You’ve seen the claims:
“Eliminate your mortgage!!”
Can this really be true? Well, I’ve researched the law and here’s what I came up with.
The Claim
They claim they are making is that you can legally eliminate your mortgage based on a legal loophole that goes something like this…“If the lender who funded your loan used borrowed money to fund your loan, then the loan is not valid. And, since the loan is not valid, the security instrument is not valid either. All you do is simply march into court and ask a judge to void your mortgage lien, and you don’t have to pay it back.”Now, without going into legal issues, a common-sense approach would tell you that the entire premise of this argument is patently absurd. Think about it… most lenders use borrowed money to fund loans, that’s the nature of the business.
So, if these promoters are correct, then millions of mortgages would be void. The entire economy would collapse.
The Law
The "mortgage elimination" promoters cite various court cases in support of their position. At first blush, it would seem there are dozens of court cases in which the judge actually did what they claimed, that is, declare a mortgage void because the lender used borrowed funds for the loan. But, since most laymen are not trained in the law, they take this stuff, hook, line, and sinker.I’ve read the decisions and they all have a common theme: they don’t support the mortgage elimination theory. In fact, most of the cases are only vaguely on point.The “tax protestor” promoters did the same thing… take a quote from a judge’s decision out of context and cite the case as support for their position. In the end, the tax protestors all lost in court, paid large fines and went away with their tails between their legs. The government went after the promoters of the scam.
Similarly, the government is going after the promoters of the mortgage elimination scam. The Federal Reserve recently issued a warning, a copy of which can be found at the end of this article. The Office of the Comptroller of the Currency issued a similar warning last year.
The Cult of Stupidity
As I write this, undoubtedly a few “followers” of the theory will email me and argue that I don’t understand or that I’m part of the “establishment mentality” that keeps the little guy down. Of course, these are likely the same people who are collecting referral fees from the scammers that are charging thousands of dollars to consumers in exchange for a false promise to eliminate their mortgages.
How to Really Eliminate Your Mortgage
There are some legal ways to eliminate your mortgage:
- Pay it off in full
- File for Chapter 7 bankruptcy (in which case you will not be liable for the mortgage note, but you will also lose the house)
- Find a REAL legal challenge that a judge is willing to accept as a valid reason to declare the debt void, such as usury, a gross violation of lending laws, fraud, incompetence or the like.
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