More Market State In Action: Consumers Treated Differently Under the Law Than Businesses

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You thought corporate personhood was a bad thing? Think twice. You should be so lucky as to be a corporate person. They don’t just get treated like you and me, they are increasingly being treated better than you and me.

Bear with this very specific and for non-laywers, legally dense illustration, that I received earlier in the week:

I am Michael Morgan, the pro se plaintiff in Morgan v. Ocwen Loan Servicing, LLC, et al., 795 F.Supp.2d 1370 (N.D.Ga. 2011). This is one of two extremely well-written decisions in which Judge Amy Totenberg ruled that, in Georgia, a non-judicial foreclosure must be brought by the secured creditor and that the identity of the secured creditor must be revealed. The other case is Stubbs v. Bank of America, 844 F.Supp.2d 1267 (N.D.Ga. 2012).

I was wondering if you have seen You et al. v. JP Morgan Chase Bank, N.A., et al., Case No. S13Q0040, Georgia Supreme Court.

In the You et al. case, the Georgia Supreme Court held that, in Georgia, (a) the holder of a security deed could be considered a secured creditor and could initiate a non-judicial foreclosure, despite the fact that it did not hold the note or otherwise have any beneficial interest in the debt underlying the security deed, and (b) the identity of the secured creditor did not need to be revealed in the foreclosure notice. In so holding, the Georgia Supreme Court was interpreting O.C.G.A. Section 44-14-162.2(a), which requires that the foreclosure notice be sent by the secured creditor. See also O.C.G.A. Section 44-14-162, which requires that the security instrument or an assignment thereof vesting title in the secured creditor be filed in the real estate records of the appropriate county prior to the foreclosure sale.

While not expressing it in precisely this manner, the Georgia Supreme Court held, in effect, that the relevant provisions of the Georgia Uniform Commercial Code, O.C.G.A. Section 11-1-101, et seq., yield to and are superseded by O.C.G.A. 44-14-64(b). This code section provides that the transfer of a security deed is sufficient to transfer the indebtedness, even when the indebtedness is evidenced by a note.

N.B. O.C.G.A. 11-10-103 requires precisely the opposite result; i.e., this code section specifically provides that provisions included in Article 3 of Chapter 14 of Title 44 (which includes O.C.G.A. Section 44-14-64(b)) yield to and are superseded by the Georgia UCC. (Appellants’ counsel did not refer to O.C.G.A. Section 11-10-103 in either of the two briefs which he submitted to the Court. I have not yet confirmed that there is no reference to this code section in any of the six other briefs submitted in the case, but I do not expect to find such a reference.)

If it makes any difference, pursuant to O.C.G.A. Section 1-1-9, the effective date of both the current version of the Georgia UCC and O.C.G.A. Section 44-14-64(b) was November 1, 1982. Appellees apparently argued that O.C.G.A. Section 44-14-64(b) prevailed over the Georgia UCC, because the corresponding provision in the 1933 Georgia Code (Section 67-1305.1) was adopted after Georgia first adopted its version of the UCC. (With limited exceptions, the 1933 Georgia Code has been repealed in its entirety.)

I believe that it is readily apparent that the effect of the ruling in You et al. could wreak havoc in commercial markets, if the decision is taken seriously in contexts other than non-judicial foreclosures. Warehousing lenders, e.g., have relied upon possession of the original note as security, and the security deed is never assigned to them. However, under the rationale of You et al., an assignment of a Georgia security deed to a third party, while the warehousing lender held the corresponding note, would transfer the indebtedness to that third party. Many other scenarios can be envisioned in which this rationale would have devastating effects upon commerce.

I here am only trying to inform you about this decision, in the event that you are not aware of it. It does not yet seem to be receiving the attention that it deserves.

I ran this message by Georgetown law professor Adam Levitin, who is arguably the top US expert on mortgage securitizations. He gave the ruling a quick read and said it did appear that there appeared to be an inconsistency, that the Georgia court found that the note follows the mortgage, rather than the mortgage follows the note. They failed to reconcile the statute that says note follows the mortgage with the UCC Article 9 provision that says the opposite. Oops.

But this is where it gets interesting, and ugly. It’s clear that the conclusion the court reached in the consumer case would be untenable if you had two banks dealing with each other. Levitin speculated that what would happen in Georgia was not that some later court would come down one way or the other on this rather basic question. Instead, he anticipated that the law would be applied one way for consumers when banks want to foreclose and the opposite way for warehouse lending.

