90 Day Take Back Program Pt. 2 – Solution/Procedure

Posted by revolt | The "90 Day Take Back Program" Pt. 2 | Friday 23 April 2010 9:51 pm

The 90 Day Take Back Program – Solution/Procedure

 

Imagine a scenario where you are in full possession of the title to your home (i.e. absolute legal right to the possession of the property), free and clear of any mortgages you currently have. Imagine also that the Promissory Note (i.e. your promise to pay) that you issued to the lending bank has been made null and void, eliminating any legal obligation you had to make any additional payments against your original loan. Imagine you own your home outright and your current mortgage has been eliminated. Finally, imagine this all results in full compliance with Federal and State Consumer Protection Laws in less than six months. That is the solution our service provides. That reality can be yours.

Our service is an administrative process supported by numerous Federal Consumer Protections Laws, including, but not limited to, the Real Estate Settlement Procedures Act (“RESPA”), the Truth-In-Lending Act (“TILA”), The Code of Federal Regulations and the Fair Debt Collection Practices Act (“FDCPA”).

These laws grant consumers the right to request verification and validation of material facts related to the real estate loan transaction, as well as provide for specific remedies and damages to consumers in the event violations or fraud are found to exist (or not proven by the Lender as not to exist). Such remedies include the revocation of the Promissory Note and re-conveyance of the Deed of Trust/Mortgage Deed back from the bank and into the borrower’s sole possession. Those remedies would result in you owning your home outright with no mortgage or legal payment obligation.

Our service is far more comprehensive and effective than the many services being advertised that focus solely on the strategy of making the Lender prove they have original copies of the Promissory Note and Deed of Trust/Mortgage Deed.

While much of what we do is based on laws that are publicly available, a portion of our process is unique to us, and having been developed, refined and perfected over many years, is considered proprietary business information and will not be revealed here. 

However, we are Consumer Advocates and believe that you should have a basic understanding of this process in order to determine if it is a good solution for you. We believe it is. Therefore, we have outlined below some of the important components of our process, sharing what we can while still protecting the proprietary aspects of our business.

 This process is an administrative process that requires your involvement. By an administrative process we mean that it involves the drafting of legal documents (which we do) that must be properly executed, notarized, certified, recorded on the public record, and sent via Certified Return Receipt mail to a number of entities.

1.  In order for this process to be effective, all of the legal documents must be properly drafted, which we ensure, and all of the administrative steps must be accurately executed, which is your responsibility. You are provided detailed instructions on how to complete all of your responsibilities, and you are assigned an Educator from our staff who will serve as your personal point of contact, and who can assist you with all matters related to this process. This requires no specific prior experience or expertise on your part. Essentially we work together, combining our expertise, your legal rights and your personal effort. 

2.  This process is only effective if your Lender committed violations of Federal and/or State law, or committed outright fraud in relation to the origination of your loan. You are simply initiating a process to determine if violations or fraud exist. If violations or fraud exist (or are not proven by the Lender to not exist), then you may exercise your legal remedies to revoke the Promissory Note and obtain full title to your property. 

3.  The end goal of this process is you owning your home free and clear of your current mortgage. You must be willing to work towards that goal. On multiple separate occasions you will be responsible for having certain documents notarized and recorded in the public record. This typically involves multiple visits by you to your local courthouse during the normal workweek. You are also responsible for organizing, copying and mailing the legal documents to a number of specified entities via Certified Return Receipt mail. These processes can be time consuming and therefore may require you to take a few days off of work.  This effort is worthwhile.

4.  Once you sign up for our service, complete our Service Agreement and provide us with information and documents related to your mortgage, the first step is sending to your Lender, and other related parties, a legal document called an affidavit.  This document is both a Notice of Demand and Qualified Written Request. It is within your legal right to request verification and validation of information pertaining to your real estate loan transaction. This document serves to do this.

5.  Multiple Federal and State regulatory bodies are provided copies of the affidavit you send to your Lender and mortgage servicer (and the law firm handling your foreclosure if applicable). These regulatory bodies include, but are not limited to, the Federal Trade Commission and your State Attorney General. These regulatory bodies will open up cases or files in your name in order to monitor the outcome of this process. Involving these regulatory bodies brings additional support to you, as well as indicates to your Lender the seriousness of your intent.

6.  The law prescribes specific time frames (max 60 business days) during which your Lender must respond to the affidavit. A lack of response or insufficient response is legally considered no response at all, and allows you to move forward with the remedies of revoking the Promissory Note and re-conveying the Deed of Trust/Mortgage Deed back from the bank into your sole possession. At this time, no Lender has ever provided a legally satisfactory response to the affidavit, as doing so would require them to admit to the instances of violations or fraud in your loan transaction, and may result in an audit of their practices by the regulatory bodies you involved in this process. Preferring not to have to open their books to any regulatory bodies, and knowing that there is a 95%+ likelihood that they committed violations and/or fraud during the issuance of so many of their residential real estate loans, the Lender chooses the lesser of two evils, which is to allow you to exercise your legal remedies. The loss of the value of your home is of little consequence to them.

7.  After the legal time frame has passed, and assuming a satisfactory response to the affidavit has not been provided, the process moves forward. At the original closing of the loan, since you are the only one that signs the Promissory Note and the Deed of Trust or Mortgage Deed, you and only you can “undo” what was done in them. As is demonstrated on this website, the Promissory Note is an invalid contract. With proper notice, you have the Right to Cancel that contract.  Your Educator will provide you with documents and instructions in order to walk you through these steps. 

8.  In addition, at the closing, in the Deed of Trust/Mortgage Deed, you appointed the Trustee (usually the Title Company) and you granted Power of Attorney to the Lender. You have the right to fire the Trustee and appoint a new one of your choosing, and you have the right to revoke the Power of Attorney. By doing so you remove any power or legal authority previously available to these entities.  Your Educator will provide you with documents and instructions in order to walk you through these steps. 

9.  After all of this has been accomplished, you can then file a Quitclaim Deed or Warranty Deed with the county recorder to Notice the Substitution of the new Trustee. (FYI – Only the Trustee and the party with Power of Attorney have standing to bring a foreclosure action. By firing the current Trustee and revoking the Power of Attorney, you have removed their legal right to foreclose on you.) You can then file a Release of Trust Deed and re-convey the property to whomever or whatever you want to.  Your Educator will provide you with documents and instructions in order to walk you through these steps. 

10.  Essentially our process leverages Consumer Protection Laws to protect the borrower against unfair and deceptive lending practices by holding Lenders accountable for their actions and taking advantage of the aforementioned remedies legally available to the borrower.

If everything is properly executed, this process need not ever go to court. However, if it does go to court, we will provide you with all of the direction and support you will need to be successful. While this process has never resulting in any of our clients having to go to court (because the Lender/bank has never take any legal action back against any of our clients), we have a number of proven legal strategies that can be acted on to defend you.

Remember, the law is on your side. You have likely been injured by the Lender in the real estate loan transaction, and now you have the means to prove it. If you have been legally injured, then you have the right to remedies. When you demonstrate to the Lender that you know what is really going on, they will not want to “air their dirty laundry” in court.

Time is of the essence when they’re trying to take your home. Click now to download your 90 Day Take Back Program instantly, and arm yourself for the mortgage war, and WIN!

It’s time to join the revolution! THE HOMEOWNERS REVOLT.COM.

