Special Servicing Agreement: DENIES ANY INTEREST IN INVESTMENT VEHICLES OR MORTGAGES

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Do you know what ‘xxx’ your loan is inside of? Do you know who really is in court as Plaintiff? Did you get a name affidavit signed?

Read Special Servicing Agreement.

Special Servicer “REO Broker’ c/o Special Servicer ‘Corporation as Lender’ of real Servicer (Note Holder in Due Course) as Lender (real lender) holding unsecured note transaction between seller and purchaser ‘registered in an electronic database’ is all MERS is.

Securities & Exchange Commission’s Regulation of Asset-Backed Securities: … function such as Master Servicer, administrator, primary Servicer, Special Servicer, affiliated Servicer and unaffiliated Servicer. The SEC noted there is …
http://www.mortgagebankers.org/files/…/WhitePaper-_Final_REGAB.pdf – Similar

PDF] MEMORANDUM The company is one of the nation’s largest commercial loan servicers with over $294 billion in outstanding balances. As special servicer …www.sec.gov/comments/s7-08-10/s70810-195.pdf

Investment Company Act of 1940 — Section 3(c)(5)(C )
Capital Trust, Inc
February 3, 2009
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
Our Ref. No. 2007-121113
File No. 132-3

In your letter, dated January 29, 2009, you request that we concur with your view that certain subordinate participations in commercial real estate first mortgage loans, as described below, that are held by Capital Trust, Inc., a public company incorporated in the state of Maryland that has elected treatment as a real estate investment trust for federal tax law purposes (the “Company”), would be considered qualifying interests, as defined below, for purposes of the exclusion from the definition of investment company in Section 3(c)(5)(C) of the Investment Company Act of 1940 (“Act”).

Facts
You state that the Company engages primarily in commercial real estate financing by originating and purchasing commercial real estate debt and related instruments for its own accounts as well as the accounts of investment vehicles that the Company manages. You state that among the types of investments the Company makes are investments in A/B commercial mortgage loan financing arrangements (“A/B financings”). You explain that in an A/B financing, the principal balance of a single commercial mortgage loan is divided between two or more mortgage lenders as a means of spreading the credit risk associated with the mortgage loan between the lenders. You state that unlike a mortgage loan participation where each loan participant has a pari passu interest in the mortgage loan, an A/B financing is a senior/subordinated structure. The senior participation, called the “A-Note,” has priority over the junior participation, called the “B-Note,” with respect to the allocation of payments made on the mortgage loan.1 You explain that all periodic payments made by the borrower on the underlying mortgage loan are allocated first to the A-Note holder, as senior lender, in accordance with the terms of the A/B financing and then to the B-Note holder, as junior lender. Similarly, you explain that in the event of a default on the mortgage loan, all collections or recoveries on the loan are allocated first to the A-Note holder until the A-Note holder has been fully paid before any payments are made to the B-Note holder. You further state that any losses incurred with respect to the loan are allocated first to the B-Note holder and then to the A-Note holder. You state that the loan is fully secured by a mortgage on the underlying commercial property and the value of the underlying commercial property at the time of the A/B financing always exceeds the combined principal balance of the B-Note and the A-Note.

You state that in the typical A/B financing in which the Company invests, a lender enters into a mortgage arrangement with a borrower and then participates the mortgage loan to form an A/B financing structure. The lender, who holds legal title to the mortgage loan and is listed as the lender of record, retains the A-Note but sells the B-Note to the Company. You state that the Company as B-Note holder obtains the right to receive from the A-Note holder the Company’s proportionate share of the interest and the principal payments made on the mortgage loan by the borrower at the time such payments are made, and the Company’s returns on its B-Note investment are based on the principal and interest payments made by the borrower.

You state that in some A/B financings, the B-Note holder’s participation interest is evidenced by a separate note issued by the borrower to the B-Note holder and which is directly secured by the mortgage.2 You explain that in these types of A/B financings, the Company as B-Note holder is in contractual privity with the borrower with respect to the underlying mortgage loan and thus payment on the B-Note should not be affected in the event of the bankruptcy of the A-Note holder.3 You state that in other A/B financings in which the Company invests, the B-Note holder holds a participating beneficial ownership interest in the mortgage loan and mortgage loan proceeds. The participation interest, however, is not evidenced by a separate note from the borrower and thus the Company as B-Note holder is not in contractual privity with the borrower.4 You note that the Company arguably could have difficulty obtaining payment in the event that the A-Note holder files for bankruptcy.5 You state that, with the exception of the bankruptcy issue, the two types of A/B financings are similar in all other material respects.

You state that the Company as B-Note holder enters into an agreement with the A-Note holder that sets forth the rights and obligations of the parties (“Agreement”). You explain that under the Agreement, the A-Note holder is afforded the sole and exclusive authority to administer and service the mortgage loan so long as the mortgage loan is a performing loan. The Agreement, however, provides the Company as B-Note holder with approval rights with respect to any decisions relating to material modifications to the loan agreements, or in connection with any material decisions pertaining to the administration and servicing of the mortgage loan.

You state that the Agreement also grants the Company as B-Note holder the right to control the administration and servicing of the loan in the event that the loan becomes a non-performing loan (“control rights”).6 You state that these control rights include the right to appoint a special servicer to manage the resolution of the non-performing loan, including any proposed foreclosure or workout of the loan.7 You state that the Company generally will have the right to advise, direct, or approve certain actions to be taken by the special servicer, including those with respect to any modification or forgiveness of principal or interest in connection with the defaulted loan, any proposed foreclosure of the mortgage loan or acquisition of the underlying property by deed-in-lieu of foreclosure or any proposed sale of a defaulted mortgage loan. You state that the special servicer is generally obligated to follow the Company’s decisions unless the special servicer believes that doing so would violate any applicable law or provisions of any agreement applicable to the financing arrangement. In addition, you state that the special servicer is subject to the limitations prescribed by a “servicing standard,” which requires the special servicer to act in the best interests of both the A-Note holder and the Company as B-Note holder and in a commercially reasonable manner. The Company, however, for any reason has the right to terminate and replace the special servicer.

You also state that the Company as B-Note holder has the right to receive written notice with respect to the performance of the mortgage loan and all reasonably requested information in connection with the exercise of the B-Note holder’s rights. You further state that the Company also has the right to cure any monetary and non-monetary defaults on the mortgage loan. Finally, you state that the Company may purchase the A-Note at a price of par plus interest in the event that the loan becomes non-performing.

Analysis
Section 3(c)(5)(C) of the Act
Section 3(a)(1) of the Act, in relevant part, defines an investment company as any issuer that is, or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of Government securities and cash) on an unconsolidated basis.8 Section 3(c)(5)(C) of the Act, in relevant part, provides an exclusion from the definition of investment company for any issuer that is “primarily engaged in … purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” We previously have taken the position that an issuer may not rely on the exclusion provided by Section 3(c)(5)(C) unless at least 55% of its assets consist of “mortgages and other liens on and interests in real estate” (called “qualifying interests”) and the remaining 45% of its assets consist primarily of real estate-type interests.9 To meet the 45% real estate-type interests test, an issuer must invest at least 25% of its total assets in real estate-type interests (subject to reduction to the extent that the issuer invests more than 55% of its total assets in qualifying interests) and may invest no more than 20% of its total assets in miscellaneous investments.10

We generally take the position that a qualifying interest is an asset that represents an actual interest in real estate or is a loan or lien fully secured by real estate. Thus, for example, we have not objected if an issuer treats as qualifying interests, among other things, fee interests in real estate,11 mortgage loans fully secured by real property,12 notes secured by a pool of whole mortgage loans,13 second mortgages secured by real property,14 and leasehold interests secured solely by real property.15 We also take the position that an asset that can be viewed as being the functional equivalent of, and provide its holder with the same economic experience as, a direct investment in real estate or in a loan or lien fully secured by real estate, may be considered to be a qualifying interest for purposes of Section 3(c)(5)(C).16

We take the position, however, that an asset is not a qualifying interest for purposes of Section 3(c)(5)(C) if it is an interest in the nature of a security in another person engaged in the real estate business.17 For this reason, we generally take the position that an issuer that is engaged primarily in purchasing or otherwise acquiring participations or fractionalized interests in individual or pooled mortgages or deeds of trust is not entitled to rely on Section 3(c)(5)(C).18 We have, however, taken the position that an issuer that holds mortgage participation interests may nevertheless rely on Section 3(c)(5)(C) if the mortgage participation interests have attributes that would classify them as being interests in real estate rather than as being interests in the nature of a security in another person engaged in the real estate business. For example, in several instances we have taken the position that a trust that held participation interests in construction period mortgage loans acquired from mortgage lenders may rely on Section 3(c)(5)(C).19 We explained that each mortgage participation interest held by the trust was an interest in real estate because the participation interest was in a mortgage loan that was fully secured by real property and the trustee had the right by itself to foreclose on the mortgage securing the loan in the event of default.20

B-Notes as Qualifying Interests
You argue that the B-Notes that you describe in your letter should be considered to be qualifying interests for purposes of Section 3(c)(5)(C). You argue that each B-Note has attributes that, when taken together, would allow it to be classified as an interest in real estate rather than an interest in the nature of a security issued by a person that is engaged in the real estate business (i.e., the A-Note holder), notwithstanding that the B-Note holder does not have the right by itself to foreclose on the mortgage loan, which was a condition to the granting of relief in prior letters.21

In support of your position, you argue first that a B-Note is a participation interest in a mortgage loan that is fully secured by real property, and is not a loan extended to the A-Note holder. You state that the B-Note is not an interest in the A-Note holder with payment depending on the profits generated by the A-Note holder’s operations. Rather, you explain that payment on the B-Note is based on the interest and principal payments made by the borrower on the underlying mortgage loan.22 As such, you state that the Company invests in a B-Note only after performing the same type of due diligence and credit underwriting procedures that it would perform if it were underwriting the entire mortgage loan.23 You state that the A-Note holder does not guarantee payment of the B-Note holder’s share of interest and principal payments received from the borrower on the underlying mortgage loan.24 Accordingly, you argue that the B-Note holder looks to the borrower for payment on its B-Note and not to the A-Note holder.

You also state that the Company as B-Note holder has rights with respect to the administration and servicing of the mortgage loan that further suggest that the B-Note is an interest in real estate. Although the A-Note holder has the exclusive authority to administer and service the mortgage loan as long as the loan is a performing loan, you represent that the Company as B-Note holder has approval rights in connection with any material decisions pertaining to the administration and servicing of the loan, including decisions relating to leasing and budget requests from the borrower. You also represent that the B-Note holder has approval rights with respect to any material modification to the loan agreements.

Finally, you argue that that the Company as B-Note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, in the event that the loan becomes non-performing. You state that the Company has such rights notwithstanding the fact that the Company does not have the unilateral right to foreclose on the mortgage loan, or that the special servicer is required to act in the best interests of both the A-Note holder and the B-Note holder under the special servicing standard. In particular, you represent that the Company as B-Note holder has the right to select the special servicer, and often appoints its wholly owned subsidiary to act in that role. You state that in the event that the mortgage loan becomes non-performing, the Company is able to pursue the remedies it desires by advising, directing or approving the actions of the special servicer. If the Company is dissatisfied with the remedy selected by the special servicer, you represent that the Company may: (1) terminate and replace the special servicer at any time with or without cause; (2) cure the default so that the mortgage loan is no longer non-performing; or (3) purchase the A-Note at par plus accrued interest, thereby acquiring the entire mortgage loan.

Conclusion
Based on the facts and representations in your letter, we agree that the B-Notes which you describe in your letter are interests in real estate and not interests in the nature of a security in another person engaged in the real estate business.25 In taking this position we note in particular your representations that: (1) a B-Note is a participation interest in a mortgage loan that is fully secured by real property; (2) the Company as B-Note holder has the right to receive its proportionate share of the interest and the principal payments made on the mortgage loan by the borrower, and that the Company’s returns on the B-Note are based on such payments;26 (3) the Company invests in B-Notes only after performing the same type of due diligence and credit underwriting procedures that it would perform if it were underwriting the underlying mortgage loan; (4) the Company as B-Note holder has approval rights in connection with any material decisions pertaining to the administration and servicing of the loan and with respect to any material modification to the loan agreements; and (5) in the event that the loan becomes non-performing, the Company as B-Note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, by having the right to: (a) appoint the special servicer to manage the resolution of the loan; (b) advise, direct or approve the actions of the special servicer; (c) terminate the special servicer at any time with or without cause; (d) cure the default so that the mortgage loan is no longer non-performing; and (e) purchase the A-Note at par plus accrued interest, thereby acquiring the entire mortgage loan.27

We therefore concur with your view that the B-Notes described in your letter may be considered qualifying interests for purposes of the exclusion from the definition of investment company provided by Section 3(c)(5)(C). Please note that our views are based upon the facts and representations contained in your letter and that any different facts or representations may require a different conclusion.

Rochelle Kauffman Plesset
Senior Counsel

Endnotes

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1 You state that when a commercial mortgage loan is divided into more than two participations, the participation may be designated as an A-Note, a B-1 Note, a B-2 Note, a B-3 Note, etc. For purposes of this letter, in cases in which there are more than two participations, the term “B-Note” is used to refer to the most junior participation.

2 You explain, however, that the B-Note is different from a second mortgage loan because the B-Note represents a participation interest in a single mortgage loan, whereas a second mortgage loan represents the issuance and administration of a separate loan. You also explain that the separate note issued by the borrower evidences a participation in a mortgage loan and not an interest in a whole, unparticipated mortgage loan held by a single mortgagee.

3 You explain that since a B-Note evidenced by a separate note is an actual note conveying to the B-Note holder a portion of the mortgage that is secured by the recorded mortgage, the B-Note holder’s right to receive its share of the interest and principal payments made by the borrower on the underlying mortgage loan should not be part of the A-Note holder’s estate in the event that the A-Note holder becomes bankrupt.

4 You state that in these cases the original lending transaction already may have been structured as a single note mortgage financing at the time the Company is given the opportunity to acquire a participating interest in the mortgage loan. You explain that it would be difficult to later provide for the issuance of two separate notes because it would require that the borrower and the mortgage lender modify the documentation of the original lending transaction.

5 You suggest that in the event of the A-Note holder’s bankruptcy, the status of the B-Note holder is unclear under the United States Bankruptcy Code if the B-Note holder does not hold a separate note. You explain that it is possible that in such an event, the B-Note holder could be treated as an unsecured creditor of the A-Note holder, notwithstanding your view that the B-Note holder is holding a participation interest in a mortgage loan and not a loan from the A-Note holder. See infra notes 22, 24.

6 You state that the B-Note holder may exercise its control rights under the terms of the Agreement either directly or indirectly by appointing a third party (called an operating advisor) to administer its rights. You also state that generally the B-Note holder retains these control rights only so long as its position in the mortgage loan is deemed to have “value,” based upon an appraisal. You state that the B-Note has “value,” for this purpose, if the initial principal amount of the B-Note (adjusted for prepayments, debt write-downs and appraisal reduction amounts applied to the B-Note) exceeds 25% of the initial principal amount of the B-Note (adjusted for prepayments). You state that an “appraisal reduction amount,” for this purpose, generally is the amount by which the full outstanding mortgage indebtedness exceeds 90% of the appraised value of the underlying real property. If the appraisal indicates that the B-Note does not have “value,” the B-Note holder’s control rights are forfeited to the A-Note holder.

7 You state that the Company’s wholly owned subsidiary, CT Investment Management Co., often serves as special servicer for many of the Company’s real estate debt financing investments.

8 Section 3(a)(2) defines “investment securities” to include all securities except (A) Government securities, (B) securities issued by employees’ securities companies, and (C) securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exclusion from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Act.

9 See, e.g., Citytrust, SEC Staff No-Action Letter (Dec. 19, 1990); Greenwich Capital Acceptance Inc., SEC Staff No-Action Letter (Aug. 8, 1991).

10 See, e.g., id.

11 See, e.g., United Bankers, SEC Staff No-Action Letter (Mar. 23, 1988).

12 See, e.g., United States Property Investment N.V., SEC Staff No-Action Letter (May 1, 1989).

13 See, e.g., Premier Mortgage Corp., SEC Staff No-Action Letter (Mar. 14, 1983).

14 See, e.g., Prudential Mortgage Bankers & Investment Corp., SEC Staff No-Action Letter (Dec. 4, 1977); The State Street Mortgage Co., SEC Staff No-Action Letter (July 17, 1986).

15 See, e.g., Health Facility Credit Corp., SEC Staff No-Action Letter (Feb. 6, 1985).

16 See Capital Trust Inc., SEC Staff No-Action Letter (May 24, 2007) (a Tier 1 mezzanine loan under certain conditions may be considered to be a qualifying interest where the loan can be viewed as being the functional equivalent of, and provide its holder with the same economic experience as, a second mortgage which is a qualifying interest for purposes of Section 3(c)(5)(C)).

17 See, e.g., The Realex Capital, SEC Staff No-Action Letter (Mar. 19, 1984) (Section 3(c)(5)(C) is not available to an issuer that invests solely in limited partnership interests in an underlying limited partnership that would own and operate a building).

18 MGIC Mortgage Corp., SEC Staff No-Action Letters (Oct. 6, 1972 and Aug. 1, 1974).

19 See Northwestern Ohio Building and Construction Trades Foundation, SEC Staff No-Action Letter (Apr. 20, 1984); Baton Rouge Building and Construction Industry Foundation, SEC Staff No-Action Letter (Aug. 31, 1984); Dayton Area Building and Construction, SEC Staff No-Action Letter (May 7, 1987).

20 Id. We have also granted no-action relief to an issuer that acquired whole mortgage loans or pools of whole mortgage loans and then sold participation interests in such assets. Relief was conditioned on the issuer retaining a continuing percentage ownership interest of at least 10% in each of the whole mortgage loans or pools of mortgage loans which it had fractionalized; the issuer alone was the formal record owner; and the issuer throughout the life of the participation had complete supervisory responsibility with respect to the servicing of the mortgage loans and had sole discretion regarding the enforcement of collections and the institution and prosecution of foreclosure or similar proceedings in the event of default. We stated that these conditions were intended to ensure that the issuer would “have a substantial continuing ownership interest in … [the underlying whole mortgages and pools of such mortgages] and [the] unrestricted control over the enforcement of the lien and other matters with respect to such mortgage loans so that the interest retained by the [issuer] would be an interest in real estate within the meaning of Section 3(c)(5)(C) of the Act rather than an interest in the nature of a security in another person engaged in the real estate business.” MGIC Mortgage Corp., SEC Staff No-Action Letter (Aug. 1, 1974).

21 See, e.g., id.

22 You suggest, however, that in the event that the A-Note holder becomes bankrupt and the B-Note holder is treated as an unsecured creditor of the A-Note holder, the B-Note holder may not receive its full payment on the B-Note notwithstanding the fact that the borrower has been making full and timely payments on the underlying mortgage loan. See supra note 5. You state that in the event that this will occur, the B-Note will no longer be considered an interest in real estate and thus will no longer be treated as a qualifying interest for purposes of Section 3(c)(5)(C).

23 You explain that, like the procedures for investing in whole mortgages, the procedures that the Company performs prior to investing in B-Notes include hands-on analysis of the underlying collateral for the loan, market analysis, tenant analysis, financial analysis, visits to the property, borrower background checks, and lease and contract review. You also note that the Company performs its own independent analysis and does not rely on the A-Note holder’s analysis or conclusion on the creditworthiness of the mortgage loan borrower.

24 In addition, you state that the following additional factors indicate that the B-Note is a mortgage loan participation interest and not a loan extended to the A-Note holder: (1) there is no difference in term to maturity contained in the B-Note and the underlying mortgage loan; (2) the total payments made by the borrower on the underlying mortgage loan do not exceed the aggregate payments made on the A-Note and the B-Note; and (3) there is no difference in scheduled payment terms between the borrower and the A-Note holder, and between the A-Note holder and the Company, except for the priority in the allocation of interest and principal payments granted to the A-Note holder by virtue of its position as senior participant. Furthermore, you state that, although there is a difference in the interest rate due on the underlying mortgage loan and the B-Note, the difference is due to the legitimate risk premium that the B-Note holder receives on assuming first loss. You state that your view that the B-Notes described in your letter are true participations and not loans extended to the A-Note holder is based on an evaluation of the factors that the courts have considered in similar cases. See, e.g., In re Churchill Mortgage Investment Corp., 233 B.R. 61 (Bankr. S.D.N.Y. 1999); In re Sprint Mortgage Bankers Corp., 164 B.R. 224 (Bankr. E.D.N.Y. 1994).

