DTC FED NSS, THE (3380749)
12/05/2000 -NEW YORK NY Domestic Entity Other
Domestic Entity Other
Domestic institutions that engage in banking activities usually in connection with the business of banking in the United States

Important Notice
Fixed Income Clearing Corporation

NSS=National Settlement Service
THE DEPOSITORY TRUST COMPANY Assessment of … settlement day, DTC, as “Settlement Agent,” sends an NSS file to the Federal … in the name of Cede & Co., nominee of DTC …

Cede& co is a part of the Federal Reserve and does not answer to the SEC

“Shortcut ” Oh boy are we familiar with shortcuts, and this one not approved by the SEC, wow!

“Shortcut = assignee and/or successor”
“Cede & Co” = assignee and/or successor OWNER? and you are only a beneficiary.
Alike – Commercial Mortgage Asset Backed Securities?

‘Note’ in name of Cede & Co beneficiary Bank.

This “Shortcut” was invented so the broker would hold your stocks instead of you. A

Is this like the Corporate Treasury Securities of a bank nd in order for him to legally be able to trade them for you, the stocks were placed under their “street name”. I.e. they’re in the name of the brokerage, but they’re just holding them in trust and trading them for you. And you’re in reality the beneficiary rather than the owner. Which is all fine and dandy if everything goes right. Now, it appears the rules were then changed so the brokers are not allowed any longer to put the stocks in their own name. Instead, what they typically do is to put the stocks into the name of “Cede and Company” or “Cede & Co” or some such variation. And the broker might tell you that it is just a fictitious name, and will explain why it is really more practical to do that than to put it in your name.
Cede isn’t just some dummy name, but an actual corporation that DTCC controls
It is a private company, owned by the same people (major U.S. banks) who own the Federal Reserve Bank
if somebody at some point should decide otherwise, and there’s a national U.S. emergency and/or the U.S. government becomes unable to pay its debts, well, they might just not give you your stocks back. Because legally they own them. Something to think about.

Paste the link to read the document.

#: MBS058.06

Date: April 4, 2006

To: Mortgage-Backed Securities Division Participants

Subject: Funds-Only Settlement Processing

The Mortgage-Backed Securities Division (“MBSD”) of the Fixed Income Clearing Corporation (“FICC”) is pleased to announce that it will support the processing of all MBSD funds-only settlements in an automated process through the Federal Reserve’s National Settlement System (the “NSS”).

FICC expects to implement this service in 2006 upon receipt of approval of the requisite rule filing with the Securities and Exchange Commission.[1]

The service will introduce an automated process for the collection and payment of clearing members’ MBSD cash settlement obligations due to and from the MBSD.

The NSS process, currently used by FICC’s affiliates,

The Depository Trust Company (“DTC”), the National Securities Clearing Corporation (“NSCC”), and by the Government Securities Division (“GSD”) of FICC,[2] will be leveraged to automatically debit and credit participants’ cash settlement obligations at the settling bank level.

That is, the individual debits and credits of all clearing members using the same settling bank will be aggregated, and the net debit or credit established at the settling bank level will be settled using the NSS.

FICC will further leverage systems and procedures already in place at DTC to perform this function by using DTC as its agent to interface with the Federal Reserve Bank for settlement.

The implementation of this service will extend the settlement finality benefits currently afforded by DTC’s interface with the NSS to MBSD clearing members.

Additionally, by automating the cash settlement process, risk will be mitigated (as MBSD would have greater assurance of being paid on a timely basis), the operational burdens associated with collecting and paying out cash settlement amounts will be eliminated, and the need for FICC to fine members for late settlements will be diminished.

It will also streamline and standardize the collection of funds across clearing corporations.

The new service will be mandatory and will affect all MBSD clearing members simultaneously upon implementation. FICC will establish a new limited membership category for MBSD “Cash Settling Banks” to support this service. MBSD clearing members will be required to appoint a Cash Settling Bank to process their cash settlements by completing and signing the requisite agreements that will be provided by FICC at a later date.

The following entities will be eligible to become Cash Settling Banks by executing the requisite membership agreements (and requisite agreement with the Federal Reserve) for this purpose:

1. Banks or trust companies that are DTC settling banks (as defined in DTC’s rules and procedures)
2. FICC Government Securities Division Funds-Only Settling Banks[3]
3. MBSD clearing members with direct access to the Federal Reserve and the NSS.

Other banks or trust companies that desire to become MBSD Cash Settling Banks must apply to FICC.

In order to qualify, they must have direct access to the Federal Reserve Bank and the NSS, as well as satisfy the financial responsibility standards imposed by FICC from time to time.

Initially, these applicants must meet and maintain a Tier 1 capital ratio of 6 percent.

MBSD clearing members are urged to contact their current settling banks and inform them of the need to become an approved MBSD Cash Settling Bank.

It should be noted that if NSS becomes unavailable for any reason, MBSD participants will be required to settle their obligations with FICC using the existing procedure.

The obligation of a participant to fulfill its cash settlement amount remains at all times with the participant.

The NSS is governed by the Federal Reserve’s Operating Circular No. 12 (the “Circular”).

Under the Circular, DTC, as FICC’s settlement agent for the MBSD process, will have certain responsibilities with respect to an indemnity claim made by a relevant Federal Reserve Bank as a result of the NSS process.

FICC will apportion the entirety of any such liability to the MBSD clearing members for whom the Cash Settling Bank to which the indemnity claim relates was then acting.

This allocation will be done in directly proportion to the amount of such participants’ cash settlement amounts on the business day in question. If for any reason such allocation is not sufficient to fully satisfy the Federal Reserve Bank’s indemnity claim, then the remaining loss shall be allocated among all clearing participants in proportion to their relative usage of the facilities of the MBSD (based on fees for services) during the period in which loss was incurred.

Please direct all questions and comments on the NSS service to George Parasole, Director, Product Management, at 212-855-7670 or

Susan Tysk
Managing Director

22 Responses

  1. Source: ENCORE CREDIT RECEIVABLES 2005-1 mbs

  2. Bank of New York – Indenture Trustee a most interesting player and relationship worthy of consideration with respect to:

    Hongkong Shangahi Banking Corp Group and wholly-owned independent subsidiary in USA – Wells Fargo & Co.

    Search ‘Fax’ of BONY as ‘Indenture Trustee’ as related to ‘Countrywide’ wow!

    BONY is the Indenture Trustee. Your’s a most-interesting document.

    Oct 25, 2010 … 212 815 3986 The Bank of New York 101 Barclay Street 4 West Attn: Mortgage Backed Securities Group for Trusts Listed on Ex. A New York (Maiden Lane anyone?)

    MBS Administration for Trusts listed on…. CWALT, Inc…. Zionist Letter to crooks … Federal National Mortgage Assocation BONY maintained eligible account, ck Naughton BONY sent to BOA

    , Alternative Loan Trust 7/14/2006 Matthew Sabino of BONY you’d never know it from info… CWABS Asset-Backed Certificates Trust 2007-5 (Assignment Agreement) …; Countrywide Home Loans NY Andrew Steward… Litton Loan Servicing LP Feb 2005…; Scribd BONY; Separate eligible account created and maintained by trustee pursuant to Section 3.5 in… Alternative Loan Trust 2006-6CB 8K (383 Madison Ave …; CHL Mortgage Pass THrough Trust 2007 8K…. Rate Cap Transactions between CWHL Inc… Leo Taylor BONY; Ray Romano BONY; Charles West; CWABS Asset- Backed Certificates Trsut 2007-BC1 … remaining party Deutsche Bank AG fax of BONY….; ISDA Master Agreement Fax… Credit SUisse Managemetn LLC; UBS Warburg BONY separate eligible account created and maintained by Trustee pursuant to Section 3.5 in name of:

  3. Bank of New York will be the Indenture Trustee

    DTC and Notes (1 Year or Less)

    DTC, which is a New York-chartered limited purpose trust company, performs
    services for its participants, some of which (and/or their representatives) own

    In accordance with its normal procedures, DTC is expected to record the positions held by each DTC participant in the Book-Entry Notes, whether held for
    its own account or as a nominee for another person.

    In general, beneficial ownership of Book-Entry Notes will be subject to the rules, regulations and
    procedures governing DTC and DTC participants as in effect from time to time.

    Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte,
    L-2967 Luxembourg (“CLEARSTREAM, LUXEMBOURG”), was incorporated in 1970 as
    “CLEARSTREAM, LUXEMBOURG S.A.” a company with limited liability under Luxembourg
    law (a societe anonyme).

    Clearstream, Luxembourg S.A. subsequently changed its name to Cedelbank.

    On January 10, 2000, Cedelbank’s parent company, Clearstream, Luxembourg International, societe anonyme (“CI”) merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG (“DBC”).

    The merger involved the transfer by CI of substantially all of its assets and liabilities
    (including its shares in CB) to a new Luxembourg company, New Clearstream, Luxembourg International, societe anonyme (“NEW CI”), which is 50% owned by CI and 50% owned by DBC’s parent company Deutsche Borse AG.

    The shareholders of these two entities are banks, securities dealers and financial institutions.
    Clearstream, Luxembourg International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries.

    No single entity may own more
    than 5 percent of Clearstream, Luxembourg International’s stock.

    Further to the merger, the Board of Directors of New Clearstream, Luxembourg International decided to re-name the companies in the group in order to give them a cohesive brand name.

    The new brand name that was chosen is
    “CLEARSTREAM” with effect from January 14, 2000.

    New CI has been renamed “CLEARSTREAM INTERNATIONAL, SOCIETE ANONYME.” On January 18, 2000, Cedelbank was

    CLEARSTREAM BANKING, SOCIETE ANONYME” and Clearstream, Luxembourg Global

    On January 17, 2000, DBC was named “Clearstream Banking AG.” This means
    that there are now two entities in the corporate group headed by Clearstream
    International which share the name “CLEARSTREAM BANKING,” the entity previously named “CEDELBANK” and the entity previously named “DEUTSCHE BORSE CLEARING AG”.

    Clearstream, Luxembourg holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of
    Clearstream, Luxembourg customers, thereby eliminating the need for physical
    movement of notes.

    Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States Dollars. Clearstream, Luxembourg
    provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with
    domestic securities markets in over 30 countries through established depository
    and custodial relationships. Clearstream, Luxembourg is registered as a bank in
    Luxembourg, and as such is subject to regulation by the Commission de Surveillance du Secteur Financier, “CSSF,” which supervises Luxembourg banks.

    Clearstream, Luxembourg’s customers are world-wide financial institutions
    including underwriters, securities brokers and dealers, banks, trust companies
    and clearing corporations. Clearstream, Luxembourg’s U.S. customers are limited
    to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg
    has approximately 2,000 customers located in over 80 countries, including all
    major European countries, Canada, and the United States. Indirect access to
    Clearstream, Luxembourg is available to other institutions that clear through or
    maintain a custodial relationship with an account holder of Clearstream,
    Luxembourg. Clearstream, Luxembourg has established an electronic bridge with
    Euroclear Bank S.A./N.V. as the Operator of the Euroclear System (the “EUROCLEAR
    OPERATOR”) in Brussels to facilitate settlement of trades between Clearstream,
    Luxembourg and the Euroclear Operator.

    Euroclear was created in 1968 to hold securities for participants of
    Euroclear (“EUROCLEAR Participants”) and to clear and settle transactions
    between Euroclear Participants through simultaneous electronic book-entry
    delivery against payment, thereby eliminating the need for physical movement of
    notes and any risk from lack of simultaneous transfers of securities and cash.
    Transactions may now be settled in any of 32 currencies, including United States
    dollars. Euroclear includes various other services, including securities lending
    and borrowing and interfaces with domestic markets in several countries
    generally similar to the arrangements for cross-market transfers with DTC
    described above.

    Euroclear is operated by the Brussels, Belgium office of the Euroclear
    Operator, under contract with Euroclear Clearance Systems S.C., a Belgian
    cooperative corporation (the “COOPERATIVE”). All operations are conducted by the
    Euroclear Operator, and all Euroclear securities clearance accounts and
    Euroclear cash accounts are accounts with the Euroclear Operator, not the
    Cooperative. The Cooperative establishes policy for Euroclear on behalf of
    Euroclear Participants. Euroclear Participants include banks (including central
    banks), securities brokers and dealers and other professional financial
    intermediaries. Indirect access to Euroclear is also available to other firms
    that clear through or maintain a custodial relationship with a Euroclear
    Participant, either directly or indirectly.

    The Euroclear Operator has a banking license from the Belgian Banking and
    Finance Commission. This license authorizes the Euroclear Operator to carry out
    banking activities on a global basis.

    Securities clearance accounts and cash accounts with the Euroclear Operator
    are governed by the Terms and Conditions Governing Use of Euroclear and the
    related Operating Procedures of the Euroclear

    System and applicable Belgian law (collectively, the “TERMS AND CONDITIONS”).
    The Terms and Conditions govern transfers of securities and cash within
    Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
    payments with respect to securities in Euroclear. All securities in Euroclear
    are held on a fungible basis without attribution of specific notes to specific
    securities clearance accounts. The Euroclear Operator acts under the Terms and
    Conditions only on behalf of Euroclear Participants, and has no record of or
    relationship with persons holding through Euroclear Participants.

    Payments on the Book-Entry Notes will be made on each Payment Date by the
    Indenture Trustee to DTC.

    DTC will be responsible for crediting the amount of
    such payments to the accounts of the applicable DTC participants in accordance
    with DTC’s normal procedures.

    Each DTC participant will be responsible for
    disbursing such payments to the beneficial owners of the Book-Entry Notes that
    it represents and to each Financial Intermediary for which it acts as agent.

    Each such Financial Intermediary will be responsible for disbursing funds to the
    beneficial owners of the Book-Entry Notes that it represents.

    Under a book-entry format, beneficial owners of the Book-Entry Notes may experience some delay in their receipt of payments, since such payments will be forwarded by the Indenture Trustee to Cede & Co.

    Payments with respect to
    Book-Entry Notes held through Clearstream, Luxembourg or Euroclear will be
    credited to the cash accounts of Clearstream, Luxembourg Participants or
    Euroclear Participants in accordance with the relevant system’s rules and
    procedures, to the extent received by the Relevant Depositary. Such payments
    will be subject to tax reporting in accordance with relevant United States tax
    laws and regulations. See “Material Federal Income Tax Consequences–Tax
    Treatment of Foreign Investors” and “Miscellaneous Tax Aspects–Backup
    Withholding” in the prospectus.

    Because DTC can only act on behalf of Financial
    Intermediaries, the ability of a beneficial owner to pledge Book-Entry Notes to
    persons or entities that do not participate in the depository system, or
    otherwise take actions in respect of such Book-Entry Notes, may be limited due
    to the lack of physical notes for such Book-Entry Notes. In addition, issuance
    of the Book-Entry Notes in book-entry form may reduce the liquidity of such
    Notes in the secondary market since certain potential investors may be unwilling
    to purchase Notes for which they cannot obtain physical notes.

    Monthly and annual reports on the Trust provided by the Master Servicer to
    Cede & Co., as nominee of DTC, may be made available to beneficial owners upon
    request, in accordance with the rules, regulations and procedures creating and
    affecting DTC or the Relevant Depositary, and to the Financial Intermediaries to
    whose DTC accounts the Book-Entry Notes of such beneficial owners are credited.

    DTC has advised the Depositor and the Indenture Trustee that, unless and
    until Definitive Notes are issued, DTC will take any action permitted to be
    taken by the holders of the Book-Entry Notes under the Indenture only at the
    direction of one or more Financial Intermediaries to whose DTC accounts the
    Book-Entry Notes are credited, to the extent that such actions are taken on
    behalf of Financial Intermediaries whose holdings include such Book-Entry Notes.
    Clearstream, Luxembourg or the Euroclear Operator, as the case may be, will take
    any other action permitted to be taken by a holder of a Note under the Indenture
    on behalf of a Clearstream, Luxembourg or Euroclear Participant only in
    accordance with its relevant rules and procedures and subject to the ability of
    the Relevant Depositary to effect such actions on its behalf through DTC. DTC
    may take actions, at the direction of the related Participants, with respect to
    some Book-Entry Notes which conflict with actions taken with respect to other
    Book-Entry Notes.

    Definitive Notes will be issued to beneficial owners of the Book-Entry
    Notes, or their nominees, rather than to DTC, only if (a) DTC or the Depositor
    advises the Indenture Trustee in writing that DTC is no longer willing,
    qualified or able to discharge properly its responsibilities as nominee and
    depositary, with respect to the Book-Entry Notes and the Depositor or the
    Indenture Trustee is unable to locate a qualified successor or (b) after the occurrence of an Event of Default (as
    defined herein), beneficial owners having not less than 51% of the Note
    Principal Balance of the Notes (as defined herein) evidenced by the Notes advise
    the Indenture Trustee and DTC through the Financial Intermediaries and the DTC
    participants in writing that the continuation of a book-entry system through DTC
    (or a successor thereto) is no longer in the best interests of beneficial owners
    of such Class.

    Upon the occurrence of any of the events described in the immediately
    preceding paragraph, the Indenture Trustee will be required to notify all
    beneficial owners of the occurrence of such event and the availability through
    DTC of Definitive Notes. Upon surrender by DTC of the global note or notes
    representing the Book-Entry Notes and instructions for re-registration, the
    Indenture Trustee will issue Definitive Notes, and thereafter the Indenture
    Trustee will recognize the holders of such Definitive Notes as holders of the
    Notes under the Indenture.

    Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
    foregoing procedures in order to facilitate transfers of Book-Entry Notes among
    participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no
    obligation to perform or continue to perform such procedures and such procedures
    may be discontinued at any time.


    The Master Servicer will establish and initially maintain a note account
    (the “COLLECTION ACCOUNT”) for the benefit of the Indenture Trustee on behalf of
    the Noteholders. On a daily basis and within two Business Days after receipt,
    the Master Servicer will deposit or cause to be deposited into the Collection
    Account the following payments and collections received or made or to be applied
    by it subsequent to the Cut-off Date, including all principal and interest
    received with respect to the Mortgage Loans after the Cut-off Date (exclusive of
    any scheduled principal due on or prior to the Cut-off Date and any interest
    accruing prior to the Cut-off Date):

    (1) all payments on account of principal, including Principal
    Prepayments, on the Mortgage Loans;

    (2) all payments on account of interest (other than interest accruing
    on the Mortgage Loans prior to the related Cut-off Date and due on or prior to
    the related Cut-off Date) on the Mortgage Loans, net of the related Servicing
    Fee and Master Servicing Fee;

    (3) all proceeds of any insurance policies (to the extent such
    proceeds are not applied to the restoration of the property or released to the
    mortgagor in accordance with the Master Servicer’s or the Subservicer’s normal
    servicing procedures), other than proceeds that represent reimbursement of the
    Master Servicer’s or the Subservicer’s costs and expenses incurred in connection
    with presenting claims under the related insurance policies (“INSURANCE
    PROCEEDS”), all other net proceeds received in connection with the partial or
    complete liquidation of Mortgage Loans (whether through trustee’s sale,
    foreclosure sale or otherwise) or in connection with any condemnation or partial
    release of a Mortgaged Property, together with the net proceeds received with
    respect to any Mortgaged Properties acquired by the Master Servicer or the
    Subservicer by foreclosure or deed in lieu of foreclosure in connection with
    defaulted Mortgage Loans (other than the amount of such net proceeds
    representing any profit realized by the Master Servicer in connection with the
    disposition of any such properties) (together with Insurance Proceeds,
    “LIQUIDATION PROCEEDS”) and any unexpected recoveries, net of reimbursable
    expenses, with respect to Mortgage Loans that have been previously liquidated
    and that resulted in a Realized Loss (“SUBSEQUENT RECOVERIES”);

    (4) all Compensating Interest paid by the Master Servicer and the

    5) any amount required to be deposited by the Master Servicer or the
    Servicer in connection with any losses on investment of funds in the Collection

    (6) any amounts required to be deposited by the Master Servicer or
    the Servicer with respect to any deductible clause in any blanket hazard
    insurance policy maintained by the Master Servicer or the Servicer in lieu of
    requiring each mortgagor to maintain a primary hazard insurance policy;

    (7) all amounts required to be deposited in connection with
    shortfalls in the principal amount of Replacement Mortgage Loans; and

    (8) all Advances.



