Why Third Party Payments Are So Important to Defending Foreclosure Cases

I keep getting inundated with creative arguments about the documentation, which is exactly the rabbit hole that the Banks want you to go down. It is a trap.

Technical attacks on documentation are not going to win the day because in the end, it is public policy for negotiable instruments to be safe bets in the marketplace. You are not going to get excused from payment without payment or bankruptcy orders.

But payment includes all payments received by the creditor and that is not just servicer advances. It includes insurance and other third party co-obligors who paid the broker dealers. They claim the insurance and other trading profits do not inure the benefit of the investors. But established law shows that by issuing the mortgage bonds in nominee “street name” they are at all times acting as agent for the investors. And all money from sales, insurance, credit default swaps etc must be credited first to the investor which means the creditor is satisfied up to the amount of money actually received by the creditor or by any authorized agent of the creditor even if the agent disclaims the principal agent relationship.

Basic accounting rules require that if a deduction is made from the account receivable there must be a corresponding deduction in the account payable. If it were otherwise only payments received from the borrower could be credited to the account even if the borrower’s Aunt Alice specifically stated that this was to be credited to the borrower’s account. The problem for the Trust, amongst others, is that the law makes no distinction between “Aunt Alice” and any other payor who advances a payment for express purpose of satisfying an account receivable that derives its value from the debt of a person on whose behalf the payment is received and accepted.

The argument about the so-called windfall to the borrower drops to the ground with a thud when the court is presented with parties who have unclean hands, who defrauded the investors in the first instance and who are defrauding the investors now even as they try to enforce the documentation that was an illegal diversion of title from the investors. Giving THEM the right to collect yet again or to foreclose on property and be named as the creditor to the detriment of the investors, is merely using the court to continue the fraud and theft.

Tags: account payable, account receivable, co-obligors in securitized loan transactions, defective documentation, Servicer advances, third party payments
Posted in Corruption, evidence, expert witness, Modification, Motions, Pleading, securities fraud, Servicer |