Consummation- Is an Act not an Illusion

by William Hudson

Neil Garfield is adamant that if consummation did not occur, there can be no contract. His belief is supported by hundreds of years of contract law (including the marriage contract). In regards to marriage, most people know if consummation occurred, yet when it comes to taking out a securitized loan like a mortgage, most people only assume it did.   Without proof one can only speculate that consummation occurred.

Due to the Sarbanes-Oxley Act, any lender in America should be capable of producing the needed documentation to prove they own a Mortgage and Note- and that consummation occurred. With the click of a computer mouse, instantaneously the journal entries in the lender’s financial, accounting, and general ledger systems should show that a loan was consummated and the Note was assigned to a valid trust. Instead, the banks resort to forgery and fraud. If they had the documentation, fraud would not be necessary.

Since around 2001 banks have been mocking up documents to create a paper trail to create the illusion of ownership- but in light of all the fabricated document fraud, it is time that homeowners demand to see the money trail and are permitted to do so. The money trail should begin at consummation of the loan between the two parties who agreed to contract: the homeowner and lender. However, this is not the way that consummation works in a securitized mortgage transaction. By design, the homeowner is not allowed to know who they are borrowing funds from- and transparency is of no concern.

Can you imagine this occurring in any other consumer transaction?  Imagine the chaos that would ensue, for instance, if you thought you were financing a truck through Ford Credit, yet unbeknownst to you, Honda funded the loan.  You may have ended up with the truck, but you may have been induced into a contract you didn’t agree with (especially if your goal was to “buy American”).  Why should Mortgage loans be any different?  And why should Congress bother passing laws like TILA if the banks are going to ignore consumer protection laws with impunity?

There can be no consummation when the party lending the money is never disclosed to the borrower. A homeowner is conned into believing the party listed on their note and mortgage is actually the party who is taking the risk by lending their own funds- when this party who is named on the Note is an originator- not a lender.

Has anyone stopped to ask why all the secrecy?   The only reason for secrecy is to hide the truth- whatever that may be (dark pools? empty trusts? stolen funds?). There is a reason for the deception that begins at the closing table, endures through servicing, and only ends upon sale of the property or payoff.

Consummation under the Federal Truth-in-Lending-Act occurs when the state law on contract or lending says it begins. According to attorney Neil Garfield, “Most state laws require offer, acceptance and consideration. So while the door is open to inconsistent results, in order to find that consummation did happen and that the date of consummation is known, we still must visit the issue of consideration.” Consideration is basically the exchange of something of value in return for the promise or service of the other party. Take note, consideration is not the exchange of value in return for the promise or service of an unidentified third party. However, modern securitization has nothing to do with the name of the original “lender” on the Note that in 99% of all cases did not loan anything of value.

When a homeowner is not provided the name of the party who is actually taking the risk and has skin in the game- they lose their ability to negotiate in good faith with this party (the investors of the trust). Over the span of a 30 year loan, “life” happens. It is terrifying that a bank can use one late payment as an excuse to create a default.

Banks were once responsive to homeowners because they had an actual investment and needed the homeowner to successfully make payments.   If a homeowner had a short-term cash flow problem, the banks were willing to work with them- it was in their best interest to do so. Homeowners no longer have the luxury of negotiating with the party who provided the funds, but must attempt to solve any mortgage issues with a loan servicer who is financially rewarded by engineering a default- by failing to provide responsive customer service to the homeowner (or by blatantly misleading the homeowner).

In fact, this week the CFPB announced that consumers made almost 900,000 complaints about their loan servicers between March and April 2016. The complaints center around three areas:

  1. Problems when consumers are unable to pay: Consumers complained of prolonged loss mitigation review processes in which the same documentation was repeatedly requested by their servicer. Consumers also complained that they received conflicting and confusing foreclosure notifications during the loss mitigation review process.
  2. Confusion over loan transfers: Consumers complained that they were often not properly informed that their loan had been transferred. As a result, payments made to either the prior or current servicer around the time of the transfer were not applied to their account.
  3. Communication issues with servicers: Consumers complained that when they were able to speak with their servicer, the information they received was often confusing and did not provide the clarifications they were hoping for.

