Applying Common Sense and Law to Assignments of Mortgage

Every time a homeowner wins in foreclosure the investors are actually protected. It’s the sale of the property and/or entry of the foreclosure judgment that cuts investors off from their investment. Weird, right?

An article in the recently published Florida Bar Journal illustrates perfectly the confusion that occurs within the courts and by lawyers when they stray from the simple pronouncement of accepted law in all jurisdictions.

Here is one simple proposition declared by the Florida Supreme Court which is a mirror of similar pronouncements from the Highest courts in all other U.S. Jurisdictions: The case is Johns v Gillian 134 Fla. 575, 184 So. 140 (1938).

“the mere delivery of the note and mortgage, with intention to pass title, upon proper consideration, will vest the equitable interest in the person to whom it is so delivered.”

The obvious implication is that such a person can enforce the mortgage. The other obvious implication is that a claimant who claims to have received possession by delivery of the note and mortgage cannot enforce the mortgage if there was no intent to transfer title to the mortgage, or if there was no payment of consideration.

The obvious takeaways from this simple, basic and completely accepted point of law are

  • delivery of note and mortgage is important and potentially dispositive BUT
  • defects in the instrument of assignment of mortgage are not fatal IF
  • intention to pass title is present AND
  • payment of proper consideration is present
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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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The jumble occurs when anyone of those points is taken out of order or entirely out of consideration which is what the courts and even some foreclosure defense lawyers are missing.

Delivery of the original note and the recorded mortgage document is important and potentially dispositive. This is true if proper consideration was paid and there was an intent to pass title.

But the banks would have us believe that only the intent to pass title is important, even if the transferor has no title. There is no law and no case decision that agrees with that proposition. And the banks would have us believe that the intent to pass title is the only thing that matters even if no proper consideration was paid. There is no law and no case decision that supports that proposition.

By law, as adopted in the statutes of all 50 states when they adopted the Uniform Commercial Code, consideration must be paid for an effective transfer of the mortgage.  UCC Article 9 section 203. All the case law agrees and there is no case law contrary to that proposition.

BUT there is plenty of case law where the courts ignore it mostly because the pro se homeowners or foreclosure defense attorney didn’t present the issue clearly.

The money proves the intent and the intent justifies the money.  Without the money the transfer is a complete nullity which legally means it never happened.

While there are presumptions about transfer of the debt when the “original” note is supposedly delivered (as though transfer of the note was title to the debt), the only thing that actually transfers the debt under law is payment of money with intent to purchase and sell the debt and the mortgage.

Where’s the money?

In virtually all cases the money is absent, which leads directly to the point of the law to begin with — foreclosure should only be granted in circumstances where the proceeds of foreclosure will go to the party claiming that equitable remedy. Here is the plain truth. Those proceeds are not going to anyone who has value/consideration in the deal.

The investment bank’s legal strategy of claiming that it once paid consideration is defeated entirely by its sale of the “risk of loss” (i.e., the debt) several times over in the shadow banking market.

Dubious? Check the proposed and actual regulations concerning the retention of a share of the risk of loss by investment banks. That is the big dispute. For loans that were created up until around 2010, there was zero retention of risk.

The meaning  of that eludes most people unfamiliar with the terminology of Wall Street. So here it is: if you have no risk you own no debt.

My sources say that is still true and the regulators are powerless to stop it because of the right to enter into contracts that are disguised sales of the risk of loss, which is to say disguised sales of the debt by the one party who is always the one controlling events on the ground in foreclosures — the investment bank.

Do you need to prove all that? Nope. Just demand proof of consideration. And don’t stop demanding it no matter what the opposing lawyer says and even regardless of what the judge says. In the end, you’ll be right. Every time a homeowner wins in foreclosure the investors are actually protected. It’s the sale of the property and/or entry of the foreclosure judgment that cuts investors off from their investment.

UCC Hierarchy of Rights to Enforce Note and Mortgage

HAPPY NEW YEAR to readers who celebrate Rosh Hashanah! To all others, have a HAPPY DAY. This is a prescheduled article.

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I have assembled a partial list of various possible claimants on the note and various possible claimants on the mortgage. Which one of these scenarios fits with your case? Once you review them you can see why most law students fall asleep when taking a class on bills and notes. Some of these students became practicing attorneys. Some even became judges. All of them think they know, through common sense, who can enforce a note and under what circumstances you can enforce a mortgage.

But common sense does not get you all the way home. It works, once you understand the premises behind the laws that set forth the rights of parties seeking to enforce a note or the parties seeking to enforce a mortgage. The only place to start is (1) knowing the fact pattern alleged as to the note (2) knowing the fact pattern alleged as to the mortgage and (2) looking at the laws of the state in which the foreclosure is pending to see exactly how that state adopted the Uniform Commercial Code as the law of that state.

I don’t pretend that I have covered every base. And it is wise to consider the requirements of law, as applied to the note, and the requirements of equity as applied to the mortgage.

In general, the UCC as adopted by all 50 states makes it fairly easy to enforce a note if you have possession (Article 3).

And in general, the UCC as adopted by all 50 states, increases the hurdles if you wish to enforce a mortgage through foreclosure. (Article 9).

The big one on mortgages is that the foreclosing party must have paid value for the mortgage which means the foreclosing party must have purchased the debt. But that is not the case with notes — except in the case of someone claiming to be a holder of the note in due course. A holder in due course does not step into the lender’s shoes — but all other claimants listed below do step into the lender’s shoes.

The other major issue is that foreclosing on a mortgage invokes the equitable powers of the court whereas suing on the note is simply an action at law. In equity the court takes into consideration whether the outcome of foreclosure is correct in the circumstances. In suits on notes the court disregards such concerns.

Knowing the differences means either winning or losing.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

I provide advice and consent to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.

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Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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UCC Hierarchy 18-step Program – Notes and Mortgages

The following is a list of attributes wherein a party can seek to enforce the note and mortgage if they plead and prove their status:

  1. Payee with possession of original note and mortgage.
  2. Payee with lost or destroyed original note but has original mortgage.
  3. Payee with lost or destroyed original note and lost or destroyed original mortgage.
  4. Holder in Due Course with original note endorsed by payee and original mortgage and assignment of mortgage by mortgagee.
  5. Holder in due course with lost or destroyed note but has original mortgage.
  6. Holder in due course with lost or destroyed original note and lost or destroyed original mortgage.
  7. Holder with rights to enforce with possession of original note and original mortgage.
  8. Holder with rights to enforce with lost or destroyed original note but has original mortgage.
  9. Holder with rights to enforce with lost or destroyed original note but does not have original mortgage.
  10. Possessor with rights to enforce original note and original mortgage
  11. Former Possessor with rights to enforce lost or destroyed note and original mortgage
  12. Former Possessor with rights to enforce lost or destroyed note but does not have original mortgage.
  13. Non-possessor with rights to enforce original note and original mortgage (3rd party agency)
  14. Non-possessor with rights to enforce lost or destroyed note (3rd party agency) and rights to enforce original mortgage
  15. Non-Possessor with rights to enforce lost or destroyed note (3rd party agency) but does not have the original mortgage.
  16. Assignee of purchased original mortgage with possession of original mortgage but no rights to enforce note.
  17. Assignee of purchased original mortgage without possession of original mortgage and no rights to enforce note.
  18. Purchaser of debt but lacking assignment of mortgage, endorsement on the note, and now has learned that the loan was purchased in the name of a third party and lacking privity with said third party. [This category is not directly addressed in the UCC. It is new, in the world of claims of securitization]

Facts matter. It is only by careful examination of the fact pattern and comparing the facts with the attributes listed in the UCC that you can determine the strategy for a successful foreclosure defense strategy. For example if the XYZ Trust is named as the foreclosing party and 123 Servicing is holding the original note and perhaps even the original mortgage, who has the right to foreclose and under what lawful scenario — and why?

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TONIGHT! How to distinguish between legal presumptions of facts and the facts themselves

A client of our internet services store asked a simple question. He had asked the opposing side if they were a holder in due course. What he received was evasive and misleading and essentially never answered the question. Now what? Below is my answer to his question and what we will be discussing tonight on the The Neil Garfield Show

How the banks confuse judges, foreclosure defense lawyers and homeowners by wrongfully inoking legal presumptions.

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You have already achieved the intermediate goal. At this point you can argue that you asked for the identity of the holder in due course and they were unable or unwilling to provide the information. The confusion emanates from the fact that a holder can sue on the note if it has the right to enforce the note, which right must come from the creditor.
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But the apparent rebuttable legal presumptions run against you. In every case the success of the foreclosure is entirely dependent upon the success of the foreclosure mill attorneys in invoking legal presumptions of fact because the actual facts differ from what is presumed by the Judge.
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But the one legal presumption that would wipe out virtually all borrower defenses is NEVER invoked — the status of holder in due course. Because that would mean proving that a purchase of the debt, note and mortgage occurred in which the foreclosing party is or was the purchaser in good faith and without knowledge of the borrower’s defenses. Instead the crafty lawyers get judges to presume that the foreclosing party should be treated as a holder in due course, thereby evading their true burden of proof.
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It’s no mystery why they don’t use the holder in due course allegation. But the absence of such an allegation simply and logically leads to a conclusion. One or more of the elements is missing. Which part? Is it the purchase, the good faith or knowledge?

Terms of Art: Assignment or Endorsement?

Lawyers, judges and homeowners are using different terms interchangeably thus muddying up the argument or ruling. An assignment refers to a mortgage whereas an   endorsement (“indorsement” in legalese) refers to a note. The rules regarding enforcement of a mortgage are different than the enforcement of a note.

Let us help you plan your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORMWITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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I want to point out the difference between assignment and endorsement. Because judges often defer to bank lawyers to explain the law, there is some confusion there. Often the point is that there was no valid purported assignment of the mortgage and there was no valid endorsement of the note. The argument has great significance particularly in view of the use of sham conduints at the initial “closing,” where the disclosed “ledner” is a misrepresentation, thus preventing the doctrine of merger in which the debt is merged with the note.
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By law, notes are not assigned. They are endorsed if a transfer occurs. Like a check the endorsement must be on the face of the instrument (like the back of the check), or if there is no room because of prior endorsements then an allonge must be permanently affixed to the note containing the endorsement. A separate paper is not an allonge, by definition.
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Keep in mind that the note is not the debt and the debt is not the note. The note can be (a) evidence of the debt or (b) merged with the debt (to prevent double liability only if the payee on the note is the same as the lender. The only exception to this is if the payee was acting as a disclosed agent for the lender. The debt exists regardless of whether there is paperwork. The note might exist but it might be invalid depending upon whether it memorializes a real transaction between the parties on the note.
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In practice in the typical “closing” the borrower signs the note and mortgage before he receives the alleged loan. Neither one should be released, much less recorded, by the closing agent unless and until the borrower receives the funds or money is actually paid on the borrower’s behalf by the Payee on the note. When it comes to purported transfer of these residential “loans,” low level employees are not given powers over tens of millions of dollars worth of loans in banking custom and practice.
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The biggest point I wish to make here is that the assignor and assignee of a mortgage must exist legally and actually. Similarly the endorser and endorsee of a note must exist. An apparently valid assignment or endorsement to a party who did not purchase the debt can result in two things: (a) the assignment of mortgage is not valid because it failed to transfer the debt and/or (b) the failure of the assignment to transfer the debt may be fairly construed as failing to place the subject loan in trust. Without the trust owning the debt (as evidenced by a real transaction in which the debt was purchased from a party who owned the debt), the trust does not exist as to the subject loan nor does it exist at all if that was the practice with respect to all alleged loans for which there was a transfer on paper that did not memorialize real life events.
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Three endorsements:
Dated special endorsement to a particular party. This will be treated a presumptively valid. But the presumption can be rebutted — if the endorser (“indorser” in legalese) did not own the note or otherwise have the right to act as agent for a party who did own the note. This is the point of our TERA — to expose the fact that the paper is self generated and self serving and fabricated by revealing the one simple fact that the party who executed the endorsement was an actual or fictitious individual who was probably a robo-signor on behalf of an entity that did not own the note nor have the power to assign.
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Undated special endorsement to a particular party. If it is undated, it is probably fabricated because custom and practice in the industry does not treat mortgage loans the same as they treat checks. When dealing with high ticket items a special endorsement that is dated would (a) ordinarily accompany an assignment of mortgage (often abandoned by the foreclosing party) and (b) MUST be accompanied by acquisition for value — i.e., purchase of the debt. Ordinarily there would also be correspondence and written agreements concerning the sale of the note and mortgage. Those are issues for discovery.
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Dated or undated blank endorsement — bearer paper. As stated above, big ticket items usually are not generally transferred by blank endorsements, assuming the paper is actually “negotiable.” Hence if it is bearer paper (no person identified as the endorsee) this is likely a fabricated, backdated document, if it is dated, or just a blanket self serving document that consists of a misrepresentation to the court. Note that most provisions in a PSA (Pooling and Servicing Agreement, also referred to as the “trust instrument”) state specifically that (a) the “trust” is organized to be a REMIC vehicle which means there is a 90 day window in which they can acquire loans (the cutoff period) and (b) the assignments must be in recordable form and (c) the endorsements must be valid. Otherwise, the apparent transfer cannot be accepted by the Trust under REMIC rules (see Internal Revenue Code 26 U.S. Code § 860D – REMIC defined), under the powers of the Trustee (virtually nonexistent in most REMIC Trusts), and under New York Law which almost always invoked as the  State in which the Trust is organized. New York Law states that any act that contravenes the powers expressed in the Trust instrument are void, not voidable. So a transfer after the cutoff date is void, as it would ruin the REMIC status under the IRC and violate the specific provisions of the Trust designed to invoke the REMIC rules.

