MORTGAGE RIGHTS
 The New Foreclosure Defenses Dernier: Lost or Stolen Notes
We should not give up on using securitization failures as a defense. Let me make one common sense point before explaining that securitization failures may serve as an affirmative defense: courts are not in the business of aiding thieves. The better approach, which has been approved by the Vermont Supreme Court, is to assert the securitization failure either as an affirmative defense (An affirmative defense is proved by the defendant to defeat all or part of the plaintiff's case) or as a declaratory judgment action brought by the homeowner (a declaratory judgment action asks a court to declare rights in a contract). When homeowners bring a declaratory judgment action, they are the plaintiff in the case. In Dernier v. Mortgage Network, Inc., 87 A.3d 465, 2013 VT 96, Peter and Nicole Dernier brought a declaratory judgment action in Vermont state court. There are many important holdings by the Vermont Supreme Court in its opinion, but I would like to focus on the part dealing with securitization failures. The Derniers alleged that the note was not conveyed to the trust in the method required by the Pooling and Servicing Agreement, and that the signature on the assignment of the mortgage from MERS to the trust was forged. The Derniers contended that these problems meant that the trust did not have the right to enforce the note. The trust made the usual "even a thief can enforce a note" argument. The biggest problem the Derniers faced was that the maker of the note is not allowed to use another person's claim to the note as a defense to its enforcement. There is, however, an exception to the rule. Here is the rule and the exception: in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, a claim … to the instrument … of another person. … An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument. To avoid the rule that it could not use somebody else's claim to the note, the Derniers had to prove (1) the trust was not a "holder in due course" and (2) the note was lost or stolen. Let's skip over the "holder in due course" part and focus on "lost or stolen." Here is what the Vermont Supreme Court said: 53. While plaintiffs' complaint did not use the terms "lost" or "stolen," their allegations are consistent with this theory. The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant. These allegations are sufficient to give plaintiffs standing. The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement. By saying that the Derniers have "standing," the Supreme Court acknowledged "lost or stolen" as a valid defense if based on irregularities in the transfer of the note from party to party that do not involve the pooling and servicing agreement. That is a great holding! I disagree with the Vermont Supreme Court, however, on the relevance of the Pooling and Servicing Agreement. UCC § 3-305(3) allows the obligor on the note (that is you) to avoid having to pay the note by proving that the person seeking enforcement of the instrument (1) does not have rights of a holder in due course and (2) the instrument is a lost or stolen instrument. The question is, how do you prove that the instrument was stolen? Wisconsin (and I believe every other state) defines theft as intentionally taking and carrying away, uses, transfer, conceal, or retain possession of movable property of another without the other's consent and with intent to deprive the owner permanently of possession of such property. I have highlighted "of another" and "owner" to emphasize that while ownership does not matter in determining whether a party has the right to enforce the note, ownership most certainly matters when the obligor defends on the ground that the note was stolen. How do we prove who owns a piece of property? If it is a car, we produce the title. If it is a house, we produce the deed. If it is a television, we produce the sales receipt. The Pooling and Servicing Agreement is like the registration, deed and sales receipt: it is proof of whether the trust owns your loan. The qualifications a loan must meet to be owned by the trust can be found in the definitions section. (Always read the definitions section of Wall Street deals. A lot of heavy lifting is done there to make the document more readable). You will find that "mortgage loan" is defined there as well as "trust estate" in some PSAs. The "trust estate" is the property owned by the trust. "Mortgage Loan" may define the qualifications that a loan must meet to be considered a "mortgage loan" owned by the trust. The first time I read the definition section of a PSA, it defined a "mortgage loan" as a loan that had satisfied the transfer requirements in the Pooling section. The Vermont Supreme Court held that the Derniers were allowed to prove at trial that the documents were stolen: "The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature that was created by defendant." If the note was fraudulently acquired by the defendant based on a fraudulent endorsement with a forged signature, it is almost certain that the loan does not satisfy the definition of "mortgage loan" or "property of the estate" in the PSA. That is, the PSA is the evidence that the loan does not belong to the trust. The PSA must be consulted when determining whether the loan, which includes the note, was stolen.
