Looming Title Problems from Fabricated, Fraudulent Forged Documents

The one thing that is perfectly clear is that at some point the state legislatures who govern title to property already have a huge problem brewing under their feet. There is no doubt in my mind, that the solution will follow the example of the Murphy Act in Florida when title became unintelligible some 80 years ago.

The new acts will essentially reset title as of a certain date. All the previous illegal and potentially criminal actions will be ignored. All the people who were swindled out of their life savings will also be ignored, because in the end it is the banks who control legislation, not the people.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see http://www.vice.com/read/when-you-buy-a-house-but-dont-actually-own-it

You have two problems looming here.

The first and largest problem is that most, nearly all, of the foreclosures were void and fraudulent. The credit bid was accepted from a party who was not the creditor. THAT probably means that any deed on foreclosure was and is void. In some states there is a “statute of limitations” on the void title which is waived if you don’t try to make it right before the one-year statute runs out. In Florida, after one year, you can get damages (i.e., money) but you can’t reclaim your title even from a void, fraudulent foreclosure. Hence the Florida legislature institutionalized fraud in exchange for campaign donations.

The second problem is even worse and might not be correctable by legislation or even a court order. For those who sent a notice of rescission and the “lender” did nothing, there is no doubt that if the rescission was sent within 3 years of the fabricated “closing” that the nonexistent “loan contract” was canceled and the note and mortgage were rendered void as of the date of mailing of the notice of rescission.

Under Federal Law that notice of rescission rendered the mortgage or deed of trust void along with the note. Therefore any action on the loan contract, the note or the mortgage or deed of trust after rescission is void because those “instruments” are void. Void=Nothing. As far as I have been able to determine, there is no statute of limitations on “nothing.”

It gets worse. If the homeowner recorded the rescission, then according to State law, there is notice to the world that title derived from the mortgage is void. And there is no statute of limitations on that either, as far as I can tell.

Anyone who has taken title arising from either of the above scenarios has no title. If and when the day comes that they are forced to defend the illusion of their “title” they will quickly find out that the title insurer will be of no help and will deny coverage. And the same holds true for lenders — but the lenders don’t care because their goal is merely to perpetuate the illusion of securitization.

Nearly all the foreclosures in the past 10 years fall under the first category, the second category or both. Any legislation that deprives the owner of property without due process (i.e., judicial action) violates the 14th Amendment to the constitution.

Judicial action is void if it is based upon nonexistent facts. The facts are nonexistent if they were never proffered in court or found, based upon competent evidence to be true, by the trier of fact. That is missing from virtually all foreclosures.

Accordingly, it is my opinion that this another situation where the constitution be damned. The courts and legislatures are continuing to advance nonsense: the pretense of valid loan contracts, valid notes, valid mortgages and valid foreclosure sales to valid creditors submitting a valid credit bid.

Ask these lawmakers and law interpreters four questions:

  • did you hear or see any evidence that identified the party to whom the payments from the borrower were forwarded?
  • If not, why did you assume that such a party existed and had authorized the parties in court to act on collateral for the benefit of the real creditor?
  • did you hear or see any evidence that connects the real creditors with the parties who appeared in court?
  • If not, why did you assume that such a connection existed with an unidentified entity?

 

Appeals Court Challenges Cal. Supreme Court Ruling in Yvanova/Keshtgar

The Court, possibly because of the pleadings and briefs refers to the Trust as “US Bank” — a complete misnomer that reveals a completely incorrect premise. Despite the clear allegation of the existence of the Trust — proffered by the Trust itself — the Courts are seeing these cases as “Bank v Homeowner” rather than “Trust v Homeowner.” The record in this case and most other cases clearly shows that such a premise is destructive to the rights of the homeowner and assumes the corollary, to wit: that the “Bank” loaned money or purchased the loan from a party who owned the loan — a narrative that is completely defeated by the Court rulings in this case.

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

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see B246193A-Kehstgar

It is stunning how lower courts are issuing rulings and decisions that ignore or even defy higher court rulings that give them no choice but to follow the law. These courts are acting ultra vires in open defiance of the senior authority of a higher court. It is happening in rescission cases and it is happening in void assignment cases, like this one.
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This case focuses on a void assignment or the absence of an assignment. Keshtgar alleged that “the bank” had no authority to initiate foreclosure because the assignment was void or absent. THAT was the first mistake committed by the California appeals court, to wit: the initiating party was a trust, not a bank. This appeals court completely missed the point when they started out from an incorrect premise. US Bank is only the Trustee of a Trust. And upon further examination the Trust never operated in any fashion, never purchased any loans and never had any books of record because it never did any business.
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The absence of an assignment is alleged because the assignment was void, fabricated, backdated and forged purportedly naming the Trust as an assignee means that the Trust neither purchased nor received the alleged loan. Courts continually ignore the obvious consequences of this defect: that the initiator of the foreclosure is claiming rights as a beneficiary when it had no rights as a beneficiary under the deed of trust.
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The Court, possibly because of the pleadings and briefs refers to the Trust as “US Bank” — a complete misnomer that reveals a completely incorrect premise. Despite the clear allegation of the existence of the Trust — proffered by the Trust itself — the Courts are seeing these cases as “Bank v Homeowner.” The record in this case and most other cases clearly shows that such a premise is destructive to the rights of the homeowner and assumes the corollary, to wit: that the “Bank” loaned money or purchased the loan from a party who owned the loan — a narrative that is completely defeated by the Courts in this case.
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There really appears to be no question that the assignment was void or absent. The inescapable conclusion is that (a) the assignor still retains the rights (whatever they might be) to collect or enforce the alleged “loan documents” or (b) the assignor had no rights to convey. In the context of an admission that the ink on the paper proclaiming itself to be an assignment is “nothing” (void) there is no conclusion, legal or otherwise, but that US Bank had nothing to do with this loan and neither did the Trust.
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Bucking the California Supreme Court, this appellate court states that Yvanova has “no bearing on this case.” In essence they are ruling that the Cal. Supreme Court was committing error when it said that Yvanova DID have a bearing on this case when it remanded the case to the lower court of appeal with instructions to reconsider in light of the Yvanova decision.
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One mistake committed by Keshtgar was asking for quiet title. The fact that the MORTGAGE is voidable or unenforceable is generally insufficient grounds for declaring it void and removing it from the chain of title. I unfortunately contributed to the misconception regarding quiet title, but after years of research and analysis I have concluded that (a) quiet title is not an available remedy against the mortgage unless you have grounds to declare it void and (b) my survey of hundreds of cases indicates that judges are resistant to that remedy. BUT a similar action for cancellation of instrument could be directed against the an assignment, substitution of trustee on deed of trust, notice of default and notice of sale.
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Because there was an admission by Keshtgar that the loan was “non-performing” and because the court assumed that US Bank was a lender or proper successor to the lender, the question of what role the Trust plays was not explored at all. The courts are making the erroneous assumption that (a) there was a real loan contract between the parties who appear on the note and mortgage, (b) that the loan was funded by the originator and that the homeowner is in default of the obligations set forth on the note and mortgage. They completely discount any examination of whether the note is a valid instrument when it names not the actual lender but a third party who is also serving as a conduit. In an effort to prevent homeowners from getting windfalls, they are delivering the true windfalls to the servicers who are behind the initiation of virtually every foreclosure.
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The problem is both legal and perceptual. By failing to see that each case is “Trust v Homeowner” the Courts are failing to consider that the case is between a private entity and a private person. By seeing the cases as “institution v private person” they are giving far too much credence to what the Banks, up until now, are selling in the courts.
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Rescission and Subject Matter Jurisdiction

