UCC: possession is not an indication of ownership of the note

UCC: possession is not an indication of ownership of the note. Recording of collateral assignments is not required under Revised Article 9. Enforcement of the debt without the note is allowable under Article 3. Equitable arguments are available to prevent a borrower from benefiting from the industry’s inability to keep track of its documents.

by John C. Murray and Dena Cruz
© 2003. All rights reserved.

Effective July 1, 2001, the rules regarding interests in promissory notes under the Uniform Commercial Code (“UCC”) dramatically changed. This was done in an attempt to accommodate asset securitization; the asset-based commercial-paper market currently holds $708 billion in assets (up from $517 billion in 1999), and is by far the most rapidly growing segment of the U.S. credit markets.

Former Article 9 of the Uniform Commercial Code classified a promissory note as an instrument, and the sale of an instrument was outside the scope of Article 9. In 2001, revised Article 9 (“Revised Article 9″) of the UCC was enacted into law in every state. Revised Article 9 expressly includes the sale of promissory notes within its scope. See UCC sec. 9-109(a)(3). However, there are some limitations:

1. Sales of promissory notes as part of the business from which they arose;
2. Assignments of promissory notes for collection only; and
3. Assignments of promissory notes to an assignee in satisfaction of indebtedness

These exclusions typically do not effect securitization transactions.

Sec. 109(b) of Revised Article 9 provides (as did Former Article 9) that “[t]he application of this article to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this article does not apply.” However, Comment 7 to this section makes clear the views of the drafters that a recorded assignment of a mortgage has no bearing on whether a security interest in the mortgage is created or perfected and that any cases to the contrary are overruled. According to Comment 7, “an attempt to obtain or perfect a security interest in a secured obligation by complying with non-Article 9 law, as by an assignment of record of a real-property mortgage, would be ineffective . . . [O]ne cannot obtain a security interest in a lien, such as a mortgage on real property, that is not also coupled with an equally effective security interest in the secured obligation.”

A buyer of an interest in a promissory note should enjoy automatic perfection under Revised Article 9, but should also file a UCC-1 Financing Statement in case the seller/originator’s bankruptcy trustee subsequently alleges that the transaction was really a loan and not a sale. Methods of perfection can create problems for the escrow holder and the borrower/debtor. The method of perfection of a security interest in a promissory note depends on whether the transaction involves a “sale” of that type of property or a “loan” secured by that type of property. To perfect an interest in the note, the buyer/lender should, if the interest is a:

a. “Loan secured by interest in promissory note”: Perfect by possession or filing. See UCC secs. 9-312(a) and 9-313(a). Since possession of the note is not always practical, in many instances filing of a UCC-1 may be only way to perfect. A bona fide purchaser in possession will prime perfection by filing!

b. “True Sale” of an interest in a promissory note: Be aware that neither filing nor possession is necessary or effective to perfect the security interest. Perfection is automatic upon attachment if the “security interest” results from the sale of the promissory note. See UCC sec. 9-309(4). Once perfected, the security interest takes priority over the interest of a subsequent lien creditor and the originator/debtor’s bankruptcy trustee. See UCC sec. 9-317(a)(2); 11 USC sec. 544(a)(1).
In addition, to accommodate the practice of warehouse lending, Revised Article 9 provides that a secured party does not relinquish possession of the mortgage if a mortgage warehouse lender delivers the original note to prospective purchasers. It need only instruct the third party that it is to hold for the benefit of the secured party, and to re-deliver the collateral to the secured party. See UCC sec. 9-313(h), cmt. 9.

