NJ Court: Possession of note + mortgage assignment is prerequisite to foreclosure

Pretender lenders are going to cite this case as support for the idea that the note and mortgage can be separated and that either one can be the basis of a successful foreclosure. They will rely on the “exception” implied in the court decision wherein the owner of the note has an agency relationship with the servicer who is the foreclosing party.

In this case Freddie Mac clearly possessed the note, although there was no evidence cited that Freddie Mac had actually purchased it. That was presumed in this case. The purchase of the note was not an issue on appeal.

Freddie Mac had made it clear in public announcements that foreclosures should be in the name of servicers. So the possession of one part of the paperwork by the agent and the other by the principal are joined as a single unit.

This decision was correct in ruling against the homeowner, given the issues before it. The homeowner was attempting to make a technical distinction contrary to the facts and contrary to law. The issue brought on appeal was whether Freddie Mac was the only party with standing to foreclose. I would say that shouldn’t have been the issue. Both Freddie Mac and Capital One had standing depending upon who asserted it. Either one could have foreclosed.

Any party may foreclose in its own name or through an agent with authority to do so — if they otherwise plead and prove their status as holder in due course, or holder, or non-holder with rights to enforce. The issue on appeal was a non-starter.

Despite the article, there is no exception here. This New Jersey court simply followed the law.

see Court-says-note-and-mortgage-assignment-both-prerequisites-to-foreclosure-but-makes-an-exception/

see case decision: Peck adv Capital One

The difference between this case and most other cases is that in this case there appears to be a tacit admission that Freddie Mac, as possessor of the note, was a holder or non-holder with rights to enforce because they had purchased the note. It is assumed in this case that Freddie was the actual owner of the debt.

The key differences between this case and most other cases are as follows:

  1. The “principal” in this case has been identified and assumed to be the owner of the debt.
  2. The “agent” in this case, Capital One, is a servicer whose authority to act as agent was not contested.

What is missing is whether Freddie Mac actually purchased the debt or the note and whether Freddie Mac still owned anything at all. Purchase of the note does not mean purchase of the debt if the debt is owned by someone other than the seller of the note. It is well settled law that only the owner of the debt can foreclose. But even if a purchase transaction did in fact take place, the question remains as to whether the interest of Freddie Mac was sold back to some private label REMIC Trust or some other third party such as the seller who may have given warranties as tot he performance of loans.

But if the note was purchased in good faith and without knowledge of the borrower’s defenses, if any, then the purchaser of the note increases their status to holder in due course where there are no defenses even if the preceding origination or transfers had defects.

On the other hand, if the seller of the note did not own the note, then the purchase by Freddie would be nullity. This is also well settled law. A seller of an interest that is nonexistent or in which the seller has no interest, cannot create the interest by selling it. This is the basic problem with “originations” and most “transfers” by endorsement or assignment. In such circumstances the buyer would be a possessor without rights to enforce unless the owner of the debt was in privity with the buyer of the note. The buyer would have a potential claim against the seller, but not the maker of the note.

In such circumstances, the owner of the debt or the true owner of the note would be able to file a claim against the maker and the buyer of the note, explaining how the possession of the note was lost and pleading (and proving) ownership of the debt.

NOTE THAT THERE IS A DEEPER ISSUE PRESENT. But it probably won’t get you any traction despite the clear basis in law and fact. Freddie Mac may or may not have actually made a purchase of the subject loan. If they didn’t then asserting them as the owner of the note might be OK for pleading, but the case ought to fail at trial — if the homeowner denies that they are the owner of the note.  

If it paid in money, then to whom was payment sent? This is different than who claimed ownership of the note and mortgage. More often than not the money trail is NOT the same as the paper trail.

Note that many transactions occurred in which the “Mortgage Loan Schedule” was incomplete or nonexistent at the time of the purported sale. The identity of the seller in such purported transactions is also obscured by clever wording.

If they paid using RMBS certificates, then things get more interesting. Because the RMBS certificates were in all probability worthless. Hence there would a failure of consideration and Freddie Mac could not claim to be a purchaser for value. The vast majority of RMBS were sold under the false pretense that they were “backed” my residential mortgages. The issuer of the certificates is asserted to be a named trust. But if the trust never came into ownership of the alleged mortgage loans, then the RMBS certificates were backed by nothing at all.

