Ice in the Winter: Government backed loan foreclosures suspended through the end of the year. Nice! If only the foreclosures were valid to begin with!

see https://www.cnn.com/2020/08/27/success/freddie-fannie-foreclosure-eviction-moratorium-extended/index.html

There was time that mainstream reporting was investigating whether the loans were valid and whether their enforcement was valid. Published news reports, court decisions and massive settlements all pointed to huge inconsistencies between the positions that investment banks took with the investors, the courts and with borrowers.

Millions of documents were fabricated for purposes of enforcement of a debt account that did not exist. After foreclosure the debt account again receded into vapor. Reporters were getting close.

Then, all of a sudden, somebody pulled the plug and investigative reporting dried up leaving homeowners and their lawyers without the information they needed to successfully defend against illegal foreclosures based upon nonexistent loan accounts. Litigating against a designee instead of an actual creditor was likened to fighting with a ghost.

And now we have moratoriums and suspensions of enforcement for political and practical reasons. The effect is to bottleneck what will be a torrent of foreclosures and evictions based upon nonexistent claims in many cases by naming nonexistent claimants.

This is the time to start administrative strategy in advance of the end of moratoriums so homeowners and their lawyers have the ammunition and the footprints in the sand to prove that they are entitled to an inference that is in direct conflict with the presumption the banks want the courts to apply — that the possession of the note is all you need to foreclose on a mortgage.

The problem lies in the rules not the substance of the law. In the Uniform Commercial Code adopted by all U.S. jurisdictions, possession of the note is practically all you need to enforce a promissory note — as long as the note is a negotiable instrument. So the note is enforceable even by strangers to the underlying obligation.

But a mortgage is not a note nor any other kind of negotiable instrument. And enforcement of the mortgage or deed of trust falls under a very direct, clear unambiguous statement that in order to foreclose on the security instrument (mortgage) there was must be a creditor who has paid value for the underlying debt — Article 9 §203 UCC.

The problem is in pre-approved p[leading forms from the Supreme Court of each state. They allow for pleading based upon allegation of “holder” status without requiring a plain statement of ultimate facts asserting that the claimant paid value for the underlying debt. Thus mortgages are being enforced on the false standard of enforcement of notes.

This is not mere technical “theory” as some have alleged. I note that none of my critics have advanced the “theory” that anyone in the chain of prospective enforcers of the mortgage has ever paid value or currently possesses a loan account created on their books and records by virtue of an actual transaction in the real world in which the company paid value for the underlying debt and now carries the loan as an asset receivable.

None of those parties ever did pay value in exchange for a legal or equitable ownership of the underlying debt because they were all getting their money from a parallel securitizations scheme that concealed the fact that the “loan” was paid off contemporaneously with origination or acquisition using investor funds from investors who neither wanted nor received equitable or legal ownership of any loan.

A holder is not necessarily a party who padi value for the underlying debt. This is no small matter. Because state law in all jurisdictions requires as a condition precedent to any enforcement action, that the claimant have already apdi value for the underlying debt, and thus claim injury from alleged nonpayment. You can’t claim injury if you didn’t own the loan. That Is a contradiction in terms.

So what is needed is (1) remind the trial court that the pre approved forms are just guidelines and (2) petition the Supreme Court in each state to change the pleading forms such that there must be an express statement of ultimate fact asserting payment for the underlying debt by the claimant who received a conveyance of ownership of that debt.

*Neil F Garfield, MBA, JD, 73, is a Florida licensed trial 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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