The implications of this are very serious. The basic premise of the law has for a very long time been that justice is blind, that judges will rule without reference to who is making the argument, unless the party gives reason for that to be made an issue (for instance, one of the parties has a history of bad faith behavior). Of course, any black person will tell you that’s nonsense, that blacks are found guilty and get far more severe punishments in similar fact sets than whites. But that’s seen by most commentators as symptomatic of how deep seated prejudice is in American society as much as a serious shortcoming of our legal system (studies continue to find ample evidence of discrimination in hiring, promotion, treatment by salesmen, etc). Similarly, small fry who go up against people with better, meaner lawyers usually fare badly in court, but again, the outcome is a result of their access to resources, not to their demographics.

By contrast, this sort of outcome that Levitin anticipates in Georgia illustrates a serious erosion in the role of the judiciary, that the law has become pliable and will be twisted in knots if that’s what it takes to serve commerce. Contract law has for some time been moving in a direction that gives businesses the upper hand. IN consumer cases, take it or leave it contracts (“adhesion contracts”) are treated in litigation as if the consumer had bargained over terms, while in a business to business case, the court would typically look to see if the parties really had negotiated terms in making a ruling. Another example is binding mandatory arbitration. That gets forced on consumers all the time as a way to prevent class action litigation and to stack the deck overwhelmingly in their favor when disputes arise. What good is having a contract when it is certain to be interpreted in a one-sided manner?

I’ve used the term “market state” for this practice, but as Lambert flagged in his earlier discussions, it’s not clear if this expression is adequate. One of the problems is that we are struggling for terminology to describe our new social/political order. The old frames don’t fit well. Even “neofeudalism” is too generous, since peasants weren’t subject to a surveillance state and the nobles actually were expected to fight. By contrast, one of the salient characteristics of our emerging social order is covert coercion. There are all sorts of things you can’t do if you refuse to have a credit card, or a broadband account (and the surveillance that goes with it) or a cell phone (ditto). You mark yourself a weirdo and hurt your employability. Most people don’t think about what they submit to in participating in modern life, and that’s because, for many, they can’t function and earn an income otherwise.

I’d very much welcome reader input on both more examples of this phenomenon and better ways to describe it.

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    1. AbyNormal

      rentier state is exactly what it is down here
      “They’ve just set the fair market rent at $1,650 [a month], which is a considerable hike and doesn’t really fit the market,” the resident says about his three-bedroom house a few blocks from Zoo Atlanta. “Somewhere more around the $1,200 or $1,300 range seems to be what’s going in our area. If we can negotiate what we feel is market value [we’ll stay].”

      …please note these neighborhoods are quickly deteriorating thanks to recent GA legislatures austerity shindigs. of course try and explain to the trendsetters that we are all Detroit an the response will be the same denial, but with a twang.

  1. FoolTheBastids

    As an “under-banked” or “unbanked” American I can tell you that an interesting thing is happening in that sector that, at least for the present, is actually enabling the poor or unbanked to have better access to their money than the banked. The explosion of the debit card industry, with its bill pay services, routing and account numbers (and all the conveniences that come with those) and complete lack of “gotcha”-type fees that are commonly associated with checking accounts is pretty neat. I have several of these accounts now and there is zero danger of a $35 bounced check fee, etc. They don’t check your credit rating for these accounts, accept direct deposit, and allow you to provide a biller with your routing/account info to pay bills, or you can pay your bills directly from your account (this service varies in quality amongst the offerings). I allowed my bank account to default a year ago because they were ripping me off constantly simply by refusing to check my account balance before making a payment and then wanted to open one of these “Simple Bank” accounts online that offered all the conveniences without the fees and game playing. I found that you needed a routing number/account number in order to open the Simple account. So I looked around and figured out that debit accounts offer all these services. Some of them offer “virtual” credit cards that you use online and that can be canceled with no hang up in service if they’ve been compromised (you also get a plastic card that you should only use for in person transactions). They are FDIC insured, offer chargeback protection if your card is stolen, and generally make me very happy. Sure it costs a little more to take cash out at the atm but that is a small price to pay to not be treated like a cash machine by my bank. Avoid greendot bank (though their moneypaks are convenient and work with many other accounts) but mango, paypower and netspend are all pretty damn good. They even offer savings accounts (one even offered a 6% interest rate!), credit lines (yuck), online budgeting tools and text alerts if you want them. But you aren’t forced to take a credit line or anything else if you don’t want it.

    I fail to see how they differ from a traditional bank account in any way other than that they will not gouge you for “bounced check” or other gotcha fees. I don’t work for any of these companies, I’m just very happy to have found an alternative to the crappy rip-off known as a bank account.

