Category Archives: Your Home

Defendant is not Responsible for Fraudulent Check Transactions.

Citation. 211 Pa. Super. 42, 234 A.2d 32, 1967 Pa. Super. 724, 4 U.C.C. Rep. Serv. (Callaghan) 624
click the citation to view the entire case on Lexis Nexis

Brief Fact Summary. This is an appeal of the trial court’s holding that the defendant is not responsible for fraudulent check transactions. An employee of the plaintiff stole scaling slips and used the slips to obtain checks which he cashed with fraudulent endorsements. The plaintiff is suing the defendant bank to recover the amount procured by the fraud. Synopsis of Rule of Law. “Any person who by his negligence substantially contributes to the making of an unauthorized signature is precluded from asserting the lack of authority against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee’s or payor’s business.”

Facts. Emery Albers was an independent log hauler that frequently transported logs to the Thompson Maple Products’ (the “plaintiff”), company mill. After establishing a close relationship with the plaintiff, Albers obtained blank sets of scaling slips and filled them out to show substantial deliveries of logs with the names of local timber owners as suppliers. Albers then delivered the slips to the bookkeeper who prepared checks payable to the timber owners listed on the scaling slips. Albers then volunteered to deliver the checks to the owners and would forge the payee’s signature and either cash the checks or deposit them in his account at the defendant, Citizens National Bank (the “defendant”). In 1963, the forgeries were uncovered and Albers was imprisoned. The plaintiff then instituted this suit against the defendant alleging that the defendant breached its contract of deposit by paying the checks over forged endorsements. The trial court ruled that the plaintiff’s own ne gligence contributed to the unauthorized endorsements and consequentially dismissed part of the plaintiff’s claim.

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Mortgage Loans and Basis in Assets

Loans originate on bank lines of credit. The banks line will wire the proceeds into settlement and there are dispersed by the settlement agent. The banks outstanding balance is a liability. The loan it holds is an asset. By the end of a given term, the volume of loans assembled over the quarter is transferred away from the banks and removed as a liability. In other words the servicing rights are what are left held by the bank upon the transfer of the assets capitalization or Derecognition of its basis in the assets.
Each loan is measured by the face amount of the note and borrowers promise to pay indicated by the terms and conditions held in the promissory note.
The capitalization is the wire balance authorized in the advance authorized by the bank under a federal wire transfer manifesting from bank to settlement agent. The key elements to this discovery of the banks ownership in the assets are the ABA wire amount, the HUD -1 settlement statement and subsequent recording.
The promissory note holds no evidential value to the controversy were litigation arises. In accounting, this is the general rule for booking assets under a mortgage backed securities scheme. It is for this particular reason that the accounting concept of Derecognition becomes so important in understanding the conflict with the courts understanding of the accounting dilemma.
The loan amount balance wired into the settlement agent upon the initiation and delivery of the wire is the basis in subject loan or the accountant’s recognition of the basis in assets. The basis in loan is both the value of the note and the liability for lines of credit outstanding. It is no different than spending $1,000 to purchase furnishing for a home. The cost of the furniture is $1,000 paid from the proceeds of a credit card.
The net effect of the purchase price is the amount shown on the credit card as an outstanding balance.

Arises when IRS assesses that taxes are owed

FEDERAL GOVERNMENT
1. Federal priority provision relates to all claims by federal government. Debtor must be insolvent, and when debtor must manifest it in three ways [see class notes]. When those two conditions apply and any of the debtor’s property is sold, the feds get paid first except for choate creditors–complete creditors. Choate=has done everything they can do to reach the highest status as a secured creditor. Name, amount subject to lien must both be definite,which means JLC, SP with future advance/after acquired can’t be choate.
2. Federal tax lien act. Applies to debts owed feds for unpaid taxes. Arises when IRS assesses that taxes are owed, a letter is sent out demanding payment, debtor fails to pay, and a tax lien is filed. When tax lien arises, it dates back to assessment not filing. General rule is only creditors who have choate lien at time tax lien arose have priority. Exceptions: special parties when tax lien FILED (mechanic’s lien holders, JLC’s, perfected SP’s, and purchasers of the collateral). Protected parties take free of tax lien, period (bona fide purchaser of motor vehicle who does not know of tax lien, buyer in the ordinary course of business, bona fide purchaser of personal property of taxpayer of less than $250, attorney’s liens).

INVOLVEMENT OF THIRD PARTIES 2-403(1)

ARTICLE 2 PROVISIONS
WHAT IF THE CREDITOR IS A SELLER, AND THE DEBTOR A BUYER?
The seller is in no better position subject to a few exceptions:
1. Right to withhold goods, 2-703, 2-511 (1)
2. Right to resell the goods, 2-703(d)
3. If seller has reasonable grounds to feel insecure, he can get assurance under 2-609, and if there is no assurance, he can treat the K as repudiated.
4. Refuse to deliver if buyer is insolvent except for cash, 2-702(1)

GOODS IN TRANSIT
1. If seller ships something to buyer, and while goods are en route, seller discovers that buyer is insolvent, seller may stop delivery, 2-705(1) If it is a large delivery, the seller may stop for two additional reasons: if buyer repudiates, fails to make a payment, or if for any other reason the seller has the right to withhold the goods.

