Enforcement of Note vs. Enforcement of Mortgage

Watch out for the discrepancy between enforcement of a note and enforcement of an encumbrance. Enforcement of the note requires proof that the claimant is the owner of the debt, or has been authorized by the owner of the debt to enforce the note. Enforcement of the mortgage requires that the claimant be the owner of the debt. 

Judgment on the note can be rendered based upon legal presumptions arising from the UCC as adopted by state law as it applies to negotiable instruments. Mortgages (deeds of trust) are not negotiable instruments. The courts err when they apply Article 3 presumptions to the enforcement of a mortgage.

And take note that not all promissory notes are necessarily negotiable instruments and that therefore they too are not entitled to the benefit of legal presumptions under Article 3.

Always remember that legal presumptions are not intended to created findings of act that are contrary to reality. Quite the contrary, they are intended only as a convenience by which the court, in the absence of any meaningful objection, can presume such facts as part of its conclusion; no presumption should be employed if the evidence is tinged with a self serving nature and produced by the named claimant, and all such presumptions are rebuttable by exposing the reality. 

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 Possession of the original note usually results in a presumption that the possessor is a holder, and being holder usually results in the presumption that the holder is authorized to enforce as an agent of the owner of the debt.

Those are the rules for negotiable paper (notes). It is easier to state a case for enforcement of the note than enforcement of a mortgage or deed of trust. The intent in the law is to make it easy for notes to flow through the marketplace as cash equivalents. 

It is entirely possible for the same party to be awarded judgment on a note and denied judgment for enforcement of a mortgage or deed of trust, which are not negotiable instruments. An assignment of mortgage without a transfer of the debt is a nullity. But when the note is transferred, that is generally treated as though title to the debt has been transferred. That is an error in most cases involving claims of “securitization.” The reason it is an error is that the transferor of the note did not own the debt.

Both the endorsement of the note and the assignment of the mortgage can be attacked on the basis that authorization from the owner of the debt has not been shown. But the burden is on the claimed debtor (You) to rebut the assumptions and presumptions.

The only way to do that appears to be through discovery in which you request the owner of the debt to be identified. This is tricky and the other side knows it. They will reply that a designated party has some sort of authority to claim ownership without actually saying that they are the owner. So if you merely ask for the owner of the debt to be identified you probably won’t get very far.

You need to probe deeper than that. Go to an accountant and find out what the attributes are under GAAP and the FASB of an owner of the debt. The answer will be that the owner will have entries in its own books and records of an asset consisting of the claimed debt. Those entries must include an entry on the asset side of the amount of the supposed debt. Usually on the liability side there is a reserve for bad debt or default.

Any accountant will tell you that if the loan is not carried as  an asset on the books and records of the named claimant, they are not the owner of the debt.

This dichotomy is revealed easily in Article 3 UCC as adopted by state statute, which applies to notes and Article 9 UCC as adopted by state statute which applies to mortgages.

The legislative intent is that nobody should be allowed to enforce a mortgage without actually owning the debt. This is backed up by your jurisdictional argument, to wit: the party named as claiming the right to foreclose is not the party who will receive the benefits of that remedy because they have no financial injury in the first place. 

It’s one thing to get a money judgment against someone. But the legislature of every state has already decided that is quite another thing to take the homestead away from a homeowner. The big safeguard is the requirement that the claimant in foreclosure actually has ownership of the debt and therefore would be injured financially if the encumbrance were not enforced. 

20 Responses

  1. Hmmm —- Did hear story today about judge who says to borrower — good case, but I am under order. WHAT???? Whose order?? Foreclosure affirmed.

    As to hedge funds — source tells me they don’t hold mortgages, but they do purchase distressed debt. We are all distressed debt.

    Deregulated. Can’t find out about hedge funds holdings. Private. Proprietary information. HUD says it is not disclosed. WHAT?? What about the FDCPA?? Current creditor?? OH yeah — only one year statute of limitations for that.

    Who set this up? Who allowed this to go on? Who allows it continue?
    Were afraid of financial meltdown. It will come anyway.

  2. RogerRinaldi- great letter! Have you sent that to all the judges in your district?
    I remember you stating that all judges have had their mortgage balances lowered or removed, Ive yet to check our county judges.
    Does anyone know anything about debt collectors or hedge funds or whomever buying or acquiring rights to deficiency judgements in judicial states after foreclosure and dunning (former) property owners for the amounts over the f/c sale proceeds?

  3. So i have a ledger from nationstar my 2nd servicer that States new loan no cash? Then a 3rd servicer took over. How do they prove standing with no cash exchanged? Trial in 1 month no discovery. Judge set trial. ?

