What Accountants Say About the REMIC Trusts

“Because securitization entities are typically insufficiently capitalized, with little or no true “equity” for accounting purposes, and are rarely designed to have a voting equity class possessing the power to direct the activities of the entity, they are generally VIEs. [Variable Interest Entities]. The investments or other interests that will absorb portions of a VIE’s expected losses or receive portions of its expected residual returns are called variable interests.”

Editor’s Note: There are two main takeaways from the attached book from Deloitte, one of the largest accounting firms in the world. One is their lead question — “In accounting for securitizations… Do I have to consolidate the special purpose entity(its) involved.” The other is a flat out statement that the trust does not own the loans except in rare circumstances.

The question about consolidation comes up because the “REMIC Trust” is in actuality a part of the underwriter (Master Servicer) and is not an independent issuing entity. It is not an IPO in any sense of the word. The question about the “assets” of the Trust comes up because there are no assets of a REMIC Trust. And THAT means that the “Trust” (really a subdivision of the underwriting brokerage firm) does not own any loans nor any other assets that have any meaningful value.

This corroborates my repeated statements here that the Trust is a non-entity, a “pass-through” entity used to obscure the actual path of money and transactions. If it actually owned debts, notes or mortgages, it would need to be consolidated onto the balance sheet of the brokerage firm that issued mortgage backed securities under the name of the trust. This never happens. There is no business activity in the trust. The designation of the trust as a “holder” is smoke and mirrors. Someone else owns the loans.

And THAT corroborates my attack on the style of the cases in foreclosure wherein a bank is named by attorneys as the trustee not for the trust but for the holders of the certificates. Since the certificates were issued by an entity that has no business or assets, they are worthless. Since the certificate holders are only holding a note or bond owed by the trust they have nothing to do with any specific loan documents.

Whether the foreclosing party is designated by attorneys as trustee for a trust (rare) or trustee for the certificate holders it is a misrepresentation. The ownership of the loan lies not with any trustee but in the equitable right of the”certificate holders” to be repaid.

Read the complaint and summons carefully. You will see that in most instances there is no reference to a trust “organized and existing under the laws of the State of New York.” Instead there is language that means nothing. The Plaintiff or “beneficiary” does not legally exist.

This means that the right party to sue for wrongful foreclosure etc is the underwriter (master servicer) and perhaps the individuals who directed operations in connection with foreclosures, even if it was through layers.

see us-aers-securitization-accounting-011914-final

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