Bills are being introduced into State Legislatures all over the U.S. that will imperil your mortgage. There has been an uproar on conservative blogs that these UCC Amendments will be able to usher in a Central Bank Digital Currency. While this is a real threat, many are ignoring the additional threat these proposed Amendments will usher in. That is the threat to the integrity and security of your mortgage.
It appears the serious nature of the proposed changes to the current UCC laws are being routinely dismissed.
These proposed changes that are contained in Article 12 are extremely dangerous for the consumer.
Here’s why:
Please find a link to the National Law Review analysis of these proposed UCC Amendments: New UCC Article 12 Matters to More than Just Cryptocurrency. Their analysis brings up a serious issue: “Imagine a circumstance in which a hacker hacks the system where a CER is maintained and takes control of the CER − effectively stealing it and depriving its rightful owner of it. Then imagine that the hacker turns around and sells the CER to an innocent buyer who meets the criteria of a qualified purchaser − for value, in good faith, without notice of the competing claim. That qualified purchaser could claim good title to the CER, even though the hacker had no title to the CER at all under general legal principles.[11]”
Additionally, in the ULC drafter’s own Zoom meeting, explaining the UCC Amendments to the Commission, they state FOUR separate times that the industry (the bankers) needed these amendments for the purposes of creating and delivering electronic negotiable instruments, or promissory notes (which are mortgage documents). Please see the excerpts from their Zoom meeting transcribed here:
1) Edwin Smith, ULC drafter, at 00:07:20, “There was a lot of desire to use electronic promissory notes, electronic bills of exchange and there was limitations on that.”
2) Juliet Moningiello, ULC drafter, at 00:14:03, “Ed mentioned the desire in the marketplace for a functional equivalent of an electronic promissory note and these amendments achieve that.”
3) Steve Weise, ULC drafter, at 00:24:10, “As Ed and Juliet have mentioned, one of the key goals here was to create the functional equivalent of a negotiable instrument….”
4) Juliet Moringiello, ULC drafter, 00:29:39, “As Ed said before, the market wanted some equivalent of an electronic negotiable instrument….”
Finally, relating to the complete lack of consumer protection within these proposed changes, in the ULC’s own Zoom meeting at 00:54:27, a question comes in from a Zoom listener:
“With respect to providing evidence of control of a transferee to an account debtor, if the account debtor so requests, what are some examples of pre-agreed evidence be? Was the intent that records under certain types of blockchain would suffice? What would those standards be and who would adjudicate whether a system works as proper evidence or not?”
Answer from Edwin Smith, ULC drafter, “I don’t know that we can predict exactly how this will all work.”
Mr. Smith’s response is shocking and so disturbing because it reveals that the drafters of the legislation do not even know how the bank’s proposed system will work!
Why is all this so serious?
From 2006 through 2013, there were 17,604,064 foreclosures that were completed across this nation (data comes from Statistic Brain whose sourcing comes from RealtyTrac, the Federal Reserve and Equifax.) These foreclosures, as attested by the OCC (see below paragraph), using documents perfected and delivered via electronic means should have been considered unenforceable.
In 2004, the OCC issued dire warnings to the banks that under the new E-Sign legislation, electronic records would not hold up in a court of law. The letter states, “For example, the Act does not ensure admissibility of electronic records in litigation. This is important because the practical effect of having electronic records that are not admissible into evidence in judicial proceedings may be to render the electronic contract or record effectively unenforceable.” Additional important language in this OCC letter of warning is, “Without adequate and admissible records, the bank will be unable to enforce its rights and to protect itself against claims in litigation. Thus, if records that support loan or investment transactions are inadmissible, the bank may face credit, transaction, and market risk.”
In 2009, the Florida Banker’s Association submitted an admission into the Florida Supreme Court relating to the Emergency Rule and Form Proposals of the Supreme Court Task Force on Residential Mortgage Foreclosure Cases, here is the language verbatim, “It is a reality of commerce that virtually all paper documents related to a note and mortgage are converted to electronic files almost immediately after the loan is closed. Individual loans, as electronic data, are compiled into portfolios which are transferred to the secondary market, frequently as mortgage-backed securities.” And the Florida Bankers Association further admits, “The reason "many firms file lost note counts as a standard alternative pleading in the complaint" is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003).
