legal the way it was enacted and the housing market will be decimated for years because of these deceptive deeds.

A “meeting of the minds” must exist with respect to each material issue in the agreement. Montagna, 269 S.E.2d at 845; Scott v. Pacific Gas & Elec. Co., 904 P.2d 834, 841 (Cal. 1995).   Failure to agree on essential terms of a contract indicates a lack of mutual consent and online agreements must also demonstrate that both parties intend to be bound to the contract.   See Feldman v. Google, Inc., 513 F. Supp. 2d 229, 236 (E.D. Pa. 2007). Although online agreements include credit card agreements and loans that are accepted online, mortgage notes otherwise known as promissory notes fall into a different category. Even if the mortgage agreement was downloaded from the Internet the Uniform Electronic Transactions Act still required that an explicit agreement be made at the time of issuance, but homeowners never received notice of UETA “safe harbor” clauses. So much for the fact that contracts require the, “Terms of the agreement should be clear and unambiguous, and it is the duty of a court, not a jury, to determine if a valid contract exists. See W.J. Schafer Assocs., Inc. v. Cordant, Inc.., 493 S.E.2d 512, 519 (Va. 1997).

These electronic issue affect the overall validity of a contract but are rarely plead in court. Other essential elements of a contract tend to go unaddressed in a foreclosure dispute including the “agreement to agree”. A promise to agree in the future is not binding on the parties, and therefore creates a failure of consideration. Consider the clause in your promissory note that says the lender “may transfer” the note. It does not say the lender “will” transfer the note, or “is going to” transfer the note, or even “already has transferred the note.” The clause quite clearly communicates that “sometime in the future” the lender “may” transfer the note to someone else. “May” as defined by Black’s Law Dictionary (8th ed. 2004) is futuristic:

may, vb. 1. To be permitted to <the plaintiff may close>. [Cases: Statutes 227. C.J.S. Statutes §§ 362–369.] 2. To be a possibility <we may win on appeal>.

Transfer, according to Black’s Law is also well defined:

transfer, n.1. Any mode of disposing of or parting with an asset or an interest in an asset, including a gift, the payment of money, release, lease, or creation of a lien or other encumbrance. • The term embraces every method — direct or indirect, absolute or conditional, voluntary or involuntary — of disposing of or parting with property or with an interest in property, including retention of title as a security interest and foreclosure of the debtor’s equity of redemption. 2. Negotiation of an instrument according to the forms of law. • The four methods of transfer are by indorsement, by delivery, by assignment, and by operation of law. [Cases: Municipal Corporations 917. C.J.S. Municipal Corporations §§ 1658–1660.] 3. A conveyance of property or title from one person to another. [Cases: Bills and Notes 176–222. C.J.S. Bills and Notes; Letters of Credit§§ 4, 29, 139–141, 143–159.]s

“May transfer” appears to mean that “sometime in the future” the lender might dispose of its interest in this note to another party. However when a note is securitized (in most cases) the warehouse lender or investment bank has already taken the “transfer” when it funded the loan before the homeowner ever signed the note. It did not happen in the future – it had already occurred and there was no disclosure, meeting or the minds or mutual assent. Why not just change the terms in the contract to actually what will transpire? Why the secrecy?


Basic contract law would allow us to deduce that there was a securitization already in motion, and that the originator failed to obtain explicit agreement to electronically transfer the documents per UETA, that the mortgage was intentionally designed to avoid the consumer safe harbor of UETA, and that the clause in the note the “lender may transfer the note” (in the future) wasn’t defined; when in fact the note had already been pledged and paid for in a securitization transfer; and, undisclosed to the homeowner – would it be considered “far too central” to the transaction when it appears “there was never any intention to enter into a binding contract” by the originator? The Illusion of Consummation is why Neil Garfield advocates the act of Rescission. There is something sinister when a homeowner is not allowed to know WHO is LENDING the homeowner MONEY. If you don’t know WHO has “skin in the game” HOW can you negotiate in good faith if there are any bumps along the road during a 30 year mortgage? A servicer who is rewarded financially to foreclose and who has never paid a dime for your loan has no “skin in the game.” In your grandparent’s time if someone got sick or lost a job they would go see their banker and make an agreement to correct any deficiency. The banker didn’t want the home- they wanted payment. Today, the bank does not want the payment, or even the house- they want the foreclosure.

The mortgage contract should be called a securitization contract since the intent is to securitize the loan. Because of the securitization and the material alteration of a negotiable instrument under UCC Article 3 that mutates into a mortgage backed security under UCC Articles 8 and 9 without disclosure to the borrower- wouldn’t that appear to be a central contract issue?

