Banks Escape Criminal Fraud With “Settlements” But Civil Fraud and Qui Tam Actions Are Just Getting Started

http://recorderstandard.com/2015/12/bank-of-america-smacked-with-foreclosure-fraud-lawsuits/

by Manuel Ortega

Although Bank of America (BoA), along with other big banks like Wells Fargo, Citibank, Ally/GMAC and JPMorgan Chase, recently reached a very favorable settlement of potential criminal fraud charges related to their mortgage lending practices, two recently unsealed civil fraud lawsuits against BoA reveal they may not be out of the woods just yet. Such whistleblower suits allow individuals, usually ex- employees, with knowledge of fraud committed against the federal government to bring suit on its behalf and collect a portion of any damages awarded. The federal government has until March 16 to decide whether to intervene in these suits on the side of the plaintiffs. Two such fraud suits filed against Bank of America shine a bright light on abuses in the mortgage industry that led to the 2007 housing crash and continued as late as 2011. Recorder Standard http://recorderstandard.com/2015/12/bank-of-america-smacked-with-foreclosure-fraud-lawsuits/

33 Responses

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  2. @ mn

    It makes sense to point to a couple of articles much better written than my own clumsy attempts, which are entitled as:

    Now UCC Me Now You Dont_ The Massachusetts Supreme Judicial Court Ignores the UCC

    Losing the Paper – Mortgage Assignments Note Transfers and Consumer Protection

  3. @ mn

    Addressing the reply to question of who is the TRUE CREDITOR:

    If the “LINO” (Lender In Name Only) on the transaction instruments either purported to fund the originating transaction with its own monies, or in fact merely “table funded” the originating transaction with an immediate “flip” for downstream monies in the securitization transaction, either way, the LINO “sold” its’ interest(s), whatever that may be, vel non, to the downstream REMIC securitization transaction(s), to wit:

    Nemo dat quod non habet, literally meaning “no one gives what he doesn’t have” is a legal rule, sometimes called the nemo dat rule, that states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title.

  4. @ mn

    I, too, wrestled for a very long time with the intersection of the Commercial Law (UCC’s Articles 3 & 9) and Property Law . Obviously I still combat how to cogently interpret and articulate that intersection of law, as do the courts.

    The UCC itself is akin to a complex foreign language that is definitely a specialty practice within the law. Relevant here, following the MAKER’s execution of the TANGIBLE NOTE and lien instrument, the UCC is the operative law in the core context of this commerce activity by the deceitful CONDUIT ORIGINATOR: negotiable instruments, payment intangibles, and securitization transactions.

    There is no disagreement that the boilerplate language in the TANGIBLE NOTE includes that it may be “sold” more than once. Here, the TANGIBLE NOTE was presumed to have been properly NEGOTIATED for VALUE through the chain of intermediaries in compliance with the UCC, “sold” multiple times and ostensibly transferred to a REMIC trust. Theoretically, securitization has not yet occurred. That TANGIBLE NOTE is supposed to be vaulted, but in at least some known instances it has been destroyed. Hence, the “lost note” affidavit(s) maneuver.

    Now, behind the REMIC trust curtain the securitization transaction is conducted. Assuming the REMIC trust is the “holder” in possession of the TANGIBLE NOTE, it is not the NOTE that is securitized. What is securitized is the parts (tranches) of the PAYMENT INTANGIBLE, BIFURCATED from the TANGIBLE NOTE. The whole PAYMENT INTANGIBLE is further BIFURCATED into tranches (parts), and then “sold” through certificates to investors.

    With these facts in mind, fundamental questions of Commercial Law arise on some core issues including, but not limited to:

    (1) Who, what, where, when and why on the NEGOTIATION, DELIVERY and TRANSFER of a PERFECTED INTEREST(s) of, on the one hand the singular TANGIBLE NOTE, and on the other hand the multiple PAYMENT INTANGIBLE(s);

    (2) Evidence of a PERFECTED security instrument in (1);

    (3) (1) PETE authority under the UCC.

    Respectfully, query “PAYMENT INTANGIBLE” for edification, and please continue to challenge and expand all of our collective cognition.

