The Reason Why the PSA Becomes Part of the Loan Contract and Therefore the Borrower Has Standing to at Least Make Inquiries About the PSA Terms, Exhibits and Actual Workings of the Parties to It

The bottom line is that every decision regarding payoff, collection, forbearance and foreclosure must satisfy the conditions of the alleged REMIC securitization. The securitization is most often proffered in court in the form of a Pooling and Servicing Agreement (PSA) which in turn is supposed to have a Mortgage Loan Schedule (MLS) attached but the MLS is actually a fabricated document that didn’t exist when the PSA was created.

So if you want to settle a foreclosure, it must pass through several layers of approvals, and the authority for each level is in considerable doubt.

But all you need to do is rely upon the assertions and allegations of the foreclosure mill.

If they say that there is a REMIC trust that owns the loan and they either offer or submit to discovery demands producing the PSA, then you at least have a credible argument for saying that the alleged lender made the PSA part of the loan contract since no decision can be made without reference to the PSA and the parties who claim authority pursuant to the PSA.

Then you have the issue of whether the loan contract still exists (if it ever existed) because the borrower never agreed to securitization which was, as it turns out, an undisclosed element of his transaction that was so important that but for securitization, the loan would not have ever existed.

• So the last provocative thought is that if the borrower never agreed to securitization and yet the foreclosure mill is relying upon securitization then when did the new contract arise?
• After all if all decisions regarding the modification, payoff, or settlement of the loan are subject to the various documents in securitization when did those conditions arise?
• And if they were contemplated at the time of contract with the borrower should they not have been disclosed?
• And if there was compensation, fees or profits arising from securitization then should not that have been disclosed and is not that the proper subject for an action in disgorgement?

Interesting. Of course the elephant in the living room is that the trust does not exist and even if it did, it does not own or control the debt, note or mortgage. Hence the PSA is irrelevant but if that is the case then nobody claiming any authority through the PSA has any relevance either.

Here are quotes for the article in the link below:

Servicing Counselor identifies issues a servicer considers when a borrower requests a release

(1) Securitization Issues. A partial pay down of a loan has no negative REMIC tax consequences and will never compromise a REMIC’s tax status. See Kilpatrick Townsend, Servicer Survival Guide 2019-2020 Edition, Tom Biafore “Prepayments and Payoffs—What You Can and Cannot Do” for a discussion of the technical reasons why a pay down of a loan presents no REMIC concerns.

In Example 1, however, the borrower’s partial pay down is associated with a release of the noteholder’s lien on Parcel C. The servicer must review the release aspect of the borrower’s request separately from the borrower’s partial loan prepayment. The release of the noteholder’s lien on part of the real property collateral (Parcel C in this example) will not cause any adverse REMIC tax consequences only if after the release of Parcel C, the borrower’s loan meets the “principally secured” by an “interest in real property” test. The “principally secured” test is met when the fair market value of the remaining real property collateral for the borrower’s loan equals at least 80% of the loan’s remaining balance. See Kilpatrick Townsend, Servicer Survival Guide 2019-2020 Edition, Tom Biafore “Modern Day Alchemy—Modifying Qualified Mortgages in REMICs” for an analysis of the “principally secured” test. Provided that the 80% valuation test is met in connection with the release of Parcel C, the noteholder’s release of Parcel C will not cause any adverse REMIC consequences.

(3) PSA Limitations. Just because a borrower’s request may be granted without causing adverse REMIC or other securitization-level tax consequences and without raising credit concerns does not mean that the servicer can approve the borrower’s request before confirming that the requirements in the PSA provisions can also be satisfied.

Most PSAs for fixed rate securitizations prohibit the servicer’s taking actions that change the amount or timing of the borrower’s loan payments. In this case, and despite the fact that the transaction may not cause any REMIC or other tax concerns and may also be regarded by the servicer as positive for the credit for the loan, the servicer must review the PSA and confirm that the release and pay down will not violate the terms of the PSA. In this case, by allowing the transaction to go forward, the servicer will be accelerating the prepayment of part of loan by the amount of the pay down of the release price which violates the standard provisions in most PSAs prohibiting the alteration of the timing of a borrower’s loan payments.

When examining these rules, it does not matter that the borrower’s loan documents contemplated that under some circumstances (which circumstances are not met in Example 1) the borrower could have paid down part of the loan prior to maturity. In Example 1, the borrower fails to meet the conditions for the release of Parcel C and the servicer’s waiving required loan document conditions for the release and pay down results in an impermissible alteration of the loan’s payment terms in violation of the PSA. (e.s.)

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