American Home Mortgage Unraveled

From David Briedenbach

In reference to Anonomous;
“Occasionally, there were securitizations in which Depositor was not a a subsidiary of the Wall Street bank – and appeared to be a subsidiary of the originator. These securitizations were simply fronts – for actual party who purchased the loans – since an originator could not sell loans to “itself.” It is possible that these securitizations were directly related to Fannie/Freddie”

One apparent example of this particular comment relates to a securitized trust supposedly sponsored by American Home Mortgage–now in bankruptcy, such that investors ostensibly have little to pursue. In one trust sponsored by the burn company, The trail was as follows: AHM Acceptance Inc, a wholly-owned sub of the AHM REIT group, “originated” home-owner loans of about $3 billion principal in 2004. Acceptance then supposedly transferred the homeowner notes, secured by mortgages, to its sister subsidiary, AHM Securities LLC. “Securities” then is represented to have “deposited” the notes and mortgages securing them to a purported trust American Home Mortgage Investment Trust 2004-4. The trust supposedly issued $3.5 billion in mortgage backed securities [MBS] described as “Notes”. These notes were returned to “Securities” in exchange for the conveyance of the homeowner notes/mortgages. Depositor “Securities” then allegedly “sold” the trust “Notes” to Lehman etc. who as underwriters that resold the notes to investors around the world. The series of steps would was a way for AHM to lend money to homeowners using short-term warehouse borrowings and paying off the warehouse lender with proceeds of sales of MBS to investors. The final speps in the series theoretically took the home-owner loans off the assets side of the AHM group and the proceeds of “sale” to investors of AHMIT 2004-4 IOUs off the liability side of the AHM group. The overall effect of the transactions was an apparent attempt by AHM to take the transactions off its balance sheet. However, as Anonomous rightly points out the entire series of transactions described in the securitization documents appears to have been a smoke-screen for off balance sheet activities by the BIG BANK that actually was “behind” all of this. In this particular case, that was Bank of New York. BNY was the named Indenture Trustee for AHMIT 2004-4. That means, its BNY that is the named plaintiff in a foreclosure action on behalf of the purported trust.
AHM CEO Strauss signed the Sarbannes Oxley certification in the 10K EOY 2004 for that trust. In a curious twist Strauss stated that in making the Sarbannes oxley filing that he relied on representations by BNY. BNY was more than a passive Indenture Trustee. BNY employees signed and presumably filed the 8Ks. These are truly noteworthy. The Prospectus stated that several classes of the off-balance sheet investor notes [MBS] would add to $3.5 as noted above. The amounts of each class was set out in the 8Ks prepared by BNY, there is a column of these amounts in each of 11 filings. The last filing was a delisting of all MBS in the trust as being owned by a single investor? However, the columns of tranche note face amounts of the MBS simply do not add up to the amount inserted by BNY–roughly twice the amount of the numbers being added. The $3.5 seemingly grew to over $7 billion in the BNY-source filings. Strauss caveat in the 10K re reliance on BNY and the BNY filings which seem to mistate the amounts of the tranches, suggest that BNY was at all points involving securitization “in charge”. Further, the trust has no mortgage loan schedule on file with SEC and no list filed with the Delaware UCC although both actions were represented in the securitization documents. For you legal experts out there a question: If BNY was the person in control as Strauss and the 8Ks suggest, who was the real issuer? And if the Indenture Trustee never filed the key documents entrusting the purported trust with assets, does the trust own those assets? Does a disembodied trust lacking a corpus exist? If it was created for the purpose of concealing the interest of the true owner? or other misdeeds? Any caselaw?

Another key element, the trust is stuffed with predatory loans -especially in the group I loans. 4-option ARMS with negative amortization and a teaser rate good until the 1st payment. This fact pattern seems to support all of Anonomous contentions and suggests that the bad loans should be put back to BNY –not a bankrupt AHM.

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