Because perfection can be done without filing, and possession of the instrument is not determinative of ownership, and because UCC sec. 9-203(g) states that the mortgage follows the note, the original maker of the note and an escrow holder cannot rely on the public records to determine who owns the note and who can sign a reconveyance or release of the mortgage. Revised Article 9 does not protect the original maker, nor provide advice on how to determine whom to pay. Revised Article 9 simply states that the “issues are determined by real-property law”. The Comments to UCC Sec. 9-109 of Revised Article 9 also state that any attempt to obtain or perfect a security interest in a mortgage by complying with non-Article 9 law (such as recording a collateral assignment of the beneficial interest) would be ineffective. Purchasers of interests in promissory notes and the underlying debtors must rely on representations and the financial stability of originators/sellers to determine who really
owns the interest. See UCC sec. 9-308, cmt. 6.

Some commentators, viewing this phenomenon from the maker/account debtor’s perspective, refer to this set of facts as an “invisible lender scenario” because the debtor under the mortgage-secured note will not be able to ascertain what has occurred through examination of the public records (including who has the right to execute a reconveyance or release of the mortgage).

If the maker of the note cannot determine whom to pay, and recording of a collateral assignment of the beneficial interest is ineffective and not indicative of ownership, failure to rely on the public records by the escrow holder should not be the basis of a breach of fiduciary duty cause of action. Reliance on the public records would be foolhardy and may even be actionable negligence.

As noted above, an absolute assignment of a promissory note carries with it the securing mortgage without the requirement of physical delivery of either the note or mortgage. Attachment of a security interest in a promissory note (which automatically includes the attachment of a security interest in the securing mortgage) requires either a security agreement authenticated by the debtor or possession of the collateral by the secured party pursuant to an agreement. See UCC secs. 9-309(4) and 9-203. Under the “principal/incident” view of the note/mortgage relationship, UCC secs. 9-203(g) and 9-308(e) provide that attachment of a security interest in a promissory note is also attachment of a security interest in a securing mortgage, and the perfection of a security interest in a promissory note is also perfection of a security interest in a securing mortgage.

It should be noted that Revised Article 9 ostensibly makes it easier for a secured party with a security interest in a promissory note to foreclose a mortgage securing the note. After the debtor/mortgagee’s default, the secured party may exercise the debtor/mortgagee’s rights with respect to any property that secures the debtor/mortgagee’s obligations. See U.C.C. sec. 9-607(a)(3).

The secured party does not have to foreclose on the promissory note in order to foreclose on the mortgage. Of course, the secured party cannot foreclose or exercise the debtor/mortgagee’s foreclosure or other remedies unless the debtor/mortgagee is entitled to do so under the mortgage. This raises the possibility that the debtor/mortgagee may not be in default under its obligation to the secured party, but the obligor/mortgagor is in default under its note to the debtor/mortgagee. If the debtor/mortgagee is not in default, the secured party cannot foreclose on the mortgage. (The agreement between the debtor/mortgagee and the secured party should address this situation).

Title insurers may have some concerns with respect to these particular revisions to Article 9. For the secured party to have insurable title following a foreclosure, the secured party will need to have a good chain of title to the mortgage. (In some states, a secured party cannot foreclose unless it has a recorded chain of title). This is why the secured party will usually require that an assignment of the mortgage from the debtor/mortgagee to the secured party be properly recorded in the applicable land records at the time of the grant of the security interest in the note to the secured party. If this has not occurred, the debtor/mortgagee may subsequently be unwilling to cooperate in the secured party’s request for an assignment to assist the secured party (especially if the debtor/mortgagee is in default under the security agreement or other loan documents).

