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Why the Mortgages Cannot Legally Be Enforced

livinglies.wordpress.com | August 30, 2016

By Neil Garfield

From the point of view of Article 9 there can be no foreclosure of a mortgage without the party claiming rights under the mortgage showing that they purchased the mortgage for value.

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

—————-

After completing another two trials -- one of which went exceedingly well (I will be commenting on it in the next few days) --- and receiving more inquiries about the same things I am revisiting the UCC. It seems that everyone is paying attention to Article 3 but nobody is paying any attention to a very simple proposition in Article 9. The important thing to remember is that the UCC is not some sort of guideline. It has been adopted as state law in all 50 states, most without any major revision. It is the law --- and courts are supposed to follow it, not rewrite it. Of course they can't do that unless the foreclosure defense attorney raises the issue.

Transfers of "property" (meaning real property, or personal property --- which includes legal rights) can be accomplished in a number of ways. Gifts, loans, purchase and sale, endorsement, assignment, etc. So in our context, the transfer of negotiable paper (note not in default) or non negotiable paper (mortgages etc.) can occur legally in the stroke of a pen. But being the transferee is not the same as having all rights to the paper or property.

So if a courier picks up a bearer note, it has been transferred by delivery from Point A to the courier. Theoretically this would alow the courier to take the note to the maker and demand payment, and to sue for payment on the note. The courier would have standing because of legal presumptions. As the possessor of the note he is presumed to be the holder. But as holder of the note he is NOT presumed to be a holder in due course.

Follow the statute. So what are the rights of a holder? To make demand and sue on the note. On a motion to dismiss he is presumed to be entitled to enforce. The mistake by the courts is that they don't allow for that presumption to be rebutted by evidence from the maker. If the courier wins at trial then the debt is merged into the judgment. (Remember the debt was merged into the note when the note was executed --- otherwise there would be two liabilities for the same loan).

These are all rules about enforcing the NOTE. And the huge mistake the courts have made is that they have not followed all the applicable statutes. Ownership of the mortgage instrument even if assigned with all the right formalities does NOT allow the possessor or assignee to sue for foreclosure UNLESS the possessor assignee has purchased it for value.

So the interesting thing here is from the point of view of Article 9 there can be no foreclosure of a mortgage without the party claiming rights under the mortgage showing that they purchased the mortgage for value. What is interesting is that this flips back onto Article 3, which governs notes (as opposed to Article 9 which governs mortgages). If the statute adopting the UCC requires purchase of the mortgage to enforce it, it has the effect of requiring the holder of the note to be a holder in due course --- a purchaser for value, in good faith without knowledge of the maker's defenses.

But of course the banks and servicers and trusts never allege they are holder in due course because there was no purchase transaction.

If the courier DID purchase the mortgage for value (which is never the case) then the allegation that he is a holder rather than a holder in due course would give rise to a problem. Since payment was made, then the only way the courier would NOT be a holder in due course would be if the courier did not purchase it in good faith and DID know fo the borrower's defenses, including lending violations etc.

If the courier did NOT purchase the mortgage or pay for transfer of the note, then the courier is neither a holder in due course nor may he foreclose on the mortgage.

But the courier could theoretically win in a suit just based on the note. The notion that the mortgage follows the note (etc.) is true as to ownership but not as to rights to enforce.

If the courier DID purchase the mortgage for value (which is never the case) then the allegation that he is a holder rather than a holder in due course would give rise to a problem. Since payment was made, then the only way the courier would NOT be a holder in due course would be if the courier did not purchase it in good faith and DID know fo the borrower's defenses, including lending violations etc.

But the courier could theoretically win in a suit just based on the note. The notion that the mortgage follows the note (etc.) is true as to ownership but not as to rights to enforce. Banks and servicers and their lawyers are exploiting this confusion to win millions of foreclosure cases in which they DID have standing to sue on the note (Article 3) but they did NOT have standing to foreclose on the mortgage (Article 9) --- even though they may have owned the "paper."

So transfers are not the end of the story.

 

 

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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