- Real Estate
Diving Head First Into The Securitized Mortgage Pool
Most homeowners have never heard of the term “securitization” and have no clue what has happened to their mortgage, until they have an issue with missed payments or a possible foreclosure. The belief of most homeowners is that the entity that they are sending their monthly mortgage payment is the owner of their mortgage. WRONG.
From around 2002 – 2007, mortgages were securitized faster than they were created. The securitization of mortgage loans is an extremely complex process which involves many different entities. The majority of securitized trusts are governed by New York Trust Law and their associated documents, which include the most important document which is called a POOLING AND SERVICING AGREEMENT(PSA). This document describes VERY strict procedures and guidelines which must be followed precisely, in order to assign these mortgages into the trust within a certain time frame (cut off date and closing date). ONCE THE CUT OFF DATE AND CLOSING DATE FOR THE PARTICULAR TRUST HAS OCCURRED, MORTGAGES CAN NO LONGER BE ASSIGNED INTO THE TRUST.
In order to keep the trust “bankruptcy remote” with limited liability, the mortgage must be assigned through several entities, which include the originator (A) assigning the mortgage to the Sponsor (B). The sponsor was primarily responsible for filing the necessary documents with both the IRS and SEC in order for the trusts to claim a “tax exempt” status. These trusts were claiming a “tax exempt” status by filing documents with the IRS and SEC stating that all of the mortgages were properly assigned into these trusts, and in doing so these trusts have up until this point evaded BILLIONS of dollars in taxes owed to the government. The IRS and SEC are currently doing their own independent investigations into these acts of tax evasion and fraud.
The sponsor then assigns the mortgage to the Depositor (C) and finally with the Depositor assigning the mortgage to the Trust (D).
There was no incentive for the originators to follow their own rules to ensure that the mortgages were properly assigned into the trust. The mortgages were sold to the trusts before the ink was dry on the paperwork.
Throwing hundreds of years of property law out the window, all in the name of as much profit as quickly as possible for Wall Street, the paperwork was never completed in order to properly document the required transfers of the properties into these trusts. In most if not all cases, there will only be ONE assignment of mortgage created and dated SEVERAL YEARS after the cut off date and closing date of the trust (which is in clear violation of the PSA). This single assignment will usually be from the Originator (A) DIRECTLY to the Trust (D), skipping all of the entities in between (also in violation of the PSA).
There are multiple problems with these “A to D” assignments, which include: When these documents are created, the Originator (A) no longer has anything to sell or transfer. The PSA states that such a sale and transfer needed to occur years ago prior to the cut off date and closing date of the trust. Next, the documents do not comply with the objective of securitization by creating “bankruptcy remote” and “true sales” of the Trust, by assigning the mortgage to the Sponsor (the B party) and the Depositor (the C party). In a true securitization, a direct transfer (A to D) from the originator to the trust would not be allowed. Also, these A to D transfers ignore the representations and warranties made to the Securities and Exchange Commission, the IRS, and to the certificate holders issued by the Trust.
In many cases, the A to D documents are executed by parties (Robo-Signers) who are not even employed as "Vice President" or "Assistant Secretary", but claim to have “signing authority” or some type of “agency authority” from the originator. These "Robo-Signers" sign THOUSANDS of documents each day that they know absolutely nothing about. Lastly, in most if not all situations, the originator is legally defunct (out of business) at the time the mortgage is assigned directly from the Originator to the Trust. In addition, these documents are often signed with a current date and an “effective date” that was one or two years earlier, essentially "backdating" the document and creating the false impression that the mortgage has been into the trust all along.
If your mortgage has been securitized (most if not all mortgages have been securitized), you were actually an issuer of an unregulated security in a highly complex structured financial transaction, which was not disclosed to you at closing, and is a violation of several laws. When a homeowner takes out a loan to purchase a house, the two documents used are a NOTE and a MORTGAGE. The original mortgage and loan documents were destroyed, and the mortgages were sliced and diced multiple times and pledged to multiple trusts simultaneously. The investors who pooled their money into these trusts were given BONDS AND/OR CERTIFICATES as evidence of ownership, which is regulated by the SEC (Securities and Exchange Commission).
THE BANK CANNOT “HAVE THEIR CAKE AND EAT IT” TOO. IF AN ENTITY IS ATTEMPTING TO FORECLOSE BY WAY OF THE MORTGAGE, KNOWING THE LOAN HAS ALSO BEEN CONVERTED TO A BOND BY SECURITIZATION, THIS IS A FORM OF SECURITIES FRAUD. THE NOTE AND BONDS CANNOT EXIST AT THE SAME TIME.
This is the reason why the banks cannot "produce the note" when the homeowner stands up for their rights in Court. The Bank will only be able to produce "copies" of the note and mortgage and not original documents.
The players involved in the securitization scheme relied on “Credit Default Swaps”, and essentially placed unregulated side bets against the homeowner, in that they would not be able to continue making their mortgage payments on mortgages which were purposely designed to fail. That’s right, Wall Street knew this, and placed HUGE bets and HIT THE JACKPOT. Not only were these side bets very profitable, but other forms of insurance were placed on the pools to cover the manufactured “losses”.
For example, if a homeowner has an adjustable rate mortgage for $300,000 and goes into “default”, the credit default swaps and pool insurance will pay the investors of the trust for their “losses” up to THIRTY TIMES THE AMOUNT OF THE LOAN FOR A GRAND TOTAL OF $9 MILLION DOLLARS. As a result, your mortgage has been PAID IN FULL many times over.
As if being paid up to thirty times over is not enough, the servicer will collect one more time and foreclose on the homeowner and sell the house for a very nice profit when they have NO LEGAL AUTHORITY TO FORECLOSE. THERE IS ABSOLUTELY NO INCENTIVE FOR THE SERVICER TO WORK WITH A HOMEOWNER TO STAY IN THEIR HOUSE. IT IS MUCH MORE PROFITABLE TO FORECLOSE.
Some of the many critical questions that the homeowner must ask themselves is: “Is the entity that I am making my monthly mortgage payments to, entitled to be receiving those payments”? “Moreover, why am I still making payments on a mortgage that has been paid up to THIRTY times over”?