rescission-600x400-600x330
I was recently requested to review a 6th Circuit Opinion in which the court stated that the rescission was barred by res judicata — i.e. that the matter had already been litigated and that the homeowner was therefore barred from bringing it up again.
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The Court never considered that it was wrong in the first place and that the decisions that ignored the rescission were themselves void for lack of subject matter jurisdiction. The Court started with the premise that the bank must win on this rather than from the point of view that the law should be applied, not personal preferences. Thus such decisions come down to “because I said so” rather than through any legal analysis.
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I think the court has missed the point completely. A deed has no statute of limitations. Even a mortgage deed or deed of trust has no statute of limitations. It only expires after the contractual terms end. A rescission, especially if it is recorded, has no expiration. All of these things can ONLY be removed by (a) a proper pleading (b) proof that the offending document should be canceled and removed from the chain of title and (c) filed within the time limit prescribed by statute.
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The court has turned this on its head. There is no lawsuit required to make rescission effective. There is no tender. There are no conditions whatsoever — see Jesinoski v Countrywide (SCOTUS). It is effective as a matter of law and if recorded remains a permanent impediment to any subsequent instrument claiming clear title (as though the rescission did not exist) in any instrument executed or recorded after the rescission was sent and/or recorded.
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The borrower is obligated to do nothing. The borrower can do nothing because even if it was the borrower that wanted to remove the rescission it would need to be done through court procedure. Otherwise, any person properly relying upon what appears in the title chain in the county records might act based upon their proper belief that the rescission exist would then find themselves having spent or lent money to a homeowner who in fact either had no title to the home or was already encumbered by the very instruments that were rendered void by operation of law. I can already see how foreign investors and lenders could get stuck by that having read the Federal, State and local laws and thinking themselves perfectly protected, and ending up with nothing.
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The time limit is set on the bank, not the borrower. It is set by the statute as 20 days from receipt of the rescission to (1) comply or (2) file suit to vacate or cancel the rescission. This is a burden on the bank, not the borrower. To construe the statute any other way would be to violate the terms of the statute and to violate the specific explicit instructions from the US Supreme Court. Any decision or ruling that the bank or creditor could contest after 20 days would mean that the rescission is not effective when mailed as set forth by the Statute and Jesinoski. Such a ruling would mean that the rescission is not effective by operation of law; it would mean that the rescission is effective ONLY if and when the bank files suit to vacate or cancel the rescission and loses. How one would logically say that the rescission is not effective until there is a lawsuit is incomprehensible.
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Rescission therefore is a fact and not a claim, pleading or defense. It may be raised as a defense merely to show that the court lacks subject matter jurisdiction, to wit: that the note and mortgage were rendered VOID by operation of law and as specifically stated in Reg Z which carries the full force of law. It follows that nobody can make a claim based upon void instruments. It also follows that the void instrument (i.e., the mortgage or deed of trust) must be removed from the chain of title as a void instrument. Hence quiet title is appropriate.
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Rescission is an event and the recording of it preserves the rights and benefits of rescission against the whole world. What courts and lawyers have failed to comprehend is that the rescission may not be ignored or even canceled or vacated or waived by the homeowner who sent it and recorded it. With a deed you can file a corrective deed but all parties to it must join in the correction. Otherwise it remains. The converse is also true. if as a matter of law the mortgage or deed of trust has been rendered void by operation of law, then it is void for all purposes and against all claims to the contrary from all claimants of every kind, especially if it is recorded.
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The court here has essentially adopted the strategy of the banks. By creating multiple layers of transmission, assignment, delivery and endorsement it gradually appears that the end successor indeed owns the debt, loan, note and mortgage. But if you start at the base of the chain and come to realize that the originator was not the lender and that the first transferee was merely a conduit who paid no money either for the origination nor the acquisition of the loan, one can easily see how the borrower’s rights have been egregiously violated.
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This court has done the same thing. It is taking the original ruling that the erroneous ruling (without subject matter jurisdiction) ignoring but not removing the rescission somehow was valid because the court later said that the claims as precluded by having been previously litigated,a decision later affirmed by appellate court. They can say it but it is erroneous, false and void for lack of subject matter jurisdiction. This is the rule of men rather than the rule of law. If the trial court had ignored the deed, mortgage or deed of trust without proper pleading and proof of a claim upon which such relief could be granted, the same result would apply.
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This is not some technicality. Allowing parties who have no interest or injury to apply for relief that properly belongs to other parties opens up floodgates of malicious practices in the marketplace in which the courts will face in full circle the absurdity of their own prior rulings when they believed that the banks must be right even if what they did was wrong.
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That the previous decisions considered the arguments of the homeowner and rejected them is irrelevant as long as the issue is lack of subject matter jurisdiction. If there was no such jurisdiction then none of the decisions are effective as a matter of law.

Beware of Thieves and Con Artists

I know that the first line of thieves and con artists are viewed by many as the banks and the “servicers” and the “trustees.” But the second wave are those who prey on the emotional turmoil of homeowners and get them to deed their homes into some sort of convoluted entity that will (1) shred the homeowners credibility in court and (2) essentially allow the new thief to get into your living room before the old thief has a chance to do so. In all events none of these schemes will ever do anything substantive to save a home, although some of the schemes may delay the judgment and sale for a short period of time.

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

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With the single exception of recording a notice of rescission I don’t see any plan by which a homeowner can preserve their rights in a foreclosure that is allowed by a judge to proceed. In nonjudicial states there MIGHT be one more: filing a corrective substitution of trustee returning the original trustee to the deed of trust. Anything in the chain of title on public records that is properly filed may well give homeowners a leg up and preserve rights when the issue of title finally comes front and center. The banks are proceeding under cover of title insurance. But in my opinion that cannot last and the title companies will file for bankruptcy protection in many cases.

It will be interesting to see what happens later when courts are faced with the consequences of their own decisions — creating and augmenting a title nightmare. Ultimately I think the rescission will have the effect that Federal law requires. Until then homeowners must seek to preserve their rights. They might find out years later that they still own the home they thought was long gone. This specific strategy requires very little money and certainly does not require deeding your home to another person leaving them to claim the asset and leaving you with the same apparent “debt” you had before.

People facing foreclosures are generally in severe emotional distress. Their home and their lifestyle are being threatened and the likelihood they will lose is in the statistics. As a result their judgment is impaired. In their desperation they will grasp at straws potentially destroying any hope of saving their home.

Although far more homeowners are winning their cases than a few years ago, it is nonetheless true that the deck is stacked against them. Some people, meaning well, have attempted to reverse the schemes from the banks by doing the same crazy documentation tactics that the banks.

Those schemes have failed because of the assumption by the judges that when the banks do it, which might include fabrication and forgery, they are merely patching up the paperwork on a valid debt. When homeowners do it, as Judges see it, it is to escape a legitimate debt. Both assumptions are wrong. Those judges are wrong but it seems counterintuitive.

This underscores the need for a lawyer: just because you found a statute or case that shows you are right and the bank, servicer or trustee is wrong doesn’t mean you will win. Trial court orders and judgments are final even if they are wrong. If you fail to appeal or preserve your rights in some other way, they stay final. Going to a smooth talking nonlawyer is likely the first step in jumping off of a legal cliff. BUT if the nonlawyer is attached to an actual lawyer, the outcome changes.

The problem with some of the schemes is that they are not per se illegal. But they lead to one result — the homeowner pays money and then loses the house. The moral of the story is don’t go with someone who is offering a nonexistent magic bullet. If it is so crispy clear and it works you would have heard about it already. Use a lawyer. Get references. Choose wisely.

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

 

RESCISSION Revalidated in CA Decision

1sT Appellate District US Bank v Naifeh: “… we conclude that a borrower may rescind the loan transaction under TILA without filing a lawsuit, but when the rescission is challenged in litigation, the court has authority to decide whether the rescission notice is timely and whether the the procedure set forth in the TILA (sic) should be modified in light of the facts and circumstances of the case.”

The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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

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see US BANK VS NAIFEH

In a carefully worded opinion at least one appellate court seems to be moving closer to the view I have expressed here on these pages. But they still left some simple propositions unclear.

It remains my opinion that a recorded rescission forces those who would challenge it to file suit to remove the rescission from the title record. In that suit they would need to plead and prove standing — without using the note or mortgage to do it because rescission renders them void at the moment the letter of rescission is mailed..

  1. The decision clearly says that for the rescission to be effective (deriving its authority from 15 USC §1635 and the unanimous SCOTUS decision in Jesinoski v Countrywide), the borrower need NOT file suit. That means it is effective when mailed (NOT FILED) just as the statute says and just as the late Justice Scalia penned in the Jesinoski case.
  2. The decision anticipates a challenge to rescission — which in and of itself is recognition that the rescission IS effective and that something must be done about it.
  3. But the court does not clarify what is meant when it said “when the rescission is challenged in litigation.” Clearly the decision stands for the proposition that the rescission stands as effective unless challenged in litigation. The unanswered question is ‘what form of litigation?’
  4. If we apply ordinary rules of procedure, then the decision dovetails with my opinions, the statute and the US Supreme Court decision. The rescission is effective when mailed. So the “challenge” must be “in litigation.” But whether that means a lawsuit to vacate or a motion challenging the rescission is unclear. A “motion challenging the rescission” is problematic if it does not set forth the standing of the party making the challenge and if it does not set forth the plain facts that the rescission, under law, is already effective but should be vacated, then it is trying to get the court to arrive at the position that the rescission can be ignored even if it is recorded (a condition not addressed in the opinion).
  5. The claimant challenging the rescission must state a cause of action, if the rescission is recorded, that is in essence a quiet title claim that needs to be framed as an original complaint in a lawsuit. So far the banks have been successful in getting trial judges to IGNORE the rescission rather than remove it as an effective instrument, whether recorded or not. This only compounds title problems already present.
  6. The procedural oddity here is that in foreclosure litigation the court might conclude (erroneously in my opinion) that the beneficiary under the deed of trust had standing to substitute trustee, standing to to have the trustee record a notice of default, and standing to record a notice of sale.
  7. BUT once the rescission is effective, there is absolutely no foundation for a claim of standing based upon the void note, the void mortgage and the consequential void assignments, which even if they were not otherwise void, are void now because the assignment is purporting to transfer something that no longer exists.
  8. Standing vanishes if it is dependent upon presumptions applied from the assignment, endorsement and other attributes wherein false statements are made concerning purchase and sale of the note or mortgage. The note and mortgage are void the moment the rescission is mailed. No reliance on the mortgage, note or any transfer of same can constitute standing, since those documents, as a matter of law, no longer exist.
  9. Hence STANDING TO CHALLENGE RESCISSION must logically be dependent upon the ability of the challenger to affirmatively plead that they own the debt or obligation and to prove it at a hearing in which evidence is produced. This is the holy grail of foreclosure defense. We know that 99% of the foreclosers do NOT qualify as owners of the actual debt or obligation. They are traveling on legal presumptions as alleged “holders” etc. under the UCC. If the note and mortgage don’t exist then the status of holder is nonexistent and irrelevant.
  10. This court further leaves us in a gray area when it correctly reads that portion of the statute giving the court authority to consider the options, procedurally, but incorrectly states that one of those options is that a Federal Statute that preempts state law could be “modified in light of the facts and circumstances. This is NOT contained in either the statute or the Jesinoski decision. This court is putting far too much weight on the provision of the statute that allows for a petition to the court at which the court could change some of the procedural steps in complying with rescission, and possibly by implication allowing for a challenge to the rescission in order to vacate the legal effectiveness of the rescission.
  11. ANY DECISION ON “PROCEDURE” THAT NULLIFIES THE EFFECTIVENESS OF THE RESCISSION WHEN MAILED IS ERRONEOUS.  Any such decision would effectively be eviscerating the entire statute and the opinion of the US Supreme Court. The simple rule of thumb here (heuristic reasoning) is that the rescission is and always will have been effective when mailed. The parts of the statute that deal with procedure can only be related to a party who claims to be the creditor (owner of the debt or obligation) who intends to comply.
  12. Since tender is expressly excluded in the statute and the Jesinoski decision, the change can not require the borrower to tender money — especially when the statute says that no such demand need be considered by the borrower until there is full compliance with the rescission — return of canceled note, release of encumbrance and payment to the borrower of all money ever paid by the borrower for principal, interest, insurance, taxes, and fees.
  13. Hence the changes are limited perhaps granting additional time, or maybe even to credits against what might be due from the homeowner but even that looks like a stretch. The committee notes and subsequent decisions clearly state that the intent of Congress was to prevent any bank from stonewalling the effectiveness of a rescission, which is what judges have been doing despite the Jesinoski decision and the clear wording of the statute.
  14. And this is how we know that the challenge, if brought, must be within the 20 days available for the creditor, “lender” etc to comply with the rescission. Any other interpretation would mean that the rescission was NOT effective upon mailing and would also mean that the owner of the property cannot get a substitute mortgage to pay off any legitimate claim from a true creditor. Such interpretations, while apparently attractive to bank lawyers and judges, are directly contrary to the express wording of the statute and directly contrary tot he express wording of the Jesinoski decision, decided unanimously by SCOTUS. Hence ANY CHALLENGE outside the 20 days is barred by the statute. Just like any action to enforce the TILA duties against the “lender” must be brought within one year of the mailing and receipt of the rescission.
  15. The failure of either the “lender” to comply or the borrower to enforce simply means that after one year, the rescission is still effective (meaning the note and mortgage are void) the claim for enforcement of the duties of the lender is extinguished, and the financial claim of the lender is extinguished. Hence, the infamous free house — not caused by sneaky borrowers but caused instead of malfeasant banks who continue to use their influence to get judges to re-write the law.
  16. But regardless of how one looks at this decision, the Jesinoski decision or the statute one thing is perfectly clear — vacating the rescission is strictly dependent upon timely filing of a challenge in litigation and a hearing on evidence, because the legal presumptions used in determining standing are no longer available in the absence of the the note or mortgage, which were irretrievably rendered void upon mailing of the rescission.

