Terms of Art: Assignment or Endorsement?

Lawyers, judges and homeowners are using different terms interchangeably thus muddying up the argument or ruling. An assignment refers to a mortgage whereas an   endorsement (“indorsement” in legalese) refers to a note. The rules regarding enforcement of a mortgage are different than the enforcement of a note.

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I want to point out the difference between assignment and endorsement. Because judges often defer to bank lawyers to explain the law, there is some confusion there. Often the point is that there was no valid purported assignment of the mortgage and there was no valid endorsement of the note. The argument has great significance particularly in view of the use of sham conduints at the initial “closing,” where the disclosed “ledner” is a misrepresentation, thus preventing the doctrine of merger in which the debt is merged with the note.
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By law, notes are not assigned. They are endorsed if a transfer occurs. Like a check the endorsement must be on the face of the instrument (like the back of the check), or if there is no room because of prior endorsements then an allonge must be permanently affixed to the note containing the endorsement. A separate paper is not an allonge, by definition.
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Keep in mind that the note is not the debt and the debt is not the note. The note can be (a) evidence of the debt or (b) merged with the debt (to prevent double liability only if the payee on the note is the same as the lender. The only exception to this is if the payee was acting as a disclosed agent for the lender. The debt exists regardless of whether there is paperwork. The note might exist but it might be invalid depending upon whether it memorializes a real transaction between the parties on the note.
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In practice in the typical “closing” the borrower signs the note and mortgage before he receives the alleged loan. Neither one should be released, much less recorded, by the closing agent unless and until the borrower receives the funds or money is actually paid on the borrower’s behalf by the Payee on the note. When it comes to purported transfer of these residential “loans,” low level employees are not given powers over tens of millions of dollars worth of loans in banking custom and practice.
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The biggest point I wish to make here is that the assignor and assignee of a mortgage must exist legally and actually. Similarly the endorser and endorsee of a note must exist. An apparently valid assignment or endorsement to a party who did not purchase the debt can result in two things: (a) the assignment of mortgage is not valid because it failed to transfer the debt and/or (b) the failure of the assignment to transfer the debt may be fairly construed as failing to place the subject loan in trust. Without the trust owning the debt (as evidenced by a real transaction in which the debt was purchased from a party who owned the debt), the trust does not exist as to the subject loan nor does it exist at all if that was the practice with respect to all alleged loans for which there was a transfer on paper that did not memorialize real life events.
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Three endorsements:
Dated special endorsement to a particular party. This will be treated a presumptively valid. But the presumption can be rebutted — if the endorser (“indorser” in legalese) did not own the note or otherwise have the right to act as agent for a party who did own the note. This is the point of our TERA — to expose the fact that the paper is self generated and self serving and fabricated by revealing the one simple fact that the party who executed the endorsement was an actual or fictitious individual who was probably a robo-signor on behalf of an entity that did not own the note nor have the power to assign.
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Undated special endorsement to a particular party. If it is undated, it is probably fabricated because custom and practice in the industry does not treat mortgage loans the same as they treat checks. When dealing with high ticket items a special endorsement that is dated would (a) ordinarily accompany an assignment of mortgage (often abandoned by the foreclosing party) and (b) MUST be accompanied by acquisition for value — i.e., purchase of the debt. Ordinarily there would also be correspondence and written agreements concerning the sale of the note and mortgage. Those are issues for discovery.
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Dated or undated blank endorsement — bearer paper. As stated above, big ticket items usually are not generally transferred by blank endorsements, assuming the paper is actually “negotiable.” Hence if it is bearer paper (no person identified as the endorsee) this is likely a fabricated, backdated document, if it is dated, or just a blanket self serving document that consists of a misrepresentation to the court. Note that most provisions in a PSA (Pooling and Servicing Agreement, also referred to as the “trust instrument”) state specifically that (a) the “trust” is organized to be a REMIC vehicle which means there is a 90 day window in which they can acquire loans (the cutoff period) and (b) the assignments must be in recordable form and (c) the endorsements must be valid. Otherwise, the apparent transfer cannot be accepted by the Trust under REMIC rules (see Internal Revenue Code 26 U.S. Code § 860D – REMIC defined), under the powers of the Trustee (virtually nonexistent in most REMIC Trusts), and under New York Law which almost always invoked as the  State in which the Trust is organized. New York Law states that any act that contravenes the powers expressed in the Trust instrument are void, not voidable. So a transfer after the cutoff date is void, as it would ruin the REMIC status under the IRC and violate the specific provisions of the Trust designed to invoke the REMIC rules.