Sec. 9-607(b) of Revised Article 9 provides a way for the secured party to document its interest in the mortgage in the land records without the debtor/mortgagee’s involvement. Under this section, the secured party is authorized to file in the land records a copy of the security agreement and a sworn affidavit, which states that a default has occurred and that the secured party is entitled to foreclose non-judicially. However, some problems exist with respect to this procedure: (1) a conflict may arise with state laws that require an acknowledgment or other conditions to recording a document in the land records (which provisions are usually not found in a security agreement); (2) Neither revised Article 9 nor the Official Comments provide that a memorandum of the security agreement (as opposed to the entire agreement) is sufficient for recording, and there is uncertainty as to whether other loan documents referenced in the security agreement must also be recorded (most
debtor/mortgagees would not want the entire document(s) recorded); (3) a filed security agreement will only (as noted above) establish a chain of title if the debtor named in the security agreement is in fact the mortgagee in the mortgage and the secured party named in the security agreement is the secured party that proposes to foreclose. If there have been further assignments of the note, these further assignments also would have to be documented. See UCC Sec. 9-619 (explaining the transfer statement). As one commentator recently stated, “Title insurance companies presumably will develop underwriting guidelines for determining when a foreclosure by a secured party that has established its chain of title by filing its security agreement is enforceable”; (4) this procedure does not appear to be available in those states that do not permit nonjudicial foreclosure proceedings. See W. Rodney Clement and Baxter Dunaway, “Revised Article 9 and Real Property,” 36 REAL PROP. PROB. &
TR. J. 511 (Fall 2001).

Sec. 9-109(d)(11) of Revised Article 9 continues to exclude from its coverage “the creation or transfer of an interest in or lien on real property,” with certain limited exceptions. This language, but for the exceptions (which don’t affect this analysis), is identical to Former Article 9. However, this language is not entirely accurate because, as noted above, Revised Article 9 does provide for transfers of mortgages (which clearly are “liens on real property”).

If there was intent to transfer a promissory note when an assignment of mortgage was executed, the plaintiff/ lender should prevail. See UCC sec. 3-110(a) (“The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument”). Revised Article 9 and Article 3 of the UCC (Negotiable Instruments) allow enforcement when the note has been lost, before or after the transfer to an assignee, or is simply unavailable. See UCC sec. 3-301(iii) (stating that a “Person entitled to enforce” an instrument” includes “a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument”). Section 3-109(a) provides that a person not in possession of an
instrument is nonetheless entitled to enforce it if the instrument was destroyed, lost, or is in the wrongful possession of an unknown person. However, under Sec. 3-309(b) the person seeking enforcement, if not the holder of the note, must prove the terms of the instrument and the person’s right to enforcement, and also must provide “adequate protection” (by “any reasonable means”) to the debtor/borrower to prevent the debtor/borrower from paying the same debt twice. If there was no intent to transfer, and the assignee of the mortgage was simply a “servicer”/ agent for the holder of the note (which is common in connection with securitized loan transactions), general agency law may still protect the lender. See also UCC sec. 3-110(c)(2)(ii) (providing that if an instrument is payable to “a person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative”).

In a recent decision by the South Carolina Court of Appeals, Swindler v. Swindler, 2003 S.C. App. LEXIS 104 (July 7, 2003), the court dealt with an issue involving the interplay between Article 3 and Article 9. While acknowledging that the UCC excludes from its application the creation or transfer of an interest in or lien on real estate, the court held that Article 3 clearly applies to negotiable instruments and that the negotiability of a note is not altered by the execution of a related real estate mortgage. The court noted that Article 3 does not distinguish an unsecured note from a note secured by a real estate mortgage and that Article 9 does not exclude a note secured by a real estate mortgage from the application of Article 3. According to the court, “nothing in Article 9 provides a limitation on the applicability of Article 3 to notes secured by mortgages on real estate.” Id. at *10. The court stated further that, “Article 9 controls over Article 3 only where some conflict
between the applicable provisions of Article 3 and Article 9 exists. Here, no conflict exists because Article 9 does not address the underlying indebtedness of a security interest.” Id. at *11.

To summarize, under the UCC possession is not an indication of ownership of the note. Recording of collateral assignments is not required under Revised Article 9. Enforcement of the debt without the note is allowable under Article 3. Equitable arguments are available to prevent a borrower from benefiting from the industry’s inability to keep track of its documents.

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32 Responses

  1. I seldom comment, however i did a few searching and
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  2. How does this work in Georgia? I recently heard someone mention there is a way to get the Note transfered into the homeowners name to prevent foreclosure. Is this true?