The banks and servicers have so far been successful in pulling the wool over judges eyes, perhaps because judges have long disliked TILA and especially TILA rescission. The jig was up when the Jesinoski decision was rendered — courts cannot re-write the statute, although they can consider minor changes in procedure whose purpose is to comply with the statute, not ignore. it.

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Quiet Title Revisited: Not Quite a Dead End

Void means that the instrument meant nothing when it was filed, not that it is unenforceable now.

 

I know how hard it is to let go of something that you really want to believe in. But for practical reasons I consider it unwise to continue on the QT path until we can find a way to get rid of the void assignment. That unto itself might a form of quiet title action and it is far easier to do. The allegation need only be that neither the assignor nor the assignee (a) had any right, justification or excuse to claim an interest in the recorded mortgage and (b) neither one was ever party to a completed transaction in which either of them had paid value for any interest in the recorded mortgage. Hence the assignment is void and should be removed from the chain of title reflected in the county records. So that takes care of one of several problems and the attack does not seek to remove the mortgage — yet.

 

Quiet title is a very limited remedy. In nearly all cases if the facts are contested it almost automatically means that there is no quiet tile relief available. It is meant to remove wild deeds or any other void (not voidable) instrument. Void means that the instrument meant nothing when it was filed, not that it is unenforceable now.

I contributed to the mystery of quiet title because it was apparent that the mortgage was void because it never named the true lender. In fact the existence and identity of the true source of funds for the transaction was intentionally withheld from the borrower leaving the mortgage with only one party instead of two.

 

The problem many courts are having with this is that the mortgage might still be subject to reformation that would insert the correct name of the actual lender (theoretically, potentially reformation). The fact that there is no such creditor whose name can be inserted does not make the mortgage void. It makes it voidable. Actually proving that there is no such creditor won’t be easy since only the banks have the information that shows that.

 

If there are any future events that could revive the mortgage deed, then quiet title can’t work. Add to that the fact that judges are not treating these attacks seriously and routinely ruling for the banks and you have a what appears to be a dead end.

 

All that said, there ARE causes of action that could attack the void assignment and the voidable mortgage in which the court could theoretically declare that in the absence of information sought from the defendants, who appear to be the only potential claimants, the mortgage is THEN declared void by court order, THEN a second count in quiet title would be in order. I cannot emphasize enough the fact that Judges are going to be very resistant to this but I think that appellate courts are starting to understand what happened with false claims of securitization.

 

Essentially, the Court must state that:

  1. The mortgage failed to name the correct party as lender.
  2. That failure makes the mortgage voidable.
  3. Despite publication and notice, there are no parties who could answer to the description of the creditor whose name should have been on the mortgage.
  4. The mortgage is therefore void
  5. Court declares title to be vested in the name of Smith and Jones without any encumbrance arising out of the mortgage recorded at Page 123 Book 456 of the public records of XXXX County, Florida.
 This of course directly challenges the judicial notion that once the homeowner receives money, it is a loan, it is enforceable and it doesn’t matter who comes into court to enforce it. To say that this judicial “law” opened the door to mayhem and moral hazard would be an understatement. Using the opinions written by trial judges, appellate judges and even Supreme Court justices, people who like to “leverage the system” have seized on this obvious opening to steal receivables from the rightful recipient — with no negative consequences. They write a letter that appears on its face to be correct and valid. According to current practices this raises the presumption that the contents of the letter are true.
 Hence the self-serving letter creates the legal presumption that the writer is authorized to tell the debtor that the writer is now the owner of the debt and to direct payments to the “new owner.” This isn’t speculation. Starting in California this business plan is spreading across the country. By the time the rightful owner of the debt wakes up the Newco Debt Servicing company has collected or settled the account.
Since the presumption is raised that the thief writing the letter is authorized, the real party in interest cannot beat the defense of payment by a debtor who thought they were doing the right thing. Reasonable reliance by the borrower is presumed since the authority and the validity of the letter was presumed. And that is not just a description of some dirty rag tag gangsters; it is a verifiable description of what the banks have been doing for years with mortgage debt, credit card debt, student loan debt and every other kind of debt imaginable.
By the time the investors wake up and find out their money was not used to fund a trust or real business entity, their money is gone and they are at the mercy of the big time banks who will offer settlements of claims that should have resulted in jail time for the bankers. Instead we have literally authorized small time crooks to emulate the behavior of the banks thus throwing the marketplace into further chaos.
So if you start off knowing that the banks can never come up with the name and contact information of a creditor, then you begin to see how there are some attacks on the position of banks that could have enormous traction even though on their face those strategies look like losers.

