When U.S. Bank comes in as Trustee for the the holders of series xyz etc., the use of the words Trustee and series certificates give it an air of legitimacy. But this is probably just another bluff. Reading the indenture on the bond (mortgage backed security) and the prospectus, you will see that the “Trust” may or may not be the the Special Purpose Vehicle that issued the bonds.
And of course I remind you that the “borrower” (whom I call an “issuer” for reason explained in other posts) signed a note with one set of terms and the source of funding, the investor received a bond with another set of terms (and parties) who in turn received some sort of transmittal delivery or conveyance of a pool of “assets” from a pool trustee or other third party who obtained the “assets” under an entirely different set of terms (and parties) including a buy back provision which would appear to negate the entire concept of any unconditional “assignment” (a primary condition for negotiability being the absence of conditions and the certainty that the instrument sets forth all obligations without any “off-record” activity creating a condition on payment).
In short, we have a series of independent contracts that are part of a common scheme to issue unregulated securities under false pretenses making the “borrower” and the “investor” both victims and making the “borrower” an unknowing issuer of an instrument that was intended to be used as a negotiable instrument and sold as as a security.
One of the more interesting questions raised by another reader is this issue of trusts. care to comment on the following? I’ll make it an article and post it. Send it to me at ngarfield@msn.com. Want to be a guest on the podcast show? Submit an article that gets posted.
1. What is a trust? How is it defined? How is it established for legal existence? Does it need to be registered or recorded anywhere?
2. Can a trust legally exist if it is unfunded? (If there is nothing in the trust to administer, is there a trust?)
3. What are the powers of the Trustee of an unfunded trust? Can a Trustee claim apparent or actual authority to represent the holders of bonds (mortgage backed securities) issued by a Special Purpose Vehicle — as an agent? as a trustee? Again what are the “Trustee’s” (agent?) powers?
4. Who can be a Trustee.
5. Can a financial services entity otherwise qualified to do business in the state claim to be an institutional trustee?
6. Can a financial services entity that does not qualify to do business in the state, not chartered or licensed do business as a bank? a lender? a securities issuer? a trustee? a trust company?
7. If the mortgage backed securities (bonds) are sold to investors what asset or res can be arguably in the trust?
8. If the mortgage backed securities (bonds) contain an indenture that purports to convey a pro rata share of the mortgages and notes in a pool to the owner of the certificate of mortgage backed security (bond) what asset or res can be arguably in the trust?
9. If the Special Purpose Vehicle has filed with the IRS as a REMIC conduit (see below) then how it own anything since by definition it is a conduit and must act as a conduit or else it loses tax exempt status and subjects itself to income and capital gains taxes?
FROM WIKOPEDIA:
Real Estate Mortgage Investment Conduits, or “REMICs,” are a type of special purpose vehicle used for the pooling of mortgage loans and issuance of mortgage-backed securities. They are defined under the United States Internal Revenue Code (Tax Reform Act of 1986), and are the typical vehicle of choice for the securitization of residential mortgages in the US.
REMIC usage
REMICs are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. A REMIC assembles mortgages into pools and issues pass-through certificates, multiclass bonds similar to a collateralized mortgage obligation (CMO), or other securities to investors in the secondary mortgage market. Mortgage-backed securities issued through a REMIC can be debt financings of the issuer or a sale of assets. Legal form is irrelevant to REMICs: trusts, corporations, and partnerships may all elect to have REMIC status, and even pools of assets that are not legal entities may qualify as REMICs.[2]
The Tax Reform Act eliminated the double taxation of income earned at the corporate level by an issuer and dividends paid to securities holders, thereby allowing a REMIC to structure a mortgage-backed securities offering as a sale of assets, effectively removing the loans from the originating lender’s balance sheet, rather than a debt financing in which the loans remain as balance sheet assets. A REMIC itself is exempt from federal taxes, although income earned by investors is fully taxable. As REMICs are typically exempt from tax at the entity level, they may invest only in qualified mortgages and permitted investments, including single family or multifamily mortgages, commercial mortgages, second mortgages, mortgage participations, and federal agency pass-through securities. Nonmortgage assets, such as credit card receivables, leases, and auto loans are ineligible investments. The Tax Reform Act made it easier for savings institutions and real estate investment trusts to hold mortgage securities as qualified portfolio investments. A savings institution, for instance, can include REMIC-issued mortgage-backed securities as qualifying assets in meeting federal requirements for treatment as a savings and loan for tax purposes.
To qualify as a REMIC, an entity or pool of assets must make a REMIC election, follow certain rules as to composition of assets (by holding qualified mortgages and permitted investments), adopt reasonable methods to prevent disqualified organizations from holding its residual interests, and structure investors’ interests as any number of classes of regular interests and one –- and only one -– class of residual interests.[3] The Internal Revenue Code does not appear to require REMICs to have a class of regular interests.[4]
Qualified mortgages
Qualified mortgages encompass several types of obligations and interests. Qualified mortgages are defined as “(1) any obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property, and is either transferred to the REMIC on the startup day in exchange for regular or residual interests, or purchased within three months after the startup day pursuant to a fixed-price contract in effect on the startup day, (2) any regular interest in another REMIC which is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC, (3) any qualified replacement mortgage, or (4) certain FASIT regular interests.”[5] In (1), “obligation” is ambiguous; a broad reading would include contract claims but a narrower reading would involve only what would qualify as “debt obligations” under the Code.[6] The IRC defines “principally secured” as either having “substantially all of the proceeds of the obligation . . . used to acquire or to improve or protect an interest in real property that, at the origination date, is the only security for the obligation” or having a fair market value of the interest that secures the obligation be at least 80% of the adjusted issue price (usually the amount that is loaned to the mortgagor)[7] or be at least that amount when contributed to the REMIC.[8]
Permitted investments
Permitted investments include cash flow investments, qualified reserve assets, and foreclosure property.
Cash flow investments are temporary investments in passive assets that earn interest (as opposed to accruing dividends, for example) of the payments on qualified mortgages that occur between the time that the REMIC receives the payments and the REMIC’s distribution of that money to its holders.[9] Qualifying payments include mortgage payments of principal or interest, payments on credit enhancement contracts, profits from disposing of mortgages, funds from foreclosure properties, payments for warranty breaches on mortgages, and prepayment penalties.[10]
Qualified reserve assets are forms of intangible property other than residual interests in REMICs that are held as investments as part of a qualified reserve fund, which “is any reasonably required reserve to provide for full payment of” a REMIC’s costs or payments to interest holders due to default, unexpectedly low returns, or deficits in interest from prepayments.[11] REMICs usually opt for safe, short term investments with low yields, so it is typically desirable to minimize the reserve fund while maintaining “the desired credit quality for the REMIC interests.”[12]
Foreclosure property is real property that REMICs obtain upon defaults. After obtaining foreclosure properties, REMICs have until the end of the third year to dispose of them, although the IRS sometimes grants extensions.[13] Foreclosure property loses its status if a lease creates certain kinds of rent income, if construction activities that did not begin before the REMIC acquired the property are undertaken, or if the REMIC uses the property in a trade or business without the use of an independent contractor and over 90 days after acquiring it.[14]
Regular interests
It is useful to think of regular interests as resembling debt; they tend to have lower risk with a corresponding lower yield. Regular interests are taxed as debt.[15] A regular interest must be designated as such, be issued on the startup day, contain fixed terms, provide for interest payments and how they are payable, and unconditionally entitle the holder of the interest to receive a specific amount of the principal.[16] Profits are taxed to holders.
Residual interests
Residual interests tend to involve ownership and resemble equity more than debt. However, residual interests may be neither debt nor equity. “For example, if a REMIC is a segregated pool of assets within a legal entity, the residual interest could consist of (1) the rights of ownership of the REMIC’s assets, subject to the claims of regular interest holders, or (2) if the regular interests take the form of debt secured under an indenture, a contractual right to receive distributions released from the lien of the indenture.”[17] The risk is greater, as residual interest holders are the last to be paid, but the potential gains are greater. Residual interests must be designated as such, be issued on the startup day, and not be a regular interest (which it can effortlessly avoid by not being designated as a regular interest). If the REMIC makes a distribution to residual interest holders, it must be pro rata; the pro rata requirement simplifies matters because it usually prevents a residual class from being treated as multiple classes, which could disqualify the REMIC.[18]
Forms
A REMIC can issue mortgage securities in a wide variety of forms: securities collateralized by Government National Mortgage Association (Ginnie Mae) pass-through certificates, whole loans, single class participation certificates and multiclass mortgage-backed securities; multiple class pass-through securities and multiclass mortgage-backed securities; multiple class pass-through securities with fast-pay or slow-pay features; securities with a subordinated debt tranche that assumes most of the default risk, allowing the issuer to get a better credit rating; and Collateralized Mortgage Obligations with monthly pass-through of bond interest, eliminating reinvestment risk by giving investors call protection against early repayment.
