Why it isn't really a trust — REMIC or otherwise.

The certificate holders are creditors of the beneficiary investment bank who is merely doing the business under the name or label of the “trust.” In short, it is a recitation of an investment bank doing business with itself.

If you name your car Mary Ann it does not imbue the car with the attributes of a living being. But there is no harm in you thinking fondly of your car as Mary Ann. On the other hand, if the car is an accident you can file a police report or even a lawsuit claiming property damage but you can’t claim assault and battery because Mary Ann is still a car — i.e., property.

The financial community on Wall Street depends upon the ignorance or forgetfulness of nearly everyone when they create, promote or justify strategies borne in the securitization era.

So let’s review the basics. What is a trust, what are the components, and what does a trust do?

Trusts are among the fictitious “persons” that are allowed by law. They are formed for a variety of reasons. In legal actions, it is treated as though it was a person but everyone knows it is not a person. Coming up with the name for a trust is the first step in formation. But if you do nothing else there is no trust. It’s like saying you will name your car Mary Ann before you buy the car. The name exists, but not the car.

The next thing that is required by statutes in all US jurisdictions in the writing and signing of a “trust agreement.” But if you write up your grocery list and put the label “trust agreement” at the top of the page that doesn’t qualify as a trust agreement.

Why? Because no trust was created, organized, or registered anywhere, of course. But more importantly, the trust agreement consisting of your grocery list does not contain any of the elements of a trust agreement s required by statutes in the jurisdiction in which the “trust” was intended to be created.

So if you want your document to be a valid trust that gives powers to a named trustee to act on behalf of the trust for the benefit of beneficiaries you need all of the following elements:

• Person setting up the trust. The person is commonly known as the trustor, though you may sometimes see the terms settlor or grantor.
• Objective of the trust. You use different types of trusts to achieve a variety of specific estate-planning or other objectives. You can use some trusts for a business objective, while others help you achieve more than one goal.
• Specific kind of trust. Trusts come in many different varieties. Regardless, when you’re setting up a trust, you need to decide what type of trust you want and make sure that you follow all the rules for that particular type of trust to make sure that it’s proper and legal, and carries out your intentions.
• Property. After you place property into a trust, that property is formally known as trust property. [In the case of documents that bear a title relating to REMIC trusts the trust property could be the right to receive payments from homeowners — but only if the grantor legally owned the right to receive such payments.]
• Beneficiary. A trust’s beneficiary (or, if more than one, beneficiaries) benefits from the trust in some way, usually because the person or institution will eventually receive some or all of the property that was placed into the trust — or the income from the property placed in trust. The property can be intangible (some legal entitlement) or tangible (ownership of real or personal property or an interest in property —- like a mortgage).
• Trustee. The person in charge of the trust is known as the trustee. The trustee needs to understand the rules for the type of trust he or she is managing to make sure everything in the trust stays in working order. But if a person or business is named as trustee and they have no power, rights, or obligation to manage any property for the benefit if the trust and its beneficiaries, the “trustee label” is only a label and not the appointment of anyone who is required to do anything.
• Rules. Finally, some of the rules that must be followed are inherently part of the type of trust used, while other rules depend on what is specified in the trust agreement. You will find still more rules in state and federal law.

Note that the typical PSA (Pooling and Servicing Agreement) is not a trust agreement even if it is labeled as such. It does not describe any property granted to the trustee or the trust, and the trustee has no power to do anything in connection with managing property for the benefit of beneficiaries who are not identified in the PSA.

In addition, the typical PSA contains only references to future events. A trust agreement would not be a complete creation of any trust without a legal grant of property by a grantor into the trust. And the typical PSA is unsigned or digitally singed by unknown sources. It is also incomplete in that the exhibits it refers to are not attached — most notably the Mortgage Loan Scheule which has not yet been created. And there is no recitation that anyone owns the loans on the schedule even later.

If you demand a copy of the actual trust agreement you will discover three things in the typical situation.

(1) the required elements of a trust are absent

(2) the purpose of the trust is to establish a name in which “legal title” only will be held by virtue of the execution of other documents purporting to grant title to the “trust” and

(3) the beneficiaries are one or more investment banks — i.e., they do not name any certificate holders as beneficiaries of the “trust” because they are not beneficiaries. The certificate holders are creditors of the beneficiary investment bank who is merely doing the business under the name or label of the “trust.” In short, it is a recitation of an investment bank doing business with itself.

So now you know that the lawyer who says he is filing the foreclosure on behalf of XYZ bank as trustee is not representing XYZ bank nor the tr just that is named and certainly not the certificate holders. I think more attention should be paid to his subject and the activities of lawyers who say they have a client when inf act they don’t. The circular logic of saying that they were hired by a company claiming to be a servicer because of some power of attorney signed by the company or bank named as trustee for a trust that has no property with a  trustee who has no powers, won’t survive scrutiny. But you’re going to be required to fight for it.

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• But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more.
• Yes you DO need a lawyer.
• If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.

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