Posted on October 24, 2014 by Neil Garfield
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The question keeps coming up, Judges and lawyers and even borrowers ask it. Why do I keep harping on the money? The simple answer is that these cases are all about money and not much else. The rest is window dressing or methods of collection on DEBTS that are not owed to the collectors or enforcers. It matters because it controls the issues of default, ownership and balance of the loan — as well as the terms for enforcement.
In order to get traction with a judge you need to use analogies to educate the judge. Don’t expect him or her to understand the point when you bring it up. You can work it forward or backward.
If you work it forward, your point is that the original naming of the “lender” was false and the use of the defective note and mortgage was not intended or authorized by the borrower. Collection is also an act in furtherance of what has been increasingly revealed as an intentional act of fraud against the investors, the trusts, the trustees, the government, the borrowers and the courts. That is the most in unclean hands that you can get and should prevent them from getting anything other than a money judgment assuming they can prove they are a holder in due course. A holder in due course can acquire paper from a nonexistent loan and the person who signed the paper will still be liable even though he received no money.
The debt a rises from the receipt of the money but it does not arise as an asset to anyone other than the source of funds — or someone in privity with the source of funds. That doesn’t exist in virtually all alleged acquisitions of debt by “trusts.”
Which brings us to going backward. The Trusts are said to be holders and never alleged to be holders in due course. If they are holders, they must prove the right to enforce and that they don’t merely possess the paper like a courier would. There is no logical business or legal reason not to allege holder in due course status when you qualify — it eliminates virtually all borrower defenses.
If they are alleging holder status, then for whom are they holding the paper? The issue of the paper being worthless comes from fact and logic. If they are not alleging HDC status they are admitting that something is missing. The elements are delivery as a result of a purchase for value in good faith without knowledge of borrower’s defenses. Since they are alleging delivery and trying to show that in court (even if it wasn’t in the order prescribed by the PSA). Since they are certainly going to deny that they acted in bad faith and deny they had any knowledge of borrower’s defenses, that leaves one element — purchase for value. If they didn’t purchase for value then why did the “assignor” give up the loan without receiving anything other than a fee?
No reasonable business explanation suffices. The holder of valuable paper (note and mortgage) would never simply give it away and would demand money for it unless they hadn’t paid for it. So now you have neither the trust nor the assignor of the loan PAPERS into the trust having paid for it. When you trace it down step by step you come to the only possible conclusion — the “lender” at the loan closing never funded the loan.
So where did it come from? If the trust did not purchase the loans it must be because they didn’t have the money since the only business of the trust was to acquire loans. If they didn’t have the money then the proceeds of the sale of MBS issued by the trust was never given to the trust. That means the investors who bought the mortgage backed bonds advanced funds to the underwriter expecting the funds to be given to the trust but the underwriter diverted those funds and wrote in the documents that investors have no right or authority to inquire as to status of the money or the loans. The underwriter also wrote that the Trustee could not inquire.
The only logical conclusion would be that the actual loan proceeds to the borrower came from the funds illegally diverted by the underwriter. Thus the source of funds were the investors who thought they were becoming trust beneficiaries of a trust that contained a pool of loans when the trust, in fact, received neither money nor loans. The resulting debt should be payable only to the investors, but they don’t know what happened so they make no claim (partially because they are claiming asset values deriving their value from the worthless mortgage backed bonds). The important thing is that the actual lender and the actual borrower have no written contract between them. Thus the note and mortgage are worthless and fatally defective. foreclosure therefore becomes impossible.
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Filed under: foreclosure