Apparently I have been unsuccessful in getting the main point across about the so-called securitization of loans — show me the money is the demand, not show me the note.
First, in most cases, the securitization process never happened despite the pile of paper generated by the sham securitization scheme. The “mismanaged” money of investors really amounts to intentionally NOT depositing the investor money into the trusts that had issued the bonds. It also represented a whole different world of underwriting that broke every rule in the book for risk management. But that was the point. They wanted the risk to be higher than was advertised so they could bet, on inside information that only the banks had, that the loans and bonds would fail or be substantially diminished roughly in proportion to the drop in real estate prices.
So they needed loans to fail or at least for market conditions to change such that the banks could declare a “credit event” and collect insurance and other money that should have gone to investors.
But the point is that the loan closings, were, for the most part, a complete sham with strawmen at every seat at the closing table except for the borrowers who were completely unaware of who they were taking a loan from and under what conditions.
The problem that I am still encountering with both homeowners and their foreclosure defense attorneys is the disconnect between knowing the money arrived at the closing table and the wrongful conclusion that it must have come from the payee on the note and the mortgagee on the mortgage.
In most cases the payee was a strawman, the mortgagee was a strawman, and the lender was a strawman. The worst part is that they were strawmen in a fictitious transaction — i.e. the loan never occurred which is why in common pleading today the foreclosing party scrupulously avoids alleging that a loan was ever made to the homeowner. They don’t want the burden of proof on them in their complaint that there was a loan because there was no loan.
BASIC PLEADING ERROR: Instead of alleging the loan and financial injury they skip to the signing of the documents. Yes, the homeowner signed many documents, but the bargain was that the homeowner would get a loan from the people with whom he had accepted an offer. The loan was consideration for the contract, and without consideration there is no enforcement of any contract.
This is the sticking point in the minds of many lawyers, including foreclosure defense attorneys. In fact, even the client finds it hard to believe he never had a deal with the people on the signed documents. After all money DID show up at the closing table, so how could deny the loan?
And why should the homeowner win in litigation with the foreclosing party when it is so obvious that the homeowner did receive money, and therefore by operation and presumption of law was obliged to pay it back?
I am trying to make this as simple as possible and directly address the issue that lawyers are having applying the true facts of the transaction to the requirements of contract law and property law evolved over centuries.
Mere knowledge of a loan does not make anyone a lender. If I know you received a loan from anyone that gives me no rights. If anything, my knowledge might be an invasion of privacy if you didn’t tell me.
An enforceable contract requires offer by one party, acceptance by the other party and CONSIDERATION passing between those parties. This is basic contract law. Skirting the requirements of contract law and property law opens Pandora’s box with hope crushed and annihilation a certainty. It is because avoiding basic precepts of law eliminates certainty in the marketplace for any transaction.
The real description of the real transaction is simple: in most cases the investors gave money to investment bankers under false pretenses but the money was given and the investment bankers had it. That was a real transaction, even though the paperwork that supposedly provided the terms of the investment were completely ignored. The investor money was being held by the investment bank. Real money and no doubt that occurred.
Next, for simplicity sake, the investment bank funded the origination or acquisition of loans through a series of conduits, some of which included regional banks who don’t show up as foreclosing parties but who made billions acting as conduits to scrub the money before it was received by the closing agent.
The net effect was a wire transfer from an entity with no relation or connection to the homeowner, the closing agent, the lender, the payee, the mortgagee, the mortgage broker or the originator. The wire transfer is received by the closing agent and applied to a “closing” that was a sham. The paperwork was there and the money was there, but the money never came from the parties to the paperwork.
In some cases (perhaps 20-25%) the loans were acquired in the same way but there was no need to have a closing agent, to make it look like a bona fide transaction was taking place. In most cases, the loan origination was a complete sham.
So who is the lender? It can only be the the investors who were the actual source of funds. But, as we have seen in multiple lawsuits from lenders, insurers, credit default swap counterparties, and the federal government, the banks claimed to be the lender since the money looked like it had come from them, even tough they were violating the terms of their agreement with the investors and were acting as an agent or conduit for the investors.