NEXT: Attacking the Chain of Title
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.
 The New Foreclosure Defenses Dernier: Lost or Stolen Notes  MORTGAGE RIGHTS
We should not give up on using securitization failures as a defense. Let me make one common sense point before explaining that securitization failures may serve as an affirmative defense: courts are not in the business of aiding thieves. The better approach, which has been approved by the Vermont Supreme Court, is to assert the securitization failure either as an affirmative defense (An affirmative defense is proved by the defendant to defeat all or part of the plaintiff's case) or as a declaratory judgment action brought by the homeowner (a declaratory judgment action asks a court to declare rights in a contract). When homeowners bring a declaratory judgment action, they are the plaintiff in the case. In Dernier v. Mortgage Network, Inc., 87 A.3d 465, 2013 VT 96, Peter and Nicole Dernier brought a declaratory judgment action in Vermont state court. There are many important holdings by the Vermont Supreme Court in its opinion, but I would like to focus on the part dealing with securitization failures. The Derniers alleged that the note was not conveyed to the trust in the method required by the Pooling and Servicing Agreement, and that the signature on the assignment of the mortgage from MERS to the trust was forged. The Derniers contended that these problems meant that the trust did not have the right to enforce the note. The trust made the usual "even a thief can enforce a note" argument. The biggest problem the Derniers faced was that the maker of the note is not allowed to use another person's claim to the note as a defense to its enforcement. There is, however, an exception to the rule. Here is the rule and the exception: in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, a claim … to the instrument … of another person. … An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument. To avoid the rule that it could not use somebody else's claim to the note, the Derniers had to prove (1) the trust was not a "holder in due course" and (2) the note was lost or stolen. Let's skip over the "holder in due course" part and focus on "lost or stolen." Here is what the Vermont Supreme Court said: 53. While plaintiffs' complaint did not use the terms "lost" or "stolen," their allegations are consistent with this theory. The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant. These allegations are sufficient to give plaintiffs standing. The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement. By saying that the Derniers have "standing," the Supreme Court acknowledged "lost or stolen" as a valid defense if based on irregularities in the transfer of the note from party to party that do not involve the pooling and servicing agreement. That is a great holding! I disagree with the Vermont Supreme Court, however, on the relevance of the Pooling and Servicing Agreement. UCC § 3-305(3) allows the obligor on the note (that is you) to avoid having to pay the note by proving that the person seeking enforcement of the instrument (1) does not have rights of a holder in due course and (2) the instrument is a lost or stolen instrument. The question is, how do you prove that the instrument was stolen? Wisconsin (and I believe every other state) defines theft as intentionally taking and carrying away, uses, transfer, conceal, or retain possession of movable property of another without the other's consent and with intent to deprive the owner permanently of possession of such property. I have highlighted "of another" and "owner" to emphasize that while ownership does not matter in determining whether a party has the right to enforce the note, ownership most certainly matters when the obligor defends on the ground that the note was stolen. How do we prove who owns a piece of property? If it is a car, we produce the title. If it is a house, we produce the deed. If it is a television, we produce the sales receipt. The Pooling and Servicing Agreement is like the registration, deed and sales receipt: it is proof of whether the trust owns your loan. The qualifications a loan must meet to be owned by the trust can be found in the definitions section. (Always read the definitions section of Wall Street deals. A lot of heavy lifting is done there to make the document more readable). You will find that "mortgage loan" is defined there as well as "trust estate" in some PSAs. The "trust estate" is the property owned by the trust. "Mortgage Loan" may define the qualifications that a loan must meet to be considered a "mortgage loan" owned by the trust. The first time I read the definition section of a PSA, it defined a "mortgage loan" as a loan that had satisfied the transfer requirements in the Pooling section. The Vermont Supreme Court held that the Derniers were allowed to prove at trial that the documents were stolen: "The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature that was created by defendant." If the note was fraudulently acquired by the defendant based on a fraudulent endorsement with a forged signature, it is almost certain that the loan does not satisfy the definition of "mortgage loan" or "property of the estate" in the PSA. That is, the PSA is the evidence that the loan does not belong to the trust. The PSA must be consulted when determining whether the loan, which includes the note, was stolen.
