Posted on September 11, 2010 by Neil Garfield
A contributor writes: “A number of CW cases come up with the Note titled to “Americas Wholesale Lender.” Nowhere in the Note is CW actually mentioned. Watch out for these. CW claims to be using the AWL name as a “trade name” but of course you cannot sue or maintain any cause of action in the name of a trade name.
Further complicating these situations is that there actually is a bona-fide New York Corporation with the name “Americas Wholesale Lender Inc.”
That has interesting implications. As the Note is made out to them, the payments should go to them. AWL will cooperate with the borrower to resolve these title issues, typically.”
We see this a lot with similar situations. The name of a “lender” turns out to be a fictitious name (d/b/a) of some other entity. The use of fictitious names can get complicated and usually requires a lawyer to sort it out. In the above case, which is nearly identical to several dozen I have seen with other parties, the “originating lender” is not even a legal entity. A legal entity is a natural person or a corporation or other business structure formed under the laws of a specific State. These “lenders” do not have a legal existence if they do not conform to state statute.
It is often the case that an unrelated corporation exists in some state with the same name as the originating lender. As out contributor states, the fictitious name “party” has no legal existence and cannot sue or defend any action. The legally formed entity with that name technically could claim the payments or rights under the obligation, note or mortgage (Deed of Trust) but obviously does not want to become embroiled in litigation over a deal with which it knows nothing about.
The proper way for this to be handled is for the title agent to correct it with a corrective instrument filed of record. And while there are a number of ways to do this, the best practice would be to have the borrower sign the corrective instrument so there is no cloud on title. The problem however is that borrowers are going to be loathe to cooperate with such corrective instruments. Legally, the naming of a fictitious entity creates no rights under that instrument so neither the note nor the mortgage or Deed of Trust would be a valid obligation or encumbrance.
But this does not mean the obligation doesn’t exist. The fact that it was a table-funded loan (where the source of funding is hidden) may give rise to defenses and claims by the borrower. However, the party who was the source of funds may establish that they were the principal in that transaction and seek to impose an equitable lien or at least a perfected claim under the note. This is one example of why the technicalities matter. Allowing fictitious entities to initiate foreclosures and sales clouds title further and opens the door for moral hazard on the same scale that produced this mess in the first place.
We seek a stable marketplace instead of the chaotic effects of musical chairs at the point of declaring a default, foreclosure, auction and issuance of new title. That simply can’t be done when the identity of the real party in interest is allowed to remain hidden and the accounting for all payments received is allowed to be ignored. The homeowners who were victims of this fraudulent appraisal and loan scheme, as well as parties who believe they are successors in title are going to need help in clearing title. Either the break in the chain of title is going to be routinely ignored, or the procedures allowed in foreclosures are going to be enforced. We hope it is the latter as it leads to a better result for society as a whole. But it is obvious that a lot more work needs to be done to illuminate this problem before anyone concedes it needs to be fixed.
Filed under: foreclosure |