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Commentary on Transfers of Mortgage Loans to RMBS Securitization Trusts

October 18, 2010

There is a tremendous amount of public commentary these days about possible defects in foreclosure proceedings commenced by loan servicers.  Much of this discussion concerns procedural matters, such as whether the appropriate steps are being taken to verify the accuracy of statements made in affidavits executed  in connection with these proceedings.  These issues are very fact specific and it may take some time to ascertain what effect, if any, they may have on any given loan.

Within this overall dialogue, however, more fundamental issues have been raised challenging both the validity of the procedures used to convey mortgage loans into securitization trusts and the qualification of the securitization trusts as a real estate mortgage investment conduit (“REMIC”) at the time those trusts were formed. These statements are false and misguided.

The reasoning behind these statements appears to be as follows:  (i) in order to satisfy procedural requirements in connection with foreclosure, certain steps may need to be taken in order to document the ownership of a mortgage loan by the securitization trust, and (ii) since not all of these steps were taken at the time of the securitization, the securitization trust must not own the mortgage loan.  This reasoning is faulty, because some of the steps that may be required under applicable state law in order to bring a foreclosure action are not required to transfer ownership of the mortgage loan.

The purpose of this article is to refute these challenges to the efficacy of mortgage loan transfers to securitization trusts.  Simply stated, the industry standard procedures used for decades in transferring mortgage loans to securitization vehicles comply with the well-settled principles of law governing the transfer of mortgage loans, and therefore are effective to transfer ownership of the mortgage loans.

Standard procedures for transferring a mortgage loan

A mortgage loan can be thought of as a bundle of rights, including (i) a borrower’s obligation to repay debt, evidenced by a note, and (ii) a lien on real property collateral securing this obligation to repay the debt, which  is created by a mortgage or a deed of trust.  (As used in this article, “mortgage” includes a deed of trust.)  Transfers of notes are governed by applicable state contract law including the Uniform Commercial Code (UCC). Transfers of a mortgage or deed of trust are generally governed by state real property law.  While these laws do not conflict, they do have the result of transfers of mortgage loans being legally complex.  There is no single legally prescribed format for transferring mortgage loans, such as the certificate of title rules for motor vehicles.  In addition, ownership of a mortgage loan does not require the owner to have recorded an assignment of the mortgage in the real property records.

There are decades of custom and practice in the transfer of mortgage loans as between the originator and successive purchasers or into a securitization. The practices used in conveying mortgage loans to private label securitization trusts are consistent with the practices used in transferring mortgage loans to Fannie and Freddie.  In addition, these practices are the same practices used in sales of mortgage loans (“whole loan sales”) in transactions prior to or not involving a securitization, as between the originator and successive purchasers in these whole loan sales.

These standard transfer procedures are essentially designed to meet three objectives:  1) document the parties’ intent to effect a sale of the mortgage loans and memorialize all terms and conditions of that sale, 2) evidence the transfer of ownership by delivering the physical notes with endorsements consistent with UCC provisions, which protects the purchaser from being subject to adverse third party claims in the mortgage loans, and 3) enable the purchaser to become the mortgagee of record as needed for foreclosure proceedings or other purposes.

General custom and practice in the sale of mortgage loans involves three key steps from a documentary perspective:

  • Contract.   In mortgage loan sale transactions, there is almost always a contractual agreement as between seller and purchaser which: clearly establishes the parties intent to sell the mortgage loans to the purchaser; identifies the specific mortgage loans being sold by use of a loan level schedule; contains granting language which states that it conveys ownership of the mortgage loans; identifies the time of sale; and specifies the governing law for the sale transaction (frequently, the laws of the State of New York are designated by the parties as the governing law).  These contractual agreements typically also contain representations and warranties made by the seller.  An agreement of this type is essential to establish the parties’ intent to sell the loan, to actually convey the loan to the purchaser and to articulate the terms and conditions of the sale.  (Delivery of the note and an assignment of mortgage, while important for the reasons discussed below, do not in and of themselves establish the parties intent and articulate the terms and conditions of the sale.)

In a private label RMBS transaction, the relevant contractual agreement is typically a pooling and servicing agreement, which conveys the mortgage loans from the depositor to the trustee on behalf of the securitization trust.  Another relevant document could include a separate mortgage loan purchase agreement, under which the mortgage loans are sold by the sponsor to the depositor immediately prior to the sale from the depositor to the trust, with representations and warranties that are assigned to the trustee.  These documents contain clear granting language that conveys ownership of all of the seller’s “right, title and interest in and to” the mortgage loans to the trustee on behalf of the securitization trust.  There is a schedule or exhibit to these documents that specificly identifies each loan sold under the agreement.

  • Delivery of Note.    Physical delivery of the mortgage note to the purchaser or its agent, together with an endorsement of the note by the seller in blank, are also key components in the sale of mortgage loans for several reasons.  First, because mortgage notes are generally “instruments” under the UCC, possession of the mortgage note by the purchaser in a valid sale is generally sufficient to establish that the purchaser’s ownership rights are superior to the rights of any other person in the mortgage loan.  Second, as an “instrument”, the note can be transferred and the purchaser will be recognized as the holder in accordance with applicable UCC provisions, upon physical delivery of the note to the purchaser with an endorsement (which may be in blank).  (The question of whether a mortgage note is a negotiable instrument is fact specific, and the standard transfer procedures are designed to be effective irrespective of whether it is a negotiable instrument.)  Third, since there is generally only one physical note per mortgage loan, delivery by the seller to the purchaser effectively prevents the seller from engaging in any mistaken, improper or fraudulent sale or pledge of the mortgage loans to multiple parties.    Fourth, possession of the mortgage note may be needed for enforcement of the note in the event of default, including by foreclosure.

