I SUGGEST THE READER TAKE A CLOSE LOOK AT THE COMMENTS SECTIONS UNDER “ABOUT NEIL GARFIELD” AND ELSEWHERE AS POSTED BY MARIO KENNY. HE’S DONE A LOT OF WORK FOR ALL OF US. THANK YOU MARIO. HE SHOWS WHERE THE SEC REPORTING CONTAINS ALL YOU NEED TO KNOW, IN SWORN DOCUMENTS. YOU SEE, IF THEY LIE TO THE SEC THEY GO TO JAIL. IF THEY LIE TO YOU, THEY GET RICH.
See also cyruswellstexascase-excellent-verbiage-on-securitization-conspiracy-with-charts-and-causes-of-action
Nobody named Gator Bradshaw should be anything but a lawyer from Florida. He is, and a pretty good thinker. He suggests that the statutes governing title agents and recording, and specifically those making it a crime to fail to record or to use a recorded instrument in an illegal way, provide potentially a silver bullet. It isn’t something that I had considered before, but on reflection it appears that Gator is on to something here. Here is his latest comment and my response to him thus far:
GATOR: Chapter 701 should cover assignment of mortgages just as chapter 517 should cover the notes. That being said though the rest of 701 is silent as to the way a transfer should be conducted 701.041 is illustrative of the legislatures concern in adding an orderly system to the process (arguable for the benefit of title agents) however I intend to argue that it should also apply to all assignments. Especially when there is no documentation that the entity that is bringing the action is the proper party. If they are not named in the mortgage then there should be, recorded, a record of the transfer so that the requirement of chapter 701.04 can be met.
I will give a more lengthy explanation later when I have an opportunity to draft it. I realize that this is as new idea but sometimes new ground needs to be plowed. The worst thing that can happen is for the court to tell me no. But I think that if I can argue that this interpretation is necessary to allow some minimum notice to the home owner I may find a sympathetic ear. Just a thought.
Gator Bradshaw
NEIL: I agree with that. And it does add to what I have developed so far. So you are creating a statutory duty to record everything that goes on with the mortgage note because everything that happens to it, produces an effect on the enforcement or enforceability of the mortgage. You are echoing the issue that numerous scholars and academics have raised, as an aside, as to whether mortgage notes were EVER meant to be negotiable instruments at all. Your proposition also raises the level of credibility of the argument in the Creighton Law Journal that there ought not to be a holder in due course, although their argument is a bit twisted and the conclusions obscure.
Perhaps their meaning is that their ought not to be consideration of the status of the holder — in which case your proposition goes from possible or probable to mandatory — i.e., if any holder can enforce the note and foreclose the mortgage, then the original borrower once sued should not be able to be sued again by someone else making a claim through the chain of title even if they are a bona fide purchaser for value (without notice of fraud, statutory violations or other irregularities at the loan closing) and thus a holder in due course. And whoever gets title from either a foreclosure or deed in lieu of foreclosure or short sale, should be able to get title insurance without exceptions for whatever happened in the securitization process.
Your proposition is supported by and lends support in a positive circular way to the notion that the borrower and subsequent title holders of the property or the mortgage (which is an interest in property) is/are entitled to full disclosure and notice, by virtue of state property law, TILA and fiduciary responsibilities of the lender to the borrower and the same fiduciary duties assumed by the Trustee(s) involved — i.e., (Deed Trustee in non-judicial states and perhaps the Pool Trustee of the mortgage aggregator). What I think you are zeroing in on here, Gator, is that the borrower was entitled and continues to be entitled to know who it is that he is doing business with. Clearly an attempt is being made here through slight of hand to distract us from the fiduciary duties of the “lender” and the duties on all participants at closing (title agent, appraiser, mortgage broker, real estate broker, seller etc.) who had knowledge or who come into the knowledge that things were not as they appeared at closing. The idea is to get us to look at the risk of loss rather than the duties of disclosure and fair dealing.
As for criminalization of the conduct, there are statutes in Florida and elsewhere that specifically provide for civil remedies for victims of criminal acts. Thus damages would obtain. However the greater strength of your proposition, as it appears to me, is that the title agent and the lender were under a statutory duty to “report” by way of recording, all transactions relating to the mortgage note. That duty would run all the way up the chain of securitization. Thus when AMBAC was paid a premium to insure the revenue or the principal of the note, this should have been disclosed — something obviously nobody upstream wanted as it would be a disincentive to the borrower to make the payment. The same would hold true for cross guarantees and credit default swaps or other options, agreements or additional derivative instruments that spread the risk of loss to third parties upon payment and receipt of fees generated out of the single transaction wherein the investor in asset backed securities was the source of the loan and all expenses associated with the loan, which would include those fees paid to offset risk of loss, fees paid to perform the closing, and fees paid for pooling, collateralization and issuance of asset backed securities etc..
And then of course, it occurs to me, the question might evolve into the use of proceeds from the investor that overfunded and overcollateralized this and other loans. If the criminal act in the first instance created the start of the chain of events, then the extra money that went as profit into the seller of the securities might also be criminal, perhaps theft.
I would like very much for you to expand upon this and submit an article to the Blog on this issue.
Filed under: CDO, Eviction, foreclosure, GTC | Honor, Mortgage | Tagged: criminal acts, duty to disclose, duty to record, foreclosure defense, foreclosure offense, securitization | 13 Comments »