OK so you feel a little lost. That is because most of us are jumping in at the end of a long series of events and documents.
The most important point for you to make in order to jar the Judge’s thinking is that the closing with the borrower took place in the middle of the chain of securitization and within the context of the securitization documents executed without the borrower, before the borrower existed even as a prospective customer for the loan product.
Those documents provide the context in which loans will be offered, approved, assigned, accepted, replaced, returned, insured etc. Thus the key documents that creates the securitization structure for the creation and pooling of loans precede the offering of a loan product to the borrower. The closing documents of the borrower are in the middle of the securitization chain not at the beginning. The assignment is near the end of the securitization chain in practice, contrary to the usual conditions and prohibitions contained in the original enabling documents that created the securitization structure and process.
NOTE: Do not make any assumptions that your loan was securitized. Even if it was securitized it is entirely possible, if not probable, that the “assignment” is barred by a cutoff date in the securitization documents, or that the assignment was not executed with the form and content required by the securitization documents. Thus even if there is an assignment, you should not assume that it was or could be accepted. It is highly possible if your loan appears to be securitized, or even if there is a “Trustee” under an alleged securitization structure that a party making a claim on an assignment is unaware of the absence of acceptance or even that there is no authority for the Trustee to accept the assignment.You can be certain that if the other party is unaware of these defects, that the Judge is equally unaware.
The key to understanding this evolving process is that the Judge is looking at your transaction as the beginning point. That is simply flat wrong and you need to make that point as clearly as you can.
The beginning was the creation of the securitization structure.
- The first transactions that occurred was the sale of securities to unsuspecting investors.
- The second transaction that occurred was that the investor money was put into an account at an investment banking firm.
- The third transaction was that the investment banker divided the money between fees for itself and then distributing the funds to aggregators or a Depository Institution.
- The fourth transaction was the closing with the borrower. The loan was funded with the money from the investor but because of the disparity between the interest payable to the investor and the interest payable by the borrower, a yield spread was created, adding huge sums to what the investment banker took as fees without disclosure to the ivnestors or the borrowers.
- The fifth was the assignment AND ACCEPTANCE of the loan (See below) into between 1 and 3 asset pools, each bearing distinctive language describing the pool such that they appeared to be different assets than already presumed to exist in the first pool.
- The sixth was the receipt of insurance or counter-party payments on behalf of the pool pursuant to the documents creating the securitization structure.
- The seventh was the resecuritization of the pooled assets between one and three times.
- The eighth was the federal bailout payments and receipts allocable to the balances owed on the loans that were claimed to be part of the pool.
- The ninth are the foreclosures by parties who never handled any money who allegedly represent investors who no longer have any interest in the loan.
Through the creation of multiple entities that never existed before securitization of mortgage loans, the intermediaries are able to support the illusion that they never received payment from outside parties on the obligations owed from borrowers.
Most loans are assigned only after they are delinquent or even after foreclosure has been ordered. By definition, the documents creating the securitized pool usually prohibit such an assignment from being accepted into the pool. Therefore, although an assignment was executed, it is entirely possible that it accomplished nothing of legal consequence.
Also, even if the loan was ever in a securitized pool of assets, no assumptions should be made regarding the CURRENT STATUS of the “assigned” loan. Most documents that create the securitization structure, require the assignor to take back a non-performing loan and replace it with either cash or a comparable performing loan. Therefore, it is at the very least a question of fact as to whether the loan is still in the pool whether the assignment was effective or not.
I think the fundamental issue that we have been weak on presenting is ACCEPTANCE OF THE ASSIGNMENT and STATUS OF THE ASSIGNMENT. The pretender lenders have been successful thus far in directing the court’s attention to the note, Deed of Trust (Mortgage) and the assignment and away from the facts dealing with the obligation itself and the securitization. The error is in allowing the opposition and the Court to focus its attention on the creation of the obligation and the assignment of the note. In an ABCDE chain, this is the equivalent of looking at B and D and ignoring A,C and E.
Securitization involves many documents. In broad brush, it involves the
- Closing documents between loan originators, servicers, Special Purpose Vehicles, aggregators, etc. including the pooling and services agreement, the assignment and assumption agreement, the Master Services Agreement [if separate], none of which includes the borrower as party or references any specific debtor or borrower because the debtor is unknown when the securitization structure is created
- pre-application documents before the borrower was even a prospect,
- the pre-closing documents and effect of documents that are not referenced at closing
- the closing documents with the borrower
- the assignment(s)
- the conditions imposed on the assignment (conditional assignment because the assignment was pursuant to the pre-application and pre-closing documents)
- and post closing documents involving third party payments and resecuritization of the loan or resecuritization involving additional insurance, credit enhancements, federal bailouts etc.
It should be argued aggressively that the opposing party needs to prove its case and not have the benefit of the Court assuming that a prima facie case exists. The putative creditor in each case at bar is claiming their standing by virtue of an assignment. But that assignment only exists by virtue of a larger structure of securitization in which the documents describe the conditions under which such an assignment is acceptable and further conditions if the loans ceases to perform. Provisions requiring insurance, credit default swaps, credit enhancements, and others add co-obligors to the borrower’s transaction which takes place not at the beginning of the chain, but rather in the middle of the chain.
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