Ginnie Mae, Fannie Mae, Freddie Mac — All Financed through “Securitized” Trusts

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See MidFirst Bank v Haynes 893 F.Supp. 1304 (1994)

It is always interesting to see how Federal Judges in particular take a closer look at a case when the stakes are higher. Here we have 17 properties. And instead of leading with the usual recitation about the origination of the loans, this Federal Court in Oklahoma introduces the premise of the case with an acknowledgement that loans involving Government Sponsored Entities (Ginny, Fannie, Freddie, et al) are financed not by the GSE but by the sale of mortgage backed securities. The GSE serves in one of two capacities: guarantor and/or Master trustee of a REMIC trust. Those who allow the bank to stonewall them with the assumption that the buck stops with the GSE are neither getting it right nor presenting it right.

This court was not presented with the anomaly that that the money from investors never made it into the trust and neither did the loans (because there was no money to pay for the loans). That is a line of attack that is difficult to get traction on even now. Many decisions are coming out of all sorts of courts in which the court is unconvinced that the player pretending to be the lender, holder or servicer or trustee has any right to be making such claims and fails to meet its burden of proof (prima facie case).

“This action involves a dispute regarding the ownership of, and right to proceeds payable under, seventeen mortgage notes originally executed in favor of defendant C.W. Haynes & Company, Inc. (“Haynes”) as mortgagee. The mortgage notes were secured by mortgages on the mortgagors’ residences, all of which are located in South Carolina. Haynes sold the mortgage notes to Inland Mortgage Company (“Inland”) who thereafter placed the mortgage notes in a “pool” of mortgage loans backing a security to be issued by Inland and guaranteed by the Government National Mortgage Association (“GNMA”) under its mortgage backed securities program.”

Without paying Haynes for the mortgage loans, [e.s.] on October 25, 1990, Inland placed the mortgage loans in a pool of mortgages to obtain a Government National Mortgage Association (“GNMA”) mortgage-backed security. On that same day, Inland sent the mortgage documents (indorsed in blank) to Bank of America, the document custodian, who then examined the documents and certified to GNMA that they complied with GNMA regulations. Included in the documents was an executed original Form HUD-11711B signed by an Inland officer certifying to GNMA that:

‘No mortgage in the referenced pool or loan package is now subject to any security agreement between the issuer and any creditor, and upon the release (delivery) of securities backed by the pool or loan package, only GNMA will have any ownership interest, other than nominal title, in and to the pooled mortgages.'”

[In exchange for a fee] “Inland and GNMA entered into a Guaranty Agreement which specified that it became effective on November 1, 1990, the “issue date” for the security [e.s.]. Pursuant to the Guaranty Agreement, Inland transferred and assigned to GNMA all of its right, title, and interest in and to the mortgages backing the security, effective on the date of the delivery of the GNMA guaranteed security. In return, GNMA guaranteed the timely payment of the principal and interest set forth in the security to be issued under the Guaranty Agreement.”

The Court goes into a more exhaustive analysis of the business records exception to the hearsay rule than we normally see when there is one under-resourced homeowner against a trillion dollar bank or its nominee:

“…the date on which the security was delivered by GNMA is of significance in determining whether GNMA qualifies as a holder in due course of the mortgage notes. [e.s.] For this reason, before the court may properly address the substantive legal issues presented, it is necessary to decide a threshold evidentiary issue. Haynes argues that the records of Participants Trust Company (“PTC”) (which establish the actual delivery date of the security as November 9, 1990), are inadmissible hearsay. Haynes asserts that the records of PTC are replications of information sent to it by Chemical Bank.

Federal Rule of Evidence 803(6) provides an exception to the hearsay rule for the following:

‘A … record, or data compilation, in any form, of acts, events … made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the … record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.'”

The Court decided in favor of admission of the computer reports. And you might see this case cited in briefs filed by attorneys fro the banks. But if you read the decision carefully you might find there is more in this case for your position than the other side. The records, simply stated, are subject to the test of reliability and credibility. If the corporate representative of the party who was introducing the records was shown to have an economic interest in the outcome of the case and a history of bad behavior, the court might have decided otherwise. Importantly, the Court starts with the fact that there was a contractual relationship between the company offering the evidence and the prior parties.

In the case of most individual foreclosure actions, the “party” who is offering the records is someone new to the scene who had nothing to do with the prior events in which the loan was originated, or how the loan documents and payments were transferred, processed and eventually enforced. What is happening in these cases is that the banks are taking advantage of the law relied upon by this federal Judge to get in documents that would otherwise would NOT be admissible because the actual parties involved have conflicting stories. (This is comparable to non-judicial states in which the non judicial process is manipulated to get a foreclosure sale that would never be allowed if the party had filed a judicial foreclosure. The “substituted” parties are not subject to questioning nor discovery without the borrower filing an action for Temporary restraining Order in which the burden is on the borrower to prove his theory of the case by first denying allegations that have never been made.)

The Court’s reliance on its perception of the fact pattern in this case led it to the conclusion that the records should be admitted. In mot cases I would argue that the the absence of the actual records custodian, the absence of proof as to how the records were created and maintained, the interest of the witness (a professional witness with no job description other than testifying), the interest of the company for whom he or she is testifying (contractually distancing the servicer from the true facts of origination, transfer and fictitious sales of the debt) all contribute to a conclusion that such records should not be permitted as evidence; BUT if you don’t do it in discovery and move to block the evidence in limine you are not likely to get any traction, even if the Judge thinks you MIGHT be right that the records are neither reliable nor credible.

Chemical Bank and PTC have a contractual arrangement whereby Chemical Bank provides PTC with the data shown on the transaction journal which is input for PTC by Chemical Bank’s employees. Mr. Celifarco with PTC testified that PTC’s computer records were based entirely on the records of Chemical Bank and that he did not know how Chemical Bank’s computer records were produced. Mr. Celifarco’s deposition reveals that PTC relies on the data in the ordinary course of its business, that the record was made at or near the time of the transaction, that the record was transmitted by a person with knowledge, and that it is the regular practice of PTC to make these records.

Mid-First argues that the transaction journal meets the requirements of Rule 803(6) regardless of whether it was prepared by a PTC employee or a Chemical Bank employee. Business records of an entity are admissible even though another entity made the records, and the rule does not require an employee of the entity that prepared the record to lay the foundation. United States v. Childs,5 F.3d 1328, 1333 (9th Cir.1993) (“Exhibits can be admitted as business records of an entity, even when that entity was not the maker of those records, so long as the other requirements of Rule 803(6) are met and the circumstances indicate the records are trustworthy.”), cert. denied, ___ U.S. ___, 114 S.Ct. 1385, 128 L.Ed.2d 60

[893 F.Supp. 1311]

(1994); United States v. Jakobetz,955 F.2d 786, 801 (2d Cir.1992) (“Even if the document is originally created by another entity, its creator need not testify when the document has been incorporated into the business records of the testifying entity.”); Saks Int’l, Inc. v. M/V “Export Champion”,817 F.2d 1011, 1013-14 (2d Cir.1987) (“Documents may properly be admitted under this Rule as business records even though they are the records of a business entity other than one of the parties, and even though the foundation for their receipt is laid by a witness who is not an employee of the entity that owns and prepared them.” (citations omitted)); Mississippi River Grain Elevator, Inc. v. Bartlett & Co.,659 F.2d 1314, 1319 (5th Cir.1981) (Rule 803(6) does not require the documents be prepared by the testifying business. (citing United States v. Veytia-Bravo,603 F.2d 1187, 1191-92 (5th Cir.1979), cert. denied, 444 U.S. 1024, 100 S.Ct. 686, 62 L.Ed.2d 658 (1980))).

Moreover, Rule 803(6) does not require the testifying witness to have personally participated in the creation of the document or to know who actually recorded the information. United States v. Keplinger,776 F.2d 678, 693 (7th Cir.1985). “Obviously, such a requirement would eviscerate the business records exception, since no document could be admitted unless the preparer (and possibly others involved in the information-gathering process) personally testified as to its creation.” Keplinger, 776 F.2d at 694. Rather, the business records exception requires the witness to be familiar with the record keeping system. Id.; see also United States v. Hathaway,798 F.2d 902, 906 (6th Cir.1986). The phrase “other qualified witness” should be broadly interpreted. 4 JACK B. WEINSTEIN & MARGARET A. BERGER, WEINSTEIN’S EVIDENCE ¶ 803(6)[2], at 803-196 to – 198 (1994).

Haynes further argues that computer records require additional foundation for admission such as evidence regarding the original source of the computer program used to produce the records and procedures for input control. In support of its position, Haynes cites United States v. Russo,480 F.2d 1228 (6th Cir.1973) and United States v. Scholle,553 F.2d 1109 (8th Cir.1977). Haynes’ reliance on these cases is misplaced. In Russo the court recognized that the business records exception should be liberally construed to avoid the former archaic practice of requiring authentication by the preparer of the record. Russo, 480 F.2d at 1240. In discussing computer printouts, the court noted that modern businesses rely largely upon computers to store large quantities of information, and such information is admissible so long as it is trustworthy and reliable. Id. at 1239-40.”

Lastly the Court  takes up the HDC argument, in which Haynes argued that the HDC doctrine should no longer be applied — a position that lies at the base of all foreclosing parties where their are claims of securitization. Article 3 UCC governs who and how a party can enforce a note. The source of authority can only come from the owner of the debt. Through an authentic instrument of authorization any party may become a holder with rights of enforcement if they get that right from the owner of the debt. The owner of the debt is supposed to be a Holder in Due Course (HDC). If you look at the elements of any Pooling and Servicing Agreement it is impossible to conclude otherwise.  But the investment banks made certain that the actual words (Holder in Due Course”) were never used. Nevertheless the requirements in the PSA spell out exactly what Article 3, UCC provides for a holder in due course. And the investment banks that excluded the term “HDC” did so precisely because they knew they were going to defraud the investors (see yesterday’s post).

“Haynes argues that UCC Article Three should not apply in this case because the rationale underlying the good faith purchaser for value concept (embodied in Article Three as holder in due course) no longer applies in modern day transactions. Haynes contends that this protection is unnecessary in modern day transactions because a merchant can “require the strictest accounting from the person from whom he is receiving the instrument.” (Haynes Memorandum at 24.) However, Article Three of the UCC controls transfers of negotiable instruments, and the mortgage notes are clearly negotiable. If UCC Article Three should not apply in this case and the holder in due course doctrine is no longer warranted, then any abolishment of that body of law should come from the legislature, not the court.”

33 Responses

  1. Charles Reed

    i also have ginnie mae docs. , but the note, well should i say one of the fakes IS NOT INDORSED IN BLANK,

  2. what happens after issuer buysdown the loan tha was induced to default from a GINNIE MAE pool?

  3. @ Ian ,

    Not my intention to help or hurt anyone ,, just looking for truth.. FNM and FRE aren’t on my plate … my MBS/trust crashed and burned on Bank of America before it could be put onto/into FNM (7% of loans didn’t make payment #1!!) … what I really like about that presentation is that it was created by FNM , FRE and others and their people are named as presenters… can you say “subpoena” (or deposition) boys and girls?

  4. @ James Smith ,

    Those filing rules and the exemptions to them go back 80 years when printing annual reports was very expensive… all linotype , no computers etc. ,,, so if you had under a certain number of investors you were exempted ,, these were usually closely held family corps anyway so basically “no harm” …

    What this means TODAY is that “bank X” with MBS “2005-xxx” even though they sold interest in shares to 1000 different pension funds ,, they are handling the dispersion of funds internally and are only reporting a small number of investors. This can be accomplished by simply listing the selling syndicate (the companies that were charged with selling the shares) as the “holders” even though the truth is that each of them sold to hundreds of individual entities. “Street Name” is a term that means that even though you bought shares in a stock the broker keeps them in THEIR name… and your ownership is denoted by an entry in THEIR internal bookkeeping.

    Hiding the truth is goal#1 of the security issuer as they are cheating at every step of the process.

