Securitization for Lawyers

Posted on September 2, 2014 by Neil Garfield

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The CONCEPT of securitization does not contemplate an increase in violations of lending laws passed by States or the Federal government. Far from it. The CONCEPT anticipated a decrease in risk, loss and liability for violations of TILA, RESPA or state deceptive lending laws. The assumption was that the strictly regulated stable managed funds (like pensions), insurers, and guarantors would ADD to the protections to investors as lenders and homeowners as borrowers. That it didn’t work that way is the elephant in the living room. It shows that the concept was not followed, the written instruments reveal a sneaky intent to undermine the concept. The practices of the industry violated everything — the lending laws, investment restrictions, and the securitization documents themselves. — Neil F Garfield, Livinglies.me

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“Securitization” is a word that provokes many emotional reactions ranging from hatred to frustration. Beliefs run the range from the idea that securitization is evil to the idea that it is irrelevant. Taking the “irrelevant” reaction first, I would say that comes from ignorance and frustration. To look at a stack of Documents, each executed with varying formalities, and each being facially valid and then call them all irrelevant is simply burying your head in the sand. On the other hand, calling securitization evil is equivalent to rejecting capitalism. So let’s look at securitization dispassionately.

First of all “securitization” merely refers to a concept that has been in operation for hundreds of years, perhaps thousands of years if you look into the details of commerce and investment. In our recent history it started with “joint stock companies” that financed sailing expeditions for goods and services. Instead of one person or one company taking all the risk that one ship might not come back, or come back with nothing, investors could spread their investment dollars by buying shares in a “joint stock company” that invested their money in multiple sailing ventures. So if some ship came in loaded with goods it would more than offset the ships that sunk, were pirated, or that lost their cargo. Diversifying risk produced more reliable profits and virtually eliminated the possibility of financial ruin because of the tragedies the befell a single cargo ship.

Every stock certificate or corporate or even government bond is the product of securitization. In our capitalist society, securitization is essential to attract investment capital and therefore growth. For investors it is a way of participating in the risk and rewards of companies run by officers and directors who present a believable vision of success. Investors can invest in one company alone, but most, thanks to capitalism and securitization, are able to invest in many companies and many government issued bonds. In all cases, each stock certificate or bond certificate is a “derivative” — i.e., it DERIVES ITS VALUE from the economic value of the company or government that issued that stock certificate or bond certificate.

In other words, securitization is a vehicle for diversification of investment. Instead of one “all or nothing” investment, the investors gets to spread the risk over multiple companies and governments. The investor can do this in one of two ways — either manage his own investments buying and selling stocks and bonds, or investing in one or more managed funds run by professional managers buying and selling stocks and bonds. Securitization of debt has all the elements of diversification and is essential to the free flow of commerce in a capitalistic economy.

Preview Questions:

  • What happens if the money from investors is NOT put in the company or given to the government?
  • What happens if the certificates are NOT delivered back to investors?
  • What happens if the company that issued the stock never existed or were not used as an investment vehicle as promised to investors?
  • What happens to “profits” that are reported by brokers who used investor money in ways never contemplated, expected or accepted by investors?
  • Who is accountable under laws governing the business of the IPO entity (i.e., the REMIC Trust in our context).
  • Who are the victims of misbehavior of intermediaries?
  • Who bears the risk of loss caused by misbehavior of intermediaries?
  • What are the legal questions and issues that arise when the joint stock company is essentially an instrument of fraud? (See Madoff, Drier etc. where the “business” was actually collecting money from lenders and investors which was used to pay prior investors the expected return).

In order to purchase a security deriving its value from mortgage loans, you could diversify by buying fractional shares of specific loans you like (a new and interesting business that is internet driven) or you could go the traditional route — buying fractional shares in multiple companies who are buying loans in bulk. The share certificates you get derive their value from the value of the IPO issuer of the shares (a REMIC Trust, usually). Like any company, the REMIC Trust derives its value from the value of its business. And the REMIC business derives its value from the quality of the loan originations and loan acquisitions. Fulfillment of the perceived value is derived from effective servicing and enforcement of the loans.

