BeforeYou Open Your Mouth Or Write Anything Down, Know What You Are Talking About

EDITOR’S NOTE: By popular demand I am writing a new workbook that is up to date on the theories and practices of real estate loans, documentation, securitizations and effective enforcement and foreclosure of the collateral (real property — i.e., the house). The book will be finished around the end of January. If you want to purchase an advance subscription to an advance copy we can give you a discount off the price of $599. You will receive the final edit drafts of each section as completed. And your comments might be included in the final text with attribution. This is an excerpt from what I have done so far ( the references to “boxes” is a reference to artwork that has not yet been completed but the meaning is clear enough from the words):

[Note: I did borrow some phrases and cites from Judge Jennifer Bailey’s Bench Book for Judges in Dade County. But things have changed substantially since she wrote that guide and my book is intended to update the various treatises, books and articles on the subject of mortgage related litigation in the era of securitization]

 

INTRODUCTION

 

The massive volume of foreclosures and real estate closings have resulted in a failure of the judicial system — both Judges and Attorneys to scrutinize the transactions and foreclosures and other enforcement actions for compliance with basic contract law. This starts with whether there is an actual loan at the base of the tree of assignments, endorsements, powers of attorney etc. If the party at the base of the tree did not in fact make any loan and was not possessed of any actual or apparent authority to represent the party who DID make the loan, then the instruments executed in favor of the originator are void, not voidable. This is simply because the loan contract like any contract requires offer, acceptance and consideration. Lacking any meeting of the minds and/or consideration, there was no contract regardless of what one of the parties signed.

 

The interesting issue at the start of our investigation is how to define the loan contract. Is it a contract that arises by operation of statutory or common law? Is it a contract that arises by execution of instruments? What if the borrower executes an instruments that acknowledges receipt of money he never received from the party he thought was giving him the money? Is it possible for the written instruments to create a conflict between the presumptions at law arising from written, properly executed instruments and the real facts that gave rise to a contract that was created by operation of law?

 

These questions come up because there is no actual written loan contract. The borrower and lender do not come together and sign a contract for loan. The contract is implied from the documents and actions contemporaneously occurring at or around the time of the loan “closing.” It appears to be a case of first impression that the borrower is induced to sign documents in favor of someone who, at the end of the day, does NOT give him the loan. This never was a defect before the era of claims of securitization. Now it is central to the issue of establishing the identity and rights of a creditor and debtor and whether the debt is secured or unsecured.

 

Even where the loan contract is solid, the same legal and factual problems arise at the time of the alleged acquisition of the loan where assignments lack consideration because, like the above origination, an undisclosed third party was the actual source of funds.

 

 

 

Definitions:

 

 

 

1)   Debt: in the context of loans, the amount of money due from the borrower to the lender. This may include successors to the lender. In a simple mortgage loan the amount of money due, the identity of the borrower and the identity of the lender are clear. In cases where the mortgage loan is subject to claims of assignments, transfers, sales or securitization by either the borrower or the party claiming to be the lender or the successor to the lender, there are questions of fact and law that must be determined by the court based on the method by which the money advanced to or on behalf of the borrower that leads to a finding by the court of the identity of the party who advanced the money for the origination of the debt or for the acquisition of the debt.

 

a)    In all cases the debt arises by operation of law at the moment that the borrower receives the advance of money from a lender regardless of the method utilized and regardless of the validity of any instruments that were executed by either the borrower or the lender.

 

i)     The acceptance of the money by the borrower raises a strong presumption that the advance of money in the context of the situation was not a gift.

 

ii)    In simple loans the legal instruments that were executed by the borrower at the loan closing are presumptively supported by consideration as expressed in the note or mortgage and a valid contract presumptively exists such that the court can enforce the note and the mortgage.

 

b)   The factual circumstances and any written instruments that were executed by the parties as part of a loan contract govern terms of repayment of the debt.

 

c)    Enforcement of the repayment obligation of the borrower requires either a lawsuit on the loan of money or a lawsuit on a promissory note.

