How Judges, Attorney, Homeowners and Even Investors Get it Wrong about "RMBS"

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The main point is that the “MB” in RMBS” is “BS.” The certificates are not mortgage backed — as has been repeatedly determined by competent courts considering the status of holders of those certificates.

1. Investors do not have any right, title or interest in any obligation, note or mortgage from any homeowner.
2. Investors do not have any right, title or interest in receiving payments from homeowners.
3. Investors do not have any right, title or interest in enforcement of contracts with homeowners.
4. There is no connection between investors and homeowners.
5. There is no connection between investors and foreclosures.

Look at this Ohio decision:

Countrywide Mortgage Loans, Park Granada Mortgage Loans, Park Monaco Mortgage Loans, and Park Sienna Mortgage Loans (“Countrywide”) were mortgagees that loaned money to homeowners and then pooled the mortgage loans and sold them to a depositor, which would transfer them into trusts. These trusts were created to facilitate residential mortgage backed securities (“RMBS”) transactions with Countrywide as seller.The depositor then transferred them to defendant-appellee Bank of New York Mellon (“BNYM”), which was the trustee. As trustee, BNYM issued certificates that entitled investors, or certificateholders, to income from the principal and mortgage payments collected by the master servicer, which received loan payments from the borrowers and serviced the loans. In this case, the mortgage servicer was a Countrywide affiliate, Countrywide Home Loan Servicing LP. BNYM also held the mortgage documentation for the loans. These mortgage files were supplied by Countrywide after the closing of the loans. Ultimately, BNYM would distribute payments to certificateholders. Plaintiff-appellants Western and Southern Life Insurance Company, Western-Southern Life Assurance Company, Columbus Life Insurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company, and Fort Washington Investment Advisors, Inc., (“W & S”) purchased certificates representing bundles of these mortgages with a face value of $ 538 million.

W. & S. Life Ins. Co. v. Bank of N.Y. Mellon, 129 N.E.3d 1085 (Ohio Ct. App. 2019)

To make things easy all recitals that are completely without merit and wholly untrue are in bold italics.

1. Countrywide Mortgage Loans, Park Granada Mortgage Loans, Park Monaco Mortgage Loans, and Park Sienna Mortgage Loans (“Countrywide”) were NAMED (NOT ACTUAL) mortgagees that loaned no money. THEY DID NOT LOAN MONEY, THEY DID NOT PAY MONEY AND THEREFORE THEY COULD NOT BE MORTGAGEES BECAUSE ONLY PAYMENT OF VALUE FOR THE DEBT EFFECTUATES A VALID LIEN ENCUMBRANCE ON THE SUBJECT PROPERTY. 
2.  NO DEBTS WERE POOLED, AND THEREFORE NO LOANS WERE POOLED. Loan data was aggregated without regard to ownership, which was irrelevant.
3. No sale to any depositor was ever concluded with the payment of value for any loan.
4. No transfer of a loan could ever be completed without transfer of ownership of the debt which was not owned by any of the above parties even temporarily. Such transfers are considered to be a legal nullity in all US Jurisdictions.
5. No trust or trustee ever received any ownership of any obligation owed by any homeowner.
6. Countrywide was never a seller of obligations. It was an aggregator of loan data.
7. Bank of New York Mellon never issued any certificates.
8. Certificate holders were never entitled to interest and principal from paid by homeowners. They were only entitled to discretionary payments from the investment bank doing business under the name of the “trust.”
9. Bank of New York Mellon never touched a single penny, document or had any interaction with anyone regarding any obligation relating to any homeowner. They are strictly a paid vendor — use of their name provides a royalty and under certain other agreements like “Corridor Administration  Contracts” they receive money for a service that the counterparties actually perform for themselves through intermediaries.
10. Bank of New York Mellon has never received a payment from a homeowner in this context nor has it ever paid any money to investors. It maintains no financial accounts through which such money could even pass.

The real question is why the investors chose to sue Bank of New York Mellon instead of alleging vicarious liability against the investment bank that was pulling all the strings. The answer could be that the fund managers were controlled or influenced by the investment banks who were responsible for this mess.

The secondary question is whether the beneficiaries of the investment funds (pension funds) that bought the worthless certificates can sue fund managers for breach of duties including perhaps the covenant of acting with due diligence and good faith. Any real securities analyst who looked at this scheme refused to have anything to do with it.

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