Livinglies's Weblog

The number of potential errors in analysis increases with the number of assumptions required to come to whatever conclusion is reached. Conversely, the fewer assumptions that are required, the fewer the errors.

With all those opportunities for error present in a world of convoluted complexity, it is easy to see how the courts and lawyers — including foreclosure defense lawyers — have arrived at conclusions that appear to be axiomatically true but which are categorically false.

1. The securitization of loans was an illusion. One need not delve into the complexity of a pooling and servicing agreement or the UCC or case law if indeed securitization was an illusion. The Trust instrument (PSA) is the only thing that provides the source of authority for the Trustee or servicer to act. The assumption is that the Trusts MUST exist and MUST have entered into a transaction in which the Trust purchased the loans. Yet we have seen no evidence that this occurred. But the assumption is that securitization was real and that all of its sub components are real: this is the prevailing view even among lawyers who purport to represent homeowners.

2. The REMIC Trusts were an illusion. Created by investment banks as their private tool to extract money from investors, the trusts only existed on paper, many times unsigned, with no exhibits attached despite the content of the trust instrument (PSA) that refers to the exhibits. The assumption is that the Trusts are valid despite the legal requirements — that (1) there must be a Trustor who is committing certain property or assets to be transferred into the trust, (2) there must be beneficiaries, (3) there must be a trust agreement and (4) the property or assets must in fact be transferred into the trust by the trustor who in fact owns the property or assets. For REMIC Trusts the asset would be the proceeds of sale of mortgage backed securities issued by the Trust. There is no evidence that those proceeds were ever transferred into the Trust, but the assumption is that they were. The further assumption that the Trust was actually transacting business in which it acquired other assets is also not supported by any evidence — yet it continues to be assumed. In fact, the absence of any actual evidence or information to that effect is corroborated by the unwillingness of the attorneys representing the trust to assert that the Trust is a holder in due course. The assumptions are that the trust exists, that it is an active business entity, and that it acquired loans as the last link in a chain of endorsements and assignments. Without these assumptions, the banks, trustees and servicers are without any color of authority or right to enforce documents that are assumed to be a valid basis for claims against homeowners. Yet the request for information concerning the underlying “transactions” is always met with both objections and derision. The assumption that the transactions exist lies a the heart of erroneous decisions in the courts.

3. The loans were an illusion. Since the Trusts were never funded and never active in business the investment bank was able to make funds (consisting of other people’s money) appear at the closing table of tens of millions of events that were falsely dubbed “Closings.” The assumption is that there was a closing, a loan contract was consummated between the Payee on the note and mortgage and the homeowner. If that were true, there would be ample evidence that the originator actually funded the loans. That funding gives rise to a debt. The execution of the promissory note merges the debt into the note, so that the “borrower” only has one liability — the note which is based upon the existence of a debt owed by the homeowner to the originator/payee, who funded the loan. But if the funding came from another source, then the debt is obviously owed to that party who funded the “loan.” The note is therefore a valid instrument if the debt is merged into the note. The assumption that the note IS the debt is wrong but nonetheless applied by a majority of courts. And the assumption that the debt was merged into the note is equally erroneous if the originator of the note is different from the originator of the note.

4. The homeowners who received the benefit of that money have an obligation to repay the money, less any legal deductions. By casting the investors as undisclosed third party constructive creditors or at least victims of the scheme, the debt from the homeowners, also victims, would be owed to the investors — not the originator of the note. By casting the banks or any other intermediaries as the creditors, we would be delving into the complexity of how and under what circumstances theft should be rewarded. All evidence clearly points to the proposition that the “closing” transaction was funded by investment banks, through a series of conduits, using money diverted from investors under false pretenses — thus making the investors involuntary creditors in the assumed origination of a “loan” “transaction.” The assumption that this MUST have been legal and MUST be enforced for continuity in the marketplace is thus attractive to jurists but still erroneous.

