Well, maybe…hopefully…because in most, if not all, promissory notes—particularly in the context of mortgages—this clause appears toward the end (often under section 8):
“If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note.”
Now, this is written very unambiguously and in straightforward, plain English. Let’s break down a couple of the main points.
“If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed.”
This is obviously to keep both husbands and wives bound to repay the Note, even if they get divorced or one of them dies or becomes incapacitated. Also note that this is why the lender doesn’t sign the Note, which is a circumstance that many people have pointed to as being an inherent problem with the Note to begin with.
Sentence 2 (THE BIG ONE):
“Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things.”
The phrase “these things” is a clear reference back to the first sentence which requires those signing the note to “keep all of the promises made in this Note” which includes “the promise to pay the full amount owed.” This sentence, while also clear and unambiguous, opens a giant can of worms, because it means, as Neil Garfield has said for some time now, that there are multiple co-obligors on these promissory notes. That is, there are (or can be) multiple persons who are on the hook to repay the loan just as much as the borrower is on the hook.
Robo-endorsers and GSEs in a world of hurt
So to put this in the context of a case I know a lot about, i.e. my own, this second sentence of section 8 means that Michele Sjolander and Laurie Meder—both of whom are endorsers on my Note–are obligated to “keep all of the promises made” in my Note which includes the promise to “pay the full amount owed.” And that’s gotta be a bitch for Sjolander and Meder, because their names are allegedly on a hell of a lot of Notes, so they are “fully and personally obligated” to pay literally billions of dollars, according to section 8 of millions of promissory notes.
Furthermore, Fannie Mae was/is a guarantor on my Note. That is, Fannie Mae explicitly states the following in the prospectus supplement for the pool my note was supposedly placed in (I’m paraphrasing): that Fannie Mae will pay the principal and interest payments due under my Note to the holders of certificates issued by that pool whether or not I pay Fannie Mae. I’ll get the exact quote later, but that paraphrase is practically a quote. And Fannie Mae has put this same guarantor language in other prospectus supplements as well, so Fannie Mae itself is on the hook for literally billions or trillions of dollars. QE Unlimited starts to make a lot more sense in this context, does it not? The ongoing conservatorship of Fannie and Freddie also can be seen in a much clearer light in the context of this section.
Why Neil Garfield is right
As mentioned earlier, Neil Garfield of Living Lies has talked about this phenomenon for some time. I don’t remember him ever actually specifically mentioning section 8 of a promissory note, but he may have. One of Garfield’s collaborators—Dan Edstrom—talked about this issue recently in an article entitled “Failure to Allege Lack of Default,” which nicely sums up what Garfield has been saying for a while now.
And what Garfield has said is this: there is never a default on your Note. The payment may not have been made by the borrower, but it was made by someone, either a guarantor or an endorser. So the Noteholder never experienced a default. In other words, if your Note is/was securitized, the person who was ultimately supposed to receive your payments always received them, just not from you.
Now some might say, “Well, since Fannie Mae made the payments to the Noteholder in the borrower’s stead, the borrower really does owe Fannie Mae because Fannie Mae has made good on the borrower’s promise.” Section 8, I think, argues otherwise. After all, no one forced Fannie Mae to become a guarantor of my Note. Fannie Mae knew very well that by becoming a guarantor of my Note, they were “fully and personally obligated” to keep all the Note’s promises, including full payment of the amount due. Fannie Mae wrote the Note, so they can’t say they didn’t know what it said or what it meant! So that’s on Fannie Mae, not on me or any other borrower.
What right do they have to take my house, then?
So what gives Fannie Mae the right to come after me or you? Nothing! Fannie Mae is only a trustee of the pools of notes which are sold to benefit certificateholders. And the certificateholders never experienced a default, since Fannie Mae was the guarantor of all the Notes it securitized. And it’s Fannie/Freddie’s idiotic decision to be guarantors of trillions of dollars worth of notes that led to the ongoing taxpayer bailout of those two companies.
IMPORTANT NOTE/DISCLAIMER: The above article is not and should not be construed as legal advice and was not written by an attorney. It is merely a collection of common-sense, rational observations written by a sane, rational layperson with common sense. It is recommended that you consult with an attorney for any and all legal advice and/or action.