Your Loan Has Been Sold: What Happens Next?

Too often, homeowners receive a letter in the mail from their servicer. This letter contains the verbiage “your loan has been sold.” The question becomes: what was sold? And to whom was it sold? The names Fannie Mae and Freddie Mac come up quite often. There is a misconception of what was presumed to have happened, and what actually happened.

The word “loan” has many meanings depending on who you are talking to. As defined in Wikipedia, “a loan is a debt evidenced by a note.” However, this is not to be confused with the entire mortgage loan instrument, which is comprised of the Tangible Promissory Note, the Mortgage or Deed of Trust, and the Intangible Payment Obligation. Many of these transfers are tracked electronically through MERS, which may not match the actual recorded assignments.

Understanding the Key Terms

Before we go too far, we need an understanding of a few terms:

• Tangible Promissory Note. A piece of paper that can be touched that contains the promise to pay. The real significance is not the physical paper, but the legal rights which the paper confers. The promissory note is defined by the legal debt. The Note is a tangible negotiable instrument that evidences the Intangible Obligation or the Promise to Pay.

• Security Instrument. Either the Mortgage or the Deed of Trust, seen as a Real Property Lien if filed of record, and if it is a separate contract listing, an alternative means of collecting payment is due under the Intangible Obligation.

• The Entire Instrument. Comprised of the Tangible Promissory Note, the Tangible Security Instrument (Mortgage or Deed of Trust), and the Intangible Obligation.

It Is About Rights, Not Ownership

This is not about ownership. It is about the rights acquired. We are talking about Title:

• The union of all elements constituting the “legal right” to control and dispose of property
• The “legal link” between a person who owns property and the property itself
• “Legal evidence” of a person’s ownership rights (interest) in property
• Title is the “manner” in which the “right to real property” is acquired: the conditions necessary to acquire a valid claim to land
• Title is the “RIGHT” itself; the “legal consequences” of such conditions

Only One Statute Governs Transfer of Rights

To understand how one would acquire rights for a Negotiable Instrument, one would research the statutory requirements of the Uniform Commercial Code Article 3 or your state’s equivalence. When researching, one would find that there is only one statute within this entire chapter that pertains to “Transfer of Instrument: Rights Acquired By Transfer.” That is correct. Only one statute within the entire chapter on Negotiable Instruments. The banks would have you believe otherwise.

Putting Humpty Dumpty Back Together Again

Think of the entire mortgage loan instrument as Humpty Dumpty. Once it has been broken, you cannot put it back together again. But that is exactly what happens in case after case that I investigate.

With all of the fancy word crafting and hearsay claims that are put forth to propagate the banks’ claim to property that is not theirs, the homeowner’s head is spinning on what to believe and what not to believe. The courts are just as confused as multifarious arguments are brought forth at the same time by both parties. Improperly executed assignments and fraudulent documentation to back up the transactions are done by the thousands every day in an effort to put Humpty Dumpty back together again. This is a legal impossibility. The banks do not have a time machine in which to go back and right the wrongs that have been done.

I have spent 12 years ferreting out these defects in chain of title. We must continue to do our due diligence and ferret out the improper behavior and actions of the banks. A Chain of Title Analysis is the starting point for uncovering what actually happened to your loan.

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Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted 2013.