Posted on May 26, 2014 by Neil Garfield
I think you should win this one if you do it right.
The banks fall right through the trap door on this one —- they prove that there was probable cause to believe that they were a valid creditor on the note (UCC3) but not a valid enforcer under the deed of trust (mortgage) (UCC9).
By alleging they are a holder and not a holder in due course they are admitting they didn’t pay for it and/or admitting that they took delivery with knowledge of the defenses of the borrower. That is basic black letter law, in my opinion. And one of the defenses is lack of consideration. either way they either need to show they paid for it — either directly with proof of a wire transfer receipt etc. or by getting a judgment on the note. THEN they can enforce the judgment. Neither way is non-judicial foreclosure permissible or constitutional.
Thus by their own argument and admissions they are an unsecured creditor with no right to enforce the mortgage because there is no question that they never paid value or consideration for the mortgage, which is the most basic requirement under UCC Article 9.
They may be entitled to the presumption that they can enforce the note. And perhaps the burden of proof shifts to the borrower to rebut the presumption. But remember the presumption is that the note is evidence of the debt — it is never that the note IS the debt.
If you have challenged the underlying transaction saying that the note refers to a transaction that never took place and therefore the note and the presumption of validity of the the note is rebutted — and if you are able to show the absence of an underlying transaction — simply asking for it and never getting it, then the note is not evidence of a debt and/or the assignment is not evidence of ownership of the mortgage (or deed of trust).
The same holds true for the mortgage. There must be an underlying transaction for the assignment to have any legal effect. There must be a SALE of the note just as there must be a LOAN of money if someone wants to use the note as evidence of the debt.
If there had been a sale of the loan, then they would be asserting the rights of a holder in due course. But they are not asserting that which means they are electing their remedies — they are choosing to sue on the note using the presumption of the validity of the note as evidence of the debt.
Allowing them to enforce an interest in land is bootstrapping the presumption available for the note into a prejudgment seizure of an asset to satisfy a judgment that does not exist. All of this circular reasoning exists because the banks refuse to show the money. They refuse to show it because it doesn’t exist.
Wipe the rebuttable presumption away and they have no case. The banks say that there is no reason for them to show consideration. They say that the presumption about the note ends the discussion. That is NOT why the presumption was created. The presumption was created because in most instances the underlying transaction is undeniably present and proof of it is a waste of time because nobody disputes it. That is precisely why it is a rebuttable presumption as opposed to an irrebuttable presumption.
If they want to sue on the note, let them. That is a judicial procedure. But then they must allege some things they cannot allege in good conscience — like anyone in their chain ever made a loan to the borrower or that anyone in their chain paid any money to purchase the loan. Or if that is swept aside, then they can sue as holder without the right of a holder in due course which means that the borrower can raise any defenses that could have been raised against the originator of the loan. And THAT includes lack of consideration.
Filed under: foreclosure