2. REPLEVIN–An action to get back property that belongs to you that someone else does not want to give back. If goods are delivered to the buyer, and buyer was defrauding the seller, the UCC “assumes” that the K is rescindable. While not addressed, principles of fraud and equity still apply, 1-103(b). It is a shorter judicial proceeding than the judicial lien process, because there is only one issue to decide–who owns the property. You get a trial within 15 days. Other simplified/expedited proceedings include EVICTION and REPOSSESSION. No discovery is allowed–only complaint, answer, and decision.

IF THE CODE DOES NOT ADDRESS AN ISSUE, YOU CAN USE COMMON LAW PRINCIPLES.

FRAUD–intentional misrepresentation of a past or existing fact. A promise is not a fact because it is a statement about what you will do in the future.

INSOLVENT BUYER RECEIVING GOODS ON CREDIT UCC 2-702(2)
1. Seller may recover the goods within 10 days after buyer’s receipt of the goods and nonpayment.
2. Under the common law action of replevin if there is fraud. If there is no fraud, you can’t get them back under the common law, but you can under the UCC.
3. You can get them back if you demand within 10 days. If buyer misrepresented his solvency within 3 months before receiving the goods, there is no 10 day rule. Reliance is necessary to dispense with the 10 day rule. But for the buyer’s misrepresentation, seller would have not sold the goods.
4. If several of the checks were good, but one bounced, the previous checks were a representation of solvency. However, a couple of bounced checks that is not a pattern is not insolvency.
5. If the misrepresentation was made by someone other than the buyer, such as a credit agency–the intent is to keep the buyer from misrepresenting his insolvency; unless the buyer misrepresents insolvency, the buyer’s fraud is irrelevant; that is the only time the 10 day rule is dispensed with. The only way the seller can reclaim the goods is if the buyer is insolvent. Seller cannot reclaim goods based on buyer misrepresenting anything else.

BILL OF LADING–transfers title from the seller to the buyer, allows buyer to pick up the goods.

GOODS SENT COD
The buyer cannot retain the goods unless he pays for them, 2-507(2); Basically a replevin action.

RECLAMATION MUST BE DONE WITHIN A REASONABLE TIME BECAUSE
Under 2-702 and 2-507, seller must reclaim goods within a reasonable time; if seller does not promptly reclaim, he waives his right. Seller is also motivated to be timely because he runs the risk of the buyer selling the goods off to someone else.

INVOLVEMENT OF THIRD PARTIES 2-403(1)
Voidable title–person who has this is a person who has received goods but has not paid or finished paying for them yet; seller retains power to void the sale. A person with voidable title can transfer good title to a good faith purchaser. A person with void title passes no title. A thief has no title/void title. General rule is all you can convey is what you have–you cannot convey more than what you have; 2-403 is an exception.

Avoid the Haircut Lenders Charge

Scheme 101
The Haircut Devisees
By M.Soliman

Predatory lending practices are not necessarily exclusive to a high rate charged to the borrower. It can be discovered as lower rate and higher cost or vice versa. The cost of the loan must be tied to a par rate calculated off the corresponding treasury plus margin over the current treasury at time of funding.
In Alt “A” and prime it’s simply whatever the market will bear. A predatory practice can include a competitive rate at abusive price levels measured by points and fees. One trick of trade is to “pack” the borrowers’ funding and disbursements schedule to reduce the net effect of the amount needed t wire in and settle. Lenders have a curtailment or haircut that is required in every funding. It is the difference or shortfall off what their warehouse commercial bank lines will provide at closing. Therefore a lender will post from 200 to 300 basis points per loan closing so for every $100,000 the lender originates and settles it must post $2,000. For a loan in excess of $1.0 million that can total $20,000 in out of pocket funds assuming the loan funds at par. (The note rate)
The special trick of the trade is to charge the borrower the two points arbitrarily and to avoid the haircut. Therefore by charging two points on every borrower loan, the advance is 100.00- 2.00% or funds request at 98% of the note face value. Here the lender avoids its hair cut and when it sells the loan- it makes an extra $2,000 to $20,000 to boot. But it’s the borrower is left paying the points

Avoid the “haircut”.

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Countrywide Home Loans Inc

The allegations against Countrywide are noteworthy in a number of respects. In particular are the beliefs brought against this failed subprime mortgage market leader who is alleged to have gained a corporate philosophy that failed to provide greater scrutiny of predatory and unconscionable practices in lending practices. In general the law will look to some measure of causal effect that can support or validate the allegation of the Plaintiff. A gravamen for understanding why a market leader and industry giant will fall victim to unconscionable lending practices is simply “greed”.

