How “servicer advances” advance the false premise of securitization of loans.

Since the times of ancient Greece and even before that, it has been a commonly used statement that before discussion of an issue each party should precisely define their terms. The obvious conclusion has been that without agreed definitions, it is highly probable that each side is talking about something different and making no point in the debate. Every generation since then has agreed with that premise.

This is exactly what is happening in the world of finance. Wall Street has its own definitions that are never disclosed to the marketplace, consumers, investors, the courts or government regulators.

Each of those entities or people have their own definitions  based upon partial information and mostly blind faith in certain facts that appear to be axiomatically true. even the Federal reserve under the venerated Alan Greenspan made that error.

Wall Street capitalizes on that assymetric information to create a completely illegal place for itself in the economy — that of disguised principal while everyone else thinks they are merely acting in their assigned and proper role as broker.

What I find fascinating is the meaning of securitization of servicing advances. Remember that securitization means, by definition and by law, that an asset or group of assets has been sold for value to multiple investors in exchange for pro rata ownership of those assets. That is the essence of all securitization, including IPOs and existing common stock traded on national or international security exchange services or platforms.

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Analyzing the data published by the firms promoting “securitization,” we see that no “loan” or debt has ever been purchased and sold by a grantor who owned the underlying obligation or a grantee who paid any value. “Securitization” exists — but not for the paper or the money trail (payments and collections). The securities issued are based upon a discretionary unsecured promise to make indefinite payments to buyers of certificates issued by the promisor (securities brokerage firm).
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The terms of payments from securities brokerage firms to investors who purchased certificates have no direct relationship to the terms of payments scheduled from homeowners, who are unaware that the sale of the securities resulting from their signatures greatly exceeds the amount of their transaction, leaving a zero balance due and quite possibly opening the door for a claim for greater compensation as the essential party making the securitization scheme possible. This is discussed at length on my blog.
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The securitization scheme has many subplots. One of them is “servicer advances.” A real servicer advance is one in which the company designated as the servicer receives, processes, accounts, and distributes money to the investors.
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To my knowledge and my proprietary database, there is not one existing scenario that conforms to that description. In plain terms, servicers do not make advances mainly because they do not pay investors — ever. And as I have previously discussed on this blog, they don’t receive payments either.
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So these falsely labeled “servicers” can’t and don’t create data entries reflecting the receipt of payments — but law firms seeking foreclosure argue or imply that they do receive such payments and that their “records” are business records — i.e., records of business conducted by the designated “servicer” who in fact performs no servicing duties.
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The true meaning of a servicer advance under the current schemes of securitization claims is that some of the money paid to investors is labeled as a servicer advance even though the servicer paid nothing and had no duty to pay the investors anything (just like the homeowner had no duty to pay anything because securitization sales had eliminated the debt).
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That duty (to pay investors) was reserved for the promisor, who we will remember is a securities brokerage company that is not a “servicer.” The label “servicer advance” comes from the reports issued (fabricated) by the company designated as “Master Servicer,” showing that some scheduled homeowner payments have not been paid or received. This disregards the obvious premise that there is no payment due.
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The reader should understand that the sole reason investors would be paid regardless of the number or amount of incoming scheduled payments from homeowners is that the securities firm wants to keep selling unregulated securities (certificates). That is the point of the securitization scheme —- to sell securities.
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While incoming payments from homeowners are a partial basis for payments to investors, the promise requires that new securities from new securitization schemes are being sold, producing revenues and the ability to say that certain “tranches” (that contain nothing) are “over-collateralized.”
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The reader should also understand that the fact that homeowners are making payments is the sole factual support — in law and, in fact — that payments are due. In a twisted way, homeowners, through their ignorance of the actual events in which they are key players, are playing an active role in deceiving each other, the government, investors, and the courts.
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The promissory note and mortgage role in this scenario are strictly symbolic. But they do raise the legal presumption that they are valid documents if they are facially valid according to the state statute. Nonetheless, the real reason anyone believes that payments are due when they’re not due is that homeowners make the scheduled payments to anyone who commands them to do so.
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So the fact that the investors received their promised payment from the securities firm that controls the scheme (but does not own anything) is why they call it an “advance. The idea that it came from a “Servicer” is just a fabrication to imply that a third party was involved. But that is enough to raise the facial presumption from the self-serving documentation and claims prepared by the securities firm or on its behalf.
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The prospectus for each securitization plan reveals the plot to claim “servicer advances” by labeling money not paid by homeowners (whether due or not) as a “servicer advance.” The prospectus shows that a fictional reserve account is created by selling certificates containing the investors’ money.
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The prospectus discloses that investors would receive payments from a reserve pool, which is disclosed as a return of the money the investor paid. But that is exactly the money amount used to claim “servicer advances.” The reserve account may actually exist in some securitization schemes. Still, the “reserve account” is completely controlled by the securities brokerage firm that served as the bookrunner underwriter of the securities (certificates offered for sale).
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And the money proceeds of the sale of derivatives (more unregulated securities traded in the shadow banking marketplace) based on the “servicer advances” go to the investment bank, not the servicer. This is yet another way to reduce any hypothetical (fictional) loan account below a zero balance.
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Since the investors have contractually agreed to that arrangement, the fact that it is not an advance and only a return of capital make no legal difference. So they are converting false declarations of homeowner “defaults” into saleable assets, thus creating the foundation for securitization of false claims of “servicer advances.”
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As you can see from the above explanation, the answers to almost every question dealing with securitization of debt are extremely convoluted. In fact, the vice president of asset management for Deutsche Bank described it as “counterintuitive.” The reason that it is counterintuitive is that it doesn’t make any sense, once you break it down into its component pieces.
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The big stumbling block for everyone is the fact that money appears to have been paid to or paid on behalf of the homeowner. It is therefore assumed as axiomatically true that the money reported to have been paid to the homeowner or paid on behalf of the homeowner must have been alone, if for no other reason than the fact that the homeowner executed a note and mortgage and then started paying.
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 But even that apparent reality is not true in most cases. Nearly all existing transactions that have been labeled as mortgage loan transactions are directly or indirectly the product of supplemental securitization schemes.
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That is to say that most of such transactions consist entirely of reports of payments that never occurred. To the extent that such transactions were presented as paying off a previously classified mortgage loan transaction, such reports were entirely untrue in most cases.
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As long as both transactions resulted from a controlled securitization scheme by a common securities brokerage firm acting as the book runner underwriter of certificates offered for sale to investors, there was no need to transfer any money. Our investigation has revealed the absence of any evidence ingesting that any such money was transferred.  This raises a basic defense for homeowners: lack of consideration and breach of the alleged contract.
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 If the homeowner received, for example, $30,000 from the “refinancing” of the property, but signed a note for $500,000, based upon the false premises of a payoff of the previous “mortgage loan,” the consideration for the note and the mortgage is either completely absent or at least mostly absent.
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 What most people do not understand is that the “refinancing” was just an opportunity to start another controlled securitization scheme with the new set of securities being sold without the retirement of the old securitization scheme or those securities.
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PRACTICE NOTE: The presence of servicer advances described in the prospectus and pooling and servicing agreement provides a foundation for the homeowner’s defense based on standing. Since servicer advances have priority in the liquidation of property, the outcome of foreclosure results in payment to the investment bank rather than the designated creditor. Proper discovery and objections at trial are likely to successfully undermine the most basic element of the claim: legal standing.
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There is a false premise implied in “servicer advances” that leads to false conclusions. The false premise is that the money is owed to the “Master Servicer,” and the debt is that of the investors on whose behalf the advances were presumably made. The fact that there were no such advances remains concealed, and the fact that the investors have absolutely no liability to the recipient of the “servicer advances” is also concealed. But this false premise that is always implied if the subject comes up, is usually sufficient to convince a judge that servicer advances are irrelevant. Upon proper scrutiny and analysis, the subject of servicer advances are highly relevant and even dispositive of the entire claim.

3 Responses

  1. Little is understood about Master Servicing Rights (MSR). Agree no valid securitization occurred for mortgages to begin with — no valid mortgages occurred particularly during the financial crisis heyday. Thus, no valid securitization. . However, the government has allowed those fake mortgages and fake securitizations to proliferate throughout the country, with courts buying it – hook, line, and sinker. MSR according to SEC filed documents includes all rights including servicer advances. Right or wrong – SEC filed and either approved – or ignored. Servicer advances can be advanced for any cause — not just default, but any claimed delinquency for ANYTHING. This diverts any homeowner payments from the fake “mortgage” securitized trust to the fake Advance Receivable Trust. Claimed servicers do not advance anything – the investors to the fake Servicer Advance Receivable Trust do. Who those investors are is unknown. Bottom line — 1) Once those Servicer Advances by investors occurs – no mortgage, even if valid, can ever be paid off. 2) Any modification is bogus, as the servicer advance investors claim to own collateral (despite non-disclosure to homeowners). 3) Advances cannot be undone – must be recovered from homeowner – whatever it way it takes. 4) Any claimed fake Mortgage that has any type of advance – is nothing more than debt collection and the name of foreclosure entity is false — even if we are layering falsity upon falsity. 5) Government allows and promoted itself by TALF. Liquidity is bottom line to government — they don’t care what is fake or not. Investors are KING. Use it to challenge the true identity of any creditor. The mish-mash will ultimately reveal – no valid creditor exists. To Kathy Pertew – correct.

  2. False premise leads to False conclusions.

    Closing (haha) check recalled after H.O. Started paying.

    Previously classified mortgage not paid off at closing

    Previous Lender recorded paperwork as never assigned prior to dissolving the corporation.

    Any payment by H.O. attributed to prior loans owed as advised by counsel when asked.

    Theft, just, theft, very sad.😢

  3. I have just started to approach this thing with putting the agency on the hook in my case as a part of the crime. Washington Mutual Bank (WAMU) sold it mortgage servicing rights to Wells Fargo Bank on Jul 31, 2006 when the regulator in the FDIC knew there were problems at WAMU and allow the servicing transfer to happen as the 1.3 million Fed Gov Backed loans that were Ginnie pooled UCC3 blank endorsed Note that under no circumstances can they buy or sell mortgage loan so that why this bankruptcy remote procedure was done to take away the chance that these loans are involve in a bankruptcy and the court to decide who the owner of the mortgage when Ginnie not paid a single cent for the mortgage loans.

    Now on Sept 25, 2008 WAMU was declared a “failed bank” and the FDIC sold the bank operation to JPMorgan and some portfolio loan but did not include the 1.3 million Ginnie pooled loan that Ginnie owns the mortgage notes. WAMU does not exist and cannot complete the terms of the mortgage contract and does not own the mortgage note.

    MERS gets into the act as this attorney with foreclosure mill Kozeny & McCubbin who moonlighting as a MERS Assistant Secretary who Robo signs an Assignment of Deed of Trust on Oct 22, 2009 claiming that they paid value the the originator or successors or assigns when the fact is there was only sell of the mortgage loan and that was to WAMU who Wells purchased the service right from and serviced the 1.3 million up and beyond the day WAMU died on Sept 25, 2008. You see WAMU never recorded a Assignment of the Deed of Trust and not alive on Oct 22, 2009 to sell the mortgage loan to Wells. Wells did pay $5 billion penalty for Robo signing in Jan 2012, yet were allow to keep the illegal document recorded and use then but we the homeowner did not get restitution for the illegal foreclosure?

    Wells wanted to non-judicially foreclose when not having the power of the Deed of Trust because they did not purchase the debt with is a fact they admitted to. Wells said that Ginnie Mae owned the mortgage debt as this investor owner of the debt. Here is what Ginnie wrote in response to me spending them the Wells letter “The Wells Fargo correspondent may have thought that the Ginnie Mae program operated in the same manner as the secondary mortgage market programs operated by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac purchases mortgages from the lenders and issue MBS which they guarantee. These entities are actual investors in the mortgage. Ginnie Mae guarantees MBS that are issued by the private entities, including Wells Fargo. Ginnie Mae does not purchase the mortgages, but requires the the private entities assign the mortgage to Ginnie Mae in consideration for its of the securities. Ginnie Mae permits the private entities to hold legal title and the private entities are required to service the mortgages in accordance with the standard of the agency that insures or guarantees the mortgage.”

    Ginnie allows the private party to hold legal title? Is not this up to the state the property is in, and does not holding title mean the entity that holds the Mortgage Note and debt which Ginnie requires the separation of the two because it does not purchase mortgage loans? Ginnie creates this situation where there is a need for the entity that calling a Note debt to ensure they are owed a debt if not the originator or the fact that Ginnie transferred the blank endorsed back.

    Ginnie clouds these issues just as this stuff about MERS only list Ginnie as an investors. Here is what Ginnie also wrote to me “The Wells correspondent may also be confused by the fact that when a loan backs a Ginnie Mae-guaranteed security, Ginnie Mae is identified as the “investor” on the MERS system. This is a convenience for MERS, as MERS is able avoid maintaining another separate code for Ginnie Mae.” WFT, when Ginnie Mae has millions of loans in it pooling and MERS does not want a separate code for Ginnie. So when WAMU stopped existing how did MERS not understand that there would be a missing link in title ownership between active members and it could not do its titling because WAMU was no longer a member after Sep 25, 2008.

    Because Ginnie wants to be paid for the investors loan granted to WAMU it allowed this Robo signing of WAMU loans!

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