According to the report, the mortgage companies with the worst records between November 2015 to January 2016 were Wells Fargo, Bank of America, Ocwen, and Nationstar Mortgage. Consumers are not receiving customer care because by design servicers profit when a default can be engineered. Based on the CFPB findings, it is obvious that the longer the servicer can prolong loss mitigation, the more fees they will potentially receive. A default allows them to collect thousands in late fees and penalties; and if they are lucky- foreclose on the home.

The servicer has no skin in the game and is incentivized to create a default by any means necessary- whereas, a true creditor does not want a default. The problem with the way the system is rigged is that the homeowner is prevented from knowing who they borrowed money from and therefore cannot negotiate in good faith with the party who has a vested interest in the homeowner making payment.

The central problem in all securitized mortgages is that the homeowner has no idea who they consummated the loan with. Although it is considered a predatory practice under Regulation Z to conceal the true lender, no government regulatory agency has stopped the practice of concealing the identity of the true lender at closing.  The TILA laws are on the books, but have no teeth.

Neil has said in the past that consummation only occurs after the closing agent receives and disburses the funds according to the alleged loan contract. Therefore, consummation does not occur on the date that the closing papers are signed. The requirement of giving the borrower disclosure papers three days before the closing is complete might put some daylight between the assumption that consummation occurred on the day the papers were signed.

Garfield states, “The simple argument is that the industry practice has always been that the borrower signs papers and THEN the closing agent requests or receives the money for the “loan.”” Therefore, Garfield doubts there is any support for saying that the borrower is contractually obligated to comply with the terms of the note or the mortgage if the money never came at all. Neil Garfield says that where the true problem lies is what occurs in the NEXT step.

“If we can agree that if no money ever came from anyone, the borrower doesn’t owe anyone anything and is not bound by the “facially valid” loan contract, then it follows that if no money came from the named Payee on the note and mortgagee on the mortgage, (beneficiary in a deed of trust), the “borrower” doesn’t owe anything to anyone,” states Garfield. If contract law was strictly followed, the homeowner is under no obligation to repay a party who didn’t lend them a dime.
This is where the issue of consummation becomes difficult to understand. “If money is sent to the closing agent by a party unrelated to the named payee on the note, then under what theory do we say that the note is evidence of the debt? It certainly should not be used to show that the borrower owes the payee any money because the payee did not make the loan and nobody related to the payee made the loan,” Garfield has repeatedly stated. Neil Garfield agrees with the assumption that the borrower owes back the money that was advanced on behalf of the borrower, but that transaction is not a debt nor a contract- it is a potential liability to the party whose funds were used to send to the closing agent.

That claim could not be in contract because the source of funds and the “borrower” never entered into a contract. The liability would be in equity and would exist independently of the false note and false mortgage, which means the claim from a real source of funds would not be subject to the note and mortgage but simply due on the basis of fairness in equity: the borrower received the benefit of the money from the money source and under quantum meruit would be obligated to repay the money.

This is where most people get lost on Garfield’s Rescission theories. Garfield never advocates that money is not owed to someone- what he argues is that the Note and Mortgage represent a transaction that never occurred- and therefore should be rescinded under TILA. Rescission would allow the REAL creditor (or investors) to come to the table and demand/receive payment.

And yet, loan servicers wanting to protect their unlawful gains (at the expense of the investors) are successfully deceiving the courts that consummation did occur. The entire mortgage scheme is rigged by a system of smoke and mirrors. There is evidence that the closing did not occur according to the contract- if the homeowner can manage to obtain the information through Discovery (but in 99% of all lawsuits the bank will not be compelled to reveal actual evidence). The courts could demand sua sponte that the servicer provide the actual business records and settle the matter- but this would reveal the truth that everyone has gone to great lengths to keep hidden.

When Congress wrote the Truth in Lending Act, they deliberately stated that the homeowner could rescind the Note within three days of consummation (they specifically did not say origination). The Supreme Court in Jesninoski reinforced the right to rescind and TILA was enacted so that banks would self-regulate and not devise reckless and predatory schemes (like what has happened). The homeowners and investors should not be punished for the deliberate obfuscation of the true terms of the “loan”.

