Homeowners' Motto for 2011: MODIFY, BUT ALSO NULLIFY!

Following the old adage of "Trust, But Verify" I propose a new slogan for homeowners in 2011 in response to the foreclosure crisis: Modify, But Also Nullify."

While attempting to modify your loans with banks that most likely don't own such loans and have no incentive to give you a fare deal, don't get your hopes up too high.  Instead, nullify your mortgages (deeds of trust) so that they don't encumber your property.  Obtain a determination from a court of law regarding the lack of rights of your bank in the property.  Then settle with the bank on your terms with respect to the remaining unsecured note!  The government and the bank's lobbyists didn't ask for your opinion when they developed the tricks to blow up the bubble and severely distort the real estate market.

The financial crisis (depression) and the housing crisis are here for a reason. The entity claiming to be your current "lender" is usually just a disguised distressed debt buyer or its agent, but claiming nonetheless to have the right not only to collect the debt, but also to so by way of foreclosure.  The problem is that it's one thing to buy a debt, but it's quite another to buy the preserved security that backs up that debt and provides an extra avenue of collection (levy on the property pledged as collateral). Also, nobody seems to care that your loan was based on an inflated (systemically or individually) appraisal and with utter disregard of your ability to repay. Your equity and resulting commissions, as well as profit on Wall Street, were much more important.

The U.S. Supreme Court held in 1883 that where a deed of trust is released, the parties claiming to be secured by such deed of trust later had no remedy, because their interest was not recorded and thus there was no notice to the public of such claimed interest.

The majority rule appears to be that the holder of a note secured by a recorded deed of trust ("DOT") that is released may later prevail over some member of the public only if the DOT was (1) fraudulently released and (2) without the participation or enabling of the original beneficiary of the DOT.  By contrast, if the DOT was released without fraud (e.g., by court order) and was at least in some way enabled (participation) by the original beneficiary (e.g., MERS and its members attempting to save on taxes), such claimed "holders" cannot subsequently prevail over the release of the DOT. Read between the lines: you get your property free and clear.

The minority rule (which Virginia follows!) is ever harsher toward the "banksters," as it is more bright-line and appears to be that an innocent member of the public always prevails over the holder of a released DOT.

Nullifying deeds of trusts and mortgages boils down to application of the above principles in each particular case.  As always, it's all about the details.  But the path to fight the crisis and to transfer the wealth back to the middle class, as well as to correct the distortion of the real estate market, is clear: MODIFY, BUT ALSO NULLIFY.