Notes may be delivered to the purchaser with an endorsement in blank.  It is common for a mortgage note for a mortgage loan that has been sold to have stamped on it an endorsement to the effect of “Pay to the order of _____________, without recourse”, signed by the originator or a subsequent purchaser.  Such an endorsement has the effect that any subsequent transfer of the note presumptively only requires physical delivery (i.e., with no additional endorsement).  Therefore, where there are successive purchasers to a note, the endorsement in blank by any prior holder is a sufficient endorsement for purposes of the most recent purchaser.  For this reason, a mortgage note that has been transferred numerous times typically will only show one endorsement, which remains in blank. Importantly, for all purposes for which an endorsement of a mortgage note may be necessary or desirable in connection with a sale of the mortgage note, an endorsement in blank is sufficient and is equally effective as an endorsement where the name is filled in.

In private label RMBS transactions, the prevailing and nearly universally-followed practice has been for the endorsed notes to be physically delivered to the trustee, or to a custodian as the trustee’s agent, at the closing of the securitization.   Typical procedures include a requirement that the trustee or custodian provide an initial certification at closing and a final certification a specified number of days thereafter in order to confirm the delivery of each mortgage note.  Any exceptions noted in these certifications result in a repurchase obligation of the seller within a specific period of time.  Significantly, these procedures require a specific verification by the trustee or custodian that it has in fact received the physical notes for each loan listed on the mortgage loan schedule.  These procedures make it highly unlikely that there has been any widespread failure to deliver the mortgage notes that simply went undetected.

  • Assignment of Mortgage. The final key step in transferring ownership of a mortgage loan is to provide an assignment of mortgage in recordable form to the purchaser. Typically, the assignment is in blank so the name of the assignee can be filled in later prior to recordation.  Because the mortgage “follows the note”, it secures the debt for the benefit of the noteholder, and as between seller and purchaser it is not necessary to record the assignment in the name of the purchaser in order to convey rights under the mortgage to the purchaser. However, in order to exercise its rights under the mortgage against the borrower following default, it may be necessary, under certain states’ law, that the purchaser become the mortgagee of record.  Delivery of an assignment of mortgage in recordable form in blank is intended to enable the purchaser to become the mortgagee of record by completing the assignment in its name and submitting it for recording.  Because every recording of an assignment of mortgage involves a filing fee and other expenses, it is not unusual for these assignments to remain unrecorded until such time as is needed in connection with a foreclosure of a specific defaulted loan.

In a private label RMBS transaction, the prevailing practice has been to deliver an original signed assignment of mortgage in recordable form in blank.  In many cases, the securitization governing documents have not required that the assignments of mortgage be recorded in favor of the trust as a general matter.  Certification of receipt by the trustee or custodian of the assignments of mortgage has been required under the same procedures as for the mortgage notes.

Variations from the above procedures

In our experience, we are not aware of material deviations from the general practice of delivering the physical mortgage notes to the trustee or its custodian.  In some programs, delivery of the notes was permitted to occur within a specified period of time after issuance, but subject to the overall procedures for checking in the notes and providing a certification of receipt by the trustee or custodian with repurchase required for any delivery failures as described above.

In some cases, at the time of the securitization it is known that the seller will be unable to produce the physical note because it had been previously lost or destroyed.  In that case, a lost note affidavit executed by the seller would be delivered to the trustee which affidavit would confirm that the seller (i) had owned the loan, (ii) had possession of the original note, and (iii) had attached a true and complete copy of the original note to the affidavit, and also that the original note had been lost or destroyed.  The securitization governing documents by their terms would still nevertheless convey ownership of those mortgage loans to the trustee, although the lack of the original note might in some states give rise to additional requirements that the lender must comply with in connection with a foreclosure (e.g., posting a bond).

With respect to mortgage loans where, as of the time of the securitization, the mortgage was held through the MERS system, instead of delivering an assignment of mortgage, the seller would transfer its beneficial interest in the mortgage to the trustee through MERS.  In jurisdictions where the noteholder must be named as the mortgagee of record in order to complete a foreclosure, relatively simple steps can be taken to accomplish this, thereby permitting foreclosure if necessary (although delays may occur).

Validity of original transfer procedures

For the reasons described above, these standard procedures are sufficient to validly transfer ownership of the mortgage loans to the securitization trusts, consistent with the clear and unambiguous intent of all parties to the transactions (including the investors) at the time.  Specifically, use of an endorsement in blank on the mortgage note is fully consistent with a sale.  Recordation of an assignment of mortgage to the securitization trust is not necessary to evidence ownership of the mortgage loan by the trust, and the delivery of an assignment of mortgage in blank in recordable form is sufficient to enable the trust to become the mortgagee of record if needed for foreclosure.

There may be additional steps required at the time of foreclosure in order to comply with procedural or documentary requirements.  For example, an assignment of the mortgage may need to be recorded to the securitization trust.  Any such additional steps would not convey any new or additional ownership rights to the securitization trust and would not negate the sufficiency of the transfer procedures described above to convey ownership of the mortgage loans to the securitization trust at the time of issuance.

It should not be surprising that additional steps may be needed at the time of foreclosure.  The standard transfer procedures described above are used in the context of transactions between sophisticated financial institutions and institutional investors, who clearly mutually intend for the transactions to be sales.  As commercial transactions, the steps taken are certainly sufficient to legally convey ownership and protect the rights of the purchaser, but do not include additional steps not required to convey ownership that would involve additional time or expense.  In contrast, the foreclosure process is adversarial  and in that context it is understandable that extra requirements could be imposed over and above those necessary to convey ownership of the loan itself.

