Money v Paper

If the actual facts fail to show ownership of the debt, then paper instruments indicating transfer of a mortgage (or a note) are just that: paper. If what is written on paper conflicts with the facts then the actual facts take precedence. In no case that I have reviewed (among thousands) has there ever been any proof of payment for transfer of a mortgage or deed of trust. If you demand it in discovery your adversary will fight to the death to prevent you from learning what really happened.

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It is the absence of assertions regarding the debt ownership and transfer that reveals the truth here. Industry standards for banking require both a warranty of ownership of the debt and the ability to confirm the existence and ownership of the debt. You will never see even an assertion from the parties seeking foreclosure that they are the owner of the underlying DEBT or that they ever paid for the right to collect from the “borrower.” Instead, their assertion is that they own the PAPER, to wit: the note and mortgage.

The absence of consideration is why nobody is alleging that they are holders of the note and mortgage in due course which would eliminate virtually all borrower defenses and shift the risk of loss to the maker of the note.

The logic is irrefutable: the absence of an assertion of being a holder in due course (HDC)  is evidence of no consideration, shifting the burden onto the would-be forecloser to show that there was consideration or value paid in hand.

If they did assert the status of holder in due course then they would need to prove consideration as well as that the purchaser was acting in good faith and without knowledge of borrower defenses. By not asserting HDC they create an elliptical argument that they don’t need to prove or even allege consideration or value paid in hand.

They have now elevated that nonsense into the orbit of illusion: they assert that borrowers have no right to challenge the conditions precedent to the effectiveness of the instruments upon which they rely to show legal standing and prima facie elements of a case in foreclosure.

No bank would let you borrow money using a note that had been endorsed or a mortgage that had been assigned unless they received a warranty of title, confirmation of the existence and ownership of the debt, and proof of authority of the person endorsing or assigning the paper. It just doesn’t happen.

And if they DID have proof of paying value for the underlying debt, contests to foreclosure would be virtually nonexistent. The exception being bad accounting and mistakes in the escrow account, or the delivery of default notices. Any party with a portfolio of mortgages on which they seek to foreclose should be more than anxious for the opportunity to show that the loans were properly securitized and that nobody was being cheated.

But the same banks, who set those standards, want us to accept an endorsed (indorsed) note and an assignment of mortgage without any warranty of title, confirmation of the existence and ownership of the debt and proof of authority of the person executing the document.

The industry standard for an assignment of mortgage is clearly set forth in MultiState Mortgage Assignment – Single Family – Fannie Mae Uniform Instrument Form 3741. It starts with “For value received, the undersigned holder of a Mortgage (herein “assignor)…” The instrument itself places two conditions on the effectiveness of the assignment: (1) value received and (2) assignor is a “holder” of the mortgage.

The clear meaning is that the assignor must receive value — which conforms with Article 9 UCC which is adopted in all 50 states of the union. Just like a promissory note where it is customary to execute the note first before receiving a loan, the assignor can sign (if the signature is actually authorized) the assignment of mortgage. Whether it is effective as an instrument is wholly dependent upon whether the facial statements on the assignment are true — unless the homeowner waives an objection to it.

The purpose of the requirement that value be paid in hand is to assure that the debt is being transferred. This refers to the underlying obligation not the note, which is a paper instrument that is also subject to challenge.

Thus at the very least you are entitled to confirm warranty of title, confirmation of the existence and ownership of the debt and proof of authority of the person executing the document.

in 1974, in my first semester of first year in law school, one of the main points drilled in by Professor Sam Bader was that the debt is not the note and the note is not the debt. The note is evidence of the debt but is not the debt itself.

The debt is determined by what actually happened. If someone delivers money to you it is presumed not to be gift; hence a debt is created with or without paper. If you sign a note, expecting to get a loan and you don’t get the loan, the note is subject to some very basic defenses — mainly that the note is evidence of a transaction that never occurred or that the assignment of mortgage  or indorsement of a note is evidence of a transaction that never occurred.

Professor Bader also made it clear that the main error in litigation over loan transactions occurs when the Court (the Judge, who also went to law school), makes the error of equating the underlying debt with the paper that has been executed. Blind justice mandates that we apply the rule of law without regard to the external effect of those decisions. Instead, courts have intentionally or unintentionally “forgotten” the most basic principle of contract law.

