The difference between paper instruments and real money

There is a difference between the note contract and the mortgage contract. They each have different terms. And there is a difference between those two contracts and the “loan contract,” which is made up of the note, mortgage and required disclosures.Yet both lawyers and judges overlook those differences and come up with bad decisions or arguments that are not quite clever.

There is a difference between what a paper document says and the truth. To bridge that difference federal and state statutes simply define terms to be used in the resolution of any controversy in which a paper instrument is involved. These statutes, which are quite clear, specifically define various terms as they must be used in a court of law.

The history of the law of “Bills and Notes” or “Negotiable Instruments” is rather easy to follow as centuries of common law experience developed an understanding of the problems and solutions.

The terms have been defined and they are the law not only statewide, but throughout the country, with the governing elements clearly set forth in each state’s adoption of the UCC (Uniform Commercial Code) as the template for laws passed in their state.

The problem now is that most judges and lawyers are using those terms that have their own legal meaning without differentiating them; thus the meaning of those “terms of art” are being used interchangeably. This reverses centuries of common law and statutory laws designed to prevent conflicting results. Those laws constrain a judge to follow them, not re-write them. Ignoring the true meaning of those terms results in an effective policy of straying further and further from the truth.

Listen to the Last Neil Garfield Show at http://tobtr.com/s/9673161

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-
So an interesting case came up in which it is obvious that neither the judge nor the bank attorneys are paying any attention to the law and instead devoting their attention to making sure the bank wins — even at the cost of overturning hundreds of years of precedent.
 *
The case involves a husband who “signed the note,” and a wife who didn’t sign the note. However the wife signed the mortgage. The Husband died and a probate estate was opened and closed, in which the Wife received full title to the property from the estate of her Husband in addition to her own title on the deed as Husband and Wife (tenancy by the entireties).
 *
Under state law claims against the estate are barred when the probate case ends; however state law also provides that the lien (from a mortgage or otherwise) survives the probate. That means there is no claim to receive money in existence. Neither the debt nor the note can be enforced. The aim of being a nation of laws is to create a path toward finality, whether the result be just or unjust.
 *

There is an interesting point here. Husband owed the money and Wife did not and still doesn’t. If foreclosure of the mortgage lien is triggered by nonpayment on the note, it would appear that the mortgage lien is presently unenforceable by foreclosure except as to OTHER duties to maintain, pay taxes, insurance etc. (as stated in the mortgage).

*

The “bank” could have entered the probate action as a claimant or it could have opened up the estate on their own and preserved their right to claim damages on the debt or the note (assuming they could allege AND prove legal standing). Notice my use of the terms “Debt” (which arises without any documentation) and “note,” which is a document that makes several statements that may or may not be true. The debt is one thing. The note is quite a different animal.
 *
It does not seem logical to sue the Wife for a default on an obligation she never had (i.e., the debt or the note). This is the quintessential circumstance where the Plaintiff has no standing because the Plaintiff has no claim against the Wife. She has no obligation on the promissory note because she never signed it.
 *
She might have a liability for the debt (not the obligation stated on the promissory note which is now barred by (a) she never signed it and (b) the closing of probate. The relief, if available, would probably come from causes of action lying in equity rather than “at law.” In any event she did not get the “loan” money and she was already vested with title ownership to the house, which is why demand was made for her signature on the mortgage.
 *

She should neither be sued for a nonexistent default on a nonexistent obligation nor should she logically be subject to losing money or property based upon such a suit. But the lien survives. What does that mean? The lien is one thing whereas the right to foreclose is another. The right to foreclose for nonpayment of the debt or the note has vanished.

*

Since title is now entirely vested in the Wife by the deed and by operation of law in Probate it would seem logical that the “bank” should have either sued the Husband’s estate on the note or brought claims within the Probate action. If they wanted to sue for foreclosure then they should have done so when the estate was open and claims were not barred, which leads me to the next thought.

*

The law and concurrent rules plainly state that claims are barred but perfected liens survive the Probate action. In this case they left off the legal description which means they never perfected their lien. The probate action does not eliminate the lien. But the claims for enforcement of the lien are effected, if the enforcement is based upon default in payment alone. The action on the note became barred with the closing of probate, but that left the lien intact, by operation of law.

