What is a Securitization Examination? |
|
| 16. Additionally, since the note is not a negotiable instrument -because it has many undertakings[1]- the note cannot be transferred by endorsement or physical transfer. The endorsement language of the PSA is only contractual and not UCC language; by it cannot modify the true nature of the note as a non-negotiable instrument[2]. The note has to travel from hand to hand under a sale and purchase agreement with adequate consideration exchanging hands, which in this case does not exist.
17. Therefore, Lender did not comply with the terms of the Pooling and Servicing Agreement and failed to transfer the note and mortgage according to the rules of negotiability. Lender cannot foreclosure the subject property because of lack of entitlement and standing. |
|
|
-------------------------------------------------------------------------------- [1] The note is negotiable when it's an unconditional promise to pay a fixed amount of money and does not state any other undertaking" (UCC 3-104a). In the present case there are multiple undertakings that make the note a non-negotiable instrument. Covenant 4 of the note (Borrower's right to PREPAY), Covenant 5 (Loan Charges, which is linked to covenant 2 of the deed of trusts or mortgages: mandatory application of payments), Covenant 10: Uniform Secured Note. Also, from the Security Instrument (deed of trust or mortgage) there is the Covenant 9 (Protection of lender's interest in the property and rights under this security instrument), and covenant 22 (Acceleration: from the mortgage), among other undertakings. [2] UCC 3-106 (b) A promise or order is not made conditional (i) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration. |
|
Securitization Examination
Part 3 of 3