Is a Neg-AM Note a Negotiable Instrument?

The UCC is not ambivalent about protecting both the maker of a negotiable instrument and the party seeking to enforce it. The maker does not assume the risk of double liability except for instances where the note is purchased for value in good faith and without knowledge of the borrower’s defenses. In all other circumstances the object is to prevent the maker from being exposed to double liability.

The fact that a note is not a negotiable instrument does not mean that it cannot be enforced, or that it is void or whatever else people are saying on the internet. If the note does not meet the definition of a negotiable instrument then it is simply not entitled to the legal presumptions that are given to a negotiable instrument to ease its trading and enforcement. Any other approach would be equivalent to propelling parties who seek to enforce a note being vaulted into the elevated class of holder in due course.

In other words, if the note is not a negotiable instrument then enforcement can only be achieved by pleading and proving the facts needed to enforce without the benefit of legal presumptions that each State adopted as a a statute when the Uniform Commercial Code was made law.

In cases where a negative amortization is involved, the courts have blurred the issues. Such a loan has many extrinsic factors that should disqualify the note from being treated as a negotiable instrument.

Let us help you plan your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.

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Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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We must always remember that the purpose of the UCC is not to provide a vehicle for tricking anyone. The purpose is to allow for free flow of commerce and enabling the passing of paper instruments is essential to that function. Like many statutes creating legal presumptions, perhaps all of them, the point is simply to take what is almost always true in fact and simply create a legal presumption that the matter asserted is in fact true, until proven otherwise. Lest the use of such presumptions tip the due process scales, the definitions and rules regarding the use of legal presumptions must be strictly construed.

The issue of negative amortization is highly relevant on many levels including the one frequently mentioned — negotiability. The courts are probably confusing the ability to negotiate an instrument with BEING a negotiable instrument. The words of art are important. A marketable instrument is not the same as a negotiable one. The fact that someone is willing to buy a note does not make the note negotiable. A note featuring negative amortization should not be considered a negotiable instrument even though it might be marketable.

One of the problems with consumer loans is that they are subject to TILA Rescission. That means that they are potentially enforceable if no notice of rescission has been mailed. Certainty is gone from that scenario. You cannot determine whether the note is an asset or a liability. It is practically the opposite of a negotiable instrument since it might well be worthless, and the even the purchaser of the note might suffer a total loss unless the purchaser had paid value for the debt in a transaction in which the seller owned the debt.

Most Neg-AM loans allow the borrower (or can’t stop the borrower) from switching from one payment plan to another, e.g. paying full amortization none of which changes are reflected on the face of the note. This creates relevant events that occur off the face of the note, making the actual amount of principal due (and interest on the changing principal) at any time subject to calculation, not just from the face of the note but from the face of extrinsic or parole records.

An interesting characteristic of most Neg-AM notes is that they contain provisions that require conversion or reset when the accrued interest is added to principal in such amount as to require the reset — i.e., usually at 115% of the original loan amount. But none of these features necessarily extrinsically change the terms on the face of the note. Modifications do that, but not Neg-AM loans. It is in the calculation of the principal and interest thereon that one must go to “business records.”

If Neg-AM notes can be negotiable instruments then buyers of the notes are expected to rely upon the legal presumptions that the note is what it appears to be. Such buyers, much like the borrowers, are in for a surprise when the loan resets, based upon an extrinsic calculation of when 115% of principal has been exceeded, and if exceeded, by how much. Certainty is gone. If certainty is gone then facts are necessary. No legal presumptions should apply.

There are very simple elements required in order to gain the legal presumptions that would apply to a negotiable instrument.

The main one is that the instrument must be payable in an amount that can be computed based upon the information on the face of the note. On the face of a Neg-AM note, there are terms and conditions that can easily be used to compute the total indebtedness, assuming that extrinsic factors have not come into play. All notes change every day in terms of the amount of interest due and, in the case of Neg-AM notes, the amount of principal, which goes up automatically by underpayment of interest.

It is generally agreed that a note on which there is a known or declared default is NOT a negotiable instrument for purposes of Article 3. You can’t know with certainty the amount due because you don’t know when the borrower defaulted. A DOT or Mortgage is not a negotiable instrument, and to enforce a DOT/Mortgage you must have paid value for the mortgage (Article 9), regardless of whether the note that is secured is a negotiable instrument or not. These are protections to be sure, but they are also insurance that the legal presumptions lead correctly to the truth of the matter.

A second element is that the payment must be due as of a date certain. A mortgage/DOT can’t be a negotiable instrument and cannot invoke the presumptions that a “holder” of a note can invoke, based upon possession and endorsement.

With Neg-AM notes the problem comes into high relief — when the “lender” knows that the reset will be in excess of the entire household income thus creating a virtual guarantee that the alleged loan contract will terminate in 3 years rather than 30 years. Hence the supposed indorsee of such a note is buying into a foreclosure situation, if he/she/it has done due diligence. If not, then here is a second situation where the note might be worthless and the buyer loses, unless the buyer bought the debt from a seller who owned the debt.

A third element is that the original note must either be made out to bearer or to a defined party. But it is possible for a note made payable to a non-lender or a fictitious party might be construed as bearer paper — if there was an actual transaction in which someone gave the borrower money, even if the identity of the funding source was concealed. The obviously violations of disclosure requirements are separate matters.

In all the elements the point is that in order for an instrument to be called “Negotiable” under Article 3 you must not need to inquire into parol or extrinsic evidence. All presumptions arise when the note is facially valid and there are no circumstances that the indorsee knows about that would undermine enforcement. With a DOT/mortgage, by definition on the face of the instrument, you must go to extrinsic evidence as to the presumed default on another instrument (the note) and you can only enforce upon proof of value paid for the mortgage/DOT.

A note might be facially valid and enforceable, which means that a party who pleads and proves they are entitled to enforce is entitled to a money judgment but not foreclosure unless they plead and prove they are a holder in due course, which by definition means that value was paid and hence the mortgage or DOT is also enforceable by them.

Other than an HDC, all the other categories of potential enforcement by a party should enable them only to enforce the note. Of course if the owner of the debt shows up, there would be no problems with enforcement of either the note or the mortgage because the owner of the debt is entitled to enforce the obligation to pay the debt.

Under securitization schemes in practice it is possible to own the mortgage but not be able to enforce it without having paid value. Courts that decide cases based upon the “mortgage follows the note” are missing the point of LAW that resides in their State’s adoption of the UCC, to wit: under no circumstances may a party force the sale of homestead property without being the owner of the debt. That is not a proposal. It is the law in all 50 states.

While the encumbrance may not be enforced, this does not invalidate the mortgage or deed of trust. When it comes time to sell or refi the property you will learn that you still must deal with the holder of the mortgage. An action in equity might be decided in your favor or you might have to pay a sum of money to the owner of the mortgage encumbrance even though they paid nothing for it.

People forget that there are three items here, not two. In addition to the note and mortgage, which serve only as evidence as the debt, there is the actual debt. Back before claims of securitization, all three were used interchangeably. Now it is different. If the funding source is not the payee on the note, then the doctrine of merger does not apply, to wit: the note becomes separate from the debt that arises to the person or party who advanced the money. If the Payee is in privity with the funding source then merger does apply. But most Payees were not in privity with the source of funds. The banks boast of how they created remote vehicles and relationships.

The very fact that there are terms allowing the payment to be less than PI for the month suggests that the borrower might very well have made some payments more than the minimum due. In other words, inquiry must be made to determine the debt balance with certainty. There is certainly an argument here that reference is to the payment history rather than just the note. If that is true then the face of the note is inadequate to determine the “certain sum” currently due. This can become an issue in any installment note.

A finding that all these questions are irrelevant would have dire consequences in the marketplace where certain types of predefined paper can be received in the free flow of commerce without uncertainty as to whether the paper can be enforced. This is a two edged sword. Opening the door beyond the strict definitions of the UCC is opening the door for more mischief involving fabrication of documents, forgery and robosigning.

The UCC is not ambivalent about protecting both the maker of a negotiable instrument and the party seeking to enforce it. The maker does not assume the risk of double liability except for instances where the note is purchased for value in good faith and without knowledge of the borrower’s defenses. And the purchaser should not bear the risk of a total loss immediately upon paying for the note — unless the purchaser knew there were problems and was willing to take his chances.

The final point I would make is that the question should be asked: Given the fact that so-called REMIC Trusts are supposedly buying the loan pools aggregated by the likes of Countrywide and its progeny, why do lawyers firmly announce that their clients are “holders” and not “holders in due course”.

The latter designation (HDC) would allow the possessor of the note to enforce both note and mortgage despite lending violations when the alleged loan was “originated.” Being an HDC might also avoid defenses that current abound — that there are breaks in the chain of title. If the would-be enforcers simply included the allegation (and proof) that they were the owners of the debt or a holder in due course it would be game over for borrowers. That they don’t assert that position is a tacit admission that the reason why they don’t is that they can’t.

Thus we continue to be mired in litigation with phantoms, ghosts,  smoke and mirrors.

Fla 2d DCA: HELOC Instrument Not Self-Authenticating Article 3 Note

Just because an instrument is not self-authenticating doesn’t mean it can’t be authenticated. Here the Plaintiff could not authenticate the note without the legal presumption of self-authentication and all the legal presumptions that follow.  And that is the point here. They came to court without evidence and in this case the court turned them away.

Florida courts, along with courts around the country, are gradually inching their way to the application of existing law, thus eroding the dominant premise that if the Plaintiff is a bank, they should win, regardless of law.

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see HELOC Not Negotiable Instrument and Therefore Not Self Authenticating

This decision is neither novel nor complicated. A note can be admitted into evidence as self-authenticating without extrinsic evidence (parol evidence) IF it is a negotiable instrument under the State adoption of the UCC as State Law.

The inquiry as to whether a promissory note is a negotiable instrument is simple:

  • Does the body of the note claim to memorialize an unconditional promise
  • to pay a fixed amount
  • (editor’s addition) to an identified Payee? [This part is assumed since the status of the “lender” depends upon how and why it came into possession of the note.]

A note memorializing a line of credit is. by definition, not a fixed amount. Case closed, the “lender” lost and it was affirmed in this decision. There was no other choice.

The only reason why this became an issue was because counsel for the homeowner timely raised a clearly worded objection to the note as not being a negotiable instrument and therefore not being self-authenticating. And without the note, the mortgage, which is not a negotiable instrument, is meaningless anyway.

This left the foreclosing party with the requirement that they prove their case with real evidence and not be allowed to avoid that burden of proof using legal presumptions arising from the facial validity of  a negotiable instrument.

The typical response from the foreclosing party essentially boils down to this: “Come on Judge we all know the note was signed, we all know the payments stopped, we all know that the loan is in default. Why should we clog up the court system using legal technicalities.”

What is important about this case is the court’s position on that “argument” (to ignore the law and just get on with it). “This distinction is not esoteric legalese. Florida law is clear that a “negotiable instrument” is “an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order.”§ 673.1041(1), Fla. Stat. (2012) (emphasis added).”

So THAT means that if the trial court is acting properly it will apply the laws of the state and THAT requires the court to rule based upon the UCC and cases involving
negotiable instruments.

But none of that invalidated the note or mortgage, nor should it. THAT is where it gets interesting. By denying the note as a self authenticating instrument the court was merely requiring the foreclosing party to proffer actual evidence regarding the terms of the note, including the manner in which it was acquired and how the foreclosing party is an injured party — a presumption that is no longer present when the note is denied admission into evidence as a self authenticating negotiable instrument.

