TRUE SALE and ASSIGNMENTS: The Nature of REMIC

From “Anonymous”

Editor’s Post: It’s always a pleasure to read something where someone actually knows what they are talking about. The following post was picked up from the comments. The key points that are relevant to the Qualified Written Request and Discovery are

1. In the shuffling of paperwork, where was a “true sale” of the pool , a portion of the pool or any of the alleged loan obligations?

2. This material doesn’t come from someone’s head. It comes from established rules from the Financial Accounting Standards Board, statutes and administrative rules.

3. If the “loan” doesn’t show up on the balance sheet of the entity making a claim it is an admission that they are not a creditor. This takes some digging. Individual loans are a rarely shown on any balance sheet. They are shown on the worksheets or the equivalent of the bookkeeping department and the accountant who prepared the financial statements. Deposing the accountant for the company in question might get you the information you need and make the other side pretty nervous that you are zeroing in on their game. Deposing the Treasurer or CFO might get you even more. In many cases these entities NEVER booked any loans. They ONLY showed fees on their income statement which means that they admit they only provided a service (to whom?) in passing the “loan” through as a conduit.

4. Timing of the “assignments.” Besides the obvious fabrications that have been discussed in these pages, if you actually demand and get the enabling documents you will find, most of the time, that the requirements have NOT been met for acceptance of the assignment. The author points out that there is usually a 90-day rule, after which the the assignment is by definition not accepted. But there are other requirements as well, especially the one that says that the assignment must be recorded or in recordable form, which generally speaking it is not.

5. The sale, according to the paperwork, is to the underwriter, not the “Trust” (SPV). So you have a right to challenge the assertion that the “Trustee” is a Trustee, that the “Trust” is a trust and that there is anything in the trust. But I would add that the PRACTICE here was the selling forward of the mortgage backed security which means they were selling something they didn’t have. So the LEGAL title to the paper MIGHT not inure to the benefit of the holder of the mortgage backed bond; but it is equally true that they already “promised” the investor that they WOULD own the “loans”, and the investor is the only one who advanced money (and thus the only one meeting the definition of creditor). Hence there MUST be an equitable right by MBS holders to make a claim — the question being against whom — the homeowner, the investment banker or someone else? Your point in Court should NOT be to try to cover this abstractly with the Judge but only to have an expert witness that would make the assertion backing up your allegations. Your strategy is simply to say that according to the information you have there is a question of fact before the court as to what entity, if any, has this loan on their balance sheet? That is a question for discovery. And once that entity has been identified then you would want to discover the claims of third parties who could or would make a claim on that “asset.”

6. The author’s statement that the investor does not show the loan on its balance sheet is therefore both right and wrong. The investor bought a bond that is payable by an entity that issued the bond. That entity is not the homeowner and therefore it could be argued that the homeowner, who was not party to that transaction, does not have any obligation to the investor and that therefore the entry on the balance sheet of the pension fund investor would not account for the “loan.” BUT, the bond contains a conveyance of a percentage interest in a pool (which as we have seen might not exist), which purportedly includes “loans” of which the Homeowner’s deal was one. Thus effectively the ONLY party who could make an accounting entry for the loan in compliance with generally accepted accounting practices, is the investor. It comes down to the most basic of double entry bookkeeping practice. A debit from cash and a credit to receivables.

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The “true sale” concept was the focus of FASB 166 and 167. Once the market crisis hit, intervention to support the SPVs rendered any “true sale” negated because there can be no intervention under a true sale.

Also, Mike H. is right regarding REMICs and ninety-day rule. A REMIC is a static fund and no mortgages can be added after 90 days (very limited exception). Many assignments are long after the 90 days and some are not even effectuated to the cutoff date (or 90 day rule) of the REMIC. Even if effectuated, and due to the dissolution of REMIC (violation of “true sale” by intervention), assignments are not valid. The problem is that if the loan is in default, it is no longer a pass-through security held by any trust. It has been removed.

As a result, assignments presented by foreclosure attorneys in court is probably not the LAST assignment. As discussed, collection rights are sold after the swap is paid.

Although courts view assignment and sale as the same thing for collection rights. It is not the same thing. In the process of securitization the mortgage loans are SOLD to security underwriters (we never see this sale in the chain), and the cash flows passed-through are assigned. The security underwriter still has the loan on their books (even if concealed by off-balance sheet conduit). Once in default, the loan is charged-off, and is no longer an asset, and the assignment of cash flows is also extinguished..

Again, the Federal Reserve, in Interim Opinion for TILA Amendment, has emphasized that the creditor is the one who must account for the loan on their balance sheet. It is not investors that have beneficial interests in REMICS, Pass-throughs, or any other security. Question is – who now is accounting for collection rights on it’s balance sheet. Who was accounting for rights at time of foreclosure initiation. How much did they pay for those rights??

