VOID ASSIGNMENTS

Why Loan Assignments Without Real Transactions Are Void, Not Voidable

Disclaimer: This article is for educational purposes only. It is not legal advice and should not be relied upon in any individual case. Always consult with a licensed attorney regarding your specific situation.

The Core Issue: No Transaction, Nothing to Ratify

Courts often assume that if there is an assignment of mortgage, then there must have been a valid transaction behind it. From that assumption, they conclude that even if flawed, the assignment is voidable rather than void.

But this logic is backwards. An assignment can only be valid—or subject to ratification—if there was an actual transaction: a purchase of the loan backed by payment. Without proof of payment, there was no transaction, and without a transaction, there is nothing to ratify. In that scenario, the assignment is void on its face.

Why Don’t Trusts Claim “Holder in Due Course”?

If securitization trusts really bought loans, they would claim the powerful legal status of holder in due course—a position that insulates them from most borrower defenses. Yet, in over a decade of litigation, there is almost no record of trusts making this claim.

The reason is simple: they didn’t pay for the loans. Without payment, there was no transfer of ownership. An assignment of paper does not prove a sale any more than a bill of sale proves a car purchase without evidence of payment.

The Reality of REMIC Trusts

Industry practice was to create trusts on paper—often under New York common law—but never fund them with actual assets. Trustees had no accounts, no duties, and no control. The only activity was the issuance of “mortgage-backed securities,” which were sold by investment banks, not the trusts.

That means:

• The trusts never paid for loans.

• The trusts never received loan assets.

• Assignments into the trusts documented transactions that never happened.

Without assets, the trust is a legal shell. And an assignment to a shell with no money trail behind it is void, not voidable.

Why the Money Trail Matters

When you follow the money, the picture becomes clear:

• Lenders often weren’t real lenders at all. Funds came from a commingled pool of investor money.

• Investors thought they were buying into specific trusts, but their money was diverted into a dark pool controlled by investment banks.

• Notes and mortgages were endorsed or assigned through robo-signing, without any actual purchase taking place.

This explains why banks resist discovery into the money trail—the numbers don’t add up.

Ratification: A Non-Issue

Bank attorneys frequently argue that flawed assignments can be “ratified.” But ratification presumes an act to ratify. Where no loan purchase ever occurred, there is no act, no transaction, and nothing to ratify.

The Bigger Picture

Both borrowers and investors have been harmed by this scheme. Borrowers face foreclosures based on fabricated documents. Investors were sold securities that did not reflect the transactions they believed in. Both groups are, in effect, parties to adhesion contracts where the banks controlled the terms, appraisals, and flow of funds.

✅ Key Takeaway:
Assignments unsupported by proof of payment are void because they attempt to memorialize transactions that never occurred. Until courts confront this reality, the foreclosure system remains built on legal fictions.