Whilst researching something else I ran across the following article first published in 2010. Upon reading it, it bears repeating.
Get a consult! 202-838-6345
https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.—————-WHAT IF THE LOANS WERE NOT ACTUALLY SECURITIZED?
In a nutshell this is it. The Banks are fighting the subpoenas because if there is actually an audit of the “content” of the pools, they are screwed across the board.
My analysis of dozens of pools has led me to several counter-intuitive but unavoidable factual conclusions. I am certain the following is correct as to all residential securitized loans with very few (2-4%) exceptions:
- Most of the pools no longer exist.
- The MBS sold to investors and insured by AIG and the purchase and sale of credit default swaps were all premised on a general description of the content of the pool rather than a detailed description with the individual loans attached on a list.
- Each Prospectus if it carried any spreadsheet listing loans, contained a caveat that the attached list was by example only and not the real loans.
- Each distribution report contained a caveat that the parties who created it and the parties who delivered it did not guarantee either authenticity or reliability of the report. They even had specific admonitions regarding the content of the distribution report.
- NO LOAN ACTUALLY MADE IT INTO ANY POOL. The evidence is clear: nothing was done to assign, indorse or deliver the note to the investors directly or indirectly until a case went into litigation AND a hearing was scheduled. By that time the cutoff date had been breached and the loan was non-performing by their own allegation and therefore was not acceptable into the pool.
- AT ALL TIMES LEGAL TITLE TO THE PROPERTY WAS MAINTAINED BY THE HOMEOWNER EVEN AFTER FORECLOSURE AND SALE. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.
- AT ALL TIMES LEGAL TITLE TO THE LOAN WAS MAINTAINED BY THE ORIGINATING “LENDER”. Since there was no assignment, indorsement or delivery that could be recognized at law or in fact, the originating lender still owns the loan legally BUT….
- AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
- Since the Legal obligation was both created and extinguished contemporaneously with each other, any remaining obligation to any OTHER party became unsecured since the security instrument (mortgage or deed of trust) refers only to the promissory note executed by the borrower.
- At the time of closing, the investor-lenders were the real parties in interest as lenders, but they were not disclosed nor were the fees of the various intermediaries who brought the investor-lender money and the borrower’s loan together.
- ALL INVESTOR-LENDERS RECEIVED THE EQUIVALENT OF A BOND — A PROMISE TO PAY ISSUED BY A PARTY OTHER THAN THE BORROWER, PREMISED UPON THE PAYMENT OR RECEIVABLES GENERATED FROM BORROWER PAYMENTS, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, AND THIRD PARTY INSURANCE.
- Nearly ALL investor-lenders have been paid sums of money to satisfy the promise to pay contained in the bond. These payments always exceeded the borrowers payments and in many cases paid the obligation in full WITHOUT SUBROGATION.
- NO LOAN IS IN ACTUAL DEFAULT OR DELINQUENCY. Since payments must first be applied to outstanding payments due, payments received by investor-lenders or their agents from third party sources are allocable to each individual loan and therefore cure the alleged default. A Borrower’s Non-payment is not a default since no payment is due.
- ALL NOTICES OF DEFAULT ARE DEFECTIVE: The amount stated, the creditor, and other material misstatements invalidate the effectiveness of such a notice.
- NO CREDIT BID AT AUCTION WAS MADE BY A CREDITOR. Hence the sale is void or voidable.
- ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO DEDUCTIONS FOR THIRD PARTY PAYMENTS.
- ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR UNJUST ENRICHMENT THAT IS UNSECURED.
- ANY BALANCE DUE FROM THE BORROWER IS SUBJECT TO AN EQUITABLE CLAIM FOR A LIEN TO REFLECT THE INTENTION OF THE INVESTOR-LENDER AND THE INTENTION OF THE BORROWER. Both the investor-lender and the borrower intended to complete a loan transaction wherein the home was used to collateralize the amount due. The legal satisfaction of the originating lender is not a deduction from the equitable satisfaction of the investor-lender. THUS THE PARTIES SEEKING TO FORECLOSE ARE SUBJECT TO THE LEGAL DEFENSE OF PAYMENT AT CLOSING BUT THE INVESTOR-LENDERS ARE NOT SUBJECT TO THAT DEFENSE.
- The investor-lenders ALSO have a claim for damages against the investment banks and the string of intermediaries that caused loans to be originated that did not meet the description contained in the prospectus.
- Any claim by investor-lenders may be subject to legal and equitable defenses, offsets and counterclaims from the borrower.
- The current modification context in which the securitization intermediaries are involved in settlement of outstanding mortgages is allowing those intermediaries to make even more money at the expense of the investor-lenders.
- The failure of courts to recognize that they must apply the rule of law results not only in the foreclosure of the property, but the foreclosure of the borrower’s ability to negotiate a settlement with an undisclosed equitable creditor, or with the legal owner of the loan in the property records.
Loan File Issue Brought to Forefront By FHFA Subpoena
Posted on July 14, 2010 by Foreclosureblues
Wednesday, July 14, 2010
foreclosureblues.wordpress.com
Editor’s Note….Even U.S. Government Agencies have difficulty getting
discovery, lol…This is another excellent post from attorney Isaac
Gradman, who has the blog here…http://subprimeshakeout.blogspot.com.
He has a real perspective on the legal aspect of the big picture, and
is willing to post publicly about it. Although one may wonder how
these matters may effect them individually, my point is that every day
that goes by is another day working in favor of those who stick it out
and fight for what is right.
Loan File Issue Brought to Forefront By FHFA Subpoena
The battle being waged by bondholders over access to the loan files
underlying their investments was brought into the national spotlight
earlier this week, when the Federal Housing Finance Agency (FHFA), the
regulator in charge of overseeing Fannie Mae and Freddie Mac, issued
64 subpoenas seeking documents related to the mortgage-backed
securities (MBS) in which Freddie and Fannie had invested. The FHFA
has been in charge of overseeing Freddie and Fannie since they were
placed into conservatorship in 2008.
Freddie and Fannie are two of the largest investors in privately
issued bonds–those secured by subprime and Alt-A loans that were often
originated by the mortgage arms of Wall St. firms and then packaged
and sold by those same firms to investors–and held nearly $255 billion
of these securities as of the end of May. The FHFA said Monday that it
is seeking to determine whether issuers of these so-called “private
label” MBS misled Freddie and Fannie into making the investments,
which have performed abysmally so far, and are expected to result in
another $46 billion in unrealized losses to the Government Sponsored
Entities (GSE).
Though the FHFA has not disclosed the targets of its subpoenas, the
top issuers of private label MBS include familiar names such as
Countrywide and Merrill Lynch (now part of BofA), Bear Stearns and
Washington Mutual (now part of JP Morgan Chase), Deutsche Bank and
Morgan Stanley. David Reilly of the Wall Street Journal has written an
article urging banks to come forward and disclose whether they have
received subpoenas from the FHFA, but I’m not holding my breath.
The FHFA issued a press release on Monday regarding the subpoenas
(available here). The statement I found most interesting in the
release discusses that, before and after conservatorship, the GSEs had
been attempting to acquire loan files to assess their rights and
determine whether there were misrepresentations and/or breaches of
representations and warranties by the issuers of the private label
MBS, but that, “difficulty in obtaining the loan documents has
presented a challenge to the [GSEs’] efforts. FHFA has therefore
issued these subpoenas for various loan files and transaction
documents pertaining to loans securing the [private label MBS] to
trustees and servicers controlling or holding that documentation.”
The FHFA’s Acting Director, Edward DeMarco, is then quoted as saying
““FHFA is taking this action consistent with our responsibilities as
Conservator of each Enterprise. By obtaining these documents we can
assess whether contractual violations or other breaches have taken
place leading to losses for the Enterprises and thus taxpayers. If so,
we will then make decisions regarding appropriate actions.” Sounds
like these subpoenas are just the precursor to additional legal
action.
The fact that servicers and trustees have been stonewalling even these
powerful agencies on loan files should come as no surprise based on
the legal battles private investors have had to wage thus far to force
banks to produce these documents. And yet, I’m still amazed by the
bald intransigence displayed by these financial institutions. After
all, they generally have clear contractual obligations requiring them
to give investors access to the files (which describe the very assets
backing the securities), not to mention the implicit discovery rights
these private institutions would have should the dispute wind up in
court, as it has in MBIA v. Countrywide and scores of other investor
suits.
At this point, it should be clear to everyone–servicers and investors
alike–that the loan files will have to be produced eventually, so the
only purpose I can fathom for the banks’ obduracy is delay. The loan
files should, as I’ve said in the past, reveal the depths of mortgage
originator depravity, demonstrating convincingly that the loans never
should have been issued in the first place. This, in turn, will force
banks to immediately reserve for potential losses associated with
buying back these defective mortgages. Perhaps banks are hoping that
they can ward off this inevitability long enough to spread their
losses out over several years, thereby weathering the storm caused (in
part) by their irresponsible lending practices. But certainly the
FHFA’s announcement will make that more difficult, as the FHFA’s
inherent authority to subpoena these documents (stemming from the
Housing and Economic Recovery Act of 2008) should compel disclosure
without the need for litigation, and potentially provide sufficient
evidence of repurchase obligations to compel the banks to reserve
right away. For more on this issue, see the fascinating recent guest
post by Manal Mehta on The Subprime Shakeout regarding the SEC’s
investigation into banks’ processes for allocating loss reserves.
Meanwhile, the investor lawsuits continue to rain down on banks, with
suits by the Charles Schwab Corp. against Merrill Lynch and UBS, by
the Oregon Public Employee Retirement Fund against Countrywide, and by
Cambridge Place Investment Management against Goldman Sachs, Citigroup
and dozens of other banks and brokerages being announced this week. If
the congealing investor syndicate was looking for political cover
before staging a full frontal attack on banks, this should provide
ample protection. Much more to follow on these and other developments
in the coming days…
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Posted by Isaac Gradman at 3:46 PM
Filed under: bubble, CASES, CDO, CORRUPTION, Eviction, evidence, expert witness, Fannie MAe, foreclosure mill, forms, GTC | Honor, HERS, investment banking, Investor, MODIFICATION, Mortgage, Motions, Pleading, securities fraud, Servicer, trustee | Tagged: assignment, delivery, discovery, Edward DeMarco, FHFA, foreclosureblues, indorsement, investor-lender, Isaac Gradman, pools, table funded loan, third aprty payment |
don’t just oppose Mnuchin – promote Ron Paul as Secretary of Treasury!
Where is the SEC on this and why aren’t they coming down hard on these guys?
Proof that their had to be a conglomerate of entities who all knew they were hoodwinking the borrower and investor and now in concerted efforts are trying to hide evidence change it and lie under oath the waters are as deep as they are muddy.
I definitely really enjoy this idea, and are actually considering about this sort of thing for any while now.This the best article I have never seen before….I like this post.If you have time.Please enter my blog learn finance
@ Gwen Caranchini
Links were previously posted for you in this thread concerning the removal.
Ng most of the pools no longer exist.
M. Soliman- that’s bad if the loans sold or were reclassified away from the trust SPE and indenture. Why then are you offering to determine WHERE A LOAN IS IN A STRUCTURED FINANCING ARRANGEMENT?
Ng the MBS sold to investors and insured by aig and the purchase and sale of credit default swaps were all premised on a general description of the content of the pool rather than a detailed description with the individual loans attached on a list.
M. Soliman- Read SFAS 140 and see what it is I’ve been saying here. Therefore the contents of the pool and individual loans are not of concern to the Trust. In a securitization assets are pooled and spun off into a separate business entity. The assets are in fact cashed out by trading ownership of that unit, and all the profit and loss that might come in the future. But they still own shares in a REIT. The most senior tranche investors lower their risk of default in return for lower interest payments. It is therefore the, junior tranche investors or lender that assume a higher risk in return for higher interest. (That’s your problem my friend)
Ng each prospectus if it carried any spreadsheet listing loans contained a caveat that the attached list was by example only and not the real loans.
M. Soliman- private placement memorandums. They are not prospectuses but a blue sky PPM
Ng each distribution report contained a caveat that the parties who created it and the parties who delivered it did not guarantee either authenticity or reliability of the report. They even had specific admonitions regarding the content of the distribution report.