  5. (a) this Agreement be and hereby
    is a security agreement within the meaning of Article 9 of the Uniform
    Commercial Code of any applicable jurisdiction;

  6. The Servicer shall cause to be filed the UCC assignment and UCC
    financing statement referred to in clause (II)(vii) and (x), respectively, of
    the definition of Mortgage File. If any UCC assignment or amendment or UCC
    financing statement, as applicable, is lost or returned unfiled to the Servicer
    because of any defect therein, the Servicer shall prepare a substitute UCC
    assignment or amendment or UCC financing statement, as applicable, or cure such
    defect, and cause such UCC assignment or amendment or UCC financing statement,
    as applicable, to be filed in accordance with this paragraph. In connection with
    its servicing of Cooperative Loans, the Servicer will use its reasonable best
    efforts to file timely continuation statements with regard to each financing
    statement and assignment relating to Cooperative Loans as to which the related
    Cooperative Apartment is located outside of the State of New York.

    In connection with the assignment of any Mortgage Loan registered on the
    MERS(R) System, the Servicer further agrees that it will cause, at the
    Servicer’s own expense, as soon as practicable after the Closing Date, the
    MERS(R) System to indicate that such MortgagE Loans have been assigned to the
    Trustee in accordance with this Agreement for the benefit of the
    Certificateholders by including (or deleting, in the case of Mortgage Loans
    which are repurchased in accordance with this Agreement) in such computer files
    (a) the specific code which identifies the Trustee as the assignee of such
    Mortgage Loan and (b) the series specific code in the field “Pool Field” which
    identifies the series of Certificates issued in connection with such Mortgage
    Loans. The Servicer agrees that it will not alter the codes referenced in this
    paragraph with respect to any Mortgage Loan during the term of this Agreement
    unless and until such Mortgage Loan is repurchased in accordance with the terms
    of this Agreement, and there is filed any financing statement or amendment
    thereof necessary to comply with the New York Uniform Commercial Code or the
    Uniform Commercial Code of any applicable jurisdiction.

    (f) It is intended that the conveyance by the Company to the Trustee of the
    Mortgage Loans as provided for in this Section 2.01 be construed as a sale by
    the Company to the Trustee of the Mortgage Loans for the benefit of the
    Certificateholders. Further, it is not intended that such conveyance be deemed
    to be a grant of a security interest in the Mortgage Loans by the Company to the
    Trustee to secure a debt or other obligation of the Company. However, if the
    Mortgage Loans are held to be property of the Company or of the Seller, or if
    for any reason this Agreement is held or deemed to create a security interest in
    the Mortgage Loans, then it is intended that, (a) this Agreement be and hereby
    is a security agreement within the meaning of Article 9 of the Uniform
    Commercial Code of any applicable jurisdiction; (b) the conveyance provided for
    in Section 2.01 shall be deemed to be, and hereby is, (1) a grant by the Company
    to the Trustee of a security interest in all of the Company’s right, title and
    interest, whether now owned or hereafter acquired, in and to the following: (A)
    the Mortgage Loans, including (i) with respect to each Cooperative Loan, the
    related Mortgage Note, Security Agreement, Assignment of Proprietary Lease,
    Cooperative Stock Certificate and Cooperative Lease, (ii) with respect to each
    Mortgage Loan other than a Cooperative Loan, the related Mortgage Note and
    Mortgage, and (iii) any insurance policies and all other documents in the
    related Mortgage File, (B) all amounts payable pursuant to the Mortgage Loans in
    accordance with the terms thereof, (C) all proceeds of the conversion, voluntary
    or involuntary, of the foregoing into cash, instruments, securities or other
    property, including without limitation all amounts from time to time held or
    invested in the Payment Account or the Custodial Account, whether in the form of
    cash, instruments, securities or other property, (D) all accounts, general
    intangibles, chattel paper, instruments, documents, money, deposit accounts,
    goods, letters of credit, letter-of-credit rights, oil, gas, and other minerals,
    and investment property consisting of, arising from or relating to any of the
    foregoing, and (E) all proceeds of the foregoing, and (2) an assignment by the
    Company to the Trustee of any security interest in any and all of the Seller’s
    right (including the power to convey title thereto), title and interest, whether
    now owned or hereafter acquired, in and to the property described in the
    foregoing clauses (1)(A), (B), (C), (D) and (E) granted by the Seller to the
    Company pursuant to the Purchase Agreement; (c) the possession by the Trustee,
    the Custodian or any other agent of the Trustee of any of the foregoing property
    shall be deemed to be possession by the secured party, or possession by a
    purchaser or a person holding for the benefit of such secured party, for
    purposes of perfecting the security interest pursuant to the Pennsylvania
    Uniform Commercial Code and the Uniform Commercial Code of any other applicable
    jurisdiction (including, without limitation, Sections 9-313 and 9-314 thereof);
    and (d) notifications to persons holding such property, and acknowledgments,
    receipts or confirmations from persons holding such property, shall be deemed
    notifications to, or acknowledgments, receipts or confirmations from, securities
    intermediaries, bailees or agents of, or persons holding for, the Trustee (as
    applicable) for the purpose of perfecting such security interest under
    applicable law.

