Foreclosure Defense: Basic Law Can be a Winner for Borrower

Most lawyers and borrowers take it for granted that they know what a “lender” is. They take it for granted that they know that this was a “mortgage” transaction. They take it for granted that the transaction was legal but for the legal challenges you wish to mount to ward off foreclosure, sale or eviction. But what if the so-called lender had not dotted its own “i’s” and crossed its own “t’s.” For example, what if the “lender” had not registered with the secretary of state in the state in which your property was located (and perhaps in your home state if that is different). Well, that would mean that the entire transaction could be void and any claims you have against the lender et al cannot, (i.e., may not) be defended by the “lender” or anyone else claiming through the “lender.”

Consider our latest update to Garfield’s Glossary and think about its possible ramifications in YOUR case:

LENDER:

READ THIS: A lender is not just the entity that actually “appeared” at closing. The true lender for the mortgage meltdown period is usually some larger investment banking firm or large bank that used a small “front” organization that essentially acted as a mortgage broker and mortgage aggregator before selling or assigning the mortgage before even the first payment was due. If that is the case, there were undisclosed parties to the “loan” transaction and undisclosed fees paid, all of which are TILA violations.

ATTORNEYS AND BORROWERS TAKE NOTE: DON’T TAKE THE BASICS FOR GRANTED. EXAMPLE: WASHINGTON MUTUAL IS REPORTED TO HAVE NOT QUALIFIED TO DO BUSINESS IN THE STATE OF CALIFORNIA AND MAY HAVE REPEATED THAT MISTAKE IN OTHER STATES AS WELL.

If they were not authorized to do business a the time of the transaction, it means that they had not registered with the secretary of state and paid their fees as a state corporation or other entity, or as a foreign corporation or other entity. In ALL states we have researched, the law is the same: The mortgage (or any other) transaction is unenforceable and the claims against the party transacting business without qualification MAY NOT BE DEFENDED. A simply quiet title action might end the entire affair.

Likewise, the true lender might be the investment banker, the investor in a securitized asset backed security or the entity that was created by the investment banker in which bonds or shares of asset backed securities were sold.

The “lender” would thus be defined by “substance over form” and probably doesn’t qualify under the laws of the state in which the mortgage loan was originated, does not qualify as a securities transaction under the laws of the state in which the mortgage loan was originated, and probably doesn’t qualify as a lender under the banking and finance laws of the state in which the mortgage loan was originated.  

In all of these cases the transaction is void or voidable. The lender may also have avoided “intangible taxes” in states like Florida, subjecting itself to multiple counts of criminal and civil liability, interest and penalties in addition to the taxes due. 

%d bloggers like this: