LOAN ORIGINATORS ARE NOT LENDERS

see Hancock Ins v JPMorgan Chase et al

The question hanging in the air because nobody wants to answer it is that if a party is merely an originator and NOT a lender or creditor, then is there any theory under which a loan contract could be considered consummated? Anyone who has been reading my blog over the years knows I think the answer is no — especially because that practice is called a table funded loan and is considered PREDATORY PER SE according to REG Z under the Truth in Lending Act.

The second question would be whether there is any debt owed to a party on a note and mortgage arising out of a “closing” where there was no loan between the originator and the “borrower?” Again I answer no from simple contract theory. The fact that I give you $5 does not mean you owe my friend Joe $5 unless I transfer the debt.

The banks have managed to confuse courts for 10 years but their “15 minutes” appears to be up. They have reversed it.

Joe gets you to sign a note and mortgage to his benefit and he lends no money. Then Mary asks me for $5 so she can lend it to you. We all hire a closing agent. Mary sends my $5 to the closing agent and the closing agent procures your signature on the note and mortgage that was prepared by Mary.

The note and mortgage are payable to Joe. So now, according to the paperwork, you owe Joe $5. My $5 is given to you by the closing agent, who assumes the $5 came from Joe. So you and I have a debtor-creditor relationship that neither of us knows about. You and Joe have a false relationship of “maker” and “payee” on the note that never should have been released from “closing” had the real facts been revealed by disclosures required by the Truth in Lending Act.

That lack of knowledge is at the center of all the controversies in cases where securitization is asserted. They securitized the paper but not the debt.

According to substantive law, you owe either Mary or me — not under the UCC or contract law but under rules of equity. It is a claim that is unsecured. If someone actually buys the note then you are screwed because if they paid for the note in good faith and without knowledge of your defenses, they can enforce it. Mary gets an assignment or fabricates an assignment from Joe and pays him a fee for his “troubles.”

Notice that my $5 is never mentioned in the paperwork with anyone. And my $5 is the only real money in the “game.” If later I figure out where my money went, then I can sue you under equity (unjust enrichment, etc) and win. If someone pays for the paper they can also win. You are left with an action for damages against Joe and maybe Mary. But they are most likely long gone. So you became indebted for $10 even though you only borrowed $5. Add the cost of litigation and interest and your loan probably goes from $5 to $5,000, with little hope of recovery from anyone — unless a judge believes your defenses and insists on proof of the underlying transactions, in which case Joe and Mary will get free room and board from the state (Prison).

Back to the paperwork. Mary’s Uncle creates a company and Mary transfers the loan papers to her uncle’s company. Note that the paperwork has been transferred, not the underlying debt. The paperwork is like a quitclaim deed from someone with no interest in the land. Other than me, nobody has paid any money for the origination or acquisition of the loan. But I have no paperwork protecting my interest even though Mary promised she would get it to me.

I own the debt. But since I don’t know you exist, I never claim any money from you. Instead Mary’s Uncle hires a bank to act like the servicer for the company formed by Mary’s Uncle. The servicer brings suit in the name of the company and they sue you for the $ plus fees, interest and litigation expenses.

If you have guessed that the courts have been rubber stamping a criminal conspiracy, I would agree.

FROM WILLIAM PAATALO

Tags: disclosure, foreclosure defense, foreclosure offense, fraud, originator, securitization, table funded loans
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