    The Company and, at the Company’s direction, GMACM and the Trustee
    shall, to the extent consistent with this Agreement, take such reasonable
    actions as may be necessary to ensure that, if this Agreement were determined to
    create a security interest in the Mortgage Loans and the other property
    described above, such security interest would be determined to be a perfected
    security interest of first priority under applicable law and will be maintained
    as such throughout the term of this Agreement. Without limiting the generality
    of the foregoing, the Company shall prepare and deliver to the Trustee not less
    than 15 days prior to any filing date and, the Trustee shall forward for filing,
    in accordance with the Servicer’s instructions, or shall cause to be forwarded
    for filing, at the expense of the Company, all filings necessary to maintain the
    effectiveness of any original filings necessary under the Uniform Commercial
    Code as in effect in any jurisdiction to perfect the Trustee’s security interest
    in the Mortgage Loans, as evidenced by an Officer’s Certificate of the Company,
    including without limitation (x) continuation statements, and (y) such other
    statements as may be occasioned by (1) any change of name of the Seller, the
    Company or the Trustee (such preparation and filing shall be at the expense of
    the Trustee, if occasioned by a change in the Trustee’s name), (2) any change of
    type or jurisdiction of organization of the Seller or the Company and (3) any
    transfer of any interest of the Seller or the Company in any Mortgage Loan. The
    Company shall file or cause to be filed the original filing necessary under the
    Uniform Commercial Code to perfect the Trustee’s security interest in the
    Mortgage Loans.

    Section 2.02. Acceptance by Trustee.

    The Trustee acknowledges that the Custodian, acting on behalf of the
    Trustee, has received (subject to any exceptions noted in the custodian
    certification described below) the Mortgage Notes and the Trustee declares that
    it holds or will hold the assets included in the definition of “Trust Fund,” in
    trust for the exclusive use and benefit of all present and future
    Certificateholders.

    The Trustee agrees, for the benefit of the Certificateholders, that
    pursuant to the Custodial Agreement, the Custodian will review each Mortgage
    Note and will execute and deliver, or cause to be executed and delivered, to
    GMACM, the Trustee and the Servicer a custodian certification substantially in
    the form annexed hereto as Exhibit M on or prior to the Closing Date. Pursuant
    to the Custodial Agreement, in conducting such review, the Custodian is required
    to ascertain whether the Mortgage Notes have been executed and received, and
    whether the Mortgage Notes relate, determined on the basis of the original
    principal balance and loan number, to the Mortgage Loans. Neither the Custodian
    nor the Trustee shall be under any duty or obligation to inspect, review or
    examine said documents, instruments, certificates or other papers to determine
    that the same are genuine, enforceable or appropriate for the represented
    purpose or that they have actually been recorded, or are in recordable form or
    that they are other than what they purport to be on their face.

  7. I payed for a certified copy of my 8k from security and exchange, it came in. and I found this.

    iv) such assignment is at the request of the borrower under the related
    Mortgage Loan.

    so were did we say this is ok, and were did we sign the request , for changing our mortgage s, and notes. by .25% ?? that is allot of money difference in
    interest charges on 300,000 dollar mortgage. at lets say 6.75 that would mean about 400,485.94 now lets take 6.50 and that would be about,380,000.

    that’s a big difference. more than 35.00 dollars, tila/respa

    this would say that they changed the mortgages by .25 percent in interest rates, without our permission or knowledge,
    this would also make a difference in the calculation for disclosures that needed to be given to homeowners, tila/respa.
    they made changes to our mortgages and notes, by them changing the contract terms without out knowledge.

