Does the Trust Even Exist? Probably Not.

Jun 5, 2017

This is an invitation for the Bar associations to take as close a look at foreclosure mills as they do to the low hanging fruit of solo foreclosure defense lawyers who get charged with “foreclosure rescue schemes.”

The biggest mistake we lawyers make is jumping into the middle of a fact pattern instead of starting at the beginning. Most foreclosures involve trusts at some point in the chain. And most trusts do not exist as “legal persons”. Without a legal person there can be no “jural act.” Hence the Court lacks jurisdiction to perform any act other than the ministerial act of dismissing the foreclosure action in judicial states or striking the substitution of trustee, the notice of default and the notice of sale in non-judicial states.

Any recorded document involving a nonexistent legal person should also be removed from the county records.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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The fact is that many trusts do not exist as “legal persons.”

The drafting of an instrument declaring the intent to create a trust does not create a trust until it is signed by a trustor.

A trust instrument that relies upon the attachment of exhibits does not create a trust until the exhibits are attached.

The signing of a trust instrument with all the necessary exhibits attached does not create a trust with legal standing to do anything until assets are transferred into the trust.

Many of the alleged trust instruments relied upon by foreclosing parties are unsigned. Most of them do not have all the exhibits attached, the most important of which of course would be the mortgage loan schedule. And virtually none of the REMIC trusts contain any assets or loans.

The reason is quite simple. The banks never intended to use any of the trusts except as window dressing to cover their actual activities.

The banks are relying on misdirection in order to get judges to take the trust seriously. I’ve personally seen completely illegible copies of the pooling and servicing agreement offered in evidence and accepted by the judge at trial.

One key strategy that is employed by the attorneys for the banks is to file a document on the SEC website and then ask for judicial notice. Attorney’s for homeowners often mistakenly assume the judicial notice is inevitable. It isn’t.

Unless the homeowner or the attorney for the homeowner notices that the document was never signed or that the required exhibits (especially the mortgage loan schedule) were never attached to the document filed on the SEC website, the court will often make the mistake of accepting the document because it is on a government website. All too often I have seen variances between what is offered in court as a copy of what is on the SEC website.

The fact that the document is on the SEC website does not mean it is valid or that anyone checked it for validity or authenticity. There are a huge number of documents on the SEC website that are unsigned, incomplete or both. The SEC website is not a national registry of valid documents. The fact that somebody uploaded a document to the SEC website does not make it an official document and it does not create any presumption as to the validity or authenticity of the document.

If the trust has not been completely and legally formed, it does not exist as a legal person. This is a jurisdictional issue that cannot be waived or ignored by the court. If the trust does not exist as a legal person then it does not have any of the rights claimed by attorneys purporting to represent the trust. It might just as well be Donald Duck – a fictional character. And anyone who derives their authority from Donald Duck, has nothing — no rights, powers or obligations except the obligation to represent facts and arguments that are true to the best of the lawyer’s knowledge and belief.

All of this is well-known to foreclosure mills. instead of refusing to act on blatantly invalid void documents and instructions, they proceed because they get paid to proceed. If they didn’t proceed they wouldn’t get paid. And they would lose a 5 star client. Several lawyers have admitted to me that the trusts are empty in “settlement negotiations” that I could not bring to the attention of the court.

It is for this reason that I am now recommending sending safe harbor letters (frivolous litigation) that would require both the lawyer and his nonexistent client to pay fees for defending a completely bogus action.

The problem is not just that the real party in interest has not been named. The problem is that there is no party entitled to perform any legal act. Hence the jurisdiction of the court is completely absent; and any action taken by the court as though the trust existed, is completely void and without any statutory or constitutional authority.

This is not a tactical objection in order to obtain a “free house” for the homeowner. It is a direct challenge to the court’s authority to take any action other than the dismissal of the action for lack of jurisdiction. And it is an invitation for the Bar associations to take as close a look at foreclosure mills as they do to the low hanging fruit of solo foreclosure defense lawyers who get charged with “foreclosure rescue schemes.”

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