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.
 The New Foreclosure Defenses Dernier: Lost or Stolen Notes We should not give up on using securitization failures as a defense. Let me make one common sense point before explaining that securitization failures may serve as an affirmative defense: courts are not in the business of aiding thieves. The better approach, which has been approved by the Vermont Supreme Court, is to assert the securitization failure either as an affirmative defense (An affirmative defense is proved by the defendant to defeat all or part of the plaintiff's case) or as a declaratory judgment action brought by the homeowner (a declaratory judgment action asks a court to declare rights in a contract). When homeowners bring a declaratory judgment action, they are the plaintiff in the case. In Dernier v. Mortgage Network, Inc., 87 A.3d 465, 2013 VT 96, Peter and Nicole Dernier brought a declaratory judgment action in Vermont state court. There are many important holdings by the Vermont Supreme Court in its opinion, but I would like to focus on the part dealing with securitization failures. The Derniers alleged that the note was not conveyed to the trust in the method required by the Pooling and Servicing Agreement, and that the signature on the assignment of the mortgage from MERS to the trust was forged. The Derniers contended that these problems meant that the trust did not have the right to enforce the note. The trust made the usual "even a thief can enforce a note" argument. The biggest problem the Derniers faced was that the maker of the note is not allowed to use another person's claim to the note as a defense to its enforcement. There is, however, an exception to the rule. Here is the rule and the exception: in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, a claim … to the instrument … of another person. … An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument. To avoid the rule that it could not use somebody else's claim to the note, the Derniers had to prove (1) the trust was not a "holder in due course" and (2) the note was lost or stolen. Let's skip over the "holder in due course" part and focus on "lost or stolen." Here is what the Vermont Supreme Court said: 53. While plaintiffs' complaint did not use the terms "lost" or "stolen," their allegations are consistent with this theory. The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant. These allegations are sufficient to give plaintiffs standing. The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement. By saying that the Derniers have "standing," the Supreme Court acknowledged "lost or stolen" as a valid defense if based on irregularities in the transfer of the note from party to party that do not involve the pooling and servicing agreement. That is a great holding! I disagree with the Vermont Supreme Court, however, on the relevance of the Pooling and Servicing Agreement. UCC § 3-305(3) allows the obligor on the note (that is you) to avoid having to pay the note by proving that the person seeking enforcement of the instrument (1) does not have rights of a holder in due course and (2) the instrument is a lost or stolen instrument. The question is, how do you prove that the instrument was stolen? Wisconsin (and I believe every other state) defines theft as intentionally taking and carrying away, uses, transfer, conceal, or retain possession of movable property of another without the other's consent and with intent to deprive the owner permanently of possession of such property. I have highlighted "of another" and "owner" to emphasize that while ownership does not matter in determining whether a party has the right to enforce the note, ownership most certainly matters when the obligor defends on the ground that the note was stolen. How do we prove who owns a piece of property? If it is a car, we produce the title. If it is a house, we produce the deed. If it is a television, we produce the sales receipt. The Pooling and Servicing Agreement is like the registration, deed and sales receipt: it is proof of whether the trust owns your loan. The qualifications a loan must meet to be owned by the trust can be found in the definitions section. (Always read the definitions section of Wall Street deals. A lot of heavy lifting is done there to make the document more readable). You will find that "mortgage loan" is defined there as well as "trust estate" in some PSAs. The "trust estate" is the property owned by the trust. "Mortgage Loan" may define the qualifications that a loan must meet to be considered a "mortgage loan" owned by the trust. The first time I read the definition section of a PSA, it defined a "mortgage loan" as a loan that had satisfied the transfer requirements in the Pooling section. The Vermont Supreme Court held that the Derniers were allowed to prove at trial that the documents were stolen: "The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature that was created by defendant." If the note was fraudulently acquired by the defendant based on a fraudulent endorsement with a forged signature, it is almost certain that the loan does not satisfy the definition of "mortgage loan" or "property of the estate" in the PSA. That is, the PSA is the evidence that the loan does not belong to the trust. The PSA must be consulted when determining whether the loan, which includes the note, was stolen.
 MORTGAGE RIGHTS
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.
