UCC Hierarchy of Rights to Enforce Note and Mortgage

HAPPY NEW YEAR to readers who celebrate Rosh Hashanah! To all others, have a HAPPY DAY. This is a prescheduled article.

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I have assembled a partial list of various possible claimants on the note and various possible claimants on the mortgage. Which one of these scenarios fits with your case? Once you review them you can see why most law students fall asleep when taking a class on bills and notes. Some of these students became practicing attorneys. Some even became judges. All of them think they know, through common sense, who can enforce a note and under what circumstances you can enforce a mortgage.

But common sense does not get you all the way home. It works, once you understand the premises behind the laws that set forth the rights of parties seeking to enforce a note or the parties seeking to enforce a mortgage. The only place to start is (1) knowing the fact pattern alleged as to the note (2) knowing the fact pattern alleged as to the mortgage and (2) looking at the laws of the state in which the foreclosure is pending to see exactly how that state adopted the Uniform Commercial Code as the law of that state.

I don’t pretend that I have covered every base. And it is wise to consider the requirements of law, as applied to the note, and the requirements of equity as applied to the mortgage.

In general, the UCC as adopted by all 50 states makes it fairly easy to enforce a note if you have possession (Article 3).

And in general, the UCC as adopted by all 50 states, increases the hurdles if you wish to enforce a mortgage through foreclosure. (Article 9).

The big one on mortgages is that the foreclosing party must have paid value for the mortgage which means the foreclosing party must have purchased the debt. But that is not the case with notes — except in the case of someone claiming to be a holder of the note in due course. A holder in due course does not step into the lender’s shoes — but all other claimants listed below do step into the lender’s shoes.

The other major issue is that foreclosing on a mortgage invokes the equitable powers of the court whereas suing on the note is simply an action at law. In equity the court takes into consideration whether the outcome of foreclosure is correct in the circumstances. In suits on notes the court disregards such concerns.

Knowing the differences means either winning or losing.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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UCC Hierarchy 18-step Program – Notes and Mortgages

The following is a list of attributes wherein a party can seek to enforce the note and mortgage if they plead and prove their status:

  1. Payee with possession of original note and mortgage.
  2. Payee with lost or destroyed original note but has original mortgage.
  3. Payee with lost or destroyed original note and lost or destroyed original mortgage.
  4. Holder in Due Course with original note endorsed by payee and original mortgage and assignment of mortgage by mortgagee.
  5. Holder in due course with lost or destroyed note but has original mortgage.
  6. Holder in due course with lost or destroyed original note and lost or destroyed original mortgage.
  7. Holder with rights to enforce with possession of original note and original mortgage.
  8. Holder with rights to enforce with lost or destroyed original note but has original mortgage.
  9. Holder with rights to enforce with lost or destroyed original note but does not have original mortgage.
  10. Possessor with rights to enforce original note and original mortgage
  11. Former Possessor with rights to enforce lost or destroyed note and original mortgage
  12. Former Possessor with rights to enforce lost or destroyed note but does not have original mortgage.
  13. Non-possessor with rights to enforce original note and original mortgage (3rd party agency)
  14. Non-possessor with rights to enforce lost or destroyed note (3rd party agency) and rights to enforce original mortgage
  15. Non-Possessor with rights to enforce lost or destroyed note (3rd party agency) but does not have the original mortgage.
  16. Assignee of purchased original mortgage with possession of original mortgage but no rights to enforce note.
  17. Assignee of purchased original mortgage without possession of original mortgage and no rights to enforce note.
  18. Purchaser of debt but lacking assignment of mortgage, endorsement on the note, and now has learned that the loan was purchased in the name of a third party and lacking privity with said third party. [This category is not directly addressed in the UCC. It is new, in the world of claims of securitization]

Facts matter. It is only by careful examination of the fact pattern and comparing the facts with the attributes listed in the UCC that you can determine the strategy for a successful foreclosure defense strategy. For example if the XYZ Trust is named as the foreclosing party and 123 Servicing is holding the original note and perhaps even the original mortgage, who has the right to foreclose and under what lawful scenario — and why?