  4. Hey CORRUPTO! After reading that article (and others) by Keith Jurow (this guy really spews “deadbeat borrowers” alot) I sent him this message:

    I am one of the DEADBEATS you spoke of. I fought Wells Fargo on a fraudulent loan and subsequent fraudclosure for 12 years. YUP! Last regular payment was made July 4th, 2008, for $1776. Refused deed-in-lieu. Had two HAMPs and Wells Fargo Breached them both. No intent to honor. Forged 1003 at origination, fraud all throughout.
    Default on the ARMs by borrowers was caused by the manipulated LIBOR rate. LIBOR up, FED Rate dropped. You know that scam.
    My loan was listed in two different Wells Fargo MBS and also held by Branch 708 (Springfield, Ohio drop box)
    3 Forged assignments of mortgage
    The judge that caught my fraud suit had his mortgage reduced by Wells Fargo by $125,000 with a MERS satisfaction of mortgage 43 days after my filing.
    He admitted their solicitation in open court.
    The Wisconsin Supreme Court ruled all that is necessary for foreclosure is an original note and a lawyer. No chain of title, no recorded mortgage, no testimony as to chain of custody, sale, assignment, NOTHING.
    The corruption of the mortgage market is continuing.
    I held those pricks up at Wells Fargo (and while my case is in appeals, I put a renter in my house and am now collecting rent!) for 11 years worth of payments (minus 9 months for the two HAMPs), 11 years worth of taxes and insurance, and over $120K in attorneys fees. Filed two Chapter 13’s with adversaries and a Chapter 7. Collected, oh, $1500 maybe in class action settlements. I raised my kids in that house for 14 1/2 years. Lots of illnesses and hardships.
    I didn’t buy a house to default. And I didn’t buy a house to be used as a pawn with my identity and real property becoming an artifice to defraud investors, insurers, and the taxpayers through TARP.
    It’s really funny that assholes like you keep singing this DEADBEAT song, but the reason the foreclosures have languished is these people are still waiting for Statutes of Limitation on their fraudulent acts to run.
    I’m a process server, and see all the fake endorsements in blank, allonges, rubber-stamp endorsements in the middle of blank pages, robo-signed, law-firm created assignments from dead entities, I SEE IT ALL.
    So keep writing the deadbeat stories. Keep the myth alive.
    I hope all you pricks die and rot in hell. That’s where you belong.


    Let’s see if that ends up on the editorial page.

  5. Louise — Before 2004 – private label trusts were totally guaranteed by GSEs. After that — only top tranches were GSE held. Ranieri – grandfather of mezzanine tranches created it. Swaps outs and derivatives. Contracts Not securities. Derivatives. Not in the trusts. Default derivative contracts swapped out loans. Borrowers unaware. Not notified of anything. Any place or time. Unaware. Deregulation — never had to disclose. They are pushing again.

    Damage goes back a very long time.

    My problem now is that Powell wants to bring it all back. No — -we can’t do that. Already covered up. Can’t go down that road again. And, I am neither Dem or Rep. But, for Dems to stop it — they need to admit own cover up on their time. Not going to happen.

    STUCK. – Can’t go back – can’t go forward.

  6. Ian, If your documents are a mess for 20 years, many others will be as well. I bet that the state of the documents is incredibly bad.

  7. nadianasrawi, – Need to organize Said that many many years ago. And, take to Representatives. Used to think that representatives were just clueless as they do nothing. But, when you hear them speak with those such as Powell – -they are NOT clueless. They know exactly what is going on. That are clueless as to how to FIX it. In fact, they allowed the FIX that wasn’t a FIX.

    This is not to say that everyone doesn’t need individual help – they do. Just need more. If anyone can get a Representative to listen – let me know. Greatest potential is with Maxine. Not my area of the country. But, I will speak if anyone can get there.

  8. Is it possible someone collect our illegal foreclosures take it to the SCOTUS or WH?!

  9. Anyone listening to Powell on CRA — Community Reinvestment Act?. Wants to redirect housing from GSEs to private capital markets. Has anyone informed him that the private markets caused the fraud that the Government failed to investigate , but, instead, just bailed out the too big to fail banks, and then settled with settlements that gave nothing to the people.

    Can’t fix a system until you acknowledge what caused the breakdown.

  10. Ian – For most of these private trusts (98% – I am estimating), the top tranches were sold to Freddie/Fannie. Freddie/Fannie considers the loan “delinquent” after the due date (usually the 1st) – even if borrower pays within grace period and before a late fee is owed.

    Many borrowers had difficulty finding where to originally pay their loan. I believe under TILA/RESPA, sixty days are allowed on newly originated loans before a late fee is charged due to any confusion by borrower as to where to pay.

    Also, servicers are supposed to advance payments until they deem the loan not collectible. Once deemed not collectible, the loan is accelerated (usually after 90 days) and liquidated from the trust. If no notice was given — the borrower would have no idea what the servicer did even after just 31 days. That is, the servicer can report to liquidate from the trust with no acceleration notice to you, and at whatever time they want. The PSAs give that discretion to the servicer. We simply do not know what your servicer, or other servicers did. And, because none of these private trust loans were ever on a bank’s balance sheet, these loans were likely already classified default GSE loans — just restructured at closing – so the debt was always treated as in default. .

