John Jennings Mortgage Blog
John Jennings belongs to Chandler, AZ. He has several years of experience in mortgage finance. Aim of this blog is to help people under any kind of foreclosure or mortgage finance issue.
Monday 28 October 2013
Sunday 27 October 2013
Tuesday 25 September 2012
Continued
Of course we know that the
Does never got their bond in most cases, and even if they did they received it
issued from a "REMIC" vehicle that wasn't a REMIC and which did not
have any money or bonds before, during or after the transaction. Instead of
following the requirements of the Prospectus and Pooling and Servicing
Agreement, the investment banker ignored the securitization documents (i.e.,
the agreement that induced the investor to advance the funds on a forward sale
--- i.e., sale of something the investment bank didn't have yet). The money went
from the investor into a Superfund escrow account. It is unclear as to whether
the gigantic fees were taken out before or after the money went into the
Superfund (my guess is that it was before). But one thing is clear --- the
partnership with other investors far larger than anything disclosed to the
investors because the escrow account was from all investors and not for
investors in each REMIC, which existed only in the imagination of the CDO
manager at the investment bank that cooked this up.
We now know that in all but
a scant few cases, the loan was (1) not documented
properly in that it identified not the REMIC or the investor as the lender and
creditor, but rather a naked straw-man that was a thinly capitalized or
bankruptcy remote relationship and (2) the loan that was described in the
documentation that the homeowner signed never occurred. The third thing, and
the one I wish to elaborate on today, is that even if the note and mortgage
were valid (i.e., referred to any actual transaction in which money exchanged
hands between the parties to the agreements and documents that borrower signed)
they never made it into the "pools" a/k/a REMICs, a/k/a Special
Purpose Vehicle (SPV), a/k/a/ Trust (of which there were none according to my
research).
The fact that the loan
never made it into the pool is what caused all the robo-signing, fabrication of
documents, fraudulent documents, forgeries, misrepresentations and corruption
of both the title system and the court system. Because if the loan never made it into the pool, the
investment banker and all the intermediaries that were used were depending upon
a transaction that never took place at the level of the investor, to wit:
the loan was not in the pool, the originator didn't lend the money and
therefore was not the lender, and the "mortgage" or “Deed of
trust" was useless because it was the tail of a tiger that did not exist
--- an enforceable note. This left the pools empty and the loan from the
Superfund of thousands of investors who thought they were in separate REMICS
(b) subject to nothing more than a huge general partnership agreement.
But that left the note and
mortgage unenforceable because it should have (a) disclosed the lender and (b)
disclosed the terms of the loan known to the lender and the terms of the loan
known to the borrower. They didn't match. The answer was that those loans HAD
to be in those pools and Judges HAD to be convinced that this was the case, so
we ended up with all those assignments, Allonges, endorsements, forgeries,
improper notarizations etc. Most Judges were astute enough to understand that
the documents were fabricated. But they felt that since the loan was valid, the
note was real, the mortgage was enforceable, the issues of where the loan was
amounted to internal bookkeeping and they were not about to deliver to
borrowers a "free house." In a nutshell, most Judges feel that
they are not going to let the borrower off scott free just because a document
was created or executed improperly.
What Judges did not realize
is that they were adjudicating the rights of persons who were not in the room,
not in the building, and in fact did not even know the city in which these
proceedings were being prosecuted much less the fact that the proceedings even
existed. The entry of an order presuming or
stating that the loan was in fact in the pool was the Judge's stamp of approval
on a major breach of the Prospectus and pooling and servicing agreement. It
forced bad loans down the throat of the investors when their agreement with the
investment banker was quite the contrary. In the agreements the cut-off was 90
days after closing and required a fully performing mortgage that was originated
utilizing industry standards for due diligence and underwriting. None of those
things happened. And each time a Judge enters an order in favor of for example
U.S. Bank, as trustee for JP Morgan Chase Bank Trust 1234, the Judge is
adjudicating the essential deal between the investor and the investment banker,
forcing the investor to accept bad loans at the wrong time.
Forcing the investors to
accept bad loans into their pools, probably to the exclusion of the good loans,
created a pot of s--t instead of a pot of gold. It
isn't that the investor was not owed money from the investment banker and that
the money from the investment banker was supposed to come from borrowers. It is
that the pool of actual money sidestepped the REMIC document structure and
created a huge general partnership, the governance of which is unknown.
By sidestepping the
securitization document structure and the agreements, terms, conditions and
provisions therein, the investment banker was able, for his own purposes, to
claim ownership of the loans for as long as it took to buy insurance making the
investment banker the insured and payee. But the fact is that the investment
banker was at all times in an agent/fiduciary relationship with the investor
and ALL the proceeds of ALL insurance, Credit Default Swaps, guarantees, and
credit enhancements were required to be applied FIRST to the obligation to the
investor. In turn the investor, as the real creditor, would have reduced the
amount due from the borrower on each residential loan. This means that the
accounting from the Master Servicer is essential to knowing the actual amount
due, if any, under the original transaction between the borrower and the
investors.
Maybe
"management" would now be construed as a committee of
"trustees" for the REMICs each of whom was given the right to manage
at the beginning of the PSA and prospectus and then saw it taken away as one
reads further and further into the securitization documents. But regardless
of who or what controls the management of the pool or general partnership
(majority of partners is my guess) they must be disclosed and they must be
represented in each and every foreclosure and Trustees on deeds of trust are
creating huge liability for themselves by accepting assignments of bad loans
after the cut-off date as evidence of ownership fo the loan. The REMIC lacked
the authority to accept the bad loan and it lacked the authority to accept a
loan that was assigned after the cutoff date.
Based upon the above, if
this isn't a case where necessary and indispensable parties is the key issue, I
do not know of one ---
Bankers using Foreclosure Judges
"Foreclosure judges
don't realize that they are entering orders and judgments on cases that are not
in front of them or in which they have any jurisdiction. Foreclosure Judges are
forcing bad loans down the throat of investors when the investor signed an agreement
(PSA and prospectus) excluding that from happening. The problem is that most
lawyers and pro se litigants don't know enough to make that argument. The
investor bought exclusively "good" loans. Foreclosure judges are
shoving bad loans down their throats without notice or an opportunity to be
heard. This is a classic case of necessary and indispensable parties being
ignored."
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