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Rebalancing Public And Private In The Law Of Mortgage Transfer, John P. Hunt

John P Hunt

The law governing the United States’ $13 trillion mortgage market is broken. Courts and legislatures around the country continue to struggle with the fallout from the effort to build a 21st century global market in mortgages on a fragmented, arguably archaic legal foundation. These authorities’ struggles stem in large part from the lack of clarity about the legal requirements for mortgage transfer, the key process for contemporary mortgage finance.

We demonstrate two respects in which American mortgage transfer law is unclear and offer suggestions for fixing it. Revisions to the Uniform Commercial Code adopted around the turn of the century …

Ten Dollars For 10,736 Mortgages: Should Nominal Consideration Supersede Real Property Recording Law, John P. Hunt

John P Hunt

Our review of mortgage securitization transactions from 2005 to 2007 suggests that many intermediate mortgage transfers structured as promissory note sales involved the exchange of only nominal or other dubious consideration. The Uniform Commercial Code requires consideration “sufficient to support a simple contract” as a prerequisite for treatment of a transaction as a promissory note sale. Treatment as a sale triggers the Code’s “mortgage follows the note” provisions, which may protect transactions from claims that the mortgages involved are unenforceable, are vulnerable to competing claimants, or were never transferred in the first place. Mortgage securitization transactions are potentially exposed to …

The End Of Mortgage Securitization? Electronic Registration As A Threat To Bankruptcy Remotenes, John P. Hunt, Richard Stanton, Nancy Wallace

John P Hunt

A central tenet of asset securitization in the United States—that assets are bankruptcy remote from their sponsors—may be threatened by innovations in the transfer of mortgage loans from the loan-originators (sponsors) to the legal entities that own the mortgage pools (the Special Purpose Vehicles (SPVs)). The major legal argument advanced in the paper is that because the mortgage is an interest in real property, the bankruptcy-remoteness rules applicable to real property, including § 544(a)(3) of the Bankruptcy Code, create a risk to the bankruptcy remoteness of mortgage transactions unless proper recording occurs. We review the traditional mortgage transfer process and …

Taking Bubbles Seriously In Contract Law, John P. Hunt

John P Hunt

This Article argues that bubbles driven by traders with poor judgment exist, can be identified on an aggregate level, and have negative effects on parties that are not involved in the bubble markets. If those premises are accepted, then failing to respect bubble contracts – rescinding bubble transactions – makes sense. Such a rule should deter the formation of bubbles. Moreover, the rule is not in serious tension with the principle of freedom of contract to the degree one might expect. The poor judgment exhibited during a bubble suggests that incapacity should, and mistake and fraud do, apply to a …