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EDITOR’S NOTES AND COMMENTS: My congratulations to Kentucky Attorney General Jack Conway and his staff. They nailed one of the key issues that cut revenues on transfers of interests in real property AND they nailed one of the key issues in perfecting the mortgage lien.
As we all know now MERSCORP has been playing a shell game with multiple corporate identities, the purpose of which, as explained in Conway’s complaint, was to add mud to the waters already polluted by predatory loan practices and outright fraud in the appraisal and identification of the lender. This of course is in addition to the very gnarly issue of using a nominee that explicitly disclaims any interest in the property or loan.
The use of MERS, just like the use of fabricated, forged, robo-signed documents doesn’t necessarily wipe out the debt. The debt is created when the borrower accepts the money, regardless of what the paperwork says — unless the state’s usury laws penalize the lender by eliminating the debt entirely and adding treble damages.
But the use of a nominee that has no interest in the loan or the property creates a problem in the perfection of the mortgage lien. The use of TWO nominees doubles the problem. It eliminates the most basic disclosure required by Federal and state lending laws — who is the creditor?
By intentionally naming the originator as the lender when it was merely a nominee and by using MERS, as nominee to have the rights under the security interest, the Banks created layers of bankruptcy remote protection as they intended, as well as the moral hazard of stealing or “borrowing” the loan to create fictitious transactions in which the bank kept part of the money intended for mortgage funding. Since the mortgage or deed of trust contains no stakeholders other than the homeowner and the note fails to name any actual creditor with a loan receivable account, the mortgage lien is fatally defective rendering the loan unsecured.
When you take into consideration that the funding of the loan came from a source unrelated (stranger tot he transaction) then the debt doesn’t exist either — as it relates to any of the parties named at the “closing” of the mortgage loan. So you end up with no debt, no note, and no mortgage. You also end up with a debt that is undocumented wherein the homeowner is the debtor and the source of funds is the creditor — in a transaction that neither of them knew took place and neither of them had agreed.
The lender/investors were expecting to participate in a REMIC trust which was routinely ignored as the money was diverted by the banks to their own pockets before they made increasingly toxic over-priced loans on over-valued property. The borrower ended up in limbo with no place to go to settle, modify or even litigate their loan, mortgage or foreclosure. This is not the statutory scheme in any state and Conway in Kentucky spotted it. Besides the usual “dark side” rhetoric, the plan as executed by the banks creates fatal uncertainty that cannot be cured as to who owns the loan or the lien or the debt, note or mortgage. The answer clearly does not lie in the documents presented to the borrower.
Now Conway has added the hidden issue of the MERS shell game. Confirming what we have been saying for years, the Banks, using the MERS model, have made it nearly impossible for ANY borrower to know the identity of the actual lender/creditor before during and even one day after the “closing” of the loan (which I have postulated may never have been completed because the money didn’t come from MERS nor the other nominee identified as the “lender”).
The Banks are trying to run the clock on the statute of limitations with these settlements, like the the last one in which Bank of America would have owed tens of millions of dollars had the review process continued, and instead they cancelled the program with a minor settlement in which homeowners will get some pocket change while BofA walks off with the a mouthful of ill-gotten gains.
The plain truth is that in most cases BofA never paid a dime for the funding or purchase of the loan. That is called lack of consideration and in order for the rules of negotiable paper to apply, there must be transfer for value. There was no value, there was no cancelled check and there was no wire transfer receipt in which BofA was the lender or acquirer of the loan. Now add this ingredient: more than 50% of the REMIC trusts BofA says it “represents no longer exist, having been long since dissolved and settled.
The same holds true for US Bank, Mellon, Chase, Deutsch and others. Applying basic black letter law, the only possible conclusion here is that the mortgages cannot be foreclosed, the notes cannot be enforced, the debt can be collected ONLY upon proof of payment and proof of loss. This is how it always was, for obvious reasons, and this is what we should re turn to, providing a degree of certainty to the marketplace that does not and will never exist without the massive correction in title corruption and the wrongful foreclosures conducted by what the reviewers in the San Francisco audit called “strangers to the transaction.”
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: attorney general, Bank of America, BofA, jack conway, kentucky, lack of consideration, MERS, MERSCORP, Mortgage Electronic Registry Systems, perfection of mortgage lien, shell game, state revenues | 57 Comments »