Is there a REMIC qualification issue?

A few commentators have added to the parade of horribles a concern that the REMIC would lose its qualification because it did not own the mortgage loans.  The underlying premise to this argument is that the actions taken to convey ownership of the loans at issuance were ineffective and that any subsequent step taken to supposedly “cure” such deficiency (such as recordation of an assignment of mortgage) would have the effect of transferring the mortgage loan to the REMIC after the 90 day period following the issuance date during which transfers to the REMIC are permitted, causing a prohibited transaction tax.  The simple response to this argument is that the mortgage loans have been legally conveyed to the securitization trust at the time of issuance, which satisfies the requirements of the Internal Revenue Code and the related Treasury Regulations governing REMIC qualification.  Under basic principles of tax law in which substance is controlling over form, there is no question that the REMIC at the time of issuance was the owner of the mortgage loans for tax purposes.

Conclusion

We believe that the recent allegations of possible wholesale failures to convey ownership of mortgage loans to private label RMBS trusts are baseless and unfounded.  All parties to these transactions, including issuers, underwriters, trustees and investors, clearly intended that the transactions convey ownership of the loans to the trusts, and appropriate steps were taken to effect such conveyance in accordance with well-settled legal principles governing transfers of mortgage loans.  Any attempts to assert otherwise today are inaccurate and uninformed, and, if left to stand unchallenged, could cause substantial and unwarranted harm to the economy.

If you have any questions or would like further information concerning the subject matter of this Client

Alert, please contact Stephen Kudenholdt, Co-Chair of our Capital Markets Practice Group (+1 212 768 6847 or steve.kudenholdt@snrdenton.com), or Stephen F.J. Ornstein (+1 202 408 9122 or stephen.ornstein@snrdenton.com).

The following SNR Denton partners also contributed to this article: within our Capital Markets group, Andrea N. Mandell, Michael C. McGrath, Robert B. Olin, and Richard D. Simonds; and within our Real Estate group, Peter J. Mignone and Mitchell G. Williams.

32 Responses

  1. Thanks Anonymous,

    It is frustrating. Our situation is straightforward for a court of (supposed) equity… The lender knowingly (bad-faith)left us in an impossible situation. Under an reasonable expectations…

    1. The house cannot be completed
    2. The house cannot be repaired
    3. The house cannot be sold

    All resulted from the collusion between the Bank, Builder, Appraiser & County Code Official. The house was NEVER inspected, fraudulent U&O Permit, never completed, and we learned those are NOT “authentic” signatures on our NOTE.

    The settled the construction loan agreement knowing the above – converted the loan to a perm loan – they call a refinance and all knowing the above.

    They never “Affixed” anything on the Deed of Trust showing the loan was sold. The Note was stamped (pay to the order) but Real Property Law requires the DOT noted of the Transfer from originator to purchaser up-to the time of securitization. The Loan was pre-sold and they used an illegal method of A to D during the “legitimate transfer period i.e. prior to the closing of the Trust”.

    However the house never completed, not inspected, used a fraudulent U&O at closing, so WHAT could they have “ever” legally Transferred. They cannot Transfer what they do not have – therefore at best, they Transferred a fraud – with a fraudulent assessed value – making the entire transaction a nullity or void (I think).

    Our mortgage has never complied with the requirements of the Loan Agreements nor the PSA – at no time and still to this day does NOT meet those requiremets. ALL was done by the collusion between the Lender, Builder, Appraiser, & County Code Official. I have the material evidence to prove it.

    I want to cut their legs out from under them by busting them with the Real Property requirements of recordation and Affixing Permanently to the DOT. Because our case has undeniable fraud throughout, I wish we could find a tenascous law firm to take them to task over it. IMHO- Our case is ripe to expose what you describe because they can’t get around it. Then having the foreclosure mill attorneys use forged signatures & forged notary only add icing on the cake. There is not a damn-place they can point in our loan where some form of fraud or illegality was taking place and ALL of it by THEM.

    Thanks for all your responses and many, many, thanks to NEIL and others for helping everyone. There is so much work still to do.

    David

  2. David,

    According to the PSAs – all had to be recorded. But, the foreclosure mills whine to the court – in effect saying – “Give us break – we forgot to do this – and we are doing it know.” And, many courts say – Okey Dookey. – whatever you want.!! And, the courts NEVER say – “too bad – you missed the boat” AND “WHAT REALLY HAPPENED AFTER THAT??” Why are the courts allowing such manipulation of standards? What is their purpose?

    They know – it will not reach higher courts – if anyone is near breaking the fraud – the court will force settlement. Thus, we cannot get to higher court decisions. Damned if you do – damned if you do not.

    And, additional problem is this — No one wants to address – they are just assuming all is status quo as to the time of the set-up of the Bank owned Trust. This is simply NOT so. Much has occurred – including dismantling of the Trust – and sale of default loans/removal from trust. So – WHO actually accounts for foreclosure recovery.? Are the courts so biased that they cannot demand CURRENT accounting? NO TRUST – or TRUSTEE – is being paid for foreclosure recovery proceeds. PERIOD. This is NOT happening. Extremely frustrating that only some are getting this.

    In addition, it is my belief that the loans were not actually securitized- because they never met SEC standards for mortgage-backed- securities – and therefore, the reason why certain entities are now demanding repurchases.

