SIT — SAW — SAP: 2 Minute Primer on Securitization

Almost everyone thinks they have a basic understanding of the securitization of residential debt. They don’t. Here is a basic primer to organize your thinking on the subject. Remember this only applies to securitization of residential debt and not to other things like stock IPOs etc.

  • SIT: Securitization in Theory. Simple: Asset is owned by issuer. Issuer divides ownership into shares. Shares are sold to investors. Perfectly legal, moral and good economic sense as the foundation of capitalism which for all its flaws (and there are many) is the best economic system yet devised by human beings for commerce. As long as the shares are adequately described according to regulation there is no foul. But this is not what happened in residential mortgages.
  • SAW: Securitization as Written. This is the foundation of a criminal enterprise. The atom was smashed (i.e., the debt and ownership of the debt were separated) and the paperwork was entirely designed to cover that up. Every document had to contain false statements or false implications and every document had to be executed through layers of people and companies so that nobody could be blamed for what happened. Documentation bears no resemblance to what happened to the money in the real world. Reliance on the documentation allows the banks to control the narrative.
  • SAP: Securitization in Practice. Investment banks sold their own discretionary promise to pay money to investors in the form of a certificate (“mortgage bond”. Investors who bought the certificates received no right, title or interest to any debt, note or mortgage from borrowers. The promise was unsecured. So investors paid value and did not receive ownership of any debt — something that is impossible under modern law and for good reason. Though many layers of intermediaries, conduits and sham entities documents were fabricated for various purposes including foreclosure on behalf of a non- existent entity with no right, title or interest in the debt, note or mortgage.

Separating the debt from ownership of the debt is a legal nullity in all jurisdictions. Current documentation claiming ownership of residential debt is all false. The prevailing assumption that a foreclosure will result in proceeds paid to the investors is false.

As for the named “trustee” of a “REMIC Trust” the hidden trust agreement reveals that the trustee is a nominee for the investment bank, not the investors — and that the investors who bought certificates from the investment bank issued in the name of the named trust are neither beneficiaries under the trust nor are they parties to any agreement giving any rights to the named trustee to represent them.

As nominee, under the oft-hidden trust agreement the named trustee does not acquire any right, title or interest to any debt, note or mortgage. Hence there is no right of the Trustee to enforce any debt, note or mortgage. Delivery of the note to the trust never occurs — the named Trustee wants nothing to do with it. Documentation to the contrary is false.

Money proceeds of foreclosure sales is distributed to the investment banks and to the parties who participated in the foreclosure but none of them are carrying the debt as an asset and none of them would have any loss from nonpayment. In accounting terms this translates as revenue. Foreclosure is a remedy based solely on the need to give restitution to a creditor for an unpaid debt. In securitized loans this never happens. It can’t.

Investors do not receive the proceeds because they don’t own the debt. The investment bank paid value for the debt but didn’t receive ownership — nor does it carry the debt as an asset on its own books of account beyond 30 days after funding.

While the investment bank is repaid the principal several times over by reselling the debt or attributes of the loan it does not label incoming funds as repayment even though it treats the cash flow as payment thus removing the risk of loss on the loans from its books. The trust never owns any debt, note or mortgage and neither do the investors or the named trustee.

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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. IN FACT, STATISTICS SHOW THAT MOST HOMEOWNERS FAIL TO PRESENT THEIR DEFENSE PROPERLY. EVEN THOSE THAT PRESENT THE DEFENSES PROPERLY LOSE, AT LEAST AT THE TRIAL COURT LEVEL, AT LEAST 1/3 OF THE TIME. IN ADDITION IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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6 Responses

  1. Courts-Judges know everything…

  2. Courts instructed to be in the “game” – Roger. If this were not the case, our representatives, and the media, would be showing outrage. They are quiet.

  3. No tell me the Courts aren’t in on the game….

  4. Even when you win, you lose. How did Wells Fargo get their hands on a WaMu loan. The story says WaMu was “acquired” by Wells Fargo. Who started that lie?

    A Lake Superior judge who threw out a bank’s mortgage foreclosure lawsuit against a homeowner and entered judgment in her favor was reversed by the Indiana Court of Appeals, which found the court abused its discretion in ordering a “near-blanket exclusion” of the bank’s evidence.

    Judge Calvin Hawkins awarded judgment on the evidence for the defendant in Wells Fargo Bank, N.A. v. Judith A. Hallie, 19A-MF-2183. Hallie had purchased property in Schererville in 2004 from Washington Mutual, which later was acquired by Wells Fargo. The bank sued in 2013, alleging that as of July 2013, Hallie owed about $55,600 on the note plus costs and fees. But Hallie’s counsel at trial argued Wells Fargo was not the true client and countersued.

    At a hearing last year, Wells Fargo produced an employee — a business initiatives consultant who previously had worked at Washington Mutual. She testified Wells Fargo owned the mortgage and she had reviewed Hallie’s file and payment history and the bank’s demand letter and collection notes, among other documents that the bank proffered as evidence.

    But the court excluded all exhibits except a payoff statement from evidence because the witness “was not present at the loan closing, lacked first-hand knowledge of transactions, had not personally made data entries, and was simply reading from documents,” Judge L. Mark Bailey wrote for the panel in reversing the trial court. The panel found the trial court abused its discretion in permitting “the near-blanket exclusion of exhibits.

    “Wells Fargo has shown prima facie reversible error in the trial court’s purported entry of a ‘judgment on the evidence.’ On remand, Wells Fargo should be permitted to proffer exhibits consistent with the Indiana Rules of Evidence, without a heightened personal knowledge requirement,” the court held.

  5. As I said, with Personage comes Barratry! And what they are doing is a Criminal Act!

  6. There was no REAL “note” — just a transfer of FALSELY declared default debt at so- called “origination.” The banks went after the one source of wealth after Congress gave away manufacturing to the rest of the world to benefit the CEOs. They targeted the American home. And, it is not manufacturing that caused the coronavirus. So much for the EPA.

    It does not matter what the “trust” agreement says. By law, the “trustee” is the legal holder of EVERYTHING. But, as Neil points out – the “Trust” agreement refutes this. All in violation of well established law. So are the “Trusts” in violation – as they do NOT comply with Rules and Regulations for pilot program established at the beginning of the fraud. It was ignored. .

    So here we sit — over ten years later – with the Coronavirus being a wake up call. It was impossible for the U.S. markets/economy to keep thriving while the rest of the world struggles. But it did. The policy to adjust rates, and keep low, was to cover-up the real problem in the economy. It was a band aid to the financial crisis, and that band aid just further accelerated transfer of wealth. That band aid has come off. There are no “tools” to fix.

    With NAFTA – we not only gave away the “store” — we import economically, and physically, from around the world. All was set up for the benefit of CEOs — who control Congress (I think we need Congress to take some ongoing financial/economic courses — you know, like is required for many professionals – they need it).

    We are humbled by the coronavirus. Now oil involved. Rates involved. Economy involved. I don’t have the answer. Maybe –toss every representative out and start anew.

    The sky is falling, and if there is any “bounce-back” – that too will be manipulation – for how long?

    Thanks. . .

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