TAKE YOUR PROPERTY BACK FREE AND CLEAR, NOW! Click Here to download the ammunition you need to fight your mortgage war, and WIN! Yes! The 90 Day Take Back Program is that powerful weapon in your arsenal needed to “Take Your Property Back Free & Clear!”

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90 Day Take Back Program – Pt.1

Posted by revolt | The "90 Day Take Back Program" Pt. 1 | Friday 23 April 2010 6:42 pm

The 90 Day Take Back Program – Mortgage Education (Excerpt)

If you could legally own your home free and clear of your current mortgages within six months, would you be willing to devote a few hours of your time to verify this claim?

PART I: Fraudulent Inducement of a Loan

The purpose of this essay is to disclose the fact that most residential mortgages are fraudulent and can be nullified, and if nullified, would result in the homeowner owning the property free and clear of any mortgage.

When you apply for a loan to purchase a home, you are intentionally deceived into thinking your mortgage lender has loaned you their money, and they will suffer a loss if you fail to repay the loan.  Nothing could be farther from the truth!

The truth is your lender, hereafter referred to as “bank”, or “the bank,” has not put any of their own money at risk during the creation of a mortgage. Rather, the bank fraudulently creates money during the real estate closing transaction in order to pay off the seller, and in the process, the bank deceives you into letting them hold title to the property (the Deed) in an attempt to ensure your timely and very profitable repayments. Such instances of fraud are not only common in most real estate transactions, but they are so complex that the banks are rarely confronted on the matter.

While there are a number of instances of fraud that occur in the average residential real estate loan transaction, this essay focuses on a single category of fraud that deals specifically with what is know as a Promissory Note. Simply put, a Promissory Note is a promise by one party to repay another. A Promissory Note is not money, and its only value is in the ability of the promising party to repay the Note, or in the asset that backs or secures the Note.

In a real estate transaction, the homeowner issues a Promissory Note to the bank, promising to repay the home loan the bank has allegedly issued to them. Since most homeowners do not have sufficient cash to secure the Promissory Note, the bank protects their interests by securing the Note with the property the loan is allegedly being issued to purchase. By doing so, if the homeowner fails to repay the Promissory Note, the bank can seize the property from the homeowner through foreclosure and use the value of the property to offset the Promissory Note (i.e. to regain the value of the money the bank allegedly lent the homeowner).

On the surface this appears to make perfect sense. If the bank loaned you money to purchase a home, then you have an obligation to repay the loan. If you are unable to repay it, the bank is at risk of suffering a loss, and the bank should be able to recoup the balance of their loan by foreclosing on the property and selling it.

However, what if the bank never lent you any money in the first place? What if the bank fraudulently created money during the real estate closing transaction in order to create profits for itself? What if the bank deceived you into transferring the Deed to the real estate property into their name so that the bank would have the right to foreclose on the property, even though they never actually put any of their own money at risk? What if all of this could be proven under Federal Law, and if the same Federal Law specifically provided you the legal remedy to nullify the alleged mortgage and reconvey the property back into your name? The answers to those questions are the further substance of this essay.

It has been stated that a Promissory Note is a promise to repay, and is not in and of itself money or a cash equivalent. For example, if I were to issue you a Promissory Note to repay you for theater tickets you purchased on my behalf, you would not be able to cash in that Promissory Note for additional theater tickets or deposit it into your bank account for its promised cash equivalent value. That is not the case when it comes to the “rules” the banks play by, and this particular point is critical in understanding the root of the bank’s initial fraud.

The bank treats the Promissory Note you sign at your real estate closing as if it were a cashier’s check.  Meaning, the bank fraudulently converts that Promissory Note from a promise to repay, to the equivalent of a deposit check, and in doing so, converts the Note into cash. At the closing, “For Deposit Only” is stamped on the back of your Note and it is deposited into a checking account, known as a “transaction account.” This transaction account is actually in your name and legally any money in that account is your money. But the bank never tells you this. (Click here to view a Promissory Note that contains the “Pay To The Order Of – Without Recourse – Bank” stamp – evidence of the Note being converted into a cash deposit ).

A journal entry is made recording your payment to the bank (as if you deposited cash) for the amount of the Note and a check is written from the transaction account to the seller of the property.  As the buyer or purchaser of the property, you spend the next 30 years making “principal” payments, plus interest, to the bank in repayment for what you have been led to believe was a “loan” from them.

In reality the bank never lent you any money, especially not any of their own money. Every dollar of your hard earned money that you pay to the bank is not repayment of a loan, but pure profit to the bank, since the bank never put any of their own money at risk. Instead, the bank fraudulently converted your Promissory Note into cash to pay off the seller, and in the process, deceived you into the alleged obligation to repay the bank the full value of the alleged loan, plus interest. A very profitable transaction indeed, but also one that is based on fraud, and which by Federal Law can be nullified.

Most people have difficulty understanding and believing the banks can deposit Promissory Notes as they would a cashier’s check.  But keep in mind – the Federal Reserve System (the central banking system of the United States) has the power and authority to do as it pleases with respect to printing money and monetary policy.  Above all else, the Federal Reserve System and its member banks are businesses, and as such their goal is to create profits. There are special rules unique to the banking industry that allows banks to literally create money for the ultimate purpose of creating profits for themselves.

One may wonder how the bank converts a Promissory Note into cash. This is accomplished by use of one of the unique and special rules banks operate by called “fractionalization”. Fractionalization is a process whereby the Federal Reserve System creates and provides to member banks cash equal to ten times the amount of money the bank actually has on deposit (i.e. the bank only needs to have on deposit a “fraction” of the amount the Federal Reserve System will loan them).

This means if the bank obtains a Promissory Note valued at $100,000 through a real estate closing transaction, the bank can obtain cash from the Federal Reserve System in the amount of $1 million. The $100,000 Promissory Note you issued to the bank during the closing process instantly creates $1 million dollars in investible cash that the bank can use for their own profitable benefit.

The Federal Reserve System literally creates this new money by utilizing your personal credit from your signature on the Promissory Note, a power unique to the banking industry and a power that is at the core of what makes the banking industry so profitable. .

The $1 million created from your Promissory Note is deposited in the transaction account in your name (i.e. the name of the individual that issued the Promissory Note). Since the Promissory Note in this example was for $100,000, the bank immediately issues a check from your transaction account payable to the seller for $100,000 to make the seller whole for selling the property. Since you are unaware that the balance of the $900,000 is actually in a transaction account in your name, the bank keeps the remaining $900,000 for their benefit, leaving you none the wiser.

The fraudulent conversion of your Promissory Note into $1 million in cash for the bank all occurs within a 3-day period following the date you sign the closing documents. In the end, the seller is paid, you (the buyer) have obligated yourself to principal an interest payments on a $100,000 Promissory Note, and the bank profits not only from the $900,000 created from your Promissory Note, but also by the principal and interest payments you make the bank for the life of the alleged loan.

At this point you should be asking yourself questions like: 1) Were you aware that the bank never actually lent you any of their own money at your real estate closing? 2) Were you aware that your signature on a $100,000 Promissory Note was in fact worth $1 million in value to the bank? 3) Had you been aware, would you have negotiated better terms for your mortgage, a better interest rate? 4) Would you have entered into the mortgage at all?

The purchase and sale of real estate is a contractual transaction. According to contract law in order for a contract to be valid, both parties must disclose all material facts of the transaction. Based on what you have just learned about how your signature on a Promissory Note was converted into $900,000 in profit for the bank, would you say that all of the material facts of your real estate contract were fully disclosed to you? Is there any doubt in your mind that perhaps certain material facts were withheld from you?

