IF YOU ARE IN FORECLOSURE WITH SOME BANK CLAIMING TO BE TRUSTEE FOR CERTIFICATE HOLDERS YOU NEED TO READ THIS ARTICLE.
It is in tax litigation that some of the truth comes out. While the courts have yet to determine if the REMIC Trust ever existed, they are coming to some interesting conclusions — corroborating all the basic underlying themes of this blog and all my work since 2007.
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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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Hat Tip Bill Paatalo
see Cashmere Valley Bank v WA Dept of Revenue_Unsecured Mortgages (WA Sup Ct 2014)
Borrowers making the payments that eventually end up in Cashmere’s REMIC investments do not pay Cashmere, nor do they borrow money from Cashmere. The borrowers do not owe Cashmere for use of borrowed money, and they do not have any existing contracts with Cashmere. Unlike HomeStreet, Cashmere did not have an ongoing and enforceable relationship with borrowers and security for payments did not rest directly on borrowers’ promises to repay the loans. Indeed, REMIC investors are far removed from the underlying
mortgages. Interest received from investments in REMICs is often repackaged several times and no longer resembles payments that homeowners are making on their mortgages.
While it is true that the interest received by Cashmere from the REMICs ultimately comes from promissory notes secured by mortgages and deeds of trust, Cashmere has no interest in the underlying mortgages and deeds of trust and is not a beneficiary of those instruments.
In plain language, all cases in which XYZ appears as Plaintiff or the alleged beneficiary under a deed of trust and it asserts its appearance as, for example, US Bank as Trustee for the certificate holders of 2007-A Mortgage pass though certificates it is not possible to ascertain the interests of the certificate holders without examining the certificates, their indentures and any side agreements that apply.
As stated in this Washington Supreme Court case, certificates vary as to whether they grant an interest in notes, mortgages or even a particular income stream. Prepayments by homeowners might not be paid at all to “preserve” the interest income flow. Payments received by way of a foreclosure sale are handled the same way, with deductions for alleged “servicer advances” that are neither advances nor do they come from the servicer.
The ultimate source of cash flow was mortgage payments. However, Cashmere’s investments were not backed by any encumbrance on property nor did Cashmere have any legal recourse to the underlying trust assets in the event of default. Thus, Cashmere’s investments were not “primarily secured”
by mortgages or trust deeds. We affirm the Court of Appeals and deny Cashmere the deduction.
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The secondary market buyer acquires the right to receive the borrower’s principal and interest payments on the home loan and also the right to foreclose on the home if the borrower fails to make timely payments.4 The buyer often purchases numerous mortgages from various institutions and then “securitizes” the mortgages by pooling (or packaging) the mortgages and issuing interests based on those pools to investors. These interests-that is, these MBSs-vary in how they are structured and what kind of interest the investors receive. See Cashmere Valley Bank v. Oep’t of Revenue, 175 Wn. App. 403, 305 P.3d 1123 (2013) (explaining creation of MBSs).
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