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brokedickdog -> RE: What timing! A shooting and the banks getting their asses kicked! (1/9/2011 3:09:12 PM)
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quote:
ORIGINAL: Real0ne
they sell the note 10 minutes after you sign it and they are no longer the holder and therefore its unenforcable.
The selling, or more specifically the negotiation, of a negotiable instrument, such as a promissory note, does not render the instrument unenforcable. There are a broad range of parties that can enforce an instrument that has been properly negotiated.
UCC 3-201: NEGOTIATION. (a) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder. (b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
This is basic indorsement and delivery - the stuff negotiation is made of.
UCC 3-301 goes further and defines who has the right to enforce an instrument:§ 3-301. PERSON ENTITLED TO ENFORCE INSTRUMENT. "Person entitled to enforce" an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
There are a number of reasons for the growth in securitization of mortgages in the past decade. One of them was to create indemnity for the current holder of the instruments through "holder in due course" (HDC) protections. The selling, or negatioting, of p-notes through several separate transactions is intended to make these HDC protections more ironclad.
3-302. HOLDER IN DUE COURSE. (a) Subject to subsection (c) and Section 3-106(d), "holder in due course" means the holder of an instrument if: (1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and (2) the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306, and (vi) without notice that any party has a defense or claim in recoupment described in Section 3-305(a).
Thus, an HDC is clear of any liability for claims in recoupment as defined in UCC 3-305(a), and any claims of rescission as defined in UCC 3-306, et. al.
3-305. DEFENSES AND CLAIMS IN RECOUPMENT. (a) Except as otherwise provided in this section, the right to enforce the obligation of a party to pay an instrument is subject to the following: (1) a defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings; (2) a defense of the obligor stated in another section of this Article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and (3) a claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
The HDC protections of UCC 3-305(a)(1)(iii) were particularly sought after by subsequent purchasers of p-notes that emanated from the various sub-prime loans as those were fraudulent from inception. The full UCC is available at the following link:http://www.law.cornell.edu/ucc/ucc.table.html
At present the Federal Reserve is working to alter the rescission terms of the Truth in Lending Act to make it more difficult for borrowers that have been victimized by fraudulent lending practices to rescind the loan transactions.
As for the impact of the Mass. Supreme Court decision in US Bank v Ibanez that will take some time to work its way through the courts, and that in a number of jurisdictions.
Among the more interesting portions of the decision was this:"Finally, we reject the plaintiffs' request that our ruling be prospective in its application. A prospective ruling is only appropriate, in limited circumstances, when we make a significant change in the common law. See Papadopoulos v. Target Corp., 457 Mass. 368, 384 (2010) (noting "normal rule of retroactivity"); Payton v. Abbott Labs, 386 Mass. 540, 565 (1982). We have not done so here. The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs' apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities."
This bald faced attempt on the part of US Bank/Wells to hold them harmless for their past bad deeds and failures to follow Mass. law fell flat. The court was not interested in giving them any form of blanket indemnity for the past several years of failing to follow the law. And rightly so. Either we have laws, or we don't. The court decided that we do.
There was also this:
"In some jurisdictions it is held that the mere transfer of the debt, without any assignment or even mention of the mortgage, carries the mortgage with it, so as to enable the assignee to assert his title in an action at law.... This doctrine has not prevailed in Massachusetts, and the tendency of the decisions here has been, that in such cases the mortgagee would hold the legal title in trust for the purchaser of the debt, and that the latter might obtain a conveyance by a bill in equity."The above, in particular, is an issue that will have to work its way through other jurisdictions.
I am quite anxious to see cases brought on: 1) New York Trust laws and timely conveyance of instruments into the trusts, or MBS. It looks as though few, if any, of these trusts had timely conveyances, and New York Trust laws, and case law, state that untimely conveyances are void. 2) REMIC tax status and the benefits thereof, or, in accordance with untimely conveyance the lack of REMIC tax status. This will/would be a major blow to the trusts and investors as without this status the tax rate on gains will effectively be 100%.
One of my friends in California compiled the following scribd posting of both commentary and case filings in US Bank v Ibanez. The most recent decision begins on page 73. The October 14, 2009 decision of Judge Long in the Mass. Land Court, a very well researched and eloquently expressed opinion (it is this decision the Mass. Supreme Court affirmed), begins on page 344.
http://www.scribd.com/doc/46516031/Ibanez-Case-File-From-Mass-Supreme-Court-Re-Land-Title-Transfers-Ibanez-Decision-case-file-compendium
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