I do understand what you’re saying, and I do agree that it makes sense. When I say “I don’t know all the rules,” I’m referring to the terms of the note you describe above.

If the investors who bought that note are buying a share of the underlying mortgage owners’ payments, and the bank in question is simply reduced to earning a commission on the transaction, then I agree that going after the defaulting mortgage owner is fraudulent. The bank in question is no longer a party to the loan, and it suffers no damage from the default. Hence, it shouldn’t be able to collect.

If, on the other hand, the two transactions are separate (other than one serving as collateral to the other), then things are very different. In that case, the investors have invested with the bank (not the underlying mortgage owners), and the bank has agreed to pay them based on a set of circumstances (in this case, the receipt of payment from the mortgage owners). If the mortgage owners default, then the bank doesn’t have to pay these investors their interest payment; after all, those were the terms of the deal. But separately, the bank is still owed payment from the mortgage holder, and the fact that the other note exists doesn’t change that. The bank would still be owed those mortgage payments, and should be able to recover them if they don’t arrive.

These are legal technicalities and, like I keep saying, I am not a lawyer. The important thing, in my opinion, is that all of the investors know what they’re buying up front, and know what will happen in each eventuality. Once the rules are established and money changes hands, the rules should be followed, even if the wealthier of the two parties (in this case, the bank) comes out ahead.

The mass vilification of the banks in the public sphere makes me question the latest spate of news stories, since none of them clear up the above point. Your comments seem to suggest that the first scenario is the truth, which would make the media coverage more accurate. And while you sound like you know what you’re talking about, this isn’t one of those situations where I can look to the media to validate your theory. Each case is likely unique, and the wording of the original contracts is (or should be) the ultimate arbiter.

You own a house worth $1,000,000

I purchase the house from you for a promise to pay the $1,000,000

You agree and an exchange is made.

You then turn around and sell interest in the note on a pro pro rated basis to 10,000 other “investors” (i.e. hapless saps)

I default

you then stop payment to the investors, claim you are not liable to them because of stipulations set forth in your contracts

you then turn to me, and in the same breath say I injured you and I must make you whole

unfortunately, the law, no matter how downtrodden in recent times, actually makes sense despite the legalese, you can’t compel the court to action unless an injury has has been suffered by you specifically

however, you broke up it up and sold interest to 10,000 people, now where are we:

1.) each of those 10,000 people may come to my jurisdiction and file the court fees and serve me and i file my answer and then lo and behold they get their 1/10,000th of that million dollar mortgage which amounts to $100, and thats only assuming they can prove that you granted them 1/10,000th interest in it

2.) the other scenario is you realize the legal ramifications and try to run a blitkrieg operation on the court and foreclose before you think i wise up to the scam your pulling. you see, the investors already paid you in full, now you are trying to collect the same from me, see the problem yet? probably not, i’m sure this is just a bunch of scumbags trying to wiggle out of an obligation, right?

the problem is that you’re not seeing the big picture, which is understandable given the relative dearth of sentient conversation transacted via blogs and chatboards and in many respects is a fault is of my explanatory powers, however, i think i’m right, and actually it makes alot of sense

A few common sense tenets of common law:
1.) you can’t sue someone who hasn’t caused you harm
2.) you can only sue for the amount of injury plus some clearly defined court costs

this was designed over the centuries to prevent wackos like me from just filing a claim for every injustice i saw without being party to it, and now it just blew up in the faces of those classes of people who drafted it, and with astonishing effect i might add

Lets say me, you, and guy named “Bob” exist. Bob steals your TV, I can’t sue Bob just because I’m aware that he stole your TV because Bob didn’t cause me any injury. Only you can sue Bob, because you suffered the injury. This is such a settled point of law that it is what i would characterize as fundamental to our legal system

I am (still) not a lawyer, but what you say makes perfect sense to me. I will hasten to add, though, that the appropriate analogy would be more along the lines of: I borrow money from you to buy the TV and promise to give you the TV if I can’t pay you back, and then Bob steals my TV. You are not injured unless I go out and buy another TV with the money I would have given you.

My problem with the rest of it is I don’t know all the rules. If you hadn’t defaulted, would Capital One still be legally able to collect payments from you, even though they sold the loan to an i-bank? If so, then I’d say they still lost something when you defaulted (even if they have no standing to sue). And if the i-bank’s contract is with Capital One, and not you, then I would think they’d sue Capital One if they felt they’d been wronged, not you. But again, I’m not a lawyer, and I don’t know the rules.

