Emergency: Why the New Article 12 of the Uniform Commercial Code Should Be Rejected

The UCC is a uniform authority on laws governing all transactions. It is adopted by law in all U.S jurisdictions. Transactions with homeowners are governed by Article 3 (Negotiable Instruments) and Article 9 (Secured Transactions).

My attacks on the weakness of the argument for business records of the “servicer” have resulted in the proposed new Article 12, which appears to have been adopted in other states (other than Florida). The new article proposes a new classification that will supersede all common law and statutory law regarding business records.

The new article governs the transfer of property rights in a “controllable electronic record” (CER), which is defined as a record stored in an electronic medium that can be subjected to “control” (discussed below). By definition, a CER excludes any digital assets that are not subject to “control” as well as those that are already subject to other commercial laws such as E-SIGN, the Uniform Electronic Transactions Act or other articles of the UCC. Article 12 also does not address the regulation of any digital assets (e.g., how they are taxed, implications for banking regulations or the prevalent question in the Web3 space as to whether such assets constitute securities). Those involved in the Web3 space will note that the definition does not include any reference to blockchain or distributed ledger technology. This was to make the definition technology-neutral, although the clear intent of the new amendments was to address blockchain-based digital assets. [e.s.]

The introduction of the CER is a thinly disguised attempt to solidify the consensus that the designated “servicer” reports constitute business records and, therefore, an exception to the hearsay rule.

As pointed out on this blog, the Payment History report issued under the name of a company that is proffered as a “servicer” are not business records since they are not a record of any business conducted by that “servicer.”

The Payment History purports to be a record of payments received from the homeowner.  But since that function is not performed by the “Servicer” and is instead performed by financial technology companies (now designated as “servicers” by CFPB as of May, 2022), there is a complete lack of foundation to the introduction of such a report issued under the name of the “Servicer.” It is inadmissible under current rules of evidence.

By creating the new classification of CER, the door is opened to changing all common law and statutory law governing evidence — thus solidifying the death grip that investment banks have in foreclosures that are not filed for restitution of an unpaid debt but instead are filed for profit.

The new amendment also acknowledges but excludes “Controlled digital assets.” This is a disguised effort to legalize that which has been illegal. If the assets are  digital (virtual), they are not actual. The “digital assets” are merely representations of the actual. In foreclosures, the asset is always the unpaid loan account.

For nearly two decades, most courts have erroneously allowed the “Payment History” report issued under the name of the alleged “servicer” into evidence despite the fact that the company designated as “Servicer” never received or processed any payments from the homeowner.

This amendment is an attempt to create a grey area that the investment banks can exploit for profit by filing for foreclosures — through intermediaries — despite the fact that none of the players own any loan account (which was retired in the process of what Wall Street calls “Securitization”).

Ownership of the loan account is essential under the U.S. Constitution, which provides for court jurisdiction over any justiciable issue. A justiciable issue has been universally accepted as an issue in a dispute wherein one side has been injured, and the other side has caused the injury. In foreclosures, it is only a missed payment that causes devaluation of the loan account that is justiciable.

Write your state Senators and House representatives immediately.

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