What and Who is a Creditor?

Practically everyone thinks they know what is a creditor even if they cannot identify who is the creditor. The reason that this is important is that the lawyers for the banks have created a divergence of the money trial and the paper trail. One is worth every cent claimed and the other is worth nothing, but for the repeated acceptance of a claim as proof in and of itself that a real transaction is referenced in the paper trail. In most cases, it isn’t.

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The problem is very real when you look at it through a semantic lens.

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What is a creditor? In court it has come to mean anyone with a claim. What it does not automatically mean is that the so-called creditor owns the debt. In normal situations before claims of securitization, ownership of the debt was presumed to be underlying the claim for money and thus the term creditor and owner of the debt were used interchangeably. That is what the TBTF banks were counting on and that is what they got.

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The “creditor” in foreclosures is just a party holding paper. If the paper is fabricated or otherwise does not represent an actual transaction in real life it should be struck since the paper doesn’t prove anything. A note is evidence of the debt. It is not the debt. That is why we have the merger doctrine to prevent double liability. But the merger doctrine only operates if the Payee on the note and the owner of the debt are the same.

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If the party seeking the foreclosure cannot produce the proof that the Payee and debt owner are the same, then the note lacks foundation and would be disallowed as evidence. The mortgage being incident to the note would therefore secure nothing and would be equally invalid and subject to being removed from the country records. More than a decade of experience shows that you won’t get anywhere at trial with his knowledge UNLESS you have conducted proper discovery and pursued it through motions to compel.

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But what we are left with is entirely counter-intuitive. You end up with a debt owner with no paperwork and the homeowner having two liabilities — one in the form of a debt that arises by operation of law when the debt owner advanced money and the homeowner received it — and one in the form of a potential liability in the form of a note that has no reference point in the real world, but if acquired by value in good faith and with no knowledge of the borrower’s defenses, can nonetheless be enforced leaving the maker (homeowner) to seek remedies from other parties who tricked him. {See Holder in Due Course}

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This type of analysis is not well received by courts who come to each situation with a bias toward what they perceive to be “the bank” who wouldn’t be in court if they were not the owner of the debt. But as we have seen in most instances “the bank” is not appearing on its own behalf but merely as a representative of what is most often a nonexistent common law trust. If there is any bank involved at all it must be the underwriter of “securities” that were issued under the name of an alleged REMIC Trust.

Nonetheless we see the courts referring to the case at U.S. Bank adv the homeowner instead of saying XYZ Trust adv the homeowner for the simple reason that in practice styling the case refers to the first name that appears on the pleadings. So invariably the case is referred to as “U.S. Bank. adv John Smith.”

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This continually reinforces the erroneous presumption that this is a case of a financial institution versus the homeowner; in fact, however, it is a case of an unlicensed unregistered private entity (the alleged REMIC Trust) outside the world of banking or finance whose existence as a trust entity is problematic at best, especially if the subject loan was never purchased by the Trust (acting  through the Trustee).

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Without the debt being entrusted to the Trustee on behalf of the Trust there is no trust. The existence of an assignment, absent evidence of purchase, merely means that the alleged Trust has “ownership” of the paper, not the debt. But in practice owning the paper raises a presumption of ownership of the debt — which is why so much effort must be made toward preventing the application of the presumption through objections to foundation that are themselves founded on prior discovery showing the failure or refusal to provide proof of ownership and in fact, proof the paper chain being congruent with the money trial.

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Hence the claim of creditor status may be true as to the paper but untrue as to the debt or any other monetary transaction in the real world.

3 Responses

  1. “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” – Lord Acton

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  2. The 5th Circut Appeals court clearly defined who IS a creditor. Look thorough this case: Riviere v. Banner Chevrolet, Inc., 184 F.3d 457, (5th Cir.1999) and note the following language.

    (Not that this helped me as my judges didn’t seem too interested in my pleadings.)

    “When it enacted TILA, Congress “delegated expansive authority to the Federal Reserve Board to elaborate and expand the legal framework governing commerce in credit”. Fairley, 65 F.3d at 479 (quoting Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559-60 (1980)). To implement TILA, the FRB promulgated “Regulation Z”, located at 12 C.F.R. 226. See id. Regulation Z defines a “creditor” as “[a] person (A) who regularly extends consumer credit …, and (B) to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract”. 12 C.F.R. 226.2(a)(17)(i). Regulation Z also contains an official FRB staff interpretation regarding the distinction between “creditors” and “assignees”:

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    If an obligation is initially payable to one person, that person is the creditor even if the obligation by its terms is simultaneously assigned to another person. For example:

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    *An auto dealer and a bank have a business relationship in which the bank supplies the dealer with credit sale contracts that are initially made payable to the dealer and provide for immediate assignment of the obligation to the bank. The dealer and purchaser execute the contract only after the bank approves the creditworthiness of the purchaser. Because the obligation is initially payable on its face to the dealer, the dealer is the only creditor in the transaction.12 C.F.R. pt. 226, supp. I, subpt. A, cmt. 2(a)(17)(i)(2) (emphasis added).”

    There you have it; “…AND (B) to whom the obligation is INITIALLY PAYABLE, either on the face of the note or contract,…”

    If the creditor must be initially payable, how is it possible that any other party miraculously becomes a creditor at some future date?

    Unless, of course, the truth is that, “the beatings (i.e. drubbing of Americans) will continue until morale improves.” I assure you, morale isn’t improving.

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