    Massachusetts Appellate Court – is currently considering some of these issues. Although this is a state court issue – their decision will influence other state courts across the country. However, we need to get these issues into the Federal District Court level to impact case precedent across the country. And, eventually to the Supreme Court of the United States. Individual settlements will not help us. We need case law. We need higher courts to address the fraud. We need attorneys who will take to higher courts. This is not happening.

  3. Hey ‘Fighting MERS in CA:

    Would you care to address how to avoid having a case in CA brought up were this was the finding (sorry I did not copy down the case number): “the Fourth Appellate District specifically
    held that MERS was not required to be registered with the California Secretary of State, because
    the mere act of enforcing deeds of trust does not constitute “doing business” in California under
    California law. ”

    I’d just like to be prepared to head that case reference off.

  4. MERS Defense Flaw

    On July 21, 2010 MERS registered with the California Secretary of State.
    MERS registration in California is not retroactive until its complete for the following reasons:
    1. As a result of MERS intentional failure from obtaining a certificate of qualification from the California Secretary of State as a “Beneficiary”, including filing returns and paying taxes, MERS is not allowed the right to defend a lawsuit when named as or defending its actions in a “Beneficiary” capacity, pursuant to California Revenue & Taxation Code Section §§ 23301, 23301.6, 23304.1.

    “A suspended corporation is not allowed to exercise the powers and privileges of a corporation in good standing, including the right to sue or defend a lawsuit while its taxes remain unpaid”
    PERFORMANCE PLASTERING v. RICHMOND AM. HOMES, 153 Cal.App.4th 659 (2007) 63 Cal.Rptr.3d 537

    2. MERS must first produce a Certificate of Relief from Voidability for the time prior to July 21, 2010, California Revenue & Tax Code 23305.1 and file with this Superior Court Clerk receipt of payment to the California Secretary of State for taxes and penalties, California Corporations Code §2203(c).

    “UMML qualified to transact intrastate business, but failed to pay the necessary fees, penalties and taxes. The trial court correctly dismissed the complaint without prejudice.”
    United Medical Management Ltd. v. Gatto, 49 Cal. App. 4th 1732 – Cal: Court of Appeals, 2nd Appellate

    3. MERS will very likely cite one of these two cases:
    United Medical Management Ltd. v. Gatto 49 Cal.App.4th 1732 (1996),
    or an unpublished case as of 10/18/2010 Perlas v. Mortgage Elec. Registration Systems, Inc., 2010 WL 3079262 * 7

    Both of which are based upon this case:
    “A nonqualified corporation subject to a misdemeanor prosecution and on conviction to a heavy fine for doing business without complying with the law, is permitted to qualify, be restored to full legal competency and have its prior transactions given full effect.” (Tucker v. Cave Springs Min. Corp. (1934) 139 Cal. App. 213, 217 [33 P.2d 871].

    So demand the filing of receipts and that Certificat of Relief from Voidability!
    Get more flaws at https://sites.google.com/site/mersfatalflawsincalifornia/home

    mersfatalflaws@gmail.com

  5. Hi Anonymous,

    I apprecaite the response – maybe Bill could answer it…

    After signing – the Originator sells the Note to the Sponsor – Sponsor sells it to Depositor…

    Are those other TWO Sales & Transfers required to be Recorded in the State Land Records because THOSE Transactions are still Prior to securitization? After Securitization the NOTE can travel but Prior those Transfers are part of the Chain of Title… That would equate the A to D Transfer instead of the Chain of Title being a A to B to C to D Transfer…

    That’s what I thought the Affixation Laws and Real Property Laws were for – to maintain the Chain through to the Securitization…

    In other words – that is what is meant by “decoupled” or “decollateralized” the NOTE – they split it from the Deed of Trust by jumping from A (Originator) to D (Trustee)…

    Man, this stuff makes my brain hurt…

    Thanks
    David

  6. Everyone – I am not an attorney – and what I post is just from years of research – but not legal advice.

    Bill – think you have a better grip on the Quiet Title – as your prior post reflects. All I try to point out is what the courts are deciding. But, as your prior post implies – this is not “normal” times – and the courts are trying to find “normal” in non-normal events that culminated into this crisis. Hiding information was part of the game – and deregulation allowed it. A choice was made – by those in control – to save the banks – and let the people fall. How can courts grant discovery when those in control – claim “privacy” – which deregulation allows? Although I blame the courts – they are partly controlled by the laws that Congress implemented. And, these laws were designed to promote international competition in financial services – that is – no boundaries. All collapsed – and the US had to save it’s international face. They needed scapegoats – us. Problem is mortgage title is also being destroyed in the process. I am not an expert in Quiet Title – Dave Krieger is. But, Dave should be aware of what courts are deciding – so he can counter.

    elaineb, the connections are huge.

    Lisa D. – I would say so.

    David, your post just demonstrates – WHAT WAS NOT DONE. Everyone here has to realize that the PSA and Prospectus – was not for our benefit. Those documents were intended for subsequent derivative security investors – and not to protect our rights to valid chain of title and mortgage title. But, those agreements – if read in detail – tell us what was NOT done. We have “Depositors” securitizing receivables – when they never had a balance sheet to remove the receivables from!! It was their parent – like many parents do – who did it for them!! The Depositors were set up to conceal the purchase of the loan by the bank.

    And, now,, those security investors are crying “FOUL.” And, those security documents do not demonstrate complete chain of title – or loan ownership. This is why Europe was the FIRST to dump the investments – they were the first to discover the fraud. That is when the crisis hit.