  3. Now they can go after these fraud perpetrators.

    http://www.whitehouse.gov/the_press_office/Reforms-for-American-Homeowners-and-Consumers-President-Obama-Signs-the-Helping-Families-Save-their-Homes-Act-and-the-Fraud-Enforcement-and-Recovery-Act/

    THE WHITE HOUSE

    Office of the Press Secretary
    _________________________________________________________
    FOR IMMEDIATE RELEASE May 20, 2009

    REFORMS FOR AMERICAN HOMEOWNERS AND CONSUMERS
    President Obama Signs the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act

    WASHINGTON – Today, President Obama will sign the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act into law.

    “These landmark pieces of legislation will protect hardworking Americans, crack down on those who seek to take advantage of them, and ensure that the problems that led us into this crisis never happen again,” said President Obama.

    The Helping Families Save Their Homes Act is an important step towards stabilizing and reforming our nation’s financial and housing markets – helping American homeowners and increasing the flow of credit during these difficult economic times. This legislation will strengthen our nation’s housing sector and facilitate the goals of the Administration’s Making Home Affordable Program by helping millions of American homeowners stay in their homes.

    The Fraud Enforcement and Recovery Act will protect the American people by giving the federal government new tools and resources to prevent fraud. This reform bill will help the federal government keep markets free and fair, so that American consumers can thrive.

    Fact sheets on both pieces of legislation are below.

    The Helping Families Save Their Homes Act

    Expanding Reach of Making Home Affordable to Help More Homeowners
    The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. Since January, the Administration has made significant progress in developing and implementing a comprehensive plan for stabilizing our housing market, the centerpiece of which is the Making Home Affordable Program (MHA). By reducing foreclosures around the country, the average homeowner could see their house price bolstered by as much as $6,000 as a result of this plan, and as many as 9 million homeowners may increase the affordability of their mortgages and avoid preventable foreclosures.

    Our progress in implementing MHA to date has been substantial. We have introduced detailed guidelines for loan modifications which will establish a new standard practice for affordable modifications in the industry. Servicers covering more than 75 percent of loans in the country have now begun modifications and refinancings under the Administration’s MHA Program. We have also launched MakingHomeAffordable.gov, a consumer website for the program, which has had more than 17 million page views in less than 2 months, announced details of our Second Lien Program, Home Price Decline Protection Incentives and Foreclosure Alternatives Program, strengthened Hope for Homeowners as a part of the MHA program, and expanded the efforts of the federal government to combat mortgage rescue fraud.

    * Improvements to Hope for Homeowners The legislative improvements to Hope for Homeowners included in S.896 should significantly improve the ability of borrowers to benefit from the opportunities provided by Hope for Homeowners in the context of the Administration’s housing plan. On April 28th we announced new details describing how Hope for Homeowners will be strengthened as a part of the Administration’s Making Home Affordable Program. Incentive payments will be available for successful Hope for Homeowners refinances and servicers will be required to evaluate all applicants for eligibility for Hope for Homeowners as well as the Home Affordable Modification Program.

    Hope for Homeowners targets help to underwater borrowers, who often face heightened risks of foreclosure, by requiring principal writedowns to help homeowners increase the equity they own in their homes. The legislative modifications to the Hope for Homeowners program included in S.896 will ease restrictions on eligibility and enable refinancing of underwater mortgages for a greater number of borrowers.

    * Modifications to FHA and federally guaranteed farm loans Legislative changes to FHA and federally guaranteed farm loans will facilitate cost-neutral loan modifications for federally guaranteed rural housing loans and FHA loans. These changes will improve the Administration’s ability to provide assistance to responsible borrowers with federally guaranteed rural housing loans and FHA loans as part of the Making Home Affordable Program.

