Dirt and Dollars

Everyone in the mortgage business has their own idea of what happened, why and how it might work out. I have been traveling the country speaking at workshops and talking to Judges, Lawyers, Bankers, Mortgage Brokers, Real Estate Brokers, Investors and homeowners. My materials were approved by various state bar associations for continuing legal education credits. So, I can speak with at least an awareness of where we are and what I feel will be happening. When, you went to the bank to sign for a loan, you gave the banker a promise to pay. In fact, it was technically a promissory note with specific language. "Pay to the order of". This meant that the note MUST be endorsed by the party that it was made payable to. If, on the other hand, the note was simply bearer paper of payable to the bearer it would not require an endorsement. Now how hard is that to, understand.

But, here is where everyone gets confused. At that exact minute, the consumer is lending to the bank an asset because the promissory note is now an asset of the bank. Remember, the bank owes the borrower (lender) the face amount of that document in order to pay the seller of the house. Now the game of monopoly begins. First of all, how much money did the bank give to the consumer at the closing table? NOTHING. The money needed to pay for the house was WIRE TRANSFERRED to the title company a couple of hours later (maybe less) So, we know by looking at the wire transfer document that the money to pay for the house did NOT come from the lender that you thought it did. In, fact, IF you read your promissory note and your mortgage or deed of trust, a very interesting thing shows up. Your lender DID NOT sign the promissory note, nor was it notarized or recorded. It was just like someone giving you a blank check, signed for a lot of money and you can do what you want with it.

Your mortgage/deed of trust was notarized and recorded, but your bank never signed it. WHY? There is a FEDERAL LAW called the law of Ultra-Vires. Banks cannot lend their credit. Try and get a Judge to rule on this one. Fat chance. But, nevertheless it is a law.

Now to add to the shroud of mystery, IF, the bank never signed the note at the origination table, how can they endorse it to someone else with the endorsement saying "without recourse"? Got you confused? Don't worry, just about (95%) of, all of the student we have don't get it either. Now, the title of this article "Dirt and Dollars" is appropriate. The banks are ONLY interest in dollars, your promissory note. At the closing table the note and mortgage/deed of trust were bifurcated (legally separated) The dirt went to MERS and the DOLLARS were used to go to the Federal Reserve and get ten times the face amount of what you promised to pay. What a great business. Let's move forward. Now, the bank has ten times, minus the reserve requirement and they have put up nothing. Now they take the promise to pay, (dollars) and sell it to Wall St. Wall St, or what is known as the Asset Based Trust buys the dollar obligation and the interest that it will generate and has investors to put up the money. Doesn't sound too complicated yet? But, it will, believe me.

Here comes the Federal Reserve and says to the Trustee of the Asset Based Trust, "Boys, you are all members of the Goldman Sachs Country Club, so we are going to allow you to monetize that debt obligation (30) times. WOW. They can sell that debt (30) times to more investors. How in the world are they going to generate enough interest from one debt obligation to pay (30) additional investors? Even if they were placed in different tranches, it becomes mind boggling. So, you can see that the recipe for Mom's apple pie is really convoluted. The Trustee is NOT an individual. The Trustee is usually one of the big players at the Goldman Sachs Country Club. It is usually, Deutsch, Mellon Bank of New York, Bk of America, Barclays and other majors. The role of Trustee is a very lucrative role. So, let's say that just one of the promissory notes (dollars) is for $ 500,000.00 So, multiply that times thirty and you have fifteen-million dollars created. Where do you think that goes? Now, I'll just bet you're really confused. It goes to buy derivatives from the big boys in the form of Greek bonds or Spanish or other country bonds. Got it! That is why, when we are all arguing in court that the note is missing or robo-signing took place, you are talking to deaf, un-educated ears. The real argument is in New York because that is where the majority of the Trusts are located and that is where jurisdiction is. Lately, I have been advising attorneys NOT to argue the dollars but argue the dirt. In other words, "Your honor, we do not plead that we don't owe the money. That is not what we are here for. We need to have your honor help us sort out this mess of who owes who and who owns what". "Can you help us to identify that entity that can prove they are the true owners of the debt". That my friends is how to make the Judge your lawyer and friend.

Regis Sauger Author-Speaker regis-sauger .