    The Master Servicer may from time to time withdraw funds from the
    Collection Account prior to the related Payment Account Deposit Date for the
    following purposes:

    (1) to pay to the Master Servicer the Master Servicing Fee and the
    Servicer the Servicing Fee to the extent not previously paid to or withheld by
    the Master Servicer or the Servicer (subject to reduction as described above
    servicing compensation to the Master Servicer or the Servicer, assumption fees,
    late payment charges, net earnings on or investment income with respect to funds
    in or credited to the Collection Account;

    (2) to reimburse the Master Servicer, Servicer or the Subservicer for
    Advances, such right of reimbursement with respect to any Mortgage Loan pursuant
    to this clause (2) being limited to amounts received that represent late
    recoveries of payments of principal and/or interest on the related Mortgage Loan
    (or Insurance Proceeds, Liquidation Proceeds or Subsequent Recoveries with
    respect thereto) with respect to which such Advance was made;

    (3) to reimburse the Master Servicer, Servicer or the Subservicer for any
    Advances previously made that the Master Servicer, Servicer or Subservicer has
    determined to be nonrecoverable;

    (4) to reimburse the Master Servicer from Insurance Proceeds for expenses
    incurred by the Master Servicer and covered by the related insurance policies;
    The “PRINCIPAL REMITTANCE AMOUNT” with respect to each Loan Group is equal

    (a) the sum, without duplication, of:

    (1) the scheduled principal due during the related Due Period and
    collected on or before the related Determination Date or advanced on or before
    the related Master Servicer Advance Date;

    (2) prepayments collected in the related Prepayment Period;

    (5) to pay the Master Servicer any unpaid Master Servicing Fees and the
    Servicer any unpaid Servicing Fees and to reimburse it for any unreimbursed
    ordinary and necessary out-of-pocket costs and expenses incurred by the Master
    Servicer or the Servicer in the performance of its master servicing or servicing
    obligations, as applicable, such right of reimbursement pursuant to this clause
    (5) being limited to amounts received representing late recoveries of the
    payments of such costs and expenses (or Liquidation Proceeds, purchase proceeds
    or repurchase proceeds with respect thereto);

    (6) to pay to the Seller or the Servicer, as applicable, with respect to
    each Mortgage Loan or Mortgaged Property acquired in respect thereof that has
    been purchased by the Seller or the Servicer from the Trust pursuant to the
    Servicing Agreement or the ECC Capital Servicing Agreement, all amounts received
    thereon and not taken into account in determining the related Stated Principal
    Balance of such repurchased Mortgage Loan;

    (7) to reimburse the Seller, the Master Servicer, the Servicer, the
    Subservicer or the Depositor for fees and expenses incurred and reimbursable
    pursuant to the Servicing Agreement or the ECC Capital Servicing Agreement;

    (8) to withdraw any amount deposited in the Collection Account and not
    required to be deposited therein; and

    (9) to clear and terminate the Collection Account upon termination of the

    In addition, not later than 1:00 p.m. Pacific Time on the Business Day
    immediately preceding each Payment Date (the “PAYMENT ACCOUNT DEPOSIT DATE”),
    the Master Servicer shall withdraw from the Collection Account and remit to the
    Indenture Trustee the amount of the Interest Remittance Amount and the Principal
    Remittance Amount for the mortgage loans, to the extent on deposit, and the
    Indenture Trustee shall deposit such amount in the Payment Account, as described

    In addition, during the Funding Period, amounts on deposit in the Group 1
    and Group 2 Pre-Funding Accounts will earn a limited amount of interest which
    will primarily be available to the related Noteholders. The interest earned will
    be significantly less than interest generated by the Mortgage Loans in the


    (a) the sum, without duplication, of:

    (1) all scheduled interest collected during the related Due Period,
    less the related Servicing Fee;

    (2) interest payments on any Principal Prepayment received during the
    related Prepayment Period other than Prepayment Interest Excess;

    (3) all Advances relating to interest;

    (4) all Compensating Interest;

    (5) Liquidation Proceeds (to the extent such Liquidation Proceeds
    relate to interest); and

    (6) interest earned on amounts on deposit in the Group 1 and Group 2
    Pre-Funding Account,


    (b) all non-recoverable Advances relating to interest and certain expenses
    reimbursed during the related Due Period, in each case with respect to the
    Mortgage Loans in such Loan Group.

    The “PRINCIPAL REMITTANCE AMOUNT” with respect to each Loan Group is equal

    (a) the sum, without duplication, of:

    (1) the scheduled principal due during the related Due Period and
    collected on or before the related Determination Date or advanced on or before
    the related Master Servicer Advance Date;

    (2) prepayments collected in the related Prepayment Period;

    3) the Stated Principal Balance of each Mortgage Loan that was
    repurchased by the Seller or purchased by the Master Servicer;

    (4) the amount, if any, by which the aggregate unpaid principal
    balance of any Replacement Mortgage Loans is less than the aggregate unpaid
    principal balance of any Deleted Mortgage Loans delivered by the Seller in
    connection with a substitution of a Mortgage Loan; and

    (5) all Liquidation Proceeds and Subsequent Recoveries collected
    during the related Due Period (to the extent such Liquidation Proceeds and
    Subsequent Recoveries relate to principal),


    (b) all non-recoverable Advances relating to principal and certain
    expenses reimbursed during the related Due Period, in each case with respect to
    the Mortgage Loans in such Loan Group.

  4. “Access to DTI’s book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.”

    it is my best guess that Madoff had wide access—-billions transferred to where? in that system?

    Money trail???? —-

  5. 3/3/1995
    JP Morgan Securities offering $270,000,000 NOTES

    How DTC operates

    DTC is a limited-purpose trust company organized under New York Banking Law, a ‘banking organization’ within the meaning of New York Banking Law, member of Federal Reserve System, a ‘clearing corporation’ within the meaning of the New York Uniform Commercial Code and a ‘clearing agency’ registered pursuant to provision of Section 17A of SEC Act of 1934.

    DTC created to hold securities of persons who have accounts with DTC (“participants”)
    -to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates.

    DTC’s participants include securities brokers and dealers (including the Underwriter), banks, trust companies, clearing corporations and certain other organizations, some of which (and/or their representatives) own DTC.

    Access to DTI’s book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.

  6. I am still searching for World Savings’ loans. Thought I’d go back to Golden West and happened across these which has new info (to me) and cites:

    a) The Depository Trust Company (“DTC”) or any successor to DTC, as depositary, and registered in the name of
    b) Cede & Co., the nominee of DTC
    c) Clearstream Banking S.A. (“Clearstream”) or
    d) Euroclear Bank S.A./N.V., as operator of the
    e) Euroclear System (“Euroclear”),

    I find this all VERY, VERY INTERESTING….

    (**) Golden West Financial Corp/DE · 10-K405 · For 12/31/98
    The Company also enters into dollar reverse repurchase agreements
    (dollar reverses) with selected major government securities dealers, as well as
    large banks. A dollar reverse involves the sale and delivery of mortgage-backed
    securities by the Company to a broker or dealer, coupled with an agreement to
    purchase securities of the same type and interest coupon at a fixed price for
    settlement at a later date. Under generally accepted accounting principles,
    these transactions are properly accounted for as borrowings secured by
    mortgage-backed securities. The Company pays the brokers and dealers a fixed
    rate of interest for the use of the funds for the period involved, which is
    generally short-term. At maturity, the secured borrowings are repaid (by
    purchase of similar securities) and similar securities are delivered to the

    The debt securities will constitute either senior or subordinated debt of Golden West. Senior debt securities will be issued under a senior debt indenture between Golden West and an entity identified in the applicable prospectus supplement, as trustee. Likewise, subordinated debt securities will be issued under a subordinated debt indenture between Golden West and an entity identified in the applicable prospectus supplement, as trustee. The senior debt indenture and the subordinated debt indenture are sometimes collectively referred to in this prospectus as the indentures.

    (2) Golden West Financial Corp/DE · S-3ASR · On 12/1/05
    Book-Entry, Delivery And Form.
    General. Unless otherwise specified in the applicable pricing supplement, the debt securities will be issued in fully registered form without coupons and will be evidenced by one or more global securities that will be deposited with, or on behalf of, The Depository Trust Company (“DTC”) or any successor to DTC, as depositary, and registered in the name of Cede & Co., the nominee of DTC. Beneficial interests in the debt securities will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may elect to hold their interest in the debt securities through DTC, in the United States, or through Clearstream Banking S.A. (“Clearstream”) or Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”), directly if they are participants in those systems, or indirectly through organizations which are participants in those systems. Clearstream and Euroclear will hold interests on behalf of their participants through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries, which in turn will hold these interests in customers’ securities accounts in the U.S. depositaries’ names on DTC’s books.

    Hope we find more of these securitized loan packages for the little people…

  7. IRS is very strictly subject to non-disclosure rules since Nixon abused everybody–IRC section 6103.

    taxpayer-specific info is protected—-cant even give it to other agencies. possibly FOIA can be used to obtain other more detailed info —but you must carefully formulate your request with knowledge of the limits and expectation that there may be heavy redacting.

    Many agencies are hemmed in by non-disclosure rules. One theory is that the people they oversee will more honestly report data if it is not going to end up on Wiki-leaks.

    I think that the interagency non-disclosure rules applicable to the bevy of financial regulatory agencies should be well-disclosed and the effect taken into account in terms of impairment of effective enforcement. If there are to be 4-8 agencies overlapping, then they need to have a data-sharing agreement and more importantly a data fusion capability to compare contrast data so that everybody is on same page.

    “Why did 60 Minutes not ask any quesitons regarding current domestic matters?”

    Excuse my ignorance please, this question relates to interviews of whom by 60 minutes? A past interview that did not touch this mortgage matter?
    I would guess that any interview would be specific–to cover specific items–and probably for govt officials —-questions in advance for prep-time.

    In all fairness to 60 Minutes–although it took them a year –and state AGs already there, they did take up the issues fairly aggressively with the LPS inquiry and the attempt to get something out of Wilbur Ross’ AHMSI.

    Personally, I would rather see an interview of Wilbur Ross by 60 Minutes than the President or
    the govt officials.

    Questions like:
    What did he learn from Japan’s housing meltdown and asset pickups he made there in the few years that preceeded the US meltdown?

    Did he implement that experience in 2003-4 in any way in the US?

    How much about the values of the MBS that he acquired at the bottom came from due diligence? How much from hiring former old-AHM insiders like recently resigned David M. Friedman who took over new AHMSI’s top spot to “service” the loans orginated by old AHM.?

    How would Mr Ross describe a stated teaser rate of 1% [ie will he repeat his FORBES interview answer that nobody should really expect to receive a teaser rate]

    Would he again restate his expert opinion that such loans were predatory?

    How does he reconcile the fact that he opined that the loans were predatory but AHMSI collects on them aggressively anyway?

    Did he play any role in the IRISH housing meltdown–which followed Japan’s and ocuured simultaneously with the US ?

    Same question re Spain?

    Does he have any continuing affiliation with Rothschild’s ?

    LASTLY< a question I would like all billionaires to answer: How much is enough?


    Would a 85% income tax rate on income over say $50 million/yr cause him to revise his risk/reward strategy

    Would he view a windfall profit tax on finanial spec profits as a good public policy choice to prevent future abuses–reduce risk of another meltdown?


    Some people share more insights and responsibility than others.

  9. Interesting, since President Barack Obama took office, the IRS Enforcement Results
    Compliance & Enforcement News:

    Only annual report of billions of dollars no details.

  10. Criminal Enforcement
    In support of the overall IRS Mission, Criminal Investigation serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.

    Status on IR-206-70

    IRS and States Join Forces to Combat Money Laundering

    IR-2006-70, April 27, 2006

    WASHINGTON — The Internal Revenue Service announced today agreements with 33 states and Puerto Rico to begin sharing Bank Secrecy Act (BSA) information. The agreements will allow the IRS and the participating states to share information and leverage their resources to ensure that money services businesses (MSBs) are complying with their federal and state responsibilities to register with the government and report cash transactions and suspicious activities.

    MSBs are non-bank financial institutions that provide certain financial services to their customers. Such businesses include currency exchangers, check cashers, issuers of traveler’s checks or stored value cards, and money transmitters.

    “We already work cooperatively with over 40 states to combat abusive tax shelters,” said IRS Commissioner Mark W. Everson. “This new agreement will help the federal and state governments leverage resources while attacking illegal money laundering.”

    The IRS and participating states will share enforcement leads and coordinate their efforts to make sure they are doing all the Bank Secrecy Act examinations on MSBs as required by law without overlapping efforts. The agreements will also help the IRS and the states present a united compliance front to MSBs and their representatives.

    “These agreements have ushered in an era of enhanced cooperation. Combining the expertise of the IRS with the supervision and examination of MSBs traditionally performed by state banking departments will produce greater results at lower cost,” New York State Banking Department Superintendent Diana L. Taylor said. “Just as the IRS is able to leverage the expertise of state financial regulators, our own examination and compliance programs will benefit from access to their critical examination information.”

    “The states and the federal government need to share information to track the increasingly sophisticated activities of criminal organizations and others,” Minnesota Commerce Commissioner Glenn Wilson said. “By establishing a method to report and track cash transactions, we will shed light on a currently little watched aspect of commerce.”

    Along with Puerto Rico, the following states have signed partnership agreements with the IRS: Alabama, Alaska, Arizona, Arkansas, California, Connecticut, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.

    Colorado, Hawaii, Montana, New Hampshire, New Mexico and Montana cannot enter into these agreements with the IRS because either state law prohibits them from doing so or they do not regulate the industry.

    The information the IRS and the states may share under these agreements is limited to Bank Secrecy Act examination information, not tax information. The IRS has separate, long-standing agreements with the states for the exchange of tax information.

    Additional information about money services businesses and the Bank Secrecy Act is available on this Web site or the Financial Crimes Enforcement Network (FinCEN) Web site.

    Related Link:

    Money services businesses (FAQs regarding Title 31)
    Bank Secrecy Act

    How’s Money Laundering working out for you Mr. President Barack Obama not looking back? Then can we please have an upate to IR-2006-70 last update 4/27/2006?

  11. from above:
    “White House, where word came back that the IRS was not going to be used as a tool of policy”

    Chief Executive’s most important constitutional duty, to ‘take Care that the Laws be faithfully executed’

    Constitution does not say that the President shall execute the laws, but that “he shall take care that the laws be faithfully executed,” i.e., by others,

    What powers are implied from this duty?