*

Hence when the house is sold and someone wants clear title for the sale or refinance of the home the “creditor” can demand payment of anything they want — probably up to the amount of the “loan ” plus contractual or statutory interest plus fees and costs (if there was an actual loan contract). The only catch is that whoever is making the claim must actually be either the “person” entitled to enforce the mortgage, to wit: the creditor who could prove payment for either the origination or purchase of the loan.
 *

The “free house” mythology has polluted judicial thinking. The mortgage remains as a valid encumbrance upon the land.

*

This is akin to an IRS income tax lien on property that is protected by homestead. They can’t foreclose on the lien because it is homestead, BUT they do have a valid lien.

*

In this case the mortgage remains a valid lien BUT the Wife cannot be sued for a default UNLESS she defaults in one or more of the terms of the mortgage (not the note and not the debt). She did not become a co-borrower when she signed the mortgage. But she did sign the mortgage and so SOME of the terms of the mortgage contract, other than payment of the loan contract, are enforceable by foreclosure.

*

So if she fails to comply with zoning, or fails to maintain the property, or fails to comply with the provisions requiring her to pay property taxes and insurance, THEN they could foreclose on the mortgage against her. The promissory note contained no such provisions for those extra duties. The only obligation under the note was a clear statement as to the amounts due and when they were due.  There are no duties imposed by the Note other than payment of the debt. And THAT duty does not apply to the Wife.

The thing that most judges and most lawyers screw up is that there is a difference between each legal term, and those differences are important or they would not be used. Looking back at AMJUR (I still have the book award on Bills and Notes) the following rules are true in every state:

  1. The debt arises from the circumstances — e.g., a loan of money from A to B.
  2. The liability to pay the debt arises as a matter of law. So the debt becomes, by operation of law, a demand obligation. No documentation is necessary.
  3. The note is not the debt. Execution of the note creates an independent obligation. Thus a borrower may have two liabilities based upon (a) the loan of money in real life and (b) the execution of ANY promissory note.
  4. MERGER DOCTRINE: Under state law, if the borrower executes a promissory note to the party who gave him the loan then the debt becomes merged into the note and the note is evidence of the obligation. This shuts off the possibility that a borrower could be successfully attacked both for payment of the loan of money in real life AND for the independent obligation under the promissory note.
  5. Two liabilities, both of which can be enforced for the same loan. If the borrower executes a note to a third person who was not the party who loaned him/her money, then it is possible for the same borrower to be required, under law, to pay twice. First on the original obligation arising from the loan, (which can be defended with a valid defense such as that the obligation was paid) and second in the event that a third party purchased the note while it was not in default, in good faith and without knowledge of the borrower’s defenses. The borrower cannot defend against the latter because the state statute says that a holder in due course can enforce the note even if the borrower has valid defenses against the original parties who arranged the loan. In the first case (obligation arising from an actual loan of money) a failure to defend will result in a judgment and in the second case the defenses cannot be raised and a judgment will issue. Bottom Line: Signing a promissory note does not mean the maker actual received value or a loan of money, but if that note gets into the hands of a holder in due course, the maker is liable even if there was no actual transaction in real life.
  6. The obligor under the note (i.e., the maker) is not necessarily the same as the debtor. It depends upon who signed the note as the “maker” of the instrument. An obligor would include a guarantor who merely signed either the note or a separate instrument guaranteeing payment.
  7. The obligee under the note (i.e., the payee) is not necessarily the lender. It depends upon who made the loan.
  8. The note is evidence of the debt  — but that doesn’t “foreclose” the issue of whether someone might also sue on the debt — if the Payee on the note is different from the party who loaned the money, if any.
  9. In most instances with nearly all loans over the past 20 years, the payee on the note is not the same as the lender who originated the actual loan.

In no foreclosure case ever reviewed (2004-present era) by my office has anyone ever claimed that they were a holder in due course — thus corroborating the suspicion that they neither paid for the loan origination nor did they pay for the purchase of the loan.

