Bearer Paper, the new Parlor Trick and the Holder in Due Course.

*Disclaimer: The following essay is not to be construed as legal advice, consult an attorney for that stuff.

What is Bearer Paper and why is this relevant to the foreclosure defense of borrowers in distress and on the verge of homelessness?

Bearer Paper is the ingenious method that bankers and their cohort Council have developed to enrich the players involved in the Securitized mortgage game. When is comes to Note Endorsement, it used to be very easy to determine who the real party Holding the Note is at the time of filing a Complaint for Foreclosure. Order Paper was often used when transferring ownership of the Promissory Note, hence the language, “Pay to the order of Cuntrywide Racketeers, without recourse.” stamped on the back of a negotiated instrument. When this endorsement is presented on the back of a Note or in an allonge accompanying it, along with a Mortgage or Deed of Trust, which is the mechanism by which a Loan is secured by real estate.

Bearer Paper is indorsed like this, “Payable to the order of ” That’s it. There is no party receiving this instrument, in Due Course. What does Due Course mean? The Holder in Due Course means that a party who follows the UCC Sec. 3 will have Affirmative Defenses as a NEW CREDITOR not responsible for any misrepresentation or deceit in the origination to the Borrower. there must be a party accepting this negotiable instrument For Value, they paid for it, in Good Faith, which means the Note has not been “dishonored”.

The Jury is out, on whether a party must be Holder in Due Course, to assert its right as a Holder in a foreclosure complaint, but it goes without saying, being a Holder in Due Course, is where the Foreclosing Party wants to be, as it brings with it many affirmative defenses against a wronged homeowner.

No matter from what side of the argument you may lie, it is evident that endorsing a Note in Blank, is the easiest way to enforce a Note that may have been passed around “like a whiskey bottle at a frat party”. Endorsing the Note in Blank, allows anyone who brings forth a Complaint of Foreclosure to purport they are the Real Party in Interest.

The more I study the UCC, the more it appears that the Bearer Paper tactic is just a clever parlor trick, another slight of hand convoluting the original intent of the UCC law. It is clear that a Blank Endorsement was meant only for cashier’s checks endorsed by writing the name only of the drawer, to make it easier for the draft to pass through the elaborate bank clearing houses.

It is not ethical, for a Promissory Note, attached to a Mortgage Deed of Trust, to be endorsed in Blank and scanned into an “Electronic Registry Systems” for anyone with a title to “servicing rights” and a membership code, to pass themselves off as a Holder in Due Course or a Holder of Bearer Paper. It is not morally not ethically nor lawfully sound jurisprudence, it is a blatant disregard for the Court’s Civil Procedure. A charade, a trick, a game of poker, where the gambling pro is allowed to bluff with a photocopy of the Ace up his sleeve.

Number of Mainers who are currently deliquent on mortgage: 5,371

According to an annonymous source who works with credit reporting agencies, the number of pre-default households in the State of Maine is an astounding number well over 5000!
This means 5000 Maine families could be facing foreclosure in the next few months.
Unfortunately, the traditional ways to prevent foreclosure in the past are no longer available to many homeowners because refinancing programs are NOT AVAILABLE for deliquent borrowers. Selling the home is now much more complicated because of the falling home prices and very high loan amounts most people took out over the past decade.
There is hope, but you won’t find it through the Obama Administration’s “Making Home Affordable Plan”, a plan that has been pitiful in its execution. (for reasons stated in previous blog)
Unless a homeowners facing hardship can afford an expensive attorney, they have very few options for relief.
We here at Fair Housing Counselors of Maine, offer membership for those facing the threat of foreclosure, where we will provide YOU with the resources and information that can STOP FORECLOSURE and lead to a loan modification or other relief through the use of Court Alternative Dispute Resolution.
Don’t pay thousands of dollars up front to a fancy Loan Modification outfit or a predatory Foreclosure Rescue group.
Contact a housing couselor today for more information on finding the resources to HELP YOURSELF. Call (207) 400-4413 for more information about this non-profit group helping Maine families.