    Executive power
    Firs: Constitution confers directly upon the President by the opening clause of article II and, in more specific terms, by succeeding clauses of the same article;
    second there is the sum total of the powers which acts of Congress at any particular time confer upon the President;
    third- there is the sum total of discretionary powers which acts of Congress at any particular time confer upon heads of departments and other executive (“administrative”) agencies of the National Government;
    fourth – power which stems from the duty to enforce the criminal statutes of the United States;
    fifth- “ministerial duties” which admit of no discretion as to the occasion or the manner of their discharge.

    How does President Obama protect the citizens of the United States upon which the US Constitution or the statutes confer upon him?

    How does President Obama stand by virtue of the “take care” clause to the powers of other executive or administrative agencies;?

    What relation does President Obama stand to the enforcement of the criminal laws of the United States?

    All we know so far upon entering office,
    President Barack Obama said he is looking forward not back?

    What did that mean?

    What did Geither mean when he said they are without authority?

    Why did 60 Minutes ask so many questions trying to incite relations between US and Pakistan?

    Why did 60 Minutes not ask any quesitons regarding current domestic matters?

    Will 60 Minutes interview the President and find out?

    Why is neither Democrate or Republican asking the President what to do as Commander in Chief?

  12. Additonal Definition regarding ‘Settlement Agent’ to consider regarding Federal Reserve

    Authorized Settlement Agent
    A bank that may send checks and other demands for payment to a Federal Reserve bank to be honored. An authorized settlement agent submits these demands through the Automated Clearing House. The actions of authorized settlement agents help ensure smooth functioning of banks. An authorized settlement agent should not be confused with a settlement agent.

    Asset-Backed Security
    A debt security collateralized by some receivables on some credit sale. Common examples of this collateral include receivables on credit cards, automotive loans, and similar assets. Returns on these securities come from customers’ payments on their credit cards and other loans that may be backing the securities. Banks and companies package and sell their receivables to investors in order to reduce the risk of loan defaults. See also: Mortgage-backed security.

    Asset-Backed Security (ABS)
    What Does Asset-Backed Security (ABS) Mean?

    A financial security backed by a loan, a lease, or receivables other than real estate and mortgage-backed securities. Asset-backed securities are an alternative to investing in corporate debt.

    Investopedia explains Asset-Backed Security (ABS)

    An ABS is essentially the same thing as a mortgage-backed security except that the securities backing it are assets such as loans, leases, credit card debt, a company’s receivables, or royalties but not mortgage-based securities.

    Related Terms:
    • Asset
    • Corporate Bond
    • Derivative
    • Mortgage-Backed Securities—MBS
    • Securitization

    Authorized Control Level Risk Basis Capital? Part of the credit enhancements?
    Authorized Control Level Risk-Based Capital
    The amount of capital an insurance company should have on hand, plus any surpluses.

  13. In the United States, appears that the ultimate legal party responsible for the sale of the consumer’s property to third party in the state the property is located is the Attorney – Settlement Agent. Beneficiary Settlement Agency?
    Who sold to the consumer a title policy.

    The instructions to add the consumer’s property to the title policy came in writing from the SELLER of the discounted loans.

    The instructions from the SELLER of the discounted loans sent a fax to the homeowners’ insurance company adding the ‘assignee and/or successor’ to the homeowners policy in the event of a homeowners insurance casualty claim.

    The instructions from the SELLER of the discounted loans sent a fax to the TITLE behalf of the SELLER is the Settlement Agent’s Corporate Treasury Securities entity state by state where property located


    Please read article and posts.

  14. Important Definitions: DTC is a Settlement Agent.

    Funny so was the Attorney in NJ who closed with the PRETENDER LENDER ‘Wells Fargo Bank NA’ a Settlement Agent. The funding payable to the individual agent. The funding from an intermediary third party not affiliated with the Master Servicer’s – Deutsche Bank Trust Americas.

    Settlement Agent in NJ an attorney and partner of a law firm and partner of a Title company who is an affiliate of TRG (Title Resource Group) aka Related Financial Group, Wells Fargo & Co/MN and Wells Fargo Bank NA a Trustee of the transactiions of the Settlement Agents of the affiliates’ subsidiaries including Cendant Settlement & Services, Atlantic Title & Trust, …, title companies, 1031 exchange companies, insurance companies, all agents, brokers, dealers, distributors wholesale and retail of Wells Fargo & Co. Parent operating as a financial holding company (operating characteristic) of the Federal Reserve System.

    Settlement Agent whether DTC or Wells Fargo & Co/MN dba Wells Fargo Bank NA (private brand label) or Aurora Loan Financial, Lehman Brothers, National City Bank, …

    Definition: A person responsible for ensuring that all laws and regulations are followed in transferring real estate from one owner to the next.

    For example, when one sells his/her house, the settlement agent performs the title search and conducts other activities necessary for the real estate to close smoothly.

    Generally speaking, a settlement agent does not represent either party in a real estate transaction.

    Some U.S. states require a settlement agent to work on real estate transactions.

    Settlement agent. In some states, a settlement agent, or closing agent, handles the real estate transaction when you buy or sell a home.

    He or she oversees title searches, legal documents, fee payments, and other details of transferring property, acting on your behalf to ensure that the conditions of the contract have been met and appropriate real estate taxes have been paid.

    A settlement agent also represents you at the closing, so you don’t need to be present.


    We are the inferior class whose property is coveted by foreign organizations whose foreign entities collaborated in joing ventures pillage, plunder and maurader.

    When the Agent had you sign on the dotted lind you were totally unaware and unconnected to the fraud. Your RETAIL ‘mortgage’ the underlying beneficiary US Goverment, and Settlement Agent DTC, through CeDe & Co. not subjected to the ‘regulations’ of the United States ‘Securities & Exchange Commission’

    OMG! Here I thought Congress was preventing enforcement of laws. And I guess I owe President Obama an appology for he cannot enforce laws per the TREATIES. I think under the US Constitution tht the PRESIDENT’s sold us without having to bring before CONGRESS the requistion.

    THE ‘MASTER SERVICER’ AS SELLER ‘CLOSED’ with the PROCUREMENT AGENCY, private money trusts. THEY HAD A CLOSING AGENT and SETTLEMENT Agent and when all of the NOTES conversions thru Cede & Co, DTC, DSS no turning back the clock! Each Agent of each CLOSING


    Whether a RETAIL consumer transaction or a RETAIL FEDERAL RESERVE transaction.

    CONSUMERS YOU WERE NOT PART OF ANY OF THESE TRANSACTIONS, we were / are not part of any of these TRANSCTIONS of the Settlement Agent DURING ‘ORGINATION’.

    When we signed on the dotted line we signed with the SERVICER. We are not in agreement with the SERVICER. Now what?

    What are we except for CHUMPS? chump1
    n 1. Informal a stupid person

    Precisely – “Stupid People Sign Stupid Contracts Every Day.” K.Petrides.

    Noun 1. chump – a person who is gullible and easy to take advantage of
    fall guy, gull, patsy, soft touch, sucker, mug, fool, mark
    dupe, victim – a person who is tricked or swindled

  15. Obviously, private money of certain families coveted the property of USA. Who benefits from the collapse of the economy? What percentage of the middle class (consumers) will sustain the superior classes existing as indentured servants? Sadly, upon inspection does not appear that the US Constitution protects inferior consumers from acts of harm by the Federal Reserve. Let’s not confuse the United States regulatory agency who protects the interests of the superior class of consumer ‘financial holding companies’ and the member the United States Government, who is a private entity harmed by foreign members.

