Showing posts with label Trust law. Show all posts
Showing posts with label Trust law. Show all posts

Wednesday, July 6, 2011

MUST-HAVE SECURITIZED MORTGAGE ROADMAP

Part II of Gardner and Shephard Primer

Posted on July 6, 2011 by Neil Garfield

Your Client’s Securitized Mortgage: A Basic Roadmap PART 2: Transaction Steps and Documents [2009-11-19]

Your Client’s Securitized Mortgage: A Basic Roadmap:
By O. Max Gardner, III and Richard D. Shepherd
Part 2:  Typical transaction steps and documents (in private-label, non-GSE securitizations)
1. The Originator sells loans (one-by-one or in bundles) to the Securitizer (a/k/a the Sponsor) pursuant to a Mortgage Loan Purchase and Sale Agreement (MLPSA) or similarly-named document. The purpose of the MLPSA is to sell all right, title, claims, legal, equitable and any and all other interest in the loans to the Securitizer-Sponsor. For Notes endorsed in “blank” which are bearer instruments under the UCC, the MLPSA normally requires acceptance and delivery receipts for all such Notes in order to fully document the “true sale.” Frequently a form is prescribed for the acceptance and delivery receipt and attached as an exhibit to the MLPSA.
The MLPSA will contain representations, attestations and warranties as to the enforceability and marketability of each loan, and specify the purchaser’s remedies for a breach of any “rep” or “warrant.” The primary remedy is the purchaser’s right to require the seller to repurchase any loan materially and adversely affected by a breach. Among the defects and events covered by “reps” and “warrants” are “Early Payment Defaults,” commonly referred to as “EPD’s.” An EDP occurs if a loan becomes seriously (usually, 60 or more days) delinquent within a specified period of time after it has been sold to the Trust. The EDP covenants are always limited in time and normally only cover EDPs that occur within 12 to 18 months of the original sale. If an EDP occurs, then the Trust can force the originator to repurchase the EPD note and replace it with a note of similar static qualities (amount, term, type, etc.)
2. The Securitizer-Sponsor sells the loans to the Depositor. This takes place in another MLPSA very similar to the first one and the same documents are created and exchange with the same or similar terms. These are typically included as exhibits to the PSA.
3. Depositor, Trustee, Master Servicer and Servicer enter into a Pooling and Servicing Agreement (“PSA”) in which:
— the Depositor sells all right, title, legal, equitable and any other interest in the mortgage loans to the Trustee, with requirements for acceptance and delivery receipts, often including the prescribed form as an exhibit, in similar fashion to the MLPSA’s;
— the PSA creates the trust, appoints the Trustee, and defines the classes of securities (often called “Certificates”) that the trust will issue to investors and establishes the order of priority between classes of Certificates as to distributions of cash collected and losses realized with respect to the underlying loans (the highest rated Certificates are paid first and the lowest rated Certificates suffer the first losses-thus the basis for the term “structured finance”); and