Was There a Loan Contract?

In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.  The absence of the defined set of investors is the reason why bank lawyers fight so hard to make such disclosures “irrelevant” in courts of law.

The important fact that is often missed is that the “warehouse” lender was neither a warehouse nor a lender. Like the originator it is a layer of anonymity in the lending process that is used as a conduit for the funding received by the “borrower.”

None of the real parties who funded the transaction had any knowledge about the transaction to which their funds were committed. The nexus between the investors and/or REMIC Trust and the original loan SHOULD have been accomplished by the Trust purchasing the loan — an event that never occurred. And this is why fabricated, forged documents are used in foreclosures — to cover over the fact that there was no purchase and sale of the loan by the Trust and to cover up the fact that investors’ money was used in ways directly contrary to their interests and their agreement with the bogus REMIC Trusts whose bogus securities were purchased by investors.

In the end the investors were left to rely on the unscrupulous investment bank that issued the bogus MBS to somehow create a nexus between the investors and the alleged loans that were funded, if at all, by the direct infusion of investors’ capital and NOT by the REMIC Trust.

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

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also see comments below from Dan Edstrom, senior securitization analyst for LivingLies
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David Belanger recently sent out an email explaining in his words the failed securitization process that sent our economy into a toxic spiral that continues, unabated, to weaken our ability to recover from the removal of capital from the most important source of spending and purchasing in our economy. This was an epic redistribution of wealth from the regular guy to a handful of “bankers” who were not really acting as bankers.

His email article is excellent and well worth reading a few times. He nails the use of remote conduits that have nothing to do with any loan transaction, much less a loan contract. The only thing I would add is the legal issue of the relationship between this information and the ability to rescind.

Rescission is available ONLY if there is something to rescind — and that has traditionally been regarded as a loan contract. If there is no loan contract, as Belanger asserts (and I agree) then there is nothing to rescind. But if the “transaction” can be rescinded because it is an implied contract between the source of funds and the alleged borrower, then rescission presumably applies.

Second, there is the question of what constitutes a “warehouse” lender. By definition if there is a warehouse lending contract in which the originator has liabilities or risk exposure to losses on the loans originated, then the transaction would appear to be properly represented by the loan documents executed by the borrower, although the absence of a signature from the originator presents a problem for “consummation” of the loan contract.

But, as suggested by the article if the “warehouse lender” was merely a conduit for funds from an undisclosed third party, then it is merely a sham entity in the chain. And if the originator has no exposure to risk of loss then it merely acted as sham conduit also, or paid originator or broker. This scenario is described in detail in Belanger’s article (see below) and we can see that in practice, securitization was distorted at several points — one of which was the presumption that an unauthroized party (contrary to disclosure and representations during the loan “approval” and loan  “closing”) was inserted as “lender” when it loaned no money. Yet the originator’s name was inserted as payee on the note or mortgagee on the mortgage.

All of this brings us to the question of whether judges are right — that the contract is consummated at the time that the borrower affixes his or her signature. It is my opinion that this view is erroneous and presents moral hazard and roadblock to enforcing the rights of disclosure of the parties, terms and compensation of the people and entities arising out of the “origination” of the loan.

If judges are right, then the borrower can only claim breach of contract for failure to loan money in accordance with the disclosures required by TILA. And the “borrower’s” ability to rescind within 3 days has been virtually eliminated as many of the loans were at least treated as though they had been “sold” to third parties who posed as warehouse lenders who in turn “sold” the loan to even more remote parties, none of which were the purported REMIC Trusts. Those alleged REMIC Trusts were a smokescreen — sham entities that didn’t even serve as conduits — left without any capital, contrary to the terms of the Trust agreement and the representations of the seller of mortgage backed securities by these Trusts who had no business, assets, liabilities, income, expenses or even a bank account.

If judges are right that the contract is consummated even without a loan from from the party identified as “lender” then they are ruling contrary to the  Federal requirements of lending disclosures and in many states in violation of fair lending laws.

There is an outcome of erroneous rulings from the bench in which the basic elements of contract are ignored in order to give banks a favorable result, to wit: the marketplace for business is now functioning under a rule of people instead of the rule of law. It is now an apparently legal business plan where the object is to capture the signature of a consumer and use that signature for profit is dozens of ways contrary to every representation and disclosure made at the time of application and “closing” of the transaction.

As Belanger points out, without consideration it is black letter law backed by centuries of common law that for a contract to be formed and therefore enforceable it must fit the four legs of a stool — offer, acceptance of the terms offered, consideration from the first party to the alleged loan transaction and consideration from the second party. The consideration from the “lender”can ONLY be payment to fund the loan. If the originator does it with their own funds or credit, then they have probably satisfied the requirement of consideration.

But if a third party supplied the consideration for the “loan” AND that third party has no contractual nexus with the “originator” or alleged “warehouse lender”then the requirement of consideration from the “originator” is not and cannot be met. In addition to defrauding the borrower whose signature will be copied and fabricated for dozens of “sales” of loans and securities deriving their value from a nonexistent loan contract, this distorted practice does two things: (a) it cheats investors out of their assumed and expected interest in nonexistent mortgage loan contracts and  (b) it leaves “borrowers” in a parallel universe where they can never know the identity of their actual creditor — a phenomenon created when the proceeds of sales of MBS were never paid into trust for a defined set of investors.

David Belanger’s Email article follows, unabridged:

AND AS I SAID, WITH NO CONSUMMATION AT CLOSING, BELANGER NEVER CONSUMMATED ANY MORTGAGE CONTRACT/ NOTE.

BECAUSE THEY ARE THE ONLY PARTY TO THE FAKE CONTRACT THAT FOLLOWED THROUGH WITH THERE CONSIDERATION, WITH SIGNING THE MORTGAGE AND NOTE,

AS REQUIRED, TO PERFORM. BUT GMAC MORTGAGE CORP. DID NOT PERFORM , I.E. LEND ANY MONEY AT CLOSING, AS WE HAVE THE WIRE TRANSFER SHOWING THEY DID NOT FUND THE MORTGAGE AND NOTE AT CLOSING. CANT HAVE A LEGAL CONTRACT IF ONLY ONE OF THE PARTY’S. PERFORMS HIS OBLIGATIONS.

THIS MAKE , AS I SAID. RESCISSION IS VALID. AND THEY HAVE NOT FOLLOWED THRU, THERE PART.

