Homeowners! You need to know this! The difference between the possessor of a note, the holder, and the holder in due course.

Uniform Commercial Code preempts principles of common law and equity that are inconsistent with either its provisions or its purposes and policies. 

The one thing most articles miss is that the possessor of the note is not entitled to claim the status of a holder or holder in due course merely because of possession.

By definition, that is a restriction on the ability to claim the remedy of forcing the sale of property for the benefit of someone who does not own the underlying obligation. The proceeds are intended by statute and common law to go to the party who suffered an economic loss to the loan account owned by them by their payment for it.

A possessor is exactly what it sounds like. Someone is in physical possession of the original promissory note. This has nothing to do with the mortgage. When a note is sent from one party to another party via any courier or other delivery service, the delivery person will be committing a crime and civil theft if they attempt to use the promissory note as a basis for filing a lawsuit to obtain a judgment or executing on that judgment for damages. The courier is not entitled to receive anything other than the fee for acting as the courier.

The “holder”, under Article 3 of the UCC, is a term of art prescribed by law. A person may be a “holder” or a person with the rights of the holder if they hold actual or constructive possession of the original note AND they have been granted the right to enforce the note. The grantor of that right must be a person who possesses the right to enforce or the actual creditor. In all events, the grant of authority emanates from the owner of the underlying obligation to whom the debt is legally owed.

The “holder in due course” under Article 3 of the UCC,  is the only status that automatically satisfies the condition precedent stated in UCC 9-203 adopted verbatim in all US jurisdictions. That is because Article 3 holder in due course provisions requires payment like the Article 9 UCC provision §203.

So you can see judgment obtained by your possessor is probably void or voidable and that a judgment obtained by a holder of the promissory note can only be obtained for monetary damages. Without additional evidence of value paid for the underlying obligation, the right to receive money does not trigger the right to forcibly sell the collateral property.

The additional requirement missing from nearly all orders, opinions and discussions is that the possessor must have received a grant of entitlement to enforce the note.  The grantor must be a creditor who has paid value for the underlying obligation or an agent of that creditor. This is what separates a courier from a holder entitled to enforce the note.

The right to sue for enforcement of the note differs from the right or entitlement to judgment. The first is a question of standing, and the second is a question of proof.

In addition, enforcement of the note entitles the successful claimant to a judgment for damages. That judgment does not automatically entitle the successful claimant to the remedy of foreclosure. .

The reason, as cited in the article, is UCC 9 – 203, which is incorporated into the state statutes of every US jurisdiction. A condition precedent specifically and expressly stated in that statute is that the claimant must’ve paid value for the underlying obligation.

And it is for that reason that it is universally held that a written conveyance of the mortgage lien (or beneficial interest under a deed of trust) is NOT a legal transfer of the lien without a concurrent conveyance of the underlying obligation. The language of art used by the courts that such a written document is a “legal nullity.”

What is often missed and what has been weaponized by the banks is that such concurrent conveyance must come from someone who owns the underlying obligation or is the authorized agent of a confirmable owner of the underlying obligation.

Such payment is often presumed by the transfer of the note or by an assignment of the mortgage, but it is rarely true. Unless value was paid for the note or the mortgage, such a  presumption is inapplicable, and the foreclosure action must fail. As you know, I have analyzed the reasons for this defect for 16 years and have successfully defended homeowners hundreds of times in my direct participation and thousands of times indirectly.

The reason for the defect is simply that most loans are subject to false claims of securitization. Securitization occurs, but not in the sense that nearly everyone assumes or presumes.

The fact that securities are issued does not mean that those securities convey any right, title or interest or any ownership or authority over any payment, note or mortgage. Those securities are unregulated and are deemed not to be securities for purposes of regulation pursuant to the abandonment of strict regulations that had been in place up to 1998 and 1999. They are unsecured certificates, meaning they are merely IOUs issued by investment banks operating under the name of a designated trust, which often does not exist at the time of the claim.

Here is a quote from the Code itself as quoted by the Permanent Board for the UCC:

 See id. and Official Comment 2 to UCC § 9-109. 11UCC § 1-103(b). As noted in Official Comment 2 to UCC § 1-103:
The Uniform Commercial Code was drafted against the backdrop of existing bodies of law, including the common law and equity, and relies on those bodies of law to supplement its provisions in many important ways. At the same time, the Uniform Commercial Code is the primary source of commercial law rules in areas that it governs, and its rules represent choices made by its drafters and the enacting legislatures about the appropriate policies to be furthered in the transactions it covers. Therefore, while principles of common law and equity may supplement provisions of the Uniform Commercial Code, they may not be used to supplant its provisions, or the purposes and policies those provisions reflect, unless a specific provision of the Uniform Commercial Code provides otherwise. In the absence of such a provision, the Uniform Commercial Code preempts principles of common law and equity that are inconsistent with either its
provisions or its purposes and policies. 