If any party in a contract fails to disclose any material facts related to the transaction, the contract and related transaction can be rendered null and void. The Promissory Note and Deed of Trust/Mortgage Deed contract that you entered into with the bank at the closing can be nullified if the bank did not disclose to you all of the information explained above.

The information explained above is just one instance of fraud that, if used to confront the bank, could result in your real estate loan transaction being nullified and you owning your property free and clear of any mortgage. Experts have indicated that numerous instances of violations and blatant fraud were committed in over 95% of all residential real estate loan transactions. It is likely that you were the victim of predatory lending or some other illegal act for which the law provides you with certain remedies. The question is whether or not you are going to take action to enforce your rights, and, if your loan transaction falls in the 95% of transactions that contain violations, are you going to exercise your right to claim absolute title to your property free and clear of any payment obligation.

PART II: Additional Evidence

Below are several examples of Promissory Notes that have been monetized (converted into checks that are deposited into an account at the bank).

Click here for the first example.  Notice the phrase, “Pay to the order of Washington Mutual Bank without recourse.”  This means Washington Mutual Bank is accepting payment in full for the balance of the Note.

A second example Promissory Note can be accessed by clicking here. Scroll to the last page.  Notice the phrase, “Without Recourse Pay To The Order Of Wells Fargo Home Mortgage, Inc.”

Still not convinced?   Consider the following definition of “bank” in the 4th Edition of Black’s Law Dictionary:

“If a promissory note is designed to circulate as money, like money it can be deposited into a checking account.”

Or how about the definition of “deposit” under the Federal Deposit Insurance Act in the United States Code at 12 U.S.C. Section 1813 (L) (1):

“Cash is money, and credit or promissory notes become money when banks deposit promissory notes with the intent of treating them like deposits of cash.”

Also consider what the Federal Reserve Bank of San Francisco has to say about this subject.  In their publication “Monetary Policy in the United States” page 13, it says:

“bank loans are funded . . .  by banks creating new deposits.”

Further confirmation is offered in “Modern Money Mechanics” by the Federal Reserve Bank of Chicago, page 6:

“The actual process of money creation takes place primarily in banks . . .  What they do when they make loans is to accept promissory notes in exchange for credits to the borrower’s transaction accounts.” The “credits” being referred to here are the credits provided to the bank by the Federal Reserve System through fractionalization. The Federal Reserve System creates money for the bank based off of the signed Promissory Note.

If you believe Black’s Law Dictionary, the United States Code, and the Federal Reserve Bank, then you believe what we are telling you about Promissory Notes used in mortgage loan transactions.

But we are not finished yet.  We know that most people have difficulty grasping this concept so we suggest you go back to the Wells Fargo Promissory Note and scroll down to the last page where you will notice a second stamp of “Without Recourse Pay To The Order Of Wells Fargo Home Mortgage, Inc.”

This second stamp includes a signature of the loan officer at the bank.  Notice how this final page is not actually part of the original Promissory Note, but added by the bank after the Note has been executed by the borrower. Remember, the bank never signed the Note at the real estate closing, because the bank always intended to convert the Note into a cash deposit. So, the bank fraudulently converts the Note, without the borrower’s knowledge, by adding this final piece of paper on which they place their stamp and signature. This added piece of paper is referred to as an Allonge.

According to Wikipedia, an Allonge is a slip of paper affixed to a negotiable instrument, as a bill of exchange, for the purpose of receiving additional endorsements for which there may not be sufficient space on the bill itself.  An endorsement written on the Allonge is deemed to be written on the bill itself.

Notice this definition of “Allonge” says they “are affixed to negotiable instruments, as a bill of exchange.” If Allonges are affixed to negotiable instruments as bills of exchange, and they are affixed to Promissory Notes used by mortgage banks, doesn’t it stand to reason that these Promissory Notes are negotiable instruments as bills of exchange, and can therefore be treated as checks?

Did you also notice that only the Borrower signed these Promissory Notes?  We encourage you to look at the last page of the Promissory Note you signed to acquire your mortgage.  You will find only your signature.

Please understand – Promissory Notes, and all other Contracts or Agreements, are not legal and binding without signatures from both parties.   Without both signatures, they are considered “Unilateral Contracts.”

This is not an oversight by mortgage bank loan officers.  They understand their signatures are not to be placed on Promissory Notes, since the Notes are not treated as agreements, but instead are deposited as checks.

Think about it, when you hand someone a cashier’s check for the purchase of services or merchandise, does the person receiving it, sign it?  For example, when you write a check to buy groceries, does an employee of the grocery store also sign your check?  Or when you pay your light bill, does a representative of the power company sign your check?  Of course not!

It’s the same with your Promissory Note to the bank.  Since your Note is treated as a check or negotiable instrument, it should not to be signed by a second party, such as the mortgage bank loan officer.

Our 90 Day Take Back Program shows you how to legally defeat the bank fraud that has been perpetrated against you, and legally reconvey the property back into your name, leaving you with Free & Clear title to your property, and YES, No More mortgage payments!

Time is of the essence when they’re trying to take your home. Click now to download your 90 Day Take Back Program instantly, and arm yourself for the mortgage war, and WIN!

See Part 2 of this Blog for the 90 Day Take Back Program – Click Here Solution and Procedures.

It’s time to join the revolution! THE HOMEOWNERS REVOLT.COM.

TAKE YOUR PROPERTY BACK FREE AND CLEAR, NOW! Click Here to download the ammunition you need to fight your mortgage war, and WIN! Yes! The 90 Day Take Back Program is that powerful weapon in your arsenal needed to “Take Your Property Back Free & Clear!”

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Fannie Bars Foreclosure Actions in the Name of MERS

Posted by revolt | Fannie Bars Foreclosure Actions in the Name of MERS | Friday 9 April 2010 1:03 am

Fannie Bars Foreclosure Actions in the Name of MERS

04/01/2010 BY: CARRIE BAY

In new policy guidelines released this week, Fannie Mae told servicers that they can no longer name MERS as the plaintiff in any foreclosure action, whether judicial or non-judicial, on a mortgage loan owned or securitized by the GSE. ( Government Sponsored Enterprises, such as Fannie Mae and Freddie Mac).

MERS is widely used by the industry to keep track of the servicing rights on home loans. In fact, the top 100 mortgage originators and servicers employ the system. Its repository includes information on over 60 million home loans electronically registered by lenders.

MERS was created to be a paperless property registry to facilitate the quick transfer of mortgages between lenders and the inclusion of the loans in mortgage-backed securities, and in certain jurisdictions, MERS has the authority to initiate foreclosures on properties listed in its registry.

MERS is often designated as the “mortgagee of record” as a nominee of the actual mortgage holder. The service was designed to get around the slow and clumsy process of recording deeds at a county registrar and is similar to a broker serving as stockholder of record for a client.

But the system has become the centerpiece of a number of lawsuits, with foreclosed homeowners challenging the naming of the electronic system as mortgagee. Fannie Mae stated in its new servicing guidelines that when MERS is listed as the mortgagee of record, the servicer must prepare a mortgage assignment transferring the position from MERS back to the servicer, and then bring the foreclosure in its own name.

In the event that the GSE requires the foreclosure be brought in the name of Fannie Mae, the servicer must conduct that transfer assignment as well. In all cases, the assignment from MERS to the servicer or Fannie Mae must be recorded before the foreclosure begins.

“Fannie Mae will not reimburse the servicer for any expense incurred in preparing or recording an assignment of the mortgage loan from MERS to the servicer or to Fannie Mae,” the guidelines read.