The advantages of REMICs
REMICs abolish many of the inefficiencies of collateralized mortgage obligations (CMOs) and offer issuers more options and greater flexibility..[19] REMICs have no minimum equity requirements, so REMICs can sell all of their assets rather than retain some to meet collateralization requirements. Since regular interests automatically qualify as debt, REMICs also avoid the awkward reinvestment risk that CMO issuers bear to indicate debt. REMICs also may make monthly distributions to investors where CMOs make quarterly payments. REMIC residual interests enjoy more liquidity than owner’s trusts, which restrict equity interest and personal liability transfers. REMICs offer more flexibility than CMOs, as issuers can choose any legal entity and type of securities. The REMIC’s multiple-class capabilities also permit issuers to offer different servicing priorities along with varying maturity dates, lowering default risks and reducing the need for credit enhancement.[20] REMICs are also fairly user-friendly, as the REMIC election is not difficult, and the extensive guidance in the Code and in the regulations offers “a high degree of certainty with respect to tax treatment that may not be available for other types of MBSs.”[21]
The limitations of REMICs
Though REMICs provide relief from entity-level taxation, their allowable activities are quite limited “to holding a fixed pool of mortgages and distributing payments currently to investors.”[22] A REMIC has some freedom to substitute qualified mortgages, declare bankruptcy, deal with foreclosures and defaults, dispose of and substitute defunct mortgages, prevent defaults on regular interests, prepay regular interests when the costs exceed the value of maintaining those interests,[23] and undergo a qualified liquidation,[24] in which the REMIC has 90 days to sell its assets and distribute cash to its holders.[25] All other transactions are considered to be prohibited activities and are subject to a penalty tax of 100%,[26] as are all nonqualifying contributions.
To avoid the 100% contributions tax, contributions to REMICs must be made on the startup day. However, cash contributions avoid this tax if they are given three months after the startup day, involve a clean-up call or qualified liquidation, are made as a guarantee, or are contributed by a residual interest holder to a qualified reserve fund.[27] Additionally, states may tax REMICs under state tax laws.[28] “Many states have adopted whole or partial tax exemptions for entities that qualify as REMICs under federal law.”[29]
REMICs are subject to federal income taxes at the highest corporate rate for foreclosure income and must file returns through Form 1066.[30] The foreclosure income that is taxable is the same as that for a real estate investment trust (REIT)[31] and may include rents contingent on making a profit, rents paid by a related party, rents from property to which the REMIC offers atypical services, and income from foreclosed property when the REMIC serves as dealer.[32]
The REMIC rules in some ways exacerbate problems of phantom income for residual interest holders, which occurs when taxable gain must be realized without a corresponding economic gain with which to pay the tax.[33] Phantom income arises by virtue of the way that the tax rules are written. There are penalties for transferring income to non-taxpayers, so REMIC interest holders must pay taxes on gains that they do not yet have.
Filed under: ATM, bubble, CDO, community banks, CORRUPTION, credit unions, Eviction, foreclosure, foreign relations, GTC | Honor, Investor, MODIFICATION, Mortgage, Obama, politics, securities fraud, Servicer | Tagged: borrower, disclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, lost note, mortgage meltdown, predatory lending, REMIC, rescission, RICO, securitization, taxation, trustee |
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Hello Mark,
You can get Pooling and Serving info from the Securities and Exchange Commission (SEC) web site at http://www.secinfo.com
Let me know if you need help locating your PSA.