The foreclosing party was unable to produce any testimony or exhibits demonstrating the prima facie case. Why? Because they are not and never were a creditor nor are they agent or representative of the actual party to whom the subject underlying DEBT was owed.

 

Florida law requires the authentication of a document prior to its admission into evidence. See § 90.901, Fla. Stat. (2012) (“Authentication or identification of evidence is required as a condition precedent to its admissibility.”); Mills v. Baker, 664 So. 2d 1054, 1057 (Fla. 2d DCA 1995); see, e.g., DiSalvo v. SunTrust Mortg., Inc., 115 So. 3d 438, 439-40 (Fla. 2d DCA 2013) (holding that unauthenticated default letters from lender could not be considered in mortgage foreclosure summary judgment). Proffered evidence is authenticated when its proponent introduces sufficient evidence “to support a finding that the matter in question is what its proponent claims.” § 90.901; Coday v. State, 946 So. 2d 988, 1000 (Fla. 2006) (“While section 90.901 requires the authentication or identification of a document prior to its admission into evidence, the requirements of this section are satisfied by evidence sufficient to support a finding that the document in question is what its proponent claims.”).

There are a number of recognized exceptions to the authentication requirement. One, as relevant here, relates to commercial paper under the Uniform Commercial Code, codified in chapters 678 to 680 of the Florida Statutes. “Commercial papers and signatures thereon and documents relating to them [are self-authenticating], to the extent provided in the Uniform Commercial Code.” § 90.902(8); see, e.g., U.S. Bank Nat’l Ass’n for BAFC 2007-4 v. Roseman, 214 So. 3d 728, 733 (Fla 4th DCA 2017) (reversing the trial court’s denial of the admission of the original note in part because the note was self-authenticating); Hidden Ridge Condo. Homeowners Ass’n v. Onewest Bank, N.A., 183 So. 3d 1266, 1269 n.3 (Fla. 5th DCA 2016) (stating that because the endorsed note was self-authenticating as a commercial paper, extrinsic evidence of authenticity was not required as a condition precedent…

We cannot bicker with the proposition that “for over a century . . . the Florida Supreme Court has held [promissory notes secured by a mortgage] are negotiable instruments. And every District Court of Appeal in Florida has affirmed this principle.” HSBC Bank USA, Nat’l Ass’n v. Buset, 43 Fla. L. Weekly D305, 306 (Fla. 3d DCA Feb. 7, 2018) (citation omitted). That is as far as we can travel with Third Federal.

The HELOC note is not a self-authenticating negotiable instrument. By its own terms, the note established a “credit limit” of up to $40,000 from which the Koulouvarises could “request an advance . . . at any time.” Further, the note provided that “[a]ll advances and other obligations . . . will reduce your available credit.” The HELOC note was not an unconditional promise to pay a fixed amount of money. Rather, it established “[t]he maximum amount of borrowing power extended to a borrower by a given lender, to be drawn upon by the borrower as needed.” See Line of Credit, Black’s Law Dictionary, 949 (8th ed. 1999).

This distinction is not esoteric legalese. Florida law is clear that a “negotiable instrument” is “an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order.”§ 673.1041(1), Fla. Stat. (2012) (emphasis added).

FREE HOUSE?

Judges may be biased in favor of “national security” (i.e., protecting the banks), but they have a surprisingly low threshold of tolerance when they are confronted by the bank’s argument that they don’t have to accept the money and that it is the bank’s option as to whether to accept the money or proceed with the foreclosure. To my knowledge that argument has lost 100% of the time. And THAT means the homeowner was able to get the proverbial free house or otherwise settle under seal of confidentiality (which might include the “free house.”)

all too often the Golden Rule of Mortgage Foreclosure is simply ignored and the foreclosure goes ahead as if the rule were not the statutory law of every jurisdiction in the United States — Douglas Whaley

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.
—————-

The article below demonstrates (with edits from me) just how “hairy” these issues get. Things that laymen presume to be axiomatic don’t even exist in the legal world. I just sent my son a mug that says “Don’t confuse your Google search with my medical degree.” The same could be said for law. You might have discovered something that appears right to you but only a lawyer with actual experience can tell you if it will fly — remember that the bumblebee, according to the known laws of aerodynamics — is incapable of flying. Yet it flies seemingly unconcerned about our laws of aerodynamics. Similar to the lack of concern judges have, as if they were bumblebees, for the laws of contract and negotiation of instruments.

“Be careful what you wish for.” We must not give the banks a condition that they can satisfy with a fake. If the statute says that they must come up with the original promissory note, or the encumbrance is automatically lifted by a Clerk’s signature, then that means that (a) the debt still exists (b) the note could still be enforced with a lost note affidavit (which lies about the origination of the “loan” and subsequent nonexistent transactions), and (c) the debt can still be enforced.

A suit on the note or the debt that is successful will yield a Final Judgment, which in turn can be recorded in the county records. A further action for execution against the property owner will cause execution to issue — namely the judgment becomes a judgment lien that can now be foreclosed with no note whatsoever. The elements of a judgment lien foreclosure are basically (I have the Judgment, the statute says I can record it and foreclose on it).

There are homestead exemptions in many states. Whereas Florida provides a total homestead exemption except in bankruptcy court (up to $125,000 value), Georgia provides very little protection to the property owner which means that Georgia property owners are vulnerable to losing their homes if they don’t pay a debt that has been reduced to a Final Judgment and filed as a Judgment lien.

So the upshot is this: if you ask for the original note they might simply change their routines so that they produce the fabricated original earlier rather than later. Proving that it is a fake is not easy to do, but it can be done. The problem is that even if you prove the note is fabricated, the debt still remains. And in the current climate that means that any “credible” entity can step into the void created by the Wall Street banks and claim ownership of the debt for the purpose of the lawsuit.

What you want to do and in my opinion what you must do is focus on the identity of the creditor in addition to the the demand for the “original” note. When you couple that with tender of the amount demanded (under any one of the scenarios we use in our AMGAR programs) on the industry practice of demanding the identity of the creditor before anyone receives payment, then you really have something going.

But the risk element for tender MUST be present or it will likely be brushed aside who sees it as merely a gimmick — using the state law regarding tender as an offensive tool to get rid of the encumbrance and thus prevent foreclosure.

*

So the commitment is to pay off or refinance the alleged debt conforming to the industry standard of giving estoppel information — with the name of the creditor, where the payment should be sent, and the amount demanded by the creditor, and per diem, escrow and other information.

*

The inability and unwillingness of anyone to name a creditor has been credited with eliminating both the foreclosure and the mortgages in several dozen cases.

*

Judges may be biased in favor of “national security” (i.e., protecting the banks), but they have a surprisingly low threshold of tolerance when they are confronted by the bank’s argument that they don’t have to accept the money and that it is the banks option as to whether to accept the money or proceed with the foreclosure. To my knowledge that argument has lost 100% of the time. And THAT means the homeowner was able to get the proverbial free house or otherwise settle under seal of confidentiality (which might include the “free house.”)

Here is the UCC article by Douglas Whaley. [Words in brackets are from the Livinglies editor and not from Mr. Whaley]

the Golden Rule of Mortgage Foreclosure: the Uniform Commercial Code forbids foreclosure of the mortgage unless the creditor possesses the properly-negotiated original promissory note. If this can’t be done the foreclosure must
stop.
 *
all too often the Golden Rule of Mortgage Foreclosure is simply ignored and the foreclosure goes ahead as if the rule were not the statutory law of every jurisdiction in the United States.1
 *
Why is that? The answer is almost too sad to explain. The problem is that the Uniform Commercial Code is generally unpopular in general, and particularly when it comes to the law of negotiable instruments (checks and promissory notes) contained in Article Three of the Code. Most lawyers were not trained in this law when in law school (The course on the subject, whether called “Commercial Paper” or “Payment Law,” is frequently dubbed a “real snoozer” and skipped in favor or more exotic subjects), and so the only exposure to the topic attorneys have occurs, if at all, in bar prep studies (where coverage is spotty at best). Thus many foreclosures occur without it occurring to anyone that the UCC has any bearing on the issue.
 *
If the defendant’s attorney announces that the Uniform Commercial Code requires the production of the original promissory note, the judge may react by saying something like, “You mean to tell me that some technicality of negotiable instruments law lets someone who’s failed to pay the mortgage get away with it if the promissory note can’t be found, and that I have to slow down my overly crowded docket in the hundreds of foreclosure cases I’ve got pending to hear about this nonsense?” It’s a wonder the judge doesn’t add, “If you say one more word about Article Three of the UCC you’ll be in contempt of court!”
 *
The debt is created by the signing of a promissory note (which is governed by Article Three of the Uniform Commercial Code); the home owner will be the maker/issuer of the promissory note and the lending institution will be payee on the note. There is a common law maxim that “security follows the debt.” This means that it is presumed that whoever is the current holder of the promissory note (the “debt”) is entitled to enforce the mortgage lien (the “security”). The mortgage is reified as a mortgage deed which the lender should file in the local real property records so that the mortgage properly binds the property not only against the mortgagor but also the rest of the world (this process is called “perfection” of the lien).1
 *
{EDITOR’S NOTE: Technically the author is correct when he states that a debt is created by the signing of a promissory note governed by Article 3 of the Uniform Commercial Code. But it is also true that the note is merely a written instrument that memorializes the “loan contract” and which in and unto itself constitutes evidence of the debt.
 *
This means that some sort of transaction with a monetary value to both sides must have taken place between the two parties on the note — the maker (borrower) and the payee (the lender). If no such transaction has in fact occurred then, ordinarily the note is worthless and unenforceable. But in the event that a third party purchases the note for value in good faith and without knowledge of the borrowers defenses, the note essentially and irrevocably becomes the debt and not merely an evidence of the debt. In that case the note is treated as the debt itself for all practical purposes.
 *
Such a purchaser would be entitled to the exalted status of holder in due course. Yet if the borrower raises defenses that equate to an assertion that the note should be treated as void because there was no debt (the maker didn’t sign it or the maker signed it under false pretenses — i.e. fraud in the execution) then in most cases the HDC status won’t prevail over the real facts of the case..The corollary is that if there was no debt there must have been no loan.
 *
This would be fraud in the inducement which moves the case into a gray area where public policy is to protect the innocent third party buyer of the note. All other defenses raised by borrowers are affirmative defenses (violations of lending statutes, for example) raising additional issues that were not presented nor implied in the complaint  enforce the note or the nonjudicial procedure in which the note is being enforced by nonjudicial foreclosure.}
 *
The bankers all knew the importance of the mortgage, and supposedly kept records as to the identity of the entities to whom the mortgage was assigned. But they were damn careless about the promissory notes, some of which were properly transferred whenever the mortgage was, some of which were kept at the originating bank, some of which were deliberately destroyed (a really stupid thing to do), and some of which disappeared into the black hole of the financial collapse, never to be seen again.
 *
Filing fees in real property record offices average $35 every time a new document is filed. The solution was the creation of a straw-man holding company called Mortgage Electronic Registration Systems [MERS]. MERS makes no loans, collects no payments, though it does sometimes foreclose on properties (through local counsel). Instead it is simply a record-keeper that allows its name to be used as the assignee of the mortgage deed from the original lender, so that MERS holds the lien interest on the real property. While MERS has legal title to the property [EDITOR’S NOTE: this assertion of title is now back in a grey area as MERS does not fulfill the definition of a beneficiary under a deed of trust nor a mortgagor under a mortgage deed.], it does not pretend to have an equitable interest. At its headquarters in Reston, Va., MERS (where it has only 50 full time employees, but deputizes thousands of temporary local agents whenever needed) supposedly keeps track of who is the true current assignee of the mortgage as the securitization process moves the ownership from one entity to another.3
 *
Meanwhile the homeowner, who has never heard of MERS, is making payment to the [self proclaimed] mortgage servicer (who forwards them to whomever MERS says is the current assignee of the mortgage) [or as is more likely, forwards the proceeds of payments to the underwriter who sold bogus mortgage bonds, on which every few months another bank takes the hit on a multibillion dollar fine]..

Article 3 of the Uniform Commercial Code could not be clearer when it comes to the issue of mortgage note foreclosure. When someone signs a promissory note as its maker (“issuer”), he/she automatically incurs the obligation in UCC §3-412 that the instrument will be paid to a “person entitled to enforce” the note.5″Person entitled to enforce”—hereinafter abbreviated to “PETE”—is in turn defined in §3-301:

“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) . . . .

