As to your secon question in the quoted posting above, "It just doesn't work that way."Arthur Rubin wrote:Could someone explain why the UCC applies, rather than common law on contracts?sfosmith wrote:Judge, I will grant that there is an obligation. The question before the courts, both state and federal, is to whom is it due? Who are the holders in due course? The banks come in as interlopers waiving a note (or a forged note) and claiming right to collect under UCC section 3. If it was securitized into a trust, then the note, or collateral, is governed under the terms of the trust agreement. The note cannot be paid as a bearer instrument. UCC section 9 governs the securitized asset.
Also, could someone explain why the house shouldn't be forfeited to the court, and let further legal proceedings determine who owns the note. It's clear that the "owner" has no claim to the property.
The note represents the obligation of the debtor/homeowner to repay the debt. Only the holder (possession with endorsement) or transferee (sort of like an agent of the holder) can enforce collection of the debt, even where the debt is secured by a mortgage, deed of trust, or UCC security agreement perfected by a financing statement or otherwise.
If the note cannot be located, there is a provision for lost, stolen, destroyed instruments. However, frequently the person asserting rights in the note cannot show that it has received the note by endorsement or as bearer paper before it was lost by him, her, it.
In other words, without evidence of the debt, there is no reason to enforce the pledge of the collateral.
Finally, many states permit non-judicial foreclosure and there is no court to take possession of the collateral, anyway.
As to the JRB reply on mortgage insurance, VA guarantees were limited, as I recall, and Personal Mortgage Insturance required where the down-payment was less than 20% (?) was limited, but I cannot recall the details?