All investments in all companies and all government issued bonds or other securities are derivatives simply because they derive their value from something described on the certificate. With a stock certificate, the value is derived from a company whose name appears on the certificate. That tells you which company you invested your money. The number of shares tells you how many shares you get. The indenture to the stock certificate or bond certificate describes the voting rights, rights to  distributions of income, and rights to distribution of the company is sold or liquidated. But this assumes that the company or government entity actually exists and is actually doing business as described in the IPO prospectus and subscription agreement.

The basic element of value and legal rights in such instruments is that there must be a company doing business in the name of the company who is shown on the share certificates — i.e., there must be actual financial transactions by the named parties that produce value for shareholders in the IPO entity, and the holders of certificates must have a right to receive those benefits. The securitization of a company through an IPO that offers securities to investors offer one additional legal fiction that is universally enforced — limited liability. Limited liability refers to the fact that the investment is at risk (if the company or REMIC fails) but the investor can’t lose more than he or she invested.

Translated to securitization of debt, there must be a transaction that is an actual loan of money that is not merely presumed, but which is real. That loan, like a stock certificate, must describe the actual debtor and the actual creditor. An investor does not intentionally buy a share of loans that were purchased from people who did not make any loans or conduct any lending business in which they were the source of lending.

While there are provisions in the law that can make a promissory note payable to anyone who is holding it, there is no allowance for enforcing a non-existent loan except in the event that the purchaser is a “Holder in Due Course.” The HDC can enforce both the note and mortgage because he has satisfied both Article 3 and Article 9 of the Uniform Commercial Code. The Pooling and Servicing Agreements of REMIC Trusts require compliance with the UCC, and other state and federal laws regarding originating or acquiring residential mortgage loans.

In short, the PSA requires that the Trust become a Holder in Due Course in order for the Trustee of the Trust to accept the loan as part of the pool owned by the Trust on behalf of the Trust Beneficiaries who have received a “certificate” of fractional ownership in the Trust. Anything less than HDC status is unacceptable. And if you were the investor you would want nothing less. You would want loans that cannot be defended on the basis of violation of lending laws and practices.

The loan, as described in the origination documents, must actually exist. A stock certificate names the company that is doing business. The loan describes the debtor and creditor. Any failure to describe the the debtor or creditor with precision, results in a failure of the loan contract, and the documents emerging from such a “closing” are worthless. If you want to buy a share of IBM you don’t buy a share of Itty Bitty Machines, Inc., which was just recently incorporated with its assets consisting of a desk and a chair. The name on the certificate or other legal document is extremely important.

In loan documents, the only exception to the “value” proposition in the event of the absence of an actual loan is another legal fiction designed to promote the free flow of commerce. It is called “Holder in Due Course.” The loan IS enforceable in the absence of an actual loan between the parties on the loan documents, if a third party innocent purchases the loan documents for value in good faith and without knowledge of the borrower’s defense of failure of consideration (he didn’t get the loan from the creditor named on the note and mortgage).  This is a legislative decision made by virtually all states — if you sign papers, you are taking the risk that your promises will be enforced against you even if your counterpart breached the loan contract from the start. The risk falls on the maker of the note who can sue the loan originator for misusing his signature but cannot bring all potential defenses to enforcement by the Holder in Due Course.

Florida Example:

673.3021 Holder in due course.—

(1) Subject to subsection (3) and s. 673.1061(4), the term “holder in due course” means the holder of an instrument if:

(a) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
(b) The holder took the instrument:

1. For value;
2. In good faith;
3. Without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series;
4. Without notice that the instrument contains an unauthorized signature or has been altered;
5. Without notice of any claim to the instrument described in s. 673.3061; and
6. Without notice that any party has a defense or claim in recoupment described in s. 673.3051(1).
673.3061 Claims to an instrument.—A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.
This means that Except for HDC status, the maker of the note has a right to reclaim possession of the note or to rescind the transaction against any party who has no rights to claim it is a creditor or has rights to represent a creditor. The absence of a claim of HDC status tells a long story of fraud and intrigue.
673.3051 Defenses and claims in recoupment.—

(1) Except as stated in subsection (2), the right to enforce the obligation of a party to pay an instrument is subject to:

(a) A defense of the obligor based on:

1. Infancy of the obligor to the extent it is a defense to a simple contract;
2. Duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor;
3. Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms;
This means that if the “originator” did not loan the money and/or failed to perform underwriting tests for the viability of the loan, and gave the borrower false impressions about the viability of the loan, there is a Florida statutory right of rescission as well as a claim to reclaim the closing documents before they get into the hands of an innocent purchaser for value in good faith with no knowledge of the borrower’s defenses.

 

In the securitization of loans, the object has been to create entities with preferred tax status that are remote from the origination or purchase of the loan transactions. In other words, the REMIC Trusts are intended to be Holders in Due Course. The business of the REMIC Trust is to originate or acquire loans by payment of value, in good faith and without knowledge of the borrower’s defenses. Done correctly, appropriate market forces will apply, risks are reduced for both borrower and lenders, and benefits emerge for both sides of the single transaction between the investors who put up the money and the homeowners who received the benefit of the loan.

It is referred to as a single transaction using doctrines developed in tax law and other commercial cases. Every transaction, when you think about it, is composed of numerous actions, reactions and documents. If we treated each part as a separate transaction with no relationship to the other transactions there would be no connection between even the original lender and the borrower, much less where multiple assignments were involved. In simple terms, the single transaction doctrine basically asks one essential question — if it wasn’t for the investors putting up the money (directly or through an entity that issued an IPO) would the transaction have occurred? And the corollary is but for the borrower, would the investors have been putting up that money?  The answer is obvious in connection with mortgage loans. No business would have been conducted but for the investors advancing money and the homeowners taking it.

So neither “derivative” nor “securitization” is a dirty word. Nor is it some nefarious scheme from people from the dark side — in theory. Every REMIC Trust is the issuer in an initial public offering known as an “IPO” in investment circles. A company can do an IPO on its own where it takes the money and issues the shares or it can go through a broker who solicits investors, takes the money, delivers the money to the REMIC Trust and then delivers the Trust certificates to the investors.

Done properly, there are great benefits to everyone involved — lenders, borrowers, brokers, mortgage brokers, etc. And if “securitization” of mortgage debt had been done as described above, there would not have been a flood of money that increased prices of real property to more than twice the value of the land and buildings. Securitization of debt is meant to provide greater liquidity and lower risk to lenders based upon appropriate underwriting of each loan. Much of the investment came from stable managed funds which are strictly regulated on the risks they are allowed in managing the funds of pensioners, retirement accounts, etc.

By reducing the risk, the cost of the loans could be reduced to borrowers and the profits in creating loans would be higher. If that was what had been written in the securitization plan written by the major brokers on Wall Street, the mortgage crisis could not have happened. And if the actual practices on Wall Street had conformed at least to what they had written, the impact would have been vastly reduced. Instead, in most cases, securitization was used as the sizzle on a steak that did not exist. Investors advanced money, rating companies offered Triple AAA ratings, insurers offered insurance, guarantors guarantees loans and shares in REMIC trusts that had no possibility of achieving any value.

Today’s article was about the way the IPO securitization of residential loans was conceived and should have worked. Tomorrow we will look at the way the REMIC IPO was actually written and how the concept of securitization necessarily included layers of different companies.

Filed under: AMGAR, CORRUPTION, discovery, evidence, expert witness, Fannie MAe, foreclosure, foreclosure defenses, GTC | Honor, investment banking, Investor, MBS TRUSTEE, MODIFICATION, Mortgage, originator, Pleading, securities fraud, Servicer, STATUTES, Title, TRUST BENEFICIARIES, trustee | Tagged: , , , , , , , , , , , , , , , , , | 33 Comments »

Some Florida Statutes That May Have Been Violated by the Banks

Posted on July 23, 2013 by Neil Garfield

Editor’s Note: These are not all the statutes that apply, but Rob Harrington has gone to the trouble of compiling the statutes that probably do apply to most mortgages in cases where they are subject to claims of transfer of ownership and securitization into an asset pool. This is worth keeping on hand:

Rob Harrington
8:33am Jul 20
Have any of these Florida laws been violated? PROVE IT!! There may also possibly exist other crimes as alleged to be
committed by the banks and their support service personnel against
the citizens and property owners throughout Florida:

817.02Obtaining property by false personation.

817.025Home or private business invasion by false personation; penalties.

817.03Making false statement to obtain property or credit.

817.031Making false statements; venue of prosecution.

817.06Misleading advertisements prohibited; penalty.

817.061Misleading solicitation of payments prohibited.

817.11Obtaining property by fraudulent promise to furnish inside information.

817.15Making false entries, etc., on books of corporation.

817.155Matters within jurisdiction of Department of State; false, fictitious, or fraudulent acts, statements, and representations prohibited; penalty; statute of limitations.

817.16False reports, etc., by officers of banks, trust companies, etc., with intent to defraud.

817.19Fraudulent issue of certificate of stock of corporation.

817.21Books to be evidence in such cases.

817.22Making false invoice to defraud insurer.

817.23Making false affidavit to defraud insurer.

817.2341False or misleading statements or supporting documents; penalty.

817.29Cheating.

817.34False entries and statements by investment companies offering stock or security for sale.

817.39Simulated forms of court or legal process, or official seal or stationery; publication, sale or circulation unlawful; penalty.

817.40False, misleading and deceptive advertising and sales; definitions.

817.41Misleading advertising prohibited.

817.411False information; advertising.

817.44Intentional false advertising prohibited.

817.45Penalty.

817.54Obtaining of mortgage, mortgage note, promissory note, etc., by false representation.

817.545Mortgage fraud.

817.562Fraud involving a security interest.

817.568Criminal use of personal identification information.

817.5681Breach of security concerning confidential personal information in third-party possession; administrative penalties.

817.569Criminal use of a public record or public records information; penalties.

Filed under: CDO, CORRUPTION, Eviction, foreclosure, GTC | Honor, Investor, Mortgage | Tagged: | 12 Comments »

GLARUM CASE: COURTS NOW WANT EVIDENCE — NOT REPRESENTATIONS OF COUNSEL

Posted on September 17, 2011 by Neil Garfield

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“If you want to save your home, you’ve got to get a good lawyer who knows how to take a deposition—no exceptions.”

COMPETENT EVIDENCE REQUIRED — FOR BOTH SIDES

EDITOR’S NOTE: Be careful before you celebrate over this. Yes, it is now more difficult for the banks to lie their way through foreclosure. The word is “difficult” not “impossible.”

They can still lie their way through foreclosure if you don’t know how to challenge or object to affidavits, business records, testimony that is not from a COMPETENT (that has a technical definition) witness, etc. And you must also satisfy the same requirements if YOU want to put evidence in the record and have the Judge hear it. Getting it in the record is not usually half as hard as having the Judge actually consider it — that is a matter of ease of presentation and style.

LAWYERS: I RECOMMEND YOU ALWAYS HAVE A  COPY OF THE FEDERAL AND STATE RULES OF EVIDENCE IN YOUR POSSESSION — ESPECIALLY THE PARTS ON HEARSAY AND COMPETENCY OF WITNESS. I ALSO STRONGLY RECOMMEND THAT YOU CARRY WITH YOU TRIAL OBJECTIONS 2D BY MARK A DOMBROFF.

http://floridaforeclosurefraud.com/2011/09/oh-no-we-have-to-actually-prove-our-cases-bank-lawyers-respond-to-the-glarum-case/

Oh, no, we have to actually prove our cases!” Bank lawyers respond to the Glarum case
by Mike Wasylik Esq. on September 16, 2011

Glarum has the banks running scared.
The biggest challenge banks face in today’s foreclosure crisis is that they still haven’t come to grips with the need to tell the truth when they testify. The recent case of Glarum v. LaSalle [PDF] http://floridaforeclosurefraud.com/wp-content/uploads/2011/09/4D10-1372.op_.pdf has put even more pressure on the banks to tell the truth in foreclosure court, and now the banks and their lawyers are in a blind panic.

Banks have to provide admissible evidence in foreclosure cases

In the Glarum case, the trial judge had granted a summary judgment in favor of the bank, and ordered the Glarum home to be sold at auction. In support of its motion for that summary judgment, the bank offered the sworn affidavit of Ralph Orsini, who swore that the Glarums had defaulted on their loan and that they owed the bank a particular amount of money. Unfortunately, Orsini didn’t know these things were true, so he relied on the computer database to tell him these things. And according to the appellate court, that’s where the problem began:

Orsini did not know who, how, or when the data entries were made into Home Loan Services’s computer system. He could not state if the records were made in the regular course of business. He relied on data supplied by Litton Loan Servicing, with whose procedures he was even less familiar. Orsini could state that the data in the affidavit was accurate only insofar as it replicated the numbers derived from the company’s computer system. Despite Orsini’s intimate knowledge of how his company’s computer system works, he had no knowledge of how that data was produced, and he was not competent to authenticate that data.

(Emphasis mine.) The appellate court threw out the affidavit, and the resulting judgment, because Orsini’s statements were mere hearsay. They didn’t prove anything.

Applying long-held evidentiary principles to foreclosure cases

Bank lawyers, instead of recognizing this case as reaffirming long-understood principles of basic evidence, have sounded the alarm. Here’s what one “client alert” from Greenberg Traurig had to say:
http://www.gtlaw.com/NewsEvents/Publications/Alerts?find=152634

The Fourth District Court of Appeals has sent a strong statement that more generic affidavits currently utilized in some cases will no longer be sufficient where they do not include specific and detailed factual information regarding the compilation of the loan and payment data into a computer system. In doing so, the appellate court may have achieved the unintended result of dramatically changing the foreclosure landscape in Florida.

Again, emphasis mine. Changing the landscape? Hardly. Here are some of the things that Greenberg Traurig recommends banks will need to do in future foreclosure cases:

  • The affiant should be familiar with and have a specific understanding as to how the records are kept by the company and about the company’s recordkeeping practices in general.
  • The affidavit may need to include factual information establishing that the records relied upon were kept in the ordinary course of the company’s regularly conducted business activity, with specific reference to each record that is relied upon.
  • …the affidavit may need to contain language addressing the procedures that the company takes to ensure that the information input into its computer system is accurate.
  • …the information included in the affidavit will need to be sufficient to show that the records were made by or from information transmitted by a person with knowledge.
  • The courts may even require the affidavit to provide information regarding the procedures used by the prior loan servicer to ensure that the information is kept within the normal course of its business…
  • Particular care should be given to who the company selects as the affiant…

None of this is revolutionary, or even surprising, to anyone who’s ever litigated a commercial case before—it’s “Business Records 101.” Business records are never admissible, because they are hearsay, unless you do all those things. Why? Because business records are hearsay, so you have to lay the groundwork to get them admitted.

Pursuant to section 90.803(6)(a), Florida Statutes, documentary evidence
may be admitted into evidence as business records if the proponent of
the evidence demonstrates the following through a record’s custodian:

(1) the record was made at or near the time of the event; (2)
was made by or from information transmitted by a person
with knowledge; (3) was kept in the ordinary course of a
regularly conducted business activity; and (4) that it was a
regular practice of that business to make such a record.

That’s always been the law in every case, and the Glarum court has now ruled that the same law that applies to everyone else now applies to banks, too. And that’s just fair.

If you want to save your home, you’ve got to take depositions.
What lessons can be learned from Glarum? first, that banks are terrified of having their affiants’ depositions taken, and will fight even harder to prevent that from happening. They are terrified of what “borrower’s counsel” like us can do when we have the opportunity to ask them questions under oath. And when we do get the chance to ask those questions, we can blow a foreclosure case right out of the water, just like in Glarum.

Finally, borrowers, homeowners, and other foreclosure defendants should know this: taking depositions in your foreclosure case is a critical step in protecting your home—one that our law firm has long viewed as essential in almost every foreclosure case. And it’s a step that almost no foreclosure defendant is competent to handle on their own. If you want to save your home, you’ve got to get a good lawyer who knows how to take a deposition—no exceptions.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , | 21 Comments »

Notarized MERS Assignment of DOT as Nominee: Forensic Analysis and Motion Practice

Posted on April 8, 2010 by Neil Garfield

I was looking at an assignment signed by Margaret Dalton, “Vice President”, Mortgage Electronic Registration Systems, Inc (MERS) “as nominee” for “Hoecomings” (sic) Financial Network, Inc. with an execution date of March 5, 2010 and a notarization date of the same date, notarized by D. Pakusic in Duval County, Florida, naming United Independent Title as Trustee under the Deed of Trust and purporting to assign the Deed of Trust to JP Morgan Chase Bank National Association.

A forensic analysis report would or should state as follows:

  1. The title chain reveals the property is located in the County of Los Angeles, State of California and contains a purported assignment signed by Margaret Dalton, “Vice President”, Mortgage Electronic Registration Systems, Inc (MERS) “as nominee” for “Hoecomings” (sic) Financial Network, Inc. with an execution date of March 5, 2010 and a notarization date of the same date, notarized by D. Pakusic in Duval County, Florida, naming United Independent Title as Trustee under the Deed of Trust and purporting to assign the Deed of Trust to JP Morgan Chase Bank National Association. in public records book ____, at page ____ of the County of _________, in the State of Florida. The document appears on its face to have been prepared by Malcolm-Cisneros, a Law Corporation located at 2112 Business Center Dr., Irvine, California 92612. Given the location of the property in California, the location of the law firm that prepared it in California and the location of of the other parties, the fact that it was “notarized” in Florida raises numerous forensic questions requiring production of additional documentation and facts.
  2. Location Issues: The property is located in the State of California, as are the Trustors under the Deed of Trust (DOT). Margaret Dalton is believed to be located in Irvine, California, possibly employed by or on the premises of the above-referenced Law Corporation. The Notary is located in Duval County, Florida which has no known connection with any of the parties. MERS offices are reported to be located in states other than California and the IT platform is reported to be located in the Midwest. Homecoming Financial Network, Inc. (which undersigned believes was intended by the referenced instruments and title chain) is authorized to do business in the State of California, but upon research does not appear to be a chartered bank, financial institution or lender. HFN is a mortgage originator acting on behalf of unknown sources of funds who may be located anywhere, since they are neither disclosed nor described in the closing documentation nor any document on record. Accordingly there is a question as to the identity of the creditor at the time of the origination of the loan, the identity of the creditor at the current time, and the identity of the creditor at all times between the origination of the loan and the present. There are also questions requiring additional documentation and fats to reveal whether the purported assignment was executed by or on behalf of anyone in Duval County, Florida where the instrument was notarized or in Irvine, California where the instrument may have been executed.
  3. Margaret Dalton’s employment is unknown but it does not appear that she has ever been an employee of MERS, nor that MERS is located where Margaret Dalton apparently signed the document. Previous investigations by the undersigned indicate that MERS is an electronic database privately owned and operated by fewer than 17 employees, which do not include Ms. Dalton. According to information received from MERS, the database platform operated by MERS for its members, has an access procedure consisting of a user ID and password. With such information any person could enter, alter or amend any entry in the MERS database. The procedure also provides access to an automated procedure wherein the user may name a person to serve as “vice-president” or “limited signing officer” for MERS. No record has been produced for this analysis indicating that Ms. Dalton was named as “vice-president” or whether she did so herself, nor whether she was authorized to do so or from whom said authority would be claimed. There is accordingly a question as to whether the document was in fact signed by Ms. Dalton, and if so whether she had authority to sign a document that conveyed an interest in real property.
  4. Given the above information, there is also a question as to whether the notarization was valid or void. Florida law provides that if the Notary knows that the person signing does not possess authority to sign or knows that the person is ignorant of their authority, that the oath administered is invalid and that the instrument is construed to be not notarized, despite the signature and stamp. Recording laws require notarization. Thus there is a question as to whether the document is or would be construed as a recorded instrument despite its obvious appearance in the title record. If it is not construed as a recorded instrument, then the chain of title should be amended to remove this document.
  5. The chain of title, as stated above, reveals a Deed of Trust (DOT) in favor of MERS as nominee. No issues are readily apparent as to the execution of the Deed of Trust. However, the content of the DOT raises factual issues that require further examination and the production of additional documents and information. Since MERS is an IT platform operated for the purposes of its private owners, it is not authorized by Florida Statutes nor California Statutes to serve as the equivalent of a recording record for instruments in the public records. It is a data entry and retrieval system that is private, not public. Since MERS was named as nominee and the MERS documentation available on the internet clearly state that under no circumstances will MERS ever claim an interest in the real property, the DOT, the note, nor will ever be the actual lender, beneficiary or mortgagee in any transaction, the effect of naming MERS raises factual issues since there are questions regarding title raised by the conflict between naming MERS and MERS disclaiming any such interest. There is no record of MERS accepting the position as nominee and if so under what circumstances. Those terms exist in agreements executed between members of MERS and one of the MERS corporations and are unavailable to the undersigned forensic analyst.
  6. The DOT and the above-referenced purported assignment refer to MERS as nominee for HFN, which was neither the creditor nor the lender at the time of the origination of the loan. Thus the DOT appears to name MERS (who disclaims any interest in the loan) on behalf of HFN (who served as a conduit for a table-funded loan transaction, probably as part of the securitization of the subject loan transaction) both of whom served principals that were not disclosed at the time of the origination of the loan nor, to the knowledge of the undersigned, to the present. The effect of misspelling the name of HFN on the purported assignment is unknown, but based upon advice from title agents consulted, it would be ordinarily required in any subsequent transaction, that the document be re-executed with the proper spelling. Whether this affects the legality of the instrument is unknown to the undersigned analyst.
  7. The purported assignment refers only to the DOT, which raises several questions. It is unknown whether an assignment of the note, as evidence of the underlying obligation, was executed at the same time as the purported assignment of the DOT. It is unknown whether all the necessary parties executed instruments required to authorize the assignments, and if so when this was accomplished. If there were no such other assignments then there is a question as to whether the instrument was effective, and if so, whether it intended to provide ownership of the security instrument (DOT) to one party while the ownership of the note remained or was transferred to another party, while at the same time the underlying obligation to yet another party may have existed between the Trustor as debtor and the source of funds for the origination of the loan, as creditor. Additional documentation and facts would be required to make these determinations.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, Investor, Mortgage, securities fraud, Servicer | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 34 Comments »

Trusts, Trustees and Beneficiaries

Posted on March 18, 2010 by Neil Garfield

From http://www.mattweidner.com

These statutes provide numerous regulations and requirements that entities engaging in trust activities should comply with, but the regulations are largely being ignored by the entities engaging in trust activities and both courts and the enforcing agency, the Florida Department of Financial Services,

Editor’s Note: Matt Weidner is onto something here that has been pointed out by many lawyers across the country. His central point is that if you want to call yourself a Trustee in foreclosures then there had better be a trust. If there is a trust the state laws, rules and regulations govern them and the trustees. Most of these laws are being ignored by the pretender lenders with impunity — Judges routinely ignore arguments concerning the authority of the Trust to do business in the state, the right of the Trustee to proceed with foreclosure, and the accountability to both the borrower and the investor, both of whom might be beneficiaries under the Trust. Greenwich Financial filed suit against Countrywide and BOA to underscore the point that the investors are the creditors and that if there is a trust, it is the investor who is the beneficiary. Yet, as Charles Koppa has pointed out numerous times, the prices on the courthouse steps are routinely manipulated against the interests of any beneficiaries.

But the real question in my mind is whether these “trusts” actually meet the definition of that term. for there to be a working trust and an authorized trustee, there must be a trustor (the one who creates the trust), a beneficiary (the one who receives the benefits from the trust) and a “res” which is something of value that is put into the trust and which is owned, rather than passed through the t rust.

The trustor must have some property interest (tangible or intangible) that is being conveyed to the trustee to hold in trust for the beneficiaries. I’ve looked at the pooling and services agreements, prospectuses, assignments and assumption agreement and individual assignments, alleged powers of attorney and the promotional literature of the Special Purpose vehicles that issued mortgage backed securities (bonds) to investors who end up holding a piece of paper called a “certificate.”

In my opinion, there is no trust, even though one is named. In my opinion there is no trustee, even though one is named. Beneficiaries are not named and the res of the trust which supposedly is a pool of loans has been conveyed in percentage slices to the investors who bought the certificates.

There is no Trustor identified in most cases although there have been arguments of the pretender lenders that the investors are the trustors and the beneficiaries. There is also the argument that the pooling and service agreement allocating a “pool” which more often than not initially contains fictitious assets contains a  Trustor somewhere in the document.

In my opinion the party designated as a Trustee is merely a candidate for an agency relationship that might arise if several conditions are met, as defined in the prospectus. The agent has no liability or obligations of any kind until those conditions happen at some time in the future.

And since the res of the trust allegedly includes a pool of loans that was owned by some vaguely defined pool aggregator or “trustee” and since the percentage interests in that pool was conveyed to the investors, it is my opinion that there is no res in the so-called trust (i.e., there is nothing being held in trust). If there is nothing held in trust, then even if the trust technically exists, the trustee has no powers. This is congruent with the REMIC provisions of the Internal Revenue Code that allow the SPVs to be formed as pass through entities in which no tax event occurs and therefore no tax applies.

So back to Weidner’s point, if the trust is real, it isn’t following the laws governing their creation and use, OR, to my point, the trust isn’t real anyway. It is for these reasons, among others, that you MUST identify the investors, get in touch with them, compare notes and get an accounting from them. If the Courts ever force the pretender lenders to disclose the identity of these creditors and allow you to pursue interaction with them, then, and only then, will the alleged default be validated, the demand on the note verified, and the possibility of financial double jeopardy eliminated.

CHAPTER 650 & 660 FLORIDA STATUTES AND FORECLOSURE IN FLORIDA
Florida Statutes Chapters 658 which regulates Banks and Trust Companies and can be found at http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=Ch0658/titl0658.htm&StatuteYear=2009&Title=-%3E2009-%3EChapter%20658 and chapter 660, the section of Florida Statutes which specifically regulates trust business in Florida and which can be found at http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=Ch0660/titl0660.htm&StatuteYear=2009&Title=-%3E2009-%3EChapter%20660 are two important consumer protection statutes that are being widely ignored by regulators and courts across the state.

The definition of trust activities provided in statute is very broad and specifically includes many of the activities national banks and foreign corporations engage in related to mortgage foreclosure activities. An analysis of foreclosure cases filed in counties across the state will reveal that a recognizable percentage of the cases are filed “as trustee” for some other party or entity.http://www.myfloridacfo.com/are ignoring the laws and the application of these laws to entities that are violating them. These statutes provide numerous regulations and requirements that entities engaging in trust activities should comply with, but the regulations are largely being ignored by the entities engaging in trust activities and both courts and the enforcing agency, the Florida Department of Financial Services,

Homeowners who are subject to foreclosure and foreclosure defense attorneys are encouraged to carefully review the cited statutes and consider the application of the statutes to each individual case. Lenders who are engaging in trust activities but who are not properly licensed or registered to do business in the state should be prevented from prevailing in foreclosure actions on equitable grounds based on their failure to comply with these important consumer protection and state interest laws.

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