Osmosis is the transfer of gas or fluids through a semi-permeable membrane—oxygen passes through capillary walls to mix with blood, thereby oxygenating the blood. Our bodies depend on osmosis, and some business transactions follow that organic model with the Uniform Commercial Code.
The Uniform Commercial Code (UCC) is a comprehensive code addressing most aspects of commercial law. First published in 1952, its purpose is to help commerce flow smoothly. In real estate, if the note is transferred properly, then the mortgage automatically follows the note according to the UCC. However, the UCC was designed as a set of default provisions in the absence of a contract.
In the survival of the fittest, banks sometimes overlook the trust documents that govern what a trust can and cannot hold. A trust document, a contract, trumps the UCC. If the trust document says the trust cannot hold the note, then the trust cannot hold the note. In the presence of such a contract, that contract overrides the osmosis of UCC.