Tonight! Facial Invalidity! Russell Baldwin, Esq. Rejoins the Discussion 6pm EST

SubTopic: What Happens if MBS Are Not Backed by Mortgages? How does that play out in foreclosure litigation?

Thursdays LIVE! Click in to the Neil Garfield Show

Tonight’s Show Co-Hosted by Neil Garfield and Charles Marshall, Esq. 

with Bill Paatalo, PI

And Special Guest Russell Baldwin

Call in at (347) 850-1260, 6pm Eastern Thursdays

Russ Baldwin has some special insights into a continually developing area of foreclosure defense — what if the presumptions are being applied when the document is not facially valid. When the document requires extrinsic evidence to identify parties or their authority and the extrinsic evidence is neither attached nor identified, is the document facially valid?

I say no it isn’t. If you wrote out what appeared to be a check for a sum of money made payable to a party who could only be identified by reference to a power of attorney or trust agreement, the parties would not be defined or identified until you were provided with the power of attorney or trust agreement under circumstances where the agreement or power of attorney was still in force. This sounds more like a private contract than a negotiable instrument. And yes the contract can be proved up by introducing the extrinsic (parole) evidence but no, the instrument itself would not be governed by the laws and rules governing negotiable instruments under Article 3 of the UCC.

If I am correct, then the instrument is not facially valid although the terms could still be proven. But the burden of proving the agreement, consideration, offer and acceptance would be on the party seeking enforcement. They would not get any presumptions applied. They would be required to produce proof of the owner of the debt, the owner of the instrument and the owner of the mortgage. Remember that mortgages and deeds of trust are never negotiable instruments. And also remember that there is no such thing as an owner of the mortgage who does not own the debt. That is under Article 9, UCC.

Russell Baldwin is a practicing licensed attorney in Lincoln City, Oregon. He has his own insights as to foreclosure litigation and we welcome fresh points of view. In 2011 he got the largest jury verdict of nearly $3.4 million and an award of $450,000 in attorney fees. He has wide experience in civil litigation and in City government, having been the interim City Attorney. He was admitted to practice law 30 years ago. Email

5 Responses

  1. Any comment on the above subtopic, “what happens if MBS are not backed by mortgages”?
    From a blunt common sense point of view , if I made an investment in MBS and was given a certificate or bond stating that my investment was collateralized by the mortgages held therein: and then found out that not only were the MBS not backed by mortgages, they weren’t backed by anything at all, I would have grounds for fraud, unlawful business practices, etcetera. I can’t believe no one has brought charges for selling absolutely fraudulent securities.

  2. Ian — there are no lawsuits. Government covered-up. Settlements came without investigation or disclosure. If you go to the GSEs — they will give you nothing. The law was supposed to be changed for GSEs under FOIA, but that disappeared too.

    Most of the investor lawsuits allege that the banks securitized “bad” loans. The problem is that most of these loans were not “bad,” but were made bad by banks before any claimed securitizations. Make no sense for banks to have pursued loans they knew were bad. To the contrary, they knew these loans were good, and performing, but made them bad to get control.

    Only later, when interest rates rose, and property values plummeted, when the crisis was exposed, did some borrowers actually default. Many more still are paying.

    I do disagree that these loan were ever securities. But, Deadly is right — if anyone ever knew what was going to happen, and that true debt buyer/lender would be concealed, few would have touched with a ten foot pole.

  3. Deadly Clear/ ANON-
    I would like to read further on the securities transaction details of the MBS- could you provide a few links as a place to start ? I haven’t seen any lawsuits claiming undisclosed securities transactions or identity theft. Any links to lawsuits if this type? Thanks-

  4. Thanks Deadly,

    All fine and good as to facially invalid– but not if courts do not accept. And, what if proof of payments, and past refinance payoffs, but records have been purged?????. Money vanished? All that exists is a servicer record of default that never occurred? So left with proof — but no record – as purged – to confirm. Courts don’t care. How does one handle this??

    Again, over and over, it is not enough to declare facially invalid. One also has to ask WHY???? Only then will you get to the bottom of the facially invalid documents.

  5. Reblogged this on Deadly Clear and commented:
    These were and still are securities transactions with no disclosure to American Homeowners. SEC Rule 10b-5. Not only invalid but fraudulent – the worst Ponzi scheme in the history of the world!

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