M. Soliman- as long as the dividend check arrived every month to a master servicer the delinquencies were a moot point solely to accommodate the FDIC who played a role in this borrowers loans for deposits and cost of funds paid by the consumer homeowner. That is the crime of the century. That’s where they transferred assets into a SPV from SPE laterally for showing a zero delinquencies. Hide delinquencies
Ng- No loan actually made it into any pool. The evidence is clear: nothing was done to assign, indorse or deliver the note to the investors directly or indirectly until a case went into litigation and a hearing was scheduled. By that time the cutoff date had been breached and the loan was non-performing by their own allegation and therefore was not acceptable into the pool.
M. Soliman- made it into a pool? No. Given tax exempt status –under the registration. Perfection does not require the assignment or recording public records or evidencing an assignment. I always said the assets stayed under one roof. Or did they? Hmmmmmm!
Ng. At all times legal title to the property was maintained by the homeowner even after foreclosure and sale. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.
M. Soliman- credit bid is a bankruptcy understanding in a receivership claim. You’re buying onto the lender confusing the matter. THE ASSETS ARE ORPHANED
Ng at all time’s legal title to the loan was maintained by the originating “lender”. Since there was no assignment, endorsement or delivery that could be recognized at law or in fact, the originating lender still owns the loan legally but….
M. Soliman- read the Lehman report by special prosecutor. They told us this back in early march. They moved loans in and out for earning purposes the buyers invest in the success and/or failure of the collective pool of assets. In most securitized investment structures, the investors’ rights to receive cash flows are divided into separating classes of varying value.
Ng at all times the obligation was both created and extinguished at, or contemporaneously with the closing of the loan. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the lender and payee on the note, both created a legal obligation from the borrower to the lender and at the same time, the legal obligation was extinguished because the legal lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
M. Soliman- pass thru features allows these things you speak of ….if the assets are considered chattel which they are. MERS, especially where listed on the deed of trust defeats these argument. The assets were funded by a FSB bank and that is verifiable. The lender of record, beneficiary, payee is listed on the note a promise to pay. A pass through investment is not at risk of any arguments here. The cash flow was sold and the trust sits upon collateral pledged to the sale
Since the legal obligation was both created and extinguished contemporaneously with each other, any remaining obligation to any other party became unsecured since the security instrument (mortgage or deed of trust) refers only to the promissory note executed by the borrower.
M. Soliman- your arguments assume no pass through will survive a question of the scrutiny. Pass through upon sale. The tangible assets are sold, correct. They are sold to the investment and the cash flow provided the investors are from a collections efforts processed by the lender. The most senior tranche investors lower their risk of default in return for lower interest payments. It is therefore the, junior tranche investors that assume a higher risk in return for higher interest.
Ng-At the time of closing, the investor-lenders were the real parties in interest as lenders, but they were not disclosed nor were the fees of the various intermediaries who brought the investor-lender money and the borrower’s loan together.
M. Soliman- correct this constitutes a cba and violation of RESPSA. But it’s enforceable by the dre more than HUD. Attacking MERS as people do will hurt this argument (hint hint)
Ng all investor-lenders received the equivalent of a bond — a promise to pay issued by a party other than the borrower, premised upon the payment or receivables generated from borrower payments, credit default swaps, credit enhancements, and third party insurance.
M. Soliman corrects a dividend check for a bank that – could use homeowners to capitalize its reserves to expand their lending limits so?
Nearly all investor-lenders have been paid sums of money to satisfy the promise to pay contained in the bond. These payments always exceeded the borrower’s payments and in many cases paid the obligation in full without subrogation.
M. Soliman- indemnity and absurdity payments are offered upon a trigger and that is default at 60 days. Therefore the investors are paid and the lender is off the hook for a drain of its cash flow.
No loan is in actual default or delinquency. Since payments must first be applied to outstanding payments due, payments received by investor-lenders or their agents from third party sources are allocable to each individual loan and therefore cure the alleged default. A borrower’s non-payment is not a default since no payment is due.
M. Soliman- the terms and condition of the asset prevail over these arguments. Indemnity and assurance will cover the losses in cash flow but the master servicer only receives one check. Payments are due under a note and the pass through feature totals the monthly lump sum or dividend
All notices of default are defective: the amount stated, the creditor, and other material misstatements invalidate the effectiveness of such a notice.
M. Soliman- not defective but conditioned by the sale of an asset for which the title is held by another party and the assets are sealed in a closed end fund. There is no captain at the helm here.
Ng -No credit bid at auction was made by a creditor. Hence the sale is void or voidable.
M. Soliman- the credit bid is a bankruptcy terms that failed in a recent case. You’re offering arguments here that support that courts decision in this landmark case. That’s not what is meant by a credit bid?
Your not arguing things here that will put the fear of death in a regestrant. There a re a few shareholder arguments I’v seen …but in weaker pleadings
You wont defeat the note. Never. Knonw this as a fact. That’s not the path to follow although you make some good arguments.. Look elsewhere.
M.Soliman
expert.witness@live.com
I filled out a complaint with the California AG and the only thing I heard back from them was a generic computer generated letter.
Lender fraud oppositon to demurrer
http://www.scribd.com/doc/34546517/PLAINTIFF-OPPOSITION-TO-UNIVERSAL-AMERICAN-MORTGAGE-COMPANY-DEMURRERS-FRAUD-MOTIONS-TO-STRIKE-PORTIONS-OF-PLAINTIFF-S-SECOND-AMENDED-COMPLAINTOp
CCP 128.7 filed as CC 2923.5 violated first chance for discovery the old fashion way. By rights/
http://www.scribd.com/doc/34588216/PLAINTIFF-MOTION-FOR-HEARING-CCP-128-7-AGAINST-COUNSEL-FOR-DEUTSCHE-BANK-MERS-ONEWEST-NDEX-WEST-motion-128-7-07-20-10
Gwen
You are a perfect example of what has gone very wrong in our legal system. There are no answers for a system that has gone haywire.
Everyone here must contact their state representatives and Attorney Generals. If they do not realize and acknowledge what is going on – we will be silenced. This must be done in conjunction with individual court battles. Cannot be afraid to confront our officials. Much of the fraud – and cover- up- is out of our hands.
Need to speak up – speak loud – and be a pest!!! Make them tired of hearing from us – all while you pursue your individual claim in court. Eventually all will surface. – but we need to be publicly heard.
I am in a lawsuit against BOA Wilshire, Citi, Aegis, MLMI2006-he5 etc. I had an approved Mod with Wilshire who then sold the servicing or whatever to BAS Home Loans Serving who started the Mod over and then recently denied it claiming I refused their monetary a ssistance. The lawyer for BOA wrote me a letter and said I should resubmit the mod to her for processing. I think what they are wanting to do is process it, get me to agree to it, then claim that I admitted they have authority and use that against me in the quiet title action and other actions. I have no intention of doing so–when the approve the mod, and they will as a tactical move, I will ask them to prove up they have authority to enter the mod, and by the way where is the paperwork on who owns the note. I am currently checking out MLMI2006he-5 with the SEC and I ahve the SEC file number for this which I get from some research. Let me know if anyone has had this tactic used by a loan servicer when they are sued for quiet title–I’m a 30 year former trial lawyer in Fed Cts for civil rights doing this pro se–if nothing else, I hope to make some positive case law as part of the overall lawsuit against these folks. I have MERS doing fraudulent docs already and a broken chain of title, a lender who is in bankruptcy. BOA had their attorney enter an appearance for MERS and then claimed there was a conflict and a separate attorney entered for MERS who just files things saying (we agree with BOA’s filings). This is a joke. They removed to fed ct and I am opposing claiming they lied on their docs for removal. These people sent me a letter saying they would not foreclose pending ths lawsuit, and then next day I get a letter directly from BAS saying they were going to foreclose. I then move for a TRO and they send another letter saying they won’t foreclose and say that in a pleading but they have yet to show they own the note, have anything in writing that they can service the note for the owner and the only owner of record is a trust which is questionably in existence. Anyone else have this issue????
Waiting to see if Neil responds. Servicer controls all. Once in default, your loan is subordinated to the residual tranche. Servicer must make up any default payments. Once servicer decides your loan is not collectible – servicer ceases making payments – and collection rights are swapped out of the trust to the default debt buyers waiting in the wings (by the “synthetic” resecuritization of the residual tranche).
At foreclosure, loans are long removed from original SPV – and long removed from any income passing to the “certificate holders” of the original SPV. If you continue to make payments once your loan is classified as a default (and many were falsely classified) your payment is retained by the servicer – and not passed onto the trustee for the SPV. Servicer will swap out collection rights once they deem you as unrecoverable. AND, that is the story of the NIM resecuritization.
Fact is – once there is even one month default – you might as well foreclosure – because you have lost valid title to your home anyway. They will continue to tie you to SPV certificate holders – who have subordinated any of their rights to the Residual holder – your very unfriendly SERVICER – who is subordinated to the debt buyer “investors” of the resecuritized (removed from original SPV) NIM residual claims. Your title is gone – if you even had it to begin with.
Other issues – such as did you ever even make it to the designated Trust. But, I will continue to fight for you guys/girls. Can say nothing more at this time.
And, Neil emphasizes lack of and missing assignments – all part of the fraud.
Continue to speak out – and if you sign a modification – make sure it is in the name of the CURRENT CREDITOR – do not sign away your legal rights.
Patrick Pulatie
Your #10 (is questionble)
Banks cannot loan depositors money to other people. They are supposed to hold that money for the depositor. They have a license. A license to create money (vapor) out of thin air.
The Creature from Jekyll Island is supposed to be a good book online that explains the premise of how they do that.
What they do is create obligations off the fact that those deposits are there, and rely on the fact all depositors do not need all of their money at the same time. There is a juggling of sorts where they have enough real money on deposit for what was deposited, and they created obligations (ie loans) where other depositors can withdraw that ‘created’ (ie vapor) money, and if all depositors wanted their funds at the same time, they’d have to transfer funds from another bank to meet their depositors needs.
If all banks were run on at the same time, and the depositors and those that had loaned (vapor) money on deposit, requested their money at the same time, the bank would be insolvent because other banks they relied on to transfer the funds would be going through the same thing and wouldn’t transfer.
I don’t know nothing and if I think I know something, I know nothing. I do not give legal advice because I don’t know legal things. All Rights Reserved.
The house of cards are falling.
Light and Love
2 Anonymous… that Luke Hayden from Advanta sure gets around! Interesting case.
SO BASICALLY ALL SYNTHETIC JUST LIKE GOLDMAN CDOs. NO WINDER I COULD NOT FIND MY LOAN ANYWHERE IN THE SEC FILINGS
Edgetrader,
Great point about Patrick’s post–it is a myth that banks loan depositor’s money. It is a myth that benefits the banks and it is a myth that has remarkable staying power, I guess because it SEEMS true. But it isn’t, and it’s not some big secret. It’s openly admitted by the Fed, which is the Bank of Banks. You are exactly right–loans are how money is created, which is why our money isn’t really money in any common understanding of that word, i.e., “a medium of exchange.” Our money is debt.
J in CO,
Excellent analysis. I agree that a jubilee is in order, rather than giving more money and power to the banks. And you’re right, the blank indorsements and the empty trusts are strictly for laundering purposes and for, from the securitizers’ perspective, whatever creative accounting needs to be performed in any given legal situation.
Patrick:
Re: your comment:
“10. The investor who put up the money was the “real lender”, not the lender who made the loan. Well, take this argument to its logical conclusion and you have any bank that ever made a loan has the same issues. The money for loans comes from its depositors, the people who put money into savings and checking accounts. Same difference. See how absurd?”
Banks do not lend out depositor’s money. It is against their charter and law.
Bank’s CREATE loans, via one’s signature.
Neil
Great post.
I came across a old case involving Chase Manhattan Mortgage and Advanta – (posted below). There is also a decision prior to this decision regarding privacy of information (in case anyone is interested).
Sometimes we have to go back to old case to see what was really happening. As I have suggested on previous posts, the devil is the details of the “residual tranche” – also called “equity tranche” and “net interest margin.’ These were tranches were not securitized by the Trust itself – and were/are, in my opinion, separate resecurizations of the residual tranche – usually held by the servicer. That is, this tranche was not sold to the security underwriters (as purchased certificates) for pass-through of current income. I find this case interesting as it discusses “zero balance loans” “Charge-off” “delinquency advances”, etc.
Have my own opinion, but would like yours. Thank you.
See Below:
CHASE MANHATTAN MORTGAGE CORP., et al., Plaintiffs, v. ADVANTA CORP., et al., Defendants.
