Shareholders Sue Goldman, Blankfein Confirming Trusts Do NOT Own the Loans

Leo II

Editor’s Note: I believe Leo is right. These suits allege that the SPV do not own the loan portfolios. They also allege directly that the Trust Assets included insurance — payments from credit default swaps.

Two revealing lawsuits filed against Goldman-Sachs that I believe further support arguments that most, if not all Subprime securitized Notes that went into default should be considered as satisfied by virtue of default and the ensuing payment to holders of the Credit Default Swaps (Puts) created for each such Note.

And then there’s the issue of TARP funds, ($10 billion of which went to Goldman-Sachs alone), which, along with the CDO payments should have been utilized to compensate the investors who purchased the Notes

All of which, taken as a whole, lends support to the assertion that the Notes are Satisfied..

All that remans is for the Courts to order firms like Goldman-Sachs to distribute the money to the investors, declare satisfaction of the underlying Notes and Order the quiting of the titles securing said Notes.

Agree? Disagree?

11 Responses

  1. Anonymous,

    When the underwriter purchases the offered certificates from the depositor, does that mean that the Notes go with that purchase?

    My understanding is that the depositor deposits the notes into the trust. The trust then issues the certificates to the depositor who then sells the certificates to the underwriter.

    Once the underwriter purchases the certificates, do they first create the RMBS before structuring a CDO? Is it the CDO that then gets sold to third-party investors in tranches?

    In my example of IndyMac INDX Mortgage Loan Trust 2006 AR-14, the description of the certificates already shows the tranches. Does that mean that the certificates were already sold to the underwriter in tranches or is the creation of the RMBS just not visible in the prospectus?

    What I am trying to get at is, since the certificates were purchased by the underwriter, Lehman in this case, should the underwriter be reflected in the chain of title of the Notes?

    Additionally, if they sold the certificates in a CDO, does that mean that the Trustee represents investors that do not have a beneficial interest in the Notes, just the cashflow?


  2. Philip

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

    According to the Federal Reserve (Interim Opinion), the trustee does not have standing since the investors for pass-through securities are not the creditor and do not account for the mortgage loan on their balance sheet.

    The security underwriter to your trust was Lehman. This means the certificates to the trust were first sold to Lehman and likely repackaged into “synthetic” securities for sale to the public (most likely through a CDO offering). Since Lehman is bankrupt and under FDIC control – suggest you contact FDIC – and depending on your current servicer – you may now be owned by Goldman. – .

    see below

    (To Prospectus dated October 26, 2006)



    [LOGO] IndyMac Bank
    Sponsor, Seller and Servicer

    IndyMac INDX Mortgage Loan Trust 2006-AR14 (and 5 additional grantor trusts)
    Issuing Entities

    Lehman Brothers Inc. will offer the certificates listed above to the public at varying prices to be determined at the time of sale. The proceeds to the depositor from the sale of the offered certificates are expected to be approximately 99.96% of the aggregate class certificate balance of the offered certificates plus accrued interest, before deducting expenses. See “Method of Distribution” in this prospectus supplement.


    Subject to the terms and conditions set forth in the underwriting agreement between the depositor and Lehman Brothers Inc. (“Lehman” or the “Underwriter”), the depositor has agreed to sell the Offered Certificates to the
    Underwriter and the Underwriter has agreed to purchase from the depositor the Offered Certificates.

  3. Thanks for the insights Anonymous.

    If the Trustee on the first SPV comes in to foreclose, can the case be made that they are not the real party in interest and that they would have to name and bring in the security underwriters in order to have standing?

    I ask the question because we filed Chapter 13 here in California and would like to challenge the Proof of Claim and/or Relief of Stay and state that the Trustee does not have standing.

    In your opinion, does the Trustee (for the first SPV) have standing or do they need to bring in the security underwriter to stand in as real party in interest? I believe the security underwriter is Lehman.

    The series name is: Deutsche Bank National Trust Co, as Trustee for the IndyMac INDX Mortgage Loan Trust 2006-AR14, Mortgage Pass Through Certificates Series 2006 AR-14

    Thanks again.

  4. Philip:

    The only certificate holders to first SPV are the security underwriters themselves. Usually this is found under Conveyance of Mortgage Loans and Distribution to the security underwriters. All certificates to the first SPV are sold to the security underwriters. In practice, the loans are sold to the parent bank who owns the security underwriter division, and then the certificates to SPV are sold to the security underwriters (the bottom tranches is not securitized and usually remains with the servicer – who often is also a subsidiary of the corporate bank).

    Once the certificates to trust are sold to the security underwriters, the loans have been “securitized”, thus, receivables removed from the parent’s balance sheet for pass-through of cash payments via the first SPV to the “certificate holder” (security underwriter). The security underwriters may directly sell their owned tranches rights to another financial institution, who will repackage multiple tranches and multiple SPVs tranches into CDOs – but this does not pass on loan ownership. All of this involves assignment of cash flows and not sale of mortgage loan ownership.

    The trustee for the CDO may or may not be the same trustee as the trustee for original SPV. You may be able to find the CDO, and its trustee, if you know the original SPV trust.

    Interestingly, if you refinanced – and loan was already in a trust, the mortgage documents may have been sent to a “custodian” who may also be the trustee for CDO. Also, once you know the name of CDO, you can find out which bank the CDO (as an SPV) is a subsidiary of.

  5. Anonymous,

    Is there a way to find out if a borrower’s loan is under a second SPV that handles a CDO or if it’s under the first SPV? If there are tranches involved does that automatically mean that it is a CDO?

    If the Trustee for both SPVs are the same, is there a way to differentiate (maybe an account code or number) to tell whether the loan is under a CDO?

    We are dealing with Deutsche Bank National Trust as Trustee but we don’t know if they are the Trustee for the first SPV or a CDO SPV.

    We can send you a copy of the PSA if that would help.


  6. See below for interesting perspective on non-performing loans (NPLs) by author Paul Muolo – “Chain of Blame – How Walls Street Caused the Mortgage and Credit Crisis.”

  7. No no no. The new CDO is a repackage. It is derived from particular tranches to prior securities, as you state, from particular Series Trusts, or from multiple Series Trust security tranches. No assets (loans or notes) are passed through to the CDO SPV. and it’s investors. Only rights to CURRENT cash flows derived from the original securities – which were derived from the original loans purchased by the security underwriters to the original SPV. The repackaged CDO holds no assets, no loans, no notes, and no securities. It is simply a derivative – a right to CURRENT cash flows DERIVED from the original securities.

    The CDO investors DO NOT purchase the certificates to the original trust. They purchase synthetic DERIVED rights as a CDO investor. The CDO only passes on current cash flows DERIVED from prior securities. If the underlying securities (and loans), from which the CDO was derived, performs – then the CDO investors will realize a positive cash flow. If they do not, then the parties that shorted the CDOs (with swap derivative) register a gain.

    This is basic securities law. See Regulation AB. A pass-through security must be for current cash flows – AND cannot be “DERIVED” from another security ( or basket of tranches from other securities).

    The original trustee to the original SPV is acting on behalf of the security underwriters to original SPV. Unless those security underwriters have disposed of collection rights to a third party. Very often, the trustee to the derived CDO SPV is the same trustee to original SPV. However, the investors the trustee to CDO represents, have no rights to the note – the loan – or to foreclose.

    That is the way it is – whether we like or not. And whether or not the courts ever recognize serious error in foreclosure actions filed by very wrong parties.

  8. As I understand it, ANONYMOUS. If you had the following two Pools with only 2 tranches. (They usually have way more tranches)

    – A1 tranche – $100 mill
    – B2 tranche – $20 mill

    – A2 tranche – $500 mill
    – M1 tranche – $50 mill

    Example: “XYX” CDO would buy certificates of a specific tranche from each pool. I believe it can even include the entire pool or even other CDO’s. But to to keep it simple. “XYZ” CDO would buy $10mm of A1 from ABC pool, and $10mm of M1 from DEF pool.

    So now, XYZ CDO would look like this:
    A1 – ABC POOL – $10 mm
    M1 – DEF POOL – $10 mm
    Total balance – $20 million

    It actually purchases those certificates from the various pools, so it is the OWNER of the notes.

    MOST if not ALL CDO’s had insurance on the top rated certificates. So in this example, it would collect the entire $10mm on the A1 certificates, if a credit event occured.

    So if the CDO is the owners of the notes or at least a fraction (based on number of certificates it purchased from each pool), then if they received CDS payouts, then Investor should have been paid and the underlying NOTES should be paid down by the amount of insurance they received.

    None of this happened. I believe the investors in some cases, got insurance proceeds and some did not. The ones who did are not going to say anything and the ones who didn’t are left standing saying “what happen”.

    Either way, the homeowner is screwed first along with some investors. The “protected” investors and firms who put the deal together took the money and ran.

    The RMBS pool trustees just foreclose to keep the houses and don’t want to know that some investors (certificates) have been paid in full with interest.

    I suspect they DO KNOW that most of the Investors have been paid and that the NOTES should be reduced or paid off entirely.

  9. Need to clarify. You state “SPV do not own the loan portfolios.” Believe the actions attached state that “CDOs are debt securities collateralized by debt obligations including RMBS. These securities are packaged and generally held by a special purpose vehicle (‘SPV”). In a syntehtic CDO, the SPV does not actually own a portfolio of fixed income assets.”.

    There are two SPVs utilized in securitization. The first SPV is the SPV borrowers will know when someone comes knocking at door to foreclose. These SPVs have trustees such as Wells Fargo Bank, NA, US Bank, NA, etc. All certificates to these SPVs are sold to the security underwriters. The securities to these trusts are derived from the “pooled” loan receivables held by the security underwriters related to the mortgages loans purchased by the security underwriters. Thus, the security underwriters – as purchaser of the loan originations, owns your loan and the right to receivables at this stage.

    A second SPV is then setup for CDOs which are debt obligations derived from repackaged securities in the first SPV (or multiple SPVs)- which the security underwriters own (conversion from receivables into securities by security underwriter is just an accounting gimmick). Thus, the second SPV for CDOs holds no assets – and derives value from the performance of the first SPV securities – which the security underwriters own.

    Thus, CDO investors do not own loan portfolios and do not own loans. Security underwriters to the original SPV -own the loans.

    Think courts should order Goldman (and the other financial institutions did same repackaging but were not “smart” or stupid enough to short them), to return the homes to the people first. Anyway, you look at, security underwriters (and CDO investors), had to harm the people first before they harmed the investors. Any party who invested in such “securities” were hoping to hold borrowers hostage to high adjustable interest rates – .obtained by fraud and collusion in order to profit.

    The people first deserve justice.

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