— the Servicer, Master Servicer and Trustee establish the Servicer’s rights and duties, including limits and extent of a Servicer’s right to deal with default, foreclosure, and Note modifications. Some PSA’s include detailed loss mitigation or modification rules, and others limit any substantive modifications (such as changing the interest rate, reducing the principal debt, waiving default debt, extending the repayment term, etc.)
4. All parties including the Custodian enter into the Custodial Agreement in which:
  • the Depositor agrees to cause the Notes and other specified key loan documents (usually including an unrecorded, recordable Assignment “in blank”)(NB that several recent courts have raised serious legal questions about the assignment of a real estate instrument in blank under such theories as the statute of frauds and whether or not an assignment in blank is in fact a “recordable” legal real estate document) to be delivered to the Custodian (with the Securitizer to do the actual physical shipment);
  • the Custodian agrees to inspect the Notes and other documents and to certify in designated written documents to the Trustee that the documents meet the required specifications and are in the Custodian’s possession; and
  • establishes a (supposedly exclusive) procedure and specified forms whereby the Servicer can obtain possession of any Note, Mortgage, Deed of Trust or other custodial document for foreclosure or payoff purposes.
Finding Documents on the S.E.C.’s website (the EDGAR filing system):
  • If you know the name of the Depositor and the name of the Trust (e.g. “Time Bomb Mortgage Trust 2006-2”) that contains the loan in question, then the PSA and Custodial Agreement probably can be found on the SEC’s website (www.sec.gov):
  • On the SEC home page look for a link to “Search for Company Filings” and then choose to search by “Company Name,” using the name of the Depositor. (Alternatively, click on the “Contains” button on the search page and then search by the series, i.e. 2006-2 in the above example.)
  • Hopefully, this will enable you to find the Trust in question. If so, the PSA and the Custodial Agreement should be available as attachments to one or more of the earliest-filed forms (normally the 8-K) shown on the list of available documents. Sometimes the PSA is listed as a named document but other times you just look for the largest document in terms of megabytes filed with the 8-K form.
  • The available documents also should include the Prospectus and/orProspectus Supplement (Form 424B5) and the Free Writing Prospectus (“FWP”). The latter documents (at least the sections written in English, as opposed to the many tables of financial data) can be very helpful in providing a concise and straightforward description of the parties, documents, and transaction steps and detailed transactional graphs and charts in the particular deal. And because these are SEC documents, the information serves as highly credible evidence on these points, and the Court can take judicial notice of any document filed with the SEC.
  • For securitizations created after January 1, 2006, SEC “Regulation AB” requires the parties to file a considerable amount of detailed information about the individual loans included in the Trust. This information may be filed as an Exhibit to the PSA or to a Form 8-K. This loan-level data typically includes loan numbers, interest rates, principal amount of loan, origination date and (sometimes) property addresses and thus can be very useful in proving that a particular loan is in a particular Trust.