If they had paid for it they would have asserted they were either the “lender” (i.e., the party who loaned money to the party from whom they are seeking collection) or the holder in due course i.e., a  third party who purchased the original note and mortgage for good value, in good faith and without any knowledge of the maker’s defenses). Notice I didn’t use the word “borrower” for that. The maker is liable to a party with HDC status regardless fo whether or not the maker was or was not a borrower.

“Banks” don’t claim to be the lender because that would entitle the “borrower” to raise defenses. They don’t claim HDC status because they would need to prove payment for the purchase of the paper instrument (i.e., the note). But the banks have succeeded in getting most courts to ERRONEOUSLY treat the “banks” as having HDC status, thus blocking the borrower’s defenses entirely. Thus the maker is left liable to non-creditors even if the same person as borrower also remains liable to whoever actually gave him/her the loan of money. And in the course of those actions most homeowners lose their home to imposters.

All of this is true, as I said, in every state including Florida. It is true not because I say it is true or even that it is entirely logical. It is true because of current state statutes in which the UCC was used as a template. And it is true because of centuries of common law in which the current law was refined and molded for an efficient marketplace. But what is also true is that law judges are the product of law school, in which they either skipped or slept through the class on Bills and Notes.

Foreclosure Bid Rigging at Its Worst: Tiffany and Bosco Reportedly Worst Offender

Challenging the Foreclosure Auction Process

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

see also http://livinglies.me/2013/04/04/banks-could-owe-trillions-on-fake-rigged-credit-bids/

Editor’s Analysis: The piece below is a report from our best investigator doing some work in Arizona. If you want to hire him, just contact us and we will put you in touch with him. The emphasis is added by me.

The report speaks for itself, but there clearly is something wrong with the operation of a system that allows for bidding without proof of loss, without paying the $10,000 required as earnest money and without any transparency.

The auctioneer, selected by the substituted trustee who was substituted usually by a fabricated document claiming false authority and forged by someone who may never have existed, is clearly the paid underling of the banks that ordered the foreclosure with perks offered at the end of the auction process for those who want the house in question.

Despite numerous law-breaking allegations and even proof of violations of the notary laws and recording laws, Tiffany and Bosco continue to practice without any impediment. You can thank the DOJ and AG Holder along with the Obama administration for establishing a climate where crime and moral hazard run rampant.

More importantly, while the bids and value of the notes are manipulated to be in conformance with what is reported to Wall Street investors (as pointed out by Charles Koppa), they still have no jumped the hurdle of having a non-creditor bid at the auction and are essentially hoping that the passage time will overcome any claim that they should have paid cash. It is for this and other reasons that we believe that both the substitute trustee and auctioneer, individually and as representative of the company that sent them to the auction have exposure to liability and if the right fact pattern emerges from all this, they should be sued and prosecuted.

Fundamentally the strings are being pulled by Wall Street banks who are so far successfully avoiding trillions of dollars in liabilities for paying cash on bids made on their behalf but for which there was no consideration in the form of the debt or the cash required by statute.

In my opinion those banks are extremely vulnerable to this challenge and the piercing of the corporate veils and ladders and layering will be relatively easy. There is gold in these hills for both evicted homeowners and lawyers who represent them. The pot can be measured in the trillions of dollars.

—————————————————

Hi Neil,
I have digitally recorded, at the request of a client, FIVE Tiffany & Bosco trustee sales from beginning to end.  My declarations regarding these trustee sales are now part of the record in a BK Adversary Proceeding.

I can state categorically the creditor is never at the auction.

THIS is how it goes at T&B [Tiffany and Bosco].  T&B has an auction list on their web site.  You can print it out on their web site and take it to the auction.

The auctioneer enters the room, sits down, and proceeds to read at LIGHT SPEED the list of properties scheduled for that auction.  All he calls is the T&B internal auction number and the street address.  If a bidder is interested, he yells PULL.  The auctioneer proceeds with the list with a variable number of trustee sales having had a PULL yelled.  The auctioneer then leaves the room and the bidders talk amongst themselves.

The auctioneer then returns with a stack of files, that match the sales that had a yell of PULL.  The other homes on the list are never brought up again.  I have checked the recorders web site and every one of the homes which never got passed the PULL stage had a trustee deed which T&B stated that an auction occurred and the property was sold for cash or, protanto, via a credit bid (which never happened, I have it on tape).