[Editors’ note: the caveat here is that while the execution of a note creates a liability, it does not create a liability for a DEBT. The note creates a statutory liability while the debt creates a liability to repay a loan. Until the modern era of fake securitization, the two were the same and under the merger doctrine the liability for the debt was merged into the execution of the note because the note was payable to the party who loaned the money.

And under the merger doctrine, the debt is NOT merged into the note if the parties are different — i.e., ABC makes the loan but DEF gets the paperwork. Now you have two (2) liabilities — one for the debt that arose when the “borrower” received payment or received the benefits of payments made on his/her behalf and one for the note which is payable to an entirely different party. Thus far, the banks have succeeded in making the circular argument that since they are withholding the information, there is not way for the “borrower” to allege the identity of the creditor and thus no way for the “borrower” to claim that there are two liabilities.]

Three primary entities are involved in this definition that have to do with missing promissory notes: (1) a “holder” of the note, (3) a “non-holder in possession who has the rights of a holder, and (3) someone who recreates a lost note under §3-309.6

A. “Holder”

Essentially a “holder” is someone who possesses a negotiable instrument payable to his/her order or properly negotiated to the later taker by a proper chain of indorsements. This result is reached by the definition of “holder” in §1-201(b)(21):

(21) “Holder” means:

(A) the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession . . . .

and by §3-203:

(a) “Negotiation” means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.

(b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.

The rules of negotiation follow next.

B. “Negotiation”

A proper negotiation of the note creates “holder” status in the transferee, and makes the transferee a PETE. The two terms complement each other: a “holder” takes through a valid “negotiation,” and a valid “negotiation” leads to “holder” status. How is this done? There are two ways: ablankindorsement or aspecialindorsement by the original payee of the note.

 *
With a blank indorsement (one that doesn’t name a new payee) the payee simply signs its name on the back of the instrument. If an instrument has been thus indorsed by the payee, anyone (and I mean anyone) acquiring the note thereafter is a PETE, and all the arguments explored below will not carry the day. Once a blank indorsement has been placed on the note by the payee, all later parties in possession of the note qualify as “holders,” and therefore are PETEs.7
 *
Only if there is a valid chain of such indorsements has a negotiation taken place, thus creating “holder” status in the current possessor of the note and making that person a PETE. With the exception mentioned next, the indorsements have to be written on the instrument itself (traditionally on the back).
 *
the allonge must be “affixed to the instrument” per §3-204(a)’s last sentence. It is not enough that there is a separate piece of paper which documents the unless that piece of paper is “affixed” to the note.10What does “affixed” mean? The common law required gluing. Would a paper clip do the trick? A staple?11
 *
a contractual agreement by which the payee on the note transfers an interest in the note, but never signs it, cannot qualify as an allonge (it is not affixed to the note), and no proper negotiation of the note has occurred. If the indorsement by the original mortgagee/payee on the note is not written on the note itself, there must be an allonge or the note has not been properly negotiated, and the current holder of that note is not a PETE (since there is no proper negotiation chain). THE LACK OF SIGNATURE BECOMES A SERIOUS ISSUE IN THE CURRENT ERA BECAUSE OF WHAT HAS BEEN DUBBED “ROBO-SIGNING” THE EXACT DEFINITION OF WHICH HAS NOT YET BEEN DETERMINED BUT IT REFERS TO THE STAMPED OR EXECUTED SIGNATURE BY ONE POSSESSES NO KNOWLEDGE OR INTEREST IN THE CONTENTS OF THE INSTRUMENT AND ESPECIALLY WHEN THE PERSON HAS NO EMPLOYMENT OR OTHER LEGALR RELATIONSHIP WITHT EH ENTITY ON WHOSE BEHALF THE INDORSEMENT WAS EXECUTED. As stated in one case the base of robo-signing is that it is a forgery and therefore amounts to no signature at all which means the note has not really be negotiated, all appearances to the contrary. ]
 *
The Code never requires the person making an indorsement to have an ownership interest in the note13 (though of course the payee normally does have such an interest), but simply that he/she is the named payee, and the Code clearly allows for correction of a missing indorsement. [EDITOR’S NOTE: Here is where the enforcement tot he note and the ability to enforce the mortgage diverge, See Article 9. The possessor of a note that is properly signed by a party to whom the note was payable or indorsed commits no offense by executing an indorsemtn in blank (bearer) or to another named indorse. The author is correct when he states that ownership of the note is not required to enforce the note; but the implication that the right to foreclose a mortgage works the same way is just plain wrong, to wit: foreclosure is ALL about ownership of the mortgage and Article 9 provisions specifically state the ownership means that the purported holder has paid value for it]. 
 *
  1. 13   Thieves can qualify as a “holder” of a negotiable instrument and thereafter validly negotiate same to another; see Official Comment 1 to 3-201, giving an example involving a thief.
  2. 1.  Subsections (a) and (b) are based in part on subsection (1) of the former section 3-202.  A person can become holder of an instrument when the instrument is issued to that person, or the status of holder can arise as the result of an event that occurs after issuance.  “Negotiation” is the term used in article 3 to describe this post-issuance event.  Normally, negotiation occurs as the result of a voluntary transfer of possession of an instrument by a holder to another person who becomes the holder as a result of the transfer. Negotiation always requires a change in possession of the instrument because nobody can be a holder without possessing the instrument, either directly or  through an agent.  But in some cases the transfer of possession is involuntary and in some cases the person transferring possession is not a holder.  In defining “negotiation” former section 3-202(1) used the word “transfer,” an undefined term, and “delivery,” defined in section 1-201(14) to mean voluntary change of possession. Instead, subsections (a) and (b) used the term “transfer of possession” and subsection (a) states that negotiation can occur by an involuntary transfer of possession.  For example, if an instrument is payable to bearer and it is stolen by Thief or is found by Finder, Thief or Finder becomes the holder of the instrument when possession is obtained.  In this case there is an involuntary transfer of possession that results in negotiation to Thief or Finder. 
  3. [EDITOR’S NOTE: The heading for UCC 3-201 indicates it relates to “negotiation” of a note, not necessarily enforcement. The thief might be able to negotiate the note but enforcement can only be by a party with rights to enforce it. While a holder is presumed to have that right, it is a rebuttable presumption. Hence either a borrower or the party from whom the note was stolen can defeat the thief in court. But if the negotiation of the note includes payment of value in good faith without knowledge of the borrower’s defenses or complicity in the theft, then the successor to the thief is a holder in due course allowing enforcement against the maker. The borrower or victim of theft is then left with actions at law against the thief.]
 

Educating the Judge

The assumption that the Judge already knows the facts and the law is what drives lawyers into defeat. The Judge is not required to know anything, and is actually prohibited from taking an active role in favor of one party or the other.

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.
—————-

I recently had the occasion to assist as consultant on a case in a non judicial state. The Judge was clearly struggling with giving the homeowner due process but still not able to connect the dots. So I proposed that a preliminary statement be submitted in answer to the demurrer that was filed.

Plaintiff concedes the obvious — that when money was received by him or on behalf of him, a liability arose (the debt). But as stated in Yvanova, that debt arose by operation of law from the receipt of funds from a particular identified source. And the debt is not owed to the world at large but only to the party who advanced the funds.

The debt exists without anything in writing. In fact, there was nothing in writing creating a loan contract between the funding source and the Plaintiff, as alleged in the complaint. Further there is a complete absence of any allegation or evidence, despite years of requesting same in formal requests and informal requests, in which any of the parties in the chain ever paid one cent for the origination or acquisition of the alleged loan that they alleged was sold successively.

Ordinarily the debt would merge into a promissory note in which Plaintiff was the maker and the payee was the aforesaid funding source. But the funding source was never mentioned in the note or mortgage, which now contains the signature of Plaintiff obtained by fraud in the execution, to wit: Plaintiff signed said documents based upon the representation that the payee on the note (and the beneficiary under the deed of trust) was the funding source.

The debt owed to the funding source was thus not merged into the note because the funding source and the payee on the note were two completely separate and distinct entities. Hence the transfer of the note was the transfer of paper that was worthless and which ceased status of negotiable instrument when the Defendants asserted a default in performance under the note that had been fraudulently obtained. Hence no entity can assert the status of “holder” or “holder in due course” inasmuch as such terms arise solely from the state adoption of statutes from the Uniform Commercial Code, Article 3, governing negotiable instruments.

JPMC was the underwriter, Master servicer and agent for trusts that appear to be legally nonexistent and in any event completely controlled by JPMC Nonetheless control over all the events related to the debt, note and mortgage lies in the hands of JPMC.

JPMC is referred to as lender in Plaintiff’s complaint, although the funding actually came from institutional investors and passed through JPMC as an intermediary conduit. JPMC initiated the transfer of funds from accounts in which commingled funds from institutional investors from multiple trusts had been deposited.

The assumption that any Trust or other special purpose vehicle ever funded the origination of a loan, or even purchased it for value is a fiction. The only valid purchase would have been from those institutional investors. There being no such purchase asserted nor in existence, the paper instruments upon which the Defendants rely are merely obfuscations of the truth. And the reason they seek foreclosure is that the forced sale of the property would be the first legally valid document in their entire chain.

If securitization actually occurred, then one of two things would have occurred:
  1. The Trust or other special purpose vehicle would have funded the origination, thus eliminating the need for endorsements and assignments. [The Trust would have been the payee on the note and the mortgagee on the mortgage]. OR
  2. A bona fide lender would have received actual money for the sale of the debt, note and mortgage. Both the lender or the purchaser would have a record of the payment.
The reason I say that securitization is virtually nonexistent and the reason why Adam Levitin calls it “Securitization fail” is that neither of those things happened in the vast majority of so-called loans. I even object to the using the word “loan” because I find it misleading. A scheme that relies on stolen money and fraudulent documentation should not be given the title “lending.” This takes nothing away from the fact that the debt exists. But in nearly all cases, the debt is unliquidated and unsecured.

Freddie Mac Selling Toxic Loans: Do they really own those loans?

The resulting case law is opening up Pandora’s box as the law of these foreclosure cases spills over into hundreds of other situations.

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.
—————-

see http://4closurefraud.org/2016/10/05/freddie-mac-sells-1-billion-of-seriously-delinquent-loans/

So I have two questions that should be sufficiently annoying to the banksters: (1) what makes Freddie think it owns the loans? and (2) if the loans are in default doesn’t that make the notes non-negotiable paper?

As to the first, my guess is that Freddie paid somebody something. What they used as currency was MBS issued by private label trusts. The MBS were worthless because they were issued by an unfunded paper trust. Freddie paid somebody using those bonds. But that somebody didn’t own the loans because the money had already been advanced by ANOTHER party (the investors) under a false deposit scheme with the investment/commercial banks.

*

So the debt was at all times owned by an unidentified and perhaps unidentifiable  group of investors/victims who to this day may not know that their money was hijacked to make toxic loans. That makes any sale or assignment to anyone void, including Freddie Mac. And whoever is getting paper executed by Freddie Mac is getting exactly what Freddie owns: NOTHING.

*

As to the second, if the loans in default are not negotiable paper, then the presumptions attendant to negotiable paper under Article 3 of the UCC do not apply. And if THAT is the case, the party in possession is not a holder, not a holder in due course and possibly not a possessor with rights to enforce. They would need to prove that they paid for the “loan” and they would need to show that there was a loan [not just from anyone. It must be an actual loan of money from the party identified as Payee on the note]. They would need to show that they not only bought the note but they also bought the debt.

As it turns out the note and the debt are owned by two different parties. The debt normally merges into the note so that when someone signs it they don’t have two liabilities. But what if the debt was owned by a third party at the time the maker signed the note? Assuming the maker did not know that a third party was involved, the maker is back in the position of two debts — the very problem that the merger rule was intended to prevent.

*

So far the courts have endeavored to deal with this tricky problem by pretending it does not exist. The resulting case law is opening up Pandora’s box as the law of these foreclosure cases spills over into hundreds of other situations.

 

ABSENCE OF CREDITOR: Breaking Down the Language Of The “Trust”

The problem with all this is that the REMIC Trust never received the proceeds of sale of the MBS and therefore could not have paid for or purchased any loans. It had no assets. And THAT is why the Trust never shows up as a Holder in Due Course (HDC).  HDC is a very strong status that changes the risk of loss on a note. Under state law (UCC) of every state alleging and proving HDC status means that the entire risk shifts to the maker of the note (the person who signed it) even if there were fraudulent or other circumstances when the note was signed.