The absence of any consideration in the origination or transfer of “loans” means that there was no value attached to the execution of the transfer documents or even the original loan documents. And THAT means that the debt is not present in the courtroom where foreclosures are routinely being allowed.

PRACTICE NOTES: What would you expect if you were reviewing an alleged transaction that involved hundreds of thousands of dollars? You would expect correspondence and agreements to reflect the purchase — not a single document out of context that purports to show an origination or transfer.

13 Responses

  1. Next time you feel like the Court is ignoring stated legislation or even worse, “acting like they are a legislature” re-construing laws for their own purposes, take a review of these rulings and figure out where to find similar ones in your State…

    Plain Meaning – Legislative Intent

    People v. Giraud, 2012 IL 113116 (No. 113116, 11/29/12)

    The primary objective of legislative interpretation is to ascertain and give effect to legislative intent, the most reliable indicator of which is the plain and ordinary meaning of the statutory language. In determining the plain meaning of statutory language, reviewing courts must consider the statute in its entirety, bearing in mind the subject addressed and the apparent intent of the legislature. Where statutory language is clear and unambiguous, it must be applied as written without resort to extrinsic aids of statutory construction.

    If statutory language is ambiguous, the statute is to be construed so that no part is rendered meaningless or superfluous. Principles of statutory construction are not rules of law, but are merely aids in determining legislative intent and “must yield to such intent.”

    People v. Young, 2011 IL 111886 (No. 111886, 12/15/11)

    1. When construing a statute, the primary objective is to give effect to the legislature’s intent. To determine the plain meaning of statutory terms, the reviewing court may consider the statute in its entirety, the subject addressed, and the legislature’s apparent intent. Where the language of a statute is unambiguous, the court must apply the language as written.

    Where terms in a statute have acquired a settled meaning through judicial construction, such meaning is retained in subsequent amendments of the statute unless a contrary intention by the legislature is clearly shown.

    Paszkowski v. Metro. Water Reclamation Dist., 789 N.E.2d 342, 344 (Ill. App. Ct. 2003)
    (“The cardinal rule of interpreting statutes, to which all other canons and rules are subordinate, is to
    ascertain and give effect to the true intent and meaning of the legislature. ‘The best evidence of legis-
    lative intent is the language used in the statute itself, which must be given its plain and ordinary mean-
    ing.’” (citations omitted)).

    Paszkowski, 789 N.E.2d at 344 (“When the plain language is clear and unambiguous, the legislative intent that is discernable from this language must prevail, and no resort to other tools of statutory construction is necessary.” (citation omitted)).

    In re D.F., 802 N.E.2d 800, 804 (Ill. 2003) (“Where the language is clear and unambiguous, it
    will be given effect without resort to other aids of construction.” (citation omitted)); see also Davis v. Toshiba Mach. Co., America, 710 N.E.2d 399, 401 (Ill. 1999) (“When the language of a statute is clear, no resort is necessary to other tools of interpretation.” (citation omitted));

    In re D.F., 802 N.E.2d at 805 (stating that adherence to the plain meaning rule is not required in situations where literal interpretation of the text causes unjust consequences or a result that is clearly absurd given the intent of the legislature). Id. at 807 (stating that punctuation which is clearly erroneous may be disregarded).

    See People v. Moffitt, 485 N.E.2d 513, 522 (Ill. App. Ct. 1985) (stating that the plain meaning rule “should not prevail” in situations where adherence to the literal interpretation of the text would create an inconsistent result with related provisions or statutes, absent an intent by the legislature to alter the conflicting provisions or statutes)

    Gill v. Miller, 445 N.E.2d 330, 333 (Ill. 1983). The court further noted: “[i]n ascertaining the legislature’s intent we should consider the statute in its entirety, noting the subject it addresses and the legislature’s apparent objective in enacting it.” Id.

