Discovery, Forensic Analysis and Motion Practice: The Prospectus

USE THIS AS A GUIDE FOR DISCOVERY, FORENSIC ANALYSIS AND MOTION PRACTICE TO COMPEL DISCLOSURE

see for this example SHARPS%20CDO%20II_16.08.07_9347

Comments in Red: THIS IS A PARTIAL ANNOTATION OF THE PROSPECTUS. IF YOU WANT A FULL ANNOTATION OF THIS PROSPECTUS OR ANY OTHER YOU NEED AN EXPERT IN SECURITIZATION TO DO IT. THERE ARE THREE OBVIOUS JURISDICTIONS RECITED HERE: CAYMAN ISLANDS, UNITED STATES (DELAWARE), AND IRELAND WITH MANY OTHER JURISDICTIONS RECITED AS WELL FOR PURPOSES OF THE OFFERING, ALL INDICATING THAT THE INVESTORS (CREDITORS) ARE SPREAD OUT ACROSS THE WORLD.

Note that the issuance of the bonds/notes are “non-recourse” which further corroborates the fact that the issuer (SPV/REMIC) is NOT the debtor, it is the homeowners who were funded out of the pool of money solicited from the investors, part of which was used to fund mortgages and a large part of which was kept by the investment bankers as “profit.”There is no language indicative that anyone other than the investors own the notes from homeowner/borrowers/debtors. Thus the investors are the creditors and the homeowners are the debtors. Without the investors there would have been no loan. Without the borrowers, there would would have been no investment. Hence, a SINGLE TRANSACTION.

If you read carefully you will see that there is Deutsch Bank as “initial purchaser” so that the notes (bonds) can be sold to pension funds, sovereign wealth funds etc. at a profit. This profit is the second tier of yield spread premium that no TILA audit I have ever seen has caught.

The amount of the “LEVEL 2” yield spread premium I compute on average to be approximately 30%-35% of the total loan amount that was funded FOR THE SUBJECT LOAN on average, depending upon the method of computation used.Thus a $300,000 loan would on average spawn two yield spread premiums, “level 1” being perhaps 2% or $6,000 and “level 2” being 33% or $100,000, neither of which were disclosed to the borrower, a violation of TILA.

The amount of the yield spread premium is a complex number based upon detailed information about the what actually took place in the sale of all the bonds and what actually took place in the sale of all the loan products to homeowners and what actually took place in the alleged transfer or assignment of “loans” into a master pool and what actually took place in the alleged transfer or assignment of “loans” into specific SPV pools and the alleged transfer or assignment of “loans” into specific tranches or classes within the SPV operating structure.

Here is the beginning of the prospectus with some of the annotations that are applicable:

Sharps CDO II Ltd., (obviously a name that doesn’t show up at the closing with the homeowner when they sign the promissory note, mortgage (or Deed of Trust and other documents. You want to ask for the name and contact information for the entity that issued the prospectus which is not necessarily the same company that issued the securities to the investors) an exempted company (you might ask for the identification of any companies that are declared as “exempted company” and their contact information to the extent that they issued any document or security relating to the subject loan) incorporated with limited liability you probably want to find out what liabilities are limited) under the laws of the Cayman Islands (ask for the identity of any foreign jurisdiction in which enabling documents were created, or under which jurisdiction is claimed or referred in the enabling documentation) (the “Issuer”) (Note that this is the “issuer” you don’t see don’t find about unless you ask for it), and Sharps CDO II Corp., (it would be wise to check with Delaware and get as much information about the names and addresses of the incorporators) a Delaware corporation (the “Co-Issuer” and together with the Issuer, the “Co-Issuers”), pursuant to an indenture (don’t confuse the prospectus with the indenture. The indenture is the actual terms of the bond issued just like the “terms of Note” specify the terms of the promissory note executed by the borrower/homeowner at closing) (the “Indenture”), among the Co-Issuers and The Bank of New York, as trustee (Note that BONY is identified “as trustee” but the usual language of “under the terms of that certain trust dated….etc” are absent. This is because there usually is NO TRUST AGREEMENT designated as such and NOT TRUST. In fact, as stated here it is merely an agreement between the co-issuers and BONY, which it means that far from being a trust it is more like the operating agreement of an LLC) (the “Trustee”), will issue up to U.S.$600,000,000 Class A-1 Senior Secured Floating Rate Notes Due 2046 (the “Class A-1 Notes”), U.S.$100,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2046 (the “Class A-2 Notes”), U.S.$60,000,000 Class A-3 Senior Secured Floating Rate
Notes Due 2046 (the “Class A-3 Notes” and, together with the Class A-1 Notes and the Class A-2 Notes, the “Class A Notes”), U.S.$82,000,000 Class B Senior Secured Floating Rate Notes Due 2046 (the “Class B Notes”), U.S.$52,000,000 Class C Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class C Notes”), U.S.$34,000,000 Class D-1 Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class D-1 Notes”) and U.S.$27,000,000 Class D-2 Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class D-2 Notes” and, together with the Class D-1 Notes, the “Class D Notes”). The Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are collectively referred to as the “Senior Notes.” The Class A-2 Notes, the Class A-3 Notes, the Class
B Notes, the Class C Notes and the Class D Notes and the Subordinated Notes (as defined below) are collectively referred to as the “Offered Notes.” Concurrently with the issuance of the Senior Notes, the Issuer will issue U.S.$27,000,000 Class D-2 Secured Deferrable Interest Floating Rate Notes Due 2046 (the “Class D-2 Notes” and, together with the Class D-1 Notes, the “Class D Notes pursuant to the Indenture and U.S.$45,000,000 Subordinated Notes due 2046 (the “Subordinated Notes”) pursuant to the Memorandum and Articles of Association of the Issuer (the “Issuer Charter”) and in accordance with a Deed of Covenant (“Deed of Covenant”) and a Fiscal Agency Agreement (the “Fiscal Agency Agreement”), among the Issuer, The Bank of New York, as Fiscal Agent (in such capacity, the “Fiscal Agent”) and the Trustee, as Note Registrar (in such capacity, the “Note Registrar”). The Senior Notes and the Subordinated Notes are collectively referred to as the “Notes.” Deutsche Bank Aktiengesellschaft (“Deutsche Bank”), New York Branch (“Deutsche Bank AG, New York Branch” and, in such capacity, the “TRS Counterparty”) will enter into a total return swap transaction (the “Total Return Swap”) with the Issuer pursuant to which it will be obligated to purchase (or cause to be purchased) the Class A-1 Notes issued from time to time by the Issuer under the circumstances described herein and therein. (cover continued on next page)

