Mish Is Again Off The Rails (Foreclosuregate)


The Market Ticker – Mish Is Again Off The Rails (Foreclosuregate)


State attorneys general are not happy with a $5 billion offer by major banks to settle lawsuits regarding robo-foreclosures and other alleged grievances. Some officials want as much as $20 billion. The compromise threat is on the high end.

He then goes on to try to make the case with:

This is what I want to know:

  1. How many people lost their home to foreclosure out of an error? By error I mean the wrong person, a home with no mortgage, or a major procedural error.
  2. How many people think they deserve a free house and clear or a principal reduction over “show me the note” nonsense or other problems including unemployment?
  3. How many people did banks string along for many months with promises of work-outs, where the person paid their mortgage for months, then lost their home.

Dismissing #2 right up front, of course.

There’s a problem with this: The UCC, along with the contracts in question, do not support his liberal interpretation of “Show me the Note.”

Bluntly, you only owe the person who actually owns your note money.  The UCC is very specific on what has to happen for two events to take place:

  • The security interest (the right to toss you in a foreclosure, as opposed to simply suing for money which you may not have)and
  • The owner of the paper having holder in due course status.

Neither of these are “technicalities.”

First, if someone sues for foreclosure who doesn’t actually own the loan the person who does own it still has an enforceable claim against you.  That means you could get foreclosed upon and then sued by the actual owner for the money, effectively being forced to pay twice – once by ejectment from the property and then again by being financially destroyed a second time through a lawsuit for money damages.  The UCC and general contract law, along with the PSAs, are structured in a form and fashion to prevent this.  Ignoring these very real legal requirements is not a “formality”, it is part and parcel of the rule of law.

Second, the “Holder in Due Course” status is extremely important and germane.  One of the sordid facts of the “aughts” (the 2000s) is that many people were sold money under false pretense of some sort.  There were myriad frauds, including floating-rate loans sold as fixed, “riders” in middle of paperwork that was slipped in un-noticed and in violation of the good-faith estimates and claims given to borrowers before closing along with all sorts of chicanery and outright fraud.  Lending officers held themselves out not only as sellers of money but as qualifiers of a person’s capacity to pay, an expert opinion proffered based upon ratios and program claims given to homeowners.

There is a fair issue triable at law as to whether active frauds occurred in these areas.  Some of the cases are black-letter, where borrowers had their own submitted figures and papers altered by lending officers through multiple iterations through computer-based underwriting without their knowledge.  Others are more nebulous and may have (or may not have) involved active deception by the borrower himself.  These are issues to be tried in a court of law and examined by a trier of fact. 

If holder in due course status does not apply to the current “owner” of the debt the remedies available to the buyer extend to the current holder of the paperIt is only through establishment of that holder in due course status that the paper’s owner escapes successor liability for these actions.

This isn’t academic in these situations by any means.  The majority of borrowers in “risky” loans such as 2/28s, 3/27s and Option ARMs have reasonable assertions to make in these situations.  You cannot try these cases “en-masse” and dismiss the claims by fiat; you must look at them individually, in each case, and try them on the facts.  If in point of fact the trust never got the paper as required by the PSA then the trust has no “holder in due course” status at best as a late transfer now takes place with knowledge of the fraud claim existing against its origination, which negates that status.

In many of these cases it appears that the PSA was in fact not complied with and in many of those situations the conundrum becomes even worse, because the originator, securitizer or depositor, whoever they may be, is out of business and has no successor organization.  In some (but not all) of these cases the corporate estate is in bankruptcy and the asset in question is properly an asset of the bankrupt estate.  The Trustee of the bankruptcy is the only one legally empowered to transfer an asset out of a bankrupt estate prior to its final disposition at law and your assertion of a contractual right to that asset is immaterial as you are subject to the priority of claims in a bankruptcy action.

I have seen many examples of exactly this sort of apparent fraud, where an “assignment” takes place on a day during which the organization allegedly performing the assignment literally does not exist as a matter of fact or law.  Even worse there are assignments that appear to have been initiated by the grantee, which is exactly backwards and is effectively identical to me assigning myself title to your house – without your signature anywhere to be found!

In still other cases where transfers did not happen the REMIC sections of IRS code prohibit the transfer without destroying the trust’s tax preference.  In some cases that late transfer might actually have negative value when one considers the tax implications on a lookback basis.  In all cases where a legal bar exists to that late transfer the choice has to be taken – either perform it late, take the tax hit and have the certificate holders sue the hell out of the Trustee for not performing their duties faithfully (and exposing them to a huge retroactive tax hit) or take the hit of not having the security and losing the principle they allegedly “loaned” but in fact paid for nothing.   It is manifestly unjust to simply pretend these violations of the law never happened.

Finally, some of these circumstances have irrevocably severed the security interest.  Such an event is a disaster for the noteholder, but again, that’s not the buyer’s problem.  He is not “unjustly enriched” by such an event, as he still owes the money – he just can’t be foreclosed upon.  The holder of the note in these cases may still sue and recover to their ability (which may, admittedly, be quite limited.)

What’s happening here is a mass delusion.  We have a bunch of institutions that through their own hand violated not only black-letter law but the contractual provisions they entered into with investors around the world.  When this failure was first discovered they tried to cover it up with bogus affidavits that nobody had even read, say much less verified – if they had verified them they would have known that the paperwork wasn’t done and the alleged transfers were not made.  When they got caught doing that the next response was to claim that the homeowner was a deadbeat anyway, and thus “deserved it”, which is identical to the rapist claiming that his victim “deserved” to be raped because she had a short skirt on and no panties, and he could “clearly see” the target of his assault.

We properly dismiss that sort of defense these days when it comes to rape, although that same delusional process used to work once in a while in those cases.

If I “lend” you money but fail to protect my own interests by my own hand, uncolored by anything you do, that I have reduced or eliminated my rights of recourse is not your problem.  It’s mine.  It is not unjust for a debtor to demand that his creditor prove that he followed the law and that he really is the creditor, especially when there is very reasonable doubt as to whether or not he is.

Finally, it is never excusable to say “well that apparent felony (perjury) is just fine because the deadbeat over there didn’t pay his mortgage.”


Bankers for the last thousand years have existed entirely on the back of the storage and keeping of physical documents.  Your passbook savings account from your childhood is just one example.  So were the common ledgers going all the way back to the Depression and beyond.

These “record keeping” lapses are not an occasional error or problem; they’re systemic and intentional.  Now, having been caught, the excuses have become manifest and outrageous.

The borrower does not deserve to be raped simply because she wore a short skirt.

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5 Responses to “Mish Is Again Off The Rails (Foreclosuregate)”
  1. Mark says:

    Let me get this straight, homeowners who rightfully and knowingly have signed a contract and a legal promissory note are now blaming the banks for their unwillingness to pay back the loan. They are scamming banks by saying “show me the note.” You knowingly under your own content signed a promissory note to pay back the loan. Hence that is a legal contract, a PROMISE. Who cares where the note was sold. I don’t care if a pile of dirt owns the note, you have a legal obligation and contract to pay back the note or you should go through foreclosure. What a scam, you should not have the right to get a loan! You know you owe money on a loan, yet you try and intentionally deceit the lender by saying “show me the note”. Last time I checked that is fraud: intentional deception made for personal gain!

  2. Wayne says:

    So what are “We the People” going to do about this. I am definitely Not a Timothy McVeigh, however I am sure there is another, in the wing somewhere. Why are the people who are in power, FBI, Secrete Service, Attorney General’s and even our President, not doing a F’n thing about this. You would have to be a Rip Van Winkle not to know. I truely believe they all knew of this 2 years ago, yet not one thing has been done to satisfy the simplist equation of this problem. They should have shut down all foreclosures and start at the Begining …. MERS …. Then on to the BANKS and Investors …. but NO … They still foreclose and foreclose.

    • l vent says:

      The media is literally throwing fraudclosurefraud up in our faces everyday. The media are practically bragging about how these criminals are rampantly fraudclosing and continuing to steal homes they do not own everyday, esp. CNBC and that lying bitch Diana Olick. Bloomberg isn’t much better with that jerkoff with the bowtie who is on there BOLD FACED LYING everyday about fraudclosures with his NEW WORLD ORDER guests. Screw them, they are all liars, New World Order perps. Our homes are paid for because of the criminals and their PONZI SCHEME SWINDLE AND HEIST and we all have the proof that we need of the MORTGAGE FRAUD, it is in the ORIGINATION FRAUD and the proof they never secured the collateral lien. There is also the not so little matter of the fact that they never did what the PSA requires, an unbroken chain of title from Originator to the Sponsor to the depositor and to the Trustee who becomes the beneficiary of the note on behalf of the investors. They RAMPANTLY, MASSIVELY AND PERNICIOUSLY broke contractual law, committed securities fraud, engaged in massive, deceptive PREDATORY LENDING practices A/K/A Liars Loans, MERS, FORGERIES,ROBO-SIGNING, FICTITIOUS BANKERS AND NOTARIES, THEY — USED MILLIONS OF BOGUS MANUFACTURED DOCUMENTS, DESTROYED TITLES TO MILLIONS OF HOMES with MERS, DESTROYED NOTES,COMMITTED MASSIVE CYBER SPACE COUNTERFEIT SECURITIES FRAUD, and this is why there is rampant FORECLOSURE FRAUD and the theft of millions of homes they do not own. . Dylan Ratigan Show had a segment on today about Fannie Mae and how they are the most fraudulent criminals of all of them. Their criminal ex-CEO’s are still floating around Washington, like Bill Daley and going to work at other banks, one of them is now a head honcho at CITI. Proof this is a massive ongoing criminal enterprise. There appears to be a very dangerous conflict of interest between homeowners and the politicians whom we have “elected” because they have apparently been corrupted and hijacked by the very criminals who robbed us who are FANNIE/FREDDIE, the bankers,the mortgage servicers, the Federal Reserve and WALL STREET.

  3. l vent says:

    O.K.,The entire mortgage fraud Ponzi Scheme has already proven to be massive and pernicious, so why is there not a moratorium on fraudclosures? Ignoring this is not going to make this go away. None of the criminals involved in this want the finger pointed at them that is why. They are all very deceptive cowards. The Ponzi Scheme was an evil plan for world domination and eternal impoverishment and debt slavery for America by a few hundred elite.. Pity they got screwed by their own perps when they destroyed the notes and never secured the collateral liens. They all got filthy rich but that is not enough for the evil greedy New World Order bastards, they want our homes too. They already stole our jobs and life savings and retirement accounts, they stole all of the wealth out of everything not nailed down in their insider trading cyberscam that intentionally collapsed the markets in 08. These foreigners can’t have our homes, they don’t legally own them, we do, because of the giant Ponzi Scheme Swindle and Heist. And that is the bottom line. They are just too greedy, period. Their only wish is they can keep getting away with manufacturing documents to steal homes they dont own.. Their PONZI SCHEME crimes aren’t as easy to get away with when they need actual legal physical proof to steal homes they don’t own. These foreigners thought they were brilliant and had all of us in the trick bag with MERS. I guess that is the disadvantage for them being foreigners, there actually are STRICT PROPERTY LAWS IN AMERICA AND LEGAL CONTRACTS THAT HAVE TO BE FOLLOWED TO ALLOW THEM TO STEAL OUR HOMES. MERS was just more arrogance by the ruling elite and is proving to be a giant cyber giant failure for them.

  4. jim bethea says:

    PAY A FINE……….these funds would just be made-up from some new scam fees and the consumer and taxpayer will foot the bill……..

    What ever happened to jail for crooks???????? TOO BIG TO FAIL MY ASS………NOT TO BIG TO DO THE TIME…..

    Congress and these BS banking regulators including the illegal cartel known as the Federal Reserve seem to be promoting banking fraud instead of controlling and enforcing criminal and civil charges which should include jail time…..revoking their banking, investments & insurance licenses……….

    Where is John Wayne when we need him???

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