Since 2006, Fannie Mae has required servicers to file foreclosure actions in their own name in judicial states where proceedings take place in the courtroom, such as Florida, Illinois, and New York.

Beginning May 1, 2010, Fannie is adding that same stipulation to foreclosure petitions in non-judicial states such as California, Massachusetts, and Texas, which allow lenders to foreclose without involving the courts.

Time is of the essence when they’re trying to take your home. Click now to download your Take Your Property Back Step-By-Step Manual instantly, and arm yourself for the mortgage war, and WIN!

It’s time to join the revolution! THE HOMEOWNERS REVOLT.COM.

TAKE YOUR PROPERTY BACK FREE AND CLEAR, NOW! Click Here to download the ammunition you need to fight your mortgage war, and WIN! Yes! The first weapon in your arsenal is the Take Your Property Back Step-By-Step Manual.

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2nd Appellate Court: Foreclosure Reversed

Posted by revolt | Proof: Promissory Note defense Works 2 | Thursday 1 April 2010 5:06 am

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING

MOTION AND, IF FILED, DETERMINED

IN THE DISTRICT COURT OF APPEAL                     Case No. 2D08-3553

OF FLORIDA

SECOND DISTRICT

BAC FUNDING CONSORTIUM INC.  

ISAOA/ATIMA,                                     

Appellant,                                                 

                v.

GINELLE JEAN-JACQUES, SERGE

JEAN-JACQUES, JR., and U.S. BANK

NATIONAL ASSOCIATION, as Trustee)

for the C-Bass Mortgage Loan Asset

Backed Certificates, Series 2006-CB5,

Appellees.

Opinion filed February 12, 2010.

Appeal from the Circuit Court for Sarasota

County; Robert B. Bennett, Jr., Judge.

F. Malcolm Cunningham, Jr., and Amy

Fisher of The Cunningham Law Firm, P.A.,

West Palm Beach, for Appellant.

Cindy L. Runyan of Florida Default Law

Group, LP, Tampa, for Appellee U.S. Bank

National Association.

No appearance for Appellees Ginelle M.

Jean-Jacques and Serge Jean-Jacques, Jr.

VILLANTI, Judge.

BAC Funding Consortium Inc. ISAOA/ATIMA (BAC) appeals the final summary judgment of foreclosure entered in favor of U.S. Bank National Association, as Trustee for the C-Bass Mortgage Loan Asset Backed Certificates, Series 2006-CB5 (U.S. Bank).

Because summary judgment was prematurely entered, we reverse and remand for further proceedings.

On December 14, 2007, U.S. Bank filed an unverified mortgage foreclosure complaint naming the Jean-Jacqueses and BAC as defendants. The complaint included one count for foreclosure of the mortgage and a second count for reestablishment of a lost note.

U.S. Bank attached a copy of the mortgage it sought to foreclose to the complaint; however, this document identified Fremont Investment and Loan as the “lender” and Mortgage Electronic Registrations Systems, Inc., as the “mortgagee.” U.S. Bank also attached an “Adjustable Rate Rider” to the complaint, which also identified Fremont as the “lender.”

Rather than answering the complaint, BAC responded by filing a motion to dismiss based on U.S. Bank’s lack of standing. BAC argued that none of the attachments to the complaint showed that U.S. Bank actually held the note or mortgage, thus giving rise to a question as to whether U.S. Bank actually had standing to foreclose on the mortgage. BAC argued that the complaint should be dismissed based on this lack of standing.

 U.S. Bank filed a written response to BAC’s motion to dismiss. Attached as Exhibit A to this response was an “Assignment of Mortgage.” However, the space for the name of the assignee on this “assignment” was blank, and the “assignment” was neither signed nor notarized. Further, U.S. Bank did not attach or file any document that would authenticate this “assignment” or otherwise render it admissible into evidence.

For reasons not apparent from the record, BAC did not set its motion to dismiss for hearing. Subsequently, U.S. Bank filed a motion for summary judgment. At the same time, U.S. Bank voluntarily dismissed its count for reestablishment of a lost note, and it filed the “Original Mortgage and Note” with the court. However, neither of these documents identified U.S. Bank as the holder of the note or mortgage in any manner. U.S. Bank did not file the original of the purported “assignment” or any other document to establish that it had standing to foreclose on the note or mortgage.

Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank. BAC now appeals, contending that the summary judgment was improper because U.S. Bank never established its standing to foreclose.

The summary judgment standard is well-established. “A movant is entitled to summary judgment ‘if the pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials as would be admissible in evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc., 928 So. 2d 1272, 1274 (Fla. 2d DCA 2006) (quoting Fla. R. Civ. P. 1.510(c)).

When a plaintiff moves for summary judgment before the defendant has filed an answer, “the burden is upon the plaintiff to make it appear to a certainty that no answer which the defendant might properly serve could present a genuine issue of fact.” Settecasi v. Bd. of Pub. Instruction of Pinellas County, 156 So. 2d 652, 654 (Fla. 2d DCA 1963); see also W. Fla. Cmty. Builders, Inc. v. Mitchell, 528 So. 2d 979, 980 (Fla. 2d DCA 1988) (holding that when plaintiffs move for summary judgment before the defendant files an answer, “it [is] incumbent upon them to establish that no answer that [the defendant] could properly serve or affirmative defense it might raise” could present an issue of material fact); E.J. Assocs., Inc. v. John E. & Aliese Price Found., Inc., 515 So. 2d 763, 764 (Fla. 2d DCA 1987) (holding that when a plaintiff moves for summary judgment before the defendant files an answer, “the plaintiff must conclusively show that the defendant cannot plead a genuine issue of material fact”).

As these cases show, a plaintiff moving for summary judgment before an answer is filed must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint.

In this case, U.S. Bank failed to meet this burden because the record before the trial court reflected a genuine issue of material fact as to U.S. Bank’s standing to foreclose the mortgage at issue. The proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder’s representative. See Mortgage Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007); Troupe v. Redner, 652 So. 2d 394, 395-96 (Fla. 2d DCA 1995); see also Philogene v. ABN Amro Mortgage Group, Inc., 948 So. 2d 45, 46 (Fla. 4th DCA 2006) (“[W]e conclude that ABN had standing to bring and maintain a mortgage foreclosure action since it demonstrated that it held the note and mortgage in question.”).

While U.S. Bank alleged in its unverified complaint that it was the holder of the note and mortgage, the copy of the mortgage attached to the complaint lists “Fremont Investment & Loan” as the “lender” and “MERS” as the “mortgagee.”

When exhibits are attached to a complaint, the contents of the exhibits control over the allegations of the complaint. See, e.g., Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So. 2d 399, 401 (Fla. 2d DCA 2000) (“Where complaint allegations are contradicted by exhibits attached to the complaint, the plain meaning of the exhibits control[s] and may be the basis for a motion to dismiss.”); Blue Supply Corp. v. Novos Electro Mech., Inc., 990 So. 2d 1157, 1159 (Fla. 3d DCA 2008); Harry Pepper & Assocs., Inc. v. Lasseter, 247 So. 2d 736, 736-37 (Fla. 3d DCA 1971) (holding that when there is an inconsistency between the allegations of material fact in a complaint and attachments to the complaint, the differing allegations “have the effect of neutralizing each allegation as against the other, thus rendering the pleading objectionable”).

