Who is PETE?

Let us start from the beginning shall we. Quite simply put when the borrower signs the Tangible Promissory Note the borrower automatically incurs the obligation under the Uniform Commercial Code or your states statutory equivalence of UCC Article §3-412 . The obligation of the issuer of the Tangible Promissory Note will be paid to a “person entitled to enforce” the note. “Person entitled to enforce”—hereinafter abbreviated to “PETE”—is in turn defined in UCC Article §3-301as Person Entitled To Enforce Instrument “”Person entitled to enforce” an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d)”

The judicial requirements have not changed, what has changed is the understanding of how to correctly articulate those requirements of the law pertaining to PETE with specificity and particularity as the arguments that are being presented to the courts are multifarious and not complete.

The simple (and basic) rule is what is called the Golden Rule of Mortgage Foreclosure: the Uniform Commercial Code forbids foreclosure of the mortgage loan unless the creditor possesses the properly-negotiated original promissory note. If this can’t be done the foreclosure must stop. It is a fundamental requisite to a foreclosure proceeding that the party seeking foreclosure have standing to seek relief. McLean v. JP Morgan Chase Bank, N.A., 79 So. 3d 170 (Fla. Dist. Ct. App. 2012). We are enunciating in regards to acquiring rights.

Very seldom does this actually happen. What does happen is the judicial system and the public record system is lead to believe that certain transactions and events have taken place when in fact they have not. The reason why they have not taken place is simple. Greed has overtaken all. We still have the same amount of time that we had years ago for each day. The difference is how much more money can be made in that same amount of time. By cutting corners and not doing what was required pursuant to the statutory requirements of law, time could be saved and more money was put into the pockets of the banks. The drawback to this is that there is now no PETE. With the Tangible Promissory Note not being properly negotiated, transferred and delivered negotiation does not take place. PETE cannot exist.

Yes an obligation does still exist, but to whom and what obligation are we talking about? Are we talking about the obligation which is evidenced by the Tangible Promissory Note or are we talking about the intangible obligation that was created by the Tangible Obligee also known as the (Account Debtor)? The Account Debtor is defined in UCC § 9-102(3) or your states equivalence as ) “account debtor” means a person obligated on an account, chattel paper or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper;

A second obligation has been created using the payment stream of the Tangible Promissory Note. This is how it is consummated. After the borrower signed the documents at closing, the security instrument being either a Deed of Trust or Mortgage is sent to the County Recorder’s Office where it is filed, indexed and recorded. When the documents come back from the county recorder’s office within 48-72 hours they are scanned into a digitized format, or better known as an electronic copy. It is this electronic copy that is now used for negotiation and not the Tangible Originals. This is what is sold to an Intangible Obligee. The problem is that Intangible Obligee, has taken possession of an “Electronic Mortgage Loan Package” and is lacking legal rights to the tangible security instrument.

Many times it is a NON- Holder in Due course that is alleging a default and it is this NON-Holder in Due Course that has not been damaged. Only when challenges have been made to the validity or claim of PETE will the judicial system take a second look. This is what we must do.


Joseph Esquivel
Mortgage Compliance Investigators
Copyrighted© 2013

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