Wall Street Has Invented the Concept of a Virtual Loan — Contrary to Law

The money proceeds from the forced sale of homes is not going to get paid to anyone who owns a loan account receivable. In effect, the courts are proceeding as though reformation has occurred without going through the process of reformation in which both sides would receive the benefit of a bargain (even if it was one created by a court).

Homeowners have never received the benefit of the bargain that exists. Without their initial and conitnued cooperation, the securitization scheme fails. Without the securitization scheme the transction fails. (There is no money).

Some questions arose as a result of my recent post. People asked me whether I was now conceding that there is a valid loan agreement or a valid enforceable underlying transaction. My answer is no.


Perhaps I did not express my point clearly enough. As it stands, in the world of securitization, there is no loan. That is the conclusion of my analysis. If the definition of a loan requires the presence of a borrower and a lender, with the lender assuming a risk of loss on the loan agreement, then there is no logical basis for asserting that the loan exists. If the definition includes the start of a loan account receivable on the books of the lender and its continued existence throughout the term of the relationship with the homeowner, then there is no loan. It is simply not legally or logically possible. This leads to a conundrum.


We have a loan agreement without a loan. We have a loan agreement because we have documents saying that there is a loan and an agreement.

Normally such a scenario would lead to common law rescission or statutory rescission. So what would ordinarily happen in a transaction like this, is that the court would find that there was differing contractual intent going into the transaction or that circumstances had changed the nature of the transaction without the agreement or consent of one of the parties. But to do that, would be to dismantle a much larger set of transactions in the world of derivatives, whose existence depends upon reports of data that include performance under a loan agreement without a loan.
So the next step in the legal process, if you can’t rescind the transaction without disturbing dozens of other transactions, is to reform the base transaction. This time, either the parties agree on the terms, or the court will set the terms. In order to maintain the securitization infrastructure, the reformed transaction would include the homeowner’s consent to the deal. It would also include transparent disclosure of revenue arising from the origination of the reformed transaction. And it would include a finding of adequate consideration paid to the homeowner for participation in the reformed agreement.
It’s not perfect, but it is the only legal way out of this mess. It would mean creating an enforceable agreement in which the homeowner agreed that the transaction was a loan for purposes of enforcement. This would mean that the homeowner agreed to the appointment of a designated creditor rather than an actual one. Such agreements would be imputed to the homeowner regardless of present actual intent. This process does not actually create a loan agreement that is enforceable under current law. The nuance here is that it creates an agreement to treat the transaction as though it were enforceable under current law. Presently there is no such agreement and that is why homeowners win.
If the investment banks and government regulators were being honest, they would own up to the fact that reformation is the only way out. But the investment banks do not want reformation, because that would include disclosure and sharing of revenue that was never intended when securitization was launched. It would reduce their revenue and their profit. It would also increase competition to provide incentives to homeowners to enter into future agreements. Those are all things that the investment banks do not want. And because of the revolving door between regulatory agencies and Wall Street, the regulators are stuck.
I think that homeowners have standing to demand (i.e. file a lawsuit) the reformation and maybe they should. But there is no question that this would be an uphill battle since most people do not recognize the need. But the fact remains that under current law, none of the foreclosures can legally be allowed to proceed. The money proceeds from the forced sale of homes is not going to get paid to anyone who owns a loan account receivable. In effect, the courts are proceeding as though reformation has occurred without going through the process of reformation in which both sides would receive the benefit of a bargain (even if it was one created by a court).
So the bottom line, following the logic of my blog post, is that there is no loan, but there could be a loan — or at least a virtual loan.

At the present time, the only practical Avenue open to homeowners is to attack the case against them, revealing the unwillingness or inability of the Foreclosure Mill to produce corroborating evidence for the legal presumption they seek to apply from fabricated documents. If the homeowner starts early enough and has the resources to be persistent and aggressive, the foreclosure action will most likely fail. The problem with this avenue of attack is that the later the homeowner starts the more likely it is that admissions will be imputed to the homeowner that diminishes the likelihood of success in court.


Nobody paid me to write this. I am self-funded, supported only by donations. My mission is to stop foreclosures and other collection efforts against homeowners and consumers without proof of loss. If you want to support this effort please click on this link and donate as much as you feel you can afford.
Please Donate to Support Neil Garfield’s Efforts to Stop Foreclosure Fraud.



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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10 Responses

  1. Legisman is correct – securitization is irrelevant to debt since no one’s debt was securitized. Because here is no debt to be securitized.

    Thus, Judges KNOW about Wall Street crimes and actively cover for them.

    Thank you Neil for sharing your knowledge and wisdom.