There seems to be much confusion regarding the word “investor.” For beneficial interest in securities one may be called an “investor”. But this investor does not account for mortgage loan on its books. In terms of mortgage loan ownership, “investor” may also be used instead of “creditor.” But this investor accounts for mortgage loan (or collection rights) on its books – that is the investor you want to know.

Any last assignment recorded is likely NOT the actual last assignment executed. Foreclosure attorneys ignore this because they reason that the default derivatives attach the current owner/investor to the original trust. This is false – as derivatives are not certificates and not securities – and not part of the trust. The default loan is gone from the trust – gone from banks books – and in the hands of some “investor” who saw profit potential in the collection rights to the default loan. This what the government not only concealed, but also promoted to help the banks “clear” their off/on balance sheets of “toxic assets.”

Finally, Neil is right about sentiment in courts. Going in and asking for a “free house” will harm you. Sentiment in country in not on our side due to media propaganda. I have a long time friend in a prestigious private equity firm. Sentiment is that if anyone gets a principal reduction it is unfair because everyone should then get a principal reduction. People not affected by foreclosure fraud just do not get it. It is always all about “me” – even if they have not been harmed. I do not know how we are going to change this thinking – but if we do not – we will continue to get no help from government and lose in courts. Need a big case, with a judge that grants and enforces full discovery, in order to change the sentiment.

14 Responses

  1. […] each mortgage and each promissory note had to be irrevocably transferred into the them prior to the “Cut-Off Date.” Once in, subject to limited exceptions, that is where they must stay.  But if this is so, why are […]

  2. so what happened in your case?

  3. Brian,
    You might try Dan Edstrom. He’s done a hell of a lot of research, is in California, and regularly posts here. He’s very cool and his email is dmedstrom@hotmail.com (he regularly includes his email in his posts, so I figure it’s OK to give out–Dan, correct me if I’m wrong).

  4. Anyone have any comments from California. I have been an agressor and filed in a non judicial state. I was given a pro se lis pendens. I filed an amended complaint against UAMC, Indymac, Onewest, MERS, DBNTC as trustee of RAST 2007-A5 and the spa 2007E. I served discovery as a compilation of multiple sites and covered many of the topics presented here.
    UAMC did not respond as of 40 days.
    Has anyone gotten or heard of California and the discovery process compliance of these entities?
    comments welcome. Also getting forensics done.

  5. IAN,. it’s called an rss feed. upper left under the header on the front page.

    So once a month for the last year I’ve been getting the Hope Now letters with the servicer phone and the counseling phone. Big scam to get you to call. Funnier still since the foreclosure started a year ago. Anyway, I’ve been receiving two of them. Thought that was kinda funny. Then it dawned on me…Two different account numbers. Letters print 3 days apart (just like the spread in the lock/close date). Hmmmm. Stupid criminals.

  6. Hello Neil – livinglies site is getting too spread out,is there any way to read all contributors’ comments without clicking on each post, scrolling down, seeing that no-one posted today, backpedalling, going to the next post- I am not complaining, and I know nothing of the inner workings of websites-am I missing something or is there another way to get all daily posts without the aforementioned rigamaroll? ALSO A QUESTION- I am in Pa. and the State Dept. of State which regulates and licenses notaries just got back to me today to tell me that the “notary” who “notarized” the assignment of mortgage from my lender to MERS wasn’t a notary then or now. (no record of the person) What does this mean? Where should my atty go from here? I just emailed him tonight. Any thoughts would be appreciated- also, the loan closed in 1999, the assignment to Wells fraudgo was 9/9/09, what is the 90 day rule about? Thanks, Ian

  7. JUST LIKE HOW ON THE SECOND TRUSTEE’S DEED UPON SALE(YES SECOND) THEY RECORDED AGAINST MY HOUSE STATED IN BOLD ALL CAPITOL LETTERS RIGHT UNDER THE NOTARY’S SEAL “THIS OFFICE IS ATTEMPTING TO COLLECT A DEBT, ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE” AND HOW IT SAYS ON MERS RECORDS THAT THE LOAN IS STILL ACTIVE ALSO THE FACT THAT THE SO CALLED BFP AT THE SALE DECLARED UNDER P.O.P. IN THE UD EVICTION IT WAS NOT THE BENEFICIARY IT HOWEVER ADVERTISED OR REPRESENTED THAT IT WAS THE BENEFICIARY WHEN LISTING THE PROPERTY FOR “RESALE” WHICH IT MADE SURE IT DID BEFORE THE BRIEFS FOR THE UD APPEAL WAS DUE WHICH WAS ONLY 30 DAYS FROM FILING NOTICE OF. THIS IS GOING TO CREATE PROBLEMS THAT I DO NOT WANT TO BE HELD RESPONSIBLE FOR, LIKE I HAVE FRIENDS THAT KNOW THAT THE COURT, ATTORNEYS, SERVICERS AND SO CALLED TRUSTEE ARE INTENTIONALLY SCREW ME OVER THAT KNOW WHERE SOME OF THE PEOPLE RESPONSIBLE LIVE ie ATTY JUDGES NOTARY ETC AND ARE EXPRESSING A DESIRE TO TAKE MATTERS INTO THIER OWN HANDS EVEN THOUGH I TOLD THEM I WAS TAKING CARE OF IT IN A CIVIL MANNER. I THINK MAYBE I SHOULD JUST MOVE OUT OF STATE BECAUSE I DON’T NEED ANYMORE TROUBLE .