23 Responses

  1. don’t worry about it…just go make money with it.

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  2. @ Bob G.

    I wholly concede a mistake.

    There is no such object as a “Recovery” Act.

    **Shakes head in self-disgust.**

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  3. FDCPA is federal law, but some states have their own Fair Credit collection laws. Once a bank charges off debt, it can no longer accrue interest on that debt unless it returns the debt to a performing status. Debt collectors are restricted by states on how much interest they can charge.

    So — on what on-balance sheet, for accrual of interest, did the private trust bank loans lye? Were never there. Why not? .

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  4. KALI…can we agree that there is no such statute known as “Fair Debt and Credit Recovery Act?” And you might be able to restrict the mortgagee to the amount it paid for the debt plus accruals, but you’re not going to find that in the FDCPA. I’ve made good and easy money suing debt collectors, so i’m pretty certain of this.

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  5. @ Bob G.

    Below is the link:

    https://www.ftc.gov/system/files/documents/plain-language/fair-debt-collection-practices-act.pdf

    I’m searching for the “black and white” indicating that the debt collector can only recover what he paid for the debt.

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  6. Ian…there is no “Fair Debt and Credit Recovery Act.” Where are you getting this from? And show us where “in black and white” any statute says that the debt collector can only recover what he paid for the debt.

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  7. It was a relatively simple program… Use correspondents and other subsidiary entities to acquire “qualified mortgages”… as revenue opportunity declines, redefine credit guidelines and have Newt Gingrich lobby on behalf of Fannie Mae to permit the former GSE’s / quasi governmental agencies to purchase Non QM loans. When shit hits the fan, consolidate all of the investment banks and other non depository mortgage lending institutions into the Reserve System Banks for pennies on the dollar of portfolio value… i.e Bear Stearns to Chase .04 on the dollar of actual marked assets prices… Thereafter, have the FED’s keep rates at artificially low levels, and pour cheap credit (dollars) into the system, pushing asset values past their 2007 highs… Nobody went to jail?

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  8. Roger/ANON- re: debt collectors:
    Under the FDCRA ( Fair Debt and Credit Recovery Act), a debtor is only obligated to pay the amount that the debt collector paid for the debt. That’s the law in black and white.
    But then neither the debt collectors nor anyone else appears to have purchased the debt, only the mortgage servicing rights, or MSRs. This is why all the documents are forged, fabricated , backdated and otherwise falsified.
    So during QE I thru QE IV, I can’t for the life of me figure out what the Federal Reserve purchased for 6.3 trillion dollars, as they were buying 85-100 billion per month of alleged MBS. All I can figure is that they were buying prime performing loans, but the. Why would they do that?

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  9. The criminal banks and/or servicers ADMIT they are nothing more than lowlife debt collectors in every phone conversation. These debts are at very best UNSECURED. And at very least NOT VALID DEBTS. Fraudclosures should be impossible!!

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  10. Roger — you are correct.

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  11. the people of the USA are the owners of the debt, the gov is their agent, they don’t want you to know that you foreclosed on yourself

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  12. And I’m premising that on the fact that these are all defaulted debt collections by debt collectors. The servicers are debt collectors, not servicers.

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  13. ANON: agreed. The bank lawyer has the note, but where does the payment stream go? I surmise only to the servicer.

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  14. Good questions Roger. And how about if the loan was reported as liquidated to the trust, without any actual prepayment?

    So, in effect, the “servicer” or “Master Servicer” would own the loan. But they still claim they are a servicer, so then servicer for who?

    I don’t think the people were ever told what really happened to their loan.

    Whatever was signed — was not the truth. .

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  15. Hi all. Hey ANON, I found some language in the Prospectus Supplement you might enjoy…

    Refinancings At the request of the mortgagor, a Servicer, including Wells Fargo Bank, may allow the refinancing of a Mortgage Loan in any Trust Estate serviced by such Servicer by accepting prepayments thereon and permitting a new loan secured by a Mortgage on the same property. Upon such refinancing, the new loan will not be included in the Trust Estate. A mortgagor may be legally entitled to require the Servicer to allow such a refinancing. Any such refinancing will have the same effect as a prepayment in full of the related Mortgage Loan. In this regard a Servicer may, from time to time, implement programs designed to encourage refinancing through such Servicer, including but not limited to general or targeted solicitations, or the offering of pre-approved applications, reduced or nominal origination fees or closing costs, or other financial incentives. A Servicer may also modify the payment terms of a defaulted Mortgage Loan or encourage selling a Mortgaged Property securing a defaulted Mortgage Loan for less than the unpaid principal balance of such Mortgage Loan.

