Meet PETE: Person Entitled to Enforce

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§ 3-301. PERSON ENTITLED TO ENFORCE INSTRUMENT.

Person entitled to enforce” an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

See my blog article from yesterday and listen to the show.

Concentrating on PETE goes to the nub of the problem. But Judges are not looking for the letter of the law — especially if it conflicts with what they think is common sense. And frankly the UCC is not very helpful for a situation like this — where the banks institutionalized violating the law. It doesn’t make sense to the Judge. From the beginning of this era of litigation, which I would say was around 2004, it was generally thought that Banks would not risk destruction and diminishing their brands by committing crimes that would or could send bankers to jail. Individuals would but banks would not.

The Judge would believe this crazy story if it was an individual in a tee shirt with tattoos and a Hells Angel jacket but it is completely counter-intuitive to believe that the banks would have committed so many crimes in such an elaborate, complicated and complex scheme of layers and laddering. The banks would not do these things they are accused of doing and the regulators would not have allowed it. And today, it STILL makes no sense to most people and most Judges. The borrowers  do not have sufficient education or experience to argue with the popular myth about what the Banks would do, why they would do it and why the borrowers are technically speaking in a far superior legal position when compared to the banks.

So everything presented to the Judge including outright proof of the facts supporting the homeowners’ theory of the case is filtered out by the completely wrong assumption that the bank would never act so irresponsibly and the borrower is merely seizing on hairsplitting notions to escape liability on a deal that went bad for them. The little voice in the Judge’s mind says “Even if you are right, the bank got hurt as well and our laws favor enforcement of negotiable instruments.” And the bank argument that failure to enforce would destroy the financial system and the economy therefore resonates strongly with nearly all judges on both the trial bench and courts of appeal.

The real cause of the trouble comes from the fact that the borrower got money at closing and the notion that assignments, endorsements, powers of attorney were not based upon any actual transaction. To say that there was no money at closing sounds ridiculous to anyone who has not analyzed this from the perspective of an investment banker. There you will easily see that there was no money in the original transaction and there was no money in any “succession” created by false paperwork. And the reason that is important is that in the end the intent of all law is to make a debtor pay his creditor. But who is the creditor?

As the old cases put it, the mortgage follows the note and will automatically inure to the benefit of the party to whom the obligation is owed. see http://law.missouri.edu/whitman/files/2013/12/Foreclosing-on-Nothing.pdf.
The trick here is that the borrower didn’t know there was a difference at closing between the party who funded the loan and the party to whom he promised to pay money. If he did know, or if he was told shortly after closing, then he would no doubt have reconsidered or rescinded once he saw all the people who were actually making money on the origination and transfers of his loan.
The confusion starts with the novel issue or novel fact pattern in which there is now a difference between PAYMENT and REPAYMENT. PAYMENT means you have an obligation to pay. That is not the deal with a loan. THAT is a promise caused by the sale of goods or services. REPAYMENT means that you made a promise to pay back money you received from the Payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust.
It should be about REPAYMENT not PAYMENT. And that is where the essential problem lies. If there was no loan at the base of the chain of transfers, then there is no basis to enforce by ANYONE. I think we ought to argue that if some crooked individual had done these things for himself, the Judge would have no problem in stopping enforcement. The fact that a crooked banker engineered this through dozens of conduits and outright civil and potentially criminal theft should make no difference to the result.
I wonder if a voir dire question should not be addressed to the Judge to ask whether it makes any difference to him whether the acts complained of by the homeowner were allegedly committed by some felon with a criminal record or a banker with a clean record. Admittedly the credibility of witnesses is at stake in that example but the ultimate ANALYSIS of the legal and financial  consequences of these schemes should be examined with lady blind justice in mind. I have asked voir dire questions to judges and found them receptive. It is an ideal time to take control of the narrative.
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