Last point: The Dow Jones Industrial Average is an average of the prices of thirty of the most popular stocks on the NYSE & Nasdaq stock markets. If your pension/401k/IRA/etc. is invested in an index fund that tracks to the DJIA, then it is as high, relative to pre-crash levels, as the DJIA itself. That’s just simple math. If you’re invested in other things (riskier stocks, derivatives like options & futures, etc.) that didn’t do as well as the DJIA, then you may still see a 40% (or any other rate) loss. These times are not unique in that sense…

In any case, I’m glad you’re back on your (financial) feet. And thanks for stopping back and keeping us updated. Come visit again soon!

They’re starting to use words like “standing” to describe the securitization debacle in the mainstream press, no doubt the government will step in and ex post facto clear up this little minor paperwork error, sweep it under the the rug like a good little house boy cuts corners to please the plantation master so he may remain in the house and not be relegated to the fields.

But allow me the juvenile satisfaction of saying “I told you so.” And having been emboldened by recent events,allow me unfurl before you the next logical conclusions I had in store back in early ’09.

First of all, it is NOT a paperwork error as the media outlets who fall under same corporate umbrella as several banks would like you to believe, it is a question of legal “standing”. Standing means I have a right to sue you because you caused me injury. Lets say me, you, and guy named “Bob” exist. Bob steals your TV, I can’t sue Bob just because I’m aware that he stole your TV because Bob didn’t cause me any injury. Only you can sue Bob, because you suffered the injury. This is such a settled point of law that it is what i would characterize as fundamental to our legal system, to abrogate a question of standing in order to suit a particular purpose would have to override an immense and long settled corpus of law. It would be a “clusterfuck” if you will. Further, it would set precedent and cause a further “can of worms” to be opened down the line.

Now, my financial status has changed significantly since the time I wrote of battles with Capital One. I could easily pay the debt now within a months salary, however, those that suffered the injury may not be party to the claim anymore given the tumultuous and uncertain nature of my now ethereal debt being held at various times and circumstances by unknown parties. Only those parties that suffered an injury, and only for the amount of injury can anyone seek relief. So each “investor” (I added quotes as evidence of my disdain for the term “investor” to characterize the purchasers of the pools, in fact I bet the unsuspecting common man’s pension or 401k is largely comprised of these unenforceable obligations unbeknownst to them) is allowed to sue the defaulting party for the specific amount of injury, after posting court fees and such which would generally exceed the amount of the claim by orders of magnitude.

What my beef was in ’09

1.) it is not that i owe, my own stupidity is my responsibility
2.) it is not in the typographical errors of clerks
3.) i seek only only to pay the rightful owners as if i pay the wrongful owner i’m still on the hook if the rightful one should he ever surface in the future
4.) i wonder, given my newfound, yet still tenuous, burgeoning faith in the the American people to put 2 and 2 together and realize, “Hey, wait a minute, the Dow Jones is higher than before the crash yet my pension/401k/IRA/hedge fund/college savings/(insert government sanctioned yet administered by JP Morgan/Goldman Sachs/etc. investment vehicle designed to “assist” you simple folk here) is still off by 40% or more and is still bleeding like a stuck pig

I think if #4 ever happens, if people ever realize their “retirement” is just mine and a pool of other crackhead’s bullcrap credit card debt, despite the knuckle-dragging union minded moron that toils in endless slavery and yet lacks the grit to confront the oppressor, if he ever found it in himself to steel his nerves and join fellow endentured folks en masse and not in isolation as I have, then i would count the other shoe as having been dropped. Until then, the American will continue to play host to this parasite and only seek to blame those nearest to himself without ever looking at the true nature of those things deemed outside the capabilities of his reasoning, even by the most foreign of laws, which continue to keep him as its supplicant.

I never thought anyone, anywhere in mainstream media would ever have gotten as far as to even mutter merely the word “standing” in an article. Ah well, times change I guess, but if it ever gets to the point where the commoner realizes what he has been cheated from, nah, actually that would ever happen, Americans are sheep, born into slavery and forever content with that role.

Also, ABC News ran a piece today about how if you ask the loan servicer to produce the note they can’t and you can keep your house.

http://www.yahoo.com/s/1035029

Looks like my theory may be right, they definitely would show up to court for a $200,000 house if they could. They almost definitely have the original paperwork, the people in the news piece think its because when they sold their mortgage they sent the paperwork along with it, so the mortgagee no longer physically has it. But I think its almost surely all sold electronically, the loan servicer knows they would be committing fraud if they brought the original paperwork to court and tried to make it out like they never sold it.

I guess we’ll see what happens but I definitely wouldn’t be investing in these asset backed securities right now.