    When these rules are used to hide data it is referred to as “GOING DARK”. In the scenario above this is an abuse of the rule and is illegal ,, however you’ll have a hard time finding a SEC investigator to even consider this as an offense.

  5. You’d have to remove all the judges in the South, because they’re all corrupt. We have a “good old boy” club of corruption run by judges who regularly dismiss pro se filers cases on any grounds they can dream up, and I have a certified copy of the trial transcript wherein Robert Flournoy III told me to hire a member of his club if I wanted him to “take my case seriously”.

  6. @neidermeyer, it just goes to show you that fraud when you make it look pretty with lots of pictures and nice words still smells like fraud!

  7. Can someone tell me what this type of filing means in laymans terms SEC 15d-6

    WASHINGTON, D.C. 20549

    FORM 15


    Commission File Number 333-122688-17

    Residential Asset Securities Corporation, as depositor for RASC Series 2006-EMX1
    (Exact name of registrant as specified in its charter)

    8400 Normandale Lake Blvd., Suite 250,
    Minneapolis, Minnesota 55437,
    (952) 857-7000

    (Address, including zip code, and telephone number, including area code, of
    registrant’s principal executive offices)

    Home Equity Mortgage Asset-Backed Pass-Through Certificates, Series 2006-EMX1

    (Title of each class of securities covered by this Form)


    (Titles of all other classes of securities for which a duty to file reports
    under section 13 (a) or 15(d) remains)

    Please place an X in the box(es) to designate the appropriate rule
    provision(s) relied upon to terminate or suspend the duty to file reports:

    Rule 12g-4(a)(1)(i) |_| Rule 12h-3(b)(1)(i) |_|
    Rule 12g-4(a)(1)(ii) |_| Rule 12h-3(b)(1)(ii) |_|
    Rule 12g-4(a)(2)(i) |_| Rule 12h-3(b)(2)(i) |_|
    Rule 12g-4(a)(2)(ii) |_| Rule 12h-3(b)(2)(ii) |_|
    Rule 15d-6 |X|

    Approximate number of holders of record as of the certification or notice
    date: 3

    Pursuant to the requirements of the Securities Exchange Act of 1934
    Residential Asset Securities Corporation, acting solely in its capacity as
    depositor for the above-referenced Trust, has caused this certification/notice
    to be signed on its behalf by the undersigned duly authorized person.

    Date: January 11, 2007 By: /s/ Mark White
    —————————— ——————————
    Name: Mark White
    Title: Vice President

  8. The Cherry … Multiple Claims of ownership, CWs misrepsentations and BOA sucessor lIability. Oh what the Hell sayath BOA, I will repeat the crime and finish what CW started. So they claimed ownership via CW, but two other parties had something to say about that.

  9. What about Triple Taxation? Wages income tax,, trust income tax, sellers income tax. . . . . . Woe is Me

  10. I take it personaly when photo copies of my acknowledgements are taken and attatched to documents I didn’t witness. I go bat shit crazy when anothers acknowledgement shows up on a photo copy/forgery of my signature page and attatched to documents I have never laid my eyes on before. Documents that don’t match up with copies of signed originals from closing.

  11. This article linked below discusses the same issue, that Fannie Mae owns nothing .. the Article speaks of Judge Schack almost getting it right, but he fell short by still referring to Fannie Mae as “owner” .. the comments section beneath the article makes some excellent points. Judge Schack , the posters commenting say, may have been constrained or handcuffed by an “affidavit” that Fannie Mae submitted and he had no way of going against the affidavit? Has anyone here heard of that problem? And how we as homeowners can overcome an affidavit filed by the bank or Fannie Mae? Please see the piece below

  12. I say I neIther confirmed or denied anything. I just said he missed the bus. The MBA and Me have a History. Who do you think wrote our training material? Are you aware of their dealings with LPS?

  13. Neidermeyer- I’m impressed!
    While not necessary, you have totally vindicated Chas Reed and corroborated his years-long posts here.
    Hey cookie jars, now whaddya say? Read page 47…..