Because the exhibit to U.S. Bank’s complaint conflicts with its allegations concerning standing and the exhibit does not show that U.S. Bank has standing to foreclose the mortgage, U.S. Bank did not establish its entitlement to foreclose the mortgage as a matter of law.

Moreover, while U.S. Bank subsequently filed the original note, the note did not identify U.S. Bank as the lender or holder. U.S. Bank also did not attach an assignment or any other evidence to establish that it had purchased the note and mortgage. Further, it did not file any supporting affidavits or deposition testimony do establish that it owns and holds the note and mortgage.

Accordingly, the documents before the trial court at the summary judgment hearing did not establish U.S. Bank’s standing to foreclose the note and mortgage, and thus, at this point, U.S. Bank was not entitled to summary judgment in its favor.

In this appeal, U.S. Bank contends that it was not required to file an assignment of the note or mortgage or otherwise prove that it validly held them in order to be entitled to summary judgment in its favor.

We disagree for two reasons. First, because BAC had not yet answered the complaint, it was incumbent on U.S. Bank to establish that no answer that BAC could properly serve or affirmative defense that it might allege could raise an issue of material fact. Given the facial conflict between the allegations of the complaint and the contents of the exhibit to the complaint and other filings, U.S. Bank failed to meet this burden.

Second, regardless of whether BAC answered the complaint, U.S. Bank was required to establish, through admissible evidence, that it held the note and mortgage and so had standing to foreclose the mortgage before it would be entitled to summary judgment in its favor.

Whether U.S. Bank did so through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer, it was nevertheless required to prove that it validly held the note and mortgage it sought to foreclose. See Booker v. Sarasota, Inc., 707 So. 2d 886, 889 (Fla. 1st DCA 1998) (holding that the trial court, when considering a motion for summary judgment in an action on a promissory note, was not permitted to simply assume that the plaintiff was the holder of the note in the absence of record evidence of such).

The incomplete, unsigned, and unauthenticated assignment attached as an exhibit to U.S. Bank’s response to BAC’s motion to dismiss did not constitute admissible evidence establishing U.S. Bank’s standing to foreclose the note and mortgage, and U.S. Bank submitted no other evidence to establish that it was the proper holder of the note and/or mortgage.

Essentially, U.S. Bank’s argument in favor of affirmance rests on two assumptions: a) that a valid assignment or transfer of the note and mortgage exists, and b) that a valid defense to this action does not. However, summary judgment is appropriate only upon record proof—not assumptions.

Given the vastly increased number of foreclosure filings in Florida’s courts over the past two years, which volume has taxed both litigants and the judicial system and increased the risk of paperwork errors, it is especially important that trial courts abide by the proper standards and apply the proper burdens of proof when considering a summary judgment motion in a foreclosure proceeding.

Accordingly, because U.S. Bank failed to establish its status as legal owner and holder of the note and mortgage, the trial court acted prematurely in entering final summary judgment of foreclosure in favor of U.S. Bank.

We therefore reverse the final summary judgment of foreclosure and remand for further proceedings.

Reversed and remanded for further proceedings.

ALTENBERND and SILBERMAN, JJ., Concur.

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An Anarchist’s Strategy To Dismiss Every Foreclosure In Florida

Posted by revolt | An Anarchist’s Strategy To Dismiss Every Foreclosure In Florida | Thursday 1 April 2010 4:10 am

An Anarchist’s Strategy To Dismiss Every Foreclosure In Florida

February 7th, 2010

 by Matthew D. Weidner, Esq.

Courts Are Overwhelmed With Foreclosures

Across the country, circuit court judges and their staff are becoming overwhelmed and frustrated by the total avalanche of foreclosure cases that have been dumped in their courtrooms.  In Pinellas County, Circuit Court judges who used to handle like 400 foreclosure cases are now handling something like 3,000.These judges still have one judicial assistant and the same limited resources the had before the crisis.  When the judge’s loan JA sits down to start the day, they are bombarded with phone calls and mail and people in their face every single second….it’s chaos, its a burden and it is completely untenable for the long run.

Things have gotten so bad for the judges that I’m told at least two Circuit Court Judges in Pinellas County (Linda Allan and Douglas Baird) have announced they were no longer going to hear Motions to Dismiss filed by Defendants in foreclosure cases, but were going to start just denying them across the board without even having a hearing on the matter.  Now that’s one way to deal with the crisis.  It’s an unconstitutional, unfair and totally biased approach that completely ignores the law and the rights of the citizens these judges took an oath to serve, but it is one way to deal with the crisis. (Look for Appeals To Come If This Practice Really Begins to Take Hold.)

I know, Let’s Throw All The Rules Out The Window

Many of the Plaintiff’s attorneys that are working so hard to throw borrowers out of their home cannot rely on good, solid, honest legal work to accomplish their job.  As an attorney who sees the work of these firms every day, I am just astonished that the Courts continue to allow such horrendous practice to continue unchecked, but there seems to be little desire to try and force a correction of the behavior.  Just in case you think I’m overstating the problem, here is an excerpt from the Florida Supreme Court’s Task Force Report on Residential Mortgage Foreclosures

  • Finally, it is critical that these firms be candid, clear, and truthful and accurate in connection with pleadings and affidavits filed with the Courts.  A leading plaintiff’s lawyer and a major plaintiff’s law firm have been the subject of a public reprimand and sanctions due to untruthful filings with the courts.  Judges continue to see affidavits of amounts due and owing signed by law firm employees, and cost affidavits charging very high service of process fees for process serving firms owned by the law firm principals.  To some extent, it is fair to be concerned whether the press of the case load is interfering with a judge’s ability to police the conduct of the firms before them in these usually uncontested, unopposed foreclosure cases.

The full report can be found researched, but the bottom line is this, the lenders and their law firms are lying, lying, lying.  They’re committing fraud on the courts on an unprecedented scale.  The report of the Supreme Court is a bit sanitized, but the firms are whipping out foreclosure cases so quickly that they’re not even bothering to get the proper documents that prove they have a correct basis to file a suit from the outset.  Some firms have ownership interests in the process servers who are supposed to personally hand the lawsuit to a defendant and they’re both charging exorbitant fees for this service and lying about whether proper service has been obtained or even attempted.  And finally, the biggie….they’re lying, lying, lying about the evidence they’re submitting to the court, these come primarily in the forms of Affidavits and Assignments submitted to support Summary Judgments of Foreclosure.

Affidavits and Assignments in Foreclosure, Liars Re-Telling Lies Re-created From Fiction

There are several areas where the lying is reduced to black and white and submitted to the court.

Assignment of Mortgage

First, when the foreclosing Plaintiff is not the original lender, there must be a formal Assignment of Mortgage executed which says, “The Original Lender Assigns This Mortgage to the Plaintiff in This Case.”  This document is needed to give the Plaintiff the proper legal basis to be suing the Defendant. Many of the originating lenders are no longer operating so getting a real assignment from a dissolved corporation would be difficult.  In other cases, the Plaintiff introduces an Assignment of Mortgage executed by “MERS” a shadowy, shifty, shady backroom dealer of mortgages.   The Assignment of Mortgage issue is problematic even when a mortgage was only assigned from an originating lender to the foreclosing Plaintiff, but in cases where a mortgage has changed hands many times, there should be an unbroken chain of properly executed assignments from originating lender straight through to foreclosing Plaintiff.  (In fact, this requirement of an unbroken chain of assignments was originally part of the foreclosure procedures in Pinellas County, but this requirement was stripped.)  The problem is these assignments are frequently fraudulent.  The lenders know this, their attorneys know this and the courts know this, but they’re all just going ahead and pretending like it’s not an issue. IT IS AN ISSUE!

