It seems pretty clear to me that the MERS system that the mortgage industry put together in order to facilitate mortgage securitization has really screwed up the system of titles that the states and local governments had in place for over a hundred years.
It has caused many to question who actually owns their mortgage and who has the legal standing to actually foreclose on the home.
This has caused the whole "robo signing" fiasco where banks thumbed their nose to the legal system and fraudulently created fake documents in order to push through the foreclosure in court hoping that no one would take a close look and see the fraud that they were committing.
Our legal system is all about process. Forget to read a murderer his rights or some other technicality and they can get off free even though they have overwhelming evidence that they killed someone.
I just can't understand why all of the clear cut fraud and perjury committed on the court in foreclosure proceedings is being let go with nothing more than a slap on the wrist.
Since when does expediency override legal process, especially when we are dealing with kicking someone out on the street.
I like a solution that Karl Denniger proposes. He wants to model the way Florida handled the Swampland Fiasco during the Great Depression. It sure makes sense to me.
This is not about free houses. It is about the rule of law. Our federal government has studiously refused to act as required by that law when it comes to safety, soundness and prudence in lending matters by our nationally-chartered banks.
But the matter of land titles and security interests in them is a matter of state law.
The States must act - right here and now - in the following fashion:
- All foreclosures must be stayed until the following procedure is completed.
- All entities seeking to foreclose, irrespective of whether it is a judicial state or not, must come to court and prove up the provenance of their foreclosure. Specifically, they must be forced to prove all of the following:
- They are the actual holder in due course of the note, and can prove it with the original paperwork containing all allonges and endorsements from the originator to themselves.
- All those endorsements were made in due course of business, and not now as a "backdated" event in an attempt to mislead the justice system.
- The note, at the time it was originated, was negotiated in good faith. That is, it did not violate the implied covenant of fair dealing and there was a reasonable expectation that the terms of the note as originally drawn could be complied with to completion. This means that the original loan file in total must be presented to the court and subject to challenge by the debtor as to its provenance; the debtor must be given the opportunity to show that the debt is avoidable under the Uniform Fraudulent Transfer Act or violation of the implied covenant of fair dealing that attaches to all contracts and cannot be waived. Since we now know due to under-oath testimony that Citibank's chief underwriter knew and reported that 60% of all origination was defective in 2006 and 80% in 2007, there is a strong presumption that loans made in these years, at minimum, breached this covenant.
- They are the actual holder in due course of the note, and can prove it with the original paperwork containing all allonges and endorsements from the originator to themselves.
If all of these cannot be shown, then the foreclosure must be avoided. This will not, in most cases, result in a free house. If the note is not actually owned and properly endorsed by the party claiming a security interest, then they cannot foreclose at all, and the real party at interest will have to step forward. If that real party is a securitizer (or an originator who is bust, and their successor or bankruptcy trustee holds the paper) then they must come to seek the remedy desired. If they have been paid in full then the MBS trust who was defrauded (who believed he had the note but in fact does not) must first pursue recovery of the funds from the securitizer or originator, so as to restore that party's standing. Once they have done so they can come to court and run the same three-step gauntlet.
If the note cannot be proved up to have met the covenant of fair dealing in the inducement then the debt is avoidable and must be so-ruled. This too does not result in a free house, but it does result in the debtor being released from the debt without damage to their credit. They lose their home, but they never really owned it anyway. The creditor is left with the home, but has no suit-at-law to recover from the debtor, since he dealt with the consumer in bad faith.
If the courts don't force the legal process to be followed, then the people need to use their power of civil disobedience. Do what it takes to defy the implementation of foreclosures where the legal process was ignored. Force the courts to follow the law.
If nothing else, boycott the banks who are committing the fraud on the courts. Put them out of business. There are plenty of banks to do business with. Make them know that their are consequences for their actions.
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