    As a result, no one would know what happened to the loan. Any loan that had early payment missing or missing documents, was likely deemed a “scratch and dent’ loan Scratch and dent is an industry term for loans that had missing documents or missing payment – or any other “defect” the servicer or trustee deems. It allows loan to be sold elsewhere – likely to distressed debt buyers, but the servicer continues to act for claimed original creditor (they will claim the trust), even thought the loan has been “swapped” out by derivative contracts – which are not securities but contracts. Because you never received an acceleration notice does not mean your loan was not LIQUIDATED from the trust. Who knows where the money goes, and title is corrupted. Loans deemed scratch and dent were traded like kids used to trade baseball cards.

    Once one pays or cures any missing payment it does not change the status of loan — or whatever the servicer did with it – even without providing notice to you. Under the FDCPA, “creditors” are supposed to give the CURRENT creditor — they do not. It is concealed. They will put the trust down — even if long gone. Only 1 year SOL for FDCPA. Little time to challenge.or even be aware. Most ignore debt validation notices.

    Try explaining this to a court — they have no clue. Like with Enron, all was concocted so that courts would not understand. Courts want it simple. That is impossible.

    I am not an attorney, this is for educational purposes only, and not to be construed as legal advice.

  11. ANON- the PSA for one of my “trusts” stated that the loan was in default on the 31st day following the due date.
    Not 60 or 90 or 120 days, but 31 days. That was a suprise. So on the 31st day after the due date, the loan would have been removed from the alleged trust and placed with a default servicer. Even though we cured the past due amount and are still here 20 years later.
    I don’t even know how to begin thinking about this.

  12. Thus. Making all UNSECURED Debt !!!!!!!!

  13. Reblogged this on Deadly Clear and commented:
    “And take note that not all promissory notes are necessarily negotiable instruments and that therefore they too are not entitled to the benefit of legal presumptions under Article 3.” Especially if these are securities transactions rather than traditional mortgages.

  14. And to corruptionpedia2, — excellent article. It under estimates the dollar value of the debt for loan performing — that value is in the trillions.

    And, I always wondered why so many “early payment” defaults were reported. Do they they the public is stupid?? All these people actually defaulted for the first payment? Of course not. I have two bridges to sell.

  15. Friends. This is again excellent info from Neil. Yes. Balance sheet “carrying” matters. Have said that for many years.

    But there is more – that Neil has articulated before. Authority. If anyone thinks that the trustee to the trust is being represented in any of the foreclosures — I have a bridge to sell. Cheap — just let me know!!!!.

    The trustee is supposed to be legal collateral holder — collateral assigned to them by the PSA requirements. But, no one represents them. Servicers just attach the trustee name to the trust — even though that is NOT the legal name of the trust. No trust name includes a prefix name of the trustee. Adversaries will say – no right to challenge anything. But before they can say that – challenge representation. Neil knows how. If none — case should be gone.

    One must be very careful to distinguish “owner” (ie beneficial security owners for pass through of cash flows) with “Holder.”- Legal holder. Legal Title is NEVER passed through to security investors. If the trusts are valid (which we known they are not as there is no “carrying”) each and every security investor would have to record a “discharge” upon satisfaction. That will never happen. Federal Reserve, by opinion to Dodd Frank TILA changes, says, — it can’t happen. They say Legal title is NEVER conveyed to security investors – who could change by the moment. Only cash flows are passed through to them – NOT legal title. , and only if the “asset” was validly on someone’s balance sheet to allow for off balance sheet transfer of cash flows. Nope — never happened.

    And, if no representation of legal holder — separate and distinct from the legal trust name which DOES NOT INCLUDE THE TRUSTEE — (not that any trust is actually legal)– there is no case, because there is no representation.

    So check the representation — trustee and trust — are they separate and distinct? Of course, according to SOCTUS, the trust cannot survive if a traditional trust -without the trustee. So who is representing who?? Should be tossed on that alone. Trustees are only a division of the bank. Not a separate entity. So – the bank must be represented. Are they? Doubt it. If so, my bridge gets bigger.

    I am confident that Neil is onto this. He understands it — and can challenge it.

  16. Corruptionpedia2. I believe every figure as well as every word of that article.

    The question I always ask is….

    Why would a Servicer continue to pay property taxes all those years if they will not/cannot fraudclose ???

  17. Corruptionpedia2. I believe every figure as well as every word of that article.

    The question I always ask is.

    Why would a Servicer continue to pay property taxes all those years if they will not/cannot fraudclose ???

  18. Looks like the new housing Armageddon is just around the corner..the article worth to read

    Why bubble-era home mortgages are a disaster waiting to happen ?


  19. No standing as usual. Servicers do not own anything. The big question: who is the creditor?

  20. Without any assignments of mortgage to them. And only a blank and robo stamped endorsement of note.
    How can Freddie Mac by the creditor of the Loan. The owner and holder of the mortgage and note.

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