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“REMIC TRUST PAYMENTS ADRIFT AFTER LOSING CLARITY OF THEIR SAFE HARBOR”
8 years ago the Fordham Law Review published an article entitled “Will the Real Holder in Due Course Please Stand Up?” They had studied the securitization and correctly predicted that there was no holder in due course nor any creditor in the scheme of “Securitization”. This mystifying conclusion was completely ignored by virtually every court (except for a few decisions in New York and California). It was dismissed as preposterous. Among the points raised was that the certificate holders were to be paid in accordance with their contract (Certificate) with a REMIC Trust and not with the borrower. If they were being paid, even for a while, and even as “Servicer advances” it had nothing to do with whether borrowers on “loans” made payments or not. The problem is that the REMIC Trust never existed as an operating entity and the payments were therefore “volunteer” payments tendered on behalf of a nonexistent trust. So the very basic problem is starting to emerge —
The premise is simple and the tax courts and bankruptcy courts are starting to piece the story together. According to the banks, they received payments from the borrowers and third parties and paid the certificate holders acting as banks and for the REMIC Trust. There is a safe harbor provision that caused the BKR judge in Illinois to dismiss one of the 6 courts filed by the US Trustee seeking to force the “bank” to disgorge payments that were not subject to safe harbor.
They were all re-arranging deck chairs on the Titanic as it went down. The simple fact is that the boat had already sunk and the US Trustee WAS RIGHT FOR EVEN MORE REASONS THAN THE TRUSTEE KNEW. THE US TRUSTEE FILED A STATEMENT THAT CHALLENGED THE ASSUMPTIONS BY THE JUDGE. FIRST AMONG THEM THAT THE SAFE HARBOR PROVISION APPLIED ONLY TO BANKS — AND THAT THE PARTY RECEIVING THOSE PAYMENTS WAS NOT A BANK, BUT AN AFFILIATE OF A BANK. The court reversed and sustained the complaint and now Lucy (the Master Servicer) has some “splaining” to do.
As they dig deeper they will find that the REMIC Trust never went operational, never had any assets or liabilities, never had any income or expenses, never had any investment dollars from the Sale of REMIC TRUST securities supposedly issued by the Trust and sold by the broker who was an “Affiliate” of the Master Servicer. A Trust without a res (something in the Trust) is an inchoate inactive and meaningless document with no real existence. In this case since the Trust never became operational, NONE of the presumptions about it apply. And those include
- The contractual connection between the REMIC Trust and the subject loan in foreclosure is completely nonexistent — not just broken.
- The payments received by those whom Wall Street bank lawyers assert are the “creditors” were volunteer payments unrelated to the presumed liability of the borrower.
- Consummation of the loan contract is thus negated by two facts — (a) consideration never flowed from the “lender” on the note and mortgage (or deed of trust) and (b) the ultimate creditor never accepted the proposed loan contract with borrowers.
- The Pooling and Servicing Agreement applies only to assets that were put in the Trust — not assets claimed by the Trust.
- The Trust was never operational and therefore it is impossible that the REMIC Trust acquired any loan. The fact that some third party conjured or fabricated a document allegedly transferring an interest to the REMIC Trust only means that there was a passive offer of assignment and endorsement that the Trustee of the REMIC Trust and the Trust itself could never accept — except as a representative of some OTHER real party in interest that would qualify as either a Holder in Due Course (HDC) or a creditor.
- This is why the REMIC Trust is never claimed to be the HDC. It never paid for the loan and it was never operational. In addition even if it had become operational, the transaction in which the assignment and endorsement allegedly took place resulting in the Trust owning the loan never took place and certainly not within the “Cutoff period” (which is irrelevant since there was no beginning and therefore no end).. All presumptions to the contrary are wrong.
- It follows that any authority claimed by the Trustee of the REMIC Trust is derived from a PSA (Trust Instrument) for a non-existent Trust and is therefore moot, void and meaningless.
- It also follows that any servicer, master servicer, sub-servicer, attorney in fact or agent is derived from a PSA (Trust Instrument) for a non-existent Trust and is therefore moot, void and meaningless.
- It also follows that any payments to the “creditors” under the ruse of the non-existent REMIC Trust is subject to disgorgement and clawback both in and out of bankruptcy court.
- And it also follows then that whether the foreclosure proceeding (whether judicial or nonjudicial) is a sham initiated by entities who are claiming powers from organizational documents of a non-existent entity which obviously means none of them have any legal standing to pursue or defend anything in any court.
- My final conclusion is that the remedy, if any, should flow to the “investors” who thought they were buying shares of an operating entity — but that remedy is an equitable remedy that excludes foreclosure since there is no loan contract with a nexus between the investors and the borrowers. This was not some trick created by the borrowers. It was an illegal table funding process that violated public policy depriving the consumer of the knowledge as to the party with whom the borrower was induced to believe was lending him money.
Filed under: foreclosure |