  14. Charles ,, you’ll love page 47…

    Does not impair Freddie Mac’s status as a “holder in due course” or any of Freddie Mac’s rights under the Purchase Documents.

  15. MCJ , Louise and Charles ,,

    This is a Mortgage Bankers Association powerpoint/pdf slideshow that goes into all that Charles noted in his 1:04pm post ,,, starts getting interesting in pages 15-25…

    MCJ said “What we do have is a private right of action for misrepresentation and reliance. FRAUD! ” … Right you are… and it’s all provable.

  16. Judges allegedly using the Courts for there own personal economic gain. I wonder if they are immune? .

  17. midfirst bank are a buch of rats , they are a debt collection company called MIDLAND MORTGAGE CO. it is MIDLAND GROUP.

    they changed the name to midfirst bank also in mers. when i uncovered that in one of my motions they changed the name everywhere even in google.

    one more interesting thing…..ginnie mae actually OWNS the loans.

    midfirs bank has been used as a gov debt collector for years.

    midfirst bank fraudcloses FHA loans that were securitized in GINNIE MAE pools

    does the document custodian for a GINNIE MAE pool must endorse the notes?

    the players shonw in the prospectus in a GINNIE MAE issuance are:
    issuer (servicer)
    transfer agent
    document custodian

    somebody know what are the indorsements the should be in the fake note?


  18. Follow up to the article linked below .. regarding Conflicts of Interest in the banking industry .. (which highlights the question many here are asking about regarding the need for a conflict of interest policy set in place for Judges presiding over foreclosure cases in which they hold a financial stake or interest in) ..

    Here are developments following our report about the New York Fed and Carmen Segarra’s secret recordings:

    •Sens. Elizabeth Warren, D-Mass., and Sherrod Brown, D-Ohio, called for Senate hearings to explore whether the New York Fed is too deferential to banks it supervises, according to reports in The Hill and Reuters.

    •Goldman Sachs is reportedly changing its conflict of interest policy to ban employees from trading in individual stocks or bonds in certain situations, according to Bloomberg and BuzzFeed. As we reported with This American Life (transcript), Segarra had been tasked at the New York Fed to investigate Goldman’s policies in 2011. At the time, Goldman faced conflict of interest accusations in a shareholder lawsuit over Kinder Morgan’s acquisition of the energy company El Paso. Goldman was advising both companies and held a large stake in El Paso. A Goldman banker who worked on the deal advising El Paso had a $340,000 personal stake in Kinder Morgan. The case settled, but a judge called Goldman’s handling of the conflict “inadequate.”

  19. Great article about an examiner who secretly recorded the ugly truth about what is really happening behind closed doors .. “The audio is muddy but the words are distinct. So is the tension. Segarra is in Silva’s small office at Goldman Sachs with his deputy. The two are trying to persuade her to change her view about Goldman’s conflicts policy…”You have to come off the view that Goldman doesn’t have any kind of conflict-of- interest policy,” are the first words Silva says to her. Fed officials didn’t believe her conclusion — that Goldman lacked a policy — was “credible.”

    Segarra tells him she has been writing bank compliance policies for a living since she graduated from law school in 1998. She has asked Goldman for the bank’s policies, and what they provided did not comply with Fed guidance.

    “I’m going to lose this entire case,” Silva says, “because of your fixation on whether they do or don’t have a policy. Why can’t we just say they have basic pieces of a policy but they have to dramatically improve it?”

    It’s not like Goldman doesn’t know what an adequate policy contains, she says. They have proper policies in other areas.

    “But can’t we say they have a policy?” Silva says, a question he asks repeatedly in various forms during the meeting.

    Segarra offers to meet with anyone to go over the evidence collected from dozens of meetings and hundreds of documents. She says it’s OK if higher-ups want to change her conclusions after she submits them.

    But Silva says the lawyers at the Fed have determined Goldman has a policy. As a comparison, he brings up the Santander deal. He had thought the deal was improper, but the general counsel reined him in.

    “I lost the Santander transaction in large part because I insisted that it was fraudulent, which they insisted is patently absurd,” Silva said, “and as a result of that, I didn’t get taken seriously.”

