4 Nov

From: Charles Cox []
Sent: Wednesday, August 17, 2011 9:41 AM
To: Charles Cox


Posted on August 17, 2011 by Neil Garfield

I held back on writing this post until I was sure beyond a reasonable doubt that I was right. I’ve said it one form or another, but not like this. It is my opinion (to be checked with licensed attorney) that most mortgage liens over the last 10 years+ were never perfected and improperly filed. If you check with cases involving mechanics liens, mortgage liens, bankruptcy etc., the issue is always about priority of liens and perfection of liens. The essential tests I have distilled from many sources are as follows:

  1. The most important test of the perfection of a lien is whether the lienholder could issue a satisfaction of that lien.
  2. The other statutory steps in establishing the lien and giving it the right place in the priority of the lien must be fulfilled to the letter. Each state differs slightly on such procedures.

Be careful here because this is not one size fits all. There are two classes of such mortgages, and this conclusion regarding the perfection, priority, enforcement and viability of the lien only applies to one class. The first class is the minority by far, but it is a significant minority. There were some actual lenders, apparently like World Savings, that did in fact make loans out of their own cash or credit. That they were later sold into the secondary market does nothing for you if you are challenging the original loan, which presumably was otherwise executed and properly filed. Hence, at the time of origination neither misrepresentation of the creditor nor the PSA were involved.

The other class, including subclasses, accounts for at least 85% of all loans during this period. In most cases the loan originator was either a thinly capitalized mortgage broker who was called “the lender” even though they never gave the borrower one penny and never intended to do so. If there were any borrower claims arising out of the loan transaction itself it would, the strategy goes, be filed against the loan originator (except now we know they were not the lender and were acting as an agent for an undisclosed principal).

The fact that the loan originator was not the lender/creditor means that the real creditor was outside the transaction. Thus a satisfaction of the obligation could only be given by or on behalf of the undisclosed creditor. By definition there is no way of knowing, but for off-record communication, who to go to for a satisfaction. Factually the Promissory Note is a lie. And therefore the “Security instrument” which misstates the terms itself, is based upon a document that does not properly recite the terms of repayment (i.e., including the terms of the PSA).

It does not properly recite the terms of repayment because (1) it provides a nominee instead of the real name of the creditor/lender and (2) it does include all the terms and parties to the deal (see the PSA). If MERS was used, you have a nominee for title, a nominee for creditor, and therefore no real party on the side of the lender, in terms of on-record activity. This results in the lien being imperfect or never perfected. Check the cases and statutes. This conclusion is unavoidable based upon the factual assumptions I have made here.

The focus on forgery, fabrication and misrepresentation (robo-signing) is important. After all this shows fraudulent intent. But it begs the question as to whether the original lien was perfected. And by the way (see previous post) invalidating the lien does not eliminate the obligation or even the possibility of a judgment lien if it is available to the creditor (depends upon the state).

So the narrow issue addressed here ONLY relates to the perfection of the mortgage or deed of trust, which is only one method of enforcement of a debt. These issues are important as to discharge-ability of the obligation in bankruptcy and enforceability of the putative lien in state or Federal Court. There are obvious ramifications as to lawsuits to Quiet Title as well.

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