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.
—————-

A reader pointed to the following language, asking what it meant:

The certificates represent obligations of the issuing entity only and do not represent an interest in or obligation of CWMBS, Inc., Countrywide Home Loans, Inc. or any of their affiliates.   (See left side under the 1st table –  https://www.sec.gov/Archives/edgar/data/906410/000114420407029824/v077075_424b5.htm)

If an “investor” pays money to the underwriter of the issuance of MBS from a “REMIC Trust” they are getting a hybrid security that (a) creates a liability of the REMIC Trust to them and (2) an indirect ownership of the loans acquired by the trust.

The wording presented means that only the REMIC Trust owes the investors any money and the ownership interest of the investors is only as beneficiaries of the trust with the trust assets being subject to the beneficiaries’ claim of an ownership interest in the loans. But if the Trust is and remains empty the investors own nothing and will never see a nickle except by (a) the generosity of the underwriter (who is appointed “Master Servicer” in the false REMIC Trust, (b) PONZI and Pyramid scheme payments (I.e., receipt fo their own money or the money of other “investors) or (c) settlement when the investors catch the investment bank with its hand in the cookie jar.

The wording of the paperwork in the false securitization scheme reads very innocently because the underwriting and selling institutions should not be the obligor for payback of the investor’s money nor should the investors be allocated any ownership interest in the underwriting or selling institutions.

The problem with all this is that the REMIC Trust never received the proceeds of sale of the MBS and therefore could not have paid for or purchased any loans. It had no assets. And THAT is why the Trust never shows up as a Holder in Due Course (HDC).  HDC is a very strong status that changes the risk of loss on a note. Under state law (UCC) of every state alleging and proving HDC status means that the entire risk shifts to the maker of the note (the person who signed it) even if there were fraudulent or other circumstances when the note was signed.

By contrast, the allegation and proof that a Trust was a holder before suit was filed or before notice of default and notice of sale in a deed of trust state, means that the holder must overcome the defenses of the maker. If one of the defenses is that the holder received a void assignment, then the holder must prove up the basis of its stated or apparent claim that it is a holder with rights to enforce. The rights to enforce can only come from the creditor, directly or indirectly.

And THAT brings us to the issue of the identity of the creditor. This is something the banks are claiming is “proprietary” information — a claim that has been accepted by most courts, but I think we are nearing the end of the silly notion that a party can claim the right to enforce on behalf of a creditor who is never identified.

Uniform Trust Code (UTC)

Hat tip to David Belanger

see utc_final_rev2010

see also utc-itc

Readers and analysts should refer to this as very persuasive authority and if enacted by the State legislature, it is the law. But this is not the Uniform Commercial Code. The UCC applies in all cases where paper instruments are involved and transfers of that paper are involved — although you wouldn’t know it looking at many case decisions that essentially ignore the UCC and apply common law contract law and interpretation. This approach was knocked down by the Jesinoski decision on rescission — the courts are meant to enforce the law and are not authorized to make the law. The courts may interpret the law only if they find a specific provision that is ambiguous.

The UTC is different. It applies only where the trust itself is ambiguous or fails to address an issue. The Pooling and Servicing Agreements of the alleged “REMIC Trusts” purport to be the trust agreement; those agreements are ambiguous, opaque, and contain conflicting provisions and are nearly always missing key provisions like the actual acquisition of loans in exchange for payment by the trust.

Banks are counting on lawyers and pro se litigants to either not read the statutory laws or other persuasive and authoritative materials or not understand them. The reason why the banks have been so successful at prosecuting fraudulent foreclosures is that they made the false securitization scheme so complex that government and lawyers and judges look to the authors of these documents to tell them what it means — i.e., they are asking the banks to explain their fraudulent documents. The only way to counter that is to drill down on specific provisions and show that the “explanation” offered by the banks is simply compounding the initial lie — i.e., that the REMIC Trusts actually purchased the loans. They didn’t.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

The Dangers of Disregarding the Uniform Commercial Code

There is a trend nationwide where judges are ruling that broken chains of title are not relevant.

 
The UCC is one of the least favored courses in law school. Judges hate it because they didn’t pay attention during class. But it’s the law. So the courts are ruling by the seat of their pants instead of following the law. Banks like it for now but be careful what you wish for — these rulings are undermining the marketplace for negotiable instruments.

 
Eventually lenders and factoring companies are going to come face to face with the “law” they have created through the courts — the UCC doesn’t mean anything and there are no protections against a party with a broken chain pursing a competing claim. The end result is that they will start lending or trading in negotiable instruments or even non-negotiable instruments. That could stop the economy dead in its tracks as the credit markets freeze up because players have lost confidence in the courts applying the rule of law instead of following statutes that have been on the books for generations.

 
The second problem with the current approach is that it leads inescapably to a constitutional crisis: if the Courts can ignore the rule of law as set forth in a statute, then legislation is final only after a court rules on it. This is a fundamental break with the express provisions of the US Constitution which provides for separation of powers within three independent branches of government — executive, legislative and judicial. This takes us far from the rule of law and into the third world nation context where it is the the rule of men in power that prevails, that changes the laws at their whim, and that enables such leaders to line their pockets with Government money.

 
Also arising out of their inattention to the UCC — which is adopted into the laws of every state in the union — courts are left with applying their own sense of what SHOULD happen as an end result. And by their reckoning, the most important thing is that the marketplace SHOULD be a place where you can be assured that borrowers repay their debts or suffer the consequences.

 
Add the political fear factor and you have a mess. The political fear factor is that most judges are laboring under the delusion that ruling for the borrower will cause the entire financial system to crash. This has been the most powerful weapon used by the banks in creating the myth of too big to fail. But as I predicted years ago during the bailout, this policy — of deferring to the thieves that undercut all world markets — will prevent Government or anyone else from pursuing policies of growth.

 
No judge wants to be responsible, even in part, for the downfall of the entire financial system. The irony is that their rulings are doing exactly that — holding the economy back from a real rebound. Nearly all of the foreclosures were wrongful. As a result the modifications and deeds in lieu of foreclosure were also wrongful — a continuing pattern of converting investor wealth into bank wealth.

 
Nearly all foreclosures could have been settled under the premise that everyone, including the banks, should share in the losses created by the false claims of securitization. Merely applying the rule of law as it has existed for decades would have stopped the foreclosures, stopped the loss of wealth, and stopped the loss of jobs and income for wage earners. We continue to see a “recovery” that has none of the ear-marks of a strong economy.

 
The reason is simple. We are a consumer driven economy and many of the consumers now have been stripped of the ability to buy anything. Until that fundamental element is addressed, the economy will never recover in actuality. We will continue to have the bubble and illusion that the economy is strong because the stock market has gone up. But ask any financial analyst and they will say that the stock market itself has taken on all the attributed of a bubble that will burst.

 
Stocks are over-valued by a factor of as much as 3, which means that for stocks falling into that category, they should be selling at one-third of their current share price. Averaging out the price earnings multiples and comparing it with traditional fundamental securities analysis and you come up with the inescapable conclusion that the DOW ought to be under 10,000.

 
When that correction happens, the last vestige of the illusion of economy recovery will be gone — because Government never addressed the fundamental element of our economy — consumer wealth and income.

The Money Trail: Does anyone meet the definition of a creditor?

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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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I speak to people across the country. As I discuss the issues that get increasingly complex, we reach areas in which there are differences of opinion which is why you need to consult with someone who is licensed in your state and who has done the heavy research (no skimming allowed). The issue is what payments should be credited to whom. And the answer really is you should be asking an accountant and a lawyer. This is why my team is reaching out to accountants and auditors to round out what is needed in cases.

The problem is that this is a grey area. Payments made to the beneficiaries of the trust were never intended to discharge the debt from the “borrower.” That’s obvious. But payments were made on account of this debt. So we go back to the law of presumptions. If the creditor receives a payment and the payment is on account of a particular debt due from a particular debtor, then it is discharged to the extent of the payment — regardless of the stated “intent” of the payor after the fact. So servicer advances definitely fall into that category. But in addition, if the entire debt has been discharged by the replacement of the obligation with another obligation from another party, then you have similar issues.

So first of all, the beneficiaries agreed to take payments from the REMIC Trust — not the “borrowers”. There is no relationship between the beneficiaries of a trust and any single “borrower” or group of “borrowers.” The REMIC Trust doesn’t pay the beneficiaries despite the paperwork to the contrary. The REMIC Trust is inactive with no assets, bank accounts, business activity etc.

It is the Master Servicer that pays the beneficiaries. And the Master Servicer makes those payments regardless of whether it has received payments from the beneficiaries. (servicer advances). The note and mortgage name a specific payee that is neither the Trust (or Trustee) nor the Master Servicer. So the first real legal question that I raised back in 2007 was the issue of who was the owner of the debt or the holder in due course?

The debt arose when the “borrower” accepted the benefits of funding that came from an unidentified source. It is presumed not to be a gift. The “borrower” has signed a note and mortgage in favor of a party that never loaned him any money — hence there is no loan contract and the signed note and mortgage should have been destroyed or released back to the “borrower.” Such a loan is table-funded and is almost certainly “predatory per se” as described in REG Z.

Since there is no privity between the “originator” and the Trust or Master Servicer the loan documents cannot be said to be useful, much less enforceable. Those documents should be considered void, not voidable, when the payee and mortgagee failed to fund the loan. The repeated transfers of the loan documents without anyone ever paying for them clearly means that the consideration at the base “closing” was absent. Hence there is no consideration at either the origination or acquisition of the loan documents. Acquisition of the loan documents does not mean acquisition of the loan. If there was no valid loan contract or there is no valid loan contract (rescission) executing endorsements, assignments and powers of attorney are meaningless.

So there is a serious question about whether there is a legal creditor involved in any of these loans. There are parties with equitable and legal claims, but not with respect to the loan documents that should have been shredded at the very beginning. All those claims are unsecured. And the foreclosures, in truth, are for the benefit of parties who have no relationship with the actual money that was used to the benefit of the alleged “borrower” who is looking more and more like a party who is not a borrower but who could be debtor if there is anyone answering to the description of “creditor.” No party in this scenario seems to answer to that description.

And THAT would explain why NO PARTY steps forward to challenge rescissions as a creditor and instead they attempt to retain their status of having apparent “Standing” and attack the rescission through arguments that require the court to interpret the TILA Rescission Statute, 15 USC §1635. But the US Supreme Court has already declared that it is the law of the land that this statute is not subject to interpretation by the courts because it is clear on its face. So such parties are seeking relief they didn’t ask for (vacating the rescission) using the void note and void mortgage as their basis for standing.

Thus without someone filing an equitable claim showing that their money is tied up in the money given to the “borrower” there does not seem to be a creditor at law.

Add that to the fact that most of the “Trusts” were resecuritized by more empty trusts and you have the original beneficiaries completely out of the picture as to any particular loan and the so-called REMIC Trust being completely out of the picture with respect to the loan or loan documents that were originated, even if they were not consummated.

Fla 4th DCA: The Starting Point is Standing — If You Don’t Have It, There is no Jurisdicition

For further information please call 954-495-9867 or 520-405-1688

This is not a legal opinion on any case. Consult with an attorney.

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see Rodriguez v. Wells Fargo

“The core element concerning to whom the note was payable on the date suit was filed was not proven.”

Bottom Line: You can’t file a lawsuit without standing. Judgment reversed with instructions to enter Judgment for the homeowner. And you can’t cure standing by getting it later. That would be like filing suit for a slip and fall in front of a super market, and once the suit was filed, you then go to the supermarket, get out of your car and proceed to slip and fall. And the second story is that the BURDEN OF PROOF is on the foreclosing party, not the homeowner.

Many courts are now leaning away from the legal fantasies being promoted by “servicers”, “trustees’ and other parties attempting to “foreclose” on debts that very often are (a) not owned by them (b) they have no authority to represent the owner of the debt (c) the alleged creditor is not showing a default on its books (d) on behalf of a Trust that (1) never operated (b) exists only on paper (c) with no bank account (d) no financial statements (no assets (e) no liabilities (f) no income (g) no expenses.

All this is becoming abundantly clear. The prior assumptions that allowed for some crossover between a holder and a holder in due course are giving way to another look, starting from the beginning. In this case there was no endorsement on the note at all. The Appellate court said that ended the inquiry. There was no lawsuit, it should have been dismissed and now judgment, entered by the Judge in West Palm beach is reversed with instructions to enter judgment for the Defendant homeowner.

In my opinion the courts are now being presented with the correct arguments and facts that leave them in a position where if they allowed these kinds of action they would be setting a precedent making it legal to steal.