M. Soliman
Expert.Witness@live.com

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MBS ABS Foreclosures and Money Spent

According to the Mortgage Bankers Association, subprime
mortgages totaled almost 20 percent of all new home loans last year, a
Washington-based trade group. When U.S. growth slowed and home prices stopped
rising last year, delinquencies mounted. About 13 percent of subprime mortgages
made in 2006 were delinquent after 12 months, with 6.65 percent considered
“seriously delinquent,” or more than 90 days late, Standard & Poor’s
estimates.  Conservative lending is risk
avoidance and something held as a bank motto.

That appears to have all changed after nearly 7.2 million
“high-interest” or subprime loans made from 2005 through 2007, a
period that marks the peak and collapse of the subprime boom. The analysis
reveals the top 25 originators of high-interest loans, accounting for nearly $1
trillion, or about 72 percent of such loans made during that period.

Investment banks Lehman Brothers, Merrill Lynch, JPMorgan
& Co., and Citigroup Inc. both owned and financed subprime lenders. Others,
like RBS Greenwich Capital Investments Corp. (part of the Royal Bank of
Scotland), Swiss Bank, Credit Suisse, First Boston, and Goldman Sachs &
Co., were major financial backers of subprime lenders. The blame is in part due
to unceasing demand for high-yield, high-risk bonds backed by home mortgages.

Investigation upon investigation will show conclusive evidence
for U.S. and European investment banks having invested enormous sums in
subprime lending.  Those banks booked huge
profits prior to bottom falling out of the real estate market.  My analysis determined the amount of money
spent by homeowners on their mortgages as a percentage of their income spiked
sharply during the peak of the subprime boom. The analysis surveyed of more
than 350 million mortgage applications reported to the federal government over
a 10 year period through 2007.

Under the HMDA the Home Mortgage Disclosure Act, data from
lenders are collected and reviewed. The purpose is to determine whether the
banks are adequately serving their communities with added emphases on discrimination
against minority borrowers.

The government estimates their data accounts for about 80 percent of all home
mortgages.  
 
Starting in 2004, the Federal Reserve’s commenced to gather data
encompassing “substantially all of the subprime mortgage market while generally
 avoiding coverage of prime loans,”.

Business Trusts and How to Pierce the Corporate Veil

Piercing the corporate veil describes a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Courts must first decide the matter of allowing the plaintiff to allow the corporation to be treated as a separate legal person. In particular who is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed.

In this analysis we consider SOP for accounting and any thing available for mandatory reporting requirements. Clarity is important in an accredited investments and demands subject matter fact gathering. A big question is in determining if the corporation sold their interest in the asset, and transfered the subject loan? This is likley answered n advance by plaintiffs own admission found in public records and documents. The party, who originated the subject loan or claim interest in an unrecorded assignee, is the immediate successor who did transfer whole, the entire mortgage loan receivable. Now that same corporation is returning to claim the asset. The business trust’s affairs are by operation of the trustees and each appointed by a sponsor of the trust. The trustees are always a bigger Bank national Association as the “property trustee,” US Bank Trust NA is listed as a Delaware Trustee” and three or more individual trustees, or “administrative trustees,” who are employees or officers of or affiliated with US Bank.

The property trustee will act as sole trustee under the declaration of trust for purposes of compliance with the trust indenture act. This is to mean the trustee designated will also act as Trustee under the Guarantee and the Indenture. See “description of the Guarantee” in PPM and or Pooling & Servicing”. Unless an event of default under the indenture has occurred and is continuing at a time that the trust owns any “JSNH” the holders of the common securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee.
The property trustee and/or the Delaware trustee may be removed or replaced for cause by the holders of a majority in liquidation amount of the trust preferred securities.

In conclusion , holders of a majority interest in liquidation amount of the trust preferred securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee if an event of default under the indenture has occurred and is continuing.

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A “Deed for Bond” is Clearly Defined in Civil Code of Procedures

Requirements under mortgage Law
Validity of a Chattel Mortgage Contract
1. Stock certificates issued in formation of a trust and later sold would yield to the certificates “holder” the ownership in the assets the proceeds were used to acquire.
2. Herein the example given would be a “deed for bond” clearly defined in the states civil code of procedures governing a non judicial or the judicial, foreclosure rights.
3. The deed of trust or mortgage that is initially recorded is owned by the certificates holders. The validity of the recorded mortgage speaks unto itself as a perfected lien.
4. The certificates deemed to be “chattel” is in certain instances, made liquid under securities laws.
5. The deed for bond concept is further validated by the state enforced CCP over matter and appropriate jurisdiction.
6. Their value is marked to market, the total amount of the lien on real property and liquidity is Pro Tanto, or to that extent of the law what the bearer of the paper is entitled for like consideration.

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