25 You have not asked for, and we are not expressing, a view on whether an A-Note, as you describe in your letter, is a qualifying interest for purposes of Section 3(c)(5)(C) notwithstanding the fact that, as you represent, the B-Note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, in the event that the loan becomes non-performing.

26 See supra note 22.

27 As indicated above, while the right to foreclose is an important attribute to consider when determining whether an asset should be considered a qualifying interest, we believe that, in addition to this attribute, other attributes of an asset need also be considered when making such a determination. We note, however, that at this time we are not withdrawing any previous no-action positions that have not addressed this point.

Incoming Letter

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The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/investment/noaction/2009/capitaltrust020309-3c5c.htm

8 Responses

  1. […] Special Servicing Agreement: DENIES ANY INTEREST IN INVESTMENT VEHICLES OR MORTGAGES MOST POPULAR ARTICLES DISCOUNT FOR EARLY BIRD REGISTRATION RUNS OUT ON JUNE 22 CLICK HERE TO REGISTER FOR 2 DAY GARFIELD CONTINUUM CLE SEMINAR GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE FROM MARY COCHRANE: MANY THANKS FOR YOUR EXCELLENT WORK Do you know what ‘xxx’ your loan is inside of? Do you know […] […]

  2. ‘ABS’ & MORTGAGE BANkERS ASSOCIATION. White Paper. Securities & Exchange ….. Regulation AB is available on the Internet at http://www.sec.gov/rules/final/33-8518. pdf ….. Provide the trustees with updated data files and other required reports.

    http://www.mortgagebankers.org/files/CREF/WhitePapers/WhitePaper-_Final_REGAB.pdf

    Who is the ‘OWNER” of the ‘Mortgage Loans’ and ‘Other Property’ at Closing Date?

    EX-4 · 1st Page of 117
    The Depositor SASCO has has acquired the “Mortgage Loans”
    From Lehman Brothers Holdings Inc. (the “Seller”) and
    at the Closing Date
    The “owner of the Mortgage Loans and the other property”
    being conveyed by it to the Trustee for inclusion in the Trust Fund.

    On the Closing Date, the Depositor SASCO will acquire the Certificates from the Trust Fund, as consideration for its transfer to the Trust Fund of the Mortgage Loans and the other property constituting the Trust Fund.

    The Depositor has duly authorized the execution and delivery of this Agreement to provide for the conveyance to the Trustee of the Mortgage Loans and the other property constituting the Trust Fund.

    All covenants and agreements made by the Depositor, the Master Servicer and the Trustee herein with respect to the Mortgage Loans and the other property constituting the Trust Fund are for the benefit of the Holders from time to time of the Certificates.

    The Depositor and the Master Servicer are entering into this Agreement, and the Trustee is accepting the Trust Fund created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.

    Yes there are multiple Notes. TWO S/3 SEC REGISTRATION FORMS.
    (8K’s) reference securities registration 333-xxxxx (click) will link to list and at bottom of list will be (S 3 Form) and (S 3/A Form).

    Rolling six months moving assets and REO properties in Reconstituted Servicing Agreements into ‘S-3 Form’ both prior to consumer closing and after consumer closing. S-3 Forms (hot link) moving preferred and common stock into shell of ‘issuing entity’ a fictitious name c/o Registrant (Structured Asset Securities Corp) or (Wells Fargo Asset Securities Corp) or …

    MASTER SERVICERS, 2 TRUSTEES One on SEC side, One on UCC side; Only ONE OWNER who purchased the ‘mortgage note’ remains undisclosed at the closing table with borrower.