  2. Blocked again. Trying again. FBI tells me – statute of limitations. Just peachy.

  3. Oh Legi — one more thing — What did the FBI recently tell me? Statute of Limitations. No argument against liquidation and zero value – just SOL. Just Peachy. Continuing Tort I argued — no response. Who do we have to thank for that? They knew. They know all.
    Thanks!!! Best!!!

  4. And, Legi — NO — no title company thinks I am a wacko — to the contrary!!!!!!!! Thanks again.

  5. Well Legi – not so. I can’t give away details here – or I give away myself – and I can’t do that. But, you are wrong. Wire transfers, for one, are meaningless – because, my friend, we don’t know where those wire transfers go – if they go anywhere. The key is to look at what was reported to the PRIOR trusts (and everything was in a trust for past 35 years or more – unless held in bank portfolio – which is rare.) Clue — look for “LIQUIDATION” – “ZERO Value” in prior trust. Then you have to trace “repurchases” also. Zero value means – not paid by borrower. Not that I doubt criminals also involved – good point by FBI, but they are not doing anything. And, those criminals would be have to be major banks. Irrelevant though. The only way you will know is by ascertaining EXACTLY what was reported to prior loan trust. I admit – not easy. But can be done. And, I don’t state “not paid off” — have to be clear here, and detailed. It is reported as not paid off BY THE BORROWER. “Paid-off” and “Paid-out” are not the same thing. But you won’t know this until you research. So – I am thinking – you are going to now research!!! Thanks!!! Maybe get the FBI back in — they can research!!!! They just have to know what to look for!!! But you know what to look for now!!! You can tell them!!!! Thanks for the open-mind!!

  6. Still Fighting — many of them — who knows where they went. All to fabricate documents because real ones don’t exist.
    Legi — no one has taken on a grand-scale basis. The fact is simple: There was no balance sheet accounting by crisis loans. Hence, no valid securitization (which you are correct — should be no business of homeowner even if valid) occurred. No one asks — what happened to the money that was supposed to pay off prior loan by the borrower? If they did, they would find — nothing was paid off by the homeowner. Then, the “note” comes into question, because any “note” by fraud – is not negotiable. Maybe you can take it on!!! But have to revise your thinking a bit. Don’t show us cases — show us the accounting!!!! Look into it!! Thanks.

  7. Has anyone ran into these folks or seen them in any fraudulent foreclosure cases? Their signatures are on fake documents, but they don’t have any social media existence and are not found in google searches… very odd!

    Rosalind Paul, Lead Funder at 1st Franklin Financial Corp

    Tara Newton of Trinity Financial Services

    Leah Whitworth of Trinity Financial Services

    Karissa Jones of Main Street Asset Solutions

  8. There may be duplication in my posts. Was posting same time as Legisman — and first post was knocked off. I did not save — so a similar post may come up because my first post later appeared. Sorry. Thanks.

  9. We need reformation. But, the security infrastructure of the crisis loans cannot be reformed. You cannot go back in time and decades later make something valid that was not. However, we can reform to reflect the actual claimed creditor with decent terms, and have that creditor be recorded. Many will oppose this as it could open litigation among the perpetrators. The government has to be involved to help reform. Right now – they ignore. It is correct that securitization should have no effect on debt. But, securitization is used to foreclose. You can’t say – “no effect” on debt, but then have the trustee to claimed trust foreclose. Makes no sense. MERS conceals that transfers and transactions never occurred. Securitization cannot occur without on-balance sheet accounting to begin. The government is going to have to help with reformation. I think we will get there. Thanks.

  10. Thank you for this explanation. I think reformation is essential. You write – “In order to maintain the securitization infrastructure, the reformed transaction would include the homeowner’s consent to the deal.” I disagree partly with this — the securitization infrastructure cannot be reformed as no valid securitization ever occurred with crisis loans. One cannot go back in time and create something valid. Too late. Homeowners can consent to reform to reflect the hidden creditor with decent terms and recordation of that creditor in the County to clear title. I agree that this is the only way to fix the situation and cease fraudulent foreclosures. The main obstacle is that the hidden parties do not want to disclose their affiliations, or what actually occurred due to their own fear of litigation by their affiliates by such disclosure (this is why GSEs will not provide any information and are not subject to FOIA to do so). The government would have to mandate that such disclosure would not open litigation. After all, the government covered up too. In effect, borrowers would also be able to sue the government (or the GSEs – from which all loans are originally derived). Nevertheless, we must shift the burden off the homeowners, and let the perpetrators work out their own agreements. I do not think this will occur until someone actually puts forth the lack of accounting, lack of securitization, and invalid title, on a grand scale. Some attorney out there should be willing to take this on. It has taken years to weed through all the falsities. We would need an attorney to be competent to grasp quickly the truth. Thanks.

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