Marcus (info@foreclosureProSe.com)
THE OFF BALANCE SHEET LIES
The following taken from a recent filing by management HSBC Finance Corporation
The consolidated financial statements include the accounts of HSBC Finance Corporation and all subsidiaries including all variable interest entities in which we are the primary beneficiary as defined by Financial Accounting Standards Board Interpretation No. 46 (Revised) (“FIN No. 46(R)”).
Unaffiliated trusts to which we have transferred securitized receivables which are qualifying special purpose entities (“QSPEs”) as defined by Statement of Financial Accounting Standards (“SFAS”) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS No. 140”), are not consolidated.
All significant intercompany accounts and transactions have been eliminated. (Really and now what…….)
Counsel, let’s attack the financial statements and compliance requirements in light of the aftermath, with new reporting requirements which may come across as an admission of guilt. Otherwise look for on going material misrepresentations, for hiding disguising or failing to disclose critical information or financial information that lacks integrity.
M Soliman
admin@borrowerhotline.com
nye, that’s the exact same thing i am dealing with, poolong & servicing agreement and subsequent transfer instrument puport my mortgage was assigned from superior to lasalle effective july 22, 1998, a corrective assignment of mortgage puports may 30, 2002, why previous assignment from original lender to alliance/superior not reocrded until may 29, 2002, lasalle now wants to change history any omments or suggestions would be appreciated
dave schaar
gobb@ptd.net
Gator,
can you explain this, please:
Florida Rules of Civil Procedure
1.120 Pleading Special Matters
(a) Capacity. It is not necessary to aver the capacity of a party to sue or be sued, the authority of a party to sue or be sued in a representative capacity, or the legal existence of an organized association of persons that is made a party, except to the extent required to show the jurisdiction of the court. The initial pleading served on behalf of a minor party shall specifically aver the age of the minor party. When a party desires to raise an issue as to the legal existence of any party, the capacity of any party to sue or be sued, or the authority of a party to sue or be sued in a representative capacity, that party shall do so by specific negative averment which shall include such supporting particulars as are peculiarly within the pleader’s knowledge.
It appears that the trustee is not required to plead representative capacity with any specificity but rather the defendant(s) have to negate that averment with specificity. this puts the onus on the defendant(s), not the plaintiff.
Am I reading this correctly?
Alina
Nye, do you have book or manuel that can teach a perosn how to do the forensic audit you take about?
How do we locate the PSA, trust documents, remic trust, etc. etc.
Relaxed REMIC Requirements: IRS and Treasury Efforts to Address the Subprime Mortgage Crisis
October 16, 2008
Expanded safe harbor rules allow real estate mortgage investment conduits (REMICs) and REMIC owners to modify certain residential mortgage loans while maintaining favorable tax status.
Since the onset of the subprime residential mortgage crisis, there have been dramatic increases in mortgage loan defaults, foreclosures and calls for restructuring. With enactment of the Emergency Economic Stabilization Act of 2008, pressure has intensified for mortgage servicers to modify mortgage loans to minimize foreclosures. But if such loan modifications create serious tax disadvantages to the entities that own those mortgages, it would be difficult—if not impossible—to modify mortgage loans.
Many pools of mortgages are held in tax advantaged entities that qualify for tax purposes as REMICs that avoid double taxation under the Internal Revenue Code. But for an entity to qualify as a REMIC, the pooled mortgages must be basically treated as static pools of mortgage loans. Loan modifications could force a REMIC to lose its favorable tax treatment, and once REMIC status is lost, it is lost forever.
This means that REMIC efforts to minimize foreclosures through loan modifications can threaten favorable tax status of the REMIC and its owners.
To address these risks, the Internal Revenue Service (IRS) and U.S. Department of the Treasury (Treasury) have taken actions to expand safe harbor rules that apply to REMICS. Through a number of recently issued revenue procedures, the IRS has provided assurances that REMICs can retain their favorable tax status when mortgage servicers make certain loan modifications as part of programs aimed to reduce foreclosures. The safe harbors allow REMICs to engage in certain, previously prohibited activities that in the past could have resulted in significant tax penalties.
The American Securitization Forum Framework
IRS guidance builds on recent efforts by the American Securitization Forum (ASF), an independent adjunct forum of the Securities Industry and Financial Markets Association (SIFMA), to address the subprime mortgage crisis. In June 2007, ASF published its Statement of Principles, Recommendations and Guidelines for the Modification of Securitized Subprime Residential Mortgage Loans. In the statement, ASF recommended that loan modifications should be permitted, under limited circumstances, without triggering a violation of REMIC tax status.
The statement recommended that loan modifications be made only (1) consistent with the operative securitization documents (that is, pooling and servicing agreements); (2) in a manner that is in the best interest of the securitization investors in the aggregate; (3) in the best interests of the borrower; (4) in a manner that avoids adverse tax or accounting consequences to the REMIC servicer; (5) where the loan is either in default or default is reasonably foreseeable; (6) the servicer has a reasonable basis for concluding that the borrower will be able to make the scheduled payments once modified; and (7) in a manner that provides sustainable and long-term solutions and does not reduce the required payments beyond anticipated period of borrower need.
ASF asserted that loan modifications meeting these criteria are generally preferable to foreclosure, particularly in situations in which the net present value of the loan payments is likely to be greater than the expected net recovery that would result from foreclosure. ASF subsequently refined its position in two follow-up statements: Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans, issued in December 2007, and Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans, issued in July 2008.
These two statements recommended that fast track modifications be allowed for subprime mortgages and borrowers that meet strict criteria. Eligible loans include specific subprime adjustable rate mortgage (ARM) loans with limited loan origination and initial interest reset dates. Within the framework, borrowers are also classified into three distinct segments based on whether the borrower is current, likely to be able to refinance or likely to have difficulty meeting the introductory rate.
IRS Issues Revenue Procedures Consistent with ASF Recommendations
In response to the ASF framework and to allow REMICs to participate in loan modifications, the IRS issued revenue procedures discussed in this section.
Revenue Procedure 2007-72 and 2008-47
In December 2007, the IRS issued Rev. Proc. 2007-72, in which the IRS stated it would not challenge the qualifications of a REMIC that followed the ASF framework’s fast track modifications. In July 2008, the IRS issued Rev. Proc. 2008-47 to replace and supersede Rev. Proc. 2007-72, extending its guidance to include residential mortgage loan modifications. In Rev. Proc. 2008-47, the IRS largely reiterated its conclusions in Rev. Proc. 2007-72:
* First, the IRS will not challenge an entity’s qualification as a REMIC on the grounds that the mortgage modifications were significant because they are deemed to fall within the exception for modifications made in anticipations of default in I.R.C. §1.860G-2(b)(3).
* Second, the IRS will not assert that the loan modifications result in a disposition of qualified mortgage subject to the 100 percent prohibited transaction tax.
* Third, the IRS will not challenge an entity’s qualification as a REMIC on the grounds that the modification caused a reissuance of the REMIC’s regular interests.
* Fourth, if the securitization entity is a grantor trust, the IRS will not assert that the mortgage modifications result in the prohibited power to vary investments.
To make it clear that Rev. Proc. 2008-47 is intended as a safe harbor, the IRS cautioned that “[n]o inference should be drawn about whether similar consequences would obtain if a transaction falls outside the limited scope” of Rev. Proc. 2008-47.
Revenue Procedure 2008-28
In May 2008, to expand the safe harbor protections, the IRS issued Rev. Proc. 2008-28 to address additional questions of whether loan modifications undertaken as part of foreclosure prevention programs would have adverse tax consequences to REMICs and REMIC owners. The IRS clarified that, if the conditions specified in Rev. Proc. 2008-28 are met, it will not challenge the securitization entity’s qualifications as a REMIC.
Rev. Proc. 2008-28 applies to a mortgage loan held by a REMIC if the mortgage meets six requirements:
* the mortgage must be secured by one to four unit single family residences;
* the residence is owner occupied;
* only 10 percent or less of the stated principal of total assets of the REMIC consists of loans with payments 30 days or more past due at the time of securitization;
* the servicer reasonably believes that there is a significant risk of foreclosure;
* the terms of the modification are less favorable to the lender; and
* the servicer believes the modification has substantially reduced the risk of a foreclosure.
