“Lost notes” and the Sudden Appearance of “Original Notes.”

Think of it this way: If someone wrote you a check for $100, which would you do? (1) make a digital copy of the check and then shred it or (2) take it to the bank? Starting with the era in which banks made what is abundantly clear as false claims of securitization the banks all chose option #1. And they collected incredible sums of money far exceeding the Madoff scam or anything like it.

Back in 2008 Katie Porter was a law professor and is now a member of the US House of  Representatives. For those of who don’t know her, you should follow her, even on C-Span. She nails it every time. She knows and other congressmen and women are following her lead. Back in 2008 she uncovered the fact that in her study of 1700 filings in US Bankruptcy court, 41% were missing even a copy of the note, much less the original note.

Around the same time, the Florida Bankers Association, dominated by the mega banks and who absorbed the Florida Community Bank Association, told the Florida Supreme Court that, after the purported “loan closing,” digital copies of the notes were made — and then the original notes were destroyed. FBA said it was “industry practice.” It wasn’t and it still isn’t — at least not for actual creditors who loan money. Out in the state of Washington on appeal, lawyers for the claimant in foreclosure admitted they had no clue as to the identity of the creditor. The state banned MERS foreclosures, along with Maine.

That admission, with full consent of the mega banks, raised the stakes from 41% to around 95% — a figure later confirmed in Senate Hearings by Elizabeth Warren. The other 5% are loans that were truly traditional — funded by the “lender” (no pretender lender) and still owned by the lender who had the original documents in their vault.

The law didn’t change. In order to enforce a note you needed the original. And in order to plead you “lost” the note, you had to allege and prove very specific things starting with the fact that it was lost and not destroyed. Then of course you had to prove that the original was delivered to you, which nobody could because the original was destroyed immediately after closing and a fax copy was the only thing used after that.

Typically destruction of the note means that the debt is discharged or forgiven — something that is actually a natural outgrowth of the same debt being sold dozens of times in varying pieces under various contracts, none of which give the buyer any direct right, title or interest in the “underlying” debt, note or mortgage. In short, neither the debt nor the note exist in most cases shortly after the alleged loan closing.

The representatives of the mega banks who started the illusion of securitization of mortgage debts could neither produce the original note (because it was destroyed) nor tell a credible story to explain its absence. So they did the next best thing. They recreated the note to make it appear like an original using advanced technology that could even mimic the use of a pen to sign it.

Some of us saw this early on when they failed to account for the color of the ink that was used at closing. Those were among the first cases involving a complete satisfaction of the alleged encumbrance, plus payment of damages and attorney fees, all papered over by a settlement agreement that was under seal of confidentiality.

While obviously presenting moral hazard, the process of recreation could have been legal if they had simply followed the protocols of the UCC and state law to reestablish a lost note. But they didn’t. The reason they didn’t is that they still had to prove that the note was a legal representation of a debt owed by the borrower to a creditor that they had to identify. But they couldn’t do that.

If they identified the creditor(s) they would admitting that they had no claim because a person or entity possessing a right, title or interest in the debt did not include the named claimant in the foreclosure. Naming a claimant does not create a claim. A real claim must be owned by a real claimant. That is the very essence of legal standing.

If they had no claim they would be admitting that the securitization certificates, swaps and other contracts were all bogus. That would tank the $1 quadrillion shadow banking market. That is where we see the evidence that for every $1 loaned more than $20 in revenue was produced and never allocated to either the debt of the borrower or the investment of the investors. The banks took it all. $45 trillion in loans and refi’s turned into $1 quadrillion in “nominal” value. Nice work if you can get it.

So then they did the next next best best thing thing. They simply presented the recreation of the note as the actual original and hoped that they could push it through and that has worked in many, probably most cases.

It works because most borrowers and their lawyers fail to heed my advice: admit nothing — make them prove everything. By giving testimony regarding the “original” note the borrower provides the foundation and the rest of the foreclosure is preordained.

For some reason, lawyers who are usually suspicious, refuse to acknowledge the basic fact that the entire process is a lie designed to take property, sell it and apply or allocate the sale proceeds to anyone except the owner(s) of the debt. They hear “free house” and get scared they will look foolish.

A free house to those persistent and enduring souls who finance the great fight is a small price to pay for the mountains of windfall profit of the banks and related parties. As for the banks, adding the proceeds of a house that should never have been sold is adding insult to injury not only to the homeowner but to the entire society.

