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More and more of you are getting the message that you have remedies and defenses that might be stronger than what the “lenders” have. More and more lawyers are getting the same message but it is proceeding slowly. Some states have made if official: if you don’t own the note (which is the case in most foreclosures) then you can’t foreclose. But lawyers are slow on this one because they underestimate the value of the service they could be performing, underestimate the fees they could be earning and overestimating their own knowledge.
We’re Working on It.
The legal research on the cases was continuing when I ran across the San Diego case which stated grounds for the County to stop Countrywide foreclosures and could stop others as well. The intersection of the new California law, when read carefully, would indicate that the homeowner can at the very least buy time by demanding that the procedures be invoked. In all events, of course, I defer to the opinion of local counsel.
As several states, including Georgia, Florida, New Jersey, Ohio and others have already come to realize, the securitization of loans has created a cloud on two different titles — real estate and UCC. One is obviously dealing with a recorded instrument and the other is dealing with a negotiable instrument. In any case you end up advising or representing homeowners in distress, you will find that there are many defenses, many avenues for rescission and cancellation (including usury), appraisal fraud, common law fraud, RICO etc.
But in ALL cases I have reviewed, there is one common thread: the “lender” was paid in full plus a premium of around 2.5% that was not disclosed. The payment came from a third party who in turn parceled pieces of the note out to multiple third parties.
Several states now outright bar a mortgage servicer from bringing a foreclosure action for this reason — they have no interest in the note, they don’t have the note and they have no knowledge of upstream payments from AMBAC or other third parties that guaranteed revenue stream. In interest only loans it is highly probable that at least part of the “deficiency” has been paid to the real holder in due course — i.e., the investor holding certificates of pass through asset backed securities (who are ONLY holders in due course if they were unaware of thee various fraud and deficiencies at closing).
The position of the Lenders is simple. My “theory” (accepted in over 100 cases that are reported and apparently several times that number in unreported cases that have come to my attention through speaking with the lawyers who obtained the dismissals, is allegedly “gibberish.” (I have that in a letter).
They assert they are holders and that this entitles them to enforce the note and since the note follows the mortgage, I am all vapor, smoke and mirrors. Unfortunately, they didn’t read the provisions of the UCC carefully. The note does not follow the mortgage if the parties show an intent otherwise. And in the securitization of the note, they definitely separated the right to enforce the mortgage from the note itself — which they virtually admit by asserting that even though they don’t have the note they still have the right to enforce the mortgage filed in County records. The separation occurred in the Pooling and servicing Agreement and subsequent assignments to various entities and tranches within the entities and subsequent issuance of certificates of pass though asset backed securities.
Their assertion of being holder faces two problems.
First they probably are lying outright. Most notes disappeared because the assigned notes into the pool were forged by “lender” operatives who attached the forged notes to assignments in anticipation of loan closings that sometimes didn’t close at all (we have four Wells Fargo cases where there was no loan closing but they are foreclosing on the properties anyway) or where the actual note signed by the borrower was (a) filled in after the assignment into the pool of a forged note in blank or (b) differed from the forged note signed in blank that was assigned into the pool.
The second problem they have is that there is a presumption that because they are the holder or can produce a fraudulent affidavit of lost note signed by someone with no personal knowledge (see the King’s County Case), that there is nothing we can do. The holder doctrine is only a presumption. It can be rebutted by showing ANY evidence that this holder knew, should have known or could have known of the improprieties at closing. It can also be rebutted by ANY evidence that the holder is aware or should have been that there are third parties — necessary and indispensable parties — who have legal, constructive or equitable rights to either or both of the note and mortgage (Deed of Trust in non-judicial states).
The law states not that a holder can enforce, but that a holder in due course can enforce. Without the presumption of the holder being a holder in due course they are back at square one without any authority.
It is for this reason that in most states and under most circumstances, it is my opinion that properties subject to any mortgage acquired during 2001-2008 should be examined and investigated to determine if a quiet title action should be filed against the nominal lender, the nominal servicer (who probably has “authority” from a party that did not have the power to grant it) and John Does 1-1000 being holders of asset backed securities whose identity has been sought informally from the lender and which requests have been uniformly ignored.
So you see we are back to the Single Transaction. An investor put up money, part of which was used to fund your loan, and the other part was used to feed the sharks who took it as fees, and are now taking it again as they mark down the assets, give the losses to the borrowers and the investors while they pocket the difference by having received the money, the property and a judgment for “deficiency” as well.