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Editor’s Analysis: Suppose you wanted to foreclose on property for which you never made a loan. Suppose you don’t have a lien and never did. Suppose you wanted to do this on a grand scale. How could you get away with it?
If you start with the premise in the preceding paragraph then the entire foreclosure and mortgage mess comes into focus and makes a lot of sense. Conversely if you start with the premise that all mortgage claims are presumptively valid then nothing makes sense and when you try to fix it you get nowhere. That’s what the Florida legislature is attempting to do with Senate Bill 1666 (appropriately numbered).
If you start with the premise that the mortgage claims are valid then it is quite logical and appropriate to conclude that the attempts by borrowers to escape inevitable consequences of their own bad judgment are clogging the court system and that borrowers are essentially abusing their due process rights costing each state billions of dollars in one form or another. But you have to ask yourself why there has been a sudden meteoric rise in the percentage of cases in which the borrower vigorously defends and brings claims against the supposedly valid holder of the note. What if all your assumptions and presumptions are not valid?
This is the essence of the issue confronting the courts, borrowers and their attorneys. And in a display of extreme irony the Wall Street banks even have the borrowers and their attorneys convinced that the loan was closed and the loan was sold. “The Loan” refers to the transaction that is memorialized in the loan documents. “The sale” refers to the transaction in which the loan was sold by the owner of the loan to a buyer of the loan.
There are two key questions:
- The first (origination) fact pattern is usually the same. A borrower applies to an entity that advertises itself as a lender and that “lender” agrees to loan the money to the borrower. A closing agent contacts the borrower with information concerning the closing of the loan. The borrower goes to the closing, the money appears, and the borrower signs a myriad of documents. Here’s the question: what if the “lender” did not loan the money and either played the part of an undisclosed nominee, and unlicensed mortgage broker or licensed mortgage broker, and never had a valid legal claim to collect on the note or enforce the mortgage?
- The second (assignment) fact pattern is also usually the same. In cases where there is litigation documents magically appear showing the assignment or endorsement of the loan using a claim of authority or the production of an apparent power of attorney. The assignment or endorsement frequently occurs more than once. There are actually two questions here: (A) assuming the facts in paragraph 1 above are true what difference does it make if there were one or 100 assignments? If there is no valid or perfected lien and the assignor never had a claim to collect on the “loan,” the assignment may give the appearance of propriety but it conveys nothing; (B) If the assignee never paid for the sale of the note how could the assignment transaction be considered complete? The Uniform Commercial Code governing the creation and sale of negotiable instruments indicates that each transaction must be for value received or consideration. Is the so-called assignment merely an offer lacking acceptance and payment?
You can have 100 or 1000 pages of documentation, but without a completed underlying transaction nothing in the documentation will have any legal effect on anyone despite the apparent “weight of the evidence.”
The point is actually very simple. Don’t get lost in the weeds of the documentation. The first question to be asked at the threshold is whether or not a transaction actually occurred containing the legal elements required for a completed transaction. If there is no consideration there is no transaction. If there is no transaction then there are no rights to enforce by or against anyone.
The arguments about the holder of the note are frankly silly. In the absence of consideration the party holding the note is merely possessing the note without any rights of collection or enforcement. If it were otherwise then any Courier, attorney or closing agent would be able to collect on the note and even foreclose on the mortgage leaving the lender out in the cold.
Whether or not a party is a holder or holder in due course is a question of law which raises presumptions if the proper foundation is established in order to conclude that a party is a holder or holder in due course. These are all legal conclusions and not factual issues. In order to establish the legal conclusion of holder or holder in due course the proponent of that legal conclusion must have a prima facie case showing a legal transaction in which ownership of the loan was transferred. Imagine if it were otherwise: accepting the circular logic of the banks, if six people were sitting around a table with a note in the middle the one with the fastest hands would be able to collect on a note and foreclose the mortgage. This is not the law.
As a tactical note, the practitioner should be relentless in the pursuit of the actual proof of payment (at origination or purported sale of the loan) without which there can be no proof of loss. If there is no proof of loss than there is no creditor. If there is no creditor there can be no credit bid at the time of auction of the property. And since that has occurred on a regular basis in all 50 states it would be fair to say that the sale of the property in foreclosure was never completed and that the homeowners still owns the home — or is entitled to compensatory damages equal to the value of the home because of breach of contract, slander of title, fraud etc. I believe that the claim that is easier to pursue is the one for compensatory and punitive damages plus attorneys fees and costs of the action.
In discovery what you are looking for is the actual wire transfer receipt, wire transfer instructions, ACH confirmation, cancelled check or Check 21 confirmation, showing the name of the party who paid and the name of the party who received the payment. Whether you are in small claims court or federal court the requirement is always the same. Any party seeking affirmative relief from the court must show that they were injured or damaged by the party whom they have sued. If they can’t show the payment and an unbroken chain of payments leading up and including the supposed assignment, then they have no claim because the court lacks jurisdiction and the party lacks standing to enforce or even consider a claim in which there is no injury.
So the answer to the question posed in the title of this article is no, the loan was never sold. We know that because the investors deposited money with the investment bank and it was the investors’ money that funded the loan. Contrary to popular misconception the money from the investors was never used to fund any pool of assets or trust. It was used directly to fund loans and the various fees to undisclosed third parties contrary to the requirements of the truth in lending act. The investment by the investors into each loan was the only time money changed hands which in turn means it was the only time that consideration existed.
That is why you will never find payment from one party to another in the alleged securitization chain. the truth is that there is no securitization chain and the banks intentionally failed to document the interest of the investors in each mortgage because the banks wanted to assert their own claim to ownership of the loan and the bogus securities allegedly backed by the loan. If they had been honest, then they would have taken the investor money, put it into an account that was owned by the asset pool, fund the loan from the asset pool and then document the transaction showing the interest of the asset pool at the time of origination of the loan or at the time that the loan was in fact sold to the asset pool for payment received.
And THAT is why I say that the existence of MERS is proof of fraudulent intent. There would have been no need for MERS or anything like it (See Chase Bank and Wells Fargo) if the Banks were not going to trade securities based upon THEIR ownership of a loan they never made.
If you prove these points in court I believe you will win the case.
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Filed under: CDO, CORRUPTION, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud Tagged: | assignment, consideration, credit bid, money changing hands, money damages, origination, proof of loss, proof of payment, sale of loan