Monthly Archives: October 2010

Dave Ramsey Knows What He’s Talking About

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Condoning Fraud and Expanding Federal Government: The “Interstate Recognition of Notarizations Act of 2010”

by Kenneth Gibert, Your LegalLegUp.com

In the midst of a firestorm over fraudulent foreclosures, Congress passed the “interstate Recognition of Notarizations Act of 2010” and sent it to the president for his signature. Many believe the Act would whitewash the fraudulent foreclosures that have been in the news lately and which (apparently) have thrown tens of thousands of homeowners out of their homes illegally.

The House had already passed the bill, and the Senate passed the bill unanimously by voice vote with almost no, or perhaps absolutely no, debate (the record isn’t clear). The president, in a move hailed by some as “courageous” and all that, “sent the bill back” for further study. He didn’t veto it, but he did send it back. This is definitely one to watch.

Section 3 contains the language of greatest interest to me, and I’ll note that Section 2 says exactly the same thing regarding the federal courts. Whatever else may be said, the bill is designed to “occupy the entire field” of notarizations. Here is Section 3 in its entirety, entitled “Recognistion of Notarizations in State Courts.”

Each court that operates under the jurisdiction of a State shall recognize any lawful notarization made by a notary public licensed or commissioned under the laws of a State other than the State where the court is located if–
(1) such notarization occurs in or affects interstate commerce; and
(2)(A) a seal of office, as symbol of the notary public’s authority, is used in the notarization; or
(B) in the case of an electronic record, the seal information is securely attached to, or logically associated with, the electronic record so as to render the record tamper-resistant

It sounds pretty innocent, doesn’t it?

But the bill’s congressional sponsors refused to answer reporters’ questions about the constituents who “wanted” the bill, and specifically they refused to answer whether the banks and other lending institutions wanted it. Some regard it as suspicious that the bill went through congress without debate during the very week when what may be a vast conspiracy to create illegal affidavits and railroad the foreclosure process was beginning to be exposed.

Count me as one of those.

So What Are Notarizations?

A Notary Public is a person granted the power by state law to accept sworn testimony and create a document that will become a public record. The creation of that document, though applying a notary “seal,” is “notarization.” States regulate this power, requiring notaries to take courses on their responsibilities. They also set forth a variety of requirements that must be met before a notarization can occur. I believe these (currently) include, at a minimum, the physical presence of the notary at the time of signature, and perhaps some verification that the person signing have read the document in question and have “personal” knowledge of the facts to which he or she is attesting. That verification, of course, is a pretty minimal thing, often a mere reference in the affidavit itself. The person signing the affidavit is under oath, although this is written by the notary (usually with a stamp) rather than “administered.” It can be a pretty lax thing.

The requirements have apparently been too heavy for foreclosing institutions, though, as stories of people signing 8,000 affidavits per month are coming to light or signing affidavits far from the notary or on different days than the notary signed. Signing an affidavit without reading it, where you state in the affidavit that you have read it, is perjury. A notary notarizing a blank document is, in every jurisdiction of which I know, grounds for the dismissal of the notary. It may even be criminal. The foreclosing institutions have rendered the legal apparatus, designed to protect borrowers from illegal foreclosures, a mockery. And this is probably because they do not have the documents they need to foreclose legally and do not even know where to find them.

Right now the foreclosing institutions linked to these activities are under investigation by various state attorneys general and are possibly liable to the people they have foreclosed upon for hundreds of millions of dollars, perhaps billions. Some banks have suspended foreclosures pending various outcomes.

How Would The New Bill Affect These Foreclosures?

Because the bill requires “recognition” of a “lawful” notarization, it is apparently designed to be a “procedural” requirement. That may not sound like much to non-lawyers, but it is actually a big deal and one of the most suspicious aspects of the legislation. See, “procedural” laws are normally applied retroactively. The bill then may pave the way to whitewashing all these illegal affidavits retroactively, stealing the last rights of the banks’ newly homeless victims.

It Would Probably Whitewash the Fraudulent Affidavits

It would appear that all these affidavits were not “lawful” notarizations at the time they were made, but what would happen if a state court in Delaware or North Dakota (to mention just two jurisdictions that go out of their ways to appease corporate interests) ruled that they were, in fact, lawful? Or what would happen if any state passed legislation that purported to authorize, retroactively, these affidavits? These answers are not clear to me, and I would suggest that they cannot be made sufficiently clear to justify the law. There is a high risk that the law would be applied retroactively to render these fraudulent affidavits effective.

And to be real for a minute, isn’t that exactly what the purpose of the legislation clearly was?

And, what is clear is that under the legislation, if a state actually did that, it could export its policy to every other state in the Union, regardless of whether those states wanted it.

The Bill Expands the Scope of Federal Government Too Much

Of course it is obvious, isn’t it, that the bill was designed to take the power to regulate notarization out of the hands of the states, where it has long resided, and “federalize” the process. The bill, accepted by every Republican Senator (and every Democratic one, too) is an affront to federalism and represents a significant expansion of federal power. It is a gross intrusion into the function of the state courts.

But What about the Requirement of Interstate Commerce?

Of course there’s the requirement that there be “interstate commerce,” doesn’t that count for something in limiting the effect of this act? Nope. It doesn’t.

The term “interstate commerce,” as it applies to federal power in constitutional law, is one of the most elastic terms in the language. During the 1930s, for example, in a series of cases that has often been cited and never overruled, the term was applied to small-time farmers drinking the milk of their own cows or (different) farmers baking bread from the wheat they had grown on their own small farms. Neither cows, milk, nor wheat had ever been offered for sale to anybody, much less anyone in a different state. These very private, local actions were considered “interstate commerce” because they removed demand from the interstate commercial system.

