Tom Ice has been a successful litigator for homeowners challenging foreclosures. In 2015 he wrote an article that was published in the Florida Bar Journal detailing exactly what was wrong with the legal analysis in the courts. He pointed out exactly what was happening:
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Over time, the complaints have evolved such that the word “holder” has been substituted for the “owns and holds” language approved by the Florida Supreme Court.29 Replacing the traditional language with the unrelated Article 3 term “holder”30 permits the bank to argue that mere possession of a document that its attorney asserts to be an original note endorsed in blank (or specially endorsed to the plaintiff bank) conclusively establishes its standing to foreclose.*Thus, despite the shift toward Article 9 as the real-world mechanism for transferring loans, Article 3 negotiability has become the dominant legal theory argued by plaintiffs in support of their standing to bring foreclosure actions. In the courtroom, Article 3 serves as the basis for arguing an evidentiary shortcut which not only discards ownership of the loan as an element of proof, but which circumvents basic foundational evidence for the authenticity of the note itself. Claiming that promissory notes are “self-authenticating” under the UCC,31 standing is now routinely, albeit incorrectly,32 established on a single unsworn representation by plaintiff’s counsel that the document presented is the original note.
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It’s not fair to say that nobody was listening but it seems that way because many of the homeowners and attorneys who understand this analysis have been successful in court, albeit under the seal of confidentiality and agreement to expunge the trial record. The investment banks are willing to pay for that but only after the homeowner has demonstrated the capacity and willingness to go the distance.
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Like me, Ice and others have litigated on the principle that Florida statutes (F.S. 679.203) require that the claimant pay value for the underlying obligation before seeking to enforce a mortgage. this is a condition precedent.
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But it is also jurisdictional. Nobody can go to court to seek a remedy for anything unless they can allege and prove actual harm. If they have not paid for the alleged underlying obligation then they do not own a loan account receivable.
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If they do not own the loan account receivable then they cannot possibly claim damage arising from their ownership of the loan account. And if they can’t claim damage arising from their ownership of the loan account then there is no “case in controversy.” I.E. Subject Matter Jurisdiction.
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The judges who sit on the trial bench or an appellate panel know this, but they have gone out of their way to find ways to “presume” that the ownership of the underlying obligation has been paid for by the claimant — probably because of the sub silentio assumption that even if that is not true, somebody who has suffered damage arising from a breach by the homeowner will get the money — an assumption that bears no resemblance to the real world of finance. (The doctrine of damnum absque injuria which is “no harm no foul.”)
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In some states, they use Article 3 of the UCC to justify the assumption that ownership of the underlying debt has been transferred — just because someone says so and not because anyone actually paid for anything. But as Ice points out in the FBJ article cited above, the ability to file suit on a note merely by alleging possession or right to possession is an exception to the jurisdictional rule. It does not apply to foreclosures.
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The jurisdictional rule comes from Article 3 of the Constitution. Damage is presumed in a lawsuit to enforce a promissory note. That is not so in a lawsuit or other action to enforce a mortgage or deed of trust. it is not so because of the statute not because I or anyone else says so.
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But nearly all homeowners give up any challenge and thus give up their homes even if they have nowhere else to live. It is a minority of the challengers who persist on the theme of demanding proof of the existence of the alleged obligation as an asset of the claimant.
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In fact, most homeowners think they deserve to lose their homes and they blame themselves for losing them. And that is because they don’t understand high finance. They do not realize that they should be (a) allowed to keep the home and (b) should probably be paid money as their share of a securities scheme that was undisclosed.
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The investment banks have succeeded in large part because by not disclosing the Securities scheme was part of the origination of the transaction with homeowners, they have convinced people that the Securities scheme was not part of the deal. But it was part of the deal. Without the Securities scheme, there would have been no transaction. And without the cooperation of the homeowner, there would have been no securities scheme.
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The requirement that the homeowner pays back the commission that was disguised as a loan results in negative consideration — i.e., the homeowners were paying to be screwed.
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Possession of the original note, even if it was true, could only entitle the party in possession to claim holder status. This does not mean a holder in due course who has paid for it.
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Neil F Garfield, MBA, JD, 74, is a Florida licensed trial and appellate 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.
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Neil is correct here, and Summer is correct here. Article 9 is for transferring (VALID) notes/loans. That does not mean the process is “skipped” by Article 9. It is a misconception that because a “note” may be a security – that that security means securitization. It does not. Securitization occurs after the “Note,” and is strictly confined to removal from on-balance sheet – to off balance sheet conduit. If the “note” was never taken onto a balance sheet — there simply can be no transfer or securitization. Thus, no trust or legal valid holder – the trustee. Thus, Article 9 “transfer” cannot and did not occur. And, reliance upon Article 3 therefore means that the stated claimed ORGINATOR should show money was lent, it was accounted for, properly transferred under Article 9, and that it was lent to extinguish the prior recorded loan of the borrower (or prior homeowner). No such accounting exists for “crisis” loans. Thus, there can be no securitization or valid transfer of the “note.” Also, consideration can be for purchase of collection rights – and significantly lower that the dollar amount of the claimed “note.” But disclosing that will disclose a process gone haywire. $1 consideration is acceptable for debt collection “rights” transfer (debt collection transfer is NOT accounted for by balance sheet asset accounting), and that is all we have with the crisis loans. Summer is correct — government knows this but they do not want to address it. Why do you think they pushed modification? That is all that can be done for debt collection. Why no one has demanded accounting of the “prior” loan is beyond me. Essential. I have not seen one case on this. If someone here has one – post it.
This fraud is covered and promoted by the Government and they have no intention to confront Wall Street Banks crimes.
Look at new CFPB “foreclosure protection” rule.
Lies on top of lies followed by lies. Even donkey can learn how to talk in 25 years .
CFPB continue to promote Wall Street myths, with total impunity. They simply do not want to hear anything or do anything. Except continue to lie and cover up.
https://library.nclc.org/new-cfpb-rule-protects-homeowners-facing-foreclosure