SECURITIZATION If They Did It Right

Sometimes it IS easier to prove a negative than a positive. Your opposition has far more facts than you do and in due process, should be required to prove them up into a prima facie case using real evidence from competent witnesses, with real documents that nobody played with before initiating foreclosure.

So let’s take a look at how all this WOULD HAVE BEEN DONE, because most judges, even today are seeing the transaction through this lens.

1. A homeowner or prospective homeowner would apply for refinancing or a purchase money first, second or Home Equity Line of Credit (HELOC).
2. Loan Closing and Disclosures
3. Details of the loan and loan closing, good faith estimate and closing statement are provided in some form to both the borrower and the investors who acknowledge receipt and acceptance in binding form. Presumably this would be done through the offices of the manager, agent or “Trustee” of the Special Purpose Vehicle, the name of which and contact information was disclosed to the borrower prior to closing and is confirmed at closing.
4. Assignment of Loan into Pool, acknowledged by Borrower. Intermediaries and Investors disclosed to borrower/debtor. The lender is identified as the group of investors who have provided funding for the loan.
5. Investors’ representative(s) identified and disclosed, with contact information.
6. During the life of the loan, Borrower receives same statement as investor — receipts and disbursements allocable to the loan are allocated and applied to payments and loan balance. If third party payments are received for any reason by any of the intermediaries, who are all disclosed, the amount of the receipt and the method of allocation to the borrower’s loan is disclosed.
7. If the Borrower falls delinquent, the Investors either decide as a group or through their representative, manager, agent or named Trustee whether to offer a workout or to foreclose. A modification or settlement would be negotiated with parties known to Borrower at closing or successors in interest which would have been disclosed immediately upon execution of closing documents between the investors, or part of them, and the successor(s).
8. Any change in ownership of the loan would be a change in beneficiary and a change of Payee under the note, which would be the same party. Such change would be recorded in accordance with State Law. The change would not, under these circumstances leave the Borrower in doubt as to the amount of the obligation and whether the obligation was or should be affected by the third party transactions. If the third party transaction is intended contemporaneously with the closing with the Borrower, even if the third party is not identified, this fact would also be disclosed to the Borrower and the Investors.
9. Insurance, credit default swaps, and other credit enhancements are identified and disclosed to the Borrower — pursuant to contractual provisions executed between the Investors as a Group or individually; provided however, the insurer or third party payor would have rights of subrogation in which upon payment under the referenced contract, they have acquired the interests of the insured parties, in order to mitigate their losses, a fact which was identified and disclosed to the borrower at the closing with the borrower.
10. In this transparent series of transactions that are part and parcel of a single transaction consisting of many steps, the Borrower having accepted all the terms and conditions of the approval of the loan and the securitization of the loan, achieves no greater standing or defense in the event of default. The only exception would be malfeasance or misfeasance by the participants in the securitization chain wherein, disclosed or not, the loan, or part of it, was satisfied by direct or indirect payment to a representative with apparent authority over the loan and to act in the interests of the investor as an agent. If the loan was sold multiple times, neither the Borrowers liability nor the Initial investors’ asset would be effected. Any dispute would NOT include the Borrower whose obligation would be unaffected UNLESS the intermediaries receiving multiple payments for sale of the same loan or percentage interests in the same loan pool were allowed to retain the proceeds of said sale, inasmuch as this would mean that the liability of the borrower would either (a) be diminished by the excess payments or (b) spread out to investors that were not disclosed at the Borrower’s Loan Closing.
11. In the event that the matter is referred to a foreclosure proceeding, the action (whether private non-judicial sale or public lawsuit in foreclosure) would be brought on behalf of the named investors, through their authorized representative, with a complete statement of accounting and exhibits showing the entire securitization structure and the balance due on the Borrower’s obligation, including any third party payments, whether those were allocated to payments, interest or principal, and what balance of the obligation exists. Also named as foreclosers would be those party who acceded to a subrogated interest in the Borrower’s loan in whole or in part.
12. Since a judicial allocation would be required to determine the relative interests and priority of interests of the investors, successors and subrogated parties, it is probably not possible to initiate a non-judicial sale unless there existed an agreement between all of the parties as to those matters. Such an agreement would specifically describe the distribution of proceeds of sale, which party was entitled to enter a credit bid, and what would be done with the property if the bid resulted in a Trustee Certificate being issued giving title to the party that initiated the foreclosure.
13. If the creditor parties were able to satisfy all the prerequisites of a non-judicial foreclosure sale and the sale took place under non-judicial circumstances, the Borrower would lose the right of redemption and the Creditor would lose the right to pursue any delinquency or deficiency resulting from the sale of the home.
14. If the Borrower was the defendant or re-oriented as the defendant in a foreclosure lawsuit, then the borrower’s right to redemption would be retained, if State Law permits same, and the Creditor would, if State Law permits it, be allowed to pursue a deficiency judgment against the Borrower. The allegation for suing for damages to cover a deficiency would include the fact that the sale price was fair and reasonable under the circumstances. The prima facie case of the Plaintiff Creditor in those circumstances would require evidence from an appraiser or other credible resource that is admitted by the Court as competent testimony and evidence of the fair market value and the sales price. Submission of a written affidavit or document is sufficient to support the allegation, not insufficient to satisfy the requirements of establishment of a prima facie case. A competent witness with personal knowledge and recollection is required to establish the foundation of any document. Business records do not include records regularly prepared after the loan goes into default, if those records are offered to prove facts that relate to events prior to the default. SUCH RECORDS ARE ONLY ADMISSIBLE TO PROVE (WITH FOUNDATION FROM A COMPETENT WITNESS) FACTS, CIRCUMSTANCES OR EVENTS THAT OCCURRED AFTER DEFAULT.

Tags: business records, CLOSING WITH BORROWER, CLOSING WITH INVESTORS, CLOSING WITH SECURITIZATION PARTICIPANTS, evidence, prima facie case, securitization, SUBROGATION, SUCCESSORS IN INTEREST, third party payments
Posted in foreclosure mill, Modification, securities fraud |