Failing Foreclosure Defenses (Quiet Title, CDS) –
Are you the Big Dog or the Dog-Meat?
by Bob Hurt, 31 May 2012 – Distribute immediately far and wide to all mail lists.
Many foreclosure defense “theorists” in non-judicial foreclosure states argue that winning a quiet title lawsuit will eradicate the mortgage debt, or that CDS (Credit Default Swap) or other insurance payoffs will eradicate the mortgage debt because payment by the borrower of the mortgage debt would constitute wrongful double payment.
Case law dictates otherwise, as it should:
- “A plaintiff cannot quiet title without discharging the mortgage debt. Aguilar v. Boci, 39 Cal.App.3d 475, 477 (1974) (“the cloud upon his title persists until the debt is paid”);
- “Plaintiffs argue, ‘any alleged obligation of Plaintiffs was satisfied once the default was declared, because the various credit enhancement policies paid out making any injured party whole.’ According to Plaintiffs, foreclosure on the Property to collect on payment owed under the First Note will result in a double recovery prohibited by Virginia statute and case law…Even assuming that Plaintiffs had a factual basis for their “double recovery” claim, no provision in the U.S. or Virginia Codes supports Plaintiffs’ argument that credit enhancements or credit default swaps (“CDS”) are unlawful. No decision from any court in any jurisdiction supports such a claim.””Plaintiffs’ double recovery theory ignores the fact that a CDS contract is a separate contract, distinct from Plaintiffs’ debt obligations under the reference credit (i.e. the Note). The CDS contract is a “bilateral financial contract” in which the protection buyer makes periodic payments to the protection seller. See Eternity Global Master Fund Ltd. V. Morgan Guar.Trust Co., 375 F.3d 168, 172 (2d Cir. 2004). If the credit event occurs, the CDS buyer recovers according to the terms of the CDS contract, not the reference credit. Any CDS “payout” is bargained for and paid for by the CDS buyer under a separate contract. See In Re Worldcom, Inc. Sec. Litig., 346 F. Supp. 2d 628, 651 n. 29 (S.D.N.Y. 2004) (explaining that a premium is paid on a swap contract to the seller for credit default protection, and if the default event does not occur, payer has only lost the premium). CDS do not, as Plaintiffs suggest, indemnify the buyer of protection against loss, but merely allow parties to balance risk through separate third party contracts. Therefore, Plaintiffs’ “double recovery” argument fails as a matter of law.” LAROTA-FLOREZ v. GOLDMAN SACHS MORTGAGE CO., 719 F. Supp.2d 636 (E.D.Va. 4-8-2010).
All foreclosure defenders should try to remember the US Constitution Article I Section 10 Clause 1 , which provides, among other things, “No State shall… pass any… Law impairing the Obligation of Contracts…”
Stop and think what this means, and ask yourself come questions, whether you are a foreclosure victim, or victim of an upsidedown mortgage loan:
- If the state cannot pass law impairing obligation of contracts, does that mean the state courts’ judges therefore have no authority to interpret any law as impairing the obligation of contracts?
- Can a judge rule that your mortgage and note are invalid or void, and if so, why?
- May judges willy-nilly impair the obligation of contracts, such as with a spurious quieting of a title on which the equitable owner owes a whopping mortgage debt to the legal owner?
- Does a judge have the authority to determine whether a contract contains unconscionable provisions or otherwise has a void or unenforceable nature?
- What about fraud or tortious conduct or other violations underlying a contract?
- May a judge determine that some fraud vitiated the contract, making it of no effect?
- May a judge find a breach of contract and use that as the basis for ordering some penalty against the breaching party?
- May a judge order a rescission of a contract or some financial penalty for a violation of a law like the Truth in Lending Act or Real Estate Settlement Procedures Act or Home Owner’e Equity Protection Act by a lender?
- What kind of fraud, torts, legal errors, or other violations would constitute justification for a judgment against a lender in favor of a mortgagee?
- What kind of damages may n injured party demand for fraud or other intentional injury in a contractual relationship?
- What remedies would lie for an innocent borrower whom a lender/broker/appraiser/realtor fraudulently induced to buy and mortgage real estate?
I guess the real question I want to ask of foreclosure and mortgage victims boils down to this:
- Would you rather serve as the Dog-Meat Victim of foreclosure, with the lender operating as the big dog? Or…
- Would you prefer to operate as the Big Dog Suing the dog-meat lender for torts, breaches of contract, fraud, and other violations?
- What if you become the Dog, but discover you have a big leash on you that keeps you from going after the dog-meat?
So, go ahead and answer:
- If you had a choice, which would you prefer to be the Big Dog, or the Dog-Meat?
- Do you have a choice?
Call me if at the below number if you want to find out.
You have my permission and encouragement to distribute this message far and wide to all mail lists and mortgage victims.