SHELL GAME: POOLS ARE EMPTY

the originator remained your “lender” for all legal purposes including TILA/RESPA. But, these originators are “dead” – so who is the lender for TILA/RESPA?? – not the Trust and not the security investors, not the servicer, and certainly not the Trustee – all according to the Federal Reserve Interim Opinion on May 2009 TILA Amendment (now rule). The lender/creditor is the entity on whose balance sheet the loan rights lie.

Conveyance of Mortgage Loans is usually found under Article II in the PSA. – but conveyance is NOT “on behalf of the securitization Trust.” Conveyance is for the “benefit of the Certificateholders” to the Trust.

one cannot assign a loan to a REMIC if there is knowledge of default. Thus, if assignment occurs (to cure defect) after default – and after removal of receivable from Trust – this is simply – fraud.

submitted by a very good friend “Anonymous” responding to “the other side”

It was a former attorney from Thacher Proffitt, now Sonnenschein , and whose name appeared on many SEC documents – that informed that the “Trusts” are a “shell” – meaning “empty.” This is for many reasons – and, these Trusts are no longer performing as originally intended..

1) You have to look at how these mortgage loans – not the Trust itself – were funded. The loans were funded with warehouse lines of credit – set up specifically for originators to utilize at origination and with conditional prearranged agreements to sell the loan to the Banks. NO WHERE DOES THE transfer of loan to warehouse lender and subsequent sale of the loans to the Bank exist. The originators did not remove THEIR receivables from THEIR balance sheets for securitization – the BANKs removed THEIR receivables from their own balance sheets for securitization.

2) If the process described above is accurate and currently working, then the originator remained your “lender” for all legal purposes including TILA/RESPA. But, these originators are “dead” – so who is the lender for TILA/RESPA?? – not the Trust and not the security investors, not the servicer, and certainly not the Trustee – all according to the Federal Reserve Interim Opinion on May 2009 TILA Amendment (now rule). The lender/creditor is the entity on whose balance sheet the loan rights lie.

3) According to FASB 166 and 167, these off-balance sheet trusts – owned by the banks – are now back on the banks balance sheet.

4) Why did the banks own the off-balance sheet trusts? Because the Depositor was their subsidiary – as was the security underwriter – who purchased ALL the certificates to the Trust excluding the servicer owned residual tranche. The bank would then use their certificate owned tranches in derivative CDOs, and squared CDOs – on which many credit default swaps were written.

5) When you look at PSAs – you have to know – who is the seller/sponsor, who is the originator, and who is the Depositor. The above author states – “pooling and servicing agreement, which conveys the mortgage loans from the depositor to the trustee on behalf of the securitization trust” The author does not complete his statement. Conveyance of Mortgage Loans is usually found under Article II in the PSA. – but conveyance is NOT “on behalf of the securitization Trust.” Conveyance is for the “benefit of the Certificateholders” to the Trust. The security underwriters purchase all the certificates to the Trust – they OWN the Trust . The Depositor is a subsidiary of the Bank, as is the security underwriter a subsidiary of the Bank. By the “Conveyance” – the loans are converted from on balance sheet receivables (Depositor parent owned – to off-balance sheet securities (security underwriter owned). But, all of this is without the first step – sale of mortgage loans to the bank. Now, you may consider that the sale to Depositor – since it is a subsidiary of the parent bank, counts as the sale to the Banks – but the Depositor does not provide the warehouse funding to the originator – the bank does. Which brings us to the Mortgage Loan Purchase agreement.

6) The Mortgage Loan Purchase Agreement (MPLA) is the sale of the loans from the Sponsor/Seller to the Depositor. Sometimes, the Sponsor/Seller is the originator – sometimes it is not the originator. In the case of the latter – a sale of the loans from the originator to Sponsor/Seller is often missing in the chain. Under either case, the Depositor did not provide the funding to purchase the loan – only the parent corporation bank had this ability. Neither did subsequent security investors fund the loan (this has always been my disagreement with Neil) – because the MPLA occurs PRIOR to the sale of the loans to the Trust and prior to the sale of trust certificates to the security underwriters. The loan originations were funded by warehouse lines of credit funded by the bank to the originator. And then sold to the parent bank by the originator via the warehouse funder.

7) MERS is nothing more than a “nominee” for the actual bank that funded the origination and purchased the loans via warehouse lending – which was concealed at mortgage origination..

Therefore, none of the assignments, endorsements, etc. are accurate because the FIRST SALE To the bank is not part of the chain.

9) All of this is MOOT – for two reasons A) the default loans are removed from the Trust via swap contracts and/or sale of collection rights once the receivables are charged-off. The REMICs were set up for pass-through of current receivables only. The trustee will not account for foreclosure recoveries. The only tranche that may be applicable is the residual servicer owned tranche – which means the servicer is servicing default loan for itself – or for the entity that funds the servicer payment advances. But the servicer will only advance payments for a certain amount of time – after that the servicer is servicing default loan for the entity that has purchased collection rights via swaps or direct sale of collection rights.

B) The author describes a process that was utilized WHEN the securitizations were actually functioning as intended. This is no longer the case. The trusts have been dismantled, torn apart, and paid via swaps, and with any remnants either now back on the banks balance sheet (FASB) or with the US Government’s balance sheet..

10) As far as the REMIC 90-day rule, the author’s premise MIGHT be correct – IF the loans are still performing. But, one cannot assign a loan to a REMIC if there is knowledge of default. Thus, if assignment occurs (to cure defect) after default – and after removal of receivable from Trust – this is simply – fraud.

11) Finally, none of the above accounts for any loans that may have been been a forced “Repurchase” by the originator (Repurchase Agreement is part of MPLA) – or SHOULD have been repurchased – as is being argued by derivative security investors – such as the Federal Reserve – today.

In conclusion, what the author argues does not include the flaws in chain of sale of loans at the time of loan origination and trust setup and PURCHASE of loans by the banks. And, the author does not include how default loans are removed from the trusts, or subsequent default of the Trusts themselves. As a result, the mortgage loans are back on banks (or government) balance sheet – whether performing or not – OR with collection rights sold to unidentified swap provider and/or third party distressed debt buyers/hedge funds.

While the author would love to assume that all is still well (these guys signed their names on numerous SEC documents), all is not well. All has collapsed – and there lies the foreclosure fraud.

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