All this analysis is aimed at one single point, to wit: that the source of funds does not meet the definition of a creditor to whom the money is owed. Most people understand Neil Garfield’s point but reject it regardless of how well it is founded in law and fact. They reject it because it upsets the mortgage securitization scheme started 20 years ago by the investment banks. It would mean that there is no creditor, there is no contract, and there is no obligation to comply with the payment terms under the note and mortgage. This is an unacceptable result for most people. They worry that the entire system would collapse if they were to follow the law as it has been written and decided for centuries.

But the feared consequence is not based in fact. The entire system does not collapse under this scenario. What happens is that the investors who bought fake Mortgage backed securities could deal directly with the borrowers and workout the terms of a mortgage loan that is both legal and enforceable. More importantly it would be a loan that would survive in value to the investor. As things stand now the Wall Street banks are driving as many cases as possible toward foreclosure because that is the way they collect the most fees — when the equity in the property is no longer higher than the claims for money upon liquidation.

So accepting the application of existing law as stated here, would mean that investors would suffer much lower losses and the homeowners would regain the equity in their homes or at least the prospect of equity while the wild terms and wild appraised prices of the past are abandoned. Obviously the SERVICERS would hate this equitable solution- because it would cost them the huge profits they receive through document fabrication, robosigning and other creative “solutions” that require fraud.

Let’s remember that when TARP was first announced, it was all about losses from mortgage defaults. When the government realized that homeowner defaults had little to do with TARP they expanded its meaning to include failing mortgage backed securities. But there were no bank losses from MBS because the banks were selling MBS not buying them. So then they expanded it again to include losses from credit default swaps, insurance contracts and other hedge products.

This was all based upon the premise that there MUST be a loan contract in there somewhere. There wasn’t in most cases. Nearly all of the foreclosures that have been rubber stamped by the court system were not only unnecessary, they were patently illegal based upon false representations from the banks. The foreclosure was a legal cover for all the prior illegal actions.

With that being said, if the homeowner only recently discovered that consummation did not occur; does the 3-year TILA window is likely untolled and the 3-day/3-year expiration time may never have commenced in the first place. Remember that according to law, Rescission is the act of rescinding; the cancellation of a contract and the return of the parties to the positions they would have had if the contract had not been made; rescission may be brought about by decree or by mutual consent.

Congress did not give you the Right to Cancel under TILA but the Right to Rescind. Cancellation means termination of the entire agreement by the act of parties/law. Whereas Rescission places the person back to the condition they were PRIOR to the contract; cancellation merely voids the contract and has no restorative properties. Congress could have simply allowed homeowners to cancel under TILA, but instead opted for Rescission. Cancellation would have stopped the bleeding, but Rescission actually reattaches the Limb. The judiciary must recognize that Congress used the words CONSUMMATION and RESCISSION not ORIGINATION and CANCELLATION in the Truth-in-Lending-Act so why should any Judge ignore the intention of the Act?  Rescission will eventually be won based on lack of consummation- but it may take another hearing before the Supreme Court before the state courts accept what consummation means.

19 Responses

  1. to William Hudson. Thank you for a well written article that I took the liberty of forwarding to the legislative arm of the National Association of Realtors this morning. As a Realtor, it is far past time that this strong, vocal and powerful association should use its muscle to help clean up this mess…it is clearly devasting our businesses..that is the businesses of the thousands of honest Realtors who do not want to be re-selling properties that the banks have stolen….strong words but oh so accurate……obviously the courts need some direction as they have fumbled the ball for years now……Sheri

  2. To “Kalifornia” …

    A chapter-13 bankruptcy is not a plan of reorganization, but rather a plan of “Repayment.” Chapter-7 is the liquidation chapter; chapter-13 is the repayment chapter; and, chapter-11 is the chapter of reorganization.

    Chapter-13 has a “Nanny-Trustee” meant to make sure you brush your teeth before bed and, oh ya … to make sure you make your payments or she’ll dismiss your case.

    Chapter-11 is for the “Big-Boys & Girls” that know what they’re doing so they don’t need a “Nanny-Trustee. The debtor as “Debtor-In-Possession” effectively is the chapter-11 trustee, with all the same powers as a chapter-7 trustee.

    Chapter-11 has unique rules unavailable anywhere else … and knowing those rules will clear the path through the forest..