  2. David Lentini

    Very troubling—but not surprising—post. Similar things are happening in the IP laws, which are increasingly jiggered to favor corporations at the expense of individuals and small compaines, the very persons and orgainizations that drive much innnovation.

    As for a monniker, I suggest “Randian society” or (“Randian dystopia”), or for you Plato fans out there “Thrasymachian society”, for we’ve entered a period in which justice is defined by whatever benefits the stronger.

    1. Jim Haygood

      Randian? Ask a hundred people on the street: ninety-seven won’t get the reference. Two will think you meant Rand Paul.

      How about ‘neofederalism,’ with all the Orwellian duplicity implied by completely inverting its meaning to refer to today’s comprehensive, top down, command and control from Washington?

      1. psychohistorian

        Lets go all the way and call it NeoOrwellian and cut out all the intermediate BS.

        George O is spinning in his grave at today’s reality. whoooocooodaaanode?

      2. Valissa

        The amazing Randy (Rand Paul)

        From the World English Dictionary at

        — adj , randier , randiest
        1. informal chiefly ( Brit )
        a. sexually excited or aroused
        b. sexually eager or lustful
        2. chiefly ( Scot ) lacking any sense of propriety or restraint; reckless

        — n , randier , randiest , randies
        3. chiefly ( Scot )
        a. a rude or reckless person
        b. a coarse rowdy woman

  3. allcoppedout

    I think we suffer from more of this in the UK, but both the US and UK have very poor access to justice in comparison with most other developed countries.
    I’m not sure that feudalism’s surveillance was that different from now other than in hard technology. The Domesday Book and gossip-spy-religious systems were in place. Rose and Foucault developed the term govern-mentality thirty years ago and various tongue-twisters came up in deconstructive text, connecting media, technology, propaganda … zzzz.

    I was a cop thirty years ago and I’ve noticed a massive slide in the treatment of people in our summary courts – a massive shift against the defendants from parking tickets up. We are increasing the use of administrative law that essentially allows decision by bureaucrat. My own view is that we are in the age of mannered incompetence and the denial of science. We are unmodern because we have a glimpse of what being modern might be but prefer the Frankenstein myth and to treat science as a kind of half-learning because we won’t put in the hard yards to learn it.

    In the UK we have a process called Judicial Review and it works very well – except the vast majority can’t afford it. Having things like justice in principle but not practice has long been the English way. The theory-in-action is usually more or less the opposite of the espoused theory. It’s like we live in an age of bureaucratic shoddy.

  4. Thorstein

    Catholics in the audience will appreciate that peasants were very much subject to surveillance by the Church (the Sacrament of Confession), and although history celebrates the few Richards and Henrys who actually fought, most Nobles merely enlisted in the National Guard. Fwiw, I still like feudalism.

    1. charles sereno

      Think about what you’re saying. The Nobles were getting intel from the cofessional? That’s beyond silly. Be more presentable — “I like romantic fantasies about feudalism.”

    2. F. Beard

      Biblically speaking, one might say to the priest in the confession booth, “OK Brian, I’m ready to here YOUR confession.”

  5. MolemanUV

    I prefer the term, “corporatocracy” –a state of existence in which government in all its traditional branches (legislative, executive and judicial) exists to serve the needs of the business entity. In a corporatocracy, any action or inaction of a “natural person” that reduces, or even potentially impedes, the maximum profitability of the “corporate person” is made unlawful. To ensure the enforcement of this business-skewed social/political structure, increasing levels of invasive control are required to extract all resources of value from the populace to the benefit of the corporation.

    1. Barmitt O'Bamney

      I also favor this term – and its emphasis on the distinction between corporate persons and natural persons. This seems to be the real dividing line. Only the incorporated entities have real existence and agency. In expanded and/or hyphenated forms, the term Corporatism may blossom fruitfully to describe current political arrangements (Corporate Fascism*) as well as exciting developments in current social and psychological engineering (Corporate Totalitarianism), aka mind control.

      *Some authorities deplore this as a tautology.

  6. OMF

    One of the problems is that we are struggling for terminology to describe our new social/political order. The old frames don’t fit well. Even “neofeudalism” is too generous, since peasants weren’t subject to a surveillance state and the nobles actually were expected to fight. By contrast, one of the salient characteristics of our emerging social order is covert coercion.

    “Fascism” is overloaded nowadays, but the older term “Corporatism” seems to apply very well.

    But the truth is the best term is “Legalism” in the ancient Chinese sense of the word. Absolute laws passed at will, by unaccountable rulers, to suit their own interests.