    Now, the same thing was happening with conflicts, he said.

    A week later, Silva called Segarra into a conference room and fired her. The New York Fed, he told Segarra, who was recording the conversation, had “lost confidence in [her] ability to not substitute [her] own judgment for everyone else’s.”


  20. Or you could join them and enforce the contract.?

  21. Sure we do Louise, but its up to the prosecuters to charge them. What we do have is a private right of action for misrepensation and relience. FRAUD!

  22. There is a way to see the judges financial disclosure form, but when I tried it, it went all the way to Washington. One of my concerns is the fact that there are now “retired” judges in the FC courts. Does retired mean that you do not have to provide a disclosure? Maybe an end run around the financial disclosure.

  23. I think we have had RICO violations across the board. I agree the Fed may be the mastermind of the MBS mess and it would not surprise me at all.

  24. The Note and the Mortgage were Seperated. Attack the Mortgage!

  25. Mortgage Void. Debt Unsecured. WHY?

  26. Conveyed Irrevocably? What?

  27. No liens? Conveyed and warranted free n clear of encumbs and liens. Uh huh. The mortgage is encumb but no liens. NoPe! Who is fcing on you?

  28. Louise thank you. I know about this site. Not all the judges are on the list (to the best of my amature knowlege) Wonder why? We The People will take back this country sooner or later.


  29. Louise Ginnie Mae has the information as I received a form form Ginnie that gives the date the loan received its certification on the form GMM211B. It gives the document submission date and the certificate issue date.

    Now I received this information and other thing but the most important thing they released before they knew I was on to them, was the MERS Milestones sheet that show when the loan was placed into the MERS system and Ginnie Mae was granted Transfer Beneficial Rights, which acknowledges Ginnie is more involved than they said as they requested this action be done through their notification system GinnieNET.

    This information I received was through the Freedom of Information at HUD who handles Ginnie. However they now will not response to any more of my request because they are caught in their lies. Had I not dealt with this stuff I would not know how the crime was committed, but because as a loan officer I did have some knowledge I was able to connect the dots, but it was hard for me at first.

    So I not sure the people at HUD are going to give up anymore information but it should be something that would be discoverable if Ginnie was a party you were taking to court. So since that hard because we really want to show it the banks that committed the crimes as Ginnie did not conduct the foreclose. I really think we got a RICO operation and between Ginnie and the Fed is the kingpin of the operation!

  30. Charles, great post. Do you happen to know the mechanism for placing the loan into a Ginnie Mae Mbs w/out purchasing it? Are there discoverable documents? Can we get any certifiable document that Ginnie was in physical possession of the NOtes?

  31. A Man, there are documents the judges have to fill out about their assets, finances, etc., i.e. Financial Disclosures. Those records are located in each state and in Washington, DC.

  32. Here what Neil and the attorney are missing right in front of their face, and that is the lenders in the purchaser of the loans, placed the loan into a Ginnie Mae MBS without any purchase by Ginnie Mae, and the loans had to not have and outside debts against them, in order to place the loans.

    The Notes are endorsed in blank and relinquish to Ginnie as under UCC 3 that changes the owner of the Note, yet they don’t own the debt because they never purchased it. Now when this transact was final was when the custodian of records working for Ginnie had physical possession and certified that the document HUD 11711 B was endorse and they in possession of that original Note!

    There is also HUD 11711 A which does the same thing as the blank Note, but its not legally enforceable because as it is a bankrupt remote document, it does not have a purchase agreement to back up the transfer of the debt with the exchange of monies!

    The issuer does not have an endorsed Note to claim that a debt is due and Ginnie does not have a debt that they incurred, as they did not purchase the debt.

    The best the foreclosing party could do was to present evidence of a purchase and a repurchase but a purchase by Ginnie Mae cannot and does not happen as they are not a lender and they cannot incur the debt for the taxpayers. Ginnie Mae knows they are in a pickle and is using miscommunication to avoid the “holder in due course” issue!

  33. It might be a good investment find dirt on some of the Judges and go viral and remove these evil people from our community. Ala Donald Sterling. I believe in the American people.


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