Now, regarding the sales prefaced with PULL.  The auctioneer then starts reading a long trustee disclaimer at rapid speech.  He then calls a property, starts that T&B as trustee for the lender, opens the bid with XXXXXX amount, whatever is listed on the form.  Anyone who wants to bid can not do so but has to have first handed the auctioneer a $ 10,000.00 check.  The auction continues until the last bid is received.  I have checked these properties and the Trustee Deed does match the final amount bid.

HOWEVER, I do not recall, ever, an auction where the sale amount was MORE than the declared amount of the original note (that number is in the sales list).  And I believe I know why.  The Arizona excess funds statute says there are excess funds, only, when the sale amount is HIGHER than the declared value of the original note on the Notice of Trustee Sale.  Therefore, whatever made up amount is on the Trustee Notice controls whether or not there are excess funds.

So, to avoid having excess funds, all a lender has to be is gerrymander the note about, enter whatever credit bid they want, and certainly low enough to encourage a sale, and voila, not a dime back to homeowners, even if they have received payment on the note from credit default swaps, etc.

Finally, the creditor is never there at the sale.  At least in the case of T&B, the creditor has their bid PLACED by the AUCTIONEER when a file is PULLED, or, the credit bid is never even mentioned for properties that are not PULLED!

As an aside, during some auctions, when nearly everyone has left, a couple of bidders would linger behind and when alone with only the auctioneer and ME looking like I am packing to go, the bidders ask for a LATE PULL.  Of course my recorder is still running.  The auctioneer goes and gets the late PULL property files.  He calls an auction and in these case, there is only one bidder who offers ONE DOLLAR above the credit amount bid by T&B on behalf of the lender.  You can draw a conclusion from these collusive late events that is probably entirely accurate.  AND, I have them on tape.

IF you would like a copy of the videos to see for yourself, just ask.

 

Right of Redemption: Going After the Money Trail

If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comment and Analysis: Most people and lawyers I talk to think there is no life after sale of the property. This is not the case in my opinion and I encourage lawyers to start getting up to speed on the causes of actions and remedies that are available for attacking a foreclosure judgment and separately the foreclosure sale or “auction.”

Of course we know that a cause of action for wrongful foreclosure, slander of title and quiet title, to name a few, are available to attack the foreclosure judgment or the final order in non-judicial states that allows the foreclosure sale to go through. There is also the semi-final order from the bankruptcy court which lifts the stay to allow for the foreclosure wherein the court frequently inserts that the movant is the owner of the loan. (When a different entity than the movant initiates the foreclosure and bids in the property as a creditor without getting leave of court to amend judgment or the motion to lift stay there are some very weighty issues raised that have been covered in earlier posts).

And as pointed out by one reader, the “opportunity to Cure” is another attack that is available before Judgment if you properly challenge the amount demanded. Proof of loss and Proof of Payment is NOT the note and Mortgage. It is a showing that the a party actually paid value for the debt and stands to lose money (economic loss) if it isn’t paid by the homeowner. If they can’t prove the loss, the court has one of two options, one of which is ridiculous: (1) it can order the foreclosure and prohibit the initiator of the foreclosure from submitting a credit bid (they must pay cash at auction) or (2) it can dismiss the foreclosure with prejudice because no injured party is present which is jurisdictional — i.e., STANDING.

In Florida and many other states (pro se litigants: check with local licensed counsel to make sure you know what the procedure is and what is available) there is both a statutory and equitable right of redemption. In some states the sale can be attacked during the redemption period because the consideration was faked or insufficient.

Florida Statute 45.0315 allows for redemption at the amount set forth in the final judgment. The common law equitable right of redemption in Florida has a short window — 10 days — in which you can challenge the sale based on the violation of court ordered procedures (which opens the door to wrongful foreclosure by a non-creditor), bid rigging, unfair practices which are loosely defined, or anything else that leads to a determination of a deficiency.