Affidavit of Amounts Due and Owing

The second area of Affidavit Fraud is the Affidavit of Amounts Due and Owing which states, “Your Undersigned Affiant is an employee of the Plaintiff and I SWEAR Based on my PERSONAL KNOWLEDGE that the Plaintiff is Owed, $150,000″.   In a case where the original lender is the foreclosing Plaintiff, an employee of that lender could sign such an affidavit based on their review of the company’s accounting records.  In most of the foreclosure cases currently pending in courts around the country, the mortgages have changed hands many times and there is simply no basis whatsoever for any person to sign an affidavit stating that they have any knowledge whatsoever of who is owed any money whatsoever.  These affidavits are legally insufficient, they’re false and fraudulent.

Affidavit of Lost Note

The third area of Affidavit Fraud is the Affidavit of Lost Note which states, “Your Undersigned Affiant is an employee of the Plaintiff who had posession of the note when it was lost and while we looked long and hard to find the note, it’s just plain disappeared and we just will never find it.”  In cases where the Plaintiff cannot locate the original note, this Affidavit is required in order to “Re-establish The Lost Note”, a technical process which must be followed in order to successfully and honestly proceed with a foreclosure case.  There are two problems here.  First, in many cases, the Affidavit does not include the correct language wherein the Plaintiff asserts that it was in possession of the note when it was lost.  The affidavit states, “the note was in possession of someone (we don’t know who) when it was lost”.  The other variation of this is when the Plaintiff is in possession of the note but they don’t bother disclosing this to the court.

Laws and Rules Just Don’t Matter Anymore, Everyone Hop On Board The Fraud Train!

So if the Plaintiffs and their attorneys are engaging in massive and systemic fraud and the courts are totally aware of this and yet it’s going totally unpunished and unanswered why doesn’t everyone just get on the fraud train? I mean why not?  Well here’s one way that consumers and anarchists could engage in fraud that would totally throw the system into chaos.  If rebels and anarchists and people who just don’t care executed and recorded Satisfactions of Mortgages across the country, it would send the entire foreclosure system into collapse.  A Satisfaction of Mortgage is a one page document that costs $8.50 to record.  It can be produced on a home computer, filled out correctly then sent in along with a money order or cashier’s check.  The Clerk of Court is required to record it and there would be no way of ever knowing where these fraudulently produced satisfactions were coming from.   While the lenders were trying to figure out how to deal with this massive problem, they would have no choice but to stop the pursuit of the foreclosure cases.

Anarchy Is a Crime- Revolution is a Crime.

Make no mistake, doing this is wrong.  It is a crime. A serious crime.  I would not do it and I’m not seriously suggesting anyone should, especially for their own mortgage.  But what if? I mean what if some modern day Robin Hood or Paul Revere set out with a few hundred bucks and a few hours on a computer and started just sending in satisfactions?  And what if, at the same time these same band of anarchist Robin Hoods also filed with the courts “Notice of Voluntary Dismissal and Release of Lis Pendens”?  I mean when the law firms that are prosecuting these cases are so out of touch that they have no idea what’s happening with their files and they have no contact whatsoever with the lenders they claim to represent, it would take them months to figure out if their law office or their client really did dismiss the case or whether this was another one of those Anarchist Dismissals.

But if the system is so broken down that judges are engaging in systematic denial of a defendant’s rights and if the Supreme Court of Florida is acknowledging in writing

that they are aware of widespread and systemic fraud being perpetrated on courts across the country and they’re doing nothing to stop it,

isn’t a little bit of anarchy in order?

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Promissory Note Defense: Foreclosure Dismissed

Posted by revolt | Proof: Promissory Note Defense Works | Thursday 1 April 2010 2:30 am

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

[Exerpt Of Case – Standing Issue]

SAXON MORTGAGE SERVICES, INC., et

al.,

Plaintiffs,

v.

RUTHIE B. HILLERY, et al.,

Defendants.

___________________________________/

No. C-08-4357 EMC

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS

(Docket No. 7)

Plaintiffs Saxon Mortgage Services, Inc. and Consumer Solutions REO, LLC have filed suit against Defendants Ruthie B. Hillery and the Spielbauer Law Firm, asserting claims for, inter alia, declaratory relief pursuant to the Truth in Lending Act (“TILA”).

Currently pending before the Court is Defendants’ motion to dismiss. Having considered the parties’ briefs and accompanying submissions, as well as the oral argument of counsel, the Court hereby GRANTS the motion to dismiss.

The dismissal shall be without prejudice, and Consumer shall have leave to amend.

C. Standing

Defendants contend that, even if there is subject matter jurisdiction, both Consumer and Saxon lack standing to pursue this litigation. It is well established that a plaintiff must prove standing by showing: (1) injury in fact; (2) a causal connection between the injury and the defendant’s conduct; and (3) a likelihood that a favorable outcome will redress the injury. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

1. Consumer

Consumer seeks, in essence, to “enforce the [Promissory] Note and Deed of Trust if [Ms.] Hillery does not pay the Rescission Balance by a date set by this Court.” Compl. ¶ 27. Thus, as Consumer itself acknowledges, to proceed with this action, it must demonstrate that it is the holder of not only the deed of trust but also the promissory note. If not, it has no injury in fact. See In re Foreclosure Cases, 521 F. Supp. 2d 650, 653 (S.D. Oh. 2007) (stating that, “[t]o show standing in a foreclosure action, . . . the plaintiff must show that it is the holder of the note and the mortgage at the time the complaint was filed [and] . . . that the holder of the note and mortgage is harmed, usually by not having received payments on the note”).

There is evidence that the deed of trust was transferred to Consumer. As noted above, New Century designated MERS the beneficiary of the deed and gave MERS broad authority to act with respect to the property. See Compl., Ex. A (Deed at 3) (stating that MERS “has the right to exercise any or all of those interests [granted by Ms. Hillery] in this Security Instrument”).

The Court thus assumes MERS had the power to assign the deed to Consumer, which it apparently did on or about June 20, 2008. See Compl., Ex. D (assignment, recorded on 7/21/08). However, for there to be a valid assignment, there must be more than just assignment of the deed alone; the note must also be assigned. See Carpenter v. Longan, 83 U.S. 271, 274 (1872) (stating that “[t]he note and mortgage are inseparable; the former as essential, the latter as an incident”; adding that “[a]n assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity”); In re Leisure Time Sports, Inc. 194 B.R. 859, 861 (9th Cir. 1996)

 Case3:08-cv-04357-EMC Document19 Filed12/09/08 Page7 of 10

United States District Court

For the Northern District of California

[In their motion to dismiss, Defendants further argue for dismissal based on failure to join an indispensable party. At this juncture, the Court cannot make any determination about joinder because it is not clear who currently owns the promissory note at issue. The bottom line is that if, as Consumer claimed at the hearing on the motion to dismiss, it currently owns the promissory note, then there will likely be no joinder problem. (stating that “[a] security interest cannot exist, much less be transferred, independent from the obligation which it secures” and that, “[i]f the debt is not transferred, neither is the security interest”); Kelley v. Upshaw, 39 Cal. 2d 179, 192 (1952) (stating that assigning only the deed

without a transfer of the promissory note is completely ineffective); see also Restatement (3d) of Property (Mortgages) § 5.4 (stating that “[a] mortgage may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation that the mortgage secures”) (emphasis added). As Kelley establishes, this is true under California law which presumably applies here.