    Federal Reserves’ Currency MEMBERS ONLY from the richest families and countries have spun a web of deceit creating a perpetual state of mental confusion surrounding the quantum number of momentum fouls against the USA.

    Question from a consumer harmed by Wells Fargo & Co/MN and Aurora Loan Financial Master Servicers who in five years, set the TRUST FUND’s termination date September 2011. What happens to the 88 ‘Loan Trusts’ and the TRUST FUND of SASCO 2006-WF3? What happens to all of the mortgage loans and notes?

    The ‘Certificates’ of the 88 Loan Trusts certificates, some designated physical, some slipped out of SASCO 2006-WF3 into Abacus 2007-AC1 making some certificates hand written in invisible ink and under errors and omissions policies? Then what?

  16. “of a bank nd in order for him to legally be able to trade them for you, the stocks were placed under their “street name”. I.e. they’re in the name of the brokerage, but they’re just holding them in trust and trading them for you.

    NO–not in trust or you would not need govt insurance on the accounts——YOUR stock is THEIRs—-like Madoff–they promise to pay you back an amount that they calc by reference to your account balances——-but its not yours–it is their general debt obligation —at least when comes time to go to bankruptcy court–you have no assurance that they are actually trading on your account—this is a great flaw in the system—-it should be in trust-you screw up your investment choices -you lose-but if they go to las veagas ala lehman and lose -then that loss flows down to you the unsecured creditor–i wish it were in trust–401Ks captured by the investment banks etc

  17. The Internal Revenue Service collects money for US Treasury and enforcement would be for US Government in agreements already.

    What type of conflict exists? BENEFICARY.

    This is huge is it not?

    Posted today under Neil’s
    Choking off funding for Regulation: Banks Seek to win at any cost

    1992/1993 Merger acquistion of Great Northern into Bancorporation.

    S/3 Merger Provides great historical insight into regulations and US Government – US Treasury Control

    And insight as to why – perhaps – the business entities’ executives are not being brought up on charges?

    I’ve been looking for proof of ‘intent’ of US Government (in writing) that we won’t prosecute you was born.

    How angry are you that CONGRESS created class of consumer targetted by foreign corporations outside of the United States and inside the United States. We are the Weakest Link through which direct access to deed to take property could be targetted and was not under any regulation nor protection of the US Government? OVERSIGHT, Intentional failsafe for who?

    HOW MAD ARE YOU THAT CONGRESS misrepresents every day they breath they are protecting the welfare of the nation and thought they meant you?



    “Page 64.


    Under FDICIA,

    OTS has primary enforcement responsibility over savings associations and savings and loan holding companies,

    OCC has primary
    enforcement responsibility over national banks, the Federal Reserve has primary
    enforcement responsibility over state member banks and bank holding companies,
    and the FDIC has primary enforcement responsibility over state nonmember banks.
    The FDIC has the authority to recommend that enforcement action be taken with
    respect to institutions over which it does not have primary enforcement
    authority. If action is not taken, the FDIC has authority to take such action
    under certain circumstances. These agencies have the authority to bring
    enforcement actions against those institutions and certain “institution-related
    parties,” including stockholders, and any attorneys, appraisers and accountants
    who knowingly or recklessly participate in wrongful action likely to have an
    adverse effect on an insured institution. Such enforcement actions can take
    the form of capital directives, cease-and-desist orders, removal and
    prohibition orders and civil penalties, which can range from $25,000 per day to
    as high as $1 million per day, if a finding of reckless disregard is made.
    Federal criminal penalties for most financial institution crimes, which are enforced by the
    Department of Justice, include fines of up to $1 million and imprisonment for
    up to 30 years. In addition to the prompt corrective action system, any
    financial institution that fails to satisfy any of its capital requirements is
    subject to possible enforcement actions by its appropriate federal banking
    agency. In this regard, the appropriate federal banking agency could require
    one or more of the following corrective actions: (i) increasing the amount of
    the institution’s regulatory capital to a specified level or levels; (ii)
    convening a meeting or meetings with the agency’s supervision staff; (iii)
    reducing the rate of earnings that may be paid on accounts; (iv) limiting the
    receipt of deposits to those made to existing accounts; (v) ceasing or limiting
    the issuance of new accounts of any or all classes or categories; except in
    exchange for existing accounts; (vi) ceasing or limiting lending or the making
    of a particular type or category of loan; (vii) ceasing or limiting the
    purchase of loans or the making of specified other investments; (viii) limiting
    operational expenditures to specified levels; (ix) increasing liquid assets and
    maintaining such increased liquidity at specified levels; or (x) taking such
    other action or actions as the agency may deem necessary or appropriate for the
    safety and soundness of the institution, or depositors or investors in the
    institution. The agency also could impose harsher measures such as the
    appointment of a receiver or conservator or a forced merger into another

    FDICIA amends the grounds for the appointment of a conservator or receiver
    for an insured depository institution to include the following events: (i)
    consent by the board of directors of the institution; (ii) cessation of the
    institution’s status as an insured depository institution; (iii) the
    institution is undercapitalized and has no reasonable prospect of becoming
    adequately capitalized when required to do so, fails to submit an acceptable
    capital plan or materially fails to implement an acceptable capital plan; or
    (iv) the institution is critically undercapitalized or otherwise has
    substantially insufficient capital. FDICIA provides that an institution’s
    directors shall not be liable to its shareholders or creditors for acquiescing
    in or consenting to the appointment of the FDIC or RTC as receiver or
    conservator or to a supervisory acquisition of the institution.

    The imposition of any of these measures on Bancorporation, Great Northern or
    any of their financial institution subsidiaries could have a substantial
    adverse effect on operations and profitability. The appropriate federal
    banking agency may also require the institution to raise additional capital
    through the issuance of stock or other capital instruments. ”

    Please log into: then paste URL:

    ‘Search’ box type in ENFORCEMENT for example for highlights

  18. A MUST READ… I found this on the web!

    As established readers know, we’ve been writing since mid 2010 about the widespread, possibly pervasive, failure of mortgage securitization originators to convey the notes (the borrower IOU) to securitization trusts as stipulated in the deal documents, well before the robo signing scandal broke.

    This abuse matters because the transaction procedures were designed carefully to satisfy certain legal requirements, among them rules contained in the

    1986 Tax Reform Act regarding REMICs, or real estate mortgage investment conduits, which required that the securitization trust receive all its assets by 90 days after closing and that all assets conveyed to the trust have to be “performing”, as in not in default. Failure to comply with the rules is a prohibited act and subject to taxation at a rate of 100%, and additional penalties may apply.

    Now, with the Federal government under enormous budget pressure, shouldn’t the authorities be keen to go after tax cheats? The headline of a Reuters article, “IRS weighs tax penalties on mortgage securities,” would suggest so. But don’t get your hopes up. The lesson is don’t jump to conclusions when big finance is involved.

