The Heirs of Karl Lleywellyn: the PEB Report, Green Cheese, and the...

Why the PEB Report? 

What motivated the Permanent Editorial Board for the Uniform Commercial Code to issue its ridiculous report on the enforceability of negotiable mortgage notes (discussed in the previous post in some detail) when virtually no mortgage notes are negotiable? Why go to all the effort and fuss to issue an irrelevant report?  

The report is an attempt to paper over all of the legal and paperwork snafus that have gummed up the foreclosure system. The report is an attempt to put a finger on the scale of justice in favor of the banks in foreclosure litigation. (I hope ALI members who read this understand just what a rogue body the PEB has become; I don’t think this is a policy that the ALI membership as a whole would support.)   

To understand what’s going on here, think of the scene in Star Wars when the rebels are attacking the Death Star and the imperial officer says to Grand Moff Tarkin:

We’ve analyzed their attack, sir, and there is a danger. Should I have your ship standing by?  

The authors of the PEB report are like the nameless, cautious imperial officer.  They are lawyers who have realized that there’s a real danger to the banks in the foreclosure process because the banks failed to comply with the law (the bankers themselves don’t get this--for them this is all technicalities that don’t or shouldn’t matter.  Or as Grand Moff Tarkin responded:  Evacuate? In our moment of triumph? I think you overestimate their chances!).

It seems that the PEB report has been underway since around the fall of 2010--when the robosigning scandal broke. Some bank lawyers realized that there was something to the arguments being made by consumer attorneys and law professors that the banks had screwed up the chain of title and paper work in so many different ways that they really couldn't foreclose if courts were to take the law seriously.  (Some other law professors and I have been trying to squash this tarakan for a while--we delayed it but weren't ultimately successful.  You can see some of my comments on earlier versions of the report here and here.)    

So the PEB Report is Plan B for the banks' lawyers. Plan A was for the banks to comply with the law. But if that didn’t work, then plan B is to make the law comply with the banks. The idea here is to twist the law to make it appear as if the banks are in compliance. If the banks don’t fit the law, make the law fit the banks. Hence the attempt to sound very official about the enforceability of (negotiable) mortgage notes in the hope that no one would notice that mortgage notes are non-negotiable. Instead of rule of law, it seems, we have rule of banks.