ZeroHedge: Fed Balance Sheet Unwinds as Auction of Toxic Bonds Fails

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EDITORIAL NOTE: This comes as no surprise to anyone except those at the Fed. Bernanke and especially the New York Federal Reserve still have not caught up with the reality that the toxic bonds are worthless of worth less than they thought by a long shot. It also continues to confuse the issue of who actually owns the bonds, and therefore who owns the undivided shares of the loans in the pools that issued the Mortgage Backed Securities (MBS).

The essential reality is that the transfers required by law and the PSA in each deal were never made. The darker reality is that they couldn’t be made because the obligation was between the borrower and the investors as a group and not with the REMIC which by definition is a conduit.

Since the borrower received the loan from the investors, the obligation arises by operation of law to the investors. But the paperwork with the borrower says otherwise. And the paperwork with the investor sets forth the blueprint for transfer of the loans by “sale” from entities that could never own the obligations because the investors already owned the obligation. Transfers between intermediaries were meaningless and the marketplace is realizing this and refusing to put a “value” on this procedure.

And the reason for the defects in the paperwork is simply that if that the investors were properly identified as creditors from the beginning, the intermediaries would not have had the “opportunity” to claim the loans, sell and trade them under exotic instruments and put the MBS in their balance sheets as though they owned those assets when in fact they never did. And of course they never had a dime in the deal — they didn’t loan the money, they never bought the loan.

Actually the only intermediary that has any money in the deal is the servicer that was making payments even if it did not receive payments from the borrower.

The legal consequence of this mess is uncertain, not as to what the law requires, but whether the law will be applied. It is clear that the Fed is claiming ownership or control over the mortgage bonds and just as clear that without legal transfers of the loans, the bonds were backed by nothing.

That leaves the mortgage originator with the security and the obligation and possibly the note running to other entities. hence the obligation is owed to the investors, the note may be invalid because it was never made payable to any legal creditor and the security instruments secures a debt to the originator that does not exist.

And now from Zerohedge …

Is The Fed’s Balance Sheet Unwind About To Crash The Market, Again?

Submitted by Tyler Durden on 01/13/2012 – 01:58

AIG American International Group Bond China Exchange Traded Fund Failed Auction High Yield Investment Grade M2 New York Fed Reality Recession Recoupling Sovereigns

Almost six months ago we discussed the dramatic shifts that were about to occur (and indeed did occur) the last time the New York Fed tried to unwind the toxic AIG sludge that is more prosaically known as Maiden Lane II. At the time, the failure of a previous auction as dealers were unwilling to take up even modest sizes of the morose mortgage portfolio was the green light for a realization that even a small unwind of the Fed’s bloated balance sheet would not be tolerated by a deleveraging and unwilling-to-bear-risk-at-anything-like-a-supposed-market-rate trading community.

Today, we saw the first glimmerings of the same concerns as chatter of Goldman’s (and others) interest in some of the lurid loans sent credit reeling. As the WSJ reports, this meant the Fed had to quietly seek confirming bids (BWICs) from other market participants to judge whether Goldman’s bid offered value.

The discreteness of the enquiries sent ABX and CMBX (the credit derivative indices used to hedge many of these mortgage-backed securities) tumbling with ABX having its first down day since before Christmas and its largest drop in almost two months. The knock-on effect of the potential off-market (or perhaps more reality-based) pricing that Goldman is bidding this time can have (just as it did last time when the Fed halted the auction process as the market could not stand the supply) dramatic impacts as dealers seek efficient (and critically liquid) hedges for their worrisome inventories of junk.

The underperformance (and heavy volume) in HYG (the high-yield bond ETF we spend so much time discussing) since the new-year suggests one such hedging program (well timed and hidden by record start-of-year fund inflows from a clueless public which one would have thought would raise prices of the increasingly important bond ETF) as the market’s ramp of late is very reminiscent of the pre-auction-fail-and-crash we saw in late June, early July last year as credit markets awoke to the reality of their own balance sheet holes once again.

 

33 Responses

  1. Reblogged this on khanhthinhpham and commented:
    thanks

  2. The FHL Banks limit their risk of loss on advance by:
    thi was greek to me

  3. @Niedermeyer

    The Germans are trying to prevent short-selling—but the offshore hedge funds can do it outside EU jurisdiction—the money just keeps piling up offshore

    At some point it would appear to me that the germans will reissue DM or a North European alliance will issue a new mini-euro—-in exchange for deposits held in their banks. Too bad f you have euros under the mattress. More difficult will be the south european paper—no payoff there.

    too bad forour insurance companies

    Fidelity mixed up in this–too many people have IRAs and 401Ks in that org—-its not safe–not even public–its MF Global w/o any oversight —w/o the minimal disclosures supposedly enabled by SEC

    Trouble in the air—-printing dollars in expectation that europe will use dollars after euro collapses for some period of time anyway–similar to swiss franks–iv heard some awful stories about multiple currencies after collapse of soviet union ruble—-ultimately came to bartering of goods–a radio for a train ticket——certainly will cause global depression—-

  4. @DCB ,

    Europe is getting worse by the minute … short selling is prohibited on exchanges in Europe now and the German gov’t is trying to pass a new law requiring government bonds be held to maturity which means that the banks, pension funds and all the rest will have to keep bonds denominated in euros , declining in worth , on their books until the euro disappears entirely and their investment is $0.00 ….. talk about a recipe for creating a domino effect.

  5. DCB

    I have no sympathy for investors. Some here are protecting investors — both distressed debt buyer investors and security investors (distinct) — I am not one of them.

    But, you bring an important point. There is one tranche is part of the the supposed REMIC trusts that was not a “pass-through” — it was the residual tranche owned by the servicer. This tranche was not a pass-through certificate tranche. It was a tranche owned by servicers to which all “bad” loans were subordinated – for servicer removal from the pass-through certificates/trust. If there is additional evidence that “agreements” of other sorts were orchestrated, I am open to see those agreements. But, you have to be able to provide to the court. I go by case law, because that is what will ultimately survive.

    Now, what servicers are doing, is claiming an attachment, via the trustee to pass-through certificate holders, because courts have stated the servicer is not the creditor. Servicer, by the residual tranche, service for “investors”/debt buyers, are not security investors to the trust. Servicers, by residual owned collection rights, wrongfully, attach themselves themselves to the trustee and trust — and I do not care what method they do this by — it is wrongful. And, servicers refuse to divulge on whose behalf they are acting. In fact, the OCC has recently issued a warning regarding false liability to trustees. No matter how you slice it, servicers are not pass-through investors, are not creditor/assignees, and not acting for any pass-through trust — after the loan is in default. While servicers are required to advance all payments to the trustee on behalf of pass-through certificate holders, by the PSA, they do not, as they are allowed to deem “non-collectible.” Bottom line, as the Federal Reserve states, neither pass-through certificate (security) investors, nor the servicer, are the creditor/assignee. We must separate security investments from collection rights. And, only the servicer can identify WHO owns those collection rights.

    And, my added contribution is this — the subprime refinances were in false default BEFORE the said refinance. Making the Trusts, loans, and mortgages, invalid from the onset. But, in order to survive an action or challenge in court, you must be able to show some demonstration as to the falsity. Use the TILA, use Robo-signing, use your own records, use what you can to challenge.

    If anyone else has additional sources that demonstrate the falsity, let them provide it. But, most homeowners cannot afford to pay for speculation – for support.

  6. @ Niedermeyer
    Thanks for this link.

    “Treasury Secretary Timothy Geithner, then a Fed official, expressed confidence in September 2006 that “collateral damage” from housing could be avoided. ”

    sadly these guys are currently saying the same thing about the impact on the US of the european meltdown—-and they are the ones in charge–or at least they are the ones with the bright red emergency telephone –that is the direct hot-line to Jamie Dimon’s desk–to ask what his orders are?

  7. Real Property “contracts” are not the same thing as credit card “contracts” but have been treated as such.

    Then we have this which might make fraudclosure robo signing pale in comparison:

    Check out Chase Bank v. Gergis and Midland Funding v. Brent

    http://stopforeclosurefraud.com/2012/01/12/repost-chase-bank-v-gergis-ny-civ-court-robo-testimony-wamu-credit-card-debt-dismissed-w-prejudice/

  8. @DCB:

    “yes consumer fraud–but yes the laws have narowed it–what would be common law remedy–”unconscionable forfeiture”?—–“

    Fraud if proven means the contract is null and void doesn’t it? Starting with the deed and the note and if not that – the fraud NOD and the fraud ADOTor all of the above. Harm is you paid the wrong party to the party and the wrong party seized the home or tried to seize the home. Remedy is forfeiture and restitution and penalties and jail time and triple damages times more than one perpetrator. Not enough money on the planet to make this whole or is there?

  9. @anon
    as the Fed states — the creditor is not the REMIC, not the security investors. And, therefore, not the trustee for certificate holders/security investors.

    by process of elimination that leaves the servcer–who if hes picked up collection rights only in a bk of the old servicer—is fundamentally at odds with the investors—how can he be their representative if no duties–fiduciary implies duties????

    yes you are right–most relates to investor fraud–but the homeowners are being use as tools of that fraud—–contracts vitiated by unconscionable conduct as of date bk ct turns splits duties from rights and alters the basic deal—in a way which harms homeowners as well as investors? ——–yes consumer fraud–but yes the laws have narowed it–what would be common law remedy–“unconscionable forfeiture”?—–

  10. @ian–i agree-iv been racking my brain to think of different ways to characterize what happens when you set up a defective set of docx—i think the result is a jt venture of the investors–taxable—-ie upon sales of the interests and changes in the notes’ terms

    but im hung up on what the legal role of a trustee would be–although the securitization docx typically require the filing with sec state office of ucc-financing statements to cause the loans to be dedicated to repay the mbs investors even if the off balance sheet sale by depositor etc failed—-but again if no loan schedule what do the partners share in?

    and does the psa have any value if the loans are not listed–what loans are subject to it

    and can the supposed representative capacity of a full servicer –subject to duty to make up pmts to investors on defaulted properties–does its role survive as an investor representative if there are no continuing duties to those investors–intrinsic and material conflict of interests–unconscoinable

    this is why i keep coming back to conclude that the collection rights are an unconscionable contract remnant only enabled by bk ct

    if no remnant of psa is surviving then no representative capacity and no rights to proceeds of sale–“conversion” under civil law–theft under criminal law

    there is a lot these ags could do–they seem to lack understanding of this tangle we are discussing –or of the opportunity a state has to step in and claim escheat and then work out deals with local community development agencies to sell lease etc to owners in possession
    \
    a lot of trust may be formed under delaware law–which is very much friendly to ilk –biden has opportunity there–why would the states not be trying to seize these assets from the servicers—help their people and at least claim rental streams ?????

    its often state pension trusts that are getting screwed by the “conversion” of funds by serviers and by the bkrptcy court roll over –the state ags should be reopening these –intervening—-or at this stage declaring sweeping escheats

    i just think that the typical state lawyers are too young and inexperienced and try to minimize workload as govt workers–they need to hire big guns

  11. foreclosureinfosearch and DCB.

    That is not my premise, I am only copying the Federal Reserve premise. This is THEIR reasoning for removing securities investors as the creditor for TILA purposes. This is why — as the Fed states — the creditor is not the REMIC, not the security investors. And, therefore, not the trustee for certificate holders/security investors. Tell the Fed Reserve — Whoa nelly — sure it will get their attention.

    Depositor??? That is where it stopped. DCB — agree with your 9:35 pm post. But, Depositor only a subsidiary.

    foreclosureinfosearch, —- your explanation of financial engineering is interesting. But, courts are not interested. You speak of counterclaims — we have non-judicial state homeowner victims who are evicted before they even know what happened. And, in judicial states, speculation does not work. They want proof. And, even if you have the proof you claim that you do, courts do not care — assumption is — you owe the debt to someone. But, you do not, according to the Fed Res – not me, owe to anyone who claims to be a security investor or the REMIC itself. The Trusts were for securities pass-through, whether or not they were validly formed, and whether or not receivables were actually passed-through. So, we can forget the Trust in entirety.

    What you speak of is great for investor fraud — but, just will not work for homeowner victims. They have limited consumer protection laws, have to use what we have. In other words, it does not matter about — “Defacto, embrace MersCorp ; ex ante, creditors of antecedent debt , Master Purchase and sale , Sale lease back ; executory contracts ; formation of Not for Profit under accounting scheme for Derecognition accounting rules , FHLBB, BofNY, “deep in the money “ “PUT” , Futures contracts, market triggers” —- it only matters, as to consumer, how the consumer protection laws are violated. So, if yours is the answer — how do we directly incorporate consumer protection laws, as to specific violation?? Are you going back to origination? Got that. What SOL are you upholding — under what law?? Apply your theory to the consumer law.

    Thanks for compliment — “you sure been kind to me of late.” Always been kind to you!!! In fact, have stated many times, take your information to the regulators. That could be very helpful to many victims, if the regulators do something about it. To date, they choose to ignore much. As individuals, we are very limited by weak consumer protection law. You need to apply this law — and make sure cannot be dismissed on mere technicality (which most are).

    Again, we all place a lot of hope in you, that you will get your information to proper regulator, and help homeowner victims in bulk.

    Thanks, in advance.

  12. @Java,

    Good one. It’s been my pet peeve for a while… Sopmetimes it even feels as though a lot of people throw in words they don’t really understand. Otherwise, it seems to me that they would be more than happy to explain them in layman’s terms.

  13. M.Soliman
    Whats your price to speak in laymans terms ?……I will pay you DOUBLE

  14. DCB- if the notes were never deposited into a given trust or trusts, through an A>B>C>D>E transfer(sale), then there is no trust. As such, there can be no PSA. If there is no PSA, then the servicer has no legal duty to do anything spelled out in the PSA. And extrapolating that out a bit further, you have no obligation to pay them.
    Anyone reading this, please explain to me how a non-existent trust,under the draconian NY Trust statutes, can enforce or cause to be enforced, any provisions contained within it. Thanks.

  15. This is about the Federal Home Loan Bank and pledged assets. Could someone explain it. I don’t see how a loan that was sold to a trust can be a pledged asset to anyone.

    http://victoryoverchase.blogspot.com/2012/01/what-about-wamu-pledged-loans-federal.html

  16. (FHLBB IS “TRUSTEE” Get it – tonight’s Freebee ( “IN GOD WE TRUST “) ) .

    no sorry i dont get it–what does FHLBB stand for?

    Inso far as the empty “pool”—-that happens when the piles of docx filed with SE in securitization lack the most important thing of all—-a list of included loans. There are other defects possible relating to indorsement etc –i agree–but the wheel falls completely off the cart if the loan schedules are not made and filed. Then you must start drawing on other areas of business law to figure out how to best recharacterize the failed structure–as IRS does all the time–and should for these REMICs

  17. Livinglies Readers: ” so the creditor must be the appointed representative of the pooled interests——under psa’s (PSA is worthless and a Con )

    ….that seems to apply jointly to the original servicer or the trustee—–(No servicing rights here )

    although how to be a trustee (FHLBB IS “TRUSTEE” Get it – tonight’s Freebee ( “IN GOD WE TRUST “) )

    …. if no pool was made–no loan schedule created and published—–WTF WHERE IS THIS COMING FROM ..

    Better Clues: Less than arms is a Defacto, embrace MersCorp ; ex ante, creditors of antecedent debt , Master Purchase and sale , Sale lease back ; executory contracts ; formation of Not for Profit under accounting scheme for Derecognition accounting rules , FHLBB, BofNY, “deep in the money “ “PUT” , Futures contracts, market triggers …

    expert.witness@live.com

  18. Anonymous …. in theory, be chasing the identify of your creditor forever since securities are sold as often as the wind changes. ..You would never catch a creditor. … This is why the federal reserve removed security investors from the definition of a creditor. …In order to have access to the TILA, which is your right, you need a creditor — and that cannot be a security investor.

    Anonymous – your sure been kind to me as of late – but brohter sister and undercover from one another mother …what you is writing here my dear is wrong – no cigar (or do you know something also and are trying to throw peopel off ???) No Cig or Cigar chief

    Whoa nelly!!! – your missisng it big time ..Big time !

    This is not an attack on you (I am talking or writing to an anonymous ) at all but how the lenders and big banks with sponsers continue to confuse the issues with no fear of being caught …

    Huge topic none the less – but your wrong here

    M.Soliman

  19. @anon

    Let me try another perspective here to kick around,

    If the original servicers duties ti investor pool were waived by BKY ct, then the servicer has no real reaining privity of contract–no duty to investors—–simply a right to collect from the homeowner. However the investor pool was in fact the legal owner thru the trustee however defective the appointmt–but if the trustee abandoned the collection rights in favor of the new collcetion rights claimant–who himself had a defective claim because no PSA cause to schedule—no assets in pool—then the trustee has abandoned the collection rights –the collector is operating withoutt the original authority of the securitization process

    tangled webs—the collectors rights here are so thin as to be invisible

  20. “Accordingly, an investor who purchases an interest in a pool of loans (such as mortgage-backed securities, pass through certificates, participation interests, or real estate mortgage investment conduits)”

    as quoted the fed rule would apply to any legal form of conduit—-so the creditor must be the appointed representative of the pooled interests——under psa’s that seems to apply jointly to the original servicer or the trustee—–although how to be a trustee if no pool was made–no loan schedule created and published—–

    if these conditions prevail the originator securitizer was the creditor and if then bankrupt the trustee in bkruptcy—but if the servicer duties are abandone in the servicer bky—-then only collection rights –cash to servicer collector –and servicer collector does not owe any duty to the investors and cannot be their representative—-abandoned assets by process of elimination–source of state revenue by escheat

  21. How do you know…?

    I hear , “I got to know ..who told you …you , I mean – how do you know?” ….the judge will never buy that !

    Really …

    Did you say your speaking on beghalf of a Judge –
    what he will or he will not buy into …interesting .

    None the less , my repsonses come in threes as follows:

    1) There is one sponsor for the sales of assets into a securities offering
    2) The sale and transfer is part of a sale leaseback or REPO, so “NO” assignment amongst friendly parties under a P&A and “MLAA” FBO third party creditor
    3) The third party creditor is a defacto beneficiary by its own admission operating in collaboration with is obligors

    (I love MersCorp)

  22. DCB,

    Yes. There are no longer any securities. Securities must have a current cash flow. That is why derivative contracts were invented — to remove, in the form of collection rights, when current cash flows no longer exist.

    But, subprime refinances were nothing more than collection rights at the time of the so-called contract origination. Have to go back — before the “origination.” if you start at the origination, missing the boat.

  23. Derivatives are not securities. They are contracts. They remove from securities trusts.

  24. Real valuation issue here is that the investors in mbs–or partnership units–whatever—-receive no cash flows if the homeowner promissory notes go into foreclosure—-all cash flows are “collection rights” if the original servicer went into bankruptcy —–there is no backend on this cash stream

    the LTV today will indicate that the homeowner cannot refi—so assumption is no cash to investors——everything to psuedo-servicer

  25. Must repeat again the Federal Reserve Opinion – now Rule to the TILA Amendment again —

    “Accordingly, an investor who purchases an interest in a pool of loans (such as mortgage-backed securities, pass through certificates, participation interests, or real estate mortgage investment conduits) but does not directly acquire legal title in the underlying mortgage loan, is not covered by section 226.39.”

    Covered means creditor. Real Estate Mortgage Investment Conduit — means REMIC. The so-called trusts were set up as REMICs.

    Now, for those that quite do not understand, think of this way — you need a creditor for TILA violations, and you need a creditor for TILA Amendment violations. IF — security investors could ever be considered a creditor — you could, in theory, be chasing the identify of your creditor forever since securities are sold as often as the wind changes. You would never catch a creditor. This is why the federal reserve removed security investors from the definition of a creditor. In order to have access to the TILA, which is your right, you need a creditor — and that cannot be a security investor.

    The Fed Res has codified their opinion as rule to TILA Amendment. In fact, the Federal Reserve has governance over the TILA. And, in fact, Mr. Bernanke stated this at the onset of the financial crisis, before the TILA Amendment.

    Will keep shouting.. Oh, and TILA Amendment is a Statute of Limitations subject to discovery of fraud. It is not a Statute of Repose (as in rescission).

  26. This is all part of a mark to market startegy that avoids the intrinsic valuations at 10Cents on the dollar

    Its all in days work and boring” securities re-registration featuring yet another means of ripping off the public homeowners & Tax payers with more of the same reverse equity and 3rd parties “REPO”.

    Its facinating in application – allowing the homes to be foreclosed upon under a market to market scheme using forwards and deep in the money “puts” . The conditional sales are for anitcedent value, xpost and under recycled executory contract arrangements amonsgt counter parties and domestic banks.

    The Repo is held by a custodian bank or international clearing organization. As part of a tri-party agreement the three parties to the agreement, the tri-party agent, the repo buyer and the repo seller agree to a collateral management service agreement which includes an “eligible collateral profile”.

    It is this “eligible collateral profile” that enables the repo buyer to define their risk appetite in respect of the collateral that they are prepared to hold against their cash. Etc …for the US, the two principal tri-party agents are The Bank of New York Mellon and JP Morgan Chase.

    Here is where the sham recovery is taking place at the expense of fraudulent foreclosures. It’s a tri-party agent, who is by election of parties acting as intermediary between the principal and counter party to the repo.

    I presume the intra party agent is responsible for the administration of the transactions under these Repos including collateral allocation, marking to market, and substitution of collateral. Or ,A.k.a. how to set a price at foreclosure sale conditioned to a futures contract and subsequent to transfers .

    The repo market peaked at approximately $2.8 trillion and settled at about $1.4 – 1.6 trillion. As tri-party agents JP Morgan administers hundreds of billions of US$ of collateral, having multiple data feeds to maximize the universe of coverage. tri-party agents offer exotic sophisticated collateral eligibility filters . . .Both the lender (repo buyer) and borrower (repo seller) of cash enter into these transactions to avoid the administrative burden of bi-lateral repos.

    In addition, because the collateral is being held by an agent, counterparty risk is reduced. ….I read into this as failing to mainitin integrity under the counterparty collaboration.

    Then its not a counter party – correct ?

    Affirmative defenses and counter claims emerge…

    M.Soliman
    expert.witness@live.com

  27. @ANONYMOU
    If there was a failed trust and the state law indicates that its a joint venture, and IRC says its a tax partnership—-then is not the partnership joint venture the real lender—–but who is authorized to act on its behalf if PSA failed too

  28. Good editorial here —- Quote —- “New York Federal Reserve still have not caught up with the reality that the toxic bonds are worthless of worth less than they thought by a long shot. It also continues to confuse the issue of who actually owns the bonds, and therefore who owns the undivided shares of the loans in the pools that issued the Mortgage Backed Securities (MBS). ”

    Fed never got it right in the first place. But, of course, the MBS, and REMIC security investors are not the creditor to begin with. All from the mouth of the Federal Reserve itself. And, codified by the TILA Amendment.

  29. Zoe–thanks for the link. Very enlightening. I got one of those BOA letters. It mentioned that my creditor was Fannie Mae ACT/ACT. I challenged that and they said that was a mistake and that FNMA was the creditor, not FNMA ACT/ACT. However, the form that came with that admission of “error” STILL said FNMA ACT/ACT was the creditor just like the first letter. WTF?