Head spinning? GET HELP!

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Impact of Serial Asset Sales on Investors and Borrowers

The real parties in interest are trying to make money, not recover it.

The Wilmington Trust case illustrates why borrower defenses and investor claims are closely aligned and raises some interesting questions. The big question is what do you do with an empty box at the bottom of an organizational chart or worse an empty box existing off the organizational chart and off balance sheet?

At the base of this is one simple notion. The creation and execution of articles of incorporation does not create the corporation until they are submitted to a regulatory authority that in turn can vouch for the fact that the corporation has in fact been created. But even then that doesn’t mean that the corporation is anything more than a shell. That is why we call them shell corporations.

The same holds true for trusts which must have beneficiaries, a trustor, a trust instrument, and a trustee that is actively engaged in managing the assets of the trust for the benefit of the beneficiaries. Without the elements being satisfied in real life, the trust does not exist and should not be treated as though it did exist.

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About Neil F Garfield, M.B.A., J.D.

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The banks have been pulling the wool over our eyes for two decades, pretending that the name of a REMIC Trust invokes and creates its existence. They have done the same with named Trustees and asserted “Master Servicers” of the asserted trust. Without a Trustor passing title to money or property to the named Trustee, there is nothing in trust.

Therefore whatever duties, obligations, powers or restrictions that exist under the asserted trust instrument do not apply to assets that have not been entrusted to the trustee to administer for the benefit of named beneficiaries.

The named Trustee or Servicer has nothing to claim if their claim derives from the existence of a trust. And of course a nonexistent trust has no claim against borrowers in which the beneficiaries of the trust, if they exist, have disclaimed any interest in the debt, note or mortgage.

The serial nature of asserted transfers in which servicing rights, claims for recovery of servicer advances, and purported ownership of note and mortgage is well known and leaves most people, including judges and regulators scratching their heads.

An assignment of mortgage without a a transfer of the indebtedness that is claimed to be secured by a mortgage or deed of trust means nothing. It is a statement by one party, lacking in any authority to another party. It says I hereby transfer to you the power to enforce the mortgage or deed of trust. It does not say you can keep the proceeds of enforcement and it does not identify the party to whom the debt will be paid as proceeds of liquidation of the home at or after the foreclosure sale.

As it turns out, many times the liquidation results in surplus funds — i.e., proceeds in excess of the asserted debt. That should be turned over to the borrower, but it isn’t; and that has spawned a whole new cottage industry of services offering to reclaim the surplus proceeds.

In most cases the proceeds are less than the amount demanded. But there are proceeds. Those are frequently swallowed whole by the real party in interest in the foreclosure — the asserted Master Servicer who claims the proceeds as recovery of servicer advances without the slightest evidence that the asserted Master Servicer ever paid anything nor that the asserted Master Servicer would be out of pocket in the event the “recovery” of “servicer advances” failed.

The foreclosure of the property proceeds with full knowledge that whatever the result, there are no creditors who will receive any money or benefit. The real parties are trying to make money, not recover it. And whatever proceeds or benefits might arise from the foreclosure action are grabbed by a party in a self-proclaimed assertion that while the foreclosure was brought in the name of a trust, the proceeds go to a different third party in derogation of the interests of the asserted trusts and the alleged investors in those trusts who are somehow not beneficiaries.

So investors purchase certificates in which the fine print usually says that for their own protection they disclaim any interest in the underlying debt, note or mortgages. Accordingly we have a trust without beneficiaries.

The existence of those debts, notes or mortgages becomes irrelevant to the investors because they have a promise from a trustee who is indemnified on behalf of a trust that owns nothing. The certificates are backed by assets of any kind. Even if they were “backed” by assets, the supposed beneficiaries have disclaimed such interests.

Thus not only does the trust own nothing even the prospect of security has been traded off to other investors who paid money on the expectation of revenue from the notes and mortgages claimed by the asserted trust through its named trustee.