AND IT DOES GIVE ME THE RIGHT TO

RESCIND THE CONTRACT BASED ON ALL NEWLY DISCOVERED EVIDENCE, THAT THE PARTY TO THE MORTGAGE /NOTE CONTRACT, DID NOT

FULFILL THERE DUTY AND DID NOT PREFORM IN ANY WAY AS REQUIRED TO HAVE A VALID BINDING CONTRACT.

Tonight we have a rebroadcast of a segment from Episode 15 with a guest who is a recent ex-patriot from 17 years in the mortgage banking industry… Scot started out as a escrow agent doing closings, then advanced to mortgage loan officer, processor, underwriter, branch manager, mortgage broker and loss mitigator for the banks. Interestingly, he says,

“Looking back on my career I don’t believe any mortgage closing that I was involved in was ever consummated.”
Tonight Scot will be covering areas relating to:

1 lack of disclosure and consideration
2 substitution of true mortgage contracting partner
3 unfunded loan agreements
4 non-existent trusts
5 securitization of your note and bifurcation of the security interest and
6 how to identify and prove the non-existence of the so-called trust named in an assignment which may be coming after you to foreclose

: http://recordings.talkshoe.com/TC-139335/TS-1093904.mp3

so lets look at what happen a the closing of the mortgage CONTRACT SHELL WE.

1/ MORTGAGE AND NOTES, SAYS A ( SPECIFIC LENDER) GAVE YOU MONEY, ( AS WE KNOW THAT DIDN’T HAPPEN. )

2/ HOME OWNER WAS TOLD AT CLOSING AND BEFORE CLOSING THAT THE NAMED LENDER WOULD SUPPLY THE FUNDS AT CLOSING, AND WAS ALSO TOLD BY THE CLOSING AGENT , THE SAME LIE.

3/ THERE ARE 2 PARTIES TO A CLOSING OF A MORTGAGE AND NOTE, 1/ HOMEOWNER, 2/ LENDER.

3/ Offer and acceptance , Consideration,= SO HOMEOWNERS SIGN A MORTGAGE AND NOTE, IN CONSIDERATION of the said lender’s promises to pay the homeowner for said signing of the mortgage and note.

4/ but the lender does not, follow thru with his CONSIDERATION. I.E TO FUND THE CONTRACT. AND THE LENDER NAMED ON THE CONTRACT, KNEW ALL ALONG THAT HE WOULD NOT BE THE FUNDING SOURCE. FRAUD AT CONCEPTION. KNOWINGLY OUT RIGHT FRAUD ON THE HOMEOWNERS.

5/ THERE ARE NO STATUES OF LIMITATIONS ON FRAUD IN THE INDUCEMENT, OR ANY OTHER FRAUD.

6/ SO AS NEIL AND AND LENDING TEAM, AND OTHERS HAVE POINTED OUT, SO SO MANY TIMES HERE AND OTHER PLACES,

THERE COULD NOT BE ANY CONSUMMATION OF THE CONTRACT AT CLOSING,BY THE TWO PARTY’S TO THE CONTRACT, IF ONLY ONE PERSON TO THE CONTRACT ACTED IN GOOD FAITH,

AND THE OTHER PARTY DID NOT ACT IN GOOD FAITH OR EVEN SUPPLIED ANY ( CONSIDERATION WHAT SO EVER AT CLOSING OF THE CONTRACT.) A MORTGAGE AND NOTE IS A CONTRACT PEOPLE.

7/ SO THIS WOULD GIVE RISE TO THE LAW OF ( RESCISSION).

. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

AND THE BANKS CAN SCREAM ALL THEY WANT, IF THE PRETENDER LENDER THAT IS ON YOUR MORTGAGE AND NOTE, DID NOT SUPPLY THE FUNDS AT CLOSING, AS WE ALL KNOW DID HAPPEN, THEN THE MORTGAGE CONTRACT IS VOID. AND THERE WAS NO CONSUMMATION AT THE CLOSING TABLE, BY THE PARTY THAT SAID IT WAS FUNDING THE CONTRACT.

CANT GET MORE SIMPLE THAT THAT. and this supports all of the above. that the fake lender did not PERFORM AT CLOSING, DID NOT FUND ANY MONEY OR LOAN ANY MONEY AT CLOSING WITH ANY BORROWER, SO ONLY ONE ( THE BORROWER ) DID PERFORM AT CLOSING. BOTH PARTY’S MUST PERFORM TO HAVE A LEGAL BINDING CONTRACT.

SEE RODGERS V U.S.BANK HOME MORTGAGE ET, AL

THE WAREHOUSE LENDER NATIONAL CITY BANK OF KENTUCKY HELD THE NOTE THEN DELIVERED TO THIRD PARTY INVESTORS UNKNOWN

SECURITY NATIONAL FINANCIAL CORPORATION

5300 South 360 West, Suite 250

Salt Lake City, Utah 84123

Telephone (801) 264-1060

February 20, 2009

VIA EDGAR

U. S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N. E., Mail Stop 4561

Washington, D. C. 20549

Attn: Sharon M. Blume

Assistant Chief Accountant

Re: Security National Financial Corporation

Form 10-K for the Fiscal Year Ended December 31, 2007

Form 10-Q for Fiscal Quarter Ended June 30, 2008

File No. 0-9341

Dear Ms. Blume:

Security National Financial Corporation (the “Company”) hereby supplements its responses to its previous response letters dated January 15, 2009, November 6, 2008 and October 9, 2008. These supplemental responses are provided as additional information concerning the Company’s mortgage loan operations and the appropriate accounting that the Company follows in connection with such operations.

The Company operates its mortgage loan operations through its wholly owned subsidiary, Security National Mortgage Company (“SNMC”). SNMC currently has 29 branch offices across

the continental United States and Hawaii. Each office has personnel who are qualified to solicit and underwrite loans that are submitted to SNMC by a network of mortgage brokers. Loan files submitted to SNMC are underwritten pursuant to third-party investor guidelines and are approved to fund after all documentation and other investor-established requirements are determined to meet the criteria for a saleable loans. (e.s.) Loan documents are prepared in the name of SNMC and then sent to the title company handling the loan transactions for signatures from the borrowers. Upon signing the documents, requests are then sent to the warehouse bank involved in the transaction to submit funds to the title company to pay for the settlement. All loans funded by warehouse banks are committed to be purchased (settled) by third-party investors under pre-established loan purchase commitments. The initial recordings of the deeds of trust (the mortgages) are made in the name of SNMC. (e.s.)