  7. Warren Celli

    Yves said; “I’ve used the term “market state” for this practice, but as Lambert flagged in his earlier discussions, it’s not clear if this expression is adequate. One of the problems is that we are struggling for terminology to describe our new social/political order. The old frames don’t fit well. Even “neofeudalism” is too generous, since peasants weren’t subject to a surveillance state and the nobles actually were expected to fight. By contrast, one of the salient characteristics of our emerging social order is covert coercion.”

    The word you are looking for is Xtrevilism. Xtrevilism is the world’s most suppressed mental disorder. It was responsible for all past social/political orders and still is today, but it is even more pernicious now as it controls the leverage in technology.

    Xtrevilism, is being suppressed and manipulated in the same fashion as are economic problems;


    “Economists and psychiatrists, peas in a pod — assigning subjective paper values to real world physical tangibles for parasitic profit… Take note of the broad conceptual deceptive parallels in other disciplines at work here, especially economics, where wealth in the physical environment in the form of tangible assets; real estate, gold, oil, money, factories, equipment, etc., is replaced with a ‘paper’ of description; a dollar bill, a stock share, a bond, etc. That subjective paper label so created, based on the real world, is then subsequently very easily manipulated through outright propaganda and creation of further highly leveraged derivative paper products. And similarly, all of these bogus non physical products are given credibility with ‘expert’ gradings and ratings. Note also that both disciplines are used to parasitically exploit and deceive others under the guise of aiding and helping them.

    For those of you who honestly believe that these are ‘helping’ professions; consider that you just might be drunk on your own Kool Aid and inadvertently you are selling it.”

    More here;

    Bullying and coercion, both covert and overt, and a two tier system of justice, are long standing hallmarks of the disease; as is brainwashing you into believing that it works on your behalf and makes you aspire to its craven morality. Beneath all of the deceptive and deflective abstractions, and scams that endlessly dissipate your energies, lies a moral struggle that needs to be focused on and won. It will only be won by giving Xtrevilism the center stage attention it deserves and labeling to expose and reform the aberrant < 1% who are so afflicted.

    Deception is the strongest political force on the planet.

  8. McMike

    We are CISWoRSes in a POKCoSS



    what we really are is in the third stage of simulacra (the system bears no relationship to what it pretends to be)of a democratic republic, and headed for the fourth stage (the system stops bothering even to pretend):

    1. Dave

      I don’t know what planet you folks are on, but I am here in the real world. In the real world one offers some sort of security for credit. If not, one pays high interest to compensate the lender for the risk. If the payments are not made on a securitized loan, the lender AT HIS DISCRETION may seize the security. In other words, if the lender thinks that there is a chance that the loan may be paid in the future he can forgo seizure.

      A borrower does not have the right to this money unless he can and does continue to pay it back. If a society insists on the otherwise, it will self destruct.

      1. nonclassical


        AND, the holder of the note is required to SHOW holding, in order to foreclose..

        You appear to have no idea what has been perpetrated (trenching) in terms of actual note??

        1. Dave

          The borrower is not let off the hook if the lender sells the contract. That money is still owed to someone. If not, it is then free money, and if there is too much free money it eventually loses its value.

          People are usually outraged if someone “gets off” on a technicality. This does not apply though if it happens to be them. Only the other guy should still be in trouble.The folks who borrow prudently and repay according to contract are being treated very unfairly under this “new system” and are VERY much outraged. All one would have to do to emphasize is put one’s self in their shoes. Of course if you think these folks are just suckers……………….

          1. nonclassical


            ONLY the HOLDER of the note has authority to foreclose-you appear to be unaware mortgages have been TRANCHED=broken into parts and pieces, combined with credit card debt, student loan debt, car loan debt, other trenched mortgages, then fraudulently rated “AAA”, or “AA”…then sold off to???

            (“investors”)…we need not go into REASON Wall $treet banks perpetrated these
            FRAUDS..(“leverage”, to borrow against-drive markets, derivatives)

          2. Yves Smith Post author


            You have this wrong. The note was never broken up. The tranching involves distribution of cash flows, not ownership. The note is (supposed) to be in a trust, along with 4000 to 5000 other mortgages, in the safekeeping of a custodian who is either part of or hired by the trustee.

            The problem is everyone cut corners and either can’t find the note, don’t want to produce the note because it will show ownership was not properly conveyed to the trust, or are just trying to save the cost of finding and producing the note for foreclosures.

