Here is the Debt: Securitization Shell Game

Yes ownership of the debt and payment for the debt, for the first time in history is actually split contrary to law. Under current law it is impossible to own the debt without paying for it. This is required by the most basic doctrine of judicial standing — a party may not go to court for a remedy unless there is injury. In a loan the only possible injury would be nonpayment. If nonpayment does not result in injury to the party making the claim for a remedy, no court has jurisdiction to hear that claim.


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The presumption of payment is being used to bridge the gap. So if someone gets an assignment of mortgage or  beneficial right under a deed of trust it is presumed the assignor also conveyed the debt. If the possession of the note (along with rights to enforce it) changes hands it is presumed that money exchanged hands. It’s presumed because that is the way it has been for hundreds of years. Even common sense says that only upon receiving payment would someone part with ownership of a mortgage or a note. If the assignor did not own the debt then it conveyed either the debt nor the rights to the mortgage or deed of trust. The assignor did not own the debt unless it paid for it. That is the law.
So money didn’t change hands and the law has no room for that. An assignment of mortgage without the debt is considered a legal nullity — i.e., it happened in fact but it had no legal effect — like it never happened.
Foreclosure, the greatest civil loss to a party cannot occur unless the action meets the definition — restitution for an unpaid debt due to the claimant. But if the claimant doesn’t own the debt, then the action isn’t a foreclosure. That is even more true if the claimant cannot produce admissible evidence that it is representing someone who paid for the debt and will turn over the proceeds of foreclosure to the one who paid for the debt. Of course that means disclosing who paid for the debt.
That evidence is not available because it does not exist. The parties who deposited money that was used to fund the origination or acquisition of the debt are investors who immediately (by contract) had no interest in the debt, note or mortgage — supposedly to make them remote players that wouldn’t be liable for lending violations.
The brokerage firm (investment bank) that directed the money may have had some equitable right to lay claim to the debt, note or mortgage but certainly wasn’t the legal owner of the debt for the simple reason that it isn’t mentioned anywhere in the transactions originating or acquiring the loan. That is because it was hiding its involvement (see “active concealment”).
The legal presumptions that have carried the banks over the finish line in so many cases were easily rebuttable. And in almost every case where those presumptions were effectively and persistently challenged the banks lost. They lost because the presumption did not line up with the facts.
When the money was advanced by investors, there was no business reason for money to exchange hands between (A) grantors, who did not pay for the debt, and (B) grantees who did not pay for the debt. Neither one of them cared about the money. They only cared about the fee they were being paid to act as though money was exchanging hands. One lies and the other swears to it. Hence robosigning.
The movement of the paper created the illusion of movement of the debt. But the debt never moved because nobody paid either the investors or the brokerage firm (investment bank) for ownership of the debt. Without movement of the debt there could be no new owner of the debt. Without ownership of the debt there could be no injury resulting from nonpayment. Without injury from nonpayment there can be no foreclosure which is why, in Article 9 §203 UCC, it says that a condition precedent to foreclosure is payment of value for the debt.
We have tracked in several cases the flow of funds resulting from the ultimate sale of property that was foreclosed. In no case did the Trustee of a claimed REMIC Trust ever receive or retain any such proceeds. In all cases the money was laundered through various entities claiming to be servicers or Master Servicers only to end up in general operating funds of one of the brokerage houses that were allowed to call themselves commercial banks — over a weekend of deliberations over how to prevent financial freefall caused by the unwillingness of investors to purchase more “mortgage bonds” (certificates) which provided the only fuel to the Ponzi scheme that became known as “Securitization.” 

PRACTICE NOTE: For those of you who know your rules of civil procedure, you might be coming round full circle to where we were in 2008 — i.e., besides the common motion to dismiss there is lurking here a very powerful claim for failure of the claimant to join an indispensable party. If you can get an order from the Judge saying that the party who paid for the debt must be named as a party to the action, at least in judicial foreclosures, your affirmative defenses would apply to all of the multiple parties who collectively constitute “the Plaintiff.” Your opposition will try to get you to file it as a counterclaim which they can defend using the statute of limitations. If you win, they lose.

4 Responses

  1. This was a great post. The key to taking advantage of it, however, is to get past the plaintiff’s motion for summary judgment.

  2. Ginnie Mae MBS are made up of loans owned by the bank that is issuing the securities. WAMU created Ginnie Mae MBS before Jul 31, 2006, when they transferred all 1.3 million of their Fed Gov program loans to Wells for mortgage servicing and custodian of records.

    As the OTS seized WAMU without notice of the take over of the bank, it was Ginnie that was in physical possession of the 1.3 million loans with blank endorsed Notes through UCC3 procedure. The holder of the debt in WAMU stop existing on Sept 25, 2008, in which they did not have any ability to foreclose as they did not own the Note and did not exist.

    Wells Fargo who working as the mortgage servicer continued to collect monthly payments when there was no owner of the debt. Wells would start foreclosure on loans they claimed were in default and instead of procession the collect through the UCC9 procedure, they process a non-judicial foreclosure as if they were the debt holder. Wells had Assignment of Deed of Trust created as if they purchased the debt after WAMU was seized.

    Wells is caught in this crime when the Independent Foreclosure Review (IFR) conducts its review and award the victims $6,000 as the VA HAMP is not underwritten. However, at the conception of the IFR was the category “No Standing” that after 1.5yrs and the review stop in Dec 2012, the category was removed and instruction for the victims to seek another avenue in court to address the infraction.

    The DOJ, OCC and Fed Bank came up with the categories in 2011 as to what was to be address, and “No Standing” was not selected by the victims but by the overseers, and victims were instructed to provide information to the independent reviewers to determine any guilt!

    Without the VA HAMP mandatory underwriting and granting of the modification the lender could not consider a foreclosure per Jan 8, 2010, VA Circular 26-10-02. So we know that at least 20,000 Dept of VA borrowers were wronged as the banks did not underwrite the loans and instead foreclosed against the VA Circular. All 20,000 foreclosure attached to Ginnie Mae MBS which all had UCC3 procedure, where in fact we know the WAMU does not exist and could not after Sept 25, 2008 foreclose on any of the Dept of VA borrowers!

    No Dept of VA loan that was not underwritten could be foreclosed until both the HAMP and VA HAMP were process fully. We know that the banks did not underwrite the Dept of VA loans in 2010, so 20,000 military families were illegally foreclosed!

  3. Poppy – new evidence can reset SOL.

    Neil – great post. Need to trace “flow of funds” — not only at foreclosure, but at the refinance. Nothing flowed at the refinance — it flows at the foreclosure.

  4. Good points here. The only thing I can say is, a party having a secured interest vs. a securitization in our loans are two very different things. I agreed to a loan with New Century, not the REMIC Trust. The only party entitled to demand anything would be New Century, if in fact, they tied the warehouse lenders money to the loan, which they did not. It just gets worse from there. Selling my income stream to investors without my express agreement and disclosure is not a valid contract on which to utilize my deed of trust to secure a payment to them (whoever “them” are), by the sale of my property. These guys have not established any rights or legal title to my property. The lawyers know, the judges know…the servicers are servicing “nothing”…and they cannot keep defaulting, accelerating, and consummating a foreclosure on the same deed of trust over and over. The only premise on which they may and I emphasize “may”…is to collect an unsecured debt, they purchased from someone. However, the statute of limitations has run on all of our mortgages. Non-lawyer opinion…

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