The deficiency is in Florida a judgment which the bank can pursue after the sale based upon the difference between the amount of the judgment and the amount of the sale which of course the bank fully controls and the cases are replete with references to the obvious fact that the sale price is more often than not governed by an arbitrary decision of the lender.In non-judicial states the deficiency is waived but there could be and usually are tax consequences arising from the “forgiven principal and interest” that cannot be offset by the loss taken on the house.

Some people, at my suggestion are starting funds in which the homeowner is given the means to exercise the right of redemption on one condition: that the forecloser prove loss and prove payment so the new lender can be assured that there are no claims on or off record.

This is leading to some interesting settlements and high profit margin for those people with money who can put up the full amount of the judgment but end up not laying out any money or very little and getting a mortgage from the homeowner that is valid and enforceable and in an amount far less than the original debt — when the pretender lender fails to produce evidence of loss (canceled check, wire transfer receipt etc.).

Frankly I am looking for investors and a manager who can handle that business which is very lucrative. An off shoot of the same idea is to buy the HOA’s lien, and foreclose on it, which is cheaper and messier. Either way the homeowner gets to stay in the home, creditors are paid what theyshould be paid, and the equity in the home is restored.

Procedurally, lawyers should pay close attention to the time limits lest they miss it and commit malpractice. A homeowner can come back at a foreclosure defense attorney alleging that the redemption period was not used properly. My suggestion is that immediately after sale the motion is filed to have the court set the proper amount of redemption based upon evidence of actual loss. You might be met with res judicata arguments or collateral estoppel, because you should have challenged the forecloser to prove their loss before judgment, but I think the period of redemption raises the issue again, or at least does so within the scope of reasonable argument.

It might well be that the pretender lender, now faced with a final judgment they procured, or a final order they procured will be estopped from maintaining the shell game they were able to conduct before judgment and finally pinned down to show that XYZ Bank actually has a receipt showing they paid for the loan either at origination or in a transfer.

At the risk of repeating myself, if you lead with an attack on the documents you are tacitly admitting that the underlying monetary transaction was real. If you lead with an attack on the monetary transactions (the money trail) then the deficiencies in the documents are abundantly clear. The documents should reflect the realities of the monetary transactions. If they don’t, the documents are either invalid or at least lose most of their credibility and all of their presumptions.

Think it through, do the research and don’t do anything until you are satisfied that what I am saying here applies to whatever case you are working on. In the end, you will most likely come tot he same conclusion I did — denial of the debt, note, mortgage and default is not only proper, it is the only truthful thing to do.

In discovery you will prove that the debt did not arise from any transaction between the borrower and the forecloser or any predecessor or successor. The documents, which point to the pretender, are therefore invalid as naming the wrong (and usually a strawman) party as payee and secured party. Add to that the conversion of the promissory note to a mortgage backed bond where the repayment terms offered the lender are different than the repayment terms offered the buyer, and you have a pretty strong argument to set the pretender back on its heels and draw some blood.

Bank of America is desperately trying to rid itself of these mortgages and mortgage bonds almost at any cost or price. They understand that every mortgage carries a potential huge liability. Taking my previous (see yesterday’s post) article, there could be a zero balance owed to the “creditor” after offset for mitigation payments, and the fabrication and forgery of documents, together with general application of TILA provisions might entitle you to recover treble damages plus attorneys fees and costs. In a wrongful foreclosure action the money really piles up, especially where the homeowner was evicted.

And it all can start in motions directed at setting the correct amount of the redemption.

Below is the oddly worded Florida Statutory right of redemption. remember, if you are not an attorney licensed in the state in which the property is located, you are far more likely to make procedural mistakes than the pretender lender and lose a case you might otherwise win. Advice, counsel and preferably representation by competent counsel is in my opinion an absolute requirement. If local counsel disagrees with the application of these principles to the situation presented his or her opinion should be taken as authoritative rather than this blog which is meant to be only informative.

45.0315 Right of redemption.—At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment, order, or decree of foreclosure, the mortgagor or the holder of any subordinate interest may cure the mortgagor’s indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, order, or decree of foreclosure, or if no judgment, order, or decree of foreclosure has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor. Otherwise, there is no right of redemption.

%d bloggers like this: