RED Herring: VOID, VOIDABLE — What difference does it make?

 

Just a short note this Holiday extended weekend.

The banks have raised the whole issue of void or voidable based upon the potential for ratification. That is a red herring. The fact that something COULD happen does not mean it DID happen. What is even worse is when a court decides based upon the absurd notion that the act could have been ratified already despite the nonexistence of any evidence or even a claim that such ratification occurred.

So when Trust XYZ makes a claim then homeowner files the defenses or a lawsuit stating, for example, that the cut-off period has expired and the allegations or evidence shows that the paper documents all show the same thing — an effort to transfer the loan after the cutoff date.

So in plain English, the Trust is saying we own the loan and the Homeowner is saying you don’t own the loan because the documents upon which you rely violate the express terms of the trust instrument — the PSA upon which the Trust is relying for its authority.

Under civil procedure and the requirements of due process the next thing that should happen is that the Trust comes back and says the Homeowner is right but the act of taking a defaulted loan into the Trust after the cutoff date (violating two terms of the Trust instrument (PSA) was ratified by whoever they say ratified it. Then the homeowner would have the option of saying that the ratification did not or could not happen because the party designated as the one who ratified the act did not have the power to ratify it. And so on.

But the courts are short circuiting established civil procedure and due process. They are speculating that (1) a party with power to ratify exists and (2) that they could have ratified the act and finally that therefore the Trust will be treated as having ratified the act without any evidence of any of such ratification by anyone. And then the courts rule based upon speculation rather than evidence.

The issue is not whether something COULD have been ratified. Lots of things could be possible. The problem is that the Court is ruling upon a speculation of its own. At the time of such rulings the Court has no evidence that anyone could or would ratify such acts. They are forcing the putative investors to accept (a) a loan in default in violation of the trust terms and (b) to accept an act that negates the whole reason for the Trusts existence, to wit: to be treated as a pass-through entity for favorable tax treatment as a REMIC Trust under the Internal Revenue Code.

This all leads back to the same question we started with 10 years ago: where’s the transaction? If the “transfer” (on paper) of a “loan contract” on paper COULD create ownership of the debt by a REMIC Trust can that happen without purchase of the loan? And if there was no purchase (Payment) does that mean that the Trust is just another conduit for another layer of “owners” who actually paid value for “something” (a certificate issued by the REMIC Trust that was and remained inactive)? And if that is true, is that the point in time when the “creditor” in the putative loan transaction with the homeowner completely disappears?

Moral of the story: Don’t get caught up in the void or voidable argument. Dig deeper.

 

 

3 Responses

  1. Yes, we homeowners should have access to due process.

  2. Isn’t this where we get into the lack of physical indications affecting defendants’ claimed original note had it been conveyed to trust, like the ‘true sale’ transactions? True sale transactions would require an endorsement on defendants’ original note paper by either or both of the Sponsor and/or the Depositor prior to being sold to the trust. Both also would require proof of consideration, too. Then, there’s that MERS non-member issue requiring physical transfer of the loan file. Direct Assignment from the Originator to the Trustee (not to the Trust) is an impossibility, since the Trustee exists as a corporate ‘person’ only in relation to the Trust. That action, often, ostensibly occurred beyond the date after which the Originator existed. And, Assignments from MERS, or any ‘authorized’ signer for Originator, also ceased to exist. As if MERS had ANY beneficial interest to assign in the first place. They assume the note had already been transferred, when it had not. And, also assume the Assignment indicates a transfer of the note, which it does not.

    Too many things are wrong for any valid claim.

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