          3. LucyLulu

            There is the promissory note, which is the promise to repay the loan, and the mortgage, which gives the creditor the right to seize your home. The problem here is what happens if the owner of the note is somebody other than the holder of the mortgage. You are saying the holder of the mortgage should be able to seize your home. What will then stop the owner of the note from pursuing you to repay the loan? Granted it will be an unsecured loan, like credit card debt, but that doesn’t mean the money won’t still be owed.

            Many states and courts won’t allow the mortgage to become separated from the note. Apparently Georgia does. Therefore the consumer needs protection against being required to both repay the loan AND forfeit his security. This ruling is an outlier in that preference isn’t given to the party to whom the money is actually owed.

            There have also been cases where lenders have instituted foreclosure suits where there was no mortgage loan in place, either having been a cash purchase or already paid off, and where more than one lender claimed to own the same loan. I’ve seen other uncontested cases where the wrong party filed suit and collected, one where the home changed hands three times after the foreclosure sale before it ended up in the correct lenders’ hands. It’s smart to ensure that the correct party is attempting to collect given the sad state the records are in. Given the sums of money involved, the least the lenders could do is to keep track of the paperwork. Often the notes were destroyed, which if the law were followed, would mean the lenders were out of luck, as destroyed notes can not be replaced. Instead they file affidavits stating they were ‘lost’ (i.e. commit perjury as affidavits can substitute for sworn testimony in court).

          4. Tenney Naumer

            Nearly 20 years ago, as an intern, I was tasked to check all the loan documents and documents of title of all the mortgages held by a certain local bank in its vault. This is a small town, so there were only about 200 files to check.

            So when this bundled mortgage scandal began to come to light, one of the first things I thought was: “Where did all that paper go?”

            Next, I thought: “How the hell could a title company even do its business?”

            Carrying this further: “How can an estate with real estate even clear probate?”

            Truly, if the notes will now be following the mortgage, then the final remaining substantive piece of our financial system becomes ethereal.

      2. McMike

        Yes Dave, the King makes all sorts of rules for his subjects, which he changes at his whim, and ignores for himself.

        1. Dave


          Then punish the fraud. They did not defraud the borrowers though, so why should the non-paying borrowers benefit at the expense of those who pay their obligations. (The money to compensate has to come from somewhere.)

          And McMike, in matters economic, those who make poor decisions usually make the best subjects.

          1. McMike

            Hmmm… I paid my debts on time, and I still got to bail out the bank that holds the note.

      3. F. Beard

        Dave baby, what part of “loans create deposits” = counterfeiting don’t you get?

  9. Generalfeldmarschall Von Hindenburg

    Xtrevalism sounds like something J.R. “Bob” Dobbs came up with. Which I like. But not sure it’s catchy.

    How about kakistocracy?

    1. McMike


      Hey, klepto-fascist totalito-corporatism. I like it.

  10. Paul Niemi

    Yes, the great recession world needs a new terminology. I’ll call it the rump, meaning the vestiges or remains of what were once great institutions. In the rump decade, we can say the law is rump. We have a rump economy, rump markets, rump conveyances. We are rump governed by a rump Congress with rump politics reported by rump media. I think we are fighting rump wars too. Now we must turn and search for the thousand points of light.

  11. charles sereno

    I like something along the lines of “Vichy.” Big problems though. Not personified as in “Quisling.” Nevertheless, I hope you continue its use as in “Vichy Left.”

  12. Susan the other

    We’ve always lived in a world where the rich and powerful just made up the rules as we went along. It looks like the next problem to acknowledge will be the failure of the judicial system when rich guys go against themselves. Our laws are akin to chaos. If the GSC can hand down decisions that create legal nonsense – and nobody says Huh? it won’t be long. The difference between black letter law and applied law will never be resolved as long as bribery and conflict of interest flourish. So that only leaves legal gridlock. What a mess. And an extra thank-you to Eric Holder for helping the process along.

    1. mansoor h khan

      Susan said,

      “We’ve always lived in a world where the rich and powerful just made up the rules as we went along”

      Yes. But there is kind of a divine justice built into how the creation (the universe) works. Go too far of the beaten path (of practicing decent values in culture) and societal collapse will ensue taking the elite down with all others.

      We are all connected. Elites very much fear war, chaos (and resulting poverty and loss of power from it) and acts of god.

      mansoor h. khan

      1. Nathanael

        “Elites very much fear war, chaos (and resulting poverty and loss of power from it) and acts of god. ”

        Our problem right now is, quite specifically, that we have elites who do not fear this. They SHOULD, but they don’t. This is because they are mentally defective. It is probably psychopathy — studies have shown that psychopaths have an inability to be afraid of future consequences.