    And, the one thing I do know – is the loans were sold to the banks – prior to any securitiztion. (different track for GSEs – but the banks came in with strong competition against the GSEs – that was their goal). Now, we would not be having ongoing mandate to “push through foreclosures” – by some in media or in control – if the goal is not to rid the banks of the loans – THAT THEY OWN. The securities are dead and gone. Trying to keep them alive is like the Night of The Living Dead. THE BANKS OWN THE LOANS – UNLESS THEY HAVE ALREADY DISPOSED OF THEM. This was put forth at the onset of the crisis – but quickly silenced.

    This is the ongoing crisis – and why the banks are in continued trouble. Any party that goes into court with the creditor as the “Trustee” for some defunct trust – should be investigated – and I hope that is what they are doing.

  7. Hi Anonymous,

    What about the legal process & connection between the Deed of Trust & Note – from borrowers signing at settlement with the Originator…? State’s Real Property Laws require these transactions must complete proper Recordation therefore “Perfecting” (I think) the Transaction. This legally “Seals” & makes the Instruments enforceable. I’m not positive if my legal jargon is correct but the gist is there…

    But my point is – the Deed of Trust is still a very central part of the transactions – up to the Securitization.

    Example:

    >> Untold Pre-Arrangements <> Doing the Deal <<
    • Borrowers closes loan with Originator – signs Deed of Trust & Note at Title Company
    • Originator (or Title Company) takes Deed of Trust to Courthouse to Record transaction
    o Courthouse records the Deed of Trust – stamps – signed sealed DONE.
    • Originator (or Title Company) STAMPS (Pay to the Order of) SELLS & TRANSFERS the NOTE to the Pre-Determined Sponsor…

    PAUSE – QUESTION – Does that SELL & TRANSFER require ANOTHER Recordation and does that TRANSFER require an Allonge or Assignment to be “permanently AFFIXED” to the DEED of TRUST and Recorded to be legally binding or recognized as a condition of “PERFECTION” under the UCC or Real Property Laws?

    • Pre-Determined Sponsor – then SELLS & TRANSFERS NOTE to the Depositor

    PAUSE – QUESTION – Does this require ANOTHER “ALLONGE” to be permanently “AFFIXED” to the Deed of TRUST and then RECORDED ? Is this required under States’ Real Property Laws and/or UCC?

    • Depositor then SELLS & TRANSFERS NOTE to the TRUSTEE

    PAUSE – QUESTION – Does this require ANOTHER “ALLONGE” to be permanently “AFFIXED” to the Deed of TRUST and then RECORDED ? Is this required under States’ Real Property Laws and/or UCC?

    Here’s a Quick Recap Overview
    – Borrower Goes to Originator settles/signs
    – Originator (Title Co.) goes to Courthouse and Records the Deed of Trust
    – Originator stamps and/or signs then – SELLS & TRANSFERS NOTE to Sponsor
    – Sponsor SELLS & TRANSFERS NOTE to Depositor
    – Depositor SELLS & TRANSFERS NOTE to Trustee
    At that POINT – THEN – that NOTE is Securitized… Up to that point – throughout the PROCESS it is NOT securitized…

    Therefore – each of those procedures MUST be noted on the DEED of TRUST in order to sustain the Chain of Title. Isn’t this exactly what Max Gardner talks about with A to D transaction being illegal?

    FHA & HUD – state that TABLE Funding is NOT recognized as a bona-fide sale for Holder status… However, they DO recognize a Letter of Credit between the Originator & Warehouse Lender.

    Can you explain how a Letter of Credit is permissible – but it is illegal for a Bank to lend its Credit..?

    Meaning, if the originator used a Letter of Credit to create our mortgage – is that not lending “us” their credit – while relying on warehouse credit to perform the transaction. They are still LENDING their Credit because they did NOT receive nor did they extend any funds. It is a contradiction – which MUST create a magical bookkeeping entry..?

    IMHO – if each of those must be recorded, THAT is THE KEY to cutting off EVERYTING afterwards – NO ONE could have legal standing because the Original Contract between the borrower & originator was ever legally "perfected" therefore not legally enforceable. If correct, that could be a smoking gun for a vas majority of folks…

    Sorry for the length
    David

    Keep the Powder Dry

  8. Great minds here.

    Thanks each one of you, Elaine, Dave, Anonymous, Tim, The-A-man, Frankilee, Mary, David, etc. etc! for these probing comments. We are exposing them fully now. Look at their political payoffs and connections. Desperation.

    Anonymous:

    Could you consider reviewing the Quiet Title format layout on HomeSafeUniversity.weebly.com , and add some paragraphs related to the weaknesses you know, that will further strengthen it? If Dave’s Krieger’s is available, all three strengths could be mixed, then post it somewhere for review.

    We need an editable, foundational outline, that we can fill in with our detail, that has so few errors, that the banks will have a hard time getting judges to misrule upon.

    You definitely know enough with Neil, to up the ante.

    We want to make the absolutely best precedent in each jurisdiction.

    These banks are at all out War with the people. Literally, billion-dollar staff against the David-like readers here. Cover-up at any cos

    Please consider. Moreover, tell us where to start mailing compensation checks if you would like; I and others here are willing.

  9. One thing that I have had to try to learn that is still partially unclear;
    the timeline of a trust creation. Some details work under a strict timeline, others perhaps not. Nothing can be done legally after 90 days, etc..
    Might we have a description of the timeline of events creating a legal trust? And the notation where the “shortcuts” (or bankstas) made changes to the law to fit their favorite looting pattern.
    There appear to be many events that the “shortcuts” used time as though they could manipulate it. It seems many of the issues revolve around this timing.

