The tricky thing about “loan level data” is that it is easy to slide into unintended admissions, starting with the use of the word “loan.” Sure there was a transaction, but not every transaction is a loan even if it is labelled as such by one party and the other party intended a loan agreement.
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But if in the end the other party is not the lender or successor lender and there is no loan account receivable on the books of any company, then the transaction may have looked like a loan but it was not. There is no such thing as a loan with no lender and no loan account owned by a party who paid value for the underlying obligation in exchange for a conveyance of ownership.
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This does not necessarily wipe out the obligation, but it does wipe out enforcement if the claimant does not satisfy the prima facie requirement of owning the underlying debt through payment. Without that ownership, the claimant cannot legally claim loss that damaged the value of the receivable. Because it didn’t own it. And if it can’t claim damage to an asset because it does not own it, then it cannot legally press a claim for redress of a loss that at best would be attributed to someone else.
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You also don’t want to get caught up in sliding into more admissions when you get into the weeds. “Loan number, Original Balance, Maturity Date, Property State, Property Zip Code, Property City, Pool Number and many more” each have the problems stated above. But the worst culprit is “Original Loan Balance.” We already know that the loan account did not exist in the real world. So that reference alone might trap you into an admission against interest thus establishing that there was an “original loan balance” — because if that existed, so did the obligation to pay it.
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Sometimes by simply doing a loan level analysis you are erroneously giving life to an obligation that does not exist –at least not without reformation of the total contract that would include adequate compensation to the homeowner who was drafted into a securitization scheme that had nothing to do with ownership of his loan.
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As I stated in a TV interview in April, 2006, “The real problem is going to be the homeowners who think they know but they don’t. It makes no sense to them that the transaction was not a loan or that they don’t owe the money. That’s why they keep losing. They are admitting something that is self-evident to them but still wrong.”
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HINT: Let’s say I come to you and said I have this great securitizations scheme that is going to earn big bucks and I told you that you could get in on the ground floor of this opportunity. I tell you that only need to sign a mortgage and note to start the ball rolling. So far consideration for the homeowner is negative.
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So the homeowner says “”What is in it for me?” I tell you that you get a payment of money that matches the note and mortgage. Now consideration is zero — neither negative nor positive.
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Then add a wildly inflated appraisal resulting in an immediate loss to the homeowner if he is buying a new home. Consideration to the homeowner is back to negative.
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Then add the interest, fees, and other charges and the consideration goes negative again. Then I go out and I sell securities that refer to your execution of note and mortgage. Without you signing it, there would be no securitization. Without the securitization there would be no transaction with the homeowner. Without consideration paid to the homeowner, the transaction is incomplete and leaves the homeowner as a newly labeled borrower in a newly labeled loan transaction that has no lender or any established loan account on the books of any company that owns it. All contracts require offer, acceptance, execution and consideration.
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I just described your transaction from the point of view of the investment bank. They don’t consider themselves your lender or successor lender but they will insist that they should be able to enforce with the choice or designation of a virtual creditor instead of an actual one. And in so doing they seek only to add to profits that already accrued from the securitization scheme. What does the homeowner get? — The shaft.
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I know I am in trouble with a lot of people for saying this but I am absolutely certain that homeowners (a) are generally not subject to enforcement of the note or mortgage and (b) are owed compensation from a concealed scheme that was the foundation of the transaction.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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1 thought on “Loan Level Analysis might get you into trouble unless it is worded correctly and used correctly”
Let us define a “lender” — and that meets consumer financial law – or lack there of. .