Thanks for sharing your story, and for sharing that research. I find it fascinating that, according to what I’m reading above, the bank that wrote the mortgage (Capital One, in this case) actually benefits financially if you default and then they collect, as opposed to if you simply pay on time. They have no way of incenting you to default, mind you, so the opportunity for abuse is low, but it’s still a strange set of rules.

Anyway, best of luck in your defense, and please do let us know how it all turned out.

I hope to see you around the blog in the future as well…

But I think my defense of their complaint is rock solid.

You asked…
———————————————————–
“My understanding of securitization is that the owner of the note is selling the revenue stream to the i-bank, not the note itself. I say this only because I assume the homeowner still pays the bank (not the i-bank) his/her monthly payment, so they must own the loan, no?”
————————————————————–
————————————————————-

To answer your question, at least as far as Capital One is concerned, I excerpted the following from CO’s ABS pricing supplement, you can get a copy online here if you want
http://media.corporate-ir.net/media_files/IROL/70/70667/abs/comet/Comet_Class_A_2007-3_Pricing_Supplement.pdf

(Capital One Funding is yet another entity between the bank and the trust)

————————————————————-
Prior to August 1, 2002, the bank treated its transfer of the receivables to the master trust trustee as a
sale for accounting purposes. From and after August 1, 2002, the bank treats its transfer of the receivables to Capital One Funding as a sale. Arguments may be made, however, that any of these transfers constitutes only the grant of a security interest under applicable law.

Nevertheless, the FDIC has issued a regulation surrendering certain rights to reclaim, recover, or
recharacterize a financial institution’s transfer of financial assets such as the receivables if:
• the transfer involved a securitization of the financial assets and meets specified conditions for
treatment as a sale under relevant accounting principles;
• the financial institution received adequate consideration for the transfer;
• the parties intended that the transfer constitute a sale for accounting purposes; and
• the financial assets were not transferred fraudulently, in contemplation of the financial institution’s
insolvency, or with the intent to hinder, delay, or defraud the financial institution or its creditors.
The bank’s transfer of the receivables is intended to satisfy all of these conditions.
————————————————————–

So legally speaking (not morally speaking) Capital One Bank N.A. lacks standing, plain and simple.

I’m wondering why they don’t file the suit naming COF, COMET, COMT as the plaintiff? Like in November 2007 when Judge Bloyko halted the foreclosure of 14 house in Federal court because the originators didn’t have the notes. Why wouldn’t the Trust then just refile the suit? Trust me city civil court is not Law and Order, these hearings usually last about 20 minutes with a hack lawyer
from a diploma mill who just fills out forms, the guy would probably take their case for a tainted peanut butter sandwich and a smack in the face. You don’t even have to any law background to be a darn JUDGE! The guy who fixes our printers at work is judge in the next town over, I don’t think he finished high school. It seems like it would be worth the $200 in lawyer fees for Capital One to have someone show up to court.

Oh well, I let you guys know what happens if anything. But I don’t think I’ll counter sue, I’ll just stick to defending against the complaint.

Take it easy, and Thank You

First, I’m not as quick as Brian to assume that everything Capital One has done here is kosher. It sounds possible to me that steps they took in commoditizing your debt violated federal or state creditor/debtor laws, unwittingly or not. But it sounds much more likely to me that the question of whether they have is in a realm of law that’s beyond what you can figure out without professional training. (I can describe the work you do as a biochemical engineer, but that doesn’t mean that I’m sequencing DNA in my basement.)

Second, it’s possible that they haven’t replied to you because you’ve found a legal defense that blows them apart. But I can think of two Occam’s Razor alternatives: 1) you’ve fallen through the cracks of an overworked legal team on their side, or 2) they figured out that answering you would cost more than the $20K cost of answering your claim.

That said, if you are right, and you’re filing pro se, then suddenly it is very much in their interest to eat you alive, because there are a whole lotta people with a whole lotta debt in exactly your situation. I don’t recommend going this alone. Suggestions for places to turn for help that you might not have considered:

1) You can call Legal Aid, but I’d say forget it. They’re overworked and likely to blow you off. That said, the phone call can’t hurt.

2) Next call is to national nonprofit organizations who field lawyers on consumer issues; the first one who comes to mind is Consumers Union. Explain that you need help with a legal strategy; if it has merit and it’s applicable to many people, they’ll damn well get on your side.

3) Likewise, writing this up for your Congresspersons (House and Senate) is a very good idea; you might want to cc the heads of various banking committees just to see if you get any traction. This is a low-likelihood but huge oooomph tactic.

4) Finally, if your claim has any merit, well, we’re talking the biggest class action since the storming of the Bastille, so running this by a few private attorneys in that realm is probably also worthwhile.