  13. dolleymadison

    I am speechless – you can foreclose by having “possesion” of a Deed? Without the underlying note? How do you know how much $ the Deed “secures”? This opens the door to (even more) rampant theft not just by the banks, but by anyone with access to the Registry – especially as “copies” of notes/deeds are usually accepted by the court. Good God! This makes no sense…it is gobbledy gook and the fact that a “supreme court” judge handed down the ruling doesn’t make it any less so.

  14. nonclassical

    “corporatocracy”…but “Orwell” needs just due…”Orwellian corporatocracy”?

  15. Dirk77

    To know where things are heading it may be helpful to ask those who have lived the neoliberal life longest. So, a quote in that recent article about the student protests in Chile seems to pretty much sum things up: “respect in society is achieved by making money no matter by what means” (or something like that). That is, any action done to make money is good. For example, if Al Qaeda would become Al Qaeda LLC the war on terror would end tomorrow. So the reason individuals are treated second class is that the courts are unsure of their moral purity unlike a corporation. In that way, “The Money State” probably is best.

    1. nonclassical

      …but is QE money?? “Orwellian Paper Debt State”, perhaps…but now that Wall $treet financialization of markets is dominant factor, accounting for nearly half
      U.S. profit$…???

      ..perhaps we should wait for the bubble to burst before naming…

    2. F. Beard

      I think “The Counterfeiter’s Club” is more accurate since the vast majority of wealth is built with (legally) stolen purchasing power.

  16. washunate

    The role of lawyers/judges/law schools/legal technocrats/whatever in enabling the assault on basic rights is one of the aspects that intrigues me most over the long term and guessing what the outcomes/consequences are really going to be. As far as terminology, I have long enjoyed the two tiered justice system.

    This is a very interesting read. It’s the kind of subject matter that liberal thought desperately needs to address. Tweaking monetary policy or pushing minor regulatory changes is recklessly negligent when the basic concept of rule of law is what is in play.

    This is why the Democratic establishment has gone after critics so severely, from commentators like Glenn Greenwald to whistleblowers like Bradley Manning.

  17. Wat Tyler

    The developed world is in transition from Nation states to a global Market State which goes a long way to explain governments ineffectiveness – they are not the dominate institution any longer and getting weaker by the year.

    So “Market State” is the proper term IMO.


    1. nonclassical

      Jim, appear to have missed the part where “nationaLIZED” state economies, reaping benefit of resources, or labor, are the new power in politics…”capitalism” is not leading the way…

  18. two beers

    Why don’t we just call it what it is:


    aka uni-lateral class warfare (but don’t you DARE mention class!).

  19. allcoppedout

    Anyone wanting real pain in consideration of the commercial-legal paradigm could read Jeanne L Schroeder – example here

    I have no idea how confidential confession is as I don’t do religion. Church/Mosque gossip is otherwise rife, and both Gestapo and Stasi used ‘gossip next door’ stuff in their terror. Gossip is linked in primates to what’s going on in the leadership and it’s pretty brutal in humans – leading to the concentration camp, witch trial and gulag. CCTV and so on might be less dangerous than the gossip next door on the grounds they can’t be completely made up.

    Another way I think feudal still holds relates to the biology involved in hierarchy and group control. The attitudes most have on this are feudal. We are failing to understand our biology in order to escape it. We had the idea that technology was the ideology in 1970 (Habermas) but there’s a fallacy in this – technology may not be neutral in use, but it has potential to be used by any interests. Much the same can be said of the law. The problem is the few who get highly enhanced access to technology and law, largely through money.

    Courts judge through credibility, character and other notions not supported by science at all and any cop will tell you once chummy is bawling ‘it’s your word against mine copper’ he/she is doomed. Much evidence the poor (nearly everyone without legal aid) could bring in support of their case is denied by lack of resources for investigation and experts. I doubt our courts ever were fair, but the promise on all aspects of society 50 years ago was that remedial work was in progress – instead we have probably gone backwards more often than forwards.
    One obvious way to redress the balance is to cut out the lawyers and law-makers – and it may be that our current problems are to do with a vile professional class produced by privilege and our universities.

  20. Hacksaw

    Rulings like this could have a silver lining. Once someone is burned by one of these Heads I win, tails you lose contracts it just might make them less likely to borrow again. It will be a little hard for these banks to stay in business if there’s little to no demand for loans. looks like the TBTF crowd is killing the goose to solve a short term problem.