And my question remains: IF THERE REALLY WAS A REAL TRANSACTION WHERE SOMEONE FUNDED THE LOAN AND SOMEONE ELSE BOUGHT THE NOTE THEN WHY DON’T THEY ALLEGE THAT THEY ARE HOLDERS IN DUE COURSE? If they alleged HDC status all they would need to prove is payment. No “borrower” defenses would apply. If they don’t have HDC status then on whose behalf is the foreclosure actually being filed, since the investors are getting paid anyway? I think the answer is that the servicer is converting a tenuous claim for volunteer payments on behalf of the borrower to investors who don’t know what loans they own; the real claim is that the servicer wants to “recover” servicer advances that it paid out of third party funds. These servicers are reaping windfalls every time they get a foreclosure sale.

This Court quotes approvingly from the UCC: “… the transferee cannot acquire the right of a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.” And goes on to quote the statute “a person who is party to fraud or illegality affecting the instrument is not permitted to wash the instrument clean by passing into the hands of a holder in due course and then repurchasing it.” see § 673.2031

The court concludes that there is no negotiation of the note until an endorsement appears — which read in conjunction with the rest of the opinion means that the endorsement must be by someone who is either a holder in due course or a party representing a party who is a holder in due course. If no holder in due course exists, then there is no way to construe the instrument as a negotiable instrument and there is no way to construe the instrument as having been negotiated under the UCC. And THAT means they must prove every aspect of the transaction (starting with origination) without relying on the suspect instruments.

See also 4th DCA — Standing is “Foreclosure 101” Peoples v. SAMI II Trust

Assignment Questions and Answers

For further information please call 954-495-9867 or 520-405-1688

The following article is for general information only. Slight changes in facts or procedures at trial can have a substantial impact on the conclusions or reports suggested in this article. This is not a legal opinion on your case. Before making any decision or taking any action, the reader is instructed to seek the advice of an attorney who is licensed in the jurisdiction in which your property is located or where the transaction was consummated.

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I offer my insight here as a guide to attorneys and to homeowners who need to know that when they use words, they probably don’t know the meaning of the words they are using.

A good example came in from a reader who asks “is the effective date of an assignment the 1) date it was signed; 2) date it was notarized; or 3) date it was recorded?”

As simple as this question appears it actually is missing facts, and assuming that the assignment was “effective” at any time. So first let me say that an assignment is not effective in any sense of the word if the assignor didn’t possess any rights or ownership that could be enforced by the assignor. The existence of the assignment does not raise the status of non-ownership. It is like a Trust: if the trust exists on paper but doesn’t have anything in it, the trust instrument is not effective in relation to any money or property or other rights. If the assignment is from a party who has nothing, then the instrument purporting to assign something is not effective. But presumptions arise in processing evidence in court that could result and often does result in finding the assignment valid and that the assignment is effective in creating rights now owned by the assignee.

The only “exception” to this is that if someone pays for a negotiable instrument in good faith and without knowledge of the maker’s defenses then the risk of loss does shift to the maker (borrower on a note). So the sale of a note that was in fact executed by the maker DOES raise the status such that a fraudulent “transaction” that could not be enforced by the “holder” of the note becomes, by operation of law, a valid claim against the maker. Such a transfer might be called an “assignment” or “endorsement”. The maker may still sue the intermediary parties asserting claims of fraud or other matters but the note can no longer be contested because the transaction was not consummated — thus making the transfer “effective” even though the prior party who was the assignor, endorser or transferor had absolutely no right to enforce the instrument.

An assignment is presumed to be a valid transfer of rights if it is facially valid. It is effective upon delivery, as I understand the laws governing negotiable and/or security instruments (like mortgages). The date of the assignment is generally presumed to be the date it was delivered. All of this can be rebutted by (a) discovery into what transpired in the assignment and (b) proof (admissible evidence) showing that nothing was actually transferred because no payment was made or because of other reasons that might defeat the assertion that the instrument is a negotiable instrument.

The date the document is notarized might be evidence that the date of the assignment was incorrectly stated or it might not. If the signor acknowledged his signature after the date it was signed, the date of notarization changes nothing. If the date of notarization was years later then there is at least reason to propound discovery or requests to the other side seeking to discover if the assignment was backdated AND seeking to discover whether the assignor had anything to assign. If an assignment is backdated it may or may not mean anything. If the actual date of the assignment is much later than the actual transaction in which the note and mortgage were transferred it would only be relevant if the foreclosure started before the assignment was executed. This is not universally true in all states. The issue of when a foreclosing party can initiate the proceedings (before or after the receipt of the assignment instrument) is in the process of being decided by several courts across the country.

The date the document is recorded is potentially relevant. If the document was recorded years after the date of the assignment, that might be evidence of backdating or that the assignment was fabricated. The instrument itself is effective as to all people who know about it, starting from when they knew about it. Upon recording, it is effective as to the world, if it is a valid assignment in fact.

If all this sounds convoluted to the reader, it s proof that the days of pro se litigation are nearly over with respect to the defense of false claims for foreclosure.

The “effect” of an invalid assignment cannot be improved by the fabrication of an instrument that explicitly or implicitly refers to a transaction in which the paper was acquired. The effect of such an invalid assignment also cannot be improved by notarization or recording. A recording gives notice of the existence of a claim of an interest in real property.

The existence of the claim doesn’t mean the claim is valid. Judicial notice of the existence of the recorded assignment is appropriate ONLY to the extent that the Court recognizes that the assignment exists in the public records of the county where deeds and mortgages are recorded. What is written on the recorded instrument is hearsay subject to objection by the opposing party. So the assignment would not be “effective” in court as to proving the matters stated in the assignment; BUT if no objection is made, the proffer by the assignee of the instrument as to both existence and content will probably considered to be accepted into the record as evidence.

BIAS IN THE COURTS: UCC and TILA REVIEW

Our legal history has many examples of enormous errors committed by the Courts that were obvious to some but justified by many. The result is usually mayhem. The cause is a bias toward some underlying fact that was untrue at the time. Some examples include
  1.  the infamous Dred Scott decision where the Supreme Court ruled that a black man is not a person within the meaning of the constitution and therefore could not sue to protect his rights because he was not a citizen by virtue of the FACT that his ancestors had been brought to America as slaves. The underlying bias was considered axiomatically true: that “negroes” were fundamentally subhuman. It took a civil war that took 500,000 casualties and a constitutional amendment to change the results of that decision. We are still dealing with lingering thoughts about whether the color of one’s skin is in any way related to our status as humans, persons and citizens.
  2. the internment of Japanese Americans during World War II. The Supreme Court upheld that decision on the basis of national security. The underlying bias was considered axiomatically true: that people of Japanese descent would have loyalty to the Empire of Japan and not the United States. People of German descent were not interred, probably because they looked more like other Americans. As the war progressed and the military realized that people of Japanese descent were resources rather than enemies, the government came to realize that acknowledging these people as citizens with civil rights was more important than the perception of a nonexistent threat to national security. Americans of Japanese descent proved invaluable in the war effort against Japan.
  3. the Citizens United decision in which the Supreme Court gave the management of corporations a “Second vote” in the court of public opinion. The underlying bias was considered axiomatically true: that entities created on paper were no less important than the rights of real people as citizens. The additional underlying bias was that corporations are better than people.
  4. the hundreds of thousands of decisions from thousands of courts that relied on the fictitious power of the court to rewrite legislation that Judge(s) didn’t like. A current perfect example was reading common law (inferior, legally speaking) precedent to override express statutory procedures for the exercise and effect of statutory rescission under the Federal Truth in Lending Act. Over many years and many courts at the trial and appellate level the Judges didn’t like TILA rescission so they changed the wording of the statute to mean that common law procedures and principles apply — thus requiring the homeowner to file suit in order to make rescission effective, and requiring the tender of money or property to even have standing to rescind. This was contrary to the express provisions of the TILA rescission statute. Approximately 8 million+ people were displaced from their homes because of those decisions and the property records of thousands of counties have been forever debauched, likely requiring some legislative action to clear title on some 80+ million transactions involving tens of trillions of dollars. The underlying bias was considered axiomatically true: that the legislature could not have meant that individuals have as much power as big corporation and they should not have such power. Then the short Supreme Court decision from a unanimous court in Jesinoski v Countrywide made the correction, effectively overturning hundreds of thousands of incorrect decisions. A court may not interpret a statute that is clear on its face. A court may not MAKE the law.
  5. the millions of foreclosures that have been allowed on the premise that the “holder” of a note should get the same treatment as a “holder in due course.” More than 16 million people have been displaced from their homes as a result of an underlying bias that was and often remains axiomatically true: decisions in favor of homeowners would give them a free house and decisions that allow foreclosure protect legitimate creditors. Both “axioms” are as completely wrong as the decisions about TILA Rescission.
It is the last item that I address in this article. A holder in due course is allowed to both plead and prove only the elements of Article 3 of the UCC. Article 3 of the UCC states that a party who purchases negotiable paper in good faith without knowledge of the maker’s defenses and before the terms are breached is presumed to be entitled to relief upon making their prima facie case — which are the elements already listed here. Even if there were irregularities or even fraud at the time of the origination of the loan or at a later time but before the HDC purchased the paper, the HDC will get judgment for the relief demanded. A “holder” (on the other hand) comes in many flavors under Article 3 but they all have one thing in common: they are not holders in due course.
The fundamental error of the courts has been to treat the “holder” as a “holder in due course” at the time of trial. It is true that the holder may survive a motion to dismiss merely by alleging that it is a holder — but fundamental error is being committed at trial where the holder must prove its underlying prima facie case. It should be noted that the requirement of consideration is repeated in Article 9 where it states that a security instrument must be purchased by a successor not merely transferred. So regardless of whether one is proceeding under Article 3 or Article 9, no foreclosure can be allowed without paying real money to a party who actually owned the mortgage. The Courts universally have ignored these provisions under the bias that it is axiomatically true that the party seeking to enforce the paper is so sophisticated and trustworthy that their mere request for relief should result in the relief demanded. This bias is “supported” by an additional bias: that failure to enforce such documents would undermine the entire economy of the country — a policy decision that is not within the province of the courts. And deeper still the bias is that it is axiomatically true that the paper would not exist without the actual existence of monetary transactions for origination and transfer of the paper. These “axioms” are not true.
As a result, courts have regularly rubber-stamped the extreme equitable remedy of foreclosure in favor of a party who has no financial interest in the alleged paper, nor any risk of loss or actual loss. The foreclosures are part of a scheme to make money at the expense of the actual people who are losing money. If this was not true, there would have been thousands of instances in which the “holder” presented the money trail that supposedly was the foundation for the paper that was executed and delivered, destroyed or lost. They never do. If they did, the volume of litigated foreclosure cases would drop to a drizzle. And these parties fight successfully to avoid not only the burden of proof but even the ability of the homeowner to inquire (discovery) about the “transactions” about which the paper is referring — either at origination or in purported transfers. Backdating assignments and endorsements would be unnecessary. “Robo-signing” would also be unnecessary. And the constant flux of new servicer and new trustees would also be unnecessary. Many of these events consist of illegal acts that are routinely ignored by the courts for reasons of bias rather than judicial interpretation.
A holder in due course proves their prima facie case by
a) proffering a witness with personal knowledge
b) proffering testimony that allows the commercial paper to be admitted as evidence (the note). This evidence need only be to the effect that the witness, or his company, physically has possession of the original note and presents it in court.
c) proffering testimony and records showing that the paper (the note) was purchased for good and valuable consideration by the party seeking to enforce it. This means showing proof of payment for the paper like a wire transfer receipt or a cancelled check.
d) proffering testimony and records showing that the mortgage, which is not a negotiable instrument, was purchased withe the note.
e) proffering testimony and records that the transactions were real and in good faith
f) proffering testimony that the purchaser of the paper had no knowledge of the maker’s defenses
g) proffering testimony that no default existed at the time of purchase of the paper.
Because of bias, the Courts, just as they did with TILA rescission, have mostly committed fundamental error by allowing to alleged “holders” a lesser standard of proof than the party who is legitimately in a superior position of being a holder in due course. It starts with a correct decision denying the homeowner’s motion to dismiss but ends up in fundamental error when the court “forgets” that the enforcing party has a factual case to prove beyond mere possession of an instrument they say is the original note.
The holder, in contrast to the holder in due course, is not entitled to any such presumptions at trial, except that they hold with rights to enforce. They don’t hold with automatic rights to win the case however.
A holder proves its prima facie case by
a) proffering a witness with personal knowledge
b) proffering testimony and records that allow the commercial paper to be admitted as evidence (the note). This evidence need only be to the effect that the witness, or his company, physically has possession of the original note and presents it in court.
c) proffering testimony and evidence as to the chain of custody of the paper the party seeks to enforce.
d) proffering testimony and records together with proof of payment of the original transaction (a requirement generally ignored by the courts). This means proof that the original party in the “chain” relied upon by the party seeking to enforce actually funded the alleged “loan” with funds of its own or for which it is responsible (e.g., a real warehouse credit arrangements where the originator bears the risk of loss).
e) proffering testimony and records showing that the paper (note) was purchased for good and valuable consideration by the creditor on whose behalf the party is seeking to enforce it. This means showing proof of payment for the paper like a wire transfer receipt or a cancelled check.
f) proffering testimony and records showing that the mortgage was also purchased by the creditor for good and valuable consideration. This means showing proof of payment for the paper like a wire transfer receipt or a cancelled check.
g) proffering testimony and records that the transactions was real and in good faith
h) proffering testimony that no default existed at the time of purchase of the paper. Otherwise, it wouldn’t be commercial paper and the party seeking to enforce would need to allege and prove  its standing and its prima facie case without benefit of the note or mortgage.
It should be added here that the non-judicial foreclosure states essentially make it even easier for an unrelated party to force the sale of property. Those statutory procedures are wrongly applied leaving the burden of proof as to UCC rights to enforce squarely on the homeowner who in most cases is not even a “borrower” in the technical sense. Such states are allowing parties to obtain a forced sale of property in cases where they would not or should not prevail in a judicial foreclosure. The reason is simple: the procedure for realignment of the parties has been ignored. When a homeowner files an action against the “new trustee” (substituted by virtue of the self proclaimed and unverified status of a third party beneficiary under the note and mortgage), the homeowner is somehow seen as the party who must prove that the prima facie case is untrue (giving the holder the rights of a holder in due course); the homeowner is being required to defend a case that was never filed or alleged. Instead of immediately shifting the burden of proof to the only party that says it has the rights and paperwork to justify the forced sale. This is an unconstitutional aberration of the rights of due process. The analogy would be that a defendant accused of murder must prove he did not commit the crime before the State had any burden to accuse the defendant or put on evidence. Realignment of the parties would comply with the constitution without changing the non-judicial statutes. It would require the challenged party to prove it should be allowed to enforce the forced sale of the property. Any other interpretation requires the the homeowner to disprove a case not yet alleged, much less proven in a prima facie case.