As noted above, MERS purportedly assigned both the deed of trust and the promissory note to Consumer. See Compl., Ex. D (assignment, recorded on 7/21/08). However, there is no evidence of record that establishes that MERS either held the promissory note or was given the authority by New Century to assign the note. Indeed, Consumer’s own complaint contains only an allegation

about assignment of the deed of trust — and not the note. See Compl. ¶ 17 (alleging that “New Century assigned its beneficial interest of the Deed of Trust to Plaintiff Consumer Solutions”).

 Accordingly, the Court concludes that there is insufficient evidence that Consumer has standing to proceed with this litigation. Dismissal is therefore warranted. The dismissal, however, shall be without prejudice, and Consumer shall be given leave to file an amended complaint. Such a complaint must include not only allegations that Consumer is the current holder of both the deed of trust and promissory note but also evidence supporting such.

The amended complaint must be filed no later than December 19, 2008. Defendants shall then have until January 30, 2009, to file a response. A case management conference shall thereafter be held on February 4, 2009, at 1:30 p.m.

2. Saxon

Whether or not Saxon, the servicer of the loan, has standing in the instant case rises and falls with whether or not Consumer has standing. See In re Kang Jin Hwang, 393 B.R. 701, 712 (C.D. Cal. 2008) (indicating that a loan servicer cannot bring an action without the holder of the promissory note).

[Case3:08-cv-04357-EMC Document19 Filed12/09/08 Page8 of 10]

United States District Court

For the Northern District of California

That is, if Consumer can demonstrate that it is the owner of both the deed of trust and the promissory note, then it was proper for Saxon to have been named a plaintiff at the outset of the litigation along with Consumer.

Defendants contend that Saxon cannot have standing because it was no longer the servicer of the loan at the time the original complaint was filed on September 17, 2008. The Court does not agree. The evidence of record indicates that Saxon did transfer loan servicing to another entity, EverHome Mortgage Company (“EverHome”), but the transfer was effective after the date of the filing of the complaint, i.e., on October 1, 2008. See Mot., Ex. 7 (letter, dated 9/16/08, notifying Ms. Hillery that, effective 10/1/08, EverHome Mortgage Company would be the loan servicer).

Of course, it does appear that, currently, Saxon is no longer the loan servicer. Because the Court is requiring that an amended complaint be filed, Plaintiff may want to substitute Saxon out of the complaint. See Fed. R. Civ. P. 25(c) (providing that, “[i]f an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party”); see also Hilbrands v. Far East Trading Co., 509 F.2d 1321, 1323 (9th Cir. 1975) (noting that defendant “never made a motion for substitution, only the motion for summary judgment against [plaintiff]” and therefore she should “have been permitted to continue the action”).

This order disposes of Docket No. 57.

IT IS SO ORDERED.

Dated: December 9, 2008

_________________________

EDWARD M. CHEN

United States Magistrate Judge

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California Foreclosure: The Basics of Note Enforceability Part 2

Posted by revolt | California Foreclosure: The Basics of Note Enforceability Part 2 | Thursday 1 April 2010 1:32 am

California Foreclosure Primer: The Basics of Note Enforceability Part 2 of 2

By Michael Doan on Dec 14, 2008 

In The Basics Of Note Enforceability Part 1, we explored the players typical in any California Foreclosure.  In this blog, we now turn to whether any of these players actually have the ability to enforce a foreclosure.

Lets assume that an outside foreclosure agent such as Recontrust has a valid agency relationship with an entity that claims it can enforce the note (of course, this is a new piece of the puzzle……if Recontrust can not prove an agency relationship, the foreclosure process fails at this point too).

Remember, that the entity that is attempting to enforce the note is the Servicer.  So that means that either the Servicer actually has the ability to enforce the note under CCC 3-301 or that they are the agent of the entity that has the ability to enforce the note under CCC 3-301.  Assuming that the Trust (in this example ZZZ-1234 Trust with the New York Bank as Trustee) owns and possess the note and that the servicer has a valid agency relationship, we now come full circle to whether  New York Bank is in compliance with CCC 3-301.

For New York Bank to institute a valid foreclosure proceeding, they must be able to establish compliance with CCC 3-301, at commencement of the foreclosure proceeding, the recording of the notice of default, and throughout the proceedings until sale date.  So then the following most basic requirements of CCC 3-301(a) or CCC 3-301(b) must be met:

3-301(a), Holder of the instrument: Was the entity filing the Notice of Default and subsequent actions, the Holder of the Note the entire time?  This analysis turns on transfer and possession, and under California law, there are two requirements for a person to qualify as a Holder:

(a) ACTUAL POSSESSION: the person must be in actual physical possession of the instrument, and

(b) TRANSFER BY ENDORSEMENT: the instrument must be payable to that person where the transferor must indorse the instrument to make it payable to the transferee See CComC § 1201(20); See CComC § 3205(a);

Alternatively, the transferor may indorse the instrument in blank, and thereby make it enforceable by anyone in its possession (much like paper currency). See CComC § 3205(b).  Bottom line, did the Servicer possess the note or where they acting as an agent for the entity possessing the note?  And if so, was the note either endorsed to the Servicer or its Principal, or endorsed in blank?

If the servicer meets these two requirements, then it has the ability to enforce the note and foreclose.  Again, it all depends upon POSSESSION and ENDORSEMENT.

3-301(b), Nonholder in possession of the instrument who has the rights of a holder: Was the entity filing the Notice of Default and subsequent actions, in possession of the Note, without endorsement, but with Holder rights?  Typically, this occurs where a note was transferred to a new owner pursuant to a purchase and sale agreement, but without endorsement.  In other words, the new owner obtained possession of the note pursuant to a valid purchase and sale agreement, but for some reason or another, the seller never signed off and negotiated the note through an endorsement.  In that case, the new owner meets the possession requirements of 3-301 (a) and (b), but is not considered a “Holder” by reason of CCC 1-202(b)21 to qualify under CCC 3-301(a) due to the lack of endorsement, but nevertheless has the rights of a holder due to the purchase and sale agreement.  In this situation, a prudent debtor would demand inspection of the purchase and sale agreement to confirm whether the alleged owner has the “rights of a Holder.”

Only when the underlying enforceability issues of the Promissory Note are established, can an entity then look to any Deed of Trust which is only an accessory security interest which then gives rise to a foreclosure right. Most lenders miss the forest between the trees at this stage, and just assume that since the Deed of Trust was assigned to them, they can automatically foreclose.

But the Deed of Trust is only incidental to the underlying Promissory Note.  It has no effect without the note.  It is legally impossible to foreclose on any real property without the Note.  The Deed of Trust is a legal nullity by itself, and means nothing without the note.  These lenders entirely skip the underlying enforceability of a foreclosure which only arises upon actual Note possession and proper endorsement/obtaining Holder rights.

If you are facing foreclosure, watch out!  If the actual owner of the note attempts to foreclose, but legally can not do so due to possession or endorsement issues on the note, legal grounds exist to set aside the foreclosure.   Indeed, a very similar situation arose recently in the Hwang case, a Central District of California Bankruptcy Court Case where IndyMac was the only entity with the actual legal ability to proceed with foreclose, yet it admitted it was not the actual owner of the note!

In Hwang, even though IndyMac had the rights to foreclose on the note (it had possession and a valid endorsement), the Court stated nobody knew who the owner of the note was, “Indeed, it is doubtful that IndyMac could make such a claim, because IndyMac does not know who owns the note.” In that case, the Judge denied IndyMac the ability to obtain relief of the automatic stay to pursue the foreclosure solely because no one seemed to know who the actual owner of the note was.

