Frequently Asked Questions

Q2: What justifies getting out of my loan agreement?

A: We all grew up believing that a loan was moneyat risk to the lender and that it should be repaid, so it’s difficult to acceptthat the banks and mortgage companies would have crafted a scheme of suchmonumental proportions to take advantage of that basic trust. It also explainswhy this scheme has been so successful. We are basically trusting people whobelieved that a financial institution in this country would deal honestly withus. When you sat down at closing after the nerve-wracking run-up to thismoment, you experienced it as a success, the culmination of a lot of effort toprove you were a credit-worthy client deserving of a loan to purchase a home orproperty, the biggest investment most of us ever make. Consequently, it was sofar out of your thinking that the documents placed in front of you could bedeceptive, but they were. Very deceptive. In a court of law, the judge, whounderstands legal language would say that full disclosure and equal protectionunder the law were available in the mortgage documents, but the average citizenis so ignorant of legal terminology that without really astute legal counsel atclosing there is no way for him to have known what really was about totranspire. After all, think of all the attorneys who have purchased homes andsigned such documents themselves without fully understanding what they meant.Here’s how it went: First you signed a promissory note, a promise to pay principleand interest over a period of time. You expected to do this. Second, you signeda Deed of Trust or Mortgage agreement wherein you repeated the promise to payunder rather confusing terms that you did not understand and did not question.In this agreement, you irrevocably granted and conveyed title to the propertyin question to the Trustee (title company) acting on behalf of the lender. Howcould you do this unless you owned the property, and if you did, how did youmanage to acquire it? You acquired it by signing the promissory note, which is legal tender in our economy. The banker turned thenote into cash through the Federal Reserve and used it to pay off the previousproperty owner. You just funded your own loan on the power of your signatureand the banker doesn’t tell you up front that you now own the property free andclear, but it clearly states in the Deed of Trust that you do, only you didn’tcatch it. At this point, you entered into the Deed of Trust or Mortgageagreement as sole owner of the property, bringing tremendous value to thetable. After having confirmed that you were in sole possession of the property("Borrower covenants that he is fully seized (in possession) of saidproperty and that it is free of all encumbrances."), you immediately signaway title to the property ("Irrevocably grant and convey") to theTrustee (title company) who holds the title to secure the "loan" forthe lender, except that no loan has been made because the lender did not usehis money to pay off the property. He used yours. An alternative scheme used inmany Deed of Trust states is the tenancy agreement wherein you enter the Deedof Trust agreement as both the Tenant and the Principal (owner of the property)and agree to rent the property from yourself with the lender acting as theservicer of the loan, mandated to take payment from the Tenant (you) anddisburse it to the Principal (you), except that they keep the payments. Knowanyone that ever got rent payments from himself back from his mortgage company?You have just signed an agreement wherein you promised to pay the lenderprinciple and interest for a property you owned free and clear and thensurrendered title to. Did you know that you did that? Of course not, or younever would have agreed to this in the first place. To add insult to injury,the lender can fractionalize your note through the Federal Reserve, expandingits value up to nine times the note’s face value ($100,000 can become$900,000), tax free money he can invest or spend as he pleases. Did you givehim permission to do this with your promise to pay? You thought that piece ofpaper was just a commitment to pay back a loan, but to the banker, yoursignature was worth hard, cold cash.

For these reasons and others, not the least ofwhich are the sense of personal empowerment and the surge of economicprosperity that would result from all the debt relief, we feel it is ethicaland justified for homeowners to be compensated for these unjust loan agreements.