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UncleNasty -> E-notes (10/3/2009 10:26:08 AM)
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A continuation from another thread.
Among the problems involved in housing currently is E-notes. An e-note is a digital copy of a promissory note and is created by merely scanning the original. Trading and selling of enotes has become very common in the modern world of securitization.
Typically hundreds, and/or thousands, of notes are generated by a mortgage broker, collected together and sold off in bulk to a "securitizer." Securitizers typically are purchasing in bulk from numerous brokers and originating lenders and bundle together thousands to tens of thousands of instruments into a pool. A typical pool will have $1 bn to $10 bn worth of instruments. From there they sell shares, or certificates, to investors. It is ultimately the investors that own the underlying instruments.
When brokers and/or originators make the exchange with the securitizer the only form of the instruments that is exchanged is in the form of e-notes. The original hard copy is destroyed. This is done because it is easier and cheaper to just "send it in an email," as it were. Among the laws that are perverted in this are the UCC, Article 3, which deals with "negotiation, indoresment and delivery."
Problems associated with this are common. The same enote, alleged to represent the original, frequently end up in more than one trust, or more than one pool, with each of them claiming to have full rights to enforce the associated security instrument (the mortgage, deed of trust, or lien*).
As an example one pool may have a contract to receive the payments and proceeds of the principal amounts. Another may have same for the interest up to 5.5%. Another the interest from 5.6% to 8%. Another still from 8.1% and up. Each of these parties can and does make the claim to be the owner and holder of the instruments with rights to enforce the instruments. None of them, however, actually has these rights.
But think about this. If we were dealing with a real note could it actually be owned and held by more than more one party at a time? Could more than one party make a lawful claim to rights to enforce? Clearly no. But an enote can be duplicated numerous times. Courts ignorance of the laws, and of the present standard operating procedures, continuously rule in error and grant parties not lawfully entitled to the rights to enforce judgment.
Is this really a big deal? I mean somebody did borrow the money, right?
Yes it is a big deal. Yes somebody did borrow the money. But who is it exactly that should be paid? We have multiple parties that are making claims on the same debt, each of them insisting they are the proper and lawful party entitled to "collect." But none of them actually have the right to do so. None of them actually hold the instrument/s. In many cases there is no party that will ever have those rights.
A read of UCC 3.604.1(a) reveals:
(1) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument:
(a) By an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party's signature, or the addition of words to the instrument indicating discharge;
The creation of the e-note, and the destruction of the original, actually discharges the debt.
The parties attempting to enforce the rights to collect (Plaintiffs in foreclosures) are stooping to just about any level to avoid being held accountable to the laws - including bald faced lies and the utter fabrication of documents. I have a friend litigating a case in Wisconsin (no this isn't one of those "I have a cousin who works at the plant with a guy whose brother in law..." I know this individual personally and have read his pleadings and reviewed the evidence presented by Plaintiff) in which Plaintiff has proffered as evidence 3 different promissory notes, each with different terms, conditions and information. This is their attempt at creating out of thin air the evidence needed to "take his stuff." Why do they need to "create" the evidence? Because they don't really have it.
Of the foreclosure cases that are litgated it is becoming a little more common for courts to rule in accordance with the facts and the law. But only a little. More than 90% of foreclosures aren't defended at all. Of the remaining percentage the primary defense is to rush into BK court. Rarely is much of a defense mounted in this venue with most borrowers simply admitting to the debt, to the defective proof of claim tendered by the creditor, and to a repayment plan.
In the very small percentage of cases that are truly being litigated, being defended, there is a slow turning of the courts to an awareness of what has happened, what is happening, and according to the law what is wrong with most foreclosures.
Uncle Nasty
* In the world of mortgages there are 2 instruments - a promissory note which is a debt instrument, or a financial instrument - a mortgage, which is a security instrument. The two work together, and neither has much power on its own. A promise to pay is backed up with the security of the mortgage. In other words if you don't pay they can come and take your stuff.
A note without a mortgage has little power. Without the mortgage a note holder CANNOT take the house/property. A mortgage without a note presents another problem. A mortgage can only be enforced in the case of a default. Without also having the note the holder of a mortgage has not experienced a default. In either case a foreclosure is unlawful. Think of this as "bifurcation," or separation of the note and mortgage.
There are a couple of cases I cite as controlling in these instances:
230 F.2d 330
KIRBY LUMBER CORPORATION, Appellant, v.John W. WILLIAMS et al., Appellees. No. 15465. United States Court of Appeals Fifth Circuit. February 10, 1956. Rehearing Denied April 24, 1956.
"The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity." Van Burkleo v. Southwestern, Tex.Civ.App., 39 S.W. 1085, 1087.3
And,
U.S. Supreme Court, SHELDON v. SILL, 49 U.S. 441 (1850) 49 U.S. 441 (How.)
THOMAS C. SHELDON AND ELEANOR SHELDON, HIS WIFE, APPELLANTS, v. WILLIAM E. SILL, APPELLEE. January Term, 1850
"The assignment of the mortgage, without an assignment of the debt, is a nullity."
P-notes are negotiated in accordance with the Federal UCC, or the statutes in each state that have adopted the UCC. Mortgages are assigned and this is done via each states recording statutes.
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