HOLDER IN DUE COURSE

§ 3-302. Holder in Due Course

3-106(d), “holder in due course” means the holder of an instrument if:

(1) the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and

(2) the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306, and (vi) without notice that any party has a defense or claim in recoupment described in Section 3-305(a)

The allegations in the complaint and the assignment of mortgage show the note wastransferred knowing a default had occurred and the transfer is subject to UCC 9requiring proof of the transfer chain and not UCC 3.  In addition, where the loan documents demonstrate that the loan is covered by HOEPA coverage, assignees “shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor.” 15 U.S.C. § 1641(d)(1). This provision mirrors the FTC Holder Rule and creates assignee liability for all state and federal claims and defenses. For monetary damages claims under TILA, it provides an exception to general rule that violations must appear on the face of the documents. Pulphus v. Sullivan, No. 02 C 5794, 2003 U.S. Dist. LEXIS 7080, at *64 n.11 (N.D. Ill. April 25, 2003); Dash v. Firstplus Home Loan Trust 1996-2, 248 F. Supp. 2d 489 (M.D.N.C. 2003); Cooper v. First Gov't Mortgage & Investors Corp., 238 F. Supp. 2d 50 (D.D.C. 2002); Bryant v. Mortgage Capital Resource Corp., 2002 U.S. Dist. LEXIS1566, at **17-22 (N.D. Ga. Jan. 14, 2002); Mason v. Fieldstone Mortgage Co., U.S. Dist. LEXIS 16415 (N.D. Ill. 2001); Vandenbroeck v. ContiMortgage Corp., 53 F.Supp. 965, 968 (W.D. Mich. 1999); In re Rodrigues, 278 B.R. 683 (Bankr. D.R.I. 2002); In re Jackson, 245 B.R. 23 (Bankr. E.D. Pa. 2000); In re Barber, 266 B.R. 309 (Bankr. E.D. Pa. 2001); In re Murray, 239 B.R. 728, 733 (Bankr. E.D. Pa. 1999).

In the course and conduct of offering and making HOEPA mortgage loans, defendant in numerous instances has violated, and continues to violate, the requirements of HOEPA and Regulation Z by selling or otherwise assigning such loans without  furnishing the following notice to the purchaser or assignee:  Notice: This is a mortgage subject to special rules under the federal Truth in Lending Act. Purchasers or assignees of this mortgage could be liable for all claims and defenses with respect to the mortgage that the borrower could assert against the creditor, in violation of Section 131(d)(4) of TILA, 15 U.S.C. § 1641(d)(4), and Section 226.32(e)(3) of Regulation Z, 12 C.F.R. § 226.32(e)(3). MISC. FRAUD:  Any false representation of material facts made with knowledge of falsity and with intent that it shall be acted on by another in entering into contract, and which is so acted upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover damages.”Barnsdall Refining Corn. v. Birnam wood Oil Co., 92 F 2d 817.  The contract is void if it is only in part connected with the illegal transaction and the promise single or entire.  Guardian Agency v. Guardian Mutual. Savings Bank, 227 Wis 550, 279 NW 83.  Liability 1. Duty of Good Faith In every New Mexico contract there is an implied duty of good faith and fair dealing upon the parties in the performance and enforcement of the contract.  Paiz v. State Farm Fire & Cas. Co., 1994-NMSC-079, ¶ 31, 118 N.M. 203, 880 P.2d 300 (internal quotation marks & citation omitted), limited on other grounds, Sloan v. State Farm Mut. Auto Ins. Co. (In re Sloan), 2004-NMSC-004, 135 N.M. 106, 85 P.3d 230. “The breach of this covenant requires a showing of bad faith or that one party wrongfully and intentionally used the contract to the detriment of the other.