In the end you have a name of a trust that is unregistered and never asserted to be organized and existing under the laws of any jurisdiction, trustee who has no duties and even if such duties were present the asserted trust instrument strips away all trustee functions, no beneficiaries, and no res, and no active business requiring administration nor any business record of such activity.

Yet the trust is the entity that  is chosen as the named Plaintiff in foreclosures. But the way it reads one is bound to believe that assumption that is not and never was true or even asserted: that the case involves the trustee bank for anything more than window dressing.

It is the serial nature of the falsely asserted transfers that obscures the real parties in interest in both securities transactions with investors and loans with borrowers. The unavoidable conclusion is that nothing asserted by the banks (players in  falsely claimed securitization schemes) is real.

Hawai’i Appellate Court Strikes at the Root of Fraudulent Foreclosures: HSBC Deutsch and PNC Crash and Burn

This decision, although not yet for publication, brings us another step closer to exposure to the largest economic crime in human history. Every lawyer should read it more than once in its entirety. It contains the arguments and the narrative for most successful defense strategies against fraudulent foreclosures.

Fundamental to understanding why foreclosures are fraudulent and why most borrowers should prevail is an examination of how the banks and servicers attempt to paper over the absence of (a) ownership of the debt and the failure to identify the owner and (b) any evidence of an actual nexus with the supposed contract they are seeking to enforce — in the absence of anyone else claiming the right to enforce. Their entire premise rests on bank control of who knows about the subject debt.

That void is what produced this decision and the decisions around the country in discovery, in motions (especially motions for summary judgment), and at trial that have been in favor of homeowners and then buried under settlements restricted by the seal of confidentiality —- thousands of them.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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See HSBC, Deutsch, PNC adv Felicitas Moore, Intermediate Court of Appeals, Hawai’i

Hat Tip to Da Goose and Awesome Order on Failure of Qualified Witness and Documents

Special kudos to Hawai’i Dubin Law Offices, representing the homeowner.

Whether this case will stand up to further appeal is a question that can only be answered by time. But I think that it will and that this case, like many in the past few weeks and months, is striking at the achilles heal of fraudulent foreclosures. It is worthy of study because it does much of the research and analysis for you. It is not binding in any other state and may not be binding even in Hawai’i, since it is currently designated as “not for Publication.”

If I were to write an article detailing the many fine points raised by this appellate court, it would be a book. So read the article and look for the following points:

  1. The existence and administration of the books and records of the supposed “REMIC” Trustee for the supposed trust is directly challenged, although indirectly.
  2. Summary Judgment just became more difficult for the banks and servicers, if you use the reasoning in this opinion.
  3. Verification of complaint by “authorized Signor” or the “attorney” does NOT end the inquiry into the facts.
  4. Presumptions work against the foreclosing party in motions for summary judgment.
  5. Courts are getting suspicious of anything proffered by a foreclosing party when there is an alleged “REMIC” “trust” involved.
  6. Affidavits or declarations that the affiant personally has possession of the note do NOT establish (a) possession or (b) the right to enforce before the foreclosure was initiated. [This will lead to even more backdating of documents]
  7. FOUNDATION: Self declaration of knowledge and competency are insufficient. Foundation requires that the affiant or declarant specifically state how he/she came into such knowledge and why he/she is competent to testify.
  8. A self-serving declaration that the affiant is the custodian of records as to one case” raises red flags. Such declarations are only proper when they come from an individual who is, in the ordinary course of business, the records custodian for the business. [This raises some very uncomfortable questions for the banks and servicers, to wit: there are no business records for the trust because (a) the trustee has no right to keep them or even review information that would be entered on such records and (b) the trust has no business that requires record-keeping. So the assumption that the servicer’s records are the records of the trust named as the foreclosing party is simply not true and more importantly, lacks the required foundation to get such records into evidence.]
  9. Self-serving declarations do not necessarily authenticate any documents.
  10. Attorneys for the banks and servicers are put on notice that chickens may come home to roost — for  filing attestations to facts, about which they knew nothing or worse, about which they knew were untrue.

