Wednesday, April 25, 2012

Are Mortgage Loans Illegal?

A little known landmark case makes mortgage loans illegal. In fact, any bank loan may not be legal. In order for a bank legally lend you money they have to provide what is called consideration. In this case consideration is their money. However, banks never loan you real money. They loan you money made out of thin air.

Several years ago, the Federal Reserve of Chicago drafted a document entitled Modern Money Mechanics. The document outlines how money is created in a fractional reserve banking system. The fractional banking system is standard practice for all major banks. This fractional reserve banking system generally allows the government and banks to create money from promissory notes or more simply put, out of debt. It goes on to explain is the once the bank receives the money from the Federal Reserve or from deposits from customer the bank can take 10% of that money to retain as reserves. This bank can then create nine times that amount from more debt. In a nutshell, money is debt and debt is money. So therefore, bank loans including mortgage loans, credit cards and auto loans are not legal because bank loan you money from debt and not their assets. So therefore, bank does not own this money and cannot collect money on that loan.

In 1969, a man by the name of Jerome Daly challenged the fractional reserves system when he was faced with a foreclosure for being 6 in arrears with his bank, National Bank of Montgomery, Minnesota. The bank foreclosed and brought the property to a sheriff's sale in 1967.
Mr. Daily pointed out in the case that the bank had no legal right to foreclosure because it never really offered their own money to make the loan instead the invented the money or created the money out of thin air to lend to Mr. Daily via the fractional reserve system. The banker even admitted that this was standard banking practice.

Interesting to note that six months later that banker was found dead from a "boating accident". It was later found that he was poisoned.

The judge, Justice Martin V. Mahoney agreed with Mr. Daily and stated that the bank do not in fact put up it's own cash to make the loan but rather put up money created from debt. Since the bank did not own the money they therefore cannot collect on the loan. Mr. Daily won the case and the sheriff's sale was deemed void. This case dubbed The Credit River Decision, was never appealed or overturned so this law remains in effect.

Unfortunately though, this was a landmark case it is not widely known and most people don't even known that the law is on their side when is comes to collection of debt. The laws are here to protect not just big companies but the average Joe as well. It just takes a little research to find out how the laws can benefit you.

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