  10. ANONYMOUS,
    You state: “But, one cannot assign a loan to a REMIC if there is knowledge of default. Thus, if assignment occurs (to cure defect) after default – and after removal of receivable from Trust – this is simply – fraud.” My loan was in default in October of 2004 … the closing date of the ‘Trust’ was January 28th 2005 … BUT, the ‘assignment’ is dated May 20th 2005! Does THAT alone constitute fraud??? And if that is filed in court – isn’t that fraud upon the court???

  11. Anonymous, thanks for taking the time to explain that in such detail. I’ve learned volumes from you. And BTW, I think the smiley face works quite well with that statement:

    🙂 Therefore, none of the assignments, endorsements, etc. are accurate because the FIRST SALE To the bank is not part of the chain.

  12. Again – do not know how smiley face got there.

  13. It was a former attorney from Thacher Proffitt, now Sonnenschein , and whose name appeared on many SEC documents – that informed that the “Trusts” are a “shell” – meaning “empty.” This is for many reasons – and, these Trusts are no longer performing as originally intended..

    1) You have to look at how these mortgage loans – not the Trust itself – were funded. The loans were funded with warehouse lines of credit – set up specifically for originators to utilize at origination and with conditional prearranged agreements to sell the loan to the Banks. NO WHERE DOES THE transfer of loan to warehouse lender and subsequent sale of the loans to the Bank exist. The originators did not remove THEIR receivables from THEIR balance sheets for securitization – the BANKs removed THEIR receivables from their own balance sheets for securitization.

    2) If the process described above is accurate and currently working, then the originator remained your “lender” for all legal purposes including TILA/RESPA. But, these originators are “dead” – so who is the lender for TILA/RESPA?? – not the Trust and not the security investors, not the servicer, and certainly not the Trustee – all according to the Federal Reserve Interim Opinion on May 2009 TILA Amendment (now rule). The lender/creditor is the entity on whose balance sheet the loan rights lie.

    3) According to FASB 166 and 167, these off-balance sheet trusts – owned by the banks – are now back on the banks balance sheet.

    4) Why did the banks own the off-balance sheet trusts? Because the Depositor was their subsidiary – as was the security underwriter – who purchased ALL the certificates to the Trust excluding the servicer owned residual tranche. The bank would then use their certificate owned tranches in derivative CDOs, and squared CDOs – on which many credit default swaps were written.

    5) When you look at PSAs – you have to know – who is the seller/sponsor, who is the originator, and who is the Depositor. The above author states – “pooling and servicing agreement, which conveys the mortgage loans from the depositor to the trustee on behalf of the securitization trust” The author does not complete his statement. Conveyance of Mortgage Loans is usually found under Article II in the PSA. – but conveyance is NOT “on behalf of the securitization Trust.” Conveyance is for the “benefit of the Certificateholders” to the Trust. The security underwriters purchase all the certificates to the Trust – they OWN the Trust . The Depositor is a subsidiary of the Bank, as is the security underwriter a subsidiary of the Bank. By the “Conveyance” – the loans are converted from on balance sheet receivables (Depositor parent owned – to off-balance sheet securities (security underwriter owned). But, all of this is without the first step – sale of mortgage loans to the bank. Now, you may consider that the sale to Depositor – since it is a subsidiary of the parent bank, counts as the sale to the Banks – but the Depositor does not provide the warehouse funding to the originator – the bank does. Which brings us to the Mortgage Loan Purchase agreement.

    6) The Mortgage Loan Purchase Agreement (MPLA) is the sale of the loans from the Sponsor/Seller to the Depositor. Sometimes, the Sponsor/Seller is the originator – sometimes it is not the originator. In the case of the latter – a sale of the loans from the originator to Sponsor/Seller is often missing in the chain. Under either case, the Depositor did not provide the funding to purchase the loan – only the parent corporation bank had this ability. Neither did subsequent security investors fund the loan (this has always been my disagreement with Neil) – because the MPLA occurs PRIOR to the sale of the loans to the Trust and prior to the sale of trust certificates to the security underwriters. The loan originations were funded by warehouse lines of credit funded by the bank to the originator. And then sold to the parent bank by the originator via the warehouse funder.

    7) MERS is nothing more than a “nominee” for the actual bank that funded the origination and purchased the loans via warehouse lending – which was concealed at mortgage origination..

    8) Therefore, none of the assignments, endorsements, etc. are accurate because the FIRST SALE To the bank is not part of the chain.

    9) All of this is MOOT – for two reasons A) the default loans are removed from the Trust via swap contracts and/or sale of collection rights once the receivables are charged-off. The REMICs were set up for pass-through of current receivables only. The trustee will not account for foreclosure recoveries. The only tranche that may be applicable is the residual servicer owned tranche – which means the servicer is servicing default loan for itself – or for the entity that funds the servicer payment advances. But the servicer will only advance payments for a certain amount of time – after that the servicer is servicing default loan for the entity that has purchased collection rights via swaps or direct sale of collection rights.

    B) The author describes a process that was utilized WHEN the securitizations were actually functioning as intended. This is no longer the case. The trusts have been dismantled, torn apart, and paid via swaps, and with any remnants either now back on the banks balance sheet (FASB) or with the US Government’s balance sheet..

    10) As far as the REMIC 90-day rule, the author’s premise MIGHT be correct – IF the loans are still performing. But, one cannot assign a loan to a REMIC if there is knowledge of default. Thus, if assignment occurs (to cure defect) after default – and after removal of receivable from Trust – this is simply – fraud.

