What you don’t know can hurt you. Who is an “Issuer?”

No default (no loss) means no claim. No claim means no remedy.

intrepid souls are wandering into the weeds trying to find out what it means that PennyMac Mortgage Investment Trust (PMIT) is referred to as an approved issuer of “securities.” The short answer is that none of it is true. PMIT does not own nor has it paid for any aspect of any debt, note or mortgage. What it issues as “Securities” is completely irrelevant to the instruments signed by the homeowner.

And the fact that ii issues certificates or more likely is named as the issuer of certificates is irrelevant, immaterial and not relevant to any claim against any homeowner.

BUT if homeowners agree it is true then becomes true for their case.

I have tried to stay away from the weeds of securities law and practice because it is highly complex, but some brave souls are starting to make the inquiry. They are understandably confused by what they are seeing. In a nutshell, the entire securitization scheme in its current iteration is built on what some agreements say is the law rather than what is actually in the written laws as passed by legislatures.

But, as we have all learned in many walks of life, the lack of knowledge often leads to consent to terms you never knew existed.

I must say that certain contributors to the blog have exhibited intelligence, bravery, and persistence in penetrating the dark corridors of the so-called securitization plan that securitized nothing other than possibilities. And by the way that is perfectly legal. What is illegal is telling a court or homeowner that securitization resulted in a sale of an alleged loan account and that the buyer is being presented in court. That just is not true. It has never been true.

So think about it. If the debt was never sold then how does the buyer have a claim of default or loss when the homeowner refuses to make a payment? The buyer will either get paid anyway (“servicer advances”) or not paid based upon the contractual terms and discretion of the investment bank that sold those junk certificates. Those terms are NOT based upon any terms of any note or mortgage executed by any homeowner. There is no default or loss as to that buyer nor any trust representing the buyer — nor any trustee allegedly administrating the affairs of a trust that may or may not exist.

No default (no loss) means no claim. No claim means no remedy.

So these intrepid souls are wandering into the weeds trying to find out what it means that PennyMac Mortgage Investment Trust (PMIT) is referred to as an approved issuer of “securities.” The short answer is that none of it is true. PMIT does not own nor has it paid for any aspect of any debt, note or mortgage. What it issues as “Securities” is completely irrelevant to the instruments signed by the homeowner.

SO now you have revealed the real problem. Who is an issuer?

PennyMac Mortgage Investment Trust (PMIT) may or may not have been “approved”. But approved for what? The government-sponsored entities are not the SEC nor are they any state agency. If it ever occurred, the so-called “approval” relates only to recognition of the named company (PMIT) as an aggregator. It does not give them permission, approval, or license to engage in the underwriting, issuance, or sale of securities.
But there are agreements that state IF securities are issued, then the GSE will guarantee something although that is not well defined. The problem with that of course is that under the 1998-1999 legislation, certificates sold as Mortgage-Backed Securities (MBS) are NOT securities under the regulation of any regulator of securities sales and trading. They are private contracts. So the curricular argument presented by these agreements are generally accepted by anyone who does not have a deep understanding of securities law, practice and trading.
The exemption of MBS from regulation is a legal fiction. The fiction is compounded by the illegal fiction that the certificates are securities that are regualted and reviewed by the SEC. That is 100% untrue.
The big legal question that has never been addressed is whether that legal fiction applies when the certificates (private contracts) are not mortgage-backed. And that requires a definition of “mortgage-backed.” In the current securitization infrastructure, the certificates sold to investors promise only that the underwriting investment bank bookrunner will make indefinite discretionary periodic payments.
The purchasers of such certificates possess no claim to any payment, debt, note, or mortgage issued by any third party (including any homeowner, insurer or guarantor). But the clear implication is that at least part of the money that the investment bank will use to pay those purchasers (investors) will be funded by collections from homeowners, regardless of whether those collections are legal or illegal.
The rest is funded from “reserve accounts” established by the investment bank that at least technically exist because of the difference between the amount paid to homeowners and the larger amount paid by investors to the investment bank for the certificates. (Tier 2 yield spread premium). And that is supplemented by continued sales of other securitization certificates that also sell no part of any loan. Thus the problem is that the scheme is partially but not entirely a PONZI scheme.
The SEC for its part only maintains a government website that allows potential registrants to upload data. But if the offering is exempt from securities regulation, as claimed by the investment banks under the 1998-1999 legislation, then the upload is NOT submitted for review or approval by the SEC and there is no authorization from the SEC to issue securities either.
This is an example of how the entire securitization plan in its current iteration operates in an extra-legal world — i.e. outside of any known laws. Lawyers have long known that transactional documents and court pleadings can say anything. And if the other side knows nothing about the truth or falsity of the assertion they are likely to get away with it because few clients will pay for the effort needed to examine the premises set by the trickster.
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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

Yes you DO need a lawyer.
If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

Please visit www.lendinglies.com for more information.

4 Responses

  1. All correct Neil. Claimed “issuers” are nothing more than “Aggregators” – and most from the “Crisis” are gone (they did not qualify as MBS security underwriters – although they tried) but some new “aggregators” formed after the crisis – PennyMac and NewRez and Truman (who knows who really owns them) seem to have a monopoly. Foreclosure attorneys took lessons from Bill Clinton on the word ‘is’. From Bill: “It depends on what the meaning of the word ‘is’ is. If the – if he – if ‘is’ means is and never has been, that is not – that is one thing. If it means there is none, that was a completely true statement…..Now, if someone had asked me on that day, are you having any kind of sexual relations with Ms. Lewinsky, that is, asked me a question in the present tense, I would have said no. And it would have been completely true.” “Is” is not what it used to be. Thanks.

  2. Yes, Java, it is a LIE. And the best part – for Investment Banks of course – that they don’t have to spend any money on funding “mortgages” – in most situations today. But they get very handsome payments from homeowners, as a gift or donation – tax free- because people are fooled by Agencies that here are some mystorious “mortgage backed securities” – which nobody can find. So, investors either get stolen from homeowners money as “repayment” of non-exist9ng debt; or return them their own money

  3. LOL Neil, are these brave and intrepid souls CEOs of Securities and Echange Committee and Ginnie Mae?
    PennyMac does the same as they did as Countrywide Finanial and other parts of ths mob. They create a chain of nest doll corporations each pretend that they perform certain functions. Here is from PM’s latest 10K, note how careful they word it around “mortgage related” activities.
    We are a specialty finance company that invests primarily in mortgage-related assets. We conduct substantially all of our operations, and make substantially all of our
    investments, through PennyMac Operating Partnership, L.P. (our “Operating Partnership”) and its subsidiaries. A wholly-owned subsidiary of ours is the sole general partner,
    and we are the sole limited partner, of our Operating Partnership. Certain of the activities conducted or investments made by us that are described below are conducted or made
    through a wholly-owned subsidiary that is a taxable REIT subsidiary (“TRS”) of our Operating Partnership.
    The management of our business and execution of our operations is performed on our behalf by subsidiaries of PennyMac Financial Services, Inc. (“PFSI”). PFSI is a
    specialty financial services firm focused on the production and servicing of loans and the management of investments related to the U.S. mortgage market. Specifically:

    We are managed by PNMAC Capital Management, LLC (“PCM” or our “Manager”), a wholly-owned subsidiary of PFSI and an investment adviser registered
    with the United States Securities and Exchange Commission (“SEC”) that specializes in, and focuses on, U.S. mortgage assets.

    Our loan production and servicing activities (as described below) are performed on our behalf by another wholly-owned PFSI subsidiary, PennyMac Loan
    Services, LLC (“PLS” or our “Servicer”)

  4. So what you are saying …


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