Proposed Treasury Regulations
Although current REMIC Treasury regulations provide some flexibility to allow for loan modifications, a large number of other modifications continue to pose problems under the REMIC regulations. This is particularly true because commercial mortgage loans have become increasingly common in REMIC pools, presenting ongoing servicing concerns beyond those of residential mortgage loans.
To address these concerns and to acknowledge legitimate business practices currently used in the commercial mortgage securitization market, the Treasury issued Prop. Treas. Reg. §§1.860G-2(a)(8) and 2(b)(3) to expand the safe harbor rules to allow servicers to modify commercial mortgages held by a REMIC. The proposed regulations seek to strike a balance between accommodating the legitimate business concerns of the commercial real estate industry with the requirement that a REMIC remain a substantially fixed pool of mortgages that is not engaged in an active lending business.
While the proposed regulations go some distance toward easing the concerns of REMICs holding significant commercial mortgage loans, of particular concern is the Treasury’s proposal that collateral be retested by an independent appraiser for every modification that meets certain criteria. This formal appraisal requirement is unnecessarily burdensome. Hopefully, the proposed regulations, when finalized, will not require formal appraisals in situations where the value of the collateral will not decline or where the collateral will decline on a pro-rata basis in relation to the loan.
Obviously if loan modifications create serious tax disadvantages to those entities holding the pools of mortgages, modifications will be difficult–if not impossible– to negotiate.
Rules Applicable to Foreclosure Property
When modifications cannot prevent or cure a default on a commercial loan held by a REMIC, the foreclosure rules (keyed to the foreclosure property REIT rules) apply. Unless otherwise extended, the grace period for the treatment of property as foreclosure property is at the end of the third taxable year beginning after the year that the REMIC Owned Real Estate (REO) property was acquired. A grace period can, however, under certain circumstances, terminate early. In a situation where REO property is not a permitted asset, all income and gain from that property is subject to the 100 percent prohibited transaction tax. Further, REO property can affect the tax status of a REMIC because a REMIC can only hold a de minimis amount of non-permitted assets.
Conclusion
Over the past year, or so, the actions of the IRS and Treasury to expand loan modification safe harbor rules and to update the REMIC regulations have set a clear standard within which REMICs and REMIC owners can be assured of continued favorable tax status. As a result, REMICs are now able to more effectively address the consequences of the current subprime mortgage crisis.
As the subprime crisis and its bailout unfolds, additional safe harbor areas are likely to be identified. Given the quick responses of the IRS and Treasury to the ASF efforts, hopefully the government will continue to assist REMICs and REMIC owners to enter into additional types of loan modifications to avoid foreclosures while maintaining favorable REMIC tax status. * © 2009 McDermott Will & Emery
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Allan
BeMoved@AOL.com
it’s in their best interest to keep the borrower and the investor away from each other.
Gator, I think you’re on the right track with you’re interpretation of the FL statute, but where the problem lies is that these cases are never brought in the name of the “real parties in interest”–the investors. Instead, they’re brought in the name of the Trustee bank or the original “pretender lender” and both lack standing. All of these cases are bogus from the jump unless the representative is willing and able (which he’s not) to bring the action on behalf of every single investor that owns a piece of your loan…obviously an impossible task.
What I am also seeing are purported true copies of notes with endorsements on separate sheets, not referenced on the face (signature) side of the note, with endorsements “in blank” from the originator (“the Responsible Party” under the PSA’s) straight to the Trustee of the Securitized Trust! NO intermediary endorsements nor full chain of ownership of all entities that should have taken the Note without recourse. We know what is supposed to happen to the Note per the PSA’s, but this kind of use/fabrication of alleged “endorsements in blank” – actually required by GSE’s – makes a forensic review of chain of ownership impossible.
The “true sale” question is one I wrote about in 1996 after a ratings analyst at Fitch told me they were not true sales and that the industry was VERT worried about this fact. They ARE financing of receivables and Wall St knew that fact.
She gave me an education on this area that has not received as much attention as is needed.