It is a condition to the issuance of the Notes on the Closing Date that the Class A-1 Notes be rated “Aaa” by Moody’s Investors Service, Inc. (“Moody’s”) and “AAA” by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s,” and together with Moody’s, the “Rating Agencies”), that the Class A-2 Notes be rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s, that the Class A-3 Notes be rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s, that the Class B Notes be rated at least “Aa2” by Moody’s and at least “AA” by Standard & Poor’s, that the Class C Notes be rated at least “A2” by Moody’s and at least “A” by Standard & Poor’s, that the Class D-1 Notes be rated “Baa1” by Moody’s and “BBB+” by Standard & Poor’s, that the Class D-2 Notes be rated “Baa3” by Moody’s and “BBB-” by Standard & Poor’s.
This Offering Circular constitutes the Prospectus (the “Prospectus”) for the purposes of Directive 2003/71/EC (the “Prospectus Directive”). Application has been made to the Irish Financial Services Regulatory Authority (the “Financial Regulator”) (you could ask for the identification and contact information of any financial regulator referred to in the offering circular, prospectus or other documents relating to the securitization of the subject loan), as competent authority under the Prospectus Directive for the Prospectus to be approved. Approval by the Financial Regulator relates only to the Senior Notes that are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of the Directive 93/22/EEC or which are to be offered to the public in any Member State of the European Economic Area. Any foreign language text that is included within this document is for convenience purposes only and does not form part of the Prospectus.
Application has been made to the Irish Stock Exchange for the Senior Notes to be admitted to the Official List and to trading on its regulated market.
APPROVAL OF THE FINANCIAL REGULATOR RELATES ONLY TO THE SENIOR NOTES WHICH ARE TO BE ADMITTED TO TRADING ON THE REGULATED MARKET OF THE IRISH STOCK EXCHANGE OR OTHER REGULATED MARKETS FOR THE PURPOSES OF DIRECTIVE 93/22/EEC OR WHICH ARE TO BE OFFERED TO THE PUBLIC IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA.
SEE “RISK FACTORS” IN THIS OFFERING CIRCULAR FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE NOTES. THE SENIOR NOTES ARE NON-RECOURSE OBLIGATIONS OF THE CO-ISSUER AND THE NOTES ARE LIMITED
RECOURSE OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM THE COLLATERAL DESCRIBED HEREIN.
THE NOTES DO NOT REPRESENT AN INTEREST IN OR OBLIGATIONS OF, AND ARE NOT INSURED OR GUARANTEED BY, THE TRUSTEE, DEUTSCHE BANK SECURITIES INC., DEUTSCHE BANK OR ANY OF THEIR RESPECTIVE AFFILIATES. Note that you have more than one trustee without any specific description of where one trustee ends and the other begins. It is classic obfuscation and musical chairs. NOTE ALSO THAT TRUSTEE DISCLAIMS ANY INTEREST IN THE BONDS BEING ISSUED [REFERRED TO AS “NOTES” JUST TO MAKE THINGS MORE CONFUSING].

14 Responses

  1. Stan – I think this link works

    https://trustinvestorreporting.usbank.com/TIR/landingPage.jsp

  2. Q:
    So if these parties were not disclosed to the borrowers why can’t this loan be void?

    TONY,
    Here is my email StopForeclosureFraud at gmail.com
    for the Info on INDY C-1Corp

    Thanks again
    DinSLFA

  3. Ditto
    Thank you but I can’t get on the site . I will keep trying
    Stanley Putra
    Racine, Wi. 53406

  4. Lisa

    This is a huge problem in courts. The judge has to question it – and have reason to question it. It just never happens. The judge always just accepts the “attorney” representation.