“Because I conclude that the parties merely agreed to agree in the future, and that no contract resulted, I would affirm the district court’s dismissal of the promissory estoppel claim as well. As the majority opinion concedes, the district court’s ruling was correct if there was never any intention to enter a binding contract;  promissory estoppel cannot create a contract where none exists. See Rennick v. Option Care, Inc., 77 F.3d 309, 316-17 (9th Cir.1996).”

In most mortgages it does not appear that there was ever any intention by the loan originators to enter into a binding contract with the homebuyer. The loan had already been sold by the originator before the borrower ever signed the loan. The originators deliberately hid where the funds were coming from and never owned the note. The funds were already committed to a different party and funded before the borrower signed. How could the originator transfer what he didn’t own? It couldn’t and it appears that it didn’t. Therefore, the paperwork appears to create the illusion of ownership while the true money trail is obfuscated.

22 Responses

  1. E. Tolle, you and I have been here about the same amount of time. You are right. We are in the same position or lack thereof for all these years since 2007. They (the government, courts, banksters, servicers, title companies, attorneys, judges, etc.) are still in place with all kinds of criminal activity, fraud, forgery, etc. The same thing has been going on against us, the American people, all this time and is still going on. Nothing has been done at all to fairly represent the people and stop the giant all-consuming scam. We, the People, will have to do it.

  2. @ E. ToLLe

    You’ve been commenting positive contributions here for a long time, and I saw both of your comments under this article. But it appears that the moderators are strictly complying with recently implemented rules as to the relevancy of comments posted.

    I suspect that a few serially frivolous commentators of the past have tipped the scale on the side of over moderation, ruining the open opinions and discussions of past.

    Consequently, I read more and comment very little, and only then do I do so with relevance, if I can at all.

    That said, your movie themes were an excursion in theatrics.

  3. Hey RR and elexquisitor, I answered both of you at length, but I’m being moderated to the hilt. I’m amazed that the same type of activity called out by this site is being utilized here as well.

    Oh well.

  4. @ DwightNJ

    The relevant portion of the opinion goes to the federal rules of evidence on the exception to the hearsay rule as to whether there is proper authentication, e.g., by a person with percipient knowledge.

    New Jersey should have parallel rules of evidence on admissibility and hearsay. As another consideration, search YouTube as there are a few good lectures on the topic.

    If the documentation you reference was not objected to on some ground, then it should have been.

    Just one’s opinion, that is all.

  5. Roger, yeah, I was pissed off when I was born. No change since. I imagine I’ll lighten up when I die, not sure about that either. Watch out St. Pete.

    I hate to hear about your attorney and the coming storm. That sounds kinda’ like little Frodo up against all those drooling nasties around Mt. Doom. Does she stand a chance? Don’t answer that. I’ll read the book.

    I believe I know your attorney, but on the internet, valiant lawyers need to go by moniker “He/She who should not be named”, so I won’t.

    But if I read you right, that’s going to be a nasty battle. Staying with the movie theme, I’m afraid one of you will look at the other at some point in the proceedings and say, “We’re going to need a bigger boat!” But good luck.

    It also reminds me of Butler’s Last Stand in MN. You remember the story. He single handedly tried to right all the wrongs in Minnesota Mortgage Land, but it didn’t quite turn out that way. The last I looked, he reminded me of the knight in Monty Python’s The Holy Grail who had lost all his limbs and was still begging for a brawl. Not a pretty sight. In Minnesota, it’s more like being the first soldier to climb out of the Gallipoli trench who takes off yelling “Death to the enemy”, only to glance back after a few hundred yards to see that no one followed. I hate when that happens.

    Elexquisitor, thanks for the warning. I’m not sure that the deal that went down in Oregon has quite the same flavor as injustice for all, but I hear you. But things are changing on many fronts. I feel it in the air. That Panama deal will probably be the first of many, and stands to out a lot of Very Serious People into the light of day, or better yet, the light of an interrogation room. It’s so ludicrous to think a single mom can get a decade in prison for leaving off a hundred dollars per month on a food stamp claim, while David Cameron can sit on his father’s offshore account and then simply say oops, I wasn’t thinking…! Not to mention that the squillionaires always seem to be offered a grace period to clean up their act, when it’s off to the Graybar Hotel this moment for dear young mom.

    This system of unequal justice will have to be disassembled entirely before we can even begin to move forward as a society. History has shown, each and every time, that an unequal judicial setup is the first step to the long fall of civilization. And when facing the early days of a newly forming banana republic, one can never go wrong quoting Jefferson:

    “I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.”

    Yeah! What he said!

  6. Hey, RR, it looks like the next big thing will be to go after the attorneys for their fraudulent, felonious behavior and fraud on the court. Looks very interesting, and some of the documents and behaviors are so egregious and so obvious, it is hard to believe they just throw it out there for everyone to see. Very arrogant and stupid.

