When it comes to losing one’s homestead the legislature, the executive branch and the courts insist on knowing that in all events the proceeds of foreclosure sales go to pay down the debt. A party having no risk of loss has no injury thus depriving the court of jurisdiction. A party who has no money at risk fails to satisfy the condition precedent clearly stated in the UCC.
Long overdue, many politicians are starting to understand the real nature of securitization as it is being practiced in Wall Street. This has produced a heightened awareness of the risks of not dealing with Wall Street practices and the risk of what many are calling the coming economic crash.
see Congress Tackles Looting by Wall Street
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The most salient part of the bill, in my opinion, is the part about retaining risk. It is an official acknowledgement, in addition to other governmental findings that the investment banks and hedge funds who played the unregulated securitizations scheme simply retained no risk or so little risk of loss as to be just a cost of doing business.
This bill seeks to take that issue head-on and prevent “lenders” from (a) hiding their identities and (b) creating junk loan products for the purpose of selling and trading unregulated securities.
I don’t think there is anything more important than the recognition that all or most of the risk of loss has been parsed out into many attributes each of which was sold to different classes of investors using different classes of unregulated security instruments.
None of the buyers or traders in such securities ever purchased the debt of a borrower even they paid money equivalent to a purchase of the debt. No legal title or right to enforce any debt, note or mortgage was ever conveyed to the holders of “REMIC” certificates nor any other class of investors.
Without having technically sold the debt, the investment bank retains bare legal title to the debt, which is an outcome anticipated by the framers of the Uniform Commercial Code Article 9 §203, adopted in all 50 states as law of each state. Bare legal title might be enough to enforce a note that qualifies as a negotiable instrument (article 3) but it is not sufficient to enforce a mortgage in foreclosure.
The reason is obvious and contained in the minutes of committees who created this section and the states who adopted it.
When it comes to losing one’s homestead the legislature, the executive branch and the courts insist on knowing that in all events the proceeds of foreclosure sales go to pay down the debt. A party having no risk of loss has no injury thus depriving the court of jurisdiction. A party who has no money at risk fails to satisfy the condition precedent clearly stated in the UCC.
Filed under: foreclosure | Tagged: Dodd-Frank, Elizabeth Warren, Pramila Jayapal, Sherrod Browne, Tammy Baldwin | 5 Comments »