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How Does the Debt Get Transferred?

by Neil Garfield | September 25, 2018

Basic Black Letter law: A debt can only be transferred by the owner of the debt. The owner of the debt may use agents or intermediaries to accomplish the transfer of the debt. If an intermediary executes a document of transfer without reference and identification of the owner of the debt, the document has potentially fatal defects.

Parole evidence may be admitted, upon discretion of a court of competent jurisdiction. But in the end, the party claiming authority to enforce the debt in a foreclosure of the mortgage or deed of trust must prove that it is doing so on behalf of the owner of the debt.

The simplest way of doing this is by alleging or asserting the name of the owner of the debt and the fact that the enforcer is representing the owner of the debt. In the absence of such allegation or assertion it is more likely than not that the enforcer is not representing the owner of the debt and therefore has no authority to enforce the foreclosure.

Promissory notes may be enforced without ownership of the debt. Mortgages and deeds of trust cannot. Article 9 of the UCC as adopted by all 50 states as their state law requires that the debt be owned or purchased for value as a condition precedent to the right of the claimant to enforce a mortgage through foreclosure.

The courts are hiding the issue but there is full consensus on the fact that a mortgage without ownership of the debt is useless. If you analyze the decisions it is always there. But the courts are creative in coming to the conclusion that the transfer of ownership of the debt MUST have occurred (even if it didn’t).

They are bridging that divide by making some legal presumptions like “why execute the assignment of mortgage if you were not transferring the debt?” This of course ignores the question of whether (1) the assignor owned the debt (2) the assignor also specifically referenced transfer of the debt either in the assignment of mortgage or in an indorsement on the note.

I have already explained in many different ways that the ownership of the debt is completely dependent upon actual payment of value and the assumption of the risk of nonpayment. And I have often explained that the last person in the fictitious chain used by enforcers is virtually never the owner of the debt nor an authorized representative of the owner of the debt.

The rule is this: At some point in the fictitious chain, payment was not made because the loan was already sold. This could be as early as before the loan “Closing” to as late as the most recent assignment of mortgage. Note as well that where assignment of mortgage is abandoned at trial the case ceases to become a foreclosure case and converts solely to an action for damages for nonpayment on the note.

Transfer of the note is evidence of transfer of the debt. The matter asserted is that the debt was transferred. If the transferor of the note actually owned the debt, the evidence of transfer of the debt becomes fairly conclusive. But without evidence showing that the transferor owned the debt, no legal presumption should arise. And if the maker of the note challenges (denies) the transfer of the debt, the burden is on the enforcer to establish a chain of evidence starting with the owner of the debt. One way to put this in contention is simply denying that the note is held or owned by the enforcer which makes them prove it. In many cases the enforcer ahs been successful at fabricating a new “original.”

There is also an issue that is more grounded in law: the delivery of the note signals transfer of the debt because the note is like the title to a car. You become the legal owner when you get it. When you receive the note the presumption arises that the only evidence of the debt has been transferred to the recipient. Whether the note really is the only evidence of the debt is of course subject to dispute and normally not true. Dozens of documents at closing reflect the existence of the debt but not necessarily the owner of the debt. The only real conclusive evidence of the debt is evidence of actual payment by the Payee on the note to or on behalf of the Maker.

The creative courts dodge (1) the question about whether the prior possessor owned the note or debt and (2) whether the original note was actually physically delivered. In most cases only an image was delivered electronically, the original most likely having been destroyed or “lost.” Other sales of the image of the original note have almost always occurred. However, up to this point in time, the payoff to the underwriter/investment bank is not counted as reducing the receivable from the borrower to zero, even if the amount received is a multiple of the original note. If the investment bank was acting in the interest of investors to whom it sold Trust certificates, then the first money would have been return of capital to the investors and subsequent payoffs would have been shared between the underwriter and the investors.

The problem of course is that there would be no subsequent sales without the illusion that the loan still exists. So the investment banks created a convoluted trail to make it appear that the receivable (debt) existed while at the same time not titling it as such in the name of anyone. It was a brilliant act of deception. And THAT is the reason why they won’t identify the creditor. And it is the reason why no bank has ever challenged a TILA rescission by filing a suit to vacate the rescission. THERE IS NO CREDITOR, DESIGNATED OR OTHERWISE. Hence all such enforcement claims lack legal standing. TILA rescission strips away the veneer. If the banks actually had a creditor they would have buried anyone using rescission with a simple lawsuit vacating the rescission. They don’t because they can’t.

 

 

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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-CFLA (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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