  3. IF I recall correctly, the context of the Boyce case is a PRE-NON-JUDICIAL foreclosure intended to raise the issue of a homeowner’s right to challenge an entity’s authority to initiate and execute a foreclose based upon an “assignment” of a deed of trust, but not necessarily a transfer and delivery of a NOTE.

    Generally, the Cal Court(s) of Appeal have been ruling that the comprehensive and exhaustive nature of the non-judicial foreclosure statutes were intended by the Legislature to preclude injecting the superior courts into the non-judicial foreclosure process, therefore precluding a superior court’s intervention. However, the remedies provided in the implementation of the Cal Homeowner Bill of Rights in 2013/2014 declare otherwise.

  4. FYI…Yvanonva update…

    Apparently, one of the pending seven (7) Yvanonva-based cases before the Cal Supreme Court was entirely dismissed: Boyce v. T.D. Service Co., S226267. (B255958; 235 Cal.App.4th 429; Santa Barbara County Superior Court; 1438504.)

    Six of the other Court(s) of Appeal Holdings were VACATED, are live, and remanded back to the Cal Court(s) of Appeal predicated on the Court’s Opinion in Yvanova. At least one other case is now on petition for review before the Cal Supreme Court: LAURA SATERBAK v. JPMORGAN CHASE BANK, N.A. (see

    Procedurally, the remand(s) to the Court(s) of Appeal can play out in a variety ways; but logic dictates that the six (6) VACATINGS should have issued concurrently following Yvanova.

    I suspect that as a result of the Court’s decision to defer briefing for the six (6) vacated cases until the Yvanova opinion, and then assuming the briefing that followed, if any, the Court decided to REMAND the work to the Court(s) of Appeal for reconsiderations squared with Yvanova.

    Thus, the likelihood is that it will be several more years before those Opinions will be issued by a Cal reviewing court.

  5. FYI…

    Apparently, one of the pending Cal Supreme Court cases was entirely dismissed: Boyce v. T.D. Service Co., S226267. (B255958; 235 Cal.App.4th 429; Santa Barbara County Superior Court; 1438504.)

    For whatever reason, six of the cases survived and are live, and at least one other is now on petition for review before the Cal Supreme Court: LAURA SATERBAK v. JPMORGAN CHASE BANK, N.A. (see

    Saterbak brings the count back to seven eventual rulings that will be predicated on the Court’s Opinion in Yvanova.

  6. Neil is awesome has been spot on for 8 years.I have read his blog since day one.On July 15,2007 the CEO of bear stearns called the ceo of cuntrywide and said these funked up loans are defaulting, c*$t said “keep selling” then he [angelo mozilo] called the Jew CEO lloyd blankfein of gold mansacks who said lets start selling this shit last week gold mansacks got hit with a $5 billion fine, but that is only a fraction of the money they made from the fraud anyway.I have been living in a $250K home for 9 years for free due to mortgage fraud at the closing, filed a TILA in NOV 2007, still here and am Pro Se. Look up fl. middle patrick farrell

  7. @ Iam Lazarus

    “Iam Lazarus, on March 8, 2016 at 11:17 am said:

    Rescission is absolutely effective upon notice … period.

    However … relief will only be found in the bankruptcy court. (preferably a chapter-11) It’s the only way to automatically force an automatic-mini-discovery (by Rule) of the alleged creditors claim, without objection being allowed.

    Set the trap … and pull the lever.”


    You suggested a chapter 11 (business reorganization) as “preferabl[e].”

    Why not a chapter 13 (individual reorganization) with an Adversarial Proceeding?

  8. @ Dr. James Chappel

    Please review:

    In re Banks, 457 BR 9 – Bankr. Appellate Panel, 8th Circuit 2011

    As Kondaur admits, and is apparent from the copy of the note attached to its proof of claim, the promissory note the Debtors executed in favor of NCMC has not been specifically endorsed to Kondaur; it is endorsed in blank. Accordingly, it is a “bearer” note, which requires actual possession of the note to enforce or negotiate it.[13] The Debtors raised the issue of whether Kondaur is the proper party to enforce the note and cast further doubt on Kondaur’s standing by introduction of the Corrective Assignment. Unfortunately, there is nothing in the record evidencing the location of the note. Kondaur’s counsel represented at oral argument before this Court that Kondaur has possession of the note, but its failure to produce the note prior to or at the hearing on its motion to dismiss (treated as a motion for summary judgment) precluded a determination that Kondaur has the right, as a matter of law, to enforce the promissory note.