Soon after the loan funding, the deeds of trust are assigned, using the Mortgage Electronic Registration System (“MERS”), which is the standard in the industry for recording subsequent transfers in title, and the promissory notes are endorsed in blank to the warehouse bank that funded the loan. The promissory notes and the deeds of trust are then forwarded to the warehouse bank. The warehouse bank funds approximately 96% of the mortgage loans to the title company and the remainder (known in the industry as the “haircut”) is funded by the Company. The Company records a receivable from the third-party investor for the portion of the mortgage loans the Company has funded and for mortgage fee income earned by SNMC. The receivable from the third-party investor is unsecured inasmuch as neither the Company nor its subsidiaries retain any interest in the mortgage loans. (e.s.)

Conditions for Revenue Recognition

Pursuant to paragraph 9 of SFAS 140, a transfer of financial assets (or a portion of a financial asset) in which the transferor surrenders control over those financial assets shall be accounted as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control over transferred assets if and only if all of the following conditions are met:

1

(a) The transferred assets have been isolated from the transferor―placed presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership.

SNMC endorses the promissory notes in blank, assigns the deeds of trust through MERS and forwards these documents to the warehouse bank that funded the loan. Therefore, the transferred mortgage loans are isolated from the Company. The Company’s management is confident that the transferred mortgage loans are beyond the reach of the Company and its creditors. (e.s.)

(b) Each transferee (or, if the transferee is a qualified SPE, each holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received, and no

condition restricts the transferee (or holder) from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor.

The Company does not have any interest in the promissory notes or the underlying deeds of trust because of the steps taken in item (a) above. The Master Purchase and Repurchase Agreements (the “Purchase Agreements”) with the warehouse banks allow them to pledge the promissory notes as collateral for borrowings by them and their entities. Under the Purchase Agreements, the warehouse banks have agreed to sell the loans to the third-party investors; however, the warehouse banks hold title to the mortgage notes and can sell, exchange or pledge the mortgage loans as they choose. The Purchase Agreements clearly indicate that the purchaser, the warehouse bank, and seller confirm that the transactions contemplated herein are intended to be sales of the mortgage loans by seller to purchaser rather than borrowings secured by the mortgage loans. In the event that the third-party investors do not purchase or settle the loans from the warehouse banks, the warehouse banks have the right to sell or exchange the mortgage loans to the Company or to any other entity. Accordingly, the Company believes this requirement is met.

(c) The transferor does not maintain effective control over the transferred asset through either an agreement that entitles both entities and obligates the transferor to repurchase or redeem them before their maturity or the ability to unilaterally cause the holder to return the specific assets, other than through a cleanup call.

The Company maintains no control over the mortgage loans sold to the warehouse banks, and, as stated in the Purchase Agreements, the Company is not entitled to repurchase the mortgage loans. In addition, the Company cannot unilaterally cause a warehouse bank to return a specific loan. The warehouse bank can require the Company to repurchase mortgage loans not settled by the third-party investors, but this conditional obligation does not provide effective control over the mortgage loans sold. Should the Company want a warehouse bank to sell a mortgage loan to a different third-party investor, the warehouse bank would impose its own conditions prior to agreeing to the change, including, for instance, that the original intended third-party investor return the promissory note to the warehouse bank. Accordingly, the Company believes that it does not maintain effective control over the transferred mortgage loans and that it meets this transfer of control criteria.

The warehouse bank and not the Company transfers the loan to the third-party investor at the date it is settled. The Company does not have an unconditional obligation to repurchase the loan from the warehouse bank nor does the Company have any rights to purchase the loan. Only in the situation where the third-party investor does not settle and purchase the loan from the warehouse bank does the Company have a conditional obligation to repurchase the loan. Accordingly, the Company believes that it meets the criteria for recognition of mortgage fee income under SFAS 140 when the loan is funded by the warehouse bank and, at that date, the Company records an unsecured receivable from the investor for the portion of the loan funded by the Company, which is typically 4% of the face amount of the loan, together with the broker and origination fee income.

2

Loans Repurchased from Warehouse Banks

Historically, 99% of all mortgage loans are settled with investors. In the process of settling a loan, the Company may take up to six months to pursue remediation of an unsettled loan. There are situations when the Company determines that it is unable to enforce the settlement of a loan by the third-party investor and that it is in the Company’s best interest to repurchase the loan from the warehouse bank. Any previously recorded mortgage fee income is reversed in the period the loan was repurchased.

When the Company repurchases a loan, it is recorded at the lower of cost or market. Cost is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Market value is often difficult to determine for this type of loan and is estimated by the Company. The Company never estimates market value to exceed the unpaid principal balance on the loan. The market value is also supported by the initial loan underwriting documentation and collateral. The Company does not hold the loan as available for sale but as held to maturity and carries the loan at amortized cost. Any loan that subsequently becomes delinquent is evaluated by the Company at that time and any allowances for impairment are adjusted accordingly.

This will supplement our earlier responses to clarify that the Company repurchased the $36,291,000 of loans during 2007 and 2008 from the warehouse banks and not from third-party investors. The amounts paid to the warehouse banks and the amounts originally funded by the Company, exclusive of the mortgage fee income that was reversed, were classified as the cost of the investment in the mortgage loans held for investment.

The Company uses two allowance accounts to offset the reversal of mortgage fee income and for the impairment of loans. The allowance for reversal of mortgage fee income is carried on the balance sheet as a liability and the allowance for impairment of loans is carried as a contra account net of our investment in mortgage loans. Management believes the allowance for reversal of mortgage fee income is sufficient to absorb any losses of income from loans that are not settled by third-party investors. The Company is currently accruing 17.5 basis points of the principal amount of mortgage loans sold, which increased by 5.0 basis points during the latter part of 2007 and remained at that level during 2008.

The Company reviewed its estimates of collectability of receivables from broker and origination fee income during the fourth quarter of 2007, in view of the market turmoil discussed in the following paragraph and the fact that several third-party investors were attempting to back out of their commitments to buy (settle) loans, and the Company determined that it could still reasonably estimate the collectability of the mortgage fee income. However, the Company determined that it needed to increase its allowance for reversal of mortgage fee income as stated in the preceding paragraph.

Effect of Market Turmoil on Sales and Settlement of Mortgage Loans

As explained in previous response letters, the Company and the warehouse banks typically settle mortgage loans with third-party investors within 16 days of the closing and funding of the loans. However, beginning in the first quarter of 2007, there was a lot of market turmoil for mortgage backed securities. Initially, the market turmoil was primarily isolated to sub-prime mortgage loan originations. The Company originated less than 0.5% of its mortgage loans using this product during 2006 and the associated market turmoil did not have a material effect on the Company.