So then I am asked, what difference does that make? The answer is that the paperwork makes it seem that the loan was an executed contract with offer, acceptance and consideration, but it failed in reality because none of the parties to the written documents were in fact a lender, creditor or took part in any way in any real transaction with the homeowner. The moment after the loan documents were signed, the homeowner could not obtain a satisfaction of mortgage and return of the paid note, because the investors were the only people who could sign such documentation.
But the investors could not return the original note because they never received it. And even if they received it, someone else had their name on the note as the payee. And the investor could not execute a satisfaction of mortgage that would have cleared the title of that encumbrance because they had never received the mortgage document, nor any assignment, nor was their name on the mortgage or deed of trust as beneficiary, mortgagee, lender or anything else.
So the bottom line is that the paper trail is just that — a trail of paper unsupported by any real transaction. If it were otherwise you can bet the Banks would be producing canceled checks and wire transfers and telling me to shut up. But in my cases, they are fighting me tooth and nail so they are not ordered to produce it. But they are telling me to please shut up.
A paper trail can only be one thing under law — evidence of a transaction. The debt is created when the money is received and by law the debtor is the receiver of the funds and the creditor is the source of the funds. First thing we learn in Contracts 101 is that the note is not the debt, it is evidence of the debt. The mortgage is not the debt, and it isn’t even evidence of the debt. it is a separate agreement to provide enforcement mechanisms for the note.
But the note was executed with the expectation that the homeowner would be getting money from the payee on the note. They didn’t get money from the payee on the note (in most cases). In fact, they didn’t get money from any of the parties disclosed to them in the disclosure statements and HUD settlement forms required by law. To make matters worse, the homeowner did not receive money from ANYONE in the paper trail. So this was not a table-funded loan, this was an UNFUNDED loan transaction which makes it unenforceable.
The current practice of not claiming in the allegations of the foreclosing party that a loan ever took place is an effort to force the homeowner to state it as an affirmative defense — thus violating due process. The homeowner should be able to simply deny the allegation which would keep the burden of proof on the foreclosing party. Then the foreclosing party would need to show proof of payment in order to make a prima facie case.
Instead judges are allowing the complaint to supposedly state a cause of action without alleging the loan and without alleging financial injury which opens Pandora’s box in discovery. So let’s look at the complaint and what it means. The foreclosing party need only allege that the homeowner signed the paperwork, and didn’t comply. the rest is history and “inevitable.”
The principles of pleading are that there must be a present controversy that is not hypothetical or to be inferred. The simple rule is that you must make a short plain statement of ultimate facts upon which relief could be granted.
Alleging the execution of a document by one party without alleging that it was part of an enforceable and executed contract is alleging that you have evidence of something but you won’t say whether anything actually happened. Therefore you won’t say if you have financially damaged. This flies in the face of the basic rule of construction in filing a complaint:
BREACH OF DUTY
In contract law, this means a duty imposed by a contract that is enforceable. I submit that it is basic bold black letter law that if you don’t allege a transaction conducted pursuant to a contract based upon the essential elements of offer, acceptance and consideration you have failed to state a cause of action and you have failed to establish the foundation for alleging that you were damaged.
Further, I submit that the failure to make such allegations fails to invoke the jurisdiction of the court over the parties or the property or the rents. And I further submit that any judgment rendered without a proffer of evidence of the loan of money by the parties in the paper trail is void, based upon fraud and should be vacated.
Simple reasoning: if those complaints are not dismissed for lack of jurisdiction and judgements are entered, the homeowner is stuck with possibility that someone will show up with the real promissory note and be able to prove it was their money that the homeowner received. What will be the defense of the homeowner in that position? That is why we have laws, rules of civil procedure, and pleading requirements.
If those foreclosure sales are not vacated, the fact is that anyone holding property subject to claims of securitization will never be able to get rid of the mortgage encumbrance even if they pay it off in full as demanded by some party in the paper trail. They cannot sell the property and warranty title, they cannot refinance, and they cannot modify or settle the claims without the real source of money being involved in the process.
Filed under: foreclosure |