  8. Years ago, back in the mid nineties, a ratings analyst told me that the BIG ISSUE and “achilles’ heel” for the industry is that the “very gray true sale opinion” letters by the nation’s largest law firms were really not gray.

    She claimed everyone knew the game that they were one bankruptcy court decision away from a collapse of the market. She said that the deals were really “financing of receivables” and were NOT TRUE SALES. This is the issue we ALL need to attack and is why I always have wanted to see where and WHEN a NOTE comes on and off an “entity’s books!”

  9. THANK YOU FOR THE DEFINITION. COMINGLING ALSO OCCURS COMMONLY WITH DEVELOPERS OF PROPERTIES WHO TAKES ONE INVESTORS MONEY THAT WAS DESIGNATED FOR ONE PROJECT AND USES THE MONEY FOR ANOTHER PROJECT. SOUNDS LIKE WHAT THE BANKS ARE DOING, WITH SECURITIZED BACK ASSETS. IF THEY CANNOT PROVE CHAIN OF TITLE OF THE NOTE THEY CANNOT PROVE WHERE YOUR MONEY HAS GONE. SOUNDS LIKE COMINGLING OF FUNDS.

  10. Response to “The A Man”

    From wiki

    Commingling literally means “mixing together”. Used in a legal context it is a breach of trust in which a fiduciary mixes funds that he holds in the care of a client with his own funds, making it difficult to determine which funds belong to the fiduciary and which belong to the client. This raises particular concerns where the funds are invested, and gains or losses from the investments must be allocated. In such circumstances, the law usually presumes that any gains run to the client and any losses run to the fiduciary who is guilty of commingling.

    The problem of commingling is of particular concern in the legal profession. Attorneys are strictly prohibited from commingling their clients’ funds with their own, and such activity is grounds for disbarment in virtually every jurisdiction, because of the ease of embezzlement and the difficulty of detection. Similar rules apply for licensed real estate brokers handling earnest money and other professionals who hold deposits as agents for clients in absentia.

    Commingling is also evidence that may be used in “piercing the corporate veil” of a sham corporation, where a person vainly attempts to shield himself from personal liability through “incorporation”, yet fails to observe strict separation of corporate and personal property or accounts, among other improprieties.

    In a trading organisation, the term commingling is used to describe the mixing of market prices from various foreign brokers & exchanges within a market gateway.

  11. I HAVE NOT HEARD THE TERM COMINGLING OF FUNDS

    WHY DONT I HAVE A RIGHT AS A BORROWER TO FIND OUT IF THERE IS COMINGLING OF FUNDS ESPECIALLY WHEN THE SO CALLED DEBT COLLECTOR CANT IDENTIFY THE CREDITOR (S).

  12. I have questioned the REMIC status for some time. If the sale of the mortgages to the pool in exchange for the REMIC certificates, which are tax exempt, is never truly perfected how can they claim the sale and profit anyway?

    If the assignments aren’t done until foreclosure typically or to blank how can they claim a true sale?

    If the mortgages are non-qualifying due to lack of paperwork or appraisal fraud etc why were they not removed within the 90 day window?

    If non-qualified mortgages are included and never removed would the REMIC status not be revoked and the capital gains subject to recapture?

    Why if Obama is looking for a legal way to tax the banks do they not understand that this alone will give them a claim and also expose the millions of unenforcable mortgages?

  13. This article is definitely helping me in my quest to author a book on foreclosure offense. If the lender committed a fraud in any way, shape or form, and can’t actually prove ownership interest as a creditor, then expungement of the lien as a matter of due course in quieting a title … would that not be a remedy? I would not recommend going into court and asking for a house free and clear; however, many of my friends are now willing to risk their mortgages to find out if they actually can get their homes free and clear, by keeping up on their mortgage loans and filing claims against the creditors to make them actually prove ownership … when they can’t, the homeowner then asks the court to extinguish all liens from the pretender lender and order the lender to remove its trade line items from the homeowner’s credit reports, since they’re not the true creditor (section 623 FCRA violation). Your thoughts on this?

  14. Mine may just be that “Big Case” you are looking for. My next court date is tomorrow. I’ll keep everyone posted, via this board.

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