Condoning Fraud and Expanding Federal Government:

The “Interstate Recognition of Notarizations Act of 2010”

by Kenneth Gibert, Your LegalLegUp.com

In the midst of a firestorm over fraudulent foreclosures, Congress passed the “interstate Recognition of
Notarizations Act of 2010” and sent it to the president for his signature. Many believe the Act would
whitewash the fraudulent foreclosures that have been in the news lately and which (apparently) have
thrown tens of thousands of homeowners out of their homes illegally.
The House had already passed the bill, and the Senate passed the bill unanimously by voice vote with
almost no, or perhaps absolutely no, debate (the record isn't clear). The president, in a move hailed by
some as “courageous” and all that, “sent the bill back” for further study. He didn't veto it, but he did
send it back, a maneuver called a “pocket veto.” This is definitely one to watch.
Section 3 contains the language of greatest interest to me as it applies to state courts and their
procedures, which is where foreclosures inevitably take place, and I'll note that Section 2 says exactly
the same thing regarding the federal courts. Whatever else may be said, the bill is designed to “occupy
the entire field” of notarizations. Here is Section 3 in its entirety, entitled “Recognition of Notarizations
in State Courts.”
Each court that operates under the jurisdiction of a State shall recognize any lawful notarization
made by a notary public licensed or commissioned under the laws of a State other than the State
where the court is located if--
(1) such notarization occurs in or affects interstate commerce; and
(2)(A) a seal of office, as symbol of the notary public’s authority, is used in the notarization; or
(B) in the case of an electronic record, the seal information is securely attached to, or logically
associated with, the electronic record so as to render the record tamper-resistant.
It sounds pretty innocent, doesn't it?
But the bill's congressional sponsors refused to answer reporters' questions about the constituents who
“wanted” the bill, and specifically they refused to answer whether the banks and other lending
institutions wanted it. Some regard it as suspicious that the bill went through congress without debate
during the very week when what may be a vast conspiracy to create illegal affidavits and railroad the
foreclosure process was beginning to be exposed.
Count me as one of those.
So What Are Notarizations?
A Notary Public is a person granted the power by state law to accept sworn testimony and create a
document that will become a public record. The creation of that document, though applying a notary
“seal,” is “notarization.” States regulate this power, requiring notaries to take courses on their
responsibilities. They also set forth a variety of requirements that must be met before a notarization can
occur. I believe these (currently) include, at a minimum, the physical presence of the notary at the time
of signature, and perhaps some verification that the person signing have read the document in question
and have “personal” knowledge of the facts to which he or she is attesting. That verification, of course,
is a pretty minimal thing, often a mere reference in the affidavit itself. The person signing the affidavit
is under oath, although this is written by the notary (usually with a stamp) rather than “administered.” It
can be a pretty lax thing.
Lax, but Not Lax Enough for Lenders
The requirements have apparently been too heavy for foreclosing institutions, though, as stories of
people signing 8,000 affidavits per month are coming to light or signing affidavits far from the notary
or on different days than the notary signed. Signing an affidavit without reading it, where you state in
the affidavit that you have read it, is perjury. A notary notarizing a blank document is, in every
jurisdiction of which I know, grounds for the dismissal of the notary. It may even be criminal. The
foreclosing institutions have rendered the legal apparatus, designed to protect borrowers from illegal
foreclosures, a mockery. And this is probably because they do not have the documents they need to
foreclose legally and do not even know where to find them.
Right now the foreclosing institutions linked to these activities are under investigation by various state
attorneys general and are possibly liable to the people they have foreclosed upon for hundreds of
millions of dollars, perhaps billions. Some banks have suspended foreclosures pending various
outcomes.
How Would The New Bill Affect These Foreclosures?
Because the bill requires “recognition” of a “lawful” notarization, it is apparently designed to be a
“procedural” requirement. That may not sound like much to non-lawyers, but it is actually a big deal
and one of the most suspicious aspects of the legislation. See, “procedural” laws are normally applied
retroactively. The bill then may pave the way to whitewashing all these illegal affidavits retroactively,
stealing the last rights of the banks' newly homeless victims.
It Would Probably Whitewash the Fraudulent Affidavits
It would appear that all these affidavits were not “lawful” notarizations at the time they were made, but
what would happen if a state court in Delaware or North Dakota (to mention just two jurisdictions that
go out of their ways to appease corporate interests) ruled that they were, in fact, lawful? Or what would
happen if any state passed legislation that purported to authorize, retroactively, these affidavits? These
answers are not clear to me, and I would suggest that they cannot be made sufficiently clear to justify
the law. There is a high risk that the law would be applied retroactively to render these fraudulent
affidavits effective.
And to be real for a minute, isn't that exactly what the purpose of the legislation clearly was?
And, what is clear is that under the legislation, if a state actually did that, it could export its policy to
every other state in the Union, regardless of whether those states wanted it.
The Bill Expands the Scope of Federal Government Too Much
Of course it is obvious, isn't it, that the bill was designed to take the power to regulate notarization out
of the hands of the states, where it has long resided, and “federalize” the process. The bill, accepted by