 The New Foreclosure Defenses Dernier: Lost or Stolen Notes We should not give up on using securitization failures as a defense. Let me make one common sense point before explaining that securitization failures may serve as an affirmative defense: courts are not in the business of aiding thieves. The better approach, which has been approved by the Vermont Supreme Court, is to assert the securitization failure either as an affirmative defense (An affirmative defense is proved by the defendant to defeat all or part of the plaintiff's case) or as a declaratory judgment action brought by the homeowner (a declaratory judgment action asks a court to declare rights in a contract). When homeowners bring a declaratory judgment action, they are the plaintiff in the case. In Dernier v. Mortgage Network, Inc., 87 A.3d 465, 2013 VT 96, Peter and Nicole Dernier brought a declaratory judgment action in Vermont state court. There are many important holdings by the Vermont Supreme Court in its opinion, but I would like to focus on the part dealing with securitization failures. The Derniers alleged that the note was not conveyed to the trust in the method required by the Pooling and Servicing Agreement, and that the signature on the assignment of the mortgage from MERS to the trust was forged. The Derniers contended that these problems meant that the trust did not have the right to enforce the note. The trust made the usual "even a thief can enforce a note" argument. The biggest problem the Derniers faced was that the maker of the note is not allowed to use another person's claim to the note as a defense to its enforcement. There is, however, an exception to the rule. Here is the rule and the exception: in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, a claim … to the instrument … of another person. … An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument. To avoid the rule that it could not use somebody else's claim to the note, the Derniers had to prove (1) the trust was not a "holder in due course" and (2) the note was lost or stolen. Let's skip over the "holder in due course" part and focus on "lost or stolen." Here is what the Vermont Supreme Court said: 53. While plaintiffs' complaint did not use the terms "lost" or "stolen," their allegations are consistent with this theory. The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant. These allegations are sufficient to give plaintiffs standing. The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement. By saying that the Derniers have "standing," the Supreme Court acknowledged "lost or stolen" as a valid defense if based on irregularities in the transfer of the note from party to party that do not involve the pooling and servicing agreement. That is a great holding! I disagree with the Vermont Supreme Court, however, on the relevance of the Pooling and Servicing Agreement. UCC § 3-305(3) allows the obligor on the note (that is you) to avoid having to pay the note by proving that the person seeking enforcement of the instrument (1) does not have rights of a holder in due course and (2) the instrument is a lost or stolen instrument. The question is, how do you prove that the instrument was stolen? Wisconsin (and I believe every other state) defines theft as intentionally taking and carrying away, uses, transfer, conceal, or retain possession of movable property of another without the other's consent and with intent to deprive the owner permanently of possession of such property. I have highlighted "of another" and "owner" to emphasize that while ownership does not matter in determining whether a party has the right to enforce the note, ownership most certainly matters when the obligor defends on the ground that the note was stolen. How do we prove who owns a piece of property? If it is a car, we produce the title. If it is a house, we produce the deed. If it is a television, we produce the sales receipt. The Pooling and Servicing Agreement is like the registration, deed and sales receipt: it is proof of whether the trust owns your loan. The qualifications a loan must meet to be owned by the trust can be found in the definitions section. (Always read the definitions section of Wall Street deals. A lot of heavy lifting is done there to make the document more readable). You will find that "mortgage loan" is defined there as well as "trust estate" in some PSAs. The "trust estate" is the property owned by the trust. "Mortgage Loan" may define the qualifications that a loan must meet to be considered a "mortgage loan" owned by the trust. The first time I read the definition section of a PSA, it defined a "mortgage loan" as a loan that had satisfied the transfer requirements in the Pooling section. The Vermont Supreme Court held that the Derniers were allowed to prove at trial that the documents were stolen: "The complaint alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature that was created by defendant." If the note was fraudulently acquired by the defendant based on a fraudulent endorsement with a forged signature, it is almost certain that the loan does not satisfy the definition of "mortgage loan" or "property of the estate" in the PSA. That is, the PSA is the evidence that the loan does not belong to the trust. The PSA must be consulted when determining whether the loan, which includes the note, was stolen.
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.  MORTGAGE RIGHTS