  7. @ johngault

    Thank you for the delayed gift.

    LEGAL AUTHORITY on AUTHENTICATION/CERTIFICATION of ADMISSIBLE evidence is well taken, and applied accordingly.

    Your choice(s) of craft beer(s) await your choosing….

  8. re: certification of instruments / docs by attorney:

    LATMAN v. BURDETTE, 366 F.3d 774 (9th Cir. 2004)

    “Further, the La Jara account records attached to the Trustee’s
    counsel’s declaration were not properly qualified under the
    business record exception to the hearsay rule as set forth in
    Rule 803(6). To comply with this rule, the Trustee would have to
    provide specific testimony or a specific certification that the
    account records constituted records of regularly conducted
    activity, as defined by the rule. Fed.R.Evid. 803(6).

    The Trustee’s counsel’s declaration does not suffice. The requisite
    testimony must come from the custodian of the records or “other
    qualified witness.” The Trustee’s counsel is neither.[fn10]

    Nor did the declaration constitute a proper “certification”
    under Rule 803(6). Any such certification must comply with the
    strictures of Federal Rule of Evidence 902(11). See Fed.R.Evid.
    803(6). Rule 902(11) requires that a party wishing to offer a
    record into evidence under that rule must “provide written notice
    of that intention to all adverse parties, and must make the
    record and declaration available for inspection sufficiently in
    advance of their offer into evidence to provide an adverse party
    with an opportunity to challenge them.” Fed.R.Evid. 902(11).
    There was no such written notice or opportunity to challenge the
    declaration here. In short, the bank account records were not
    properly qualified as business records in any way that Rule
    803(6) approves. Thus we agree with the district court that there
    was error in admitting the La Jara account records here.

    The Latmans were also prejudiced by the admission of the La
    Jara account records. Once these records were admitted, …..”

  9. hey, Tolle Booth, how are you other than being pissed-off as ever? We should talk again. Going up against the Wisconsin Supreme Court through the Office of Lawyer Regulation. It seems the bank attorneys, with all their wire fraud and forgery decided they would try to get through all this by going after my attorney. All the big names in the business: Gray and Associates, Litchfield-Cavo, Reinhart-Boerner Van Deuren, Hinshaw and Culbertson, Quarles and Brady, and several others, are petitioning against her (with my case being one of several involving the above-mentioned law firms) because we keep exposing their frauds. More to come.

  10. Irrevecobably Yours,
    Title Abstractor
    Certified Reverse Mortgage Specialist

    KC Out

  11. Reverse Purchase & Sale into Trust

    Reverse That!

  12. And just for the heck of it…ask them who was making the PMI payments from the get go…

    And if you can handle it …ask them when or if those payments stopped.

    Live, Love, Laugh & Learn

  13. An Educated guess…not legal advice.
    BOA s are sly manipulators who stalk their prey before the kill.
    Their trick isvto convince you of one thing and your lack of denial is all the admission they need before they move in for the kill.

    The prey squeals…I can not confirm or deny without strict proof.
    Prove Up You Slimmy Snake or be on your way.

    Personal Knowledge is a Powerful Tool …
    I would listen to FHA! They have a cure!

    Ask them if you qualify for a D.I.L or refi…?
    If you don’t like the answer…ask them why not?

    I Hope this Helps!
    Best of Wishes

    Peacefully .. As Always.

    Many Blessings to All!

  14. if your mortgage was transferred to Carrington around Aug. 2014 it probably belonged to GNMA. GNMA transferred the servicing of between 4 and 6 billion dollars worth of TBW mortgages to Carrington. I found court documents that there was 124 pools of mortgages and thousands of individual mortgages that were sold to 2 and some 3 different companies. I also found audits of GNMA where there were 20,000 mortgages with missing documents. This same court document shows that GNMA purchased my mortgage in August 2009. BOA settled with DOJ and HUD in Aug. 2014. Now FHA says my mortgage was not an FHA mortgage. My note is owned by GNMA per BOA lawyers and is in MSS GNMA TBW 1062, but FHA says it was not transferred to HUD. How can this be. Rest assured I have all of this in writing. How can HUD lie to me in writing. Ha Ha

  15. I’ve been calling for a revolution on this blog for 7 or 8 years, only to consistently hear responses such as, “No! We mustn’t have revolution! There has to be a peaceful way!”