 

i)     If the lawsuit is on the loan of money plaintiff must state the ultimate facts upon which relief could be granted including the factual circumstances of the loan and the fact that the loan was made. In Florida — F.R.C.P. 1.110 (b), Form 1.936

 

ii)    The lawsuit is on a note plaintiff must state the ultimate facts upon which relief could be granted including that the plaintiff owns and holds the note, that Defendant owes the Plaintiff money, and state the amount of money that is owed. In Florida — F.R.C.P. 1.110 (b), Form 1.934

 

(1)Where the Plaintiff alleges it is a party by virtue of a sale, assignment, transfer or endorsement of the note, Plaintiffs frequently fail to allege the required elements in which case the Court should dismiss the complaint — unless the Defendant has already admitted the debt, the note, the mortgage, and the default.

 

(2)The burden of pleading and proving the required elements is on the Plaintiff and cannot be shifted to the defendant without violating the constitutional requirements of due process.

 

(3)Requiring the Defendant to raise a required but missing element of a defective complaint filed by a Plaintiff would require the Defendant to raise the missing element and then deny it as an attempt at stating an affirmative defense that raises no issue other than an element that was required to be in the complaint of the Plaintiff. This is reversible error in that it improperly shifts the burden of pleading onto the Defendant and requires the Defendant to prove facts mostly in the sole control of the Defendant and which would establish standing to bring the action.

 

d)   In those cases where the loan is subject to claims of assignments, transfers, sales or securitization by either party the court must decide on a case-by-case basis whether the legal consideration for the loan (i.e., the advance of money from lender to borrower or for the benefit of the borrower) supports the debt described in the legal instruments that were executed by the borrower at the loan closing.

 

i)     If the Court finds that the legal instruments that were executed by the borrower at the loan closing are not supported by consideration, then the debt simply exists by operation of law and is not secured.

 

(1)Such a finding could only be based on the court determining that the lender described in the legal instruments is a different party than the party who actually loaned the money.

 

(2)Warehouse lending arrangements may be sufficient for the court to determine that the named payee on the note or the identified lender supplied consideration. The court must determine whether the warehouse lender was an actual lender or a strawman, nominee or conduit.

 

ii)    If the court finds that the legal instruments that were executed by the borrower at the loan closing are supported by consideration, then a valid contract may be found to exist that the court can enforce.

 

2)   Mortgage: a contract in which a borrower agrees that the lender may sell the real property (as described in the mortgage) for the purposes of satisfying a debt described in a promissory note that is described in the mortgage contract. It must be a written instrument securing the payment of money or advances made to or on behalf of the borrower. A lien to secure payment of assessments for condominiums, cooperatives and homeowner association is treated as a mortgage contract, pursuant to the enabling documents. See state statutes. For example, F.S. 702.09, Fla. Stat. (2010)

 

a)    a mortgage, if properly perfected, creates a specific lien against the property and is not a conveyance of legal title or of the right of possession to the real property described in the mortgage contract. See state statutes. For example section 697.02, Fla. Stat. (2010), Fla. Nat’l Bank v brown, 47 So 2d 748 (1949).

 

b)   Mortgagee: the party to home the real property is pledged as collateral against the debt described in the note. Mortgagee is presumptively the party named in the mortgage contract. With the advent of MERS and other situations where there is an assignment of the mortgage (expressly or by operation of law) the named mortgagee might be a strawman or nominee for a party described as the lender. In such cases there is an issue of fact as to perfection of the mortgage contract and therefore the mortgage encumbrance resulting from the recording of the mortgage contract. See state statutes. For example F.S. 721.82(6), Fla. Stat. (2010).

 

i)     In Florida the term mortgagee refers to the lender, the secured party or the holder of the mortgage lien. There are several questions of fact and law that the court must determine in order to define and apply these terms.

 

c)    Mortgagor

 

d)   Lender: the party who loaned money to the borrower. If the lender was identified in the mortgage contract by name then the mortgage contract is most likely enforceable.

 

i)     If the lender described in the mortgage contract is a strawman, nominee or conduit then there is an issue of fact as to whether any party could claim to be a secured party under the mortgage contract. Under such circumstances the mortgage contract must be treated as naming no identified secured party. Whether this results in a finding that the mortgage contract is not complete, not perfected or not enforceable is a question of fact that is decided on a case-by-case basis.

 

e)    No right to jury trial exists for enforcement of provisions of the mortgage. However, a right to jury trial exists if timely demanded provided that the foreclosing party seeks judgment on the note or the loan, to wit: financial damages for financial injury suffered by the Plaintiff.