Yet in 2011, the WA Legislature amended the Deed of Trust Act (RCW 61.24.030(7)) to allow the trustees to use a “beneficiary declaration” signed, under the penalty of perjury, rather than the evidence the beneficiary had possession of the original note, to suffice for the trustees to begin foreclosure proceedings. When there was plenty of evidence nationally that the WA Legislature should have known that all the beneficiary declarations submitted were fraudulent and absolutely false.
Throughout the foreclosure crisis years, homeowners across this nation found evidence that notes were being electronically delivered to multiple RMBS trusts simultaneously. In my own Appellate Reply Brief relating to WA Superior Court Case 12-2-35995-4, I provide responses to my repeated Qualified Written Requests under 12 USC 2605(e), which shows that Chase had evidence my one promissory note was in two RMBS trusts simultaneously. The trustee to my Deed of Trust was trying to foreclose using a WaMu RMBS trust, while simultaneously Chase was providing me evidence that a Bear Stearns RMBS trust also had ownership rights to the note. Notably, Chase submitted a Lost Note Affidavit in my case, even though they submitted a fraudulent copy of the purported original note early in the litigation. My Appellate Brief is public record.
Why should this concern lawmakers? Well, their own public pension funds invested heavily into these RMBS securities. These securities were fraudulent from the inception. With evidence of multiply-pledged promissory notes, the banks were stealing from the lawmakers own public pensions while also stealing from homeowners. If you are not aware, public pensions are severely underfunded nationwide. This underfunding is precisely because of these RMBS trust frauds perpetrated by the banks.
In addition, all the displaced unlawfully foreclosed homeowners drove up pricing on rentals, forcing many formerly housed low-income people into the streets due to the rise in rental units. The Great Financial Crime Spree of 2008 began the flood of homelessness we all now see on the streets of all the major cities across the U.S. and the homeless are now even making their way into rural communities. The scourge of homelessness upon our cities, contributing to millions of State and Federal dollars to provide solutions. If our government stops the banks from fraudulent practices, then we can stop the influx of more homeless people!
We are now facing the second significant bank crisis in less than 15 years. Currently, multiple banks have failed and more will continue to fail. We cannot dismiss the significance of the banking industry asking for these proposed UCC changes at precisely this time. As these proposed changes to the UCC have absolutely zero consumer protection regarding the verification of ownership of the underlying debt, they are putting at risk more WA citizens to be victimized by the banking industry. Especially considering that the number of foreclosures currently are rapidly rising due to the Covid forbearances. Also, with the current rising interest rates, there will be additional vulnerable homeowners because real estate prices have been dropping nationwide. There is a real concern that another major foreclosure crisis is brewing.
These bills drastically changes the structure of commerce with risky consequences for the consumers on the front end of transactions and diluted reliability for investors on the back end.
Changing the structure of promissory notes which results in the maker not being able to verify the location and ownership of the debt, in order to verify payment to the proper party and final cancelation of the debt with the instrument cancelled and returned to maker, is extremely careless and promotes a heavy risk of fraud.
Technology exists, developed by the Department of Defense 20 years ago, to secure a maker's signature which assures that the electronic record cannot be duplicated. Given the magnitude of effect this proposed bill will have on commerce for everyone and the removal of consumer & investor protections, it is very irresponsible to approve this proposed massive change without significant modifications.
Please STOP this legislation from moving forward in your state. Take ACTION, call your State Representatives and State Senators and relay that these proposed UCC Amendments will not be tolerated in your state.
UPDATE: The Washington State Legislature just passed this horrendous bill. What can residents do? Contact Senator Pedersen (the prime sponsor) at pedersen (dot) jamie (at) leg (dot) wa (dot) gov and tell him what a corrupt son of a bitch he is.
I am interested, but short on time and attention to chase this at the moment. Could you please explain in simple terms how and why you think this legislation came to be drafted and passed in WA at this time - I get that you think another crisis is in the making - but isn’t there always? Why right now? Why was the legislation needed - was the code changed after the 2008 crisis and now it’s being changed again to the detriment of the public? Why do you think the named politicians are the acting parties? It is interesting that so many states are taking the same steps at the same time. However, the move was rejected in SD and AR, if I recall correctly. Please help fill in the gaps.
A link to the ABA website--2011 but up-to-date and still germane. a good reference. I read SSB 5077 and the amendments seem rather anodyne---specifically what is your complaint?
https://www.americanbar.org/groups/business_law/publications/blt/2011/12/keeping_current/