 

Stupid Law

Hat tip to Bill Paatalo who wrote the main article. See link below.

I would like to say that this could have happened only in Arkansas, but that isn’t true. Watch how the Court twisted itself into a pretzel in its determines effort to make Wells Fargo win despite admitting to unlawfully altering the note by a forged endorsement.

I note also how the court steadfastly avoids the subject of ownership of the debt and clings to the notion that ownership of the note — i.e., the piece of paper that is EVIDENCE OF THE LOAN — is as deep as the court is willing to go.

see https://bpinvestigativeagency.com/wells-fargo-admits-to-executing-wamu-note-endorsement-in-2013-and-gets-away-with-it/

Register Now- 2 CLEs: Death of a Salesman — when the party who “originated” an apparent loan transaction is dead or bankrupt.

 

 

NJ Appellate Court Decision Goes to Achilles Heel of “Securitizers”

“In order to have standing to foreclose a mortgage, a party ‘must own or control the underlying debt.'”

New Jersey litigants need look no further. In fact, in every other state of the U.S. you will find the same decisions each quoting from several other to the same effect. Courts across the country have usually confused the issue and accepted the allegation of ownership as proof of ownership. This court answers that as well:

To establish such ownership or control, Plaintiff must present properly authenticated evidence that it is the holder of the note or a non-holder in possession with rights of the holder.”

So what is a holder, such that the party has established “ownership or control of the underlying debt.” That is the issue that has been blurred by the banks.

The banks focus on the state statutes (UCC) enabling a holder to enforce without ever establishing that the party owns or controls the underlying debt. If you think about it that is nonsense. But that one thing, more than anything else, is responsible for millions of wrongful foreclosures. 

see NJ Decision On POA and MERS

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Here are some basic black letter rules, quoted in the NJ case, that have been followed for centuries:

  1. A holder must possess the original note.
  2. Transfer of possession must be “authenticated by an affidavit or certification based upon personal knowledge.”
  3. A party relying upon power of attorney or other document must produce the authenticated original of that document.
  4. Using the words “as attorney in fact” means nothing unless the party is able to produce a witness who, in their own personal knowledge, knows and states that the POA is in writing and has not been revoked.
  5. That witness must be able to lay the factual foundation and authentication for introduction of the Power of Attorney or any other such document.
  6. Without such foundation and authentication, any testimony or documents proffered by virtue of the POA cannot be admitted into evidence and for purposes of the case then, such statements or documents do not exist.
  7. A party who claims a legal relationship with another party and who relies upon it for proffering evidence must provide evidence of the legal relationship.
  8. A Power of Attorney must be in writing, duly signed and acknowledged as set forth in state statutes. Oral Powers of Attorney cannot be used to circumvent the requirement that interests in real property (including mortgages) must be in writing.
  9. A party seeking to enforce a note must be able to establish, though competent evidence, the location and the previous locations of the note in order to establish possession and the right to enforce, respectively.
  10. Certifications must be based upon personal knowledge and not general familiarity.
  11. If testimony is offered based upon a “review” of records, the records must be present or the witness must identify those records and how the witness acquired personal knowledge of their content.
  12. Assignments of mortgage must be authenticated by a person who has personal knowledge of the assignment (and the circumstances in which the assignment occurred). Otherwise the assignment is hearsay and must be excluded from evidence unless otherwise admitted for different reasons. Hearsay statements in assignments cannot be admitted into evidence and for purposes of the case then, such statements do not exist.
  13. The fact that an assignment or other document exists as an original or a copy does not mean that what is written on it can be admitted into evidence. But without a proper objection, the document can be admitted into evidence as proof of the matters asserted therein.
  14. A document signed by an agent or “nominee” like MERS after the demise of the principal is void because the power of attorney expires upon expiration of the principal. If the originator no longer exists, MERS is not authorized to act on behalf of the originator.

