TAPE Recording Shows "Trustee" is NOT the party with Fiduciary Powers or Obligations

One of the interesting things about Arizona Law is that it is perfectly legal to tape record a telephone conversation without the knowledge or consent of the parties to that call.

I have a tape recording of a conversation between a borrower up in Scottsdale and an officer of Deutsch bank who is in charge of “Asset Acquisition.” His name might well be on the documents in your case. In that conversation he says that Deutsch is the “beneficiary”.. “for the “benefit of the investors”. He says that the whole arrangement is “counter-intuitive” (used that word more than once). Although the beneficiaries are the investors and Deutsch is named as Trustee, the Trustee has nothing to do. That is because the servicer (One West in the conversation) actually has complete discretion on all issues including modification. As to whether the loan was modifiable he explicitly deferred to the servicer.

Thus he is saying that notwithstanding appearances and what would be logical the ACTUAL arrangement is that the servicer has all power over the assets that have been conveyed to investors. He never mentioned the “Trust” (remember my contention is that there is no trust, that the SPV is merely a conduit vehicle for aggregating the assets and revenue streams from borrowers, insurers, counterparties on CDS etc.) He even refers to the servicer as having “fiduciary” obligations but shies away from any reference to Deutsch having fiduciary duties.

In my opinion, this tape both confirms my opinion and supplements it with a surprising detail, to wit: the servicer is the one with the power of a “Trustee” and not the named “Trustee” (in this case Deutsch). But the power of the real trustee (servicer) is limited to the provisions of the note, excludes third party payments from insurers, counterparties and federal bailouts, and is without reference to the encumbrance allegedly created by the Deed of Trust (Mortgage).

Boiling this down to its essential elements, the owner of the “asset” (the loan) is a group of investors who accepted certificated or non-certificated interests conveying to them a percentage interest in the flow of funds (principal and interest) and ownership of the note. The reference to a “Trust” is nominal (in name only) and the reference to a “Trustee” is both nominal and misleading. The beneficiary under the Deed of Trust, as seen by this representative of Deutsch is also the investor in that Deutsch is only named as a straw man for the investors as a convenience and with the result that the true beneficiaries are not disclosed.

Therefore, on its face, the beneficiary on the original Deed of Trust, the beneficiary named in the instruments used to securitize the loan, and the beneficiary in fact are all different. The original note also names a payee that is different from the payee under the assignments, which is different from the payee under the instruments of securitization and different from the actual party (the servicer) who receives those payments. In practice, according to this officer, the actual payee under the securitization documents (the investors) is different than the parties receiving payment and enforcing payment.

The effect of this “counterintuitive” arrangement is that the beneficiary and the party who represents themselves as the proper holder in due course or owner of the loan are different. All of this presumes that the loan was in fact properly, legally and successfully assigned and securitized — a question of fact since there are multiple conditions to acceptance of the assignment and multiple conditions subsequent (replacement of loan with another, buy back of the loan etc.), which are also questions of fact as to whether those conditions subsequent did or did not occur. In addition there are subsequent events (third party payments in accordance with insurance contracts, credit default swaps and other credit enhancements written into the securitization documents) that are also questions of fact.  And in either related or non-related context, there is the fact that many of these special purpose vehicles (“Trusts”) have been dissolved with the “assets” resecuritized into brand new securities sold to new investors.

Tags: beneficiary, DEED OF TRUST, Deutsch Bank, fiduciary, HERS, investors, One West, OneWest, Payee, payor, securitization, servicer, Tape recording, transparency, trustee
Posted in Corruption, expert witness, foreclosure mill, Modification, securities fraud, Servicer |