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EVERY PRO SE LITIGANT NEEDS TO KNOW ABOUT PSA'S (POOLING AND SERVICING AGREEMENTS.)


Pooling and servicing agreements (PSA)how it works in Judicial foreclosure states

THE ROOT OF FORECLOSURE DEFENSE The Pooling and Servicing Agreement (PSA) is the document that actually creates a residential mortgage backed securitized trust and establishes the obligations and authority of the Master Servicer and the Primary Servicer. The PSA is the heart and root of all securitized based foreclosure action defenses. The PSA establishes that mandatory rules and procedures for the sales and transfers of the mortgages and mortgage notes from the originators to the Trust. It is this unbroken chain of assignments and negotiations that creates what is called “The Alphabet Problem.” In order to understand the “Alphabet Problem,” you must keep in mind that the primary purpose of securitization is to make sure the assets (e.g., mortgage notes) are both FDIC and Bankruptcy “remote” from the originator. As a result, the common structures seek to create at least two “true sales” between the originator and the Trust. One of the defenses used by the famous Foreclosure Defender, April Charney is the following: PLAINTIFF FAILED TO COMPLY WITH APPLICABLE POOLING AND SERVICING AGREEMENT LOAN SERVICING REQUIREMENTS: Plaintiff failed to provide separate Defendants with legitimate and non predatory access to the debt management and relief that must be made available to borrowers, including this Defendant pursuant to and in accordance with the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission that controls and applies to the subject mortgage loan. Plaintiff’s non-compliance with the conditions precedent to foreclosure imposed on the plaintiff pursuant to the applicable pooling and servicing agreement is an actionable event that makes the filing of this foreclosure premature based on a failure of a contractual and/or equitable condition precedent to foreclosure which denies Plaintiff’s ability to carry out this foreclosure. You therefore have in the most basic securitized structure the originator, the sponsor, the depositor and the Trust. I refer to these parties as the A (originator), B (sponsor), C (depositor) and D (Trust) alphabet players. The other primary but non-designated player in my alphabet game is the Master Document Custodian for the Trust. The MDC is entrusted with the physical custody of all of the “original” notes and mortgages and the assignment, sales and purchase agreements. The MDC must also execute representations and attestations that all of the transfers really and truly occurred “on time” and in the required “order” and that “true sales” occurred at each link in the chain. Section 2.01 of most PSAs includes the mandatory conveyancing rules for the Trust and the representations and warranties. The basic terms of this Section of the standard PSA is set-forth below: 2.01 Conveyance of Mortgage Loans. (a) The Depositor, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund, and the Trustee, on behalf of the Trust, hereby accepts the Trust Fund. (b) In connection with the transfer and assignment of each Mortgage Loan, the Depositor has delivered or caused to be delivered to the Trustee for the benefit of the Certificateholders the following documents or instruments with respect to each Mortgage Loan so assigned: (i) the original Mortgage Note (except for no more than up to 0.02% of the mortgage Notes for which there is a lost note affidavit and the copy of the Mortgage Note) bearing all intervening endorsements showing a complete chain of endorsement from the originator to the last endorsee, endorsed “Pay to the order of _____________, without recourse” and signed in the name of the last endorsee. To the extent that there is no room on the face of any Mortgage Note for an endorsement, the endorsement may be contained on an allonge, unless state law does not so allow and the Trustee is advised by the Responsible Party that state law does not so allow. If the Mortgage Loan was acquired by the Responsible Party in a merger, the endorsement must be by “[last endorsee], successor by merger to [name of predecessor]“. If the Mortgage Loan was acquired or originated by the last endorsee while doing business under another name, the endorsement must be by “[last endorsee], formerly known as [previous name]“; A review of all of the recent “standing” and “real party in interest” cases decided by the bankruptcy courts and the state courts in judicial foreclosure states all arise out of the inability of the mortgage servicer or the Trust to “prove up” an unbroken chain of “assignments and transfers” of the mortgage notes and the mortgages from the originators to the sponsors to the depositors to the trust and to the master document custodian for the trust. As stated in the referenced PSA, the parties have represented and warranted that there is “a complete chain of endorsements from the originator to the last endorsee” for the note. And, the Master Document Custodian must file verified reports that it in fact holds such documents with all “intervening” documents that confirm true sales at each link in the chain. The complete inability of the mortgage servicers and the Trusts to produce such unbroken chains of proof along with the original documents is the genesis for all of the recent court rulings. One would think that a simple request to the Master Document Custodian would solve these problems. However, a review of the cases reveals a massive volume of transfers and assignments executed long after the “closing date” for the Trust from the “originator” directly to the “trust.” I refer to these documents as “A to D” transfers and assignments. There are some serious problems with the A to D documents. First, at the time these documents are executed the A party has nothing to sell or transfer since the PSA provides such a sale and transfer occurred years ago. Second, the documents completely circumvent the primary objective of securitization by ignoring the “true sales” to the Sponsor (the B party) and the Depositor (the C party). In a true securitization, you would never have any direct transfers (A to D) from the originator to the trust. Third, these A to D transfers are totally inconsistent with the representations and warranties made in the PSA to the Securities and Exchange Commission and to the holders of the bonds (the “Certificateholders”) issued by the Trust. Fourth, in many cases the A to D documents are executed by parties who are not employed by the originator but who claim to have “signing authority” or some type of “agency authority” from the originator. Finally, in many of these A to D document cases the originator is legally defunct at the time the document is in fact signed or the document is signed with a current date but then states that it has an “effective date” that was one or two years earlier. Hence, we have what I call the Alphabet Problem.

