The Reason Why the PSA Becomes Part of the Loan Contract and Therefore the Borrower Has Standing to at Least Make Inquiries About the PSA Terms, Exhibits and Actual Workings of the Parties to It

The bottom line is that every decision regarding payoff, collection, forbearance and foreclosure must satisfy the conditions of the alleged REMIC securitization. The securitization is most often proffered in court in the form of a Pooling and Servicing Agreement (PSA) which in turn is supposed to have a Mortgage Loan Schedule (MLS) attached but the MLS is actually a fabricated document that didn’t exist when the PSA was created.

So if you want to settle a foreclosure, it must pass through several layers of approvals, and the authority for each level is in considerable doubt.

But all you need to do is rely upon the assertions and allegations of the foreclosure mill.

If they say that there is a REMIC trust that owns the loan and they either offer or submit to discovery demands producing the PSA, then you at least have a credible argument for saying that the alleged lender made the PSA part of the loan contract since no decision can be made without reference to the PSA and the parties who claim authority pursuant to the PSA.

Then you have the issue of whether the loan contract still exists (if it ever existed) because the borrower never agreed to securitization which was, as it turns out, an undisclosed element of his transaction that was so important that but for securitization, the loan would not have ever existed.

  • So the last provocative thought is that if the borrower never agreed to securitization and yet the foreclosure mill is relying upon securitization then when did the new contract arise?
  • After all if all decisions regarding the modification, payoff, or settlement of the loan are subject to the various documents in securitization when did those conditions arise?
  • And if they were contemplated at the time of contract with the borrower should they not have been disclosed?
  • And if there was compensation, fees or profits arising from securitization then should not that have been disclosed and is not that the proper subject for an action in disgorgement?

Interesting. Of course the elephant in the living room is that the trust does not exist and even if it did, it does not own or control the debt, note or mortgage. Hence the PSA is irrelevant but if that is the case then nobody claiming any authority through the PSA has any relevance either.

Here are quotes for the article in the link below:

Servicing Counselor identifies issues a servicer considers when a borrower requests a release

(1) Securitization Issues. A partial pay down of a loan has no negative REMIC tax consequences and will never compromise a REMIC’s tax status. See Kilpatrick Townsend, Servicer Survival Guide 2019-2020 Edition, Tom Biafore “Prepayments and Payoffs—What You Can and Cannot Do” for a discussion of the technical reasons why a pay down of a loan presents no REMIC concerns.

In Example 1, however, the borrower’s partial pay down is associated with a release of the noteholder’s lien on Parcel C. The servicer must review the release aspect of the borrower’s request separately from the borrower’s partial loan prepayment. The release of the noteholder’s lien on part of the real property collateral (Parcel C in this example) will not cause any adverse REMIC tax consequences only if after the release of Parcel C, the borrower’s loan meets the “principally secured” by an “interest in real property” test. The “principally secured” test is met when the fair market value of the remaining real property collateral for the borrower’s loan equals at least 80% of the loan’s remaining balance. See Kilpatrick Townsend, Servicer Survival Guide 2019-2020 Edition, Tom Biafore “Modern Day Alchemy—Modifying Qualified Mortgages in REMICs” for an analysis of the “principally secured” test. Provided that the 80% valuation test is met in connection with the release of Parcel C, the noteholder’s release of Parcel C will not cause any adverse REMIC consequences.

(3) PSA Limitations. Just because a borrower’s request may be granted without causing adverse REMIC or other securitization-level tax consequences and without raising credit concerns does not mean that the servicer can approve the borrower’s request before confirming that the requirements in the PSA provisions can also be satisfied.

Most PSAs for fixed rate securitizations prohibit the servicer’s taking actions that change the amount or timing of the borrower’s loan payments. In this case, and despite the fact that the transaction may not cause any REMIC or other tax concerns and may also be regarded by the servicer as positive for the credit for the loan, the servicer must review the PSA and confirm that the release and pay down will not violate the terms of the PSA. In this case, by allowing the transaction to go forward, the servicer will be accelerating the prepayment of part of loan by the amount of the pay down of the release price which violates the standard provisions in most PSAs prohibiting the alteration of the timing of a borrower’s loan payments.

When examining these rules, it does not matter that the borrower’s loan documents contemplated that under some circumstances (which circumstances are not met in Example 1) the borrower could have paid down part of the loan prior to maturity. In Example 1, the borrower fails to meet the conditions for the release of Parcel C and the servicer’s waiving required loan document conditions for the release and pay down results in an impermissible alteration of the loan’s payment terms in violation of the PSA. (e.s.)

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4 Responses

  1. We should be, but it ain’t happening. Many of the states want this process streamlined. Best I can figure we are the sacrificial lambs…the reasoning, “you signed the note, pay what you owe” and we don’t care to whom. At this point, I, personally do not think the courts-judges care. I just lost my District Court appeal….the language in part says: no new evidence, no fraud, nothing is void (second foreclosure on the same DOT and Note), etc…I call BS, but no one cares what I think. And I used cases for my appeal that were won by the same attorneys in this case, with other defendants, that lacked standing and possession and I had more evidence of fraud-fraudulent concealment-lack of possession-a seized note…go figure? Wish I had better news. Eleven (11) years of this and the topper is: they breached the contract, when withholding payments from origination. Feeling defeated and maybe I am just not savvy enough to do this.

  2. So, if we are talking about matters of law – are we not entitled to a jury trial regarding at least ejectment?

  3. My understanding of the PSA, which is what they rely on: is the servicer, if actually working on behalf of the trust, is “required” to make payments up to a point. The loan is declared in default, NPL if not being paid. Then and only then, can the servicer proceed to foreclosure on behalf of the certificate holders. Once the note is being foreclosed on, the servicer can buy the note-debt. After that time frame has expired, they are made whole from the trust. [There is no loss for the sevicer, at that point or thereafter]. What most of us have is a loan that has been in default from the beginning….this is where the rubber meets the road. The documents do not match the pleading presented to the court on behalf of the trust.

    We are not party to the PSA, per se, but we are allowed to make arguments about whether they have established rights, because the, the Plaintiff’s, did not adhere to their contracts. The reasoning by som courts is, the homeowners have the property interest. IMHO, the parties standing before the court, have no loss, due to the reimbursement of the trust for payments made, nor do they have “standing”, or rights to enforce the deed of trust. Title has never been acquired, legally. They only rights to collect “a debt”…this is very specific to the REMIC, not a “negotiable instrument”. Once there is a foreclosure there are no protections against liability for the buyer of the debt. And it is not the property of the REMIC Trust….hence there is no security interest present. It is a “debt”, and anyone possessing the debt can file an action; however, that party has no secured interest, at this point!

    They are bringing before the court two different concepts-contracts. The courts are commingling these two things. If you are working on behalf of a REMIC, the trust rules matter. “entitled to enforce” is integral language contained in the “note”…then we have the FTC Rule regarding the liability of the buyer. They are “not” Holders in Due Course, they are merely holders and liable for what they purchased. The courts are saying, anyone who holds the note can enforce, not in the name of the trust [this is specifically spelled out] . If the trust does not hold the notes anymore and the action is in the name of the trust, it is a lie. The trust is created to protect the investment, payment stream, from false claims and make it bankruptcy remote to protect it from potential creditors.

    This is a free-for-all…not what the PSA intended.

    Feel free to correct me, I need to ensure accuracy too. This is only my understanding of reading the PSA, multiple times and referencing my own documents.

  4. Unless this tactic can get around UCC negotiable instrument law and how a note is enforced, i fail to see any merit to such a legal argument.

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