every Republican Senator (and every Democratic one, too) is an affront to federalism and represents a
significant expansion of federal power. It is a gross intrusion into the function of the state courts. While
some would argue that the Supreme Court would strike the law down as an invasion of the powers
reserved to (and traditionally residing with) the states under the 10th amendment, I do not share this
confidence. Possibly it would be, but at a minimum this would require a year of litigation, during which
time countless people would probably lose their homes.
But What about the Requirement of Interstate Commerce?
Of course there's the requirement that there be “interstate commerce,” doesn't that count for something
in limiting the effect of this act? Nope. It doesn't. Or probably not.
The term “interstate commerce,” as it applies to federal power in constitutional law, is one of the most
elastic terms in the language. During the 1930s, for example, in a series of cases that has often been
cited and never overruled, the term was applied to small-time farmers drinking the milk of their own
cows or (different) farmers baking bread from the wheat they had grown on their own small farms.
Neither cows, milk, nor wheat had ever been offered for sale to anybody, much less anyone in a
different state. These very private, local actions were considered “interstate commerce” because they
removed demand from the interstate commercial system.
Can you imagine then, that the disposition of a house, whose deed has been apportioned into a
collateralized debt obligation (cdo), sold to (the highly federally regulated) pension funds across state
or even national lines as a security under the jurisdiction of the U.S. Securities Exchange Commission
or other federal agencies, would not be considered “interstate commerce?”
There is no question in my mind that it would be.
That means that a fifty-foot by fifty-foot plot of earth in the middle of the state, perhaps not even
accessible by automobile, would be subject to the reach of federal law. The person buying the house
would have no control over whether it “entered” interstate commerce. Even in the times we live that
represents a gross expansion of the federal reach. It should be rejected.
The Supreme Court has, over the past ten years, begun to take a more cautious view of some forms of
federalism. However, not nearly enough for my comfort. This is a Supreme Court that seems to have
allowed every incursion into liberty conceived by those touting “national security” or “homeland
security.” No doubt there are some limits which survive, but again I do not have confidence they would
be invoked in this case, and,, again, the litigation to explore the question would likely take at least a
year while people were losing their homes.
The Bill Is Not Unprecedented
Unfortunately, the Interstate Recognition of Notarizations Act of 2010 is not unprecedented in the way
the federal government takes possession of an area of the law and usurps the policies of the states. One
of the most notorious examples of that is the Interstate Banking Act, which, among other things,
provide that if the interest rate charged on a credit card (for example) is legal in the state the debt was
incurred, it is legal everywhere.
This is why we have credit card interest rates of 29% or higher. Contract law permits contracting
parties to make the state where the debt is incurred or paid. This is why so many credit card payments
go to post office boxes in North Dakota, Texas or Illinois. North Dakota is just fine with 29% interest
rates although many states regard the rate as usurious and would make it unenforceable regardless of
where it was incurred. Such a rate is considered against public policy—abhorrent to public policy as a
criminal act. The Interstate Banking Act overrules those objections and opens the door to usury
nationwide. As it was, of course, intended to do by the banking interests that promoted the legislation.
A “Race to the Bottom”
Federalizing the interest rates created what is called a “race to the bottom.” Since any state would be
free to export its usury nationwide, and the corporations would locate in the state with the laxest
policies, many states rapidly and competitively reduced their usury protections or did away with them
altogether. The Founders, most of whom hated the banks for very good reasons which they frequently
discussed, would undoubtedly have been horrified by the usury the constitution supposedly permitted
to spread throughout the land. But there you have it.
Question: can anybody doubt that, going forward, states would competitively reduce the requirements
of their notary publics? Consider the politics. If North Dakota considers whether to permit distant
notarizations with virtually no controls, then a large, monied and organized elite all across the nation
would have a vested interest in the legislation passing.
The opposition would be primarily local, and it would be overwhelmed by the promises of prosperity to
the state of all those businesses relocating to North Dakota. Indeed, it might even be possible to guess
that all the money flowing into North Dakota would almost assure that none of its residents would ever
be poor enough to have a house foreclosed upon, especially if a companion law was passed providing
special governmental help to anyone who needed it. Thus a small population could be, well, let's just
call it bribed, although not illegally, into passing a law which would radically alter the future of
homeowners throughout the rest of the states.
Who can doubt that this is exactly the way it would happen? If you put tools into the hands of people
skilled and unscrupulous enough to use them, you must expect that they will do so. And again, what
other purpose could the Interstate Recognition of Notarizations Act have? It was plainly written for this
very purpose and none other.
I congratulate Obama for refusing to sign this Act. But I do not trust him—his party controlled the
Congress that passed the bill, and Obama himself has done a great deal to help the banks during his
administration. I note also with dismay the conspicuous absence of Tea Party opposition to the bill.
Watch for this bill and oppose it. It is designed to, and assuredly will if it is passed, permit highway
robbery.