  30. These predators have been in denial the words out and no one trust them any more and should not trust them. Their little secret has gone public and only a fool will trust the market of theives and cons. No with a right mind about them would invest or purchase a home by them, or trust purchasing a home without a trustworthy attorney and a lot of language in the contract to protect their purchase at at 1990’s price. I know of multiple people that were looking for houses that are afraid to trust they wont have the house taken back and given to the last owner. Once a theif always a theif they have proven not to be accountable. They will never be trusted again. Their to big to fail theory is sour, they are to corrupt to allow to stay in business, when they are in a business of trust and accountability. They must go to jail and be closed down.. Without these banksters being made accountable for their actions there will be no trust and no purchases and no investors investing money. The gig is up and their blood is what the investors and borrowers want for such a huge unconscionable crime. They are not going to beable to pretend in their make believe world of stealing and making money out of thin air and being albatroses around the necks of the 99%. Parasites! They are not bankers, they are the worst of the worst criminal institutions, committing the worst of crimes. I ask you Who Would Trust them ever again? Jail is the only solution for them, Not sanctions. Money means nothing, it is like drug money, they will make more and throw it in their closets at the exspense of the 99%, they are drunk with greed and they dont care whom they hurt or as long as they can steal and steal and get away with their fairy tales in their fairy tale life. REALITY CHECK GUYS AND GAILS. You are exposed! There are no secrets anymore! We are digging up your dirt and the bones in your closets and demanding justice. Not sanctions! No sanctions JAIL TIME oh and pretty double braclets with a link chain inbetween or zip ties.

  31. “Actually the only intermediary that has any money in the deal is the servicer that was making payments even if it did not receive payments from the borrower.”

    Servicers did not continue paying payments like that in every instance. I found a document online that explains the actual/actual and scheduled/scheduled status of a loan:

    http://www.fhlbi.com/mpp/Documents/actualactualarticle051006.pdf

    This document discusses whether the servicer is obligated to send the payment to the investor even when the borrower is not paying. Scheduled/scheduled (the first word relates to interest and the second to the principal) requires the servicer to continue paying. Actual/actual only obligates the servicer to send payment, as “actually” received from the borrower. Funny thing that the servicer kept my reduced forbearance payments until one full payment was pooled before applying it–somewhere (who knows where?).

    I think this has great significance for the homes where BoA sent a letter, midyear 2010, saying the creditor to whom the debt is due is FNMA ACT/ACT. The letter said that BoA, NA is the new servicer, but states that if BoA is not listed as owner in 2B of the letter, it does not own the loan. Thus, BoA admitted that BAC nor its parent company has economic injury if the loan has ACTUAL/ACTUAL status, yet BAC/fka CW is taking thousands of homes. BAC/fka CW is not the right party of interest, much less the owner.

    I am not a lawyer, nor am I offering legal advice. These are just points to ponder.

  32. NG absolutely correct. When the investment banker intermediaries caused the REMICs to fail to meet IRS conditions—ie must meet SEC and state law representations in securitization dox, then the “business associations” by default became as it were large limited partnerships. that again explains why the vultures that bought at 15 cents/dollar do not want to have the individual notes adjusted w/o a receipt of cash payout. If the loan is modified to say 50% of original loan principal, the vulture investor must pay tax on his phantom gain. The reset of the new loan at 50% constitutes a closed transaction.

    In most cases the investors can avoid this by allowing the loan and property to just sit out there while he recovers fees from paying loans and waits to cash out a slew of defaulted properties at once–in a natl bailout for the benefit of the vultures–

  33. The FED can’t wash the dirt off their hands at any price … This is surely being discussed at the highest levels …

    But for some levity here’s the Bernanke …

    Documents show Bernanke thought economy could pull off ‘soft landing’ from falling home prices

    Read more: http://www.foxnews.com/politics/2012/01/13/newly-released-transcripts-show-how-fed-missed-housing-bust/?test=latestnews#ixzz1jNC4ephJ

    http://www.foxnews.com/politics/2012/01/13/newly-released-transcripts-show-how-fed-missed-housing-bust/?test=latestnews

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