  9. How is Chase not one of the worst? They’re allowed to dump their “bad” loans to non lenders like PennyMac and then can take over debt by Ocwen as punishment for forgery, robosigning when they’re guilty of same thing.

  10. Dear William Hudson … I really enjoyed this wonderful post, btw!!
    Thank you for the excellent work. It read really well, too. (~bravo)

  11. Iam Lazarus … 6192121653

  12. Hello “Dr. James” … Since the daughter controls title under her joint-tenancy with her deceased mother, I can help her avoid eviction and return title to her while she keeps her earned equity, too. Afterwards, I can even finance her with a note based on her wonderful new equity-position. (.. I am a Note Broker)

    My company buys “Bad-Debts” and “Defective Liens” exactly like hers. Since her title would be conveyed by grant deed to my company … I oppose her [alleged] creditor as another institutional debt-buyer and when I demand proof of her [alleged] creditor’s entitlement to receive payment, the court will demand they present it. (..but they can’t)

    Iam Lazarus … and if it’s allowed here, I can be reached at

  13. @Dr. Chappell: You might want to check with either or both of the attorneys below:

    Charles Marshall

    Law Offices of Charles T. Marshall

    415 Laurel St., #405

    San Diego, CA 92101

    Phone 619.723.7071

    Fax 866.575.7413


    Steve Vondran at He seems like a very knowledgeable attorney in the foreclosure area.

    I pray things work out for her!!

  14. 1. Tenancy by Entirety (marriage consummation ) *😮*
    2. Tenancy in Common
    3. Joint Tenancy

    Know how you Hold Title!

  15. Makes clear the connection to derivatives and how we were used and scapegoated. What industry likes to say andd this is where real estate industry has too much influence is that on refi any payment or cash out is a “benefit” and that’s all there is to it.

  16. Terrible. Like rabid animals tearing their prey apart. I hope she filed bankruptcy with the house unsecured.

  17. In 2006, an elderly woman bought a house for herself and her daughter to live in. The mother qualified for a loan and the daughter had the money for a down payment; $108,000. The daughter also made all the payments on the loan along with property taxes and insurance. The house was deeded in both of their names as joint tenants.

    After three years, the mother died. The daughter asked the lender to have the loan transferred in her name. The lender, OneWest Bank said she needed to apply for a loan modification, but also needed to be three months late on her payments to qualify for a loan mod.
    The daughter kept making the payments for two more years and then stopped making the payments while she applied for a loan mod as directed. This was now necessary as she lost her job because of severe Type 1 diabetes.

    The lender foreclosed on the house. The buyer, FANNIE MAE, filed an unlawful detainer. The daughter proved in court that MERS transferred the Deed of Trust to OneWest Bank but NOT the note. The judge stopped the unlawful detainer AND reversed the foreclosure stating FANNIE MAE did not have standing without the note. The daughter sent a rescission letter to all the principles involved. No one replied.

    Four years later (2015), FANNIE MAE filed a NOD and then a NTS. The daughter filed a complaint in state court for numerous causes of action to including violation of Res Judicata and a Preliminary Injunction against foreclosing. FANNIE MAE transferred the case to federal court. The judge said the daughter had no standing to file as she was never the borrower. FANNIE MAE is seeking a MTD and plans to proceed to foreclosure. BK has been filed, but it is likely the court will release FANNIE MAE. The daughter has invested over $303,000 to date in this property and still lives there.

    The California AG is proposing a new law for a Survivor Foreclosure Bill of Right’s. Counsel has advised the daughter this won’t apply in her case as it is not law yet and that she should be prepared to lose the case and move.

    QUESTION to anyone: How can the daughter have no standing, but FANNIE MAE without the note in addition to all the other illegal things they did and do, HAVE standing to foreclose? Does anyone have any experience with a case like this? The daughter is now disabled living below the poverty line on could become homeless. This is a critical situation.

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