 

i)     Bifurcation of the trial for damages and trial for enforcement of the mortgage contract may be necessary if the basis for the enforcement of the mortgage is non-payment of the note. Any properly raised affirmative defenses relating to setoff or enforceability of the note would be raised in the case for damages.

 

ii)    In that case the trial on the breach of the note would first be needed to render a verdict on the default and then a trial on enforcement of the mortgage would be held before the court without a jury.  Any properly raised defense relating to fees and other costs assessed in enforcement of the mortgage contract.

 

iii)  A question of fact and law must be decided by the court in actions in which the plaintiff merely seeks to enforce the mortgage by virtue of an alleged default by the plaintiff but does not seek monetary damages. Florida Form 1.944 (Foreclosure Complaint) is not specific as to whether it is allowing for a single trial without jury.

 

(1)Since foreclosures are actions in equity, no jury trial is required, but it can be allowed. Since actions for damages require jury trial if properly demanded, it would appear that this issue was not considered when the Florida Form was created.

 

iv)  The requirement that the Plaintiff must own the loan is a requirement that the Plaintiff is not acting in a representative capacity unless it brings the action on behalf of a principal that is disclosed and alleges and attaches to the complaint an instrument that confers upon Plaintiff its authority to do so.

 

v)    Owning the loan means, as set forth in Article 9 of the UCC that the Plaintiff paid for it in money or other consideration that was equivalent to money. The same thing holds true under Article 3 of the UCC for enforcement of the note if the Plaintiff seeks the exalted status of Holder in Due Course which requires payment PLUS no knowledge of defenses all of which must be alleged and proven by the Plaintiff. [1]

 

3)   Note: a written instrument describing the terms of repayment or terms of payment to the payee or a legal successor in interest. In mortgage loans the payor is often described as the borrower. This instrument is usually described in the mortgage contract as the basis for the forced sale of the property. The note is part of a contract for loan of money. It is often considered the total contract. The loan contract is not complete without the loan of money from the payee on the note. If the lender was identified in the note by name then the note is most likely enforceable.

 


[1] In non-judicial states where the power of sale is recognized as a contractual right, the issue is less clear as to the alignment of parties, claims and defenses. In actions to contest substitution of trustees, notices of sale, notices of default etc. it is the borrower who must bring the lawsuit and in some states they must do so within a very short time frame. Check applicable state statutes. The confusion stems from the fact that the Borrower is actually denying the allegations that would have been made if the alleged beneficiary under the deed of trust had filed a judicial complaint. The trustee on the deed of trust probably should file an action in interpleader if a proper objection is raised but this does not appear to be occurring in practice. This leaves the borrower as the Plaintiff and requiring allegations that would, in judicial states, be either denials or affirmative defenses. Temporary restraining orders are granted but usually only on a showing that the Plaintiff has a likelihood of  prevailing — a requirement not imposed on Plaintiffs in judicial states where the lender or “owner” must file the complaint.

 

8 Responses

  1. @ TU ,

    What a bunch of idiots those UCR people in Colorado are ,, why forge docs when on consumer loans they already get a 98 or 99% award rate with default judgements… unless they feel bulletproof like the TBTF’s …

  2. http://www.coloradoattorneygeneral.gov/press/news/2013/12/10/attorney_general_brings_suit_against_fraudlent_debt_collection_companies

    ATTORNEY GENERAL BRINGS SUIT AGAINST FRAUDLENT DEBT COLLECTION COMPANIES

    Quoted within:
    The complaint was filed pursuant to the Colorado Consumer Protection Act and the Colorado Fair Debt Collection Practices Act with the Denver County District Court.

    Colorado’s complaint asks the courts to completely compensate or restore to their original position, all consumer injured by the defendants.

    Section of wikipedia
    Disgorgement is the forced giving up of profits[1] obtained by illegal or unethical acts. Black’s Law Dictionary defines disgorgement as “the act of giving up something (such as profits illegally obtained) on demand or by legal compulsion”.

    A court may order wrongdoers to pay back illegal profits, with interest, to prevent unjust enrichment. Disgorgement is a remedy and not a punishment.

