No Default Occurs When a Homeowner Ceases Making Payments — Unless the Payment is Missed by A Creditor Who Owns the Debt and Who Suffers a Financial Loss Because the Payment was Not Made

Practitioners should attack the default letter and stop pretending it doesn’t count or doesn’t exist.

It is not the homeowner who misses a payment it is the creditor who misses receiving it. If there is no creditor, there can be no default. If there is no financial accounting report that establishes the debt has an asset on the books of record of a creditor, then there is no creditor.

This counterintuitive  statement sounds like circular reasoning and gibberish and is often treated as such by the courts. But in an increasing number of cases Judges are understanding that it is gibberish and circular reasoning through no fault of the homeowner.

It is circular reasoning and gibberish to cover-up a scheme in which the debt continues to be paid over and over and over again without ever recording a reduction to the debt on the books of a creditor because there is no creditor and there is no such account.

The answer to most of the questions about this is the same as the answer to the question of why millions of promissory notes were destroyed contemporaneously with the apparent “closing” of transactions with homeowners.

By creating the illusion of an account holding the debt (on the books of servicer who does not claim ownership), the investment banks had effectively launched a scheme in which debts could be paid or “sold” 40 times over without the homeowner (debtor) ever knowing. Since there is no creditor and no account to reduce upon receipt of an offsetting payment, the debt is never reduced.

To add insult to injury, the homeowner is stuck defending a claim that looks bona fide upon first glance, resulting in loss of title and  possession to their home. But the claim, like the default is bogus. There is no default without someone who can legally claim that they suffered a loss due to nonpayment. But that “person” can’t exist if they don’t own the debt. And no person can own the debt without paying for it. And no loss can be alleged unless claimant is the owner of the debt who paid for it.

The default is not experienced by the homeowner who stopped paying. It can only be experienced by a creditor who paid value for the underlying debt in exchange for a conveyance of ownership of the underlying debt from someone who legally owns the debt. If the claimant does not fit that description there is no default nor any right to declare one because there has been no loss.

PRACTICE NOTE: Practitioners should attack the default letter and stop pretending it doesn’t count or doesn’t exist. And for God’s sake stop admitting the default! The attack should state as its grounds that the default letter was issued without authority from a creditor who legally owned the debt. That means that the named claimant did not pay value for the underlying debt in exchange for ownership of the debt. Nor does the named claimant represent a legal creditor of the homeowner. Keep it simple.

Attack the proof of payment. Without that there can be no actual loss and without actual loss there is no default nor any authority to issue it nor any ability to enforce based upon a default that no creditor has experienced.

If you want to know why pizza delivery people were making millions of dollars it was because there was a tub of money generated by a smoke and mirrors plan called “Securitization” in which nothing was securitized. Homeowners were drafted into a “securitization” cycle in which they received none of the benefits and were trapped into transactions in which the incentive of the named “lenders” was exactly opposite to normal lending standards.

BOTTOM LINE: Where securitization is involved either because it is alleged as a basis for a claim or because it emerges in discovery or pleadings, two things are true.

No party who pays value ever receives legal or equitable ownership of any debt, note or mortgage; and no party who ever receives a document of conveyance of ownership of the debt, note or mortgage has received anything other than a legal nullity — because they neither paid for the ownership of the debt nor represented anyone who did.

If you use  this as the premise for your defense narrative and litigate the matter properly, my data shows a 65%-80% likelihood of a flat out win for the homeowner.

Thousands of cases have been won by homeowners— almost all buried by confidentiality agreements —- because once they lose, the banks offer a financial incentive to the homeowner to execute a confidential settlement agreement. This only happens less than 1% of the time because 96% of all foreclosures are uncontested, and 3% of homeowners do not persist in their litigation to the end. All the banks need to do is NOT settle until it is the end of litigation.

Lawyers pursuing modification agreements are actually doing the business of the banks. First they are giving up valuable rights of their client and second they are having their client establish a fact that could never have been true — inserting a “servicer” as the “new lender” with no warranty that any creditor exists much less authorized the settlement. Such insertion creates a lender not a successor lender.

Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.


If you want to submit your registration form click on the following link and give us as much information as you can. CLICK HERE FOR REGISTRATION FORM. It is free, with no obligation and we keep all information private. The information you provide is not used for any purpose except for providing services you order or request from us.
In the meanwhile you can order any of the following:
CLICK HERE TO ORDER TERA – not necessary if you order PDR PREMIUM.
CLICK HERE TO ORDER CONSULT (not necessary if you order PDR)
Please visit for more information.

Contribute to the discussion!

%d bloggers like this: