You Only THINK You Know When Your Transaction Became a "Loan"

Sep 7, 2012

The truth is, it never quite made it as a loan, as I would define it as a loan. It was merely an obligation arising at common law through the receipt of money that wasn’t your own money, to which the common law adds the presumption that upon receipt there is reasonable expectation of either getting something, like goods or services, or repayment.

Some enterprising people , like of of our title analysts, recognized this anomaly when tracing the records. It appeared that only when the “loan” was reported to the investor was it created and it was at that time that the “trust” was attempted to be used as a REMIC to avoid tax consequences. She noticed and inquired to government sources who confirmed that the first time they could say the loan ever was represented to exist, with all terms and conditions known, was long after the closing and in many cases, long after the eviction resulting from the foreclosure of a lien that was recorded, but didn’t exist.

So she asked me about that and here is what I responded:

Assuming you can name the government source and that means either producing a witness or showing a website entry that you request the court to take judicial notice, then you can use such information as evidence. Otherwise it is just information.

The rest of what you are saying is interesting because it is most probably true. So here is my take, as you will also get from recent posts.

The so-called creditors in this action never were creditors, never fulfilled the definition of a party who could submit a credit bid, never funded or purchased the loan, and never maintained a loan receivable account in which they identified themselves as the owner of the loan receivable. Their own records show that it was not a loan receivable that was created but rather a Ponzi scheme in which bogus mortgage bonds were substituted for the loan receivable. These bonds were neither signed nor even known to the alleged borrower. The note was neither accepted nor known to the lender. Instead the parties that foreclosed on the subject properties intervened as strangers tot he transaction without knowledge or consent from either the lender or the borrower. The funding occurred but it came from an entirely different source unrelated to the chain of securitization documents and assignments upon which the “pretender lenders” rely.

The account from which the loan was funded came from a bank account that was named not for the First Magnus, nor even the certificate holders who should have been on the note and mortgage in the first place, if they wanted the note to be evidence of the obligation or the mortgage or deed of trust to collateralize the obligations and the terms of repayment as set forth in the note.

Instead, the investment bank funded the loan from a an escrow superfund that commingled money from hundreds of pension funds and other managed funds each of whom thought their investment was being processed through a discrete REMIC or SPV entity. But the investment bank was the owner of the account and sent misrepresented fact sheets to the investors as though the funding had been processed through trust accounts maintained for each pool (REMIC, SPV Trust, all terms interchangeably used).

The investment bank was therefore able to portray itself through lies and deception as the lender and thus able to sell the loan obligation multiple times using outright sales of bonds, exotic CDO instruments, insurance, and even claim losses for purposes of Federal bailout on loans that it had neither funded nor purchased, but rather had merely acted as a commercial bank or conduit through which the funds passed.

The investors were unaware that they were not the owners the owners of the loan nor was the pool described in the prospectus or pooling and servicing agreement. They were common law partners with all other investors whose money was in the escrow superfund at the time of the funding of the loan. Hence the exact moment of the creation of the obligation must be determined before the total number of partners and their identities can be determined.

In order to facilitate the Ponzi scheme in which investors were being paid through the sale of additional interests in the same or related bonds and loans, it was necessary to have paperwork and to report to regulators on the existence and status of loans. The investment bank could not put the name of the pool on the note as payee nor as the described lender, but instead rented the name of other companies, some of whom were banks with internationally known brand names.

The reason the investment bank did not instruct the closing agent to put the name of the pool on the note and mortgage is that would have defeated the essence of the Ponzi scheme in which trillions were reaped in profits. Instead of making money in multiples of the amounts funded as “loans” they would have to go back to the old way of getting a few basis points for facilitating the loan transaction.

They had to be able to pretend to own the loan even though they neither funded nor purchased the loan. Nobody did except the investors and nobody ever bought such a loan, as discovery in any case picked at random will demonstrate — no money is ever exchanged. Why not?

Hence, the named “originator” had no right,justification or excuse to allow itself to be used as the nominee for the payee on the note, the nominee for the lender or the nominee for the beneficiary. In the case of the note, the “originators” were acting exactly the same as MERS with no stake in the loan, but receiving fees to create the appearance of a standard loan.

Thus at the time of the loan closing there was no known payee, no known lender and no known mortgagee or beneficiary. If the borrower turned around and instead of rescinding, wanted to pay the balance due, none of those parties on the note, mortgage and disclosure materials would have had the legal right to accept the money or execute a satisfaction as that would have been embezzlement or larceny.

The closing agent knew only the source of the funds and presumed that the money was received on behalf of the named payee but no such documentation exists nor was it intended to exist since the banks were intent on trading the loans as though they owned them. Thus the investors are left with a loan receivable instead of the bond receivable they thought they were getting and the loan receivable is neither supported by a note nor secured by a mortgage or deed of trust. Meanwhile, the executed documents are unsupported by any consideration (payment). Thus neither has a completed closing upon which they can rely for enforcement.

The problem is further exacerbated by the fact that the terms of repayment offered to the lenders from the bond, were materially different from the terms of repayment recited on the note executed by the homeowner. Hence while money exchanged hands, there was no offer or acceptance of an offer on the terms stated in the offer.

As corroboration of this implausible scenario made credible only when viewed as a Ponzi scheme, the creation of the transaction as a loan was attempted only long after the origination closing that was never completed, and usually long after the foreclosure auction in which a non-creditor’s credit bid was accepted in lieu of cash. Government sources show exactly that. Further, the official “loan”, without offer, acceptance or consideration was brought into apparent reality when AMBAC, AIG and others paid for the bond losses based upon the “default” of a loan whose terms of repayment had never been agreed upon. Any argument to the contrary would mean that the investment bank was claiming to be the authorized agent or fiduciary for the investors during foreclosure or collection — but not while they were trading against the interests of the investors and reaping the benefits for the investment bank instead of crediting the principal investors as they they properly should.