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In loan transactions there usually is no actual written contract that says the creditor will loan money and the debtor will pay it back. So common law and statutory law must make certain assumptions about the loan contract — which still must exist in order for the note or mortgage to be enforced. This is till basic contract law — the elements of which are offer, acceptance and consideration each to the other. The stumbling block for most judges is that the presence of money at the table is automatically construed as consideration for the contract that is sought to be enforced.
In olden times there was no problem in using this heuristic approach to loan contracts, because nobody thought of some third party funding the loan WITHOUT a note and mortgage made out in favor of the actual creditor. But Wall Street found a way to do it and conceal it.
The genius of the Wall Street scheme is that their lawyers saw the possibilities in this informal system. The borrower could not claim lack of consideration when he received the money and thus the debt was presumed. And with enough layers of deception, non-disclosure and outright lies, neither the borrower nor even the closing agent actually realized that the money was coming from Party A but the paperwork was directed to Party B. Nobody realized that there was a debt created by operation of law PLUS another debt that might be presumed by virtue of signing a note and mortgage. Obviously the borrower was kept in the dark that for every $1 of “loan” he was exposing himself to $2 in liability.
If the creditor named as payee and mortgagee was not the source of the funds then there is no underlying debt. The rules of evidence are designed to help the court get tot eh truth of the matter asserted. The truth is that the holder of the paper is NOT the party who was the creditor at “closing.” The closing was fictitious. It really is that simple. And it is the reason for the snowstorm of fabricated, forged and robosigned documents to cover up the essential fact that there is not one shred of consideration in the origination or transfer of many loans.
Each assignment, endorsement, power of attorney or other document purporting to transfer control or ownership over the loan documents is corroboration of the lack of consideration. Working backwards from the Trust or whoever is claiming the right to enforce, you will see that they are alleging “holder” status but they fail to identify and prove their right to enforce on behalf of the holder in due course or owner of the debt (i.e., the creditor).
Close examination of the PSA shows that they never planned to have the Trust actually acquire the loans — because of the lack of any language showing how payment is being made to acquire the loans within the cutoff period. THAT was the point. By doing that the broker dealers were able to divert the proceeds of sale of Mortgage Backed Securities to their own use. And when you look at their pleading they never state they are a holder in due course. Why not? If they did, there would be no allowable defenses from the borrower. But if they alleged that they would need to come forward with evidence that the Trust purchased the debt for value, in good faith and without knowledge of the borrower’s defenses — elements present in every PSA but never named as “holder in due course.”
If the signer of the note denies that the transaction was complete — i.e., there was no consideration and therefore there is no enforceable contract, then the burden switches back to the “holder” of the note to step into the shoes of the original lender to prove that the loan actually occurred, the original lender was the creditor and the signer was the debtor.