Adam LEVITIN, a noted Georgetown University Law professor makes precisely this argument rather articulately in a post at Credit Slips:
"Fisking the American Securitization Forum's Congressional Testimony"
Although I believe that LEVITIN's argument seems compelling, particularly on public policy grounds (indorsement in blank seems to invite possible comingling and mischief where one trustee is serving in this role for many institutional trusts), I also believe that LEVITIN's argument fails for several reasons, which I have not yet posted as comments to his post (I really do NOT like making the argument for the other side).
First, if one carefully checks the trust indentures, PSAs and registration statements, most of these do NOT specify that the trusts are either New York trusts or subject to New York trust law. To the contrary, many of the trusts are described as Delaware trusts. So right off the bat, one probably needs to brush off Delaware trust law to see whether the arguments can gain traction.
Second, I believe that LEVITIN's argument imputing some requirement that every negotiation requires an indorsement, though aggressive, is a bit of a tortured reading of the PSA/registration statement language. Indorsement in blank is expressly ALLOWED under the UCC and thereby delivery of the instrument is ALL that is thereafter typcially required to accomplish negotiation.
I DO believe that delivery needs to be PROVEN by affirmative primary evidence and that conclusory statements by persons lacking personal knowledge will NOT DO. The Best Evidence Rule would require that the party seeking to prove delivery either produce a witness to the delivery (who can actually testify that they RECALL the delivery of that particular instrument amongst millions) OR a the production of a delivery receipt. The hearsay testimony of a person who asserts that the instrument was delivered because they have checked the business records and these records reflect delivery is insufficient.
Third, the argument that the belated delivery of the promissory note or belated assignment of mortgage cannot effect a valid conveyance seems to me to be a pretty shakey argument absent some specific state statutory prohibition.
Permit me to illustrate by way of analogy. Suppose that we entered into a contract of sale providing for the sale of a parcel of real estate and calling for closing as of a particular date. The date might very well be of central importance because it might affect the tax consequences of the transaction (either as to eligibility for some preferential tax treatment or the determination as to which tax year the transaction falls for one or both parties).
Further suppose that due to delays in financing or some other reason the transaction fails to close on the contemplated date. But further suppose that despite the contractual provisions specifying that time was of the essence and specifying the closing date that a later closing took place, which closing was memorialized by an otherwise valid deed, transfer of the consideration, execution of a note, mortgage, HUD-1 Settlement Statement, etc.
Can another non-party to the closing transaction subsequently argue that the conveyance is invalid because it didn't take place as expressly shown within the argeement of sale?
Common sense indicates otherwise. The delay would seem to have been waived by both parties. There may very well be unfavorable tax consequences as a result of the delay, but these adverse tax consequences are independent of the question as to the validity and legitimacy of the conveyance.
So I believe that the argument that a belated conveyance into the trust is invalid is NOT going to prove to be a winning argument where the plaintiff actually UNDERSTANDS the law and the facts and makes a compelling argument.
But I also believe that this is the incorrect argument for another different reason, and this is something that distinguishes my position from many other foreclosure defense advicates. Others look at the evdience of the belated assignment and see an untimely conveyance.
I look at this assignment and see a forged instrument which conveys nothing at all and which was fabricated solely for use as false evidence in the foreclosure. And so instead of focusing on trying to prove that the instrument was invalid, through tardiness, I would be seeking to prove that the instrument itself was a forgery and a fraud upon the court.
With good discovery and a strong expert witness, I believe that this can be done in a startling number of cases.
I would certainly encourage you to further research and explore Adam LEVITIN's arguements and to MAKE THESE arguments if you believe that they fit the facts of your case and the law of your jurisdiction. There is certainly nothing wrong with making a passionate, articulate argument, even if it proves to be unpersuasive. And in weighing these arguments, bear in mind that Mr. LEVITIN is a highly educated and qualified expert in this area of the law and I am merely a fellow pro se litigant lacking in any qualification to give you a legal opinion.
But if you find any merit to my arguments, you might use these as a basis for further research or inquiry, in consultation with a capable attorney competent to give you legal advice!