As 2007 progressed, however, the market turmoil began to expand into mortgage loans that were classified by the industry as Alt A and Expanded Criteria. The Company’s third-party investors, including Lehman Brothers (Aurora Loan Services) and Bear Stearns (EMC Mortgage Corp.), began to have difficulty marketing Alt A and Expanded Criteria loans to the secondary markets. Without notice, these investors changed their criteria for loan products and refused to settle loans underwritten by the Company that met these investor’s previous specifications. As stipulated in the agreements with the warehouse banks, the Company was conditionally required to repurchase loans from the warehouse banks that were not settled by the third-party investors.

3

Beginning in early 2007, without prior notice, these investors discontinued purchasing Alt A and Expanded Criteria loans. Over the period from April 2007 through May 2008, the warehouse banks had purchased approximately $36.2 million of loans that had met the investor’s previous criteria but were rejected by the investor in complete disregard of their contractual commitments. Although the Company pursued its rights under the investor contracts, the Company was unsuccessful due to the investors’ financial problems and could not enforce the loan purchase contracts. As a result of its conditional repurchase obligation, the Company repurchased these loans from the warehouse banks and reversed the mortgage fee income associated with the loans on the date of repurchase from the warehouse banks. The loans were classified to the long-term mortgage loan portfolio beginning in the second quarter of 2008.

Relationship with Warehouse Banks

As previously stated, the Company is not unconditionally obligated to repurchase mortgage loans from the warehouse banks. The warehouse banks purchase the loans with the commitment from the third-party investors to settle the loans from the warehouse banks. Accordingly, the Company does not make an entry to reflect the amount paid by the warehouse bank when the mortgage loans are funded. Upon sale of the loans to the warehouse bank, the Company only records the receivables for the brokerage and origination fees and the amount the Company paid at the time of funding.

Interest in Repurchased Loans

Once a mortgage loan is repurchased, it is immediately transferred to mortgage loans held for investment (or should have been) as the Company makes no attempts to sell these loans

to other investors at this time. Any efforts to find a replacement investor are made prior to repurchasing the loan from the warehouse bank. The Company makes no effort to remarket the loan after it is repurchased.

Acknowledgements

In connection with the Company’s responses to the comments, the Company hereby acknowledges as follows:

· The Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· The staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· The Company may not assert staff comments as defense in any proceeding initiated by the Commission or any person under the Federal Securities Laws of the United States.

If you have any questions, please do not hesitate to call me at (801) 264-1060 or (801) 287-8171.

Very truly yours,

/s/ Stephen M. Sill

Stephen M. Sill, CPA

Vice President, Treasurer and

Chief Financial Officer

Contract law

Part of the common law series

Contract formation

Offer and acceptance Posting rule Mirror image rule Invitation to treat Firm offer Consideration Implication-in-fact

Defenses against formation

Lack of capacity Duress Undue influence Illusory promise Statute of frauds Non est factum

Contract interpretation

Parol evidence rule Contract of adhesion Integration clause Contra proferentem

Excuses for non-performance

Mistake Misrepresentation Frustration of purpose Impossibility Impracticability Illegality Unclean hands Unconscionability Accord and satisfaction

Rights of third parties

Privity of contract Assignment Delegation Novation Third-party beneficiary

Breach of contract

Anticipatory repudiation Cover Exclusion clause Efficient breach Deviation Fundamental breach

Remedies

Specific performance Liquidated damages Penal damages Rescission

Quasi-contractual obligations

Promissory estoppel Quantum meruit

Related areas of law

Conflict of laws Commercial law

Other common law areas

Tort law Property law Wills, trusts, and estates Criminal law Evidence

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation

Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.

According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

Such defenses operate to determine whether a purported contract is either (1) void or (2) voidable. Void contracts cannot be ratified by either party. Voidable contracts can be ratified.

Misrepresentation[edit]

Main article: Misrepresentation
Misrepresentation means a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation.

There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.
According to Gordon v Selico [1986] it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation.[68] If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact.[69]

=======================

Comments from Dan Edstrom:

My understanding in California (and probably most other states) is the signature(s) were put on the note and security instrument and passed to the (escrow) agent for delivery only upon the performance of the specific instructions included in the closing instructions. The homeowner(s) did not manifest a present intent to transfer the documents or title….   Delivery was not possible until the agent followed instructions 100% (specific performance).  Their appears to be a presumption of delivery that should be rebutted. In California the test for an effective delivery is the writing passed with the deed (but only if delivery is put at issue).
Here is a quote from an appeal in CA:
We first examine the legal effectiveness of the Greggs deed. Legal delivery of a deed revolves around the intent of the grantor. (Osborn v. Osborn (1954) 42 Cal.2d 358, 363-364.) Where the grantor’s only instructions concerning the transaction are in writing, “`the effect of the transaction depends upon the true construction of the writing. It is in other words a pure question of law whether there was an absolute delivery or not.’ [Citation.]” (Id. at p. at p. 364.) As explained by the Supreme Court, “Where a deed is placed in the hands of a third person, as an escrow, with an agreement between the grantor and grantee that it shall not be delivered to the grantee until he has complied with certain conditions, the grantee does not acquire any title to the land, nor is he entitled to a delivery of the deed until he has strictly complied with the conditions. If he does not comply with the conditions when required, or refuses to comply, the escrow-holder cannot make a valid delivery of the deed to him. [Citations.]” (Promis v. Duke (1929) 208 Cal. 420, 425.) Thus, if the escrow holder does deliver the deed before the buyer complies with the seller’s instructions to the escrow, such purported delivery conveys no title to the buyer. (Montgomery v. Bank of America (1948) 85 Cal.App.2d 559, 563; see also Borgonovo v. Henderson (1960) 182 Cal.App.2d 220, 226-228 [purported assignment of note deposited into escrow held invalid, where maker instructed escrow holder to release note only upon deposit of certain sum of money by payee].)
LAOLAGI v. FIRST AMERICAN TITLE INSURANCE COMPANY, H032523 (Cal. Ct. App. July 31, 2009).
In most cases I have seen the closing instructions state there can be no encumbrances except the new note and security instrument in favor of {the payee of the note}…
Some of the issues with this (encumbrances) would be who provided the actual escrow funding, topre-existing agreements, the step transaction and single transaction doctrines, MERS, payoffs of previous mortgages (to a lender of record), reconveyance (to a lender of record), etc…
Thx,
Dan Edstrom

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