    Increasing Flow of Credit by Expanding FDIC and NCUA Capabilities
    The Helping Families Save Their Homes Act of 2009 contains provisions that will help to restore and support the flow of credit in the US economy. The act authorizes new important tools to assist in stabilizing the financial system during the current economic downturn. Together these provisions, described below, should provide additional support for increasing the flow of credit in the US economy.

    * Extension of temporary increase in deposit insurance Extending the temporary increase in deposit insurance will provide added confidence to depositors. This will provide depository institutions with a more stable source of funding and enhanced ability to continue making credit available across our economy.

    * Increase in borrowing authority of the FDIC
    Increasing the borrowing authority for the Federal Deposit Insurance Corporation (FDIC) to $100 billion will allow the FDIC to spread out premium increases over time. This will reduce near-term costs for banks and thrifts, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the FDIC to borrow additional amounts through December 31, 2010.

    * Increase in NCUA borrowing authority and creation of a stabilization fund The legislation will increase the borrowing authority for the National Credit Union Administration (NCUA) to $6 billion and create a Stabilization Fund to address problems in the corporate credit union sector. This will reduce near-term costs for credit unions, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the NCUA to borrow additional amounts through December 31, 2010.

    Increasing Consumer Protections Related to Housing

    * Establishes protections for renters living in foreclosed homes One of the often overlooked problems in the foreclosure crisis has been the eviction of renters in good standing, through no fault of their own, from properties in foreclosure. To address the problem of these tenants being forced out of their homes with little or no notice, this legislation will require that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing in which cases a minimum of 90 days notice will be required. Parallel protections are put in place for Section 8 tenants.

    * Establishes right of a homeowner to know who owns their mortgage
    Often mortgage loans are sold and transferred a number of times. Borrowers often have difficulty determining who owns their loan, and who to contact with questions, problems or complaints about their loan. This legislation requires that borrowers be informed whenever their loan is sold or transferred, so that they will always know who owns their loan.

    Provides Comprehensive New Resources for Homeless Americans
    This legislation significantly increases aid to homeless Americans, appropriating $2.2 billion dollars to help solve the crisis of homelessness, and address the enormous costs homelessness can impose on individuals, families, neighborhoods and communities. In addition, the legislation consolidates homelessness programs to improve effectiveness and streamline administration, and targets assistance to families with children – the fastest growing segment of the homeless population.

    The Fraud Enforcement and Recovery Act

    Strengthening the Capacity to Fight, Prevent, and Deter Fraud
    The legislation strengthens the capacity of federal prosecutors and regulators to hold accountable those who have committed fraud. The amendments expand the Department of Justice’s authority to prosecute crimes involving mortgage fraud, commodities fraud, and fraud involving U.S. government assistance provided during the recent economic crisis.

    * Covering private mortgage brokers and other companies Over 50% of sub-prime mortgages issued as recently as 2005 involved private mortgage institutions and similar entities not currently covered under federal bank fraud criminal statutes. FERA amends the definition of a “financial institution” in the criminal code (18 U.S.C. § 20). This will extend Federal laws to private mortgage brokers and companies that are not directly regulated or insured by the Federal Government.

    o This law will expand the Department of Justice’s authority to prosecute mortgage fraud involving private mortgage institutions under a variety of statutes, including 18 U.S.C. § 215 (financial institution bribery); 18 U.S.C. § 225 (continuing financial crimes enterprise); 18 U.S.C. § 1005 (false statement/entry/record for financial institution); and 18 U.S.C. § 1344 (bank/financial institution fraud).
    o The bill changes the definition of “financial institution” to include private mortgage brokers and other non-bank lenders will enhance our ability to prosecute criminals under the bank fraud statute who commit fraud involving loans from those companies.
    * Prohibiting manipulation of the mortgage lending business
    The new law changes the mortgage applications statute (18 U.S.C. § 1014) to make it a crime to make a materially false statement or to willfully overvalue a property in order to influence any action by a mortgage lending business. Currently, the offense only applies to federally-regulated institutions.

