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News
Of The Note/Cash Flow Business For Brokers & Investors |
You read that right: I found a case in which a court ruled that a mortgage was not a loan -- and stopped foreclosure. The details are below. Although it was overturned on appeal, you ought to be aware of the arguments. One of these days if you are foreclosing you might find yourself having to deal with this creative defense!
Cheers,
COURT RULES THAT A MORTGAGE IS NOT A LOAN,
STOPS FORECLOSURE
Jerome Daly was a defendant in a civil case in Credit River Township, Scott County, Minnesota on December 9, 1968. The plaintiff was the First National Bank of Montgomery, which had foreclosed on Daly's property for nonpayment of the mortgage. A sheriff's sale had taken place.
Daly argued that he owned the bank nothing, because it had not actually loaned him money but had simply created credit on its books. Therefore there was no consideration for the loan (required for a contract to be legal), the note was null and void and the bank was not entitled to the property.
L. V. Morgan, the president of the bank, admitted that the transaction was simply a bookkeeping entry. The money didn't actually exist. (That's how all banks operate [fractional reserve banking]; they lend far more than they have on deposit, creating "money" out of thin air.)
The jury unanimously ruled for Daly -- that the mortgage was not a loan, therefore the bank had no right to foreclose. Judge Martin V. Mahoney wrote,
"Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books, that this was standard banking practice exercised by their bank in
combination with the Federal Reserve Bank of Minneapolis, another private bank, further that he knew of no United States Statute or Law that gave the Plaintiff (the bank) the authority to do this.
"...Plaintiff's act of creating credit is not authorized by the Constitution and Laws of the United States, is unconstitutional and void, and is not a lawful consideration in the eyes of the law to support any thing or upon which any lawful rights can be built."
Judge Mahoney declared the note and mortgage null and void, that the bank had "no right, title or interest" in Daly's property and the sheriff's sale was therefore also null and void. Daly
got his property back (First National Bank of Montgomery v. Jerome Daly. See http://snipurl.com/tyo7e). The decision was overturned on appeal. So don't try this at home.
Judge Mahoney also wrote a follow-up in a matter related to the case that makes interesting reading: http://snipurl.com/tyoq5
You can say his opinion is "absurd" and "frivolous," as subsequent courts have...but would Jefferson and Madison agree?
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Where do you find the major cash flow funding sources? In THE PAPER SOURCE REGISTRY OF NOTE INVESTORS. Go to www.PaperSourceOnline.com at the Registry of Investors tab
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How The SAFE Act Affects Seller Carryback Notes:
Strategies For Note and Real Estate Brokers & Investors
Bill Mencarow has just published his analysis of the SAFE Act: How The SAFE Act Affects Seller Carryback Notes: Strategies For Note and Real Estate Brokers & Investors. It addresses questions such as:
* Do you need a license?
* How does the SAFE Act affect you if you want to buy, create or broker seller carryback notes?
* How many seller finance deals can you do?
* Can you legally get around the SAFE Act?
* Plus solutions to many of the questions we have all been asking ourselves!
* And many more ideas you may not have thought about...
7 bonus documents are included:
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SAFE Act FAQs
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Text of the Federal SAFE Act (PL 110-289)
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HUD Model SAFE Act for States
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HUD Commentary on Model SAFE Act
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HUD Report to Congress On SAFE Act
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Proposed SAFE Act Rule
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Congressional Letter To Conferees
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Court Rules A Mortgage Is Not A Loan
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