    And now years later, we’re in the exact same situation we’ve been in all along. We’re led by criminals from top to bottom, and they’re still playing their same old grifter games on us. Jack Lew is a criminal of the highest order. Read up on his background. He was instrumental in off-shoring profits for the uber-wealthy so as to escape taxation. His own little Panama gig. And Geithner before him….oh don’t get me started. He’s as slimy a conman as there ever was. He deliberately gamed the entire bail-out to be as borrower un-friendly as it could possibly be. He defied Congress’ mandate to supply $75 billion dollars in borrower relief and legal assistance. He should be blindfolded and offered a cigarette. Just one.

    Hank Paulson before him, and Rubin and Summers, and my all-time favorite, Mozilo….there’s simply no end to this Greek, um….American tragedy, everyone’s always simply played along like the borrower bought above their means….and have to suffer the consequences. Yeah right!

    Eric Holder, Lanny Breuer, and every stinking state AG from California to the New York Islands should be loaded onto boxcars and sent to barracks filled with wooden bunks and a single small stove for occasional heat. MERS is OK they said? They signed off on its legality without consulting Congress or county recorders? Not that congress would have minded. It’s one big country club, remember? But those with rabbit eared pants pockets don’t get past the metal gate.

    And then there’s our president and vice-president. Biden was instrumental in crafting the Clinton era crime bill that decided that anyone and everyone they wanted to incarcerate was thrown in the pokie lickety-split. Some for life over non-violent drug offenses. And of course our commander-in-chief tossed the gauntlet across the country right into the faces of each and every hard working citizen when he said, without any study whatsoever, “[W]e also have discovered that some of this behavior, while morally reprehensible, may not necessarily have been criminal.” Oh really? Just like that? Game over? I ask you…. are our leaders simply complacent, or 100% complicit? A constitutional lawyer? REALLY?

    The Financial Crisis Inquiry Commission discussed how “….technology has transformed the efficiency, speed, and complexity of financial instruments and transactions. There is broader access to and lower costs of financing than ever before.” How could anyone in their right mind even mention “lower costs in financing” when nine million homes have been lost to foreclosure since 2007 and there will be another 9 million before we’re done? Homeowners have lost $8 trillion in home equity (and counting) and 11 million people are currently underwater on their mortgages. All of this is unprecedented. All of this is the result of fraud. It’s not a lower cost of financing; it’s a lower cost of pillaging. And it’s 100% government ordained. You know why? Because there is NO difference between the criminals on Wall Street, and their accomplices on the Hill.

    The courts from sea to shining sea are allowing the banks to play three card Monty games in every court room across the land. When the borrower says, “But your honor, they don’t have the note!” The reply is and always has been, “Did you take out the loan? NEXT!”

    None of us signed up for a lifetime of servitude to a system so inequitable, so criminal, so outlandish as astonish anew on a daily basis. Forget about Post Traumatic Foreclosure Syndrome. How’s about Death By Astonishment? The inequities are monumental, on a scale not seen since the days of the Soviet Union. Have we come to that?

    I read a comment on Naked Capitalism recently, where this guy said he drew up complete plans for a guillotine and went to his city building officials to ask what the permit would run. I like this guys way of thinking.

    If not revolution, at least think open rebellion. And for God’s sake back Sanders! And when the obstructionists on both sides of the aisle start mucking things up, remind them that there’s an exit door just as big as the one they entered in through when they were elected. Write them, not with “oh pretty please” letters, but with admonishments at how disgusted you are with their behavior, and that you will not stand for it any longer, and that you intend to work diligently to remove anyone who isn’t working for the people, period.

    Sorry about the spew. I seek a new continent to settle in. Too bad they’re all used up.

  16. AND let’s not forget Sheila Bair, former FDIC Chair, called them NTMs (non-traditional mortgages) in her book Bull by the Horns. There are no laws on the books for non-traditional mortgages or quasi-securities. Our research indicates that the banks had pre-existing agreements (contracts) in place for the purpose of procurement of homeowner collateral to securitization – without disclosure to the homeowners that they were unwittingly participating in a securities sale before they even signed a document – the sales were Nemo Dat. Some attorneys are becoming brave enough to argue these issues and taking a lot of heat from judges and the bar.

  17. Reblogged this on UZA – people's courts, forums, & tribunals and commented:
    Brilliant explanation, thank you; in peace

  18. Reblogged this on Deadly Clear and commented:
    Judicial pension and retirement funds protection…they think.

  19. […] via Securities, Notes and the Illusion of Enforceability — Livinglies’s Weblog […]

  20. Yeah, yeah, all that plus falsifying our incomes behind our back to get the loan approved since no one qualified for those false inflated appraisals. The incomes never increased in those 17 years but the appraisals did.

  21. Excellent article. Someone, somewhere loaned the money but as to when, where, how or whom we do not know. I have often thought that there was only a wire/fax that stated the money was transferred, but in reality that wire was rescinded and the loan of money never made. All of it “invisomoney”.

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