Not to draw too fine a point here, it is still possible that Freddie could be considered a purchaser for value even if the RMBS certificates appeared to be worthless. That is because in the  shadow banking marketplace, such certificates and the synthetic derivatives deriving their purported value from the purported value of the certificates nevertheless take on a life of their own. Even if they have no fundamental value they may well have a trading value that far exceeds anything that is fundamental to the certificates (i.e.m, zero).

12 Responses

  1. This is for Rogerrinaldi. The trial judge in my case and her husband who also is/was a lawyer were invested in most of the foreclosing banks as well as been invested in property management companies in both Florida and California. It took months for me to get these financial statements. It was only when I got in touch with a state senators office that they were made available. By the time I got them the judge had retired. Also checked her land records and mortgages. Something fishy going on there too. She refinanced her house 3 times within 2 years paying down some sizable debt.

  2. corruption: I contacted Judicial Watch about Wells Fargo soliciting judges for new mortgages while they’re sitting on the bench throwing people in the streets. The corruption is appalling.

  3. Sue the property buyer for possession of stolen from you property; Quiet Title, aiding and abetting fraud and conspiracy in money laundering….Wells Fargo Bank sold my mortgage to Specialized Loan Servicing two months AFTER Wells Fargo bank sold my property which they fraudulently foreclose, though a bribery scheme to judges….

  4. Poppy — typical run around.

  5. Not the same as “anon” lower case. Maybe someone can help her/him.

  6. Our home was foreclosed by Specialized Loan Servicing (SLS) with Bank of New York Mellon as alleged mortgagee with a late and thus defective assignment producing an affidavit that the bank has the note. We have not seen the original note and the request to strike the affidavit was denied. The house was now sold to a third party.

    What do we do now?

  7. I hope you let me say this Neil, without full explanation that was blocked. There is no way that Chevy Chase was a direct servicer to Freddie Mac. This was not a direct Freddie Mac investor loan, but rather indirect through an unnamed private label mortgage backed security trust to which Freddie was only a top tranche investor.

    If you won’t let me post my explanation., I hope you use the info for your own clients.

  8. why are my comments being blocked?

  9. So, if US Bank as “trustee” for the REMIC, buys the note at a court house auction, then Ocwen as the servicer, has paperwork on their ledger, communication and website they are the first lien holder by virtue of US Bank, posing as their servicing entity, and the DOT is actually assigned to Ocwen to foreclose, then assigned back to US Bank 2 years later to foreclose as the “holder-Owner, from Ocwen, this works? Also, Ocwen claims, as attorney in fact for New Century, in 2012, while in bankruptcy, they acquired the note, by allonge indorsement, unattached, trust closed in August 2007, they had rights, to act, because New Century gave them a “funky” POA in March of 2007, after the closing….then I have 9 different law firms/attorney’s signing, making appearances for US Bank-Ocwen on behalf of New Century, in 2015, with significant defects in the paperwork, like: an affidavit from a scrivener’s error; stating: all documents should reflect the correct date of DOT, 02/27/200? actual date: 02/27/2007. with a lost assignment affidavit from 2009, they have looked high and low and cannot find the “promissory note assignment”, but it has not been assigned, endorsed, or transferred to another lender….making the note payable to: New Century in 2018? Am I missing something here folks? Oh, and they did complete a foreclosure sale on June 16, 2009, and claim they rescinded the sale to offer a modification. Well, I thought a completed foreclosure was finished…and they took 9 days after the sale to offer it AND the ledger appears to have a 6 figure payout on it?

  10. Once again, Mr. Garfield proves he doesn’t know and/or understand foreclosure law. His claim: “It is well settled law that only the owner of the debt can foreclose.”

    The facts are, it is clearly established law that a person need not own a note to be entitled to enforce the note and that the UCC’s “definition of ‘holder’ does not turn on ownership.” See, Brown v. Washington St. Dep’t of Commerce, Wn.2d, 359 P.3d 771, 778 (2015).

    The Supreme Court in Washington is not alone, every court in the country has held the same. I could post dozens more.

  11. This is the crime Wells Fargo commits in foreclosing on Washington Mutual Bank Ginnie Mae pooled loans were after Sept 25, 2008, when the bank is declared a failed bank with Ginnie holding the Notes under UCC3 and the debt stop existing. WaMu could never hold both the Note & debt to these loans as the relinquished these Notes prior to Wells taking over as servicer of the loans and custodian of records for Ginnie Mae!

  12. Does Freddie Mac need an assignment of mortgage to fraudclose ???

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