The judicial system has fashioned a remedy, to wit: judges strive to PRESUME that the underlying transaction exists and as long as they can block the homeowner from showing the absence of any such transaction, their presumption is likely to be upheld by an appellate court (although that tune seems to be changing lately).
The Wall Street banks profited far more by forcing the loans to fail, foreclosing on the property and then abandoning the property they had foreclosed
THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
I keep hearing stories about homeowners frustration with their lawyers who fail to make the connection between what happens on Wall Street and what happens on Main Street. This is an example of how lawyers are seeing what goes on with Wall Street banks as too remote to be of any value. They have not made the connection because they are not paid enough to do the research and analysis of the facts and the law.
My suggestion is that the lawyer should ask themselves some simple questions:
1. If the REMIC Trusts were not funded, then how could they be the buyer of loans?
2. If the originator did not loan money to the borrower, then what is the value of a note that has their name on it as Payee?
3. If the custom and practice of the industry was to destroy notes and then fabricate them, forge them and robosign documents of “transfer” why should anyone be entitled to any legal presumptions about a “facially valid” instrument?
4. What harm would it do to require the foreclosing party or the enforcing party to prove that the underlying transaction actually exists?
5. If the note is evidence of the debt and the debt was never owned by the originator, what value is the note?
It is basic black letter law on bills and notes that the note is not the debt. It is evidence of the debt. What if the debt does not exist? The assumption is that the debt must exist because the borrower signed the loan papers. But a quick look at the Truth in Lending Act reveals that Congress found it necessary to pass a law against “table funded” loans and even dubbed them “predatory per se.”
In each of those cases the buyer has signed the loan documents without disclosure of the actual “lender.” TILA and Reg Z were originally designed to stop the practice of denying the borrower the right to know the name of the party with whom he/she is doing business. So even on the first level the practice is illegal, even if it was custom and practice in the industry to do it.
When the law was passed it was intended to cover situations in which the real lender hid behind the originator, but there was contractual privity (in some form of Assignment and Assumption Agreement) between the real lender and the originator. That is the prevailing assumption today. But for 96% of the mortgage loans that are subject to false claims of securitization (see “securitization fail”, a term used by Adam Levitin), the hidden party is not a lender either. So we have an originator who is not a lender and then a remote vehicle that is also not a lender but through whom the funds flowed to the closing agent.
The remote vehicle is a conduit for a conduit which is completely controlled by the Wall Street bank that created the REMIC Trusts on paper and then never activated the trust as a business entity. If you look closely you will see that the REMIC Trust is the Wall Street bank that created it.
The funding for the origination or acquisition of the loan comes from funds that were illegally diverted from the REMIC Trusts who issued and “Sold” MBS and deposited into a vast commingled dark pool. There is no privity between the originator and the dark pool or anyone who manages it. I know that from inside sources and pure logic — nobody who was being paid a fee for pretending to be something they were not would want a contract that showed that they agreed to violate the law. And the investors are stuck with worthless paper issued by an inactive REMIC Trust that was, according to the prospectus, to manage investor funds in a particular way, to wit: originate or acquire Triple AAA residential mortgage loans.
So the problem is that lawyers cannot conceive of a note without a debt. And even more challenging, they cannot conceive of the illusion of a loan transaction when in fact no legal debt exists between the borrower and the originator. Is there a debt in the legal sense? I think not. But there is a liability of the homeowner owed to the parties whose money was used to create the illusion of a loan transaction — without their knowledge or consent.
Hence for the past 10 years the bench has been legislating a result based upon the policy decision to take all the wrongs committed on Wall Street and immunize the dirty work done with documents (with unclean hands). The result is that millions of people lost their homes and other properties to entities who were merely adding insult to injury. first they stole the money, then they stole the house.
This becomes self-evident by looking at blighted communities, most of whose residents would have accepted modifications that would have preserved much of the value and security for the alleged loan. But they didn’t want the loans to succeed. The Wall Street banks profited far more by forcing the loans to fail, foreclosing on the property and then abandoning the property they had foreclosed. They were able to tell investors the loans had failed, so don’t expect any money. And more importantly, they were able to get a judge’s signature on the only legal document in the entire pile of papers creating the illusion of loan origination, loan acquisition and foreclosure.
We are left to wonder whether intentionally depressing property values with fake foreclosures might be some violation of anti-trust laws.
Filed under: foreclosure