  21. Richard

    Yves, please, please, please don’t say “differently THAN…” (as in your title). It makes absolutely no sense. Yes, yes, yes, I know everybody DOES… like they say “I could care less”, when they mean “I COULDN’T care less”… but you need to say “different (or differently) FROM…” Pleeeeeeeez!

  22. Attorney Wendy Alison Nora

    This is a very important article. It articulates a burgeoning crisis in the “Rule of Law” and the perversion of the very concept of equity.

    In two bankruptcy adversary proceedings in which my clients, residing in each of the Wisconsin federal districts, alleged that the endorsements on their mortgage notes were forged. Two bankruptcy judges, collaborating with each other to prevent an inter-district split, decided that the makers of the notes do not have standing to question a forged endorsement on the notes which they are being required to pay on penalty of foreclosure.

    Holding that the maker of a note lacks standing to question a forged endorsement and fraudulently claim to payment of the note turns the law of depository banking on its head.

    Let’s take the most basic transaction involving a forgery. I send you a check for $100.00. The check is intercepted, endorsed and negotiated by a person without the authority to do so and takes the funds. You call me and say, “Where’s my payment?” and I reply, “I sent it to you and it cleared my account.” You would say, “Get a copy of both sides of the check and let me see the endorsement.” I retrieve a copy of the check and you say, “That’s not my signature.” I can go to the bank and dispute the payment made upon the forgery and I still owe you $100.00. The bank is liable to me for the $100.00 it paid on the forged endorsement. Of course I, as maker of the note (check) have the standing to question the validity of the endorsement. No one would ever use a checking account if the law were that we do not have standing to validity of the endorsements upon which are checks are paid.

    These two decisions, designed simply to prevent the makers of the mortgage notes from proving that the notes bear forged endorsements, if upheld, would spell the end of depository banking. Of course, the decisions are wrong under the UCC.

    The mortgage assignments in each case were are also forgeries. Forged mortgage assignments are ubiquitous in our public records because of what Abigail Field calls “securitization fail:” the Pooling and Servicing Agreements were simply not followed. The notes were not endorsed as required and were never delivered. The mortgages were not assigned as required either, in large part due to the MERS (Mortgage Electronic Registration Systems) scheme which attempted to circumvent public recordings.

    Both bankruptcy judges recognized that the mortgage assignments were suspect. One case had three different mortgage assignments created at different times to address issues in state court litigation, one was a patent forgery being created by servicer’s counsel years after the trust closed and over a year after a foreclosure action was filed, another was never recorded or delivered to the trust and suddenly appeared as an exhibit in the bankruptcy case over 5 years since the trust closing date, and the last one was created and recorded AFTER the bankruptcy was filed–a preferential transfer which is always set aside, until this case. The other case had a forged mortgage assignment created by the servicer and its law firm as well. And in that case, the loan was purchased by Freddie Mac more than 5 years before the mortgage assignment was forged to make it appear that BAC Home Loan Servicing, LP (BAC), which was only a mortgage servicer (since merged with Bank of America) had standing to foreclose on a secured debt. Freddie Mac owns the debt and the BAC forged mortgage assignment punctuates the failure of Freddie Mac to follow its own guidelines for purchases of mortgages which require an assignment of mortgage if MERS is not the “nominee” of the original lender. (I will not address the MERS problems here, because neither of these two cases involved MERS.)

    Both bankruptcy judges knew that the mortgage follows the note, so they decided to hold–“out of thin air”–that the maker of the note does not have standing to question a forged endorsement. Even the section of the UCC they cited: 3-308(1) states that an endorsement is presumed authentic and valid–which is an evidentiary presumption which does nothing more than shift the burden of proof in a dispute over the enforceability of the note. UCC 3-308(1) is consistent with a number of UCC Article 3 sections which provide for defenses against payment–including the defense that the endorsement is forged. (See Rinaldi v. HSBC, Bankruptcy Court for the Eastern District of Wisconsin, and Schmid v. Bank of America, Bankruptcy Court for the Western District of Wisconsin.)

    I will read the Georgia case with interest. The Minnesota Supreme Court case of Jackson v. MERS is also bad law which allows foreclosure by the claimant under the mortgage without regard to who owns the note and suggests that the homeowner has no right to know who presently owns the debt obligation secured by the mortgage. A sensible dissent from Judge Page in Jackson v. MERS is instructive.

    The Rinaldi and Schmid decisions are pending review in the respective federal districts. Dirk77’s comment: “So the reason individuals are treated second class is that the courts are unsure of their moral purity unlike a corporation” exposes the failure of our legal system. The judges are going out of their way to presume that human beings are to be condemned and the corporate fraud is to be ignored and held harmless.