    How about if the Mortgagor (us) were never told our loans were refinanced.

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  16. I’m in a mortgage state. don’t have much experience with deeds of trust.

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  17. You know — can go over and over, again and again, why everything is wrong. But, why it is wrong is still the big issue. Nothing happened in these conduit “refinances” — other than a transfer of already classified default debt. Nothing was paid off at the so-called refinance. This is why their is an attempt to “recreate” the chain. But the chain is long gone. It ceased to exist once that refinance was claimed to be executed. If this was a real “mortgage” and “note” refinance– it would have been on someone’s balance sheet and the conduit would be irrelevant to the borrower. This is not the case. Neil is right — nothing was funded. It did not have to be. Was only a transfer of already classified default debt.

    One more point — the “trust” cannot act without a trustee. The courts are well aware of this. Trustee is the legal owner/holder on behalf of the trust beneficiary “security” investors. If one is going to eliminate the trustee — and one is in federal court — demand diversity jurisdiction review, and the names of the beneficial security investors to determine whether diversity exists.

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  18. My $.02 the DOT is the controlling document. They want that deed…but nothing attaches the indebtedness to the deed, even if, under the law they say its automatic and I am not buying it, the note follows the deed, in theory only. Rules created for the cheaters…it’s laughable when they assign the DOT in one year and the note 3, 4, 5 years later, DAH? These notes have been passed around like old prostitutes. Much of the time no one really knows how they got in their possession…and Bob, I know you will jump on this, but been through so much court at this point, and deed offices all around the country. They all look the same…all garbage!

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  19. In my opinion QWRs are worthless. Judge’s are not interested in a state court foreclosure action. bring a separate action in a city court that is a court of competent jurisdiction. you’ll get a settlement offer of $1,000-$2000.

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  20. Good basic points that somehow lawyers miss on many cases

    QWRs complaints to agencies should provide copies of notes w “tada” endorsements and other back dating type inconsistencies but it seems banksters get away w blank endorsements all the time.

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  21. Iam Lazarus,

    There are some inaccuracies in your post. The mortgage follows the note as an inseparable incident thereto. The mortgage doesn’t have to be assigned to anyone.

    “The security instrument memorializes the purchase, negotiation and transfer of the debt evidenced by the note, but, the “unidentified-purchaser” of the debt must be proven to match the “named-assignee” of the security instrument.”

    No, not true. It would be the other way around. The mortgage doesn’t need to memorialize anything. The note memorializes the debt, and with the debt goes the mortgage.

    I agree with the rest of your post and would add that in discovery, the note owner’s general ledger, subsidiary ledgers, and general journals should be demanded showing proof of the note going onto the plaintiff’s accounting records, and the price paid for the note. the plaintiff can’t do this because the plaintiff has no accounting records, and the servicer’s records don’t count. I would also demand an execution copy of the the flow servicing agreement between the note owner and the servicer. this is a contract separate and distinct from the PSA.

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  22. Whenever a negotiable instrument is endorsed and transferred “in-blank,” it (should) be met with an immediate response to the party propounding the “in-blank” endorsement, demanding their proof of purchase of the debt owed, along with their concurring recorded assignment of the security instrument, correctly identifying the “undisclosed debt-purchaser,” providing proper constructive notice to the public.

    In order for a note to be negotiated and secured to a “blank-endorsee”, the security instrument must be perfected to the same assignee and owner of that debt, but, assignments of the security instrument cannot be perfected “in-blank.” The security instrument memorializes the purchase, negotiation and transfer of the debt evidenced by the note, but, the “unidentified-purchaser” of the debt must be proven to match the “named-assignee” of the security instrument.

    Security instruments are never negotiable instruments which allow for negotiation and transfer to a blank-line, a fiction, or a dead person.

    Of course, this also relies on the person transferring the debt and providing assignment of the security, to actually have been the owner of that debt with the right to sell it to the alleged assignee in the first place.

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  23. Neil,

    What would be standard practice, if the note was held in say ones Portfolio? Would the note be endorsed.

    Example: if Chase states they are the owner of the note. And threw a QWR the note is endorsed in blank by Cynthia Riley after 11/06

    Wouldn’t that contradict that it is a portfolio loan??

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