So if you are facing foreclose, you may wish to demand inspection of the original note.  Even if the note is produced, then demand proof that possession existed when the Notice of Default was entered.  And even if possession existed properly at all times, endorsement and negotiability must be proper and timely. When was the note endorsed?  Who was it endorsed to.  Is there an agency relationship between the foreclosing agent and endorsee?  Is the endorsement in blank?  If there is no endorsement, is there a purchase and sale agreement that gives Holder rights, and did it exist prior to the Notice of Default?

As always, seek a competent attorney that will investigate these issues if you are having any doubts as to the enforceability of a foreclosure proceeding you are a party to.

Time is of the essence when they’re trying to take your home. Click now to download your Take Your Property Back Step-By-Step Manual instantly, and arm yourself for the mortgage war, and WIN!

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California Foreclosure: The Basics of Note Enforceability Part 1

Posted by revolt | California Foreclosure: The Basics of Note Enforceability Part 1 | Thursday 1 April 2010 1:24 am

California Foreclosure Primer: The Basics of Note Enforceability Part 1 of 2

By Michael Doan on Dec 14, 2008 

In many California foreclosure cases, lenders are all together disregarding the underlying model provisions of UCC article 3 and 9, which California has codified in its California Commercial Code.

These lenders appear to be bypassing the most elementary and beginning stage of any foreclosure proceeding, California Commercial Code 3-301, which governs the underlying promissory note as a negotiable instrument and who is entitled to enforce it.

In a typical foreclosure, ABC Company, the last entity the borrower was paying, simply contacts its foreclosure company to issue a Notice of Default and move forward with the foreclosure process.  Everyone seems to assume that ABC Company has the ability to foreclose in the first place since that was who the borrower was paying recently and who the borrower may have received a notice that their loan was “sold” to.

Because of these assumptions, most lenders, attorneys, and borrowers altogether skip or completely assume the negotiability requirements of UCC article 3 have been met during all previous transfers of the promissory note, and jump straight to the UCC article 9 security interests issues.

Such assumptions are akin to an airline pilot assuming his plane has fuel for flying, without ever inspecting any fuel tanks for fuel! Just like a plane can not fly without proper fuel, a foreclosure can not take place with proper possession and endorsement/holder rights in an underlying promissory note.  Pilots do not skip fuel checks, so why are foreclosures skipping note enforceability issues?  Maybe because no lives are at stake?  It takes too long?  Its never been an issues before? It costs too much money?

Check your Deed of Trust and Promissory Note.  Chances are that XYZ Company is the original lender, not ABC company, and you simply received notice that your loan was sold some time ago. But keep in mind what really took place.  Chances are, in today’s securitization market, that your note was securitized in a pool with other notes to a Trust, that was then sold to a substantial number of investors on Wall Street.

In this example, XYZ company may have originated the note and funded the original mortgage with the aid of a the warehouse lender which provided interim funding (the warehouse lender normally just files a UCC-1 financing statement as to the notes or claims perfection by possession and is rarely an actual transferee of the note).

A Sponsor then organized the securitization of the mortgage and submitted the original registration statements to the Securities and Exchange Commission.  Finally, a Depositor then transferred the note a Trust.

So in effect, even though XYZ originated the note, the note eventually concluded its transfers and now resides in a Trust.  Or, as which often happens, the Trust owns the note, but somewhere along the note transfers, the actual possession of the note never made it to the Trust.

Irrespective, the Trustee of the Trust, is the actual entity that owns the notes for the benefit of the parties who invested in the various tranches of bonds issued by the Trust. Each tranche of bond holders has a different interest in the principal and interest income streams generated by the mortgage notes in the Trust or from fees and charges recovered by the servicers from the consumers (the rights of these bond holders are specified in the Pooling and Servicing Agreement, the Prospectus and the Prospectus Supplement).

So in this example, we will assume that New York Bank is the Trustee now owning the note in the ZZZ-1234 trust.  Whether New York Bank actually possesses the Note is a different matter.  And since possession allows enforcement rights, it is possible that New York Bank may own the Note, but has no ability to foreclose.

An example is where you own a $100 bill, left it at you home, and are trying to buy something at the store and can not do so since you can not present them with the $100 bill, which if you read it, it states it is a “Federal Reserve Note.”  Foreclosures all turn on possession of Notes.  The promissory note to a mortgage is very similar to money.  They are both notes and have certain value.  Possession is the only way to enforce them.

New York Bank then, as the owner of the note, has the ability to foreclose.  Of course, this all assumes that the underlying note was properly transferred in the forgoing chain of transfers and is now in New York Bank’s possession.  However, to be properly transferred, each transfer had to comply with California Commercial Code 3-301, which states:

“Person entitled to enforce” an instrument means (a) the
holder of the instrument, (b) a nonholder in possession of the
instrument who has the rights of a holder, or (c) a person not in
possession of the instrument who is entitled to enforce the
instrument pursuant to Section 3309 or subdivision (d) of Section
3418.
 

In a perfect world, the transfers were all proper and New York Bank as Trustee of the ZZZ-1234 Trust has the ability to enforce the note and foreclose if payments are not made.  Nevertheless, Trustee of the Trust does not service the note.  Instead, another entity services the note. Sometimes, it may be the original party that originated the note, such as XYZ company in this example, and the borrower thinks they had the same lender the entire time without knowing their loan was sold.

Often, however, is that the servicer changes and the borrower concludes that the new servicer owns the note.  Again, this is not true since the Trust owns the note and the new servicer is simply servicing the note on behalf of the Trust.  Then, when a foreclosure action is started, another entity usually enters the scene since the Servicer typically hires an outside foreclosure entity to conduct the Trustee sale, such as ReconTrust, Quality Loan Servicing, etc.

The confusing transfers of the Note should also not be confused with the Deed of Trust filed with the County Recorder, and any of its subsequent transfers and assignments.  While the underlying Note is the genesis to any enforcement issues, the Deed of Trust is merely an accessory to the underlying note, and only provides rights to the collateral real estate if payments are not met. The Deed of Trust is meaningless without a Promissory Note.  Indeed, case law is well defined in California, that a Deed of Trust without the underlying note is a “Legal Nullity.”

So the issue of enforcing a foreclosure on the underlying note has nothing to do with whether or not Trust has a perfected security interest in the residential real estate via the deed of trust. While perfection deals with recording the deed of trust with the County Recorder when the loan is originated and is typically done in most cases, the party still attempting to enforce the note must still qualify under the laws to enforce the note pursuant to CCC 3-301. Perfection should not be confused with transfer, assignment and ownership rights in the mortgage notes on the one hand and in the deed of trust and mortgage on the other.

If the forgoing is starting to make your head spin, it should.  But be forewarned, this is only a rudimentary analysis of the typical securitized mortgage in California.  Its actually much more complex than what is being written, and would take volumes to fully explain.  Perhaps this is why many Lenders, Consumers, Servicers, Attorneys, and Judges are perplexed when it comes to litigation involving real estate notes.

Assuming an outside foreclosing agent such as Recontrust is now attempting to foreclosure on the property, the most fundamental question then arises: Are they acting on behalf of an entity that has the LEGAL RIGHT TO ENFORCE THE NOTE?

In part 2 of this blog, we will explore whether the foreclosing agent has the legal right to enforce the note.

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