    An overview from the article:

    Should the IRS find reason to take tough action, the financial impact could be enormous. REMIC investments are held by pension funds, in individual retirement plans such as 401(k)s and by state and local government entities.

    As of the end of 2010, investments in REMICs totaled more than $3 trillion, according to data supplied by the Securities Industry and Financial Markets Association.

    In a brief statement in response to questions from Reuters, the agency said: “The IRS is aware of questions in the market regarding REMICs and proper ownership of the underlying mortgages as set out in federal tax law, and is actively reviewing certain aspects of this issue.”

    This matter was raised early last year by an attorney I know with IRS, to a senior officer, not in enforcement but familiar with REMIC rules. She immediately understood the importance and nature of the violations being alleged and was keen to proceed.

    Having had no follow up, the attorney rang again, and the IRS officer took the call, this time reluctantly. She indicated she was not supposed to be taking to him. She said the issue had gone to the White House, where word came back that the IRS was not going to be used as a tool of policy.

    So demanding that tax law violators pay what they owe is somehow seen as an misuse of government authority? That appears to be the message.

    Knowing of this background, in the blogger meeting with Treasury last August, when someone we will euphemistically call as senior official argued that the Treasury had little power over servicers, I objected, and said it depended on whether they construed of their power narrowly or broadly.

    I pointed out that a Pacer scrape on foreclosure filings would find thousands of violations of REMIC rules that were subject to punitive charges, and that that was an important leverage point to bring the industry to heel. (Yes, this is an example of using tax as a tool of policy, as opposed to merely enforcing the rules……that was by design). He sidestepped the reference to REMIC both in my initial question and follow up.

    Steve Waldman, who was also at the session, was as skeptical of the exchange as I was. From a message last August:

    Re REMICs: The reaction to your probing was very suspicious.

    It’d have been one thing if he’d said they hadn’t looked into the issue. But that wasn’t how he responded. He started talking about how he’d had his staff “look for leverage”, against servicers I think, but found there was nothing there. In other words, he didn’t want to leave the issue open. He wanted to neutralize it.

    One possibility is that the truth is face value, but I doubt it. After all, we’d just had staffers describe using the government’s leverage in creative ways to protect taxpayers or serve other public purposes as “extra legal”. Yet here was [the senior official] apparently on a fishing expedition for leverage, no doubt desperate to persuade servicers to facililitate mods to help homeowners. Yeah. Right.

    If I’m not misunderstanding you, your core point is that the paperwork on many boomtown mortgages is invalid, and therefore various sorts of transactions, from foreclosures to bundling into REMICs, cannot be legally done, at least not without a lot of expensive research and recertification. In other words, your line of thinking would put a question mark beneath the value of a whole lot of bank assets. That would obviously not be in the national interest according to Treasury. So of course they’ve already looked onto the story and there’s nothing to it.

    As Waldman indicates, there is a blindingly obvious reason why the IRS inquiry is a coverup. If the IRS were to find any of the questionable practices to be violations, they’d lead to widespread and large assessments against mortgage investors. That in turn would spawn the mother of all litigations by investors against the originators and trustees. That would blow up the mortgage industrial complex and put us back in a financial crisis. That is the last thing the officialdom wants to happen.

    Now in fact there are ways the IRS can make this problem go away. The article quotes Jim Peaslee, who is one of the top experts on REMICS and was i one of the major influences on the original REMIC regulation. Note how he avoids discussing whether there might be violations; his point is the IRS will take a “see no evil” stance:

    James Peaslee, a partner at law firm Cleary Gottlieb who is an expert on taxation of securitized investments, said that even if the IRS finds wrongdoing, it might be loath to act because of the wide financial damage the penalties would cause. He notes that the REMIC investors, who he called “innocent parties,” would have to pay rather than the banks that were responsible for any wrongdoing in transferring mortgage ownership.

    I had a few above-my-pay grade e-mail discussions with one of Peaslee’s colleagues, another REMIC expert, last year, and the issues are vastly more complex than mere mortals would appreciate. For instance (and this is one of the simple examples), arguably, if the securitization vehicle wasn’t really created with the assets it claimed, so arguably, at least technically speaking, it was disqualified from the outset. However, legal structures and issues don’t map cleanly on to tax issues. We’ve argued that if the notes were not properly conveyed to the trusts (assuming they are New York trusts, which is the governing law in the vast majority of cases) then the trusts will have a big problem with foreclosing, since New York trusts don’t have any discretion and there is no mechanism for getting the notes into the trust other than shortly after it was formed.

    But that particular concern isn’t germane from a tax perspective. State law doesn’t determine characterization of an entity for federal tax purposes. So, for example, even if a taxpayer said he a partnership and planned to set up a state law LLC as the partnership vehicle but failed to take all the legal steps, but did have a contract with a partner, and both has acted according to the partnership tax rules and reported income them on their tax returns accordingly, it would most likely still be treated as a partnership in spite of the lack of a state law legal vehicle.

    The net result, as the expert indicated, is “that the rules about REMIC (or other securitization) qualification become very bendable” which in turn gives the IRS a great deal of latitude in what it can deem to be acceptable. He felt that was a bad posture to take, since that would give the servicers considerable leeway to manipulate tax liabilities directly.

    The Reuters article points out the more obvious concern: foregone revenues by letting tax violations go unpunished:

    Adam Levitin, a Georgetown University Law School professor and expert on taxation, said that if the IRS fails to act, “it would be a backdoor bailout of the financial system.”

    If the IRS did impose penalties, the REMICs could turn around and sue the banks for causing the problems and not living up to the terms of the agreements establishing each REMIC, thus transferring the costs to the banks. If the IRS finds wrongdoing but fails to act, the IRS would forego “potentially enormous tax revenue that would be passed on to the federal government,” Levitin said. “Given the federal budget deficit that’s not something to sniff at,” he added.

    So why is the IRS looking into this issue at all? Wouldn’t one expect them to let sleeping dogs lie? I can think of reasons. First, the issue has gotten enough profile that the IRS (really Treasury) may feel it’s better to go into “put the matter behind us” mode.

    Second is that it isn’t just the Federal government who would be able to charge taxes against RMBS if they found they had violated the rules, but also states. It’s not hard to imagine that some states have realized that going after the RMBS could be a significant source of badly-needed income.

    The IRS may thus feel it needs to get in front of this potential source of that investor bugaboo “uncertainty” as well as discourage state action. Mind you, state rules necessarily track the Federal REMIC rules precisely, nor are they required to interpret them the same way, but an IRS “nothing to see here” finding would deter action by all but the most bloodyminded state treasuries).

    So we have yet again another example of two tier justice in America. Do you think the IRS would cut you any slack if you had engaged in as many violations of the tax rules as mortgage originators and trusts have? But the point of having a kleptocracy is to avoid inconveniencing the people with money at all costs.

  19. I can guarantee you there’s not one stockbroker in 100 that knows this, the assumption is that “streetname” implies that the stocks are held by your broker/dealer ,,, not a part of the Federal Reserve system another step or two removed..

  20. […] Source: Livinglies’s Weblog […]


    First DTC Information. Above represents additional information that is important as to accountability and US Governement control and why CONGRESS is attached to their umbillical cord.

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