AFFIRMATIVE DEFENSES AND COUNTRCLAIMS RELATED TO POOLING & SERVICING AGREEMENTS 
1. Plaintiff failed to comply with the foreclosure prevention loan servicing requirement imposed on Plaintiff pursuant to the National Housing Act, 12 U.S.C. 1701x(c)(5) which requires all private lenders servicing non-federally insured home loans, including the Plaintiff, to advise borrowers, including this separate Defendant, of any home ownership counseling Plaintiff offers together with information about counseling offered by the U.S. Department of Housing and Urban Development. 
2. Plaintiff cannot legally pursue foreclosure unless and until Plaintiff demonstrates compliance with 12 U.S.C. 1701x(c)(5). 
3. Plaintiff failed to provide separate Defendants with legitimate and non predatory access to the debt management and relief that must be made available to borrowers, including this Defendant pursuant to and in accordance with the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission that controls and applies to the subject mortgage loan. 
4. Plaintiff’s non-compliance with the conditions precedent to foreclosure imposed on the plaintiff pursuant to the applicable pooling and servicing agreement is an actionable event that makes the filing of this foreclosure premature based on a failure of a contractual and/or equitable condition precedent to foreclosure which denies Plaintiff’s ability to carry out this foreclosure. 
5. The special default loan servicing requirements contained in the subject pooling and servicing agreement are incorporated into the terms of the mortgage contract between the parties as if written therein word for word and the defendants are entitled to rely upon the servicing terms set out in that agreement. 
6. Defendants are third party beneficiaries of the Plaintiff’s pooling and servicing agreement and entitled to enforce the special default servicing obligations of the plaintiff specified therein. 
7. Plaintiff cannot legally pursue foreclosure unless and until Plaintiff demonstrates compliance with the foreclosure prevention servicing imposed by the subject pooling and servicing agreement under which the plaintiff owns the subject mortgage loan. 
8. The section of the Pooling and Servicing Agreement (PSA) is a public document on file and online at http://www.secinfo.com and the entire pooling and servicing agreement is incorporated herein. 
9. The Plaintiff failed, refused or neglected to comply, prior to the commencement of this action, with the servicing obligations specifically imposed on the plaintiff by the PSA in many particulars, including, but not limited to: 
a. Plaintiff failed to service and administer the subject mortgage loan in compliance with all applicable federal state and local laws. 
b. Plaintiff failed to service and administer the subject loan in accordance with the customary an usual standards of practice of mortgage lenders and servicers. 
c. Plaintiff failed to extend to defendants the opportunity and failed to permit a modification, waiver, forbearance or amendment of the terms of the subject loan or to in any way exercise the requisite judgment as is reasonably required pursuant to the PSA. 
10. The Plaintiff has no right to pursue this foreclosure because the Plaintiff has failed to provide servicing of this residential mortgage loan in accordance with the controlling servicing requirements prior to filing this foreclosure action. 
11. Defendants have a right to receive foreclosure prevention loan servicing from the Plaintiff before the commencement or initiation of this foreclosure action. 
12. Defendants are in doubt regarding their rights and status as borrowers under the National Housing Act and also under the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission. Defendants are now subject to this foreclosure action by reason of the above described illegal acts and omissions of the Plaintiff. 
13. Defendants are being denied and deprived by Plaintiff of their right to access the required troubled mortgage loan servicing imposed on the plaintiff and applicable to the subject mortgage loan by the National Housing Act and also under the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission. 
14. Defendants are being illegally subjected by the Plaintiff to this foreclosure action, being forced to defend the same and they are being charged illegal predatory court costs and related fees, and attorney fees. Defendants are having their credit slandered and negatively affected, all of which constitutes irreparable harm to Defendants for the purpose of injunctive relief. 
15. As a proximate result of the Plaintiff’s unlawful actions set forth herein, Defendants continue to suffer the irreparable harm described above for which monetary compensation is inadequate. 
16. Defendants have a right to access the foreclosure prevention servicing prescribed by the National Housing Act and under the Pooling and Servicing Agreement filed by the plaintiff with the Securities and Exchange Commission which right is being denied to them by the Plaintiff. 
17. These acts were wrongful and predatory acts by the plaintiff, through its predecessor in interest, and were intentional and deceptive. 
18. There is a substantial likelihood that Defendants will prevail on the merits of the case.