    FERRIS, THOMPSON & ZWEIG, LTD. v. ANTHONY ESPOSITO, 2017 IL 121297 at ¶ 22,
    The applicable standards are well established. Illinois Supreme Court Rules are construed using the same principles that govern the interpretation of statutes. People v. Roberts, 214 Ill. 2d 106, 116 (2005). When construing a rule of the supreme court, a court’s primary goal is to ascertain and give effect to the intent of the drafters. The most reliable indicator of that intent is the language used, given its plain and ordinary meaning. In determining the plain meaning of the rule’s terms, a court must consider the rule in its entirety, keeping in mind the subject it addresses and the apparent intent of the drafters in enacting it. Courts will also interpret the rule so that no part of it is rendered meaningless or superfluous and will not depart from the plain language of the rule by reading into it exceptions, limitations, or conditions that conflict with the expressed intent. People v. Dominguez, 2012 IL 111336, ¶ 16

    The Illinois Supreme Court, speaking for itself in AKEEM MANAGO v. THE COUNTY OF COOK, 2017 IL 121078 at ¶ 14 stated,
    Our duty [in this case] is properly limited to determining the intent of the legislature based on the plain and unambiguous statutory language and construing the relevant statutes consistent with that intent.
    Carlson, 2016 IL 120544, ¶ 17. If we do not adhere to that limitation, we

    “ ‘run[ ] the risk of implementing [our] own notions of optimal public policy and effectively becoming a legislature. Interpreting legislation to mean something other than what it clearly says is a measure of last resort, to avoid “great injustice” or an outcome that could be characterized, without exaggeration, as an absurdity and an utter frustration of the apparent purpose of the legislation.’ ” Illinois State Treasurer v. Illinois Workers’ Compensation Comm’n, 2015 IL 117418, ¶ 39 (quoting Dusthimer v. Board of Trustees of the University of Illinois, 368 Ill. App. 3d 159, 168-69 (2006)).

  2. […] View source here […]

  3. Endorsed/indorsed. Spellcheck
    It again

  4. Anon- furthermore, “the mortgage follows
    The note”: ( not the other way around)
    If the note hasn’t been negotiated, for value ( proof of such required, no presumptions allowed), and properly endorsed/informed, then the mortgage cannot follow it. The paths go separate ways.
    And never the twain shall meet.

  5. Anon- the mortgage can be assigned. The note has to be negotiated, for value. (Proof of payment: delivery receipt)
    You’ll remember MERS’ language- ” ……this mortgage, together with the note…..”
    The problem here is that MERS’ CEO, it was either William Hultsman or RK Arnold, testifying before the FCIC ( financial crisis inquiry commission) on CSPAN2, stated that MERS “has no interest in the note”. Same testimony before the Nevada Banking Commission 2008.

  6. Any comments on defects of assignment of mortgages to the Bank of New York, as trustee for the certificateholders of CWABS, Inc., asset-backed certificates, series 2007-4. Did the bank receive any value or the Notes being transferred during assignment of mortgage.

    Assignment of mortgage means mortgage was, apparently, assigned – not the Note !

  7. A Treatise on the Law of Negotiable Instruments: Including Bills of Exchange, Promissory Notes, Negotiable Bonds and Coupons, Checks, Bank Notes, Certificates of Deposit, Certificates of Stock, Bills of Credit, Bills of Lading, Guaranties, Letters of Credit and Circular Notes, Volume 1

  8. The courts know exactly what is going on; and, it is clear that they work hand-in-glove with the banksters to rob we, the people blind;

    Woe unto you lawyers, scribes and pharisees…

  9. BTW – the BS Illinois statute says that THE LEGISLATURE LIKES the mealy-mouth hybrid claim – (evidently presuming that the words “holder” and “owner” are equal) – to wit:

    1. In Mundie the court emphasized that,

    “Section 15-1208 of the IMFL defines a “mortgagee” as “(i) THE HOLDER OF AN INDEBTEDNESS or obligee of a non-monetary obligation secured by a mortgage or any person designated or authorized to act on behalf of such holder and (ii) any person claiming through a mortgagee as successor.” 735 ILCS 5/15-1208 (emphasis added);

    Is it possible for me to legally hold my hands on your throat to choke you to death without owning it?

  10. In one of my cases, the judge actually knew what a holder in due course was or so she said.

  11. Interestingly, in the complaint filed by Attys for USBANK as Trustee in our case, when it came to declaring to the court their capacity to sue they stated: “HOLDER OF THE INDEBTEDNESS” – what the heck is that?

    This seems like a meaningless wordplay taking the phrases

    and blending them into a hybrid phrase bent on confusing and deceiving the court and defendant.

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