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john gault's Blog

The Foreclosure Dilema: Decisions at the Expense of One Class
by john gault | 2012/01/11 |

This material looks at favoritism to one class of citizens at the expense of another in

enforcement of  Law in regard to foreclosures.     

john gault's Blog ::

A deed from Adam to Martha is effective upon its delivery to Martha, and not until then.  That's a fact. The only thing at all arguable is does this delivery mandate apply to a deed of trust, which  is a transfer of an interest in real property. - the DEED in deed of trust.    
 
MERS claimed to be the beneficiary in the deeds of trust,  (where it is not claiming agency in lieu of beneficiary) but MERS never took delivery of one single deed of trust. I don't know
why the law of delivery wouldn't apply.  "MERS"  doesn't take delivery of anything, or even do anything except provide a database, collect fees, and appoint anyone it feels like for a fee as an alleged officer to do things they couldn't otherwise and in reality do.  It is a shell entity with no employees. It is a  computer system used by its members for a fee. The members either with intent or as a result attempt to and are able to avoid any number of legal requirements.  Any time a member relies on anything at all as to Mers, it  is as to the claimant's employee's alleged status as an officer of MERS by the appt from William Hultman (all 25, 000 of them). 
The lack of delivery and possession may undermine a lot of what is
passing as "fact" by foreclosing parties.
MERS has no interest in notes and no one should be made at this
date to argue this point. It isn't news. MERS itself has made this very clear in MERS v. Nebraska Department of Banking and Finance, A-04-000786,  Appellant Brief filed October 14, 2004: 

“MERS does NOT acquire loans….”
“There is no rational basis for determining that MERS acquires
loans.”  P. 9

“MERS has no interest at all in the promissory note…” P. 11

"Mers is not the owner of the promissory note secured by the mortgage." P. 11

Full text of the brief is available here:

http://www.scribd.com/doc/52903486/MERS-Disavows-Interest-in-Loans-and-Notes

Every self-assignment done by a MERS' member which purports to assign the note is imo a false instrument. Such an assignment is contractually and legally impossible. You just can't 'assign' an interest you don't have and to pretend to do so to the (significant) detriment of another crosses the line and becomes criminal according to all states' law.  
By all appearances, none of the intermediaries on the note ever took possession of the note on its alleged way to securitization.  They didn't have time, they just didn't, for any of those "formalities" otherwise known as law. Did any money
actually change hands? I doubt it. That takes time, also.
Someone funded the loan, whether it were the party named on the
note or someone else.  The next time (or first, depending on your view of this funding issue) the note ever saw any money change hands after its origination was likely from the derivative investors, with no payment by anyone along the road, in stark contrast to the provisions of the UCC.  No money = no interest.  No possession = no interest. 
If Dee 'bought ' a note from joann, but Dee never gave Joann any money nor took possession but then sold the note she hadn't paid for or possessed to Richard,  I think under the UCC, there has been no transfer between Dee and Joann, so no transfer from Joann to Richard.
There just wasn't time between origination and securitization for those people to have done what had to be done: pay for-take possession-endorse-deliver,
pay for-take-possession-endorse-deliver- and so on. (And none of  this considers the constant flux of money, any promised yields in light of that constant flux,  and their self-created urgency to get that part - the promised yield - "nailed down", and that may well be at the heart of why laws weren't followed). I, for instance,  once lost around 150k for the flux of that money, and I was just a minute fry,  a mere  speck on 'the freckle of  life's complexion'.   Any business plan to get loans securitized in a NY minute (pun intended) had to consider that fluctuation and meeting deadlines on commitments.  These loans were moved around in huge blocks. Multimillion dollar blocks. Missing any commitment dates would be a very big deal.  So did they just record alleged "transfers" of notes in MERS' database and call it a done deal? Sure looks like it.     

 All these notes had to be paid for and physically transferred and possessed by everyone in the chain, at least that's my understanding of the UCC.
 We think of MERS merely as a computer database, a private registry for deeds of trust.  I think it's worse than that.  I think they skipped all the laws, including the UCC, by only (allegedly)
registering these alleged transfers of notes in MERS' database,
which could appropriately be called a private set of books, but significantly, one which has no basis in fact or law and certainly one with no governance.   What I'm suggesting is there was no endorsement of the note along the way by design. I'm opining it was not an accident - the 'shortcuts' were part of the plan, their reliance being the blank endorsement, but I think that plan fails for lack of possession and payment.  We know there was no assignment of the deed of trust and most likely no possession, either, of deeds of trusts or their assignments.  We've all done some reckless things when we're in a hurry.  But most of us confine these things to that which we know can be remedied and slap it on tomorrow's calendar.  Failure to follow the UCC as applicable as well as other contractual and statutory provisions, however, is fatal.    
A million to one there was no (required) delivery and possession along the way of either the note or deed of trust or any
assignment of the deeds of trust.  There was probably no payment, either. No money changing hands = no interest created or at least no right to enforce. No possession = no transfer.