If anyone wants to know why so many Americans are angry, look no further than the 40 million people were directly displaced by illegal foreclosure and the additional 70 million people who were affected by those dislocations. Voters know that if the many $trillions spent on bailouts had been used to level the playing field, 110 million Americans and millions more worldwide would have never faced the worst effects of the great recession.

And we will continue voting for disruptors until a level playing field re-emerges.

see Lost notes and Bad Servicing Practices and Incentives SSRN-id1027961

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6 Responses

  1. Exactly what append in my case. At the trial I testified that original Note presented by Plaintiff is no Original, because I signed the note in blue ink, same as mortgage. But who cares, if servicer`s witness comes and testify that she sees lots of Notes and this one is Original.

    No justice in Florida. On 3/27/19 1DCA- Szabo case, my case, as Per Curiam. Affirmed. No opinion written = no appeal to SC.
    If I have no 2 children which I have and I don’t believe in god, which I do, I will take a justice to my hands.

  2. Ours was a refinance in 2006 by “lender” B of A to pay off a1st & 2nd to Countrywide. A “release of mortgage” from CW was recorded by a robosigner wearing a MERS hat. FNMA was involved as an investor just 60 days later but never recorded their interest in land records. I don’t remember getting any copies back from our broker. I remember signing in blue ink cuz ex-hubby is an engineer and that’s how he signs. That’s my story and I’m sticking to it. The Note was declared by Plaintiffs in court as original, but it was not signed in blue ink. I let the Judge know that, but it really didn’t matter. Fought them as a pro se and won (but without prejudice) so they will be back. I now have an Attorney.
    10 years without a payment and going on 6 years since since the foreclosure lawsuit was commenced. Where is the Statute of Limitations on this? I am 66 years old and in zombie foreclosure land. I guess they are just waiting for me to die and go away. LOL.

  3. Javagold- there SHOULD be 2 sets of signed documents, but in our case at our refi in 2001, the broker said something to the effect “ I’ll make a copy back at the office and overnight it to you”, which he did, but as I now suspect, some things or everything was changed ( numbers, employment, fees, interest rate , etc) for whatever reasons. I do recall him insisting that we sign with either a blue pen or a black pen but don’t remember which it was. That aspect of signatures in all this fraud has always eluded me.
    Our New Century mortgage was apparently triple- funded , as Inwas able to find 2 settlement sheets which had been faxed to FNMA, one at 9:45 am, and later that day at3:52. One has the payout at 12,400$, the other at $34.000. We got the $12,400. Never found out hwho got the $34,000. Both settlement sheets had the same gross amount and different cash to borrower, all the line items were gerrymandered to make the numbers work. And both settlement sheets were stamped “paid in full”. A large stamp, diagonally from
    Lower left to upper right.
    That’s my story and I’m sticking to it….

  4. Isn’t there 2 sets of original wet ink signed notes ?..one for the pretender lender and one for the homeowners …..if homeowner brings their original to court and the pretender plaintiffs do not. … should be game over !!!

  5. What a true mess based upon one of the biggest Ponzi Scams as so many people have stated. Just so sad that our very one government is involved up to its eyeballs through Fannie and Freddie being taken over by the SEC through help and action on behalf of the FHFA as I understand it and the CFPB is totally inept and unwilling to listen to us the property owners.
    Now crooked Seterus with over 6,000 complaints has allegedly sold out all the phone, forged, fabricated and robosigned loans to another servicers Mr. Cooper whihch is really Nationstar Mortgage LLC.
    Checkk out the execs with Nationastar/Mr. Cooper and you will find guys that worked with Bank of America, Beat Sterms, and nasty old Washington Mututal- are you kidding me!! My loan numbers on two of my remaining loans have now changed four (4) timesl and no one has any proof of actual, real assisgnments!! One was even “robosigned” by confessed robosignore Michele Sjolander!! This keep going and the CFPB is totally in agreement with all the collusion that continues to this day. Now assignments from Seterus to Mr. Cooper aka Nationstar.
    Now I offer you one more step to consider and think about:
    Zillow is backed or at least a major sponsor/player behind Zillow so maybe that is one of many reasons that Zillow is so bad, puts out much fasle and wrongful information to try and keep price estimates down so people think they don’t have any equity to finally get out from under the phony, pretend lenders out there. Zillow and others should be stopped on charges of “restraint on alienation” as they continue to play the Ponzi Game and wrongfully swindle people out or their property. Semper Fi.

  6. Neil, you forgot to mention that we were shown “true and certified copies “ of the original note. Why have we never seen this questioned?
    Certified by whom? And how is the court to know that the copies were true? Copies of what? The mortgage signed by the homeowner , or the cut and pasted bogus version?

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