    * Protecting the Integrity of TARP and the Recovery Act
    The legislation amends the major fraud statute (18 U.S.C. § 1031) to protect funds expended under TARP and the Recovery Act.

    * Covering commodity futures and options in anti-fraud statutes
    This law amends the Federal securities statute (18 U.S.C. § 1348) to cover fraud schemes involving commodity futures and options. Currently, the statute does not reach frauds involving options or futures, which include some of the derivatives and other financial products that were part of the financial collapse.

    * Broadening the False Claims Act
    FERA modifies the False Claims Act (FCA) to eliminate the requirement that a false claim be presented to a federal official, or that it directly involve federal funds. It also amends the FCA reverse false claims provision to ensure that the knowing retention of an overpayment is a violation.

    Providing the Resources to Keep Markets Free and Fair
    There is no shortcut to effective fraud enforcement and prevention. FERA will also provide needed resources to help the Department investigate and prosecute those who engage in fraudulent schemes.

    * Investing in fraud prevention and enforcement
    The legislation authorizes up to $165 million in new resources for FY 2010 and 2011 to hire fraud prosecutors and investigators.

    * Strengthening the federal government’s full regulatory and enforcement capacity
    The legislation authorizes $140 million for the FBI, $50 million for U.S. Attorney’s Offices; $20 million for the Criminal Division, $15 million for the Civil Division, $5 million for the Tax Division, $30 million for the US Postal Inspection Service, $30 million for the Inspector General at the Department of Housing and Urban Development, $20 million for the Secret Service, and $21 million for the Securities and Exchange Commission.

    Addressing the Causes and Consequences of the Crisis
    This legislation creates a bipartisan Financial Crisis Inquiry Commission to investigate the financial practices that brought us to this point, so that we make sure it never happens again.

  4. Without the Note the plaintiff lacks standing to bring forth a claim of injury as a matter of law. This is important when the Exhibit A (the note) has a different lender than who the Plaintiff is representing(the Servicer ususally)

  5. My understanding is this: In a Judicial Foreclosure state this UCC jargon is not relevant!
    Without the Note the plaintiff lacks standing to bring forth a claim of injury as a matter of law. This is important when the Exhibit A (the note) has a different lender than who the Plaintiff is representing(the Servicer ususally)

  6. I absolutely agree with your mindset:

    “I would love to see some case law on this in Florida. Essentially, if you can tie this in with known fraud on the lender’s part at the time of application…especially on no-docs, F.S. 673.2031 (2) states the note is of no effect if a fradulent transfer occurs along with 517.301.”

    It also breaks a few FDUTPA acts as being deceptive when the note was transfered to the investor.

    I COMPLETELY AGREE WITH YOU, JT!

  7. “If I understand correctly it makes no difference whether the note was assigned and NOT the mortgage and vice-versa?”

    That would be in absolute contradiction of State laws that assert that possession of the mortgage without the Note is a nullity and vice versa. each state may have different rules governing the assignment of mortgages.

  8. This is of no help in California. California’s nonjudicial foreclosure statute, Cal. Civ. Code sec. 2924 to 2924k, does not require a trustee or its agent to be in possession of the promissory note to foreclose. The statutory scheme is comprehensive and exclusive, and courts will not read UCC rules into the nonjudicial foreclosure, i.e., trustee sale, process. See Moeller v. Lien (1994) 25 Cal. App. 4th 822, 830.