    These are dangerous times and I do appreciate the voice of our Humble Blogger and all who blog and post here. Without this resource and a few other insightful news and editorial sources, the light of the real law, the common law, the law which took hundreds of struggle to formulate–where the courts of equity refused to aid an iniquity–might be forever dimmed.

    1. alex morfesis

      the Supreme Court of Georgia OPENED UP A DOOR which was not available until this ruling…read it carefully and then find a real trial lawyer who can read between the lines. This is a GOOD DAY for the people of Georgia…read it carefully…

      but there is much confusion about what happens when someone thinks they were looking for a home loan when what they were looking for was “funding”

      a maker(homeowner/homebuyer) presents a contract(home loan mtg note) describing 360 home loan payment notes/instruments in return for wad of cash today.

      In return for the cash, the home owner also provides a stopping/protection mechanism(mtg/trust deed or as in the unique case of Georgia a Security Deed).

      Historically, lending sources have found the money they hand to the maker either by syndicating the loan, or selling it of to FHLBB as a cash flow management source of funds. Who is behind the curtain has historically not been an issue except that currently the who behind the what has been hidden for various reasons(my take on this is that these “BLANK” indorsed instruments(with FIRREA liabilities) are being used to back up naked derivative positions.

      A securitized loan pool has a custodian, the party who is to handle the “deposit” of the note made by the homeowner/maker and as just like your mutual fund to whom you gave your money to make LONG investments, and then takes YOUR asset and lends it out for someone to SHORT YOUR position, these “custodians” are “lending” out the instrument to be used for margin requirements(ala corzine).

      There are no LOST notes. That was a tactic developed by the USFN and ALFN in conjunction with MERS and LPS/Fidelity to be able to be used to avoid discovery, based on the purported notion they could convince a judge that since they did not have the note, they do not have the records either. Over the course of the last four years, the better prepared Bank side of the law has been able to dance around some issues and have people go down rabbit holes in others.

      there are two problems for the banking community that they have not thought through in their “defense” postures.

      one is that UCC-3 was their attempt to hide in the “checking” part of the UCC to justify actions that should be covered by article 8 since it is mostly about securitized instruments, and then article 9 which is where the real rules were designed to deal with home loan type instruments…but the lenders have a small problem. When they alter an instrument by providing a purported undated and unauthenticated allonge or assignment…well

      it is very much settled that ucc-3, when there are alterations, creates a problem for the party attempting to enforce.

      further, 3-203d helps in that since they are not getting FULL rights then they have basically not enough to enforce the entire instrument….

      (d)If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this Article and has only the rights of a partial assignee.

      3-203a …for the purpose of giving to the person receiving delivery the right to enforce the instrument.

      the right to enforce…

      but the “custodians” holding the instrument are just really janitors in a high school, with no authority to sell the desks or the computers of the school.

      further, alteration of an instrument is a defense
      (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…

      (b) Except as provided in subsection C an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration

      a homeowner has certain rights…federally protected rights that basically disappear when their instrument is thrown into the securitization rights washing machine. The contract is bilateral at inception and becomes unilateral after the securitzation laundering machine.
      a defense…

      further, under the Bank Holding Act Amendments of 1970, the concept of “anti-tying” came into being…12 USC 1972(1)

      MERS and the “standard fannie/freddie” GSE home loan funding instruments are direct violations. There is
      literally “no negotiation”. Its a take it or leave it scenario when you get a loan…

      finally(almost finally)…since a purported third party in the Trust Indenture Act controlled securitized loan pool has a “custodian” then they have a few more back flips to make…
      C [Collateral in possession of person other than debtor.]

      With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor’s business, when:

      (1) the person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party’s benefit; or

      (2) the person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party’s benefit.

      (d) [Time of perfection by possession; continuation of perfection.]

      If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.

      (e) [Time of perfection by delivery; continuation of perfection.]

      A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under Section 8-301 and remains perfected by delivery until the debtor obtains possession of the security certificate.

      In non mortgage/non judicial states, the holder of the security is NOT THE DEBTOR…the homeowner is the debtor, the trustee is the actual OWNER for UCC purposes in respect to the holding of the asset being loaned against. That is THE BANKS problem…they got legislatures to write laws and got courts to present rulings that allow them to adhere to STRICT contract law, without equitable defenses…so…since the POWER OF SALE is based on the fact there is a trustee(or security deed like in Georgia) then…this last section applies… good luck

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