Patricia Rodriguez Tonight on the Neil Garfield Show

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Patricia Rodriguez returns tonight to talk about her Seminar on October 31, 2015.. Patricia is a good lawyer and particularly good at organizing cases. She will be talking about Foreclosure Defense, Rescission, Intakes of Clients, and of course the latest in what is happening on the ground in Southern California. One of her strong points is organization — something that most lawyers are not so great at doing. Her seminar will focus on the bricks and mortar of setting up a case for litigation or modification.

Pretender Mender: Foreclosure Crisis Continues to Rise Despite Obama Team Reports

Despite various “reports” from the Obama Administration and writers in the fields of real estate, mortgages and finance, the crisis is still looming as the main drag on the economy. Besides the fact that complete strangers are “getting the house” after multiple payments were received negating any claim of default, it is difficult to obtain financing for a new purchase for the millions of families who have been victims of the mortgage PONZI scheme. In addition, people are finding out that these intermediaries who received an improper stamp of approval from the courts are now pursuing deficiency judgments against people who cooperated or lost the foreclosure litigation. And now we have delinquency rates rising on mortgages that in all probability should never be enforced. And servicers are still pursuing strategies to lure or push homeowners into foreclosure.

For more information on foreclosure offense, expert witness consultations and foreclosure defense please call 954-495-9867 or 520-405-1688. We offer litigation support in all 50 states to attorneys. We refer new clients without a referral fee or co-counsel fee unless we are retained for litigation support. Bankruptcy lawyers take note: Don’t be too quick admit the loan exists nor that a default occurred and especially don’t admit the loan is secured. FREE INFORMATION, ARTICLES AND FORMS CAN BE FOUND ON LEFT SIDE OF THE BLOG. Consultations available by appointment in person, by Skype and by phone.

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Most people simply allowed the foreclosure to happen. Many even cleaned the home before leaving the keys on the kitchen counter. They never lifted a finger in defense. As predicted many times on this blog and in my appearances, it isn’t over. We are in the fifth inning of a nine inning game.

Losing homes that have sometimes been in the family for many generations results in a sharp decline in household wealth leaving the homeowner with virtually no offset to the household debt. Even if the family has recovered in terms of producing at least a meager income that would support a down-sized home, they cannot get a mortgage because of a policy of not allowing mortgage financing to anyone who has a foreclosure on their record within the past three years.

To add insult to injury, the banks posing as lenders in the 6 million+ foreclosures are now filing deficiency judgments to continue the illusion that the title is clear and the judgment of foreclosure was valid. People faced with these suits are now in the position of having failed to litigate the validity of the mortgage or foreclosure. But all is not lost. A deficiency judgment is presumptively valid, but in the litigation the former homeowners can send out discovery requests to determine ownership and balance of the alleged debt. Whether judges will allow that discovery is something yet to be seen. But the risk to those companies filing deficiency judgments is that the aggressive litigators defending the deficiency actions might well be able to peak under the hood of the steam roller that produced the foreclosure in the first instance.

What they will find is that there is an absence of actual transactions supporting the loans, assignments, endorsements etc. that were used to get the Court to presume that the documents were valid — i.e., that absent proof from the borrower, the rebuttable assumption of validity of the documents that refer to such transactions forces the homeowner to assume a burden of proof based upon facts that are in the sole care, custody and control of the pretender lender. If the former homeowner can do what they should have done in the first place, they will open up Pandora’s box. The loan on paper was not backed by a transaction where the “lender” loaned any money. The assignment was not backed by a purchase transaction of the loan. And even where there was a transfer for value, the “assignment turns out to be merely an offer that neither trust nor trustee of the REMIC trust was allowed to accept.

All evidence, despite narratives to the contrary, shows that not only have foreclosures not abated, they are rising. Delinquencies are rising, indicating a whole new wave of foreclosures on their way — probably after the November elections.

http://www.housingwire.com/blogs/1-rewired/post/31089-are-we-facing-yet-another-foreclosure-crisis

http://www.newrepublic.com/article/119187/mortgage-foreclosures-2015-why-crisis-will-flare-again

http://susiemadrak.com/2014/08/25/here-comes-that-deferred-mortgage-crisis/

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