Now that it has come into the limelight people do take positions as to this legal loophole as it has been called. But is it a loophole or is it more?
The answer is it is more - much more. it embodies the essence of our legal system. As I say over and over again - two wrongs don't make a right. What I am saying is that you can't correct one violation by violating another.
Yes, a homeowner delinquent on their mortgage payments has violated the terms and conditions of the legal agreement they signed which agreement also gives its' owner (the contract owner) the right to recovery by foreclosure. The key word here is the contract owner. The contract (mortgage note) does not give blanket authority for just anyone to recover by foreclosure. If it did, then you and I could go out, find a delinquent mortgage and foreclose on it.
Many states - such as Florida - have specific laws on the books that detail exactly how a foreclosure can be done and by whom. The laws in most judicial foreclosure states (states where you have to go to court and get a court order to foreclosre) are very similar. They say that you must prove you own the note and produce the original - not a photo copy, fax copy or any other facsimile - the original.
The laws also say producing the original is not always enough as having possession of the note does not mean you own the note. If you gave someone a mortgage and had them sign a note then gave me the note for safekeeping does that give me legal rights to ownership and foreclosure? No it does not.
This is the real issue at hand here. In order to pass ownership you must sell or assign the note. In Florida you must record - in the public records of the county the property is located in - the bill of sale or the assignment. You can readily see why the law requires this. Recording in public records is proof positive that the action occurred, when it occurred and what parties were party to this transaction. When recording a document in public records the document itself is stamped by the court and kept on file. This way no one can create a fraudulent copy, change dates or parties involved. The law in Florida further states that if a mortgage note is sold or assigned it must be recorded in public records prior to any foreclosure action - court filing - being made. In other words, you cannot take foreclosure action on something you don't own - can't prove you own - at the time you file the aciton.
The issue then is proving ownership of the note not possession of the note. PROVE YOU OWN IT not SHOW ME THE NOTE. In other words, prove you own it by what is in public records then show me the original. That is the law, period.
In the process of securitization the lenders were in such a hurry to pass the paper along - so it could be sold as a part of a security bundle - that they did not have the time to properly and officially sell or assign the note.
This is not only a legal issue for the homeowner but is very much a legal issue for the investor who purchased a share in that security. There exists no real evidence that the mortgage an investor bought a share in truly exists in the pool the investor invested in.
There is evidence that lenders sold the same mortgage note to more then one security hence the same interest in a mortgage note was sold to multiple parties. The question now arises - if I own this mortgage in Security Package One then how can you own the same mortgage in Security Package Two? One of us bought a fraudulent investment package but without the recording documents neither of us can prove who the rightful owner is. Someone was defrauded here.
Watch this CNBC aired piece featuring Attorney April Charney, a Jacksonville, Florida attorney who has been fighting foreclosures and teaching other attorneys the statutes so they can offer the same correct legal defense to their clients. After viewing please continue to read this article below the embedded piece.
To listen to this video - please turn off Bloomberg TV on the left panel by pressing the square button
Now that you have watched this you may be forming your own opinions. But here is where this gets really intersting and where I feel the real importance of this issue is.
The issue is the law. Is it universal - meaning does it applly to everyone equally - or is it selective? If it is selective then there in fact is no law. If a law is upheld based on size, stature or wealth then there is no equality under any law of the land and - if selective - no law is reallly valid.
The judicial system of our country is there to protect all of us by upholding "the law" equally for all. We all have the right to our day in court and we all have the right to defend ourselves be it criminal or civil.
The rights of a defendant in any criminal arrest is protected under the Miranda Act. Law authorities must read a person their rights and giving them the right to have legal representation. If the Miranda Act is not read to a person arrested, the case against that person must be dropped. The Miranda Act was established for no other reason then to give everyone their "rights". Should people in civil cases not have the same rights to defend and to legal representation?
Some may argue that when served a summons by a Sherrif, the summons details the rights and the responsibilities to the person or persons being served. Indeed it does - but what it does not do is tell them that they have a right to be sued for foreclosure by the proper party and not just by anyone claiming that right.
Right is Right. It is your right to sue me if you have the right to do so and it is my right to defend myself if you are not the rightful party to sue me. That - plain and simple - is the law.
If you - as the alleged mortgage note owner - sues me, it is only right that you prove to the court - and to me - that you have the legal right to do so. If you do, I lose, if you don't, I have had my day in court, the laws have been upheld justly and we have preserved our legal system without a shadow of a doubt. It is then up to the rightful owner to either work things out with me or in the absence of my ability or willingness to do so - foreclosure on me.
The law is the law. The lender/banks/servicing companies and the attorneys that represent them in foreclosure know that they are violating the law and in fact - committing fraud upon the courts. If fraud is being committed should not the offenders be charged, tried and convicted if found guilty by a jury of their peers under the law? They should - and they should also enjoy the same fair treatment under our laws. If there is illegal activity -with knowledge and premeditated - the law should be enforced.
The issue is the preservation of each individual's rights under the Constitution, the Constitution itself, our freedom and our liberty. Selective disposition of any law takes all of that away from us and puts us closer to being a totalitarian, fascist state. One where only the elite have rights and the rest of the population is suppressed by them. Iraq was one such example as are many other countries ruled under a dictatorship. Without equality under the law there is no true democracy. There can be no class system here be it individuals or corporations.
The basic principles of our country is at stake here - as much if not more than - the economic survival of our country. the economy will matter not if we have a two class system of judicial jurisdiction. It just is not OK to break the law no matter who or what you are.
No one is above the law and no one should have the ability to manipulate the law. Preservation of our society is at stake.
Editor's Note:
More on what I believe to be positive effects of using this defense when fighting a fosreclosure in future articles.
Nice post. I like the part about produce-the-note. I live in Tampa and know one person he helped, and it actually worked. This site has all the videos they have done. Watch all the videos here:
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