The thousands of trial court and appellate decisions that have hung their hat on illegal assignments being “voidable” demonstrates either a lack of understanding of common law business trusts or an adherence to a faulty doctrine in which homeowners pay the price for fraudulent bank activities.
Some of the problems might be in the presentation of evidence, failures to object and failure to move to strike evidence or testimony. But most of it deals with the inability of lawyers and the Courts to pierce the veil of uncertainty and complexity with which the banks have covered their fraudulent tracks.
Here are the reasons the assignment might be void. No self-serving newly invented doctrine can overcome the failure of an illegal assignment.
- Common Law Trusts are almost always formed under New York State law that allows unregistered trusts to be created for business purposes. Any act in contravention of the express provisions of the trust instrument (usually the Pooling and Servicing Agreement) is void, not voidable. It cannot be revived through ratification — especially when there is nobody around to change the trust instrument, thus ratifying the void act.
- Many if not most assignments are fabricated for foreclosure and either nonexistent or backdated to avoid the fact that the assignment is void when it is fabricated — years after the so-called trust was described in a trust instrument that is rarely complete because no mortgage loan schedule at the time of the drafting of what is in most cases an incomplete trust instrument.
- Assignments are clearly void and not entitled to any presumptions under the UCC if they are dated after the loan was declared in default (albeit by a party who had no right to declare a default much less enforce the debt or obtain a forced sale of homestead and other residential properties) schedule existed at the time of the drafting of the trust instrument. The application of UCC presumptions after the alleged date of default is simply wrong.
- The fact that an instrument COULD be ratified does not mean that it WAS ratified. What is before the court is an illegal act that has not been ratified. The possibility that the parties to the trust instrument (trustor, trustee, beneficiaries) could change the instrument to allow the illegal act AND apply it retroactively is merely speculative — and against all legal doctrine and common sense. These courts are ruling on the possibility of a nonexistent act that without analysis of the trust instrument, is declared to be possibly subject to “ratification.”
- Assuming the trust even exists on paper does not mean that it ever entered into an actual transaction in which it acquired the “loan” which means the debt, note and mortgage.
- Any “waiver” or “ratification” would result in the loss of REMIC status under the terms of the Internal Revenue Code. No rational beneficiary would ratify the act of accepting even a performing loan after the cutoff period. To do so would change the nature of the trust from a REMIC vehicle entitled to pass through tax treatment. Hence even if the beneficiaries were entitled to change, alter, amend or modify the trust instrument they would be firing a tax bullet into their own heads. Every penny received by a beneficiary would be then be taxed as ordinary income including return of principal.
- No rational beneficiary would be willing to change the trust instrument from accepting only properly underwritten performing loans to loans already declared in default.
- No Trustee, or beneficiary has the power to change the terms of the trust or to ratify an illegal act.
- In fact the trust instrument specifically prohibits the trustee and beneficiaries from knowing or even asking about the status of loans in the trust. Under what reasonable scenario could anyone even know that they were getting a non-performing loan outside the 90 day cutoff period.
- The very act of introducing the possibility of ratification where none exists under the trust instrument is the adjudication of rights of senior investors who are not present in court nor given notice of its proceeding. Such decisions are precedent for other defenses and claims in which the trust instrument could be changed to the detriment of the beneficiaries.