  9. Let us add one further important point to this discussion (in the context of the Florida case), or rather a question: Why is it that Mers is recording an assignment of mortgage and mortgage indebtedness to the foreclosing lender who in turn fails to reference or attach a copy of it to the complaint (but does include the note and mortgage)? And why isn’t the separation of the note payee (the lender at closing who’s name is in on the note) from the named Mortgagee on the mortgage (Mers) exploited as a title defect from the get go? Look closely my friends at that mortgage: it is signed only by the maker of the note who has no power to bind the note payee. And there is no power of attorney from the note payee (the origination lender) recorded or other authorizing reference in the note that allows or even mentions that Mers has this power on behalf of the note payee. Record title wise, Mers is a complete stranger to the transaction. I see a vesting problem. It’s like a transfer of mortgage without the necessary assigment of the note. At best it creates an inchoate right cured only by the afteraquired title when the note is finally assigned – but places everyone on inquiry notice of a gap in title from the very beginning. This situation should make bonafide 2d mortgage holders a bit curious to find out if their mortgage now has priority, and astute judges open to a failure of title argument at the inception of the loans life.

  10. I would love to see some case law on this in Florida. Essentially, if you can tie this in with known fraud on the lender’s part at the time of application…especially on no-docs, F.S. 673.2031 (2) states the note is of no effect if a fradulent transfer occurs along with 517.301.

    It also breaks a few FDUTPA acts as being deceptive when the note was transfered to the investor.

    My opinion.

    John

  11. In California assignment of a financial instrument must be recorded to be valid and secured. So, if the lender sent it to a trust and did not record that assignment I do not think they can foreclose. Especially if the borrower has entered a chapter 13 or 11, since there is a stay which prevents recording I believe. I am not a lawyer so if I am incorrect, someone let me know.
    Thanks

  12. The upshot of this rather complex discussion (as it concerns the debtor in foreclosure) is whether a title problem or cloud has been created upon the homeowners real property by the manner in which his mortgage/note was manipulated, post closing, into the so called “pooled mortgage” vessel and from there , to the indivduals who bought from that pool. The “invisable lender” situation created under the 2001 code provisions clash with traditional title underwriting standards. Ownership of the debt is key.

  13. In a non-judicial state, would this be best adressed with the homeowner as the plaintiff bringing suit for TILA violations or in a CH. 13 BK proceeding? I would think in the CH. 13 because you are putting the burden of proof on whoever is seeking relief from stay

  14. All of you are missing the most salient point:

    “However, under Sec. 3-309(b) the person seeking enforcement, if not the holder of the note, must prove the terms of the instrument and the person’s right to enforcement, and also must provide “adequate protection” (by “any reasonable means”) to the debtor/borrower to prevent the debtor/borrower from paying the same debt twice.”

    Read that. Read it until you get it. In short (for those who refuse to read it)… the “lender” MUST PROVE that they have the “right to enforce”, AND must also provide “adequate protection” so that the “borrower” doesn’t HAVE TO PAY THE SAME DEBT TWICE!

    Make them adhere to this. Make them explain to the judge JUST EXACTLY HOW they are going to provide “adequate protection” from the actual holder in due course (the guy/girl with the note) from coming to collect after they’ve stolen your property!

  15. IN MY GREATEST OF OPINION IT’S ALL BUSH (BULLS**T FOR SHORT) THE UNITED STATES CONSTITUTION IS THE SUPREME LAW OF THE LAND LOOK IT UP(ARTICLE 6-2) FOR ANY LAW TO BE THE SUPREME LAW OF THE LAND IT HAS TO BE PASSED BY U.S. CITIZENS NOT CONGRESS NOT THE SENATE BY ALL OF US. THE ONLY THING THEY REALLY DID BY PASS THESE SO CALLED LAWS WAS KNOWINGLY COMMIT TREASONOUS ACTS AGAINST THE AMERICAN PUBLIC & PEOPLE. JUST LOOK AT THE SO CALLED “LAW” TODAY AS WE KNOW IT THE PRIVATE BANK OF THE FEDERAL RESERVE WAS NEVER DELEGATED ANY POWER BY THE CONSTITUTION TO AMEND OR CONSTRUE(INTERPRET) ITS LAWS, THOSE RIGHTS ARE RESERVED TO THE THE PEOPLE RESPECTIVELY!