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Wednesday, April 13, 2011

GET YOUR TITLE ANALYZED BECAUSE THE PLAINTIFF WILL LIE OR WILL REFUSE TO PRODUCE ANY EVIDENCE AT ALL

CONGRESSIONAL OVERSIGHT PANEL: TRANSFERS WERE VOID


Posted on April 13, 2011 by Neil Garfield

SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM
TRUST ASSET POOLS ARE EMPTY

EDITOR’S NOTE: Here we have the results of hundreds of hours of analysis corroborating everything we have said on this blog about the so-called transfers of mortgages. In plain language, the claim of the pretender lenders is that the mortgage was legally transferred into an asset backed pool governed by a trust created by the pooling and servicing agreement. But the PSA provides restrictions on such transfers and specific requirements as to the steps for transfer. Both the restrictions and requirements were violated in virtually every loan claimed to be in such a pool. New York Law which governs the ability of the trust or trustee to take action or accept assets states unequivocally that as a matter of law, the transfer never took place unless the requirements of the PSA were met.

As this segment points out the defect is not curable because of the terms of the PSA itself. This is why an analysis of title and securitization is so important in defending fraudulent  foreclosures and why I have expressed the opinion that the mortgage is not enforceable by anyone. Because the MONEY was divided up amongst the securitizers as though the loan was transferred. Hence, the obligation stated in the note, even if it were somehow deemed valid, was clearly separated from the mortgage or deed of trust in fact by the actual conduct of the parties in handling the money.

Bottom Line: Most of the foreclosures were and are fraudulent and void or voidable.
NEW YORK STATE LAW: Section 7-2.4 Act of trustee in contravention of trust
Sec.    7-2.4    Act    of    trustee    in    contravention    of    trust.   If the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.

RELEVANT PORTIONS FROM CONGRESSIONAL OVERSIGHT PANEL NOVEMBER 16, 2010 REPORT, SUBMITTED UNDER SECTION 125(B)(1) OF TITLE 1 OF THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008, PUB. L. NO. 110-343, EXAMINING THE CONSEQUENCES OF MORTGAGE IRREGULARITIES FOR FINANCIAL STABILITY AND FORECLOSURE MITIGATION

As described above, in order to convey good title into the trust and provide the trust with both good title to the collateral and the income from the mortgages, each transfer in this process required particular steps.38 Most PSAs are governed by New York law and create trusts governed by New York law.39 New York trust law requires strict compliance with the trust documents; any transaction by the trust that is in contravention of the trust documents is void, meaning that the transfer cannot actually take place as a matter of law.40 Therefore, if the transfer for the notes and mortgages did not comply with the PSA, the transfer would be void, and the assets would not have been transferred to the trust. Moreover, in many cases the assets could not now be transferred to the trust.41 PSAs generally require that the loans transferred to the trust not be in default, which would prevent the transfer of any non-performing loans to the
trust now.42 Furthermore, PSAs frequently have timeliness requirements regarding the transfer in order to ensure that the trusts qualify for favored tax treatment.43
Id. page 19.

38 See Section D.1.a.ii, supra. 39 FBR Foreclosure Mania Conference Call, supra note 3. 40 N.Y. Est. Powers & Trusts Law § 7-2.4; FBR Foreclosure Mania Conference Call, supra note 3. 41 FBR Foreclosure Mania Conference Call, supra note 3. 42 Amended Complaint at Exhibit 5, page 13, Deutsche Bank National Trust Company v. Federal Deposit Insurance Corporation, No. 09-CV-1656 (D.D.C. Sept. 8, 2010) (hereinafter “Deutsche Bank v. Federal Deposit Insurance Corporation”). 43 See FBR Foreclosure Mania Conference Call, supra note 3. 44 See, e.g., FBR Foreclosure Mania Conference Call, supra note 3. 45 Restatement (Third) of Prop. (Mortgages) § 5.4 cmt. B (1997).

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