THE PROMISSORY NOTES FROM BORROWERS ARE SECURITIES

MOST POPULAR ARTICLES

GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

EDITOR’S NOTE: Since the beginning, my experience on Wall Street, the underwriting of securities and the trading of securities, led me to believe that the documents issued at the closing with the borrower were part of a securities package. The issuer was nominally the borrower, but the real issuer was MERS or the Wall Street investment banking houses that created the securitization scheme. Securitization means by definition, that securities were involved. You don’t to be a finance pro to understand that.  By applying securities laws that already exist, the pieces of the puzzle all fall together.

But I’m not sure I agree completely with Brent about the solution. Yes, I think that being able to purchase the notes at whatever the free market dictates would be a huge step forward toward reality and the rule of law. But I think that we need to include some measures that would enable the Borrower to bring claims against the parties that slandered the title or deceived the borrower in the execution of documents that were not loan closing documents, but actually securities. The fact that the prices were purposely inflated in order to inflate the fees and trading profits that the investment banks took gives rise to a number of causes of action under appropriate securities law.

When speaking with securities lawyers I have repeatedly received the same sort of answer — they agreed with me in theory but the path was too difficult to explore. My answer is another question: do we ignore the reality of the transaction simply because people don’t get it? Let the truth and the facts come out.

Brent’s insight that the loan as part of a pool was a security begs the question of whether the loan ever actually made into the pool. But for purposes of securities litigation, it might be treated that way because now the assumption is that it is as claimed by the parties to securitization. Would the Banks have the nerve to now argue what Borrowers are saying? — That the loans were never really transferred into the pool and therefore the securities aspect doesn’t apply.

That argument would leave the notes and mortgages in limbo. If we accept the argument that the loans never made it into the pool but the loan was treated as though it had made it into the pool, it means that the money was not applied as set forth in the note — payment to the payee on the note. But the payments couldn’t go to the Payee because they didn’t make the loan. 

In fact, the moment that the loan documents were signed by the homeowner, the payee was unknown and so was the mortgagee or beneficiary. Or the note and mortgage were intentionally split, meaning the obligation existed but there was no secured interest existing as an enforceable encumbrance upon the land. The named beneficiary and/or lender were different in most closing than the actual creditor. The named beneficiary was without authority to return the note upon payment because the named payee was not the party to whom the debt was owed in the real world.

by Brent Bertrim
I have read that many believe the only way out of this mortgage mess is principal reduction.  I am skeptical after the Bevilacqua decision.  I believe the solution is allowing homeowners to purchase their own promissory notes at market rates will clear the title.

From the view of a securities expert, I think attorneys are too wrapped up in real estate law to understand much of what you put on your site.  They fail to recognize (other than in belief in your blog) that payments may not be owed because they are unable to ask the most critical question – when did the promissory note become a security?  While inside the pool, it is a security so how can simultaneously it not be during foreclosure?

I would argue that MERS itself by definition and BlueSky Laws in all 50 states made promissory notes securities.  The reason – by definition a security is an investment that can be readily exchanged for value and involves risk.  The entire point of MERS was to make the notes ‘readily’ transferable.  I will bet you $100 that the defense of MERS in the Dallas case will argue that the intent was not to escape recording fees but instead to make the notes ‘readily’ transferable.

Therefore, homeowners should in theory be able to ‘purchase’ their own notes.  This is the only way to overcome the lost/destroyed note issue and something the banks should offer all homeowners because the pretender lender defense is over.

More importantly, when a mortgage is satisfied, the lender has to file the release as well as return the note or provide a lost note affidavit.  How can they do this?

What will be funny if posing the question, is the only reply based on securitization is that you cannot buy your note because we do not know who owns each piece of it.  Therefore even trustee cannot direct servicer to foreclose.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, notes, quiet title, rescission, RESPA, securities, securitization, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |