Like the infamous NINJA loans, the REMICs ought to be dubbed NEITs — nonexistent inactive trusts.
The idea of switching lenders without permission of the borrower has been accepted for centuries. But the idea of switching borrowers without permission of the “lender” had never been accepted until the era of false claims of securitization.
This is just one example of how securitization, in practice, has gone far off the rails. It is significant to students of securitization because it demonstrates how the debt, note and mortgage have been separated with each being a commodity to sell to multiple buyers.
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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see https://asreport.americanbanker.com/news/new-risk-for-loan-investors-lending-to-a-different-company
Leveraged loan investors are now concerned about whether they are funding a loan to one entity and then “by succession” ending up with another borrower with a different credit profile, reputation, etc. You can’t make this stuff up. This is only possible because the debt has been separated from the promissory note — the same way the debt, note and mortgage were treated as entirely separate commodities in the “securitization” of residential mortgage debt. The lack of connection between the paper and the debt has allowed borrowers to sell or transfer their position as borrower to another borrower leaving the “lender” holding a debt from a new borrower. This sounds crazy but it is nevertheless true. [I am NOT suggesting that individual homeowners try this. It won’t work]
Keep in mind that most certificates issued by investment bankers purportedly from nonexistent inactive trusts (call them NEITs instead of REMICs) contain an express provision that states in clear unequivocal language that the holder of the certificate has no right, title or interest to the underlying notes and mortgages. This in effect creates a category of defrauded investors using much the same logic as the use of MERS in which MERS expressly disclaims and right, title or interest in the money (i.e., the debt), or the mortgages that reregistered by third party “members.”
Of course those of us who understand this cloud of smoke and mirrors know that the securitization was never real. The single transaction rule used in tax cases establishes conclusively that the only real parties in interest are the investors and the borrowers. Everyone else is simply an intermediary with no more interest in any transaction than your depository bank has when you write a check on your account. The bank can’t assert ownership of the TV you just paid for. But if you separate the maker of the check from the seller of the goods so that neither knows of the existence of the other then the intermediary is free to make whatever false claims it seeks to make.
In the world of fake securitization or as Adam Levitin has coined it, “Securitization Fail”, the successors did not pay for the debt but did get the paper (note and mortgage or deed of trust). All the real monetary transactions took place outside the orbit of the falsely identified REMIC “Trust.” The debt, by law and custom, has always been considered to arise between Party A and Party B where one of them is the borrower and the other is the one who put the money into the hands of the borrower acting for its own account — or for a disclosed third party lender. In most cases the creditor in that transaction is not named as the lender on the promissory note. Hence the age-old “merger doctrine” does not apply.
This practice allows the sale and resale of the same loan multiple times to multiple parties. This practice is also designed to allow the underwriter to issue investors a promise to pay (the “certificate” from a nonexistent inactive trust entity) that conveys no interest in the underlying mortgages and notes that supposedly are being acquired.
It’s true that equitable and perhaps legal rights to the paper (i.e., ownership) have attached to the paper. But the paper has been severed from the debt. Courts have inappropriately ignored this fact and stuck with the presumption that the paper is the same as the debt. But that would only be true if the named payee or mortgagee (or beneficiary on a Deed of Trust) were one and the same. In the real world, they are not the same. Thus we parties who don’t own the debt foreclosing on houses because the real parties in interest have no idea how to identify the real parties in interest.
While the UCC addresses situations like this Courts have routinely ignored statutory law and simply applied their own “common sense” to a nearly incomprehensible situation. The result is that the courts apply legal presumptions of facts that are wrong.
PRACTICE NOTE: In order to be able to litigate properly one must understand the basics of fake securitization. Without understanding the difference between real world transactions and paper instruments discovery and trial narrative become corrupted and the homeowner loses. But if you keep searching for things that ought to exist but don’t — thus undercutting the foundation for testimony at deposition or trial — then your chances of winning rise geometrically. The fact is, as I said in many interviews and on this blog as far back as 2007, they don’t have the goods — all they have is an illusion — a holographic image of an empty paper bag.
Filed under: BURDEN OF PROOF, CORRUPTION, discovery, evidence, foreclosure, investment banking, Investor, legal standing, MBS TRUSTEE, originator, Pleading, standing, TRUST BENEFICIARIES | Tagged: Adam Levitin, fake securitization, money, NEIT, real parties in interest, REMIC, single transaction doctrine, transfer, TRUTH | 15 Comments »