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I am wondering if this is too narrow. The basic assumption that turns into a presumption that turns into a judgment is that the loan was made by the originator. In most cases that isn’t so. Hence the note is defective and so is the mortgage. I also think that this is less an issue of simple due process than an issue of equal protection — debtors in the class of foreclosure victims are treated differently than debtors of similar situations.
There is at least some due process in all these cases and the argument could be made that the state isn’t doing enough to provide more — but the whole strength of that argument depends upon an allegation and proof that homeowners as a class get less due process than any other class of debtors. As a result, presumptions that are rebuttable are treated as virtually unrebuttable leading to a final judgment based upon presumptions that are contrary to the facts. Note that the forecloser is taking the position that it is a holder for purposes of suing on the NOTE, and trying to piggy back that onto the foreclosing the mortgage.
My take on this is that the courts are treating the foreclosers as they would if they alleged and proved that they are holders in due course. But that would require proof of payment, acting in good faith without knowledge of the borrower’s defenses. The PSA requires the elements of a HDC.
It is only in foreclosure cases where the court tacitly converts the allegation of “holder” on the note to a foreclosure of the mortgage as if the creditor was present, when in fact the creditor in most cases doesn’t even have notice that they are about to have the tax status of their REMIC destroyed and they are about to have a losing loan pushed into their pool by an unsuspecting judge who does not realize that his Final Judgment is forcing a loss on the investor and the borrower that neither one consented to.
THAT is why I think this is more about equal protection than a simple case of due process. Embedded in the question to the Hawaii Supreme Court is the assumption that the note is even relevant. If the note, as we were all taught in law school, is EVIDENCE OF THE DEBT AND NOT THE DEBT ITSELF, then the refusal of the courts to provide homeowners with ample opportunity in motions, discovery and at trial is all wrong. All facts point to the conclusion that no money exchanged hands in connection with any of the existing documentation starting with the note and mortgage.
The homeowner was in fact given money directly from investor funds. The Trust was not used as a conduit, which is why there is a complete absence of allegations by the banks that they are holding these loans as holders in due course which would bar almost all of the borrower’s defenses. Instead, they allege they are “holders” knowing that Judges are probably going to use that allegation as a wall against the borrower’s defenses. So the banks get treated as HDC status even though they never alleged it. The banks can claim they did nothing wrong and blame the courts when the truth comes out. I wonder how that will play in the court of public opinion?
In all other cases that would not be true. But in foreclosure cases they give 3 minutes per case and rule on things without thought.
Filed under: foreclosure