Beach v Ocwen: 1997 Decision that will be used by banks and servicers against rescission

For Further information and assistance please call 954-495-9867 and 520-405-1688.

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See Beach v Ocwen Fla. Supreme Court

I have no doubt that the Banks will attempt to use this decision — but it still is trumped by Jesinowski and other Federal decisions on equitable tolling. Having the right to cancel/rescind is described as extinguished by TILA regardless of the circumstances — including the absence of any enforceable loan contract.
This decision (1998) was rendered far before the idea of securitization was introduced into mortgage litigation. The interpretation of the extinguishment of the underlying right made sense in the context of loans from Bank A to Borrower B. In the era of securitization you have all kinds of questions — like when the transaction was “commenced”. The courts say it is when the “liability” arose. I agree — if we are saying that the consummation of the transaction begins when the lender loans money to the borrower. But in most cases we see that the lender did not loan money to the borrower and that is corroborated by the absence of anypurchase transaction, for value, when the alleged loan is “transferred.” There is no reasonable business explanation of why anyone would release an asset worth hundreds of thousands of dollars without receiving payment — unless it wasn’t an asset of the “seller” in the first place.The presumption is that TILA rescission rights run from the date the liability arose from the Borrower to the Lender. If the Lender was not properly disclosed, then one of two things are true: (1) there is no loan contract which means a nullification and quiet title action is appropriate or (2) until the real lender was disclosed, the transaction was not consummated. That might mean that both the three day rescission and the three year rescission are in play. If the position of the foreclosing party is that a REMIC Trust was finally disclosed to the borrower — and that the Trust was the lender, then disclosure is complete. But that isn’t what happened.

The ultimate decision here is going to be on the question of whether there is in fact a loan contract, and, if so, who were the parties to it? If there was no contract, it is the same as rescission by operation of law. No new rights arise on assignment or even sale of the loan from a pretender lender — unless the purchase was in good faith FOR VALUE and occurred without notice of borrower’s defenses and NOT when the loan was already in “default.” This narrow exception arises under the UCC for a Holder in Due Course to be Protected if they meet the narrow criteria stated in the UCC, article 3, and the narrow enforcement criteria for the mortgage expressed in Article 9.

The so called default is another hidden issue. If someone “acquires” the note and mortgage where the Borrower has already not paid or stopped paying on the alleged loan, then (1) it isn’t negotiable paper and (2) it provides notice that the borrower might not be paying because they don’t owe the party or successor on the note and mortgage (and never did).
When the mortgage crisis began, the banks and servicers were claiming that there were no Trusts and that they could file suit or initiate non-judicial foreclosure without any reference to trusts. That was why forensic audits were initially required — when we thought that REMIC Trusts were the true players. Banks and servicers argued convincingly in court that the Trust was irrelevant. Now in most cases (with some notable CitiMortgage, Chase and BOA exceptions) the Plaintiff or beneficiary is identified as a Trustee, bank or servicer (US Bank usually is the Trustee these days) on behalf of a REMIC Trust. They are now saying that they have the right to be in court or initiate foreclosure because (1) the Trust received an assignment and endorsement of the note and mortgage (2) the servicer has a right to represent and even testify for the the Trustee on the basis of the rights set forth in the Pooling and Servicing Agreement or by virtue of Powers of Attorney that magically appear at trial.
So the banks, servicers and their attorneys are side-stepping the issue of consummation of the transaction. They are withholding the information where the right of rescission would first become apparent to the borrower. When they withhold the information longer than 3 years from the date of the purported “loan closing”, they claim the right of rescission has expired. That is cynical and circular reasoning. That “closing” may be the point in time that the borrower’s “liability” arose, but the liability did NOT arise with the creditor being the party named on the note, mortgage and required disclosure documents.
Instead, the Payee was a naked nominee regardless of whether the “lender” was a thinly capitalized mortgage broker or a 150 year old bank.
Neither one loaned the money. In both cases there were using money essentially stolen from clueless investors on Wall Street who advanced money for the purchase of shares (mortgage backed securities) issued by an unregistered Trust that existed only on paper, had no bank account, and never received the proceeds of the shares that were supposedly sold to pension funds and other “investors” (actually victims of a fraudulent scheme).
The real answer is, as I have repeatedly said, that there was no loan contract and therefore the note and mortgage were induced to sign by both fraud in the inducement and fraud in the execution.  But the courts may turn to a foggier notion that the disclosures were intentionally withheld and that this entitles the borrower to equitable tolling of the 3 day or three year statute of limitations. It seems highly doubtful that the US Supreme Court will reverse itself.
If they deny equitable tolling by allowing stonewalling from the Banks then no new Bank would be able to enter the picture which is the whole purpose of the TILA rescission. While courts might find the argument from the banks and servicers as appealing, history shows that the US Supreme Court is just as likely to effectively reverse thousands of decisions based upon the wrong premise that rules and doctrines for common law rescission can be applied to TILA rescission.
Yet my point goes further. The express wording of the TILA rescission as affirmed by a unanimous Supreme court in Jesinowski is that the rescission is effective by operation of law when it is dropped in the mailbox — and that there is nothing else required by the borrower. If the “lender” wants to challenge that rescission it must do so before the 20 day deadline for compliance — return of canceled note, satisfaction of mortgage and disgorgement of all money paid. This makes it very clear that stonewalling or bringing up defenses later when the borrower seeks to enforce the rescission is not permissible. The idea behind TILA rescission has been to allow a borrower to cancel one transaction and replace it with another — which means that title is clear for a new lender to offer a first or second mortgage free from claims of the prior pretender lender.
Thus the expected defense from the banks and servicersis going to be that the rescission was void ab initio because of the statute of limitations or some other reason. But these are affirmative defenseswhich is to say they are pleas for affirmative relief in a formal pleading with a court of competent jurisdiction. That court does not have any jurisdiction or discretion to find that the rescission was void ab initio if more than 20 days has expired after the notice of cancellation or rescission was made.Thus procedurally, the express wording of TILA and Jesinowski totally bars the banks and servicers from raising any defenses to the effectiveness of the rescission after 20 days from the date of notice of rescission. To interpret it any other way is to overrule Justice Scalia in Jesinowski. It would mean that the banks and servicers and Trustees could later bring up defenses to the rescission which would completely bar the ability of the borrower to apply for a substitute loan. No lender is going to offer a mortgage loan where they are taking on the risk that they are not getting the lien priority that is required to assure payment and collateral protection.

And the reason why there is no qualifying creditor to bring the action within 20 days will be taken up in an upcoming article “What if a Broker Sold an IPO and Kept the Proceeds? — The True Explanation of Securitization Fail.” Also see Adam Levitin on that.

FDIC Employee Quits and Goes Public With Complaint Against Chase, WAMU, Citi and two law firms

For further information and assistance please call 954-495-9867 or 520-405-1688

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See Eric Mains Federal Complaint

see Mains – Table of Contents.petition 2 transfer

On Monday Eric Mains resigned from his employment with the FDIC. He had just filed a lawsuit against Chase, Citi, WAMU-HE2 Trust, Cynthia Riley, LPS, WAMU, and two law firms. Since he felt he had a conflict of interest, he believed the best course of action was to resign effective immediately.

His lawsuit, told from the prospective of a true insider, reveals in astonishing detail the worst of the practices that have resulted in millions of illegal foreclosures. Some of his allegations cast a dark shadow over claims of Chase Bank on its balance sheet, as reported to the public and the SEC and the reporting of both Chase and Citi as to their potential liability for wrongful foreclosures. If he is right, and he proves these allegations, much of what Chase has reported as its financial condition will vanish from its financial statements and the liability side of the balance sheets of both Citi (as Trustee) and Chase (as servicer and “owner’) will increase exponentially. This may well have the effect of bringing both giants into the position of insufficient reserve capital and force the government to take action against both entities. Elizabeth Warren might have been right when she said that Citi should have been broken into pieces. And the same logic might apply to Chase.

He has also penned the phrase “wild goose Chase” referring to discovery of the true creditors and processing of applications for modification of loans. And he has opened the door for RICO actions against the banks and individuals who did the bidding of the banks as well as the individuals who directed those actions.

His Indiana lawsuit is filed in federal court. He alleges that

1. WAMU was not the actual lender in his own loan
2. That the loan was part of an illegal scheme from the start
3. That his loan was subject to claims of securitization but that those claims were false
4. That the REMIC Trust was never funded and therefore never had the capacity to originate or buy loans
5. That the intermediaries never followed the law or the documents for securitization of his loan
6. That the REMIC Trust never did purchase his loan
7. That Citi was therefore “trustee” for an unfunded trust
8. That Chase never purchased the loans from WAMU
9. That Chase could not have been the legal servicer over the loan because the loan was not in the trust
10. That Chase has filed conflicting claims as to ownership of the loans
11. That the affidavit of Robert Schoppe, whom Mains worked for, as to ownership of the loans was false when it states that Chase owned the loans
12. That the use of WAMU’s name on the loan documents was a false representation
13. That his loan may have been pledged several times by various parties
14. That multiple payments from multiple parties were likely received by Chase and others on account of the Mains “loan” but were never accounted for to the investors whose money was being used as though it was the Banks themselves who were funding originations and a acquisitions of loans
15. That the industry practice was to reap multiple payments on the same loan — and the foreclose as though there was balance due when in fact the balance claimed was entirely incorrect
16. That the investors were defrauded and that foreclosure was part of the fraudulent scheme
17. That Mains name and identity was used without his consent to justify numerous illegal transactions in which the banks repeated huge profits
18. That neither WAMU nor Chase had any rights to collect money from Mains
19. That Citi had no right to enforce a loan it did not own and had no authority to represent the owner(s) of the loan
20. That the modification procedures adopted by the Banks were used intentionally to force the borrower into the illusions a default
21. That Sheila Bair, Chairman of the FDIC, said that Chase and other banks used HAMP modifications as “a kind of predatory lending program.”
22. That Mains stopped making payments when he discovered that there was no known or identified creditor.
23. The despite stopping payments, his loan balance went down, according to statements sent to him.
24. That Chase has routinely violated the terms of consent judgments and settlements with respect to the processing of payments and the filing of foreclosures.
25. That the affidavits filed by persons purportedly representing Chase were neither true nor based upon personal knowledge
26. That the note and mortgage are void from the start.
27. That Mains has found “incontrovertible evidence of fraud, forgery and possibly backdating as well.” (referring to Chase)
28. That the law firms suborned perjury and intentionally made misrepresentations to the Court
29. That Cynthia Riley “is one overwhelmingly productive and multi-talented bank officer. Apparently she was even capable of endorsing hundreds of loan documents a day, and in Mains’ case, even after she was no longer employed by Washington Mutual Bank. [Mains cites to deposition of Riley in JPM Morgan Chase v Orazco Case no 29997 CA, 11th Judicial Circuit, Florida.
30 That Cynthia Riley was laid off in November 2006 and never again employed as a note review examiner by WAMU nor at JP Morgan Chase.
30. That LPS (now Black Knight) owns and operates LPS Desktop Software, which was used to create false documents to be executed by LPS employees for recording in the Offices of the Indiana County recorder.
31. That the false documents in the mains case were created by LPS employee Jodi Sobotta and signed by her with no authority to do so.
32. Neither the notary nor the LPS employee had any real documents nor knowledge when they signed and notarized the documents used against Mains.
33. Chase and its lawyer pursued the foreclosure with full knowledge that the assignment was fraudulent and forged.
34. That LPS was established as an intermediary to provide “plausible deniability” to Chase and others who used LPS.
35. That the law firms also represented LPS in a blatant conflict of interest and with knowledge of LPS fraud and forgery.