Here is a link to CFO Magazine and a search on true sales with really good articles about the implications here.
http://www.cfo.com/search/search.cfm?qr=%22true+sale%22&x=33&y=10
Well here is something for all of you to consider and contemplate. Did the promissory note EVER get INTO THE TRUST in the first place? In several cases I am working on now, we have the PSAs that dictate how the notes and mortgages are to be assigned and conveyed to the trust.
However, in EACH case, we have notes being assigned from 4 years to as many as 11 years LATER and the assignments for some have been executed on behalf of entities that are GONE and NONEXISTENT!
Since these are REMIC trusts with the tax implications, my understanding is that if these notes are coming in and out of the trust, the REMIC status could be in serious jeopardy.
The provisions of these trusts typically state the loans to be transferred should be done so within a 90 to 120 day window.
In one case, we have a note that was assigned to a 2007 created trust on 2/25/09 (two years later) for an EFFECTIVE DATE OF May of 2005, two years BEFORE THE TRUST IS CREATED!
So, if the assignment years afterwards, did the lenders ever sell or transfer the notes to the trust? Were the certificate holders of the trusts and trustees defrauded as well?
Without a forensic examination of the contents of the “black box of financial alchemy” one cannot ascertain who owned and held the note on any given date in time from origination to current date in time.
In re: standing of Trustee
The Florida Rules of procedure address the issue of trustee and standing. The question is not whether a trustee can bring an action (they can) but whether they are doing it right. My opinion is in FL they are not. (You have to plead “representative capacity”) They are trying to get around the pleading requirements of the rules. They would appear to be trying to avoid some of the questions that are raised in this blog concerning liability by keeping their nature hidden.
My $.02
The FL rule on standing:
Rule 1.210. Parties
(a) Parties Generally. –Every action may be prosecuted in the name of the real party in interest, but a personal representative, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party expressly authorized by statute may sue in that person’s own name without joining the party for whose benefit the action is brought.
Can you give a complete breakdown as to what happens after a person signed a mortgage loan? Do you know what documents needed to be filed by the so called mortgage lender? How did it get to wall street ? How does it get placed into a pool?
Can we get a list of all the corresponding documents, so we can search for them? How about the lender paid mortgage insurance? How do we find out if the investors all ready got paid? Who do we contact to get a copy of PAID IN Full receipt?
This stuff is great. But can a layman use this info to defend themselves against the wolves in court. Do you have a book or instructional material that guides a person of where to get the pooling agreement? How to get a copy of the trust? What to look for in the trust?
Where can we get a copy of a REMIC? Are they public documents that are recorded? If so how do we get a copy?
This is awesome stuff, but I am confused on how to use it properly to our benefit
Ron,
You’re right about the trustee being shielded from harm. You’re argument could certainly be used as a defense.
Marcus
Neil,
One key element in fighting foreclosure in a juducial state is that under the terms of the Pooling and Servicing Agreement, thw Trustee is immune from experiencing “losses” in their role as Trustee. Accordingly, they can never be a “real party in interest” since they are not an “injured party” and therefore lack the fundamental right to bring forth a lawsuit.
Why is that aspect not being challenged ?
It had never occurred to me that the “buy back provisions” would negate the qualifying status as a “true sale!!” A “buy back provision” absoluetly suggests “recourse” which there should NOT be. Brilliant!!!
I’ve posted this elsewhere on LivingLies:
Regarding the S&P document below: This seems to be further evidence that the securitizations are supposed to be TRUE SALES with an ASSUMPTION OF RISK. It is a link to a document on ALTA’s Internet site from S&P on assignee-investor liability for predatory lending violations, showing state-by-state information. Could be useful for folks. Can see why investors want to stay hidden. Can somebody comment on this?
http://www.alta.org/govt/issues/04/sp_1019.pdf
It also seems to indicate that, even as early as 2004, the securitizers were well aware that predatory lending liability would end up at their doorsteps. And what was the response to these warnings from the mortgage industry and its servicers?: deflect predatory lending claims made in QWR’s (”We’re just the servicers.”) and make sure the identities of the investors are well hidden (Servicers, in response to information about the holder-in-due-course information requested in QWR’s: “That information is confidential and/or a trade secret.” And most of all, MAKE SURE THE BORROWERS NEVER GET THEIR DAY IN COURT.
Thanks.