    Trespass Unwanted, Creator, Corporeal, Life, Free, Independent, State, In Jure Proprio, Jure Divino

  3. New word for 2014.
    disgorgement

    The markets will reflect this, as they return what was stolen.

    Memorable quote from the movie 10,000 BC
    Tic’Tic: A good man draws a circle around himself and cares for those within. His woman, his children.

    Tic’Tic: Other men draw a larger circle and bring within their brothers and sisters.

    Tic’Tic: But some men have a great destiny. They must draw around themselves a circle that includes many, many more.

    Tic’Tic: Your father was one of those men. You must decide for yourself whether you are, as well.

    For all the heroes who didn’t fight only for their self preservation or that of their home, but who used the skills of the battle in the greater war and on all fronts have helped orchestrate a greater defeat for the benefit of all mankind.

    Trespass Unwanted, Creator, Corporeal, Life, Free, Independent, State, In Jure Proprio, Jure Divino

  4. Broken chain of title = Unjust Enrichment for the banksters.

  5. “REALLY ???……………………..take off the tin-foil before posting” For some people, that tin-foil is all the brain they will ever have.

    Hehehe. Too funny!

  6. Hello Everyone, I Hope You All Had a Wonderful Holiday! I did! Despite my 1st Christmas Morning Email … from BOA. No .. No .. No ….. the didn’t contact us to Wish us a Merry Christmas, just wanting Hubby to update his tele #, suggesting his # on file is out of date.
    Ha Ha Ha .& Ho Ho Ho
    We have had the same # for years.

    Still LMBO @ their Stupidity!

    P.S. There is NO CURE for Stupidity!
    But Duct Tape Muffles the Sound! 🙂

  7. REALLY ???……………………..take off the tin-foil before posting

  8. marilyn h Lane
    Affiliation: concerned individualSeptember 5, 2011
    The abominable banking system that is in place today, gives a bank great incentive to foreclose on an Ultra Vires contract, as the bank demands lawful money returned for the unlawful money lent.
    By what Authority are the Banks doing this? There is no authority for doing this. This is in complete prohibition to Art 1 Para 10 Cl1 of our US Constitution.
    All of our cases with slightly different facts all stem from the same Fraud.
    The Bank did not lend you LAWFUL MONEY but the Bank intentionally wrote
    a bad check and gave it to you –to circulate as money
    I certainly did not know this kind of fraud was going on when I signed my mortgage and note. Did you?
    The Mortgagor puts up a down payment, the Mortgagor pays a lot of fees and probably paid an attorney to represent them, all in order to get this bad check
    Would a Mortgagor have put in all that money, if one knew the truth of how the Banks ran their illegal business. I bet not.
    Did anyone notify you after that big day – the Banks check bounced – of course not. When the check that the Bank wrote came back to the Bank that wrote it, the bank didnt say we only have 5% , if that much and it was not stamped insufficient funds the bank stamped it paid
    So since the Bank did not have the money sitting in the banks account when they wrote the check, what the bank gave you is their credit.
    That is exactly what is prohibited by Art. 1 Para 10 Cl 1 of the US Constitution.
    What authority gives the Bank the right to make contracts with bad checks
    Nothing- Nada.
    Lawful money is needed to make a contract valid.
    Over and Over Mortgagors gave a Bank a mortgage on their castle , in return for a Bank giving you a credit entry on their books and charging you Interest on this credit. Also illegal.
    Did the Bank give you lawful money or is that what you got, credit?
    Banks are not allowed to lend their credit- Banks are in the business to lend
    lawful money There is not a Bank charter that allows a Bank to lend their credit.
    And as we continued to make monthly payments the Bank collected more money on their fraud.
    You try writing a check when you dont have funds sitting in your account to cover it.
    You can be sure that check is coming back markedinsufficient funds You are not allowed to do it and either is a Bank.
    This scam of Ultra Vire contracts caused injury to us, the true homeowners.
    In addition the banks are laundering bad checks.
    The Banks violate Truth in Lending Laws.
    The Banks are collecting Interest on money that doesnt exist. (Lending you 5% and collecting Interest on 95% of thin air)
    And once the Bank gets their Ultra Vire contract going, they start flipping them to MERS, Securitizations , Wall Street, Title Companies etc. there is no shortage of people all wanting to get their piece of the illegal profits.

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