Civil Action No. 01-507 (KAJ)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
2005 U.S. Dist. LEXIS 19374; Fed. Sec. L. Rep. (CCH) P93,348
September 8, 2005, Decided
PRIOR HISTORY: Chase Manhattan Mortg. Corp. v. Advanta Corp., 2004 U.S. Dist. LEXIS 7378 (D. Del., Apr. 23, 2004)
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff, a purchaser of residual interests in mortgage securitizations, sued defendant seller, alleging it engaged in (1) federal securities fraud in violation of 15 U.S.C.S. § 78j(b); (2) securities fraud in violation of Del. Code Ann. tit. 6, § 7323(a)(2); (3) common law fraud; (4) negligent misrepresentation; and (5) breach of contract. Defendant counterclaimed for breach of contract. The matter was before the court for decision.
OVERVIEW: The parties’ claims arose out of either a purchase and sale agreement (the agreement) under to which the seller sold mortgage assets to the purchaser, or a post-closing letter. Delaware law governed claims that sounded in contract. Pennsylvania law governed the fraud and misrepresentation claims. Regarding breach of contract, the court examined eight different provisions of the agreement, and found that the seller breached two provisions. It breached § 6.24, because, as of the closing, the securitizations had $ 17,516,456.43 in non-recoverable advances. It also breached § 7.8 of a pooling and service agreement and § 4.11(b) of the agreement. Next, the purchaser’s reliance was not reasonable under the standards set out in Straub, and thus it had not established that the seller committed common law fraud, federal securities law fraud under 15 U.S.C.S. § 78j(b), or negligent misrepresentation. Damages were calculated for the breaches of contract. On the counterclaim, the purchaser breached the terms of the post-closing letter requiring it to release money to the seller equal to the number of document exceptions no longer outstanding as of closing, and the court calculated damages.
OUTCOME: The court found that the seller was liable to the purchaser for $ 17,516,456, plus pre-judgment and post-judgment interest, and the purchaser was liable to the seller for $ 824,190, plus pre-judgment and post-judgment interest.
CORE TERMS: securitization, realized, mortgage, residual, zero, servicer, delinquency, subprime, mortgage loan, liquidation, certificateholders, disclosure, delinquent, servicing, non-recoverable, valuation, tape, monthly, misrepresentation, warranty, unreimbursed, breached, citations omitted, portfolio, outstanding, diligence, borrower, reporting, hierarchy, holder
LexisNexis® Headnotes Hide Headnotes
Evidence > Procedural Considerations > Burdens of Proof > Clear & Convincing Proof
Torts > Business Torts > Fraud & Misrepresentation > General Overview
HN1Go to the description of this Headnote. In the context of fraud claims, there is no meaningful distinction between Delaware law on fraud and Pennsylvania law on fraud. There is a meaningful distinction at this point, however, bearing on the burden of proof. In Pennsylvania, a plaintiff is required to prove fraud by clear and convincing evidence. Delaware law is that the plaintiff must prove the elements of common law fraud by a preponderance of the evidence.
Civil Procedure > Federal & State Interrelationships > Choice of Law > Significant Relationships
HN2Go to the description of this Headnote. A federal district court sitting in diversity must apply the choice of law rules of the state in which it sits to determine which state’s law governs the case before it. Under Delaware law, the law of the state with the most significant relationship to the transaction applies. For cases involving fraud or misrepresentation claims, contacts that are relevant to a choice of law determination include: (1) the place, or places, where the injured party acted in reliance upon the defendants’ representations, (2) the place where the injured party received the representations, (3) the place where the defendants made the representations, (4) the domicil, place of incorporation and place of business of the parties, (5) the place where a tangible thing which is the subject of the transaction between the parties was situated at the time, and (6) the place where the injured party is to render performance under a contract which it has been induced to enter by the false representations of the defendant.
Contracts Law > Breach > Causes of Action > General Overview
Contracts Law > Defenses > Ambiguity & Mistake > General Overview
HN3Go to the description of this Headnote. To state a claim for breach of contract under Delaware law, a plaintiff must establish that a contract existed, that the defendant breached an obligation imposed by the contract, and that the breach resulted in damage to the plaintiff. In construing the terms of a contract, a court first looks to the plain meaning of the contractual terms. In so doing, a court must give effect to each clause and phrase of a contract and cannot ignore or exclude any contractual language. In addition, a court should not interpret a contract in a way that renders a provision illusory or meaningless. A court may also look to the standard industry meaning of terms in a contract between two participants in the same industry, even if the term is not ambiguous. Finally, if after looking to the plain meaning and industry standard meaning of terms, a court finds that a contractual provision is ambiguous, the court can consider extrinsic evidence of the negotiations and intent of the parties.
Real Property Law > Financing > Mortgages & Other Security Instruments > General Overview
HN4Go to the description of this Headnote. A “non-recoverable advance” is generally understood to have reference to a particular mortgage relationship. It is not synonymous with “unreimbursability,” because it does not mean that the servicer will not be repaid at some point. It does, however, mean that the advance cannot be repaid by the liquidation of the property or by pursuing a deficiency claim against the borrower or third-party guarantor of that mortgage.
Securities Law > Additional Offerings & the Securities Exchange Act of 1934 > Issuer Recordkeeping & Reporting > General Overview
HN5Go to the description of this Headnote. See 15 U.S.C.S. § 78m(i).
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Express Liabilities > Misleading Statements > General Overview
HN6Go to the description of this Headnote. See 17 C.F.R. § 240.10b-5.
Securities Law > Blue Sky Laws > Offer & Sale
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Express Liabilities > Misleading Statements > General Overview
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Implied Private Rights of Action > Elements of Proof > General Overview
HN7Go to the description of this Headnote. The elements of federal securities fraud under § 10(b) (15 U.S.C.S. § 78j(b)) of the Securities Exchange Act of 1934 and 17 C.F.R. § 240.10b-5 and the elements of common law fraud in Pennsylvania overlap substantially. For both, one must prove (1) a misstatement or an omission of a material fact, (2) with scienter, (3) upon which the plaintiff reasonably relied, and (4) that the plaintiff’s reliance was the proximate cause of his or her injury, and, for federal securities fraud, one must further prove that the foregoing was (5) in connection with the purchase or the sale of a security. For the federal securities fraud claim, each element must be proven by a preponderance of the evidence. For the common law fraud claim, however, each element must be proven by clear and convincing evidence.
Torts > Business Torts > Fraud & Misrepresentation > Negligent Misrepresentation > Elements
HN8Go to the description of this Headnote. The elements of a negligent misrepresentation claim under Pennsylvania law include: (1) a misrepresentation of a material fact; (2) made under circumstances in which the misrepresenter ought to have known its falsity; (3) with an intent to induce another to act on it; and; (4) which results in an injury to a party acting in justifiable reliance on the misrepresentation. The elements of a negligent misrepresentation claim thus also overlap with the elements of fraud claims, to a certain extent, including that the plaintiff must act in justifiable reliance on the misrepresentation.
Criminal Law & Procedure > Criminal Offenses > Fraud > Securities Fraud > Elements
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Express Liabilities > Misleading Statements > General Overview
HN9Go to the description of this Headnote. A misrepresented or omitted fact is material if there is a substantial likelihood that it would have been viewed by the reasonable investor as having significantly altered the total mix of information available to the investor.
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Express Liabilities > Misleading Statements > General Overview
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Implied Private Rights of Action > Elements of Proof > Scienter > Recklessness
Torts > Business Torts > Fraud & Misrepresentation > General Overview
HN10Go to the description of this Headnote. To prevail on a claim pursuant to 17 C.F.R. § 240.10b-5, a plaintiff must prove scienter. In the Third Circuit, a showing of recklessness satisfies the scienter requirement. Common law fraud under Pennsylvania law can likewise be established by proving that the defendant acted recklessly. Thus, the inquiry remains the same. A reckless statement is one involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or so obvious that the actor must have been aware of it.
Governments > Fiduciary Responsibilities
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Express Liabilities > Misleading Statements > General Overview
Torts > Business Torts > Fraud & Misrepresentation > General Overview
HN11Go to the description of this Headnote. The U.S. Court of Appeals for the Third Circuit has identified a non-exclusive set of factors to aid in determining whether a party’s reliance was reasonable under all of the circumstances. Those factors include, (1) whether a fiduciary relationship existed between the parties; (2) whether the plaintiff had the opportunity to detect the fraud; (3) the sophistication of the plaintiff; (4) the existence of long standing business or personal relationships; and (5) the plaintiff’s access to the relevant information.
Contracts Law > Contract Conditions & Provisions > Integration Clauses
Securities Law > Liability > Securities Exchange Act of 1934 Actions > Express Liabilities > Misleading Statements > General Overview
HN12Go to the description of this Headnote. Although the U.S. Court of Appeals for the Third Circuit has ruled that an integration clause in a contract does not, as a matter of law, bar claims under the federal securities law, it has noted that a plaintiff will have an uphill battle to establish reasonable reliance in the face of an integration clause. Thus, the existence of a non-reliance clause is one factor to consider in determining the reasonableness of a party’s reliance.
Civil Procedure > Remedies > Damages > General Overview
Contracts Law > Remedies > Compensatory Damages > General Overview
Torts > Damages > General Overview
HN13Go to the description of this Headnote. In Delaware, the traditional measure of damages is that which is utilized in connection with an award of compensatory damages, whose purpose is to compensate a plaintiff for its proven, actual loss caused by the defendant’s wrongful conduct. To achieve that purpose, compensatory damages are measured by the plaintiff’s out-of-pocket actual loss.
Civil Procedure > Remedies > Judgment Interest > Prejudgment Interest
HN14Go to the description of this Headnote. Prejudgment interest is available in Delaware as a matter of right.
Civil Procedure > Remedies > Judgment Interest > General Overview
HN15Go to the description of this Headnote. See 28 U.S.C.S. § 1961.
Contracts Law > Contract Conditions & Provisions > Indemnity
HN16Go to the description of this Headnote. Under Delaware law, indemnification provisions are not applicable to claims between contracting parties; they are intended to protect one contracting party against liability from third party claims when the other contracting party is at fault.
COUNSEL: [*1] Michael D. Goldman, Esq. and Erica L. Niezgoda, Esq., Potter Anderson & Corroon LLP, 1313 North Market Street, 6th Fl., P.O. Box 951, Wilmington, Delaware 19899, for Plaintiffs. Co-Counsel: Jami Wintz McKeon, Esq., John C. Goodchild, Ill, Esq. and Gregory T. Parks, Esq., Morgan, Lewis, Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103.
Todd Schiltz, Esq., Wolf, Block, Schorr & Solis-Cohen LLP, Wilmington Trust Center, 1100 N. Market Street, Suite 1001, Wilmington, Delaware 19801, for Defendants. Co-Counsel: Jay A. Dubow, Esq., Patrick Matusky, Esq., Matthew A. White, Esq., Laura E. Krabill, Esq. and Lindsey B. Pockers, Esq., Wolf, Block. Schorr and Solis-Cohen LLP, 1650 Arch Street, 22nd Fl., Philadelphia, Pennsylvania 19103.
JUDGES: JORDAN, District Judge.
OPINION BY: Kent A. Jordan
OPINION
POST-TRIAL FINDINGS OF FACT AND CONCLUSIONS OF LAW
September 8, 2005
Wilmington, Delaware
Kent A. Jordan
JORDAN, District Judge
I. INTRODUCTION
Plaintiff’s Chase Manhattan Mortgage Corporation
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and Chase Home Mortgage Company of the Southeast (collectively, “Chase”) filed this action on July 26, 2001 (Docket Item [“D.I.”] 1) against defendants Advanta [*2] Corp. and certain of its affiliates 1 (collectively, “Advanta”), alleging that Advanta engaged in (1) federal securities fraud in violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j;(2) Delaware securities fraud inviolation of 6 DEL. C. § 7323(a)(2); (3) common law fraud; (4) negligent misrepresentation; and (5) breach of contract. (D.I. 1 at PP 107-44.) On September 12, 2001, Advanta filed an Answer to Chase’s complaint and asserted a counterclaim for breach of contract. (D.I. 30 at PP 166-72.)
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1 Advanta Corp.
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‘s affiliates include, Advanta National Bank USA,
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Advanta Bank Corp.,
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Advanta Mortgage Holding Co., Advanta Mortgage Corp. USA,
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Advanta Residual Holding Corp., Advanta Mortgage Conduit Services, Inc., Advanta Mortgage Corp.
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Midatlantic, Advanta Mortgage Corp.