Some Quotes form the Complaint:

“Mains perspective on this case is a rather unique one, as Main is an employee of the FDIC (hereinafter, FDIC) who worked in the Dallas field office of the FDIC in the Division of Resolutions and Receiverships (hereinafter DRR), said division which was the one responsible for closing WAMU and acting as its receiver. Mains worked with one Robert Schoppe in his division, whom the defendant Chase Bank often cites to when pulling out an affidavit Robert signed. This affidavit states that Chase Bank had purchased “certain assets and liabilities” of WAMU in the purchase transaction from the FDIC as receiver for WAMU in 2008. Chase Bank uses this affidavit ad museum to convince the court system in foreclosure cases that this affidavit somehow proves that Chase Bank purchased “every conceivable asset” of WAMU, so it must have standing in all cases involving homeowner loans originated through WAMU, or to put it simply that this proves Chase became a holder with rights to enforce or a holder in due course of the loan as defined by the Uniform Commercial Code. Antithetically, when it wants to sue the FDIC for a billion dollars… due to mounting expenses from the WAMU purchase transaction, it complains that the purchase agreement it signed didn’t really entail the purchase of “every asset and liability” of WAMU… Chase Bank claims this when it is to their advantage in a lawsuit to do so.

Mains worked as team leader in the DRR Dallas field office

[The] violation of REMIC trust rules occurred because the entities involved, for reasons of control, speed of transaction, and to hide what they were actually doing with the investors money

Unfortunately for the investors, many of the banks involved in the securitization process (like Wahoo) failed to perform the securitizations properly, hence as mentioned above, the securitizations were botched and ineffective as to passing ownership of the notes or underlying collateral. The loans purchased were not purchased THROUGH the REMIC. … The REMIC trust entity must be the one actually purchasing the mortgages directly.

This violation of REMIC trust rules occurred because the entities involved, for reasons of control, speed of transaction, and to hide what they were actually doing with the investors funds once received, held the investor funds in the “lender” banks owned subsidiary accounts, instead of funding the REMIC trusts with the money so that the trust could then purchase the loan from the “lender”, making it an actual buy and sell transaction.”

Statutory Requirements for Enforcement of Note or Mortgage

For further information please call 954-495-9867 or 520-405-1688

====================

So many people sent me this short white paper that I don’t know who to thank or even who wrote it. Any help would be appreciated so I can edit this article and give attribution to the writer.

The only thing that I would caution is that eventually, perhaps sometime soon, the importance of the Assignment and Assumption Agreement will rise in importance as to these enforcement actions based upon a fictitious closing, debt, note and mortgage. The A&A is an agreement between the “originator” and some other “aggregator conduit”.

The A&A essentially calls for violation of TILA by not disclosing the existence of a third party lender. It also allows for compensation and profits arising from the signature of the borrower on the settlement documents without disclosure of who received that compensation or made those profits and how much they were “earning.”

Whether this is ultimately determined to be a table funded loan or simply not a loan contract at all with the borrower remains to be seen. If it is determined to be a table funded loan with an undisclosed third party lender who is not even the aggregator in the A&A then according to regulations Z it is “predatory per se.” If it is predatory per se then how can anyone seek enforcement in equity (i.e. foreclosure)?

And while I am at it, to answer the question of many judges — “what difference does it make where the money came from? — ASK THE BANKS. They nearly always demand to see the bank account from which the down payment is being made and even going beyond that to require the borrower to prove that the money is the money of the borrower. If normal underwriting requires the borrower to produce proof of funding then why isn’t the bank required to prove that they funded the loan — either by origination or acquisition or both?

If a borrower gets the down payment from his Uncle Joe because he is in fact broke, then the Bank under normal underwriting circumstances won’t approve the loan. If a Bank has no financial stake in the alleged “loan” then why should THEY be allowed to enforce it? Isn’t that highly prejudicial to the real creditors? Isn’t the foreclosure judge making it harder for the real creditors to collect by entering judgment for a party who has no risk, no financial stake and no contractual right (or obligations) to represent the real creditor.

And lastly is the wrong assumption about the chronology of these transactions. The mortgage backed securities were “sold forward,” which is to say there was nothing in the Trust when they were sold — and as it turns out in most cases the Trust never got any loans. Further the notes and mortgages were also sold forward in a cloudy arrangement in which the ownership and balance due was at least in doubt if not unknown. You must remember that the banks were not in the business of loaning money — they were in the business of selling mortgage backed securities for empty trusts and then using the money any way they chose.

All that said the following was received by me from several people and I agree with virtually all of it.

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Statutory Requirements For Establishing The Right To Enforce An Instrument

1. Prove status of holder of the instrument. (UCC § 3-301(i)); or

2. Prove status of non-holder in possession of the instrument who has the rights of a holder. (UCC § 3-301(ii)); or

3. Prove status of being entitled to enforce the instrument as a person not in possession of the instrument pursuant to UCC § 3-309 or UCC § 3-418(d). (NOTE is lost, stolen, destroyed).

UCC § 3-309, requirements.

a. Prove possession of the instrument and entitled to enforce it when loss of possession occurred. (UCC § 3-309(a)(1)).

i. If illegality or fraud were involved in the original transaction, it cannot be proved that the person is entitled to enforce the instrument.(See UCC § 3-305. DEFENSES)

b. Prove non-possession of the NOTE is NOT the result of a transfer. (UCC § 3-309(a)(2)).

NOTE: If discovery shows that the instrument was sold by the person claiming the right to enforcement, a transfer occurred, and such person is NOT entitled to enforce the instrument. (See UCC § 3-309(a)(ii)).

c. Prove that the person seeking enforcement cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process. (UCC § 3-309(a)(3)).

NOTE: If discovery shows that the instrument was sold by the person claiming the right to enforcement, a transfer occurred, and such person is NOT entitled to enforce the instrument. (See UCC § 3-309(a)(ii)).

d. A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument. (UCC § 3-309(b)).

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UCC § 3-309 Enforcement Of Lost, Destroyed, Or Stolen Instrument.
(a) A person not in possession of an instrument is entitled to enforce the instrument if

(1) the person seeking to enforce the instrument​
(A) was entitled to enforce the instrument when loss of possession occurred, or
(B) has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred; ​
(2) the loss of possession was NOT the result of a transfer by the person or a lawful seizure; and​
(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.​

(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, Section 3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

****************

An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. (UCC § 3-203(a)).

If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this Article and has only the rights of a partial assignee. (UCC 3-203(d)).

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If the bank, mortgage company, etc., sold the NOTE, they have no right to enforce the NOTE, through foreclosure or court proceeding pursuant to the fact that the UCC bars such claimant from invoking the court’s subject matter jurisdiction of the case.

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Even if the claimant produces the original wet-ink NOTE, there is a defense to the action pursuant to UCC 3-305.

Illegality and false representation (fraud) perpetrated in the transaction.

Did the bankdisclose the SOURCE of the money for the transaction?Did the bank inform the NOTE issuer that the money for the transaction was provided at no cost to the bank?

Did the bank disclose that the NOTE would be sold at the earliest possible convenience, and that such sale and receipt of money from a third party would actually pay off the NOTE? (Satisfaction of Mortgage).​

Many discovery questions to be asked when a claimant initiates foreclosure proceedings.

***********

Many assume that the bank/broker/lender that begins the process is actually providing the money for making a “loan,” when in fact, the bank/broker/lender is only making an “exchange,“ of notes, at no cost, and then, coercing the issuer of the promissory note into the comprehension that he is receiving a “loan.” The following was stated in A PRIMER ON MONEY, SUBCOMMITTEE ON DOMESTIC FINANCE, COMMITTEE ON BANKING AND CURRENCY, HOUSE OF REPRESENTATIVES, 88th Congress, 2d Session, AUGUST 5, 1964, CHAPTER VIII, HOW THE FEDERAL RESERVE GIVES AWAY PUBLIC FUNDS TO THE PRIVATE BANKS [44-985 O-65-7, p89]

“In the first place, one of the major functions of the private commercial banks is to create money. A large portion of bank profits come from the fact that the banks do create money. And, as we have pointed out, banks create money without cost to themselves, in the process of lending or investing in securities such as Government bonds.”​

In this instance, the transaction was funded by using the prospective property (collateral) and the signer’s promissory note as if the property and the Note already belonged to the bank/broker/lender. [Editor’s note: Those loans NEVER belonged to the Bank who was selling them before they even existed.]

So, if the bank used the promissory NOTE, as money, to create the cash reserve which was then used to validate the bank check issued on the face amount of the promissory NOTE, at no cost to the bank, without NOTICE to the signer of the promissory NOTE, and without fully disclosing these facts and aspects of the transaction, the bank committed a DECEPTIVE PRACTICE, FRAUD.

Livinglies “Theory” Again Corroborated by 4th DCA in Florida: Proof of transaction IS required.

For Further information please call 954-495-9867 or 520-405-1688

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see Murray vs. HSBC – 4D13-4316

Having exhausted all possible explanations for the fraudulent behavior of the banks, the 4th DCA has now come to the conclusion that the reason for robo-signing, fabrication, backdating, forgery etc. is that there was no transaction underlying the paperwork that the banks rely upon — at least in this case. In this case in particular, after all the cynics, critics and ridicule I confess my base instincts when I say “I told you so.” Of course the case is remanded, but there is no way HSBC is going to be able to prove anything required by this decision.

For legal practitioners the take away from this case and others being decided in Florida and around the country, is that you should not accept proclamations from either opposing counsel or the bench that the facial validity of a document is enough. In most cases there is no underlying transaction in which a purchase and sale of the loan was completed. So now, at least in the 4th DCA in Florida, foreclosing parties are being returned to the days when they had to prove the actual loan and prove that actual purchase of the loan through proof of payment for the transaction by the party seeking to enforce the loan. And when they don’t or can’t they should be subjected to sanctions against both the conspirators and their attorneys, plus punitive damages.

CAVEAT: THIS CASE DOES NOT APPLY TO ALL CASES. Check with an attorney licensed in the jurisdiction in which your property is located before you make any decisions or start celebrating. But if you check around you will see an increasing number of Florida and other state and Federal decisions, including bankruptcy court, where they found the original note and mortgage void or the transfers to have eviscerated the right to enforce the mortgage through foreclosure. In short, the tide has turned.

A nonholder in possession, however, cannot rely on possession of the instrument alone as a basis to enforce it. . . . The transferee does not enjoy the statutorily provided assumption of the right to enforce the instrument that accompanies a negotiated instrument, and so the transferee “must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired it.” Com. Law § 3–203 cmt. 2. If there are multiple prior transfers, the transferee must prove each prior transfer. Once the transferee establishes a successful transfer from a holder, he or she acquires the enforcement rights of that holder. See Com. Law § 3–203 cmt. 2. A transferee’s rights, however, can be no greater than his or her transferor’s because those rights are “purely derivative.”

Id. (emphasis added) (internal citations omitted).
HSBC had to prove the chain of transfers starting with Option One California as the first holder of the note. The only document admitted that purported to transfer the note was the PSA. Although the note was included in the PSA, the parties to the PSA were ACE, Option One Mortgage Corporation, Wells Fargo, and HSBC; not Option One California. The loan analyst testified that Option One California was acquired by AHMS, which rebranded to Homeward Residential, which was ultimately acquired by Ocwen. HSBC argues that since “Option One” is defined under the PSA as “Option One Mortgage Corporation or any successor thereto,” and Option One transferred its interest to HSBC through the PSA, HSBC had the rights of a holder. We disagree.

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