  16. My understanding is this: In a Judicial Foreclosure state this UCC jargon is not relevant.

    In order for the Plaintiff to be “entitled to the presumption under Maine law that it could enforce the Note” the Plaintiff is required to prove sufficient transfer from a holder. FDIC v. Houde, 90 F. 3d 600, 605 (1st Cir. 1996)

    “An assignment of a mortgage unaccompanied by the note it secures is a nullity.”
    5 Star Management, Inc v. Rogers 940 F. Supp 512, 521(E.D. NY)

    Without the Note the plaintiff lacks standing to bring forth a claim of injury as a matter of law. This is important when the Exhibit A (the note) has a different lender than who the Plaintiff is representing(the Servicer ususally)

    Hope this helps.

  17. If this is true,then how do you explain the 2007 decision of federal Judge Christopher Boyko stopping 14 foreclosures in Ohio because the actual mortgage notes could not be produced in court?

    Tom

  18. hey that’s fine but we also don’t have to show if we paid our bills or not, what’s good for the debt is good for the debtor

  19. Any one else have any insights? Neil?

  20. I am lost, is this good or bad, how does this benefit or affect us?

    how can we better use this if at all?

  21. Please, break this down, so that a layman can understand. Thank you

  22. Neil,
    Is it possible for you to write a comment or explanation regarding the UCC-9 and how it affects the foreclosure defense?

    Your opinion, would be greatly appreciated by the foreclosure stressed and confused homeowners ! !

  23. OOPS!!!!

    Fla. 679 is Secured Transactions. It’s the Florida equivalent to UCC-9.

    Alina

  24. Ok guys,

    This is Fla. UCC 679: Negotiable Instruments

    679.336 Commingled goods.–

    (1) In this section, the term “commingled goods” means goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.

    (2) A security interest does not exist in commingled goods as such. However, a security interest may attach to a product or mass that results when goods become commingled goods.

    (3) If collateral becomes commingled goods, a security interest attaches to the product or mass.

    (4) If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under subsection (3) is perfected.

    (5) Except as otherwise provided in subsection (6), the other provisions of this part determine the priority of a security interest that attaches to the product or mass under subsection (3).

    (6) If more than one security interest attaches to the product or mass under subsection (3), the following rules determine priority:

    (a) A security interest that is perfected under subsection (4) has priority over a security interest that is unperfected at the time the collateral becomes commingled goods.

    (b) If more than one security interest is perfected under subsection (4), the security interests rank equally in proportion to value of the collateral at the time it became commingled goods.

    Question: wouldn’t securitized mortgages be considered commingled goods? Additionally, since the majority of these mortgages were table-funded (sold b4 the loans closed), wouldn’t subsection (2) apply? In other words, since the security interest was not perfected b4 the goods became commingled, it stands to reason that the security interest does not exist.

    Thoughts?????

    Alina

  25. Actually tony it was Diane who brought this to my attention this morning and it did change my life somewhat

  26. Its been on the books since 2001 and no one realised

  27. Thanks Mario – that burns me beyond belief… the fact that the appearance of regulation (facade) is placed out in front of the general public, such as FIRREA after the S&L and then picked at to leave giant loopholes for the people who know just where to find them (lobbyists, wall st. insiders and the likes).

    I guess the fight is better fought elsewhere, sounds like there is no such thing as a “flaw” under UCC.

  28. TA this was the email u sent me I sent this to the whole circuit as you see

  29. TA u are correct they covered the rear going in

  30. I really do not understand this. Can someone please explain? Thanks.

  31. If I understand correctly it makes no difference whether the note was assigned and NOT the mortgage and vice-versa?

  32. I have read over and over the Article related to” UCC: Possession is not an indicator of ownership of the note,” and I find it difficult to understand.

    Can somebody please explain what all this means?
    It looks like anyone can claim ownership of the note and can enforce and foreclose at their will..

    The wording is confusing for a person who is not an attorney and it really worries me.

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