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Northeast, Advanta Mortgage Receivables Inc., Advanta Finance Corp., Advanta Conduit Receivables, Inc., and Advanta Finance Residual Corporation. (D.I. 1, Complaint Caption.)
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[*3] Each of the parties’ claims arises out of either a Purchase and Sale Agreement dated as of January 8, 2001 (the “Agreement”), pursuant to which Advanta sold mortgage assets to Chase, or a Post-Closing Letter pursuant to which $ 1,270,000 was placed in a Document Holdback Account. (See D.I. 422 at PP 1-2, 127-28.) In an earlier Opinion, I denied the parties’ cross-motions for summary judgment. (D.I. 382, Mem. Opinion, Mar. 2, 2004.) A bench trial followed in April and May, 2004. These are my post-trial findings of fact and conclusions of law issued pursuant to Federal Rule of Civil Procedure 52(a), 2 and on the basis of which Advanta is liable to Chase for $ 17,516,456.43, plus interest, and Chase is liable to Advanta for $ 824.190, plus interest.
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2 Throughout these Findings and Conclusions, I have adopted without attribution language suggested by one side or the other in this dispute. In all such instances, the Finding or Conclusion in question has become my own, based upon my review of the evidence and the law. To the extent that any of my findings of fact may be considered conclusions of law or vice versa, they are to be considered as such. Citations to paragraphs within these Findings and Conclusions are in the following format: for Findings of Fact, FF at P , for Conclusions of Law, CL at P .
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[*4] II. FINDINGS OF FACT
A. General Background on Subprime Mortgage Securitizations
1. Central to this case are residual interests in subprime mortgage securitizations. (D.I. 422 at P 11.) 3 A subprime mortgage loan is a mortgage loan to a borrower with sub-standard credit. (Id. at P 10.) In a subprime mortgage securitization, a number of mortgage loans are pooled together and sold into a trust by an “originator.” (Id. at P 12; see also Tr. 59:7-13.) Interests in the trust are in turn sold to investors, known in this case as certificateholders. (D.I. 422 at P 12.) The cash from the certificateholders goes to the originator, and the originator can then use that cash to originate more loans. (Tr. 59:14-16.) The certificateholders receive monthly payments, constituting a paydown of their principal investment and interest on that investment. (D.I. 422 at P 13.)
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3 D.I. 422 is the First Amended Stipulation of Uncontroverted Facts.
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2. When a subprime mortgage securitization is formed, a [*5] number of complex, interrelated contracts are executed. (Id. at P 14.) Typically a Pooling and Servicing Agreement (“PSA”) is among them. (Id.) In general, the PSA sets forth the rights and obligations of the participants in the securitization. (See id. at PP 14, 15.)
3. Subprime mortgage securitizations generally have a trustee that is responsible for, among other things, reporting information about the trust activities to the certificateholders and distributing cash to the participants in the securitizations. (See id. at P 16.) Such securitizations also typically have a servicer who is responsible for receiving payments from mortgage borrowers, depositing those payments into a custodial account (known as a “P&I account”), handling collections and foreclosure matters, and providing information to the trustee. (Id. at P 17.) In addition, the servicer generally must preserve the trust’s interest in the collateral, which could include making tax payments, paying for maintenance, or paying attorneys’ fees related to foreclosure actions. (Id. at P 18.) These payments are generally known as “servicing advances” or “escrow advances.” 4 (Id.) A servicer may also [*6] be required to advance to the trust the amount of unpaid interest and principal due from a delinquent borrower. (Id. at P 19.) Advances of interest are known as “delinquent interest advances,” “delinquency advances,” or “interest advances.” (Id.) When the servicer makes servicing or interest advances as a result of delinquent loans, the PSA generally provides that the servicer is entitled to be reimbursed for those advances. (Id. at P 20.)
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4 Advanta also sometimes refers to property preservation expenses as “corporate advances.” (D.I. 422 at P 18.)
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4. As cash comes in from payments collected from the mortgage borrowers, it is used to reimburse servicing advances, to repay interest and principal owed, and to provide a monthly payment to the certificateholders; any remaining money goes into what is called the “residual account” or “residual interest.” (Tr. 59:23-60:6.) The result of this structure, is that the residual interest holder either suffers the effect of any losses or benefits from the gains. [*7] (See Tr. 60:7-10.)
B. The History of the Parties’ Subprime Mortgage Businesses
1. Chase
5. Since before the mid-1990s, Chase had been engaged in the origination and servicing of prime mortgages. (D.I. 422 at P 21.) Beginning in the mid-1990s, Chase began originating, purchasing, and selling subprime mortgage loans. (Id. at P 22.) From 1996 until the transaction at issue in this case, Chase contracted with Advanta to have Advanta service Chase’s portfolio of subprime loans. (Id. at P 23.) In 1998, Chase sponsored its first securitization of subprime mortgage loans. (Id. at P 24.) In 1999 and 2000, Chase was looking to either build or acquire subprime servicing capabilities and was also looking for opportunities to expand its subprime mortgage origination capabilities. (Id. at P 25.)
2. Advanta
6. Advanta began originating subprime mortgage loans in the mid-1980s. (Id. at P 26.) It was one of the first companies to securitize subprime mortgage loans, executing its first such securitization in 1988. (Id. at P 27.) From 1988 through 1999, Advanta sponsored subprime closed-end mortgage securitizations approximately four times each year. [*8] (Id. at P 28.) Each subprime, closed-end securitization that Advanta sponsored is identified by a designation that first notes the year in which the securitization was originated, followed by a sequential number indicating which issue it was for that year. (Id.) For example, Advanta Mortgage Loan Trust 1997-3 was the third Advanta mortgage securitization executed in 1997. (Id.) Advanta was both the servicer and the residual interest holder in the securitizations it sponsored. (Id. at P 29.)
C. Advanta’s Mortgage Securitizations
7. Pursuant to the Agreement at issue in this case, Advanta sold, and Chase purchased, the residual interests in 30 Advanta-Sponsored Closed-End Mortgage Securitizations (collectively, the “Securitizations”). 5 (Id. at P 33.) Each Securitization 6 has a PSA that defines the rights and obligations of the parties to the Securitization. (D.I. 422 at P 36.) In its role as servicer for the Securitizations, Advanta, through its investor reporting department, sent monthly reports to the trustees for the Securitizations. The monthly reports for each Securitization included a Monthly Summary Report and Certification; a Loan-Level Liquidated [*9] Loss Report; a Monthly Accounting Report, an REO Log; 7 and a loan-level data tape or electronic file. (Id. at P 39.) Deutsche Bank is the trustee for all but one of the Securitizations. 8 (Id. at P 40.) A Deutsche Bank predecessor in interest that is named as trustee on several of the Securitizations is Bankers Trust Company. (Id.)
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5 The Securitizations include, Advanta Home Equity Loan Trusts 1992-3, 1993-1, 1993-2, and 1993-3: and Advanta Morgage Loan Trusts 1993-4, 1994-1, 1994-2. 1994-3, 1994-4, 1995-1, 1995-2, 1995-3, 1996-1, 1996-2, 1996-3, 1996-4, 1997-1, 1997-2, 1997-3, 1997-4, 1998-1, 1998-2, 1998-3, 1998-4 (including Sub-Trusts A, B, & C), 1999-1, 1999-2, 1999-3, 1999-4, 2000-1, and 2000-2. (D.I. 422 at P 33.)6 A “Securitization” is any one of the Advanta Mortgage Securitizations listed in note 5.7 Although not described be either party, the REO log appears to represent the real estate owned in each Securitization. (See PX-523 at DB 04227-30.)8 State Street Bank is the trustee for one part of the 1995-3 Securitization and Deutsche Bank is the trustee for the remainder of that Securitization. (D.I. 422 at P 40.)
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[*10] 8. The trustee for the Securitizations issued monthly reports known as Statements to Certificateholders (the “Statements”). (Id. at P 41.) The Statements contain a variety of information about the status and performance of the Securitizations. (Id. at P 42.) Although varying in format and presentation, each Statement included information about, inter alia, (a) the unpaid principal balance of the loans remaining in the Securitization, (b) the balance of the certificates or bonds that remain outstanding in the Securitization, (c) the interest rates owed to the certificateholders, (d) the amount of overcollateralization, 9 (e) information on loans that are delinquent or in foreclosure, (f) the losses suffered in the reported month, and (g) the amounts distributed by the trustee of the Securitization to, among others, the servicer, the certificateholders, and the residual interest holder. (Id.)
D. Examination of Advanta by the OCC
9. Part of the assets of Advanta’s mortgage business were owned by Advanta National Bank (“ANB”), an entity subject to regulation by the United States Office of the Comptroller of the Currency (the “OCC”). (D.I. 422 at P 97.) In 1999 [*11] and 2000, ANB, like other national banks, underwent periodic examinations by the OCC. (Id. at P 97, 98.)
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9 The amount of overcollateralization refers to the amount of money each trust has brought in over its expenses and required monthly payments. One significance of the amount of overcollateralization is that once certain triggers are reached, i.e., there is a sufficient amount of overcollateralization, distributions are typically made to the residual interest holder. (Tr. 601:5-602:13.)
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10. On May 31, 2000, in connection with its 2000 OCC examination, ANB entered into a consent order with the OCC (the “Consent Order”) which contained provisions relating to Advanta’s valuation of its residual interests. (Id. at P 99; PX-309, Consent Order.) On or about July 17, 2000, Chase received a copy of the Consent Order from the OCC. (Id. at P 100.)
11. On July 28, 2000, ANB executed an agreement with the OCC which also related to the valuation of Advanta’s residual interests (the “OCC Agreement”). (Id. [*12] at P 101.) Article IV of the OCC Agreement provided that ANB would “reduce the value of its residual assets” by approximately $ 201 million. (Id. at P 102.) The OCC Agreement further provided that ANB would use a 6% cumulative loss forecast in its future valuations of the residual interest for the Securitizations, rather than the 3-3.5% cumulative loss forecast it had been using. (Id.)
E. Initial Discussions Regarding a Potential Transaction
12. Earlier, on May 17, 2000, Advanta had announced that it was exploring the possible sale of some or all of the assets and liabilities of its mortgage and leasing businesses. (Id. at P 44.) The assets of Advanta’s mortgage business that were the subject of a possible sale included subprime loans (also known as “whole loans”), residual interests in Advanta’s subprime mortgage securitizations, and certain assets Advanta used to originate and service subprime mortgage loans. (Id. at P 45.) Advanta retained Salomon Smith Barney (“SSB”) to serve as its investment banker for the potential sale and invited interested parties to contact SSB. (Id. at PP 44, 46.)
13. Chase did so. (Id. at P 47.) After executing a “Confidentiality [*13] Agreement,” Chase was provided with a copy of a “Confidential Memorandum.” (See id. at P 48; PX-005, Confidential Memorandum; PX-004.) The Confidential Memorandum summarized the mortgage banking business of Advanta, identifying its servicing statistics, production statistics, securitization statistics, and loss statistics. (Tr. 72:17-21.) The Confidential Memorandum indicated that the losses in Advanta’s mortgage securitization emerged over time to a lifetime loss rate of about 3,5%. (PX-005 at 46, Confidential Memorandum; Tr. 73:23-25; PX-1004.) However, as revealed by Ms. Chris Davies, the Advanta employee who prepared the loss statistics, the 3.5% figure did not represent the total losses on the portfolio, but rather only the principal losses. (Tr. 1054:6-1057-3.) In other words, it excluded the delinquent interest advances to the trust. (Tr. 1054:22-24.) In the spreadsheets prepared by Ms. Davies, she had included a notation at the bottom of the page stating that the tosses were principal chargeoffs plus specific reserves. (Tr. 1056:16-22.) That footnote, however, was not included in the Confidential Memorandum provided to Chase (PX-005 at 46, Confidential Memorandum), nor [*14] is there any indication that this significant caveat was otherwise communicated to Chase.
14. On June 28, 2000, Chase executives and Advanta executives had an initial meeting to discuss a potential transaction. (D.I. 422 at P 50.) On or about July 20, 2000, Chase submitted a Preliminary Indication of Interest. (Id. at P 52.) On July 25, 2000, SSB, on behalf of Advanta, invited Chase to conduct due diligence for a potential transaction. (Id. at P 53.)
F. Due Diligence and Data Requests
15. Advanta created a data room in Fort Washington, Pennsylvania (the “Data Room”), in which it compiled more than 100,000 pages of documents relating to its mortgage business and operations. (Id. at P 54.) Chase representatives made two visits to the Data Room, on July 26-27 and August 7-9, 2000. (Id. at P 55.)
1. Residual Data
a. The Statements
16. On July 27, 2000. Mr. Matt Whalen of Chase sent an email to Mr. Jeff Denton of Advanta in which he requested specific documents and information “in order to evaluate the residuals.” (PX-020 at ADVE00426808.) Mr. Denton responded to Mr. Whalen’s request the next day, July 28, 2000, providing Statements to Certificateholders [*15] and electronic spreadsheets with information from the Statements; Chase referred to those spreadsheets as the “Remittance Rollups.” (D.I. 422 at P 63; PX-023; PX-038; Tr. 781:22-782:17.) Advanta provided Chase with Statements to Certificateholders on other occasions too, as requested by Chase. (See D.I. 422 at PP 82, 83, 86.)
17. The Statements were produced by the trustee based on the information supplied by Advanta in its monthly reports to the trustee. (D.I. 422 at P 39.) In 1997, Bankers Trust Company, as trustee, changed the format of the Statements it issued. (Tr. 624:12-625:2; PX-523.) Instead of the four-column loss chart earlier employed (see, e.g., PX-531.1000 at 4), the new format used the term “Realized Losses” 10 in a box captioned, “Mortgage Loan Principal Reduction Information.” (PX-531.002 at 3; Tr. 1521:24-1524:10.) However, the term Realized Losses was not used consistently. (See PX-531.002 at 2, 4 (compare $ 0.00 in Realized Loss column on page 2 with over $ 14 million in cumulative Realized Losses column on page 4).)
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10 The PSA for the Advanta 1997-4 Securitization defined “Realized Loss” to mean “as to any Liquidated Loan, the amount, by which the Loan Balanced thereof as of the date of liquidation is in excess of Net Liquidation Proceeds realized thereon.” (PX-431 at 36, PSA for 1997-4 Advanta Securitization.) The definition of “Realized Loss” is substantially the same across all of the relevant Advanta PSAs. (Tr. 1178:10-1179:6; Tr. 1186:21-1187:22.)
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[*16] b. The Liquidated Mortgage Losses Report
18. One of the monthly reports upon which the trustee relied in preparing the Statements was Advanta’s Liquidated Mortgage Losses Report (“LMLR”). (See D.I. 422 at P 39; PX-523 at DB04208 to DB04226.) The PSAs define Realized Loss to include unreimbursed Delinquency Advances. 11 See infra at FF P 49 (PX-431 at 32, 36, PSA for 1997-4 Advanta Securitization). Despite that, the losses listed by Advanta under the heading Realized Loss, as reported to the trustee in the LMLR, were understated because they did not include the unreimbursed Delinquency Advances. (Tr. 649:10-19; see Tr. 637:5-21.)
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11 “Delinquency Advances” are the interest portion of a delinquent monthly payment which Advanta was required to advance if a borrower on a mortgage loan in one of Advanta’s securitizations failed to make a monthly payment. (Tr. 316:11-317:18; PX-1020 at 10; PX-431 at 87, § 8.9(a); D.I. 422 at P 19.)
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19. The LMLR also reported total losses. (PX-523 at DB04208.) [*17] To the extent that principal losses reported in the LMLR were lower because of Advanta’s posting hierarchy, 12 interest losses were correspondingly higher, and the total losses remained the same. (Tr. 660:11-661:12.)
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12 A description of Advanta’s unusual hierarchy for posting customer payments is set forth at FF PP 43-45, infra. See also, infra note 13.
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c. The Chris Davies Loss Report
20. Additionally, on August 15, 2000 Advanta provided Chase with a loss report, referred to by the parties as the “Chris Davies loss report.” (D.I. 422 at P87; PX-055; Tr. 805:7-21.) The Advanta employee who transmitted it, Mr. Chris Curran, described the loss report as summarizing “losses life-to-date.” (PX-055.) Although the report contains a column labeled “Principal Charge Offs,” it is not clear from the report whether the numbers listed included interest advances. 13 (Tr. 1058:15-20.)
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13 If one knew of Advanta’s practice of applying the proceeds from the mortgage liquidations to principal prior to interest, some insight about the report would be gained, because one would then understand that principal charge-offs did not reflect adjustments after interest losses. (See Tr. 1058:15-20.)
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[*18] d. Valuation Data
21. Mr. Whalen also requested and received copies of a number of documents from the Data Room which were devoted to Advanta’s residual interest valuation materials. (D-751 at ADV552917; D-500 at CMM620840.) Those documents included 14 Advanta’s December 1999 valuation binder (D-78A), Advanta’s March 2000 valuation binder (D-8), and the Static Pool Cash Collection Analysis (“Static Pool Analysis”) (D-143). 15 (D-295 at CMM026089.) The valuation binders also contained information about the lifetime losses of the securitizations. Additionally, Chase requested and received Advanta’s Credit Risk Executive Summary which described Advanta’s method of forecasting future losses (D-561; Tr. 1464:5-17), and Advanta’s Prospectus Supplements for the Securitizations (PX-450.1001; Tr. 1436:10-1438:18).
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14 This is not to suggest that no other documents were provided to Chase during the course of its due diligence leading up to the transaction or thereafter. To the contrary, there were clearly numerous other documents provided both before and after the deal closed.15 The Static Pool Analysis was a source of information for and backtesting of Advanta’s residual interest valuation process required by the OCC in the Consent Order and the OCC Agreement. (D.I. 422 at P 103; PX-309 at CMM5032532; PX-311 at ADV077957-58.)
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[*19] e. Notes and Reports by Chase Employees
22. One of the Chase employees participating in the due diligence process was Mr. Michael Pocisk, who reviewed a copy of Advanta’s Monthly Summary Report and Certification and wrote “wow” next to the total loss figure for the 1997-3 Securitization, because he had never seen a loss of that magnitude in any securitization. (D-Pocisk-5 at CMM5087964; Tr. 1769:3-1770:24.) Independently, another Chase employee, Mr. Bill Steinmetz, prepared a due diligence report in which he warned Chase that “assumptions not be based on historical performance of Advanta originated product” (D-0347 at CMM042438), because he was worried that Chase might “not anticipate how poorly [the 1999 and 2000 Securitizations] might perform in the future” (D-2163(20) at 202:25-203:25, 206:20-207:7).
f. Mr. Rosoff’s Conversation with Mr. Hayden
23. On or about July 25, 2000, Mr. William Rosoff, the President of Advanta, had a conversation with Mr. Luke Hayden, an Executive Vice President for Chase, in which Mr. Rosoff informed Mr. Hayden that the OCC was going to mandate a writedown of Advanta’s residual assets by approximately $ 200 million. (Tr. 79:4-80:3.) Mr. [*20] Rosoff also said that the OCC was going to mandate an increase in the expected lifetime losses for the closed-end home equity loans from 3-3.5% to 6%. (Id.) He told Mr. Hayden that he didn’t think the OCC mandated loss assumption of 6% made any sense and that “there was almost no way to get from here to there… .” (Tr. 291:12-21; Tr. 1703:16-1704:11.)
2. Zero Balance Loan Data
24. Zero balance loans are loans which have been liquidated or “charged-off” and whose principal is reduced to zero. (D.I. 422 at P 116.) Another Chase representative, Mr. John Barren, requested information about advances on zero balance loans and was provided with a one-page schedule similar to PX-396, showing that Advanta had a credit in its favor with respect to advances on zero balance loans. (PX-396; Tr. 441:4-445:17.)
G. Chase’s Valuation of the Residuals
25. In determining what to bid for Advanta’s residual interests, Chase of course undertook to place a value on those assets. (Tr. 94:10-95:9.) Chase’s point-man in the valuation process was Mr. Christian Schiavone. (See Tr. 776:19-21.) The most important step for Chase in valuing the residual interests was to develop a loss assumption, [*21] i.e., an opinion about the likely losses to be sustained over the course of the securitized loans. 16 (Tr. 1124:2-1125:19.) Historical losses were an important factor in Chase’s analysis because they are considered one of the best predictors of future performance and because historical loss experience is an indicator of the performance of the mortgage originator and servicer, as it shows the quality of the loans they are producing and the effectiveness of their collection abilities. (Tr. 69-20:71:11; see Tr. 820:5-823:22.)
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16 Witnesses for both parties agreed that developing a loss assumption is the most important factor in a valuation of residual interests. (Tr. 69:20-71:10; Tr. 220:1-8; Tr. 1929:25-1930:4.)
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26. In formulating its loss assumption, Chase relied on the historical Realized Losses in the Statements to Certificateholders and Remittance Rollups provided by Advanta. (Tr. 777:3-777:7; Tr. 91:25-92:17.) Once Chase determined that the Remittance Rollups were periodic presentations of the Realized [*22] Losses in the Statements to Certificateholders, Chase mainly used the Remittance Rollups in the course of its analysis because they allowed Chase to see not only the level of losses, but also the timing of the emergence of losses. (Tr. 790:12-793:1, 796:12-797:7.)
27. In developing a generalized opinion about the loss performance of Advanta’s mortgage securitizations, Chase focused on the 1997 securitizations. (Tr. 788:25-790:11.) Chase chose the 1997 securitizations because it believed the underlying loans for those securitizations were not so old so as to be nearly paid off (and therefore associated with less residual value) and not so recent as to lack enough historical losses to present significant data. (See id.; Tr. 1047:15-1048:21.) Thus, Chase decided that the 1997 mortgage securitizations, which were three to four years old, were in the “sweet spot” of the most relevant information. (Tr. 790:9-11.) Chase also compared the historical loss information from one of the 1996 securitizations against the loss assumptions it was deriving for the 1999-2 securitization. (PX-037; Tr. 948:24-953:22.)
28. Based on the historical information reviewed by Chase, including the Confidential [*23] Memorandum provided by Advanta, the Statements to Certificateholders, the Remittance Rollups, and the Chris Davies Loss Report, Chase determined that the Advanta securitizations generally experienced a lifetime loss performance of 3-4%. (Tr. 809:4-15.) Chase also asked an analyst from Bear Steams to perform a similar analysis, which confirmed Chase’s opinions regarding the lifetime loss performance of the Advanta securitizations. (Tr. 862:1-864:23.)
29. Chase then applied the general performance data to the individual securitizations. (Tr. 809:4-810:19.) This process involved the use of credit models to produce a lifetime loss expectation for each securitization analyzed, based on the historical performance of that securitization coupled with the loan-level characteristics of the loans remaining in the securitization. (See PX-087; Tr. 809:17-814:16.) In this analysis, Chase used the historical Realized Loss information from the Statements and Remittance Rollups 17 (Tr. 814:11-815:4) and the loss severity information from the Chris Davies Loss Report (Tr. 806:23-808:23, 819:5-11,824:9-825:15).
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17 Compare PX-038 at 4 (showing historical Realized Losses of $ 6,104,450.34 for Group 1) with PX-087 (showing historical losses of $ 6,104,450.34 for Group 1 in one of the credit models).
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[*24] 30. Finally, Chase backtested the results of the credit models against the actual, historical Realized Losses, to test the reasonableness of its results. (Tr. 816:25-818:3.)
31. Once Chase had derived its loss assumptions, it used those together with the prepayment assumptions to derive the projected cash flow that Chase anticipated would be received by the Advanta residual interests. (Tr. 826:16-827:20.) Chase then discounted the cash flow using a 25% discount rate to determine the present value of those interests. (Tr. 829:24-830:17.) Chase thus arrived at an initial bid of $ 319 million for Advanta’s residual interests. 18 (Id.; Tr. 100:8-10; PX-196; D.I. 422 at P 109.)
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18 Later negotiations resulted in a purchase price $ 25 million higher than Chase’s initial bid. (See Tr. 110:14-16; PX-198; PX-213; D.I. 422 at P 110.)
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H. The Agreement
32. The Agreement between Chase and Advanta was executed as of January 8, 2001, and the deal closed on February 28, 2001 (the “Closing”). (D.I. 422 at PP [*25] 111, 113.) There are numerous schedules, exhibits, and addenda to the Agreement. (Id. at P 112.)
1. Section 4.40 19
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19 The Sections of the Agreement are not discussed in the order of their appearance in the Agreement but are discussed in an order roughly corresponding to subject matter.
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33. Section 4.40 of the Agreement warrants that “all … advances on zero balance Loans are disclosed in Section 4.40 of the Company Disclosure Schedule.” (PX-001 at 47, the Agreement (emphasis added).) Advanta disclosed delinquent interest advances on zero balance loans under the heading “Charge-Off interest to be recovered” 20 in Section 4.40 of the Company Disclosure Schedule. (See, e.g., PX-373 at CMM5257321, Section 4.40 Company Disclosure Schedule.) Advanta did not include advances on zero balance loans in its disclosure on the first page of Section 4.40 of the Company Disclosure Schedule under the headings “Zero UPB” (unpaid principal balance). “Escrow $,” or “Corporate Advance $.” (Id. at CMM5257106; [*26] Tr. 357:24-361:16.)
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20 Michael Pocisk, one of the Chase employees who visited Advanta while conducting due diligence, took notes indicating that the term “Charge-off to be recovered” was discussed at some point during his visit. (D-Pocisk at CMM5087959, Pocisk notes.) His notes, however, do not reveal whether the term was discussed with regard to advances on zero balance loans. (See id.)
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2. Section 6.24
34. Section 6.24 of the Agreement required, inter alia, that Advanta “take such actions as are necessary so as to ensure that, as of the Closing Date, there are … no non-recoverable advances on zero balance loans… .” (PX-001 at CMM5254315, the Agreement at 71.)
35. Section 6.24 was heavily negotiated. (Tr. 447:12-449:11; Tr. 489:23-491:15; Tr. 1421:16-25.) Mr. John Barren, the Controller for Chase Home Finance, 21 sought a representation from Advanta that there would be “no …escrow Advances on zero balance Loans.” (D-0329 at ADVE01379758 (emphasis added); Tr. 447:24-448:6; Tr. 494: [*27] 17-495:15.) Advanta proposed the language “no … unrecoverable escrow Advances on zero balance Loans.” (D-332; see Tr. 447:12-448:6.) Ultimately, the parties agreed to the language “no non-recoverable advances on zero balance loans… .” (PX-001 at CMM5254315, the Agreement at 71.) Thus. in the final version, the term “escrow” was removed and the term “non-recoverable” was added. (See id.)
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21 Chase Home Finance is the name of Chase’s residential lending division, (Tr. 422:24-25.)
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36. In reaching the agreed upon language, Mr. Barren of Chase and Mr. James Shreero, Advanta’s Chief Accounting Officer, discussed the meaning of the term “non-recoverable” in the context of the Agreement. (Tr. 448:7-449:11; Tr. 489:23-491:3.) Mr. Barren expressed his understanding that the term “non-recoverable” meant not recoverable from a borrower or a third-party guarantor of that mortgage loan. (Id.) Mr. Shreero did not recall the specifics of the conversation, but thought it possible Mr. Barren “said something like [*28] that… .” (Tr. 1421:16-25.) Additionally, Mr. Barren and Shreero agreed that one purpose of Section 6.24 was to prevent financial harm to Chase. (Tr. 449:12-25, 491:7-15; Tr. 1419:1-1420:20.)
3. Section 4.11(b)
37. Advanta warranted in Section 4.11(b) of the Agreement that it “has compiled in all material respects with all of the material provisions of the Material Company Contracts” which included the PSAs. (PX-001 at CMM5254281, the Agreement at 37.)
4. Section 4.27
38. Section 4.27 of the Agreement required that Advanta be in compliance with “all federal, state, local or foreign laws or regulations… .” (PX-001 at CMM5254289, the Agreement at 45.)
5. Section 4.08
39. Section 4.08 of the Agreement required that Advanta was “in possession of and [had] good title to or avalid leasehold interest in … all of the Assets, … except for Permitted Liens.” (PX-001 at CMM5254277, the Agreement at 33.)
6. Section 4.22
40. Section 4.22 required that the Advanta balance sheet “was … prepared in accordance with the books and records of the Company[,] .. fairly presents the financial condition of the Business… [,] and … was compiled from the business [*29] books and records regularly maintained by the management and used to prepare the financial statements of the Company.” (PX-001 at CMM5254289, the Agreement at 45.)
7. Section 4.28
41. In Section 4.28 of the Agreement, Advanta warranted that the information contained on a magnetic computer tape containing data on the mortgage loans, set forth in Section 4.28 of the Company Disclosure Schedule (the “June 30, 2000 Tape”) “(i) was true and correct in all material respects and (ii) was a true and correct copy of the information relating thereto contained in the loan servicing systems of the Company… .” (PX-001 at CMM5254290, the Agreement at 46.)
8. Section 6.26
42. In Section 6.26 of the Agreement, Advanta warranted that the information contained in the fields of the “Closing Tape,” another magnetic computer data tape, would “be true and correct in all material respects… .” (PX-001 at CMM5254316, the Agreement at 72.)
I. Advanta’s Posting Hierarchy
43. Advanta developed a process for valuing its residual interests that included an unconventional method of accounting for losses and was a departure from common industry practice. (Tr. 326:11-331:6.)
44. Under [*30] Advanta’s PSAs, if a borrower on a mortgage loan in one of Advanta’s securitizations failed to make a monthly payment, Advanta was required to advance, in other words to pay into the trust, the interest portion of the delinquent monthly payment; this was known as a “Delinquency Advance.” (Tr. 316:11-317:18; PX-1020 at 10; PX-431 at 87, § 8.9(a); D.I. 422 at P 19.) An exception permitted Advanta to avoid making the advance if it believed that the advance would not ultimately be recovered from the related mortgage loan. (PX-431 at 87, § 8.9(a); Tr. 318:18-319:10.) In the event that a borrower made the missed payment, Advanta could use that payment to reimburse itself for any outstanding Delinquency Advances. (Tr. 318:4-9: PX-431 at 87, § 8.9(a).) If, however, the borrower continued to miss payments, Advanta could foreclose on the property or otherwise take steps to liquidate the loan. (Tr. 318:10-17, PX-1020 at 11.) The resulting liquidation proceeds could then become the source of reimbursement for the Delinquency Advances. (Tr. 319:11-21; PX-1020 at 12.) Significantly, Delinquency Advances or other advances not reimbursed from the related liquidation proceeds or some third-party [*31] insurance related to that loan would become, and are referred to in the PSAs as, “non-recoverable advances.” 22 (Tr. 320:2-9; PX-1020 at 13; Tr. 332:13-22; Tr. 448:12-22.) The PSAs further state that after the servicer forecloses or liquidates a delinquent loan, the servicer must report any Realized Loss to the trustee. 23 (PX-431 at 79-80, §§ 7.8(b) and (b)(vi) (listing Realized Losses as one of the items which “must be prepared and furnished by the Master Servicer.”).)
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22 See infra at CL P 10, discussing the meaning of “non-recoverable advances.”23 Advanta included information labeled Realized Loss in its monthly reports for each Securitization. See supra at FF PP 18-19.
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45. The common industry practice in the mortgage loan industry was to use a posting hierarchy called “EIPA,” in which liquidation proceeds were posted in the following order: first to “E,” expenses and escrow, then “I,” interest (e.g. Delinquency Advances), then “P,” principal, and finally “A,” ancillary fees. (Tr. 336:3-9; [*32] Tr. 341:11-19.) Thus, liquidation proceeds were posted to interest before principal. (Id.) Advanta, however, used a unique “EPIA” posting hierarchy, in which liquidation proceeds were posted to principal before delinquent interest advances. (Tr. 326:11-331:6.) This had the effect of shifting into the interest-loss category losses that would otherwise have appeared as principal losses. (Tr. 660:11-661:12; see supra at FF P 19.)
J. Advanta Did Not Disclose the Effects of its Posting Hierarchy to Chase
46. Ms. JoAnn Dolan, the Senior Vice President of Loan Administration for Advanta at the time of the transaction at issue, became concerned that Chase might not be aware of the effects that Advanta’s posting hierarchy had on the reported loss figures. (PX-268; Tr. 738:22-739:2.) Her concerns were shared by Advanta employees Scott Heidemann, the head of Investor Accounting, and Richard Yonemura, the head of Investor Reporting. (Tr. 701:17-703:20; PX-263; PX-254.) Ms. Dolan sent at least three emails to Mr. Shreero expressing her concerns and asking for his advice on the issue. (PX-268; PX-273; PX-276.) Mr. Shreero did not inform Chase of the concerns raised by Ms. Dolan, Mr. [*33] Heidemann, or Mr. Yonemura. (Tr. 754:21-25.)
K. Chase Relied on Realized Loss Figures Which Did Not Include Delinquency Advances
47. In March 2000, when the parties’ subprime mortgage businesses were combined, Advanta’s mortgage employees became Chase employees. (See, e.g., Tr. 1051:21-1052:3.) Mr. Schiavone began to work with Chris Davies, the Advanta employee who prepared her eponymous report indicating the losses for the Securitizations. (Tr. 836:19-838:7; Tr. 1062:3-10.)
48. Ms. Davis reviewed Mr. Schiavone’s loss assumptions and realized that they matched up almost exactly with her principal-only loss assumptions (i.e., the loss assumptions that were derived from the historical Realized Loss data that did not include losses on account of unreimbursed Delinquency Advances. (Tr. 1062:22-1063:5.) When Ms. Davies advised him to include an additional interest-loss component, Mr. Schiavone was initially confused because he believed that his purchase loss assumptions already included interest losses. (Tr. 838:8-839:8; Tr. 864:25-865:24.) After a review of the Realized Loss data reported in the Statements, and the definitions of Realized Loss and “Net Liquidation Proceeds” [*34] in the PSAs, it became clear that the Realized Loss numbers on the Statements matched Ms. Davies’ numbers, which excluded losses on account of unreimbursed Delinquency Advances. (Tr. 864:25-865:24; Tr. 834:10-835:23; Tr. 1069:13-1070:2; PX-573.)
49. The PSA for the Advanta 1997-4 Securitization defined Realized Loss to mean “as to any Liquidated Loan, the amount, by which the Loan Balanced thereof as of the date of liquidation is inexcess of Net Liquidation Proceeds realized thereon.” (PX-431 at 36, PSA for 1997-4 Advanta Securitization.) “Net Liquidation Proceeds” is also defined, “as to any Liquidated Loan, Liquidation Proceeds net of, without duplication, Liquidation Expenses and unreimbursed Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid Servicing Fees through the date of liquidation relating to such Liquidated Loan.” 24 (Id. at 32.) Thus, as admitted by Advanta’s Rule 30(b)(6) witnesses, Realized Loss, as defined in the PSAs, should include unreimbursed Delinquency Advances, including interest losses. (Tr. 1344:8-1345:16.) It is undisputed that the Realized Loss figures reported in Advanta’s Statements were not calculated in a manner consistent [*35] with the definition of “Realized Loss” in the PSAs because those figures left out interest losses. (Tr. 1346:13-1347:4.)
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24 The definitions of Realized Loss and “Net Liquidation Proceeds” are substantially the same across all of the relevant Advanta PSAs. (Tr. 1178:10-1179:6; Tr. 1186:21-1187:22.)
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L. Whole Loan Sale
50. Chase also purchased whole loans from Advanta. (D.I. 422 at PP 114-15.) Whole loans are mortgage loans that are retained on a company’s balance sheet rather than being sold into securitizations. (Id. at P 114.) The purchase of the whole loans was accomplished by two separate agreements, a Mortgage Loan Purchase and Sale Agreement and related schedules thereto, dated as of February 23, 2001, and a Mortgage Loan Purchase and Sale Agreement and related schedules thereto, dated as of February 28, 2001. (Id. at P 115.)
51. Chase undertook a separate process to value the whole loan portfolio, using something called the “S&P Levels” program, which employs an industry-based model. ( [*36] See Tr. 1354:4-1356:10.) That program produced lifetime cumulative loss assumptions which Chase then compared to the historical performance of the Advanta securitizations to validate the program’s results. (Id.) Based on the results of the comparison between the historical performance and the cumulative loss assumptions derived from the S&P Levels program, Chase was able to adjust its assumptions. 25 (Tr. 1356:19-24.)
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25 Chase relied on the historical loss information when determining the reasonableness of the program results. (See Tr. 1354:8-1356:24.)
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M. Document Holdback Account
52. Section 1.05(m) of the Agreement memorialized the parties’ decision to set aside a particular amount of money in a “Document Holdback” account, in “an amount equal to $ 55 for each document that is reported in the Document Report as a Missing Document or a defective Document under the terms of Section 1.05(m)(i).” 26 (PX-001 at 20; PX-001, Section 1.05(m); Tr. 1854:2-6.) Based on a total of 23,091 starting exceptions, [*37] the parties agreed to place $ 1,270,000 in the Document Holdback Account. (D.I. 422 at P 128; D-2028 at CMM5136316, Document Exception Holdback Status 03/02.)
53. Pursuant to a post-closing letter agreement executed as of the date of Closing (D.I. 422 at P 127), Chase was required within two weeks of the Closing to “release any funds in the Document Holdback Account in excess of the amount that would have been the amount of the Document Holdback at Closing, computed in accordance with the provisions of the Agreement.” (D-2016 at CMM5254351, Post-Closing Letter at 2.) The parties dispute the number of document exceptions outstanding as of the Closing.
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26
Section 1.05(m)(i) provides, in relevant part, that The Document Holdback shall be retained from the Purchase Price by Buyer. … The Company shall cause the Custodian to provide a document level inventory report for all mortgage loans in the company’s owned and securitized mortgage loan servicing portfolio … that (A) are not contained in the Custodial Files (the “Missing Documents”) or (B) do not meet the requirements of the applicable Servicing Agreements, excluding for this purpose those immaterial document exceptions mutually determined by the parties to be immaterial (the “Defective Documents”).
The defects or deficiencies in the loan documents for loans that Advanta was transferring to Chase were referred to as “document exceptions.”
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[*38] 54. The parties used Deutsche Bank as the custodian for the Document Holdback Account. (Tr. 1864:8-10.) As custodian, Deutsche Bank issued a report regarding that account. 27 (See Tr. 1864:11-18.) The summary page indicates that there were 23,091 total starting exceptions, which includes the “original population” on October 2000 (20,987) and those added on March 23, 2001 (2,104). (D-2028 at CMM5136316.) It also indicates that, as of March 2002, 21,451 exceptions were cleared on the project and 1,640 remain. (Id.) It does not indicate, however, how many exceptions were outstanding as of the Closing on February 28, 2001. (See id.) Advanta presented the only evidence of the number of document exceptions as of the Closing in the Advanta Mortgage Securitization Portfolio (the “Portfolio”). 28 (D-2017.) According to the Portfolio, there were 6,306 document exceptions as of the Closing. (Tr. 1859:9-17; D-2017.)
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27 Exhibit D-2028 shows the summary page of a similar report as issued by Deutsche Bank.28 The Portfolio is the only evidence on this point because the report summary that Chase points to does not indicate whether any of the document exceptions had been cleared between October 2000, the date of the “original population,” and March 23, 2001, the date the exceptions from the 2000-2 securitization were added. (See D-2028.)
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[*39] III. CONCLUSIONS OF LAW
1. Jurisdiction over this case is proper under Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, 28 U.S.C. §§ 1331, 1332, and 1367. Venue is proper under 28 U.S.C. § 1391(b).
A. Choice of Law
2. I noted in my March 4, 2004 Opinion that “any claims that sound in contract in this case are governed by Delaware law by the express terms of the Agreement … .” Chase Manhattan Mortg. Corp. v. Advanta Corp., 2004 U.S. Dist. LEXIS 3933, No. Civ. A. 01-507(KAJ), 2004 WL 422681, at *5 n.12 (D. Del. Mar. 4, 2004). As to the fraud claims, I noted HN1Go to this Headnote in the case.in that context that there was “no meaningful distinction between Delaware law on fraud and Pennsylvania law on fraud.” (Id.) There is a meaningful distinction at this point, however, bearing on the burden of proof. Compare Blumenstock v. Gibson, 2002 PA Super 339, 811 A.2d 1029, 1034 (Pa. Super. Ct. 2002) (noting that a plaintiff is required to prove fraud by clear and convincing evidence); with Tracinda Corp. v. DaimlerChrysler AG, 364 F. Supp. 2d 362, 389 (D. Del. 2005) (noting Delaware law that “the plaintiff [*40] must prove the elements of common law fraud by a preponderance of the evidence”) (citing Lord v. Peninsula United Methodist Homes, 2001 Del. Super. LEXIS 127, No. Civ.A. 97C-10-012. 2001 WL 392237, at *5 (Del. Super. Ct. Apr. 12, 2001 )). Thus, a choice of law analysis is required to determine whether Chase must prove each element of fraud by a preponderance of the evidence or by clear and convincing evidence.
3. HN2Go to this Headnote in the case.A federal district court sitting in diversity must apply the choice of law rules of the state in which it sits to determine which state’s law governs the case before it. Hionis Int’l Enters., Inc. v. Tandy Corp., 867 F. Supp. 268, 271 (D. Del. 1994) (citing Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 4, 46 L. Ed. 2d 3, 96 S. Ct. 167 (1975); Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941 )). Under Delaware law, the law of the state with the most significant relationship to the transaction applies. Travelers Indem. Co. v. Lake, 594 A.2d 38, 40 (Del. 1991) (adopting most significant relationship test from Restatement (Second) of Conflicts, § 145). For cases involving fraud or misrepresentation [*41] claims, Section 148 of the Restatement (Second) of Conflicts lists contacts that are relevant to a choice of law determination. Brown v. SAP Am., Inc., 1999 U.S. Dist. LEXIS 15525, No. C.A. 98-507-SLR, 1999 WL 803888, at *6 (D. Del. Sept. 13, 1999). Those contacts include:
(1 ) the place, or places, where the [injured party] acted in reliance upon defendant[s’] representations,
(2) the place where the [injured party] received the representations,
(3) the place where the defendant[s] made the representations,
(4) the domicil … place of incorporation and place of business of the parties,
(
I have been trying to piece some of the issues together as of late as well. I think Neil is spot on and wanted to throw a few other thoughts out to get some feedback as well.
The first comment that draws my attention is:
8 -AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN
I believe the Vapor Money Theory is starting to work its way to the surface with evidence to back it up. For this I wanted to introduce a thought that helps the argument.
If you give a left and right adjustment for the deposit of the note and the exchange of funds received then when the originator sells the note to the trust money is received but not credited to the borrower transaction account and the note is not transferred to the investor. This is where I believe the creation of a REMIC is paramount. It is also where I believe that the three “absolute sales” are also extremely important.
The REMIC exempts the bank from “gain on sale” taxes- How much was the gain? 100%+…..Why?
If they sold a note for 105% of face value but yet the borrower created the money as understood by the fed publications and the matching principle under GAAP as required by 12 USC 1831(n)(2) the sale of the note without transfer would be 105% gain.
The three absolute transfers with a blank note endorsement is the attempt to cleanse the note under UCC for bearer instruments as the enforceability of a note if taken by an unwitting buyer is allegedly upheld. Simply a flaw in logic from their perspective as it fails to be a “true sale” under UCC as defined.
If they did not create money and immediately required that they must transfer the note multiple times, it was done to launder the money(note) and also create a tax exemption(evasion) for the bank.
Most banks borrowed credit from one another as they always helped their buddies to leverage the potential for gain. They clearly loaned the money to each other to carry out this racket similar to the recent REPO 105 blunders in which the banks swapped dog s*^t with each other to turn it into gold nuggets.
No money was ever loaned yet they were allowed to launder the theft and leverage the system while using the untaxed gain to buy insurance knowing it would eventually lead to a failure of those institutions that would need bailouts.
They always made firewalls to block liability. The originator was usually dumped into BK to stop fraud liability from traveling up to the next level. Once that was achieved they failed the main securitizing banks with the aid of the FDIC and cleansed the money another time also putting that level of banks into BK as well.
The expansion of the fiat system continues until the reserves run out or the accounting is perverted to a point that all “sales” such as in REPO 105s etc stop being clean transactions.
The FDIC and the banksters know that the leverage was beyond anything on this planet and the only way to perpetuate the rampant and unimaginable leverage is to constrict back on the american homeowner and to hide the true coverup which is the derivative market. They must fail all the small banks and shut them down. They must deliver the smaller banks to the big banks for pennies and they must allow the homeowners to be crushed and the losses to show for pennies. This is the only way to contract the system back to a level that can maintain.
God forbid they do what all other prior civilizations have done at this same point which a jubilee(defined as total debt forgiveness) and allow the continuance of a normal civilization without complete destruction.
The rest of my thoughts are that the recording of 15d filings with the SEC coupled with the failure of the IRS to publish a 938 report in 2008 is a tell tale sign that the trusts have been wiped out. How you may ask?
I think the TALF program allows the banksters to pledge the top tier tranches of the trusts to the Treasury for a loan which they use to buy up the destroyed certificates from all of the holders for pennies on the dollar. This would lead to the need to file 15D reports showing the the number of investors has dropped below the reporting need as they are owned by the banks.
The securitization stopped and so the reporting was unnecessary as they moved forward with the plan. They then resumed with only the largest of entities being allowed to play the game.
The trusts are maintained for laundering purposes so that they can put the proceeds of the REO disposition back into something that doesn’t link the banks to the theft. This I can clearly see as they have sold my deal from themselves to themselves in the trust in an attempt to launder title before putting it back in the trust proving it was never there to begin with. The transfer was for ten dollars creating basis then the gain inside the trust will again be exempt from taxes and reinvested inside the trust.
This is why the trusts remain open and active in the DE records as they are going to control them to launder the theft of the homes and once again evade taxes on the gain after the theft.
Move over Gambinos, here comes the REAL MOB. Federal Racketeering charges anyone?
The simple defense to this is Article III standing as the contract or note may in essence be enforceable if each is looked upon narrowly with archaic statutes but the total of the transaction which is at all times concealed fervently would simply show that they have no economic damage AT ALL and have NEVER been able to invoke the jurisdiction of any court.
NO STANDING, NO JURISDICTION, ALL IS VOID.
Clear title anyone?
There is much here to contest. Just a few points on certain issues Neil brings up.
3. Neil claims that either no loan schedules or only “samples” existed in the Prospectus. I have examined thousands of loans, looking at Trusts. I find large numbers have the full schedule of loans included, especially after Jan 1 2006. Prior to that, much fewer had schedules, but many still did.
5. Notes are not assigned to pools. I have seen plenty of Notes, endorsed in blank, at the start. If one accepts Commercial Code, then simply taking the Note and handing it to another person is a legitimate transfer. If one looks at the PSA, some say a full Chain of Endorsements is required. Others do not.
The Notes and loan documents are kept by custodians named by the Trust. This should be evidence of transfer of the loan, if the custodian has the documents.
Now there are some arguments to be made in favor of what Neil says, but such blanket statements are wrong.
8. Pure b.s. argument. Like with Mortgage Insurance payments, if the Note is paid, the debt transfers to the party paying it.
10. The investor who put up the money was the “real lender”, not the lender who made the loan. Well, take this argument to its logical conclusion and you have any bank that ever made a loan has the same issues. The money for loans comes from its depositors, the people who put money into savings and checking accounts. Same difference. See how absurd?
13. Any payment goes to outstanding payments due, so no loan is in default. Well, here is the absurdity of this argument. Servicers must “advance” funds to the Trust every month for each payment that a homeowner has missed. They only stop when it is determined that the money is “unrecoverable”. Therefore, according to Neil’s arguments, none of these loans are in default, because the “advances” keep them current.
Most of his other points can be effectively challenged as well, with more complex arguments, but that would take significant time.
The other point that I will make is that try to take his arguments into court and see what happens. It sound great in theory, but in reality, it is completely different.
Of course, Neil has as his last point a “nice” caveat, blame the courts if the arguments he makes does not work.
Tuesday 20 July 2010
Can anyone explain a few things here?
“Item 6. AT ALL TIMES LEGAL TITLE TO THE PROPERTY WAS MAINTAINED BY THE HOMEOWNER EVEN AFTER FORECLOSURE AND SALE. The actual creditor who submitted a credit bid was not the creditor. The sale is either void or voidable.”
How is that so?
“Item 8. AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.”
I fail to comprehend this. How can the loan have been created and extinguished at the same time? How can one prove that the originating Lender was paid in full?
“Item 15. NO CREDIT BID AT AUCTION WAS MADE BY A CREDITOR. Hence the sale is void or voidable.”
Again, how does one prove this? Careful on the use of “void” and “voidable.” The circumstances of each differ. It is one or the other.
Any clarity will be appreciated.
One other thing: The FHFA refused my FOIA request for info about my loan with Fannie. They refused my appeal. They said they don’t have Fannie’s records in their files. I wonder if they’re covering up for Fannie because, as Neil said, the notes/loans may not have been properly securitized or securitized at all.
Angry: Reading any of these legal documents is stupor-inducing, leaving you not sure if they mean a or b or both or neither…”Yes you cannot” is a great summary of that effect…
I think this is one of Neil’s most important posts ever. The rabbit hole is going deeper and deeper…
His main question, “What if the loans were not actually securitized?” is very intriguing, I think particularly so in light of Fannie Mae’s new stated policy of having servicers prepare assignments from MERS to the servicers. On its face, such a dictum seems to make no sense–why would Fannie, if it in fact owns the notes/loans in question, tell servicers to do the legally impossible, i.e., assign loans from MERS to servicers rather than from Fannie to servicers?
In my case, my servicer is BAC Home Loans Servicing f/k/a Countrywide Home Loans. Countrywide was my “originating lender,” and BAC is Countrywide’s successor. So when Fannie tells BAC to prepare an assignment from MERS to BAC rather than from Fannie to BAC, the reason they’re doing that is because Fannie knows that BAC is now and always has been the owner of my note because the note/loan in my case was never properly securitized. I know that in a lot of cases, the originating lender and the servicer are different parties, but it seems to me that a situation like mine might be the catalyst for the Fannie assignment policy.
I agree with Neil that the obligation to a “lender” was both created and extinguished at closing, but for different reasons. Yes, it’s the “vapor money” theory–which I know many posters here ridicule and think is a useless defense, but apparently Rhode Island attorney George Babcock doesn’t, as he posted here recently that he would be using exactly that defense in some new pleadings. If he or someone connected to him could summarize those pleadings or give us links to the actual pleadings, that’d be great.
The “vapor money” idea is not a theory at all. It’s openly admitted by the Fed in various publications (“Money Matters,” for example). It’s openly discussed in government documents (Wright Patman’s “Primer on Money” comes to mind). The ability of banks to create money, not really out of nothing, but instead from a “borrower’s” promise to pay is THE central issue of not only the foreclosure crisis but the whole economic crisis we’re having.
It doesn’t matter if courts have refused to consider the argument of vapor money, because the fact that our money is vapor is still true. I’m not saying that we should all go out and include a vapor money component to our foreclosure defense pleadings, but we should not scoff at it and consider the matter closed. It isn’t at all. Most people have some sense that the vapor money idea is true, they just can’t bring themselves to believe it, even when, like I said, it’s openly admitted and has been for decades. As der Fuhrer pointed out, though, the bigger the lie–in this case, that banks lend deposits and take risks in making loans–, the more people believe it.
One more thing–I think we’d all do well to immediately copy and archive any of Neil’s info that we think is useful because we may wake up one morning and not be able to read or access it. The government recently shut down the site blogetery.com, which used the Word Press platform, because it supposedly contained bomb-making instructions and an al Qaeda hit list. The shut down cut off 73,000 blogs. Neil has to be making the banks very nervous and angry, and it would not be difficult for someone to come along and post on an old thread somewhere some bomb-making instructions and/or a supposed al Qaeda hit list on Neil’s site, which could cause Neil’s site to be shut down. It probably won’t happen, but things are sure getting strange…
Neil, you are the Dwight D. Eisenhower of our foreclosure defense army–I salute you, sir!
DISCOVERY MOTION TO COMPEL READY TO FIRE.
http://www.scribd.com/doc/34546517/PLAINTIFF-OPPOSITION-FRAUDULENT-LENDING-TO-UNIVERSAL-AMERICAN-MORTGAGE-COMPANY-DEMURRERS-AND-MOTIONS-TO-STRIKE-PORTIONS-OF-PLAINTIFF-S-SECOND-AM
http://www.scribd.com/doc/34565087/DEUTSCHE-BANKS-LOAN-LEVEL-FILES-AND-FRAUDULENT-TRANSFER-PLEASE-GIVE-ME-THE-DISCOVERY-REQUESTS-THAT-ARE-REQUIRED-BY-LAWLtr-Patel-Re-Mot-Cpl-07-19-10
I am only raising 2 points that appear weaker to me than the others.
I totally agree with the rest of Neil’s statements.
no point in arguing a weakness when the rest & most important parts cover it.
I started with legalese reading insurance policies- they pay for almost nothing,are all double speak, requires rereading 3-4 time to absorb the cryptic “YES YOU CAN NOT” insurance is the al-time greatest rip-off .
angry & NOT TAKING IT!,
The Patriot community has always said the money was created when the ‘borrower’ placed their signature on the Note. It became a negotiable instrument.
Since no money actually changed hands, the obligation was canceled when it was created, as soon as you signed the Deed of Trust.
I never took the time to understand that part, but some say that the Deed of Trust says something to the effect that this Deed of Trust is executed…and that word means something different legally than we’d think.
I haven’t gotten into it, but the complexity of each person’s lender agreement in that Deed of Trust and the diversity of the arguments won by Laywers, Pro Se, or those that just haven’t gone to court based upon someone’s answer, may have the nail that people are looking for to drive in the coffin.
There will not be a one size fit’s all answer, for the mere fact that as soon as an opinion is good enough to stop one foreclosure, the attorneys are trying to figure out ways to keep the next case from using it, remembering to refer to it, or discover it, by their tactics and delays.
Keeping it simple seems to work. I find that when they introduce a problem, as in moving a case to Federal Court, a person gets so caught up in not having it moved that when they try to fight the move, they forget to ‘keep’ their original objection, and can lose it if it does get moved to a federal court. Because the court will say, you can’t introduce new arguments once they get jurisdiction, or whatever.
I will always say I don’t know anything and if I think I know something, I don’t know anything. I don’t give legal advice because I don’t know legal things.
Neil, you are doing a great job with this site.
A lot of what you stated that was ‘simple’ I see and agree with. I don’t know the complexities of the pools and investor lenders. But I agree with the rest.
What’ is happening is an illusion. if you go to court believing it, you can lose based on your belief it’s real. If it’s not real. No money, no real lender, no real obligation, not real default, no secured creditor unless you are the original lender, etc…then you will pull back the curtain, the wizard (wearling green, the color of money, seeming all knowing and all powerful) is exposed and a mere man using gadgets and smoke and mirrors and making you believe he is the ‘all powerful wizard of OZ.
Toto, who didn’t know anything about power and intimidation, went looking around and saw things Doroty, the Tin Man, and the Scarecrow, and Cowardly Lion did not see. They were too busy seeing what they were ‘shown’.
Toto didn’t want to see what was shown, he knew what the wizard showed them was not real, and as long as they looked at it, they would not discover the truth.
Toto looked at what he wasn’t shown.
This is the same thing. Whatever they introduce in the court papers, whatever they claim, whatever the try to do to the case, that’s what they want you to see.
Look past that, get into the paper,go to the beginning, and see what they don’t want you to see.
Once you see the house was built on sand, no amount of paperwork will build it on a solid foundation.
They don’t want you to see that.
I got a three page complaint on why I should be evicted from my house.
I could care less about a point for point rebuttal of an illusion.
I answered with what I saw that they didn’t want me to see. Took a few sentences to break their entire claim to pieces.
I pulled back the curtain.
The sent smoke, flashing lights, loud noise, loud voices,
rumbling floors, and I said, look judge, look at this.
That’s why this is my home.
Still in process, but no fear when you can see through the illusion, and can show someone what you see.
LIght and Love
angry & NOT TAKING IT- The credit default swaps, invented by DeutscheBank due to demand, typically cost (initially) 1.5% per insured pool, with no differentiation between the AAA tranche and the mezzanine (basement) tranche. These were purchased by the investment bank(not banks per se) who were the “man behind the curtain”. There was no intention to insure the homeowners(borrowers), for as you well know, the loans made to them were designed to fail, as they didn’t qualify for the teaser rate(0-1%), let alone the first reset. In addition to the CDS insurance, the lender’s policy paid out when the mortgage defaulted out ot the trust, 90 days delinquency was the trigger event in that case. Plus you had PMI, Ambac, MBIA, Radian Guarantee, National Fidelity, etc. plus federal bailouts, TARP,TALF, on and on to the tune of 27 trillion. But were the homeowners ever insured against predatory loans, misrepresentations, liar’s loans made by the ‘LENDER’, bait and switch, predatory servicing with phone lines switching from CA and Fla to boiler rooms in India where the people who answered the phone were hired because they spoke indecipherable English if they spoke English at all? So, you think that the borrowers/homeowners wouldn’t be entitled to money damages because they weren’t insured by the various policies? This isn’t a good train of thought, you are falling in lockstep with the adversaries. But your other comments were right on target.
@ Gwen Caranchini
Below, please find useful links:
-for a ORDER from the US Northern District remanding to California Superior Court after Wells Fargo’s removal
http://www.scribd.com/doc/34558365/CGC-03-427472-Cortazar-ACORN-v-WELLS-FARGO-Consolidated-Class-Action-ORDER-Remanding-From-Federal-Jurisdiction
-for further inquiry of Register of Actions and docs, the case number is 427472
http://webaccess.sftc.org/scripts/magic94/Mgrqispi94.dll?APPNAME=IJS&PRGNAME=casenumberprompt22
1
Neil i agree with almost everything you laid out “Great job”btw.
these issues are in need of logical evaluation to circumvent potential land mine
that may fatally injure a borrower in the court context,
8 -AT ALL TIMES THE OBLIGATION WAS BOTH CREATED AND EXTINGUISHED AT, OR CONTEMPORANEOUSLY WITH THE CLOSING OF THE LOAN. Since the originating lender was in fact not the source of funds, and did not book the transaction as a loan on their balance sheet (in most cases), the naming of the originating lender as the Lender and payee on the note, both created a LEGAL obligation from the borrower to the Lender and at the same time, the LEGAL obligation was extinguished because the LEGAL Lender of record was paid in full plus exorbitant fees for pretending to be an actual lender.
-8= argument – If the “lenders” business is “handling” money for a profit, it maybe a stretch to somehow imply that the arrangement [unless it is illegal] between the borrower & lender could be extinguished this handling of funds, no matter who’s $ was was used or substituted with credits, lenders accounting practices “unless illegal” has little to do with the borrower’s end of the obligation [imho]
11- ALL INVESTOR-LENDERS RECEIVED THE EQUIVALENT OF A BOND — A PROMISE TO PAY ISSUED BY A PARTY OTHER THAN THE BORROWER, PREMISED UPON THE PAYMENT OR RECEIVABLES GENERATED FROM BORROWER PAYMENTS, CREDIT DEFAULT SWAPS, CREDIT ENHANCEMENTS, AND THIRD PARTY INSURANCE.
-11-argument – Insurance the lend applied to the loan with lender as the beneficiary , would not entitle the borrower to any $ benefit simply because he was the party being insured by CDS> {imho]
other wise I LIKE IT!
PLEEEEEEESE throw insome case law to nail the coffin closed!!!
thanks Neil
how do we find out if pool pur mortgage is purportedly in still exists, do you have a service that provides this, i already know the pool. please advise i need to know
ie ol;d superior loan to lasalle w emc as servicer
BOA, its servicing company and MERS are fighting discovery as they try to remove my case to Federal Court. I objected to the removal on the grounds that the sole basis for removal was diversity and the removing defendants (there are other defendants not yet served) lied to the court about the amount in controversy. They claim an exception to the 30 day removal on the “other paper” rule–that is, they claim that they got a demand letter that established an amt in controversy in excess of the statutory limit AFTER the thirty day time period–howeveer, I sent the demand letter to them certified mail return receipt overnite mail and the receipt and post office receipt shows that they had it five days prior to their answer. Additionally, they failed to remove all the court docs to federal court and fail to establish that MLMI2006-he-5 is in fact an entity with complete diversity. Finally,they failed to get the consent of the nonserved defendants (Citi, Citi as Trustee for MLMI2006he-5) and MLMI2006he-5 which I don’t even think exists any more. So when they removed they sought a protective order to keep discovery from going forward. Unfortunately the basis for this PO was that they had filed a motion to dismisson two of my lending law violations claim and not on the quiet title action which is 90 percent of the discovery. Mers filed their PO out of time. So I am opposing these PO. We will see what happens. But I believe that fighting these PO’s is urgent and getting the discovery is a must. I am going to attach this blog comment to the opposition to the M/PO so that th Judge can see it is not just me that they are doing thisto but it is a concerted around the country effort to avoid discovery. Also, the blog comment says what we are all saying as to why they don’t want to produce this info–it shows there is no value in the trust and that it was all dobne fraudulently as well as violating the correct prcedure for perfecting loans etc. etc. Keep writing in folks–we need to hear what you are dong and your experiences and moer importantly what the defendans are doing so we can advise the courts this is an across the board concerted effort by defendants to stonewall.
I cannot wait to see how all this is going to play out. May the courts finally apply the law and the rules of evidence and make us all whole again.