Can you imagine then, that the disposition of a house, whose deed has been apportioned into a collateralized debt obligation (cdo), sold to (the highly federally regulated) pension funds across state or even national lines as a security under the jurisdiction of the U.S. Securities Exchange Commission or other federal agencies, would not be considered “interstate commerce?”

There is no question that it would be.

That means that a fifty-foot by fifty-foot plot of earth in the middle of the state, perhaps not even accessible by automobile, would be subject to the reach of federal law. The person buying the house would have no control over whether it “entered” interstate commerce. Even in the times we live that represents a gross expansion of the federal reach. It should be rejected.

The Bill Is Not Unprecedented

Unfortunately, the Interstate Recognition of Notarizations Act of 2010 is not unprecedented in the way the federal government takes possession of an area of the law and usurps the states. One of the most notorious examples of that is the Interstate Banking Act, which, among other things, provide that if the interest rate charged by a credit card (for example) is legal in the state the debt was incurred, it is legal everywhere.

This is why we have credit card interest rates of 29% or higher. Contract law permits contracting parties to make the state where the debt is incurred or paid. This is why so many credit card payments go to post office boxes in North Dakota, Texas or Illinois. North Dakota is just fine with 29% interest rates although many states regard the rate as usurious and would make it unenforceable regardless of where it was incurred. Such a rate is considered against public policy—abhorrent to public policy as a criminal act. The Interstate Banking Act overrules those objections and opens the door to usury nationwide. As it was, of course, intended to do by the banking interests that promoted the legislation.

A “Race to the Bottom”

Federalizing the interest rates created what is called a “race to the bottom.” Since any state would be free to export its usury nationwide, and the corporations would locate in the state with the laxest policies, many states rapidly and competitively reduced their usury protections or did away with them altogether. The Founders, most of whom hated the banks for very good reasons which they frequently discussed, would undoubtedly have been horrified by the usury the constitution supposedly permitted to spread throughout the land. But there you have it.

Question: can anybody doubt that, going forward, states would competitively reduce the requirements of their notary publics? Consider the politics. If North Dakota considers whether to permit distant notarizations with virtually no controls, then a large, monied and organized elite all across the nation would have a vested interest in the legislation passing.
The opposition would be primarily local, and it would be overwhelmed by the promises of prosperity to the state of all those businesses relocating to North Dakota. Indeed, it might even be possible to guess that all the money flowing into North Dakota would almost assure that none of its residents would ever be poor enough to have a house foreclosed upon, especially if a companion law was passed providing special governmental help to anyone who needed it. Thus a small population could be, well, let’s just call it bribed, although not illegally, into passing a law which would radically alter the future of homeowners throughout the rest of the states.

Who can doubt that this is exactly the way it would happen? If you put tools into the hands of people skilled and unscrupulous enough to use them, you must expect that they will do so. And again, what other purpose could the Interstate Recognition of Notarizations Act have? It was plainly written for this very purpose and none other.

I congratulate Obama for refusing to sign this Act. But I do not trust him—his party controlled the Congress that passed the bill, and Obama himself has done a great deal to help the banks during his administration. I note also with dismay the conspicuous absence of Tea Party opposition to the bill. Watch for this bill and oppose it. It is designed to, and assuredly will if it is passed, permit highway robbery.

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Debt Collection Mills Using Computer Software to File “Factory” Suits

As anyone who visits my site or reads any of my writings can attest, I often point out that debt collectors frequently file lawsuits based on little more than a “computer tape” containing some very basic information about the alleged debtor and debt. The New York Times has confirmed that essential insight in their article, “Automated Debt Collection.

In the article, the Times points to a firm called Cohen & Slamowitz, a Woodbury, N.Y., firm that specializes in debt collection. The firm has been filing roughly 80,000 lawsuits a year.

With just 14 lawyers on staff, that works out to more than 5,700 cases per lawyer. That in turn works out to filing about two cases per hour, every hour of a 365 day year. Of course, this leaves the lawyers no time at all to do anything else on the suit.

How is it possible? Cohen & Slamowitz relies on computer software to help prepare its cases, and the lawyers merely process the paperwork. As the Times article points out, typically, a debt buyer sends a law firm an electronic database that contains various data about consumers, including name, home address, the outstanding balance, the date of default and whether interest is still accruing on the account.

Once the data is obtained by a law firm, software like Collection-Master from a company called Commercial Legal Software can “take a file and run it through the entire legal system automatically,” including sending out collection letters, summonses and lawsuits, said Nicholas D. Arcaro, vice president for sales and marketing at the company. Although legal ethics requires a lawyer to perform an independent analysis to make reasonably certain a case is well-founded in law and fact, there is little time for such niceties when you’re filing two suits per hour every hour of the year.

The Federal Trade Commission has also weighed in, saying the system for resolving disputes over consumer debts was broken and in need of “significant reforms.” The agency urged states to adopt measures to make it more likely that consumers would show up in court to defend themselves; currently, most do not, resulting in default judgments. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment.

“We are pushing very hard to make certain that debt collectors have sufficient substantiation, particularly when a consumer challenges the debt,” said David Vladeck, director of the commission’s Bureau of Consumer Protection. Of course, this documentation does not exist in many cases.

There is a website that provides people being sued for debt all the information they need to take action to protect themselves. My site: YourLegalLegUp.com. If more people used it, they could probably force the debt collectors to change their business practices. If you’re being sued for debt, or threatened or harassed about debt, check it out.

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Do YourLegalLegUp Litigation materials work on Original Creditors

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Debt Is a Family Matter

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Introduction to Your Legal Leg Up

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Filed under credit card debt, credit debt, debt collection, discovery, Evidence, FDCPA, Motions - for summary judgment, to compel, to vacate or set aside, to exclude, to dismiss