Policy Changes aka eNotes are Here! New Paragraph 11 in Promissory Notes.

monopoly_electronic_banking_editionWe’ve discussed UETA and eSign and the significance of explicit consent…in most cases pre-2008…there isn’t any. Here is a Indiana case that is riveting: Good v. Wells Fargo. Read it HERE.

In this case, Bryan Good stated that in this 2008 transaction there were apparently 2 notes. Wells Fargo asserts that Good signed an eNote with a new (policy change) paragraph 11 – and that is still not enough.

Yes – go get your promissory notes and look for paragraph 11. You probably won’t see it if your note pre-dates 2008.

“On March 14, 2008, Good purchased real estate in Elkhart. Good executed an electronic promissory note (“the Note”) in favor of Synergy Mortgage Group, Inc., (“Synergy”). The Note included the following term:

11. ISSUANCE OF TRANSFERABLE RECORD;
IDENTIFICATION (sic) OF NOTE HOLDER; CONVERSION
FROM ELECTRONIC NOTE TO PAPER-BASED
NOTE”

Wells Fargo asserted that, because the Note was an electronic note, “delivery,
possession, and endorsement of an electronic promissory note are not required pursuant to federal statute.”

policy-changeNow, let’s look at this in today’s light dealing with foreclosures that stem from earlier dated mortgages that were not assigned timely to the trusts and the assignments are considered void.

Do you think that maybe this new policy change adding the explicit consent paragraph to the note per the safe harbor laws in UETA and eSign as of 2008 might stem from the fact that these banks were actually electronically transferring the documents because there was always the intention to securitize (gamble your collateral and credit on Wall Street) – without full disclosure to you?

Is this an admission of error by making a policy change and altering traditional mortgage instruments as a result of discovering Mortgage Electronic Registration Systems, Inc. in the mortgage wasn’t enough to skirt the safe harbor provisions of the statutes? Yeah, baby…

Well, here ya go…

transformationIt would appear for the banks to assert homeowner documents have somehow entered a securitized trust would be to admit that the documents have been electronically transferred and transformed through mathematical equations into securities where certificates have been issued against the documents’ value and used in active trading transactions on the Wall Street markets, without disclosure to homeowners.

The transformation would obviously eliminate the negotiability of the instruments until the documents were purchased out of the trust. Thus, the bank as a trustee for the securitized trust must use and follow UCC Article 8 and Article 9, rather than UCC Article 3, correct?

MA ROBOIn arguendo – let’s assume the banks failed to assign the loan documents simply because they were operating under the misguided notion that they had electronic transfer-ability and UCC Article 3 still applies…

This is where their fraudulent robo-signing in blank catches up with them as the court noted in Good after Wells Fargo said it had a Certificate of Authentication:

” Even if the Affidavit established that Wells Fargo possessed the electronic note, control, not possession, is the relevant consideration under §7021, and the Certificate does not establish that Wells Fargo controlled the Note. The Certificate does establish that Wells Fargo, as servicer of Good’s mortgage loan for Fannie Mae, “maintains a copy of [Good’s] promissory note on behalf of Fannie Mae.” Id. at 26.

The Certificate also establishes that Wells Fargo’s electronic records are received, stored, and managed in a secure manner with controls to assure they are accurately received as originally executed and protected against alteration. However, the Certificate does not suggest that Wells Fargo maintains the single authoritative copy of the Note as described in §7021(c)(1). Even if we were to assume that the copy of the Note maintained by Wells Fargo is the authoritative copy, it does not indicate that the Note has been transferred or identify either Wells Fargo or Fannie Mae as the person to whom the Note was most recently transferred. See 15 U.S.C. §7021(c)(2)(B).” 

Conclusion
Wells Fargo has not shown that it controls the Note for purposes of §7021(b) and, accordingly, has not established its status as holder for purposes of the UCC. Because Wells Fargo has not established that it was entitled to enforce the Note as its holder, the trial court’s grant of summary judgment was improper and the resulting judgment must be set aside. We reverse and remand.
Reversed and remanded.
BRADFORD, J., and BROWN, J., concur.”

hands_clapping

RELATED POSTS:

MERS – TOO MANY DEAD DUCKS
Is the Promissory Note Even Enforceable?

Thanks Glenn for the heads up!

3 thoughts on “Policy Changes aka eNotes are Here! New Paragraph 11 in Promissory Notes.

  1. Taken from a “Servicer Guide:”

    In lieu of retaining copies and originals as required above, the Servicer may maintain its loan files in the form of microfilm, microfiche or electronic media, provided that the following requirements are met:
    1. The copies or electronic media are made in the regular course of business pursuant to an established written policy of the Servicer applying to all of its loan files:
    2. The copies or electronic media are made by a process that accurately reproduces or forms a durable medium for reproducing the original;
    3. The copies or electronic media are clearly marked to indicate the Buyer’s ownership of the loan and the Buyer loan number assigned to it;
    4. The Servicer maintains the copies or electronic media in a manner that permits ready transfer to legible hard copies of the material relating to the loans serviced for the Buyer;
    5. A reader/copier that can be used by the Buyer representatives is maintained in the same office where the copies are stored; and
    6. The Servicer makes back-up copies and retains them off-site to protect against fire and other hazard losses.
    The Servicer must bear the entire cost of restoring loan files and related documents transferred to microfilm, microfiche or electronic media if the copies or electronic media become damaged or lost for any reason, or if legible hard copies are requested by the Buyer.

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