    WHO IS THE UNDISCLOSED “OWNER” who paid for ‘mortgage loans’ AT THE CLOSING TABLE. Who are responsible for the non-disclosure? What are your state disclosure laws?

    Where is ‘LENDER’ ON ‘MORTGAGE NOTE who is to be the HOLDER IN DUE COURSE? WHERE ARE THEY?. Why does the ‘Owner’s Trustee and Master Servicer not have ‘evidence’ for Chain of Title?

    CMBS mixed into ABS

    Owners of rental properties in trouble needing help and there are differences to be noted and similarities all facts provide limitless discovery of documents and evidence that is ‘missing’.

    SEC Letter 2009 old. Please share newer letters.

    SEC is a federal administrative agency with limited powers vested by Congress regulating private members’ roles and responsiblities conducting business over private financial exchange who are not ‘members’ given privledges of ‘bank secrecty act’ and ‘securities exchange commission acts’ governing or looking other way??? Where does SEC, OCC, FRB end and begin?

    For example, ‘Special Servicers’ are independent contractors, third party LENDERS utilize long arm reach through to manage the real estate owned properties (REO’s) who hire in state-REO brokers, dealers, agents, distributors, vendors, temporary lenders (bailee letter’s) assigned job of taking of property by deceptive acts filing falsified documents, with COunty Courts and County Clerk and County Recorders in 50 states and US Terrirorites.

    Loans that are not in default, the Servicer paying monthly payment, and Special Servicer ‘pretending to be Lender’ claiming to be party with right to take property for the bad debt (debt they are forced to pay to Lender and calculated risk they took allowing Lender to take possession of property in larcensou manner.

    Real estate owner properties of bank, ((REO Brokers, Appraisers, Contractors, Special Hazard Insurance Brokers ) non-member of SEC and able to update

    David C Breidenbach, on May 23, 2011 at 4:39 pm said:
    “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???? —-

    WHO WAS THE UNDISCLOSED PARTY AT THE CLOSING TABLE?

    WHERE IS THE LINE DRAWN? OR A GLARING LOOPHOLE THAT ENABLED THIS MESS? SHOULD THE SEC BE ON THE HOOK OR OFF THE HOOK? OCC ON THE HOOK OR OFF THE HOOK?

    From Actual Agreement:

    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
    renamed
    CLEARSTREAM BANKING, SOCIETE ANONYME” and Clearstream, Luxembourg Global
    Services was renamed “CLEARSTREAM SERVICES, SOCIETE ANONYME.”
    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.
    DEPOSITS TO THE COLLECTION ACCOUNT
    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
    Servicer;
    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
    Account;
    (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.
    WITHDRAWALS FROM THE COLLECTION ACCOUNT
    WITHDRAWALS FROM THE COLLECTION ACCOUNT
    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
    under “THE SERVICING AGREEMENT–ADJUSTMENT TO THE MASTER SERVICING FEE AND THE
    SERVICING FEE IN CONNECTION WITH PREPAID MORTGAGE LOANS”) and, as additional
    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
    to:
    (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
    Indenture.
    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
    below.
    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
    Trust.
    The “INTEREST REMITTANCE AMOUNT” equals:
    (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,
    LESS
    (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
    to:
    (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),
    LESS
    (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.
    http://www.secinfo.com/dqTm6.zgv.htm#b37

  3. I would have once said unbelievable, but its so tired. If they can’t have it their way, they will work it so they have it their way. When did the SEC get the right to dictate property law regarding a note? Would I be going to far by comparing their term “fractionalized” with “fictionalized”? Bankruptcy remote transfers to any holder once named? “let’s see here, holder N-4 didn’t go bankrupt, they can foreclose, quick, call DocX.
    If they are speaking of this openly, it must be history. Imagine running this up the flagpole to a judge?

  4. This is pretty much useless stuff. It refers to commercial deals, REIT status, and the Investment Co. Act of 1940.

    Complete waste of time.

  5. What we’re supposed to get is that there are 2 different Note Holders. I think.

  6. I’m not sure what we’re supposed to get from this. It’s borderline gibberish – an out-of-context business letter from more than 2 years ago. Was the broken link near the beginning supposed to provide additional context?

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