…The enforcement of real estate mortgages by foreclosure is primarily the province of a state’s real property law, but legal determinations made pursuant to the four sets of UCC rules described in this Report will, in many cases, be central to administration of that law. In such cases, proper application of real
property law requires proper application of the UCC rules discussed in this Report.

2 Responses

  1. These were NOT negotiable notes for RMBS. That is the distinction. That is the lie at the table. UNSECURED – and what was was concealed at table. You paid for a ‘mortgage’ – never got – so no ‘note’ to a claimed mortgage that does not exist. NO MORTGAGE -. THIS was the cause of the financial crisis explosion. You can’t validly securitize when not accounted for by financial balance sheet accounting sheet. NONE were. All just reinstatement of already declared default debt. Anything collected is ‘accounted” for by financial INCOME statement – not a financial accounting balance sheet. Difference. Securitization requires financial balance sheet accounting. If not there – UNSECURED. it is all so simple – but just too big for government to acknowledge.

  2. This is what I been arguing that as Washington Mutual Bank (WAMU) stopped existing and 1.3 million Fed Gov Backed loans of WAMU could not and did not sale these loans to JPMorgan during the FDIC sale of the operation, locations, equipment and some portfolio loans but the Fed Gov loans in the Ginnie Mae MBS required that UCC3 procedure of endorsing the Note in blank and relinquish the blank Note to Ginnie for consideration of the securities which are base on the loans without owning the loans as Ginnie cannot buy or sell a mortgage loan.

    So as Wells continues to mortgage service the 1.3 million loans after Sept 25, 2008, and I ask how when the owner of the loan debt in WAMU stopped existing. Who is Wells collecting payment for when the debt holder stopped existing and declared a failed bank and cannot complete the mortgage loan contract. WAMU did not file bankruptcy so where are these monies for payments going, foreclosure proceeds and all payoffs going when as Wells is servicing the loans.

    So now it a year after WAMU failed and Wells is calling the mortgage loan due and has Robo signed the Assignment of Deed of Trust and states they paid value for my mortgage loan on Oct 22, 2009, when as the mortgage servicer and the custodian of records for Ginnie Mae and has the files of the Ginnie acceptance of the loan, that must contain both the Note and all assignment per Ginnie requirements.

    So MERS assigns over this assignment as the nominee leaving out WAMU in the chain of title as if they never existed as the owner of the debt, but in the state of NE this violates NE Statute 76-2710 where is says “Holder of evidence of debt does not include a person acting as a nominee solely for the purpose of holding the evidence of debt or deed ot trust as an electronic registry without any authority to enforce the evidence of debt or deed of trust”.

    So days before the foreclosure, Wells tells me that they are not processing my loan for the VA HAMP because it not there decision and it up to the investor owner of the loan who they are not at liberty to tell me who the owner is due to privacy reasons. A year later Wells writes to me that the investor owner was Ginnie Mae in which Ginnie Mae write that Wells was mistaken and that Ginnie does not buy or sell mortgage loans but they were the right entity to foreclose.

    Ginnie who requires that loan that the lender/issuer pay back the loan that they received from the investor against the MBS before Ginnie will release the mortgage loan from the pooling so that the lender/issuer can foreclose. But in my case because there was no lender in WAMU there was not a counter party to upfront the $211,000 to Ginnie, so Ginnie allow the foreclosure to take place in which those funds were to go to the alleged debt balance which was paid off by the foreclosure proceeds and VA Guaranty Fund claim as the two totals were $14,000 over the balance due plus the Dept of VA loan has a non-recourse clause in it.

    What I feel happen is that Wells and Ginnie hijacked my mortgage servicing account to launder monies into the account that showed the amounts being received but never applied to my balance, as over $432,000 received in my account with an alleged balance only to an entity in WAMU that not alive and no other entity as in the bankruptcy court looks for monies to settle the debt by WAMU because WAMU did not file BK. They are committing a type of bank fraud in accounting and splitting the monies between Wells & Ginnie which neither I owed a single red cent too

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