Apr 20, 2016
From Dan Edstrom, senior forensic analyst for livinglies. —
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The OCC Interpretive Letter #1016 (attached) supports our determination that the Step Transaction and Single Transaction Doctrine applies to the alleged mortgage and securitization transactions…
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Consider the following:
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Office of the Comptroller of the Currency Interpretive Letter #1016 (February 2005) available on the following government website: http://www.occ.gov/static/interpretations-and-precedents/feb05/int1016.pdf states, among other things:
“[I]n no sense, under the facts presented, can the Banks be viewed as making a real estate loan under 12 U.S.C. §371 and 12 C.F.R. §34.4.
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The Banks did not originate the loans. They did not fund the loans at inception. Nor did they ‘purchase’ the loans as part of any real estate lending program comprehended by the regulation. *** [T]he Banks act as trustees for the benefit of investors in the trusts. The substance of the transaction is that the investors, not the Banks, are purchasing the loans that have been made by Delta. The investors own the beneficial interest in the loans held by the Banks as trustees.
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And the effect of any liability for violation of the [New Jersey Act] ultimately falls on the investors. Nowhere do the Banks allege that they themselves, as opposed to the trusts they represent, are exposed to liability for any violation of the [New Jersey Act]. For all these reasons, 12 U.S.C. §371 and 12 C.F.R. §34.4(a) simply do not apply to the transactions by which the Banks acquired legal title to the loans***.”
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This interpretation supports our assertion (described first and foremost by Neil) that the Step Transaction and Single Transaction Doctrine apply where complex financial engineering transactions (i.e. securitization transactions) are claimed. So the IRS uses this pursuant to the tax code, California uses this for Assessors, and the OCC uses it (at least implicitly) for securitized transactions. I would actually describe this use by the OCC as using SUBSTANCE to overcome FORM and collapse the transaction leaving out the irrelevant parts.
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This would seem to support the fact that the real parties in interest are NEVER named (the investors) in any lawsuit, non-judicial foreclosure or claim in bankruptcy. (Seems to me this might impact “finality”, especially because the investors are hidden and never disclosed – and in fact may not exist). And of course this could lead us back in to the other problem described by Neil – resecuritization …
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This interpretive letter would also seem to support the idea that the homeowner is a party to the securitized transaction (the PSA, etc.) as is the investor. Both of whom are not named or disclosed (except that the investors supposedly purchased securities offered by the trust and the homeowner’s loan attributes and property attributes are included in the static loan level file usually filed publicly with the SEC (and which in most cases contains personal identifying information of the homeowner).
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And of course we still have all of the problems described by Neil (the parties aren’t in privity, the trusts were never funded, etc., etc., etc.,).
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