    11) Finally, none of the above accounts for any loans that may have been been a forced “Repurchase” by the originator (Repurchase Agreement is part of MPLA) – or SHOULD have been repurchased – as is being argued by derivative security investors – such as the Federal Reserve – today.

    In conclusion, what the author argues does not include the flaws in chain of sale of loans at the time of loan origination and trust setup and PURCHASE of loans by the banks. And, the author does not include how default loans are removed from the trusts, or subsequent default of the Trusts themselves. As a result, the mortgage loans are back on banks (or government) balance sheet – whether performing or not – OR with collection rights sold to unidentified swap provider and/or third party distressed debt buyers/hedge funds.

    While the author would love to assume that all is still well (these guys signed their names on numerous SEC documents), all is not well. All has collapsed – and there lies the foreclosure fraud.

  14. oh I forgot to mention that my loan was removed from the MERS system and the MIN# deactivated in 2002. The puported sell of my loan into the securities wasn’t until june 2003, uh huh then when foreclosure started the successor trustee recorded an assignment of the note and mortgage acting for the original corporation that deactivated the min # removed it from the MERS system andthe originator was aquired by another company in 2005 and totally shut down by the FDIC in 2007. MERS had no authority period the company was defunct who they were acting in the corporate name of and the loan was removed from MERS by the same corporation….hahahaha

  15. They never say die these criminals I hope that they end up festering in jail these banksters are not well they are sick to the pont if having no insight into what they alll conspired to do the fallout is a devastated economy and and striong probability of a volitile society our leaders have buckkled and betrayed us our courts are where we look now we must have our laws prevail god is on our side and if he for us for us who can be again us. And let me tell you god loves a fighter

  16. meant to say where is the conveyence..

  17. The UCC is clear that an allonge must be attached to the Note firmly afixed as to become a permament part of. If there not a note only a lost note the loose allonges left lying in their document files is not any good. If the originator lost the note and gave only a lost note affidavit to the seller , wouldn’t the seller have to prepare a lost note affidavit to the depositor and so-on? the lost note from the originator would only give right title and interest to the seller was is the conveyence to the depositor and to the trust . It can’t be with allonges not attached to the NOTE! I’m glad for this article I should have no problem against my foreclosure because I have the note endorsed in blank, the produced a lost note affidavit that didn’t even have any terms of conveyence and two allonges both undated , one from the originator to the seller and the other was undated and unsigned directly to the trust from the seller, hahahaha bring on the lies.

  18. would anyone know if this could be used as a defense for voiding the contract?

    Void (law)
    From Wikipedia, the free encyclopedia
    Jump to: navigation, search
    This article does not cite any references or sources.
    Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (May 2010)

    In law, void means of no legal effect. An action, document or transaction which is void is of no legal effect whatsoever: an absolute nullity – the law treats it as if it had never existed or happened.

    The term void ab initio, which means “to be treated as invalid from the outset,” comes from adding the Latin phrase ab initio (from the beginning) as a qualifier. For example, in many jurisdictions where a person signs a contract under duress, that contract is treated as being void ab initio.

    Black’s Law Dictionary defines void as:

    Void. Null; ineffectual; nugatory; having no legal force or binding effect; unable, in law, to support the purpose for which it was intended. Hardison v Gledhill 72 Ga.App. 432, 33 S.E.2d 921

    The dictionary further goes on to define void ab initio as:

    Void ab initio. A contract is null from the beginning if it seriously offends law or public policy in contrast to a contract which is merely voidable at the election of one of the parties to the contract.

    In practical terms, void is usually used in contradistinction to voidable and unenforceable, the principal difference being that an action which is voidable remains valid until it is avoided. The significance of this usually lies in the possibility of third party rights being acquired. For example, in Cundy v Lindsay (1878) 3 App Cas 459 a fraudster induced Messrs Lindsay & Co to sell to him a quantity of handkerchiefs. The fraudster then sold the handkerchiefs on to an innocent third party, Mr Cundy. The fraudster was convicted, and the money was never recovered from him. Lindsay sued claiming ownership of the handkerchiefs. If the contract of sale was held to be voidable for fraud, the fraudster could pass good title Mr Cundy (provided that the contract had not yet been avoided), and Lindsay & Co would only have recourse against the insolvent fraudster. However, if (as was in fact held) the contract of sale was void ab initio, then title did not pass, and Lindsay could claim back the handkerchiefs as their property, and Mr Cundy was left with only a claim against the insolvent fraudster.

    However, the right to avoid a voidable transaction can be lost (usually lost by delay). These are sometimes referred to as “bars to rescission”. Such considerations do not apply to matters which are void ab initio.

    An insurer facing a claim from an insured who had deceived the insurer on a material fact, would claim that the insurance contract was void ab initio; that it was null and void from the beginning and that since there was no legally enforceable contract, the insurer ought not to have to pay.[3]

  19. I have seen umpteen assignments in blank and they are ALL notarized in blank too. That is fraud. Plain and simple. No wiggle room under ANY state’s laws. Blank notarized assignments transfer nothing and intent does not trump black letter law. SNRDenton is the reincarnation of the failed former law firm of Thacher Proffitt and is a disgrace to the rule and practice of law.

  20. Hey Wells Fargo ,, listen up .. You didn’t create my TRUST … read that again YOU DIDN’t CREATE MY TRUST and no matter what steps you took you cannot fix that ,, You transferred things around (maybe) ,, sold things you didn’t own (definately) and defrauded the investors (and me until I wised up) ..

    We (collectively) are through with you. Even if you get Obamas lame duck stooges to pass a retroactive law fixing all your illegalities we will not pay and you are SCREWED… Then we will get it to the SC and thrown out.