Now, a promise to pay for the note might transfer interest IF the note is physically delivered.  I'm not clear on this one, although I uderstand the significance of the answer. But you can't enforce a note you haven't paid for. Promises to pay don't cut it for enforcement.   

 After closing, where did the debt and collateral instruments go? If any of them went right to the trust custodian (or were destroyed), then surely there was no possession by anyone whose endorseable or assignable interests were as a matter of law dependent on that possession. 
There is a reason there were 'intermediaries' between the originators and the trusts having to do with
bankruptcy-remoteness, which discussion is not up my alley.  If someone were to put the two together - 1) the no money and no possession arguments and 2) why the intermediaries were necessary (bankruptcy-remoteness), maybe we'd have a shot at arguments and need to know clearances judges could only find reasonable, and in fact indispensable to adjudications.

We'll probably never know, but is the reason they needed those TARP funds because their little private registry either failed in 'system-integrity', in which there could be 'accidents',  or for lack of recordation of the collateral instruments allowed one note to be 'sold' multiple times to different entities and or trusts.  What is the old saying? "A stitch in time saves nine"?

TARP was meted out ostensibly for the greater good. I can't help wondering if in 2012 it isn't (past) time to consider the economic impact of following the law as to foreclosures, which entails appropriate discovery, because,  to borrow a phrase (Olds?), "This isn't your father's car", your honor.  

If this necessary discovery results in routine findings of unenforceable obligations to homeowners, wouldn't that be a heck of a stimulus to our sputtering economy? It's the same ship which is sinking, regardless of whether it's at the aft or stern.  It would also signal a return to the law and rights on which our country was founded and without which we will not survive.   

It is certainly challenging for any of us mere mortals to try to figure out what is actually going on with this whole mess. It's been proven in more than one case, for instance,  that a loan was not transferred into a trust by psa cut off dates or at all. Other trusts appear to me messed for other reasons, some of which are decidely over my head. I am a mere-mortal-plebe-, but even as such, I can see problems for the trusts and others with these "fouls". So if I, a plebe, can see this, what is really going on with people who should know more than me, specifically people who are charged with responsibility to protect the law?  I think that's a pretty important question. Last I heard, for instance, the IRS was undecided about how it was going to treat income to investors which didn't really qualify for the favored tax status they thought they were getting with their investments.  Some trust investors, as we know, are fighting mad over various issues with the bill of goods they were sold, but to my knowledge, none of their suits quarrel about whether or not loans made it into a trust. The suits are centered around the quality and ratings on the loans. Apparently they can't admit the loans didn't make it without conceding the tax consequence of their received payments. 

 Is this the alleged dilema?  Is there a struggle, for one,  by and large for the powers that be between the consequences of an acknowledgement these are taxable events to one group, and in order to avoid that acknowledgement with its broad consequences (and this of course includes to people aka Wall Street & Co. who truly should be bearing the brunt of those consequences), blind eyes are turned toward what is wrongful foreclosure, in which case, the homeowner certainly loses? Is there a pi$$ing match of whom should bear the economic brunt of the misdeeds and or systemic failures (this struggle would be true only for those literati with any kind of conscience at all).  Better for the governmental literati to sit on the bench  and let us all sort it out (but AFTER the TARP hand-outs) as best we can in the interests of "Something", and that "Something" not including the welfare of American homeowners, for whose benefit laws were enacted, and which 'something' in fact must ignore the law? Is there some mass conclusion, some consensus, by those in power that the winner of the struggle should not be the homeowner, who, after all, is perceived to have gotten the benefit of the bargain?  Is this our enemy?

Well, if so, that's just wrong and a damn sad commentary.   

                

 




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You raised some good points...

Ohio courts have completely "botched" this in my opinion.  Cases in which homeowners argued that MERS lacks standing, or that MERS is not the real party in interest, have been decided in pro-MERS fashion.  Despite arguments that MERS has no beneficial interest in the mortgage, that it would not be entitled to any proceeds from the sale, and that MERS did not bear the loss on default, the courts here have held that MERS does, in fact, have standing.

Generally, they have found that MERS is a mortgagee and has a contractual right to foreclose on the Mortgage.  Though one case had a good desenting opinion by a judge who seems to understand the issue quite well, it would be tough to challenge a MERS mortgage here.

The Ohio Supreme Court has not yet addressed the issue.  It will be interesting to see how they do when a case eventually makes it there.

There seems to be a substantial amount of case law approving the way ownership of the note and mortgage are split today.  Basically, the courts find that it is okay, because the borrower agreed to it in the mortgage.  I disagree with it, but for now MERS is in a pretty good position here.

 
by Robert Franco | 2012/01/11 | log in or register to post a reply
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