Re-REMIC: Adding Insult to Injury

Nov 2, 2015

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see RE-REMICS Deloitte’s Speaking of Securitization_The Re-Remic Phenomenon

Apparently back in June, 2009 Deloitte published an article for general use about the process of “Re-REMIC.” The article corroborates what I have been saying since 2007. First, the original trusts mostly don’t exist anymore. Second the purported (i.e., nonexistent) assets of the trusts are scattered to the winds and the investors have received bonds from a new special purpose vehicle. Third, the investment banks are avoiding disclosure requirements on something that would ordinarily be insisted upon by investors and regulators alike. Fourth, the article introduces the term “static pool information” which corroborates the fact that all other information is fluid — i.e., they are changing the Mortgage Loan Schedule at will. Fifth, all of that means that the investment banks are covering up the fact that the REMIC Trust had no business or assets by using the Re-REMIC process as a further layer to penetrate, much like organized crime does with shell corporations with zero balance accounts used as conduits.

Because of securities law concerns and SEC registration fees, the vast majority of RE-REMICs are done as 144A private placements. The public deals would most likely be deals from dealer inventory with the underlying REMIC bonds coming from prior deals of that same dealer. If a sponsor were to do a RE-REMIC as a public offering, the offering and the applicable disclosures would be subject to the rules applicable to public offerings generally (including those pertaining to liability) for all of the disclosures required in the prospectus by Regulation AB concerning the underlying REMIC securities, including static pool information.

Note that while this is put out by Deloitte, the use of private placements eliminates the need for a SEC level audit — which would have revealed the absence of any transactions conducted by the REMIC Trust.

When the underlying bonds are from deals that were brought to market by unaffiliated issuers, the sponsor of the RE-REMIC would likely not want to be subject to the additional rules and regulations applicable to public offerings covering data for which they have no control over its preparation and for which, as a practical matter, they may be unable to obtain.

For those with the knowledge and stomach to read it, you will see in the article the way that “value” is a process of smoke and mirrors — far away from the assessment of value that the same banks would allow if they were taking any risk instead of acting as an intermediary for multiple entities in parallel transactions.

Yes it’s complicated and convoluted. But that was always the point. The idea is to get people like you to feel that you are in over your heads and jump to the safer conclusion that they must have known what they were doing and it must be as they say. Yes they knew exactly what they were doing which is why they should be prosecuted. No, it isn’t OK. Just look a the results — the banks are bigger and reporting more profits than ever while the rest of the economy is still limping. Why? Because the banks are holding the juice (Trillions of dollars) that was in the economy until they sucked it all out.

Judges seem to think they don’t need to know any of this, that they can keep it simple and come to the right conclusion supportable by the facts. But they don’t have the facts. They have representations of the facts by attorneys, “business records”, and robo-witnesses. The answer is if you want the truth, then you need to drill down much deeper than what the banks are presenting in court.

The interesting question that will haunt auditors is when the truth comes out about the empty trusts that were retired long before a foreclosure was brought in the name of the Trust. The question will be how did the bank auditors not know?

Tags: DEloitte, Re_REMIC, securitization
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