    Wish I could say more – no way to force the issue – but it is a big issue. Only know of one case that pushed for this – it was a pro se case but the pro se claimant happened to be an attorney. She won. When cases get settled – they can no longer be discussed.

    Funny thing I know, is that an old friend contacted me – an old friend from over thirty years ago – who is a prestigious attorney at an insurance company – and recognized my name. He just wanted to say “Hi” – but gave away the process by saying “Hi”.

    Believe me, it is a difficult process to prove representation is lacking. Ask for insurance contracts for settlement – they are obligated to provide. See what happens from there.

  5. Stanley

    Try this site – you will have to register to use it.

    http://www.trustinvestorreporting.usbank.com

  6. How do I find Lehman’s pass through mortgage certificates?
    US Bank National Association, as
    Successor Trustee to Bank of America,
    National Association, as successor by
    merger to LaSalle Bank National Association
    as Trustee for Lehman XS Trust Series 2007-9
    Instead of an Allonge the Plaintiff is using nunc pro tunc to get an assignment of judgement and rights through summary judgement (granted) from LaSalle to BA to US BANK. The note I can not find but there is no assignments with the Register of Deeds

    Stanley Putra
    Racine WI

  7. Anonymous —
    * How does one check whether the attorneys really represent DB?
    * How does one find out if they really represent an insurance liability company, the Servicer or a subsequent third party debt buyer?
    * How does one find out if they are falsely utilizing representation of DB in court?

    Thank you~

  8. ANONYMOUS,

    I agree, if you paper is 90 days+ its no good. They even says this in there own ppm’s and supplements. I love the line of starting after 13 months thats when all the defaults start happening. I think 90 days is bit bit shorter than 13 months.

    Of course this is why everyone has to follow the paper trail and follow it carefully. Don’t try to take a short cut because you will only have half the information.

    People that are in business and ever factored there invoice to get some money early, securitized mortgages is just the same.

    No funder will pass you money on a receiveable that is in default, because they can not get any money from it. Same thing for the trust, they can not pass through a default because there is no income coming from it.

    More and more the door is opening on this whole world wide problem and the flood gates can hold all the information, so soon companies will just pick and choose there battles more wisely.

  9. I thought it appropriate to remind everybody of what Neil said in the very beginning … “In the complex there is fraud, in the simple there is usually just fundamental cash flow, finance and economics.” … Well said!

  10. Tony

    Okay – so we know that the servicer has to keep up all payments to the trust including, mortgage payments, tax property payments, private insurance payments, and if the Trust is guaranteed by a GSE – the servicer’s obligation to advance payments cease when the loan is 90 days in default – at which point, the GSE purchases the default loan from the trust. Interestingly, 90% of all mortgages were guaranteed by a GSE – including Fannie, Freddie and Ginnie Mae. Only 10% were not GSE guaranteed. (New York private equity firm informed me of this quite some time ago). Thus, GSEs were purchasing out early default mortgages quite some time ago.

    The single transactions occur when loans are default – and when these loans are “pooled” together for sale to a subsequent investor – who neither funded nor advanced any money in the mortgage origination or subsequent securitization. The GSEs would pool these defaults and sell to “bottom” investors in a SINGLE transaction. After the crisis, the GSEs could not sell these loans – in any transaction – never mind a single transaction.

    Point is – up to the point of default – investors do “indirectly” own the right to mortgage “pooled” payments – BUT after default the story is a very different one.

    What went on from here has been covered up by the US government – in fact, again, the government employed distressed debt buyers to purchase the “toxic” default “pooled” portfolio whole loans and securities – which are not really securities. Default loans are no longer securities – this is the key. They are not even “junk” bonds – they are nothing. But someone wants them if – and only if- they think they can a make a profit. All is about profits. No pass-through security investor is going to hang in there if they cannot even make a “return” on their pass-through investment..

    Deutsche Bank and the rest of the “trustees” try to hang their hats on something that has long been removed from the trust. Further, better check whether the attorneys for Deutsche Bank really represent Deutsche Bank – far more likely that the attorneys represent insurance liability companies for the actual bank (security underwriter- or subsequent debt buyer) and that they are falsely utilizing representation of Deutsche Bank in court.
    This is a big issue. But no judge will question. Parties will continue to believe that Deutsche Bank is validly responding or validly the plaintiff. by the “good” attorneys who claim to represent them. This is not likely the case.
    Not talking “just” from theory. Question it!!!!.

    Disclaimer – i am not an attorney and this is not meant to be construed as legal advise and only for educational purposes.

    Time for government to explain.

  11. Neil- you have come full circle to the single-transaction theory. This seems to be proof of such. Have there been any recent rulings corroborating this? You haven’t posted much, if anything about it lately. Keep the info flowing, we are all gaining steam. Thank you.

  12. I would like to find what pool my loan is in. How do I or whom can I hire to do a forensic audit ? Thanks in advance

  13. Good post, what’s even more funny is that they are not even paying the note holders. Check this link:

    http://www.investegate.co.uk/Article.aspx?id=200907171018408583V

  14. Ok, so in laymens terms, what?

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