5. Foreclosures are based upon the above illusions. Continuation of foreclosures merely creates more complexity in title, credit and the marketplace, as well as the law of unintended consequences when the courts rewrite laws allegedly under their power to interpret the law. Foreclosures therefore should not continue. Any other conclusion requires diving into all the machinations of “holder” vs “holder in due Course” and Article 3 vs Article 9 UCC, void assignments etc. The assumption is that the foreclosures were legally valid and and final gives way tot he fact that except for certain very narrow circumstances there is no statute of limitations on theft of title based upon wild deeds or other void instruments.

6. Proof is all that is required to confirm whether the situation is as simple as I have stated here or whether it is a defective hypothesis. If my above assertions are untrue then it is true that (a) the money advanced by investors went for the purchase of mortgage backed securities and the proceeds of sale went to the issuer (i.e., the REMIC Trust). (b) The Trust was thus actually in business and actually paid for acquisition of loans previously originated. (c) The Trustee maintained a bank account in which the Trust funds were kept until they were used for payment to sellers of the loans. (d) the Trustee has records of such transactions. (e) The loans were indeed loans and (f) the Payee on the notes actually did the underwriting and funding of the loan. (g) The assignments were all supported by consideration, inasmuch as each party actually had a financial stake in the transition — i.e., each party assumed the risk of loss on the loans. (h) The result is that the Trust is in fact a holder in due course under the UCC Article 3 and the risk of loss has shifted to the borrower.

7. But all of that leaves one simple question: if holder in due course status has been achieved, and if holder in due course eliminates virtually all borrower defenses, why has no-one ever asserted holder in due course status? A holder in due course is one who has purchased negotiable paper for value in good faith and without knowledge of the maker’s defenses. Contrary to rulings across the country the risk (burden of proof) is on the “lender” up until the point at which the “lender” achieves the status of holder in due course. If the Trusts purchased the loans, it is difficult to see how they could be accused of not acting in good faith nor of knowing the borrower’s defenses. And yet in millions of foreclosures, the Trusts have insisted that their status was only that of a holder, defying the laws of gravity. If they are only a holder, then for whom are they holding the instrument? And THAT would be the creditor whose identity must be disclosed under Federal and state lending and collection laws.

Formulations before Ockham

Part of a page from Duns Scotus’ book Ordinatio: “Pluralitas non est ponenda sine necessitate“, i.e., “Plurality is not to be posited without necessity”

The origins of what has come to be known as Occam’s razor are traceable to the works of earlier philosophers such as John Duns Scotus (1265–1308), Robert Grosseteste (1175–1253), Maimonides (Moses ben-Maimon, 1138–1204), and even Aristotle (384–322 BC).^[9][10] Aristotle writes in his Posterior Analytics, “We may assume the superiority ceteris paribus [other things being equal] of the demonstration which derives from fewer postulates or hypotheses.”^[11] Ptolemy (c. AD 90 – c. AD 168) stated, “We consider it a good principle to explain the phenomena by the simplest hypothesis possible.”^[12]

Phrases such as “It is vain to do with more what can be done with fewer” and “A plurality is not to be posited without necessity” were commonplace in 13th-century scholastic writing.^[12] Robert Grosseteste, in Commentary on [Aristotle’s] the Posterior Analytics Books (Commentarius in Posteriorum Analyticorum Libros) (c. 1217–1220), declares: “That is better and more valuable which requires fewer, other circumstances being equal… For if one thing were demonstrated from many and another thing from fewer equally known premises, clearly that is better which is from fewer because it makes us know quickly, just as a universal demonstration is better than particular because it produces knowledge from fewer premises. Similarly in natural science, in moral science, and in metaphysics the best is that which needs no premises and the better that which needs the fewer, other circumstances being equal.”^[13] The Summa Theologica of Thomas Aquinas (1225–1274) states that “it is superfluous to suppose that what can be accounted for by a few principles has been produced by many”. Aquinas uses this principle to construct an objection to God’s existence, an objection that he in turn answers and refutes generally (cf. quinque viae), and specifically, through an argument based on causality.^[14] Hence, Aquinas acknowledges the principle that today is known as Occam’s razor, but prefers causal explanations to other simple explanations (cf. also Correlation does not imply causation).

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