    Sleep well.

  21. Reminder: Neil posted this article to prepare us all for the deceitful and deceptive legal arguments that we are all likely to see used in the courts. With this being published, the opposition law firms that are not up to doing any of their own double-speak are likely to use this content to try to trick us up.

    This example article should be looked upon as an exercise to prepare for our battle.

    If you don’t see the flaws in the example, read thru the earlier comments and take note of some of the links to other documents that pick this article to shreds.

  22. If they are right, why have they been hiding information all of the time when we asked for discovery?

    Plus if they are the ‘owners’, then they are liable for all of the regulatory violations, and the documentation fraud!

    Something is wrong here Neil, or they wouldn’t have acted the way they have the last three years, hiding sneaking, and making false documents and notaries.

    Nullity still exists when the note is separated from the Deed of Trust. What could be a better example of what they were talking about than this repeated securitization mess?

  23. Something Fishy here:

    After just four months of planning and work, Sonnenschein Nath & Rosenthal and U.K.-based Denton Wilde Sapte have merged to officially become SNR Denton. The new firm, which went live Thursday, has roughly 1,250 lawyers in 48 offices worldwide and estimated annual revenues of $750 million.

    Notice at bottom where Michael Posner worked previously and is now a US government official!

    • Michael Posner, executive director at Human Rights First who is leading the world-wide “Stop Torture Now” campaign focused entirely on the U.S. military. He has stated that Mr. Rumsfeld’s refusal to resign in the wake of the Abu Ghraib scandal is “irresponsible and dishonorable.”

    • George Soros, billionaire founder of Open Society Institute, the nonprofit foundation that helps fund Human Rights First and is an early contributor to the IFC. Mr. Soros has stated that the pictures of Abu Ghraib “hit us the same way as the terrorist attack itself.”

    Before joining Human Rights First, Mr. Posner was a lawyer with Sonnenschein, Nath & Rosenthal in Chicago. He lectured at Yale Law School from 1981 to 1984, and again in 2009. He was a visiting lecturer at Columbia University Law School since 1984. A member of the California Bar and the Illinois Bar, he received his J.D. from the University of California, Berkeley Law School (Boalt Hall) in 1975, and a B.A. with distinction and honors in History from the University of Michigan in 1972.

    Michael H. Posner Assistant Secretary Bureau of Democracy, Human Rights, and Labor (for US) Term of Appointment: 09/23/2009 to present

  24. Sounds like an attempted cover up to stay the IRS and State AG’s from looking into the sketchy transfers & assignments, missing original notes and forged or robo signed documents. He fails to mention that each assignment of the note should have included an assignment of the deed of trust so that they were not bifurcated– which then would have needed a recording fee and/or tax stamp fee in most states.
    Plus, if those notes went into the “trust” lock box, how did they get out? in order to foreclose? If you took all those notes (like carrots) and blended them into carrot juice to sell the juice as stock, how do they make them back into carrots to foreclose on each one individually?
    Let’s all sue this guy collectively for malpractice and misleading commentaries. He must be on the George Soros payroll.

  25. Wow what an article. from the Latimes,com
    Paying the Mortgage is a drag on the economy from the Los Angeles Times

    http://www.latimes.com/business/la-fi-economy-mortgages-20101101,0,7338975.story

  26. Where are the citations to support these alleged “well-settled legal principles.”

    “All parties to these transactions, including issuers, underwriters, trustees and investors, clearly intended that the transactions convey ownership of the loans to the trusts, and appropriate steps were taken to effect such conveyance in accordance with well-settled legal principles governing transfers of mortgage loans.”

    It reads more like a confession of guilt, I think.
    “Well-settled” or business-as-usual?

  27. i totally disagree with this article. so why is it the loan servicer did not follow this procedures? instead they hired a “robo signer” to signed this fabricated documents and even the law firm used their own employees to sign the fabricated documents such as NOD, substitution of trustee, assignment of deed, why not follow this procedures? if there is a legal way to do it. why cut corners? why would MERS allowed their names to be use in assigning the deed , substitution of trustee and other documents to help the loan servicer and their attorneys, third parties vendor such as a debt collectors and debt collectors attorneys to run this foreclosure frauds? like what neil told us three years ago that this foreclosure mess was design to commit fraud by using our signatures to feed the wall st. greediness in order to sell it to the hungry investors who wants a high return of their investment.

  28. Then why did the commit Forgery Perjury Back Dateing etc… Why didnt they already fix the mistakes.

    Because they broke the chain of title and sold the same loan or parts of the loan to to different investors.

    Co mingling of funds.

    The Accounting audit will say.

    “Wheres the Beef?”

    Plus if the Dems loose the House Pelosi will loose her job and she and her friends will do an Enron on the Banksters.

    NEVER AGAIN

  29. I guess we really need to make sure that Judge Shack sees this article. I think he’d pick it apart thoroughly instead of it convincing HIM that he is all wrong about what he has been finding.

  30. “…since there is generally only one physical note per mortgage loan, delivery by the seller to the purchaser effectively prevents the seller from engaging in any mistaken, improper or fraudulent sale or pledge of the mortgage loans to multiple parties…possession of the mortgage note may be needed for enforcement of the note in the event of default, including by foreclosure.”

    Duh gee the fact that there is only one physical note …DOES NOT prevent them from pledging the obligation to multiple parties in return for payment…as we have found out…because multiple parties PAID them…that is actully transferred the money to their account without first VERIFYING they had received the actual collateral file including the original note.

    This argument falls under the category “Gee Dad all the kids are doing it…” even though its in violation of the law.”

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