KISS – Keep It Simple Stupid: Why Brad Conducts Part of the Workshops

See also provident-bank-v-silverman-super-duper-explanation-of-ucc-transferres-holders-and-holders-in-due-course-and-perfecting-title-to-note-or-mortgage

 KISS – Keep It Simple Stupid

Totaled Cars and Totaled Mortgages – Credit Default Swaps – CDS – 101

By Brad Keiser

OK this article is for those newer readers and tenured Livinglies devotees as well as those who have attended Al Pacino’s(oops I mean Neil Garfield’s ) workshops and are not quite yet fluent in Garfieldeese or Wall Street Pig Latin. You have  heard him rant about derivative securities, credit default swaps, insurance products and co-obligors, etc….and why/how they come into play with the securitization process with respect to the argument that the party bringing the foreclosure action against you has already been paid.  Trial lawyers who use expert witness testimony realize that the success of expert testimony often hinges less on impressing the jury with degrees or credentials of the expert witness than on the ability of the expert witness to effectively communicate with a jury or judge and often simplify complex subject matter and put them into the context of the case at hand. The same is true for lawyers or Pro Se litigants. Allow me to break down the credit default swap elephant into bite size pieces

First, a credit default swap(CDS) can be defined in layman’s terms as “an insurance policy.” The objective of my car insurance policy is to protect a physical asset I own or replace the vehicle if it is totaled without having to take the cash out of my pocket. In the case of my life insurance policy, the benefit is a lump sum of money that theoretically would replace the “income stream” my family depends on if I die. The rationale for insurance is that it is easier for me to budget $500 every six months for car insurance than suddenly have to come up with $30,000 at once to replace my wife’s totaled minivan. In both instances beside the financial benefit I also derive the additional benefit of peace of mind.

In the securitization process, typically the Special Purpose Entity (SPE) or Trust that issued the mortgage backed securities (MBS) purchased an insurance policy (CDS) on the assets they were holding for the same reasons. In the event the mortgage was “totaled” the insurance carrier (we’ll call them AIG in this instance) paid out on the policy and made the SPE or Trust whole so they could continue to pay the investors they sold the securities to their periodic return on investment(ROI). As with the car and life insurance above, there was a similar “non-financial benefit” called peace of mind. The presence of this “insurance” gave the investors in the securities peace of mind and no doubt contributed to the peace of mind of the ratings agencies (Moody’s, Fitch, S&P) who gave these securities AAA ratings. The triggering events in each of the above examples are respectively an accident, a death or a default.

Totaled Car, Totaled Mortgage Pretty Simple Judge

So when my wife totaled the minivan, a vehicle I might add that had a properly RECORDED lien noted on my vehicle title, the insurance carrier issued a check to the bank that held the lien and paid off the note on the car OR put another way satisfied the obligation. The check did not come from me, it came from the insurance company, the bank obviously did not care where the money came from, the obligation was satisfied and the lien on the minivan was released. So did the bank, after getting paid by the insurance company, get to keep the damaged minivan ALSO and take it to an auto auction (READ: foreclosure sale) and keep the proceeds of auctioning off the wrecked minivan?  Noooo… Did I, the owner, of the minivan get to keep the wrecked minivan and sell it for additional $$$ beyond the benefit of the proceeds of the insurance policy paying off the loan at the bank? Noooo…

Based on the terms of the typical auto insurance policy who ends up with the title on the totaled minivan? It sure isn’t the bank that got paid off by the insurance company. The point is that absent someone’s sworn testimony, who can attest to personal knowledge about your specific loan and/or irrefutable evidence that your mortgage was a) not sold or securitized or b) not subject to an “insurance policy” we cannot be sure that the parties in court today have any authority.

KISS – Just win the argument of the day. Judge we are not saying this closing never occurred, we are not saying that a note was never signed; we are not saying the note wasn’t funded. We are saying the  material dispute before the court today is whether or not the parties here today bringing this action have already been paid and/or whether or not they are even the right parties with authority to bring this action against my client… We simply want the case to be heard on the merits.

By the way my wife now drives a monster, gas guzzling Chevy Suburban ,not that I am anti-environment or anything, just protecting the most valuable cargo I have in this world …the Keiser kids.

Tags: borrower, brad keiser, credit, disclosure, foreclosure, foreclosure defense, foreclosure offense, fraud, lender, Lender Liability, predatory lending, rescission, RESPA, securitization, TILA audit, trustee
Posted in bubble, Eviction, securities fraud |