NAKED REMIC TRUSTEES

The Navarro case clearly explains the difference between a naked trustee who cannot sue or be sued in their own name and a real trustee who can. The answer is common sense — the trustee is naked if it is there in name only, like all REMIC Trustees where control, knowledge and accountability are removed from their “position” as trustee.

Quote from Deposition of John G Richards II, as corporate representative of US Bank [vice president at U.S. Bank within
13 the global corporate trust services group]:

Q: Do you manage Chase as the servicer of the trust?

A: I would not describe that there is any kind of management or oversight role by the trustee of a servicer in this trust or any other.

Hat tip to Bill Paatalo for depo transcript

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Hat tip Dan Edstrom

see Role-of-Trustee-Sept2013OCC_Letter_

Trustees_Do_NOT_own_Loans – Int1016

Navarro v Lee – Trust Type and Person Status 1980 US Supreme Crt

We conclude that these respondents are active trustees whose control over the assets held in their names is real and substantial. That the trust may depart from conventional forms in other respects has no bearing upon this determination. Nor does Fidelity’s resemblance to a business enterprise alter the distinctive rights and duties of the trustees.^[15] There is no allegation of sham or collusion. [e.s.]See 28 U. S. C. § 1359; Bullard v. Cisco, supra, at 187-188, and n. 5. The respondents are not “naked trustees” who act as “mere conduits” for a remedy flowing to others. McNutt v. Bland, 2 How., at 13-14; see Browne v. Strode, 5 Cranch 303 (1809). They have legal title; they manage the assets; they control the litigation. In short, they are real parties to the controversy. [e.s.] For more than 150 years, the law has permitted trustees who meet this standard to sue in their own right, 466*466 without regard to the citizenship of the trust beneficiaries. We find no reason to forsake that principle today.

1.  Does the Trustee have legal title? Grey area when it takes title on behalf of the trust rather than simply in its own name when it is supposedly operating as Trustee.  Better to assume that courts will say they have passed the test of legal title.
2. Does the Trustee manage the assets? The answer is no. In fact every PSA I have read specifically cuts the Trustee off from any right or duty to manage the alleged “assets” or any right to even know the status of the “assets” — including knowing whether the assets are actually in the trust (i.e., that the assets have been entrusted to the trustee). In other words if US Bank is named as Trustee it has not opened up a Trust account in the name of the trust nor does it even know, much less manage, the assets or status of the assets.
3. Does the Trustee manage the litigation? The answer is no. Hundreds of foreclosure defense attorneys and hundreds of thousands of pro se litigants learned quickly that they were distracted and diverted to the alleged “servicer” rather than the Trustee who disclaims any interest or knowledge in the litigation.
4. [Editor note: Does the Trustee have any accountability for what happens in the “trust” and in particular with respect to the subject loan? The answer is no. In fact the PSA (Trust Instrument) specifically indemnifies the Trustee from all accountability for any actions within the “Trust” or any actions ostensibly taken in the name of the “Trust” or “Trustee.” The absence of such accountabiliity corroborates that the existence of a Naked Trustee.]

Thus with numbers 2 and 3 (and 4) off the table, the use of the Trustee’s name becomes merely a veil for the real parties in interest.  When I am negotiating settlement I always demand that the Trustee sign off on the settlement or modification. It NEVER happens. The opposition lawyers get very squirrily when I demand that because they know that their client is an alleged servicer and NOT the named foreclosing party (“Trustee”) with whom they have had no contact. The servicer signs modification agreements as attorney in fact for the named Trustee. Thus the Trustee has not directly or indirectly managed the settlement.

It may seem nuts to make a deal with someone with whom you have no legal relationship regarding a loan they neither own nor legally control through an intermediary (“servicer”) whose right to manage and litigate is derived from a trust instrument (PSA) for a trust that does not exist (no assets). I allow it and advise my clients accordingly in the hope that one day a legislative reset button might be pushed to make certain what is now not only uncertain but unknowable.

Practice Note: If you think about it, reseearch it and analyze it, you will have an aha! moment when you consider an assignment from one naked title holder (like MERS, with no authority —  and public disclaimer of any interest in the loan —  over the alleged loan) to another naked title holder (like a REMIC Trustee, as Trustee, and not on its own behalf —  and public disclaimer of any interest in the loan — for a REMIC Trust that doesn’t exist.) That entire exercise is meant to provide cover for the fact that the original loan documents were false. The loan wasn’t made by any of the parties on the loan documents but rather was funded by diverting money from investors’ expectation of the creation of a trust to the funding of an origination of a residential loan.

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