    I would say they would be void, the borrower never sign the new mortgage and note stating the .25 % change in interest being charged.
    no meeting of minds.

    EXHIBIT K

    FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF MORTGAGE LOAN

    _____, 20__
    Residential Asset Mortgage Products, Inc.
    8400 Normandale Lake Boulevard
    Suite 250
    Minneapolis, Minnesota 55437

    Wells Fargo Center
    Sixth and Marquette Avenue
    Minneapolis, Minnesota 55479-0113

    Attention: Corporate Trust Services–GMACM 2006-J1
    Re: GMACM Mortgage Pass-Through Certificates, Series
    2006-J1 Assignment of Mortgage Loan

    Ladies and Gentlemen:
    This letter is delivered to you in connection with the assignment
    by Wells Fargo Bank, National Association (the “Trustee”) to (the “Lender”) of
    (the “Mortgage Loan”) pursuant to Section 3.13(d) of the Pooling and Servicing
    Agreement (the “Pooling and Servicing Agreement”), dated as of February 27, 2006
    among Residential Asset Mortgage Products, Inc., as seller (the “Company”), GMAC
    Mortgage Corporation, as Servicer, and the Trustee. All terms used herein and
    not otherwise defined shall have the meanings set forth in the Pooling and
    Servicing Agreement. The Lender hereby certifies, represents and warrants to,
    and covenants with, the Servicer and the Trustee that:

    (i) the Mortgage Loan is secured by Mortgaged Property located in a jurisdiction
    in which an assignment in lieu of satisfaction is required to preserve lien
    priority, minimize or avoid mortgage recording taxes or otherwise comply with,
    or facilitate a refinancing under, the laws of such jurisdiction;

    (ii) the substance of the assignment is, and is intended to be, a refinancing of
    such Mortgage Loan and the form of the transaction is solely to comply with, or
    facilitate the transaction under, such local laws;

    (iii) the Mortgage Loan following the proposed assignment will be modified to
    have a rate of interest at least 0.25 percent below or above the rate of
    interest on such Mortgage Loan prior to such proposed assignment; and

    (iv) such assignment is at the request of the borrower under the related
    Mortgage Loan.

    Very truly yours,
    ——————————————
    ——————————————
    (Lender)
    By:
    ————————-
    Name
    ————————
    Title
    ————————-
    WHO IS THE LENDER
    © 2015 Microsoft Terms Privacy & cookies Developers English (United States)

  8. Thursday 24 December 2015

    From Kalifornia:

    >The issue(s) are:

    >Who are the holder(s) of a PAYMENT INTANGIBLE?

    What is a payment intangible, in law?

    >Who are the holder(s) of the NOTE?

    The plaintiffs making claim, according to local rules [varies by state]

    >Who are the purported TRUE CREDITOR(s)?

    The lender listed on the note, unless and until one can prove otherwise.

    >Whether the holder(s) of a PAYMENT INTANGIBLE also holds a >perfected security interest in the LIEN?

    See first Q, above.

    >Whether the holder(s) of a PAYMENT INTANGIBLE have the authority >to enforce the LIEN?

    Non-sequitur

    >Does securitization of the PAYMENT INTANGIBLE further >BIFURCATE the security instrument such that it is a nullity?

    Depends on what the definition of is is.

    I have only read the info on this theme your provided, once, and I have
    no feel on how to use this in court. None, and I am one willing to stretch
    and make any argument.

  9. We are now “missionaries” of a new order.

  10. Trespass,

    Define the terms and meanings… study
    the difference in the cultures..

    I’m with you! Now we’re learning to understand by engaging in the discipline of a religious scholar… just like studying “comparative religion,” reviewing the history of the development of the languages and the traditions of the many “different, sometimes competitive ‘players’.”

    Now we just need credible access to the courthouse, the court rooms, and the judges chambers…. maybe even into the corridors of juristic learning?

    Not being sarcastic… just wide eyes realistic!

  11. Look for definitions
    creditor, debtor, consumer, servicer.

    Can’t assume it means what you think it means.
    The definition section is where you begin, before reading any document with that much legalese.

    When in doubt, grab a legal dictionary.
    Word for word, you’ll find out it means something different from what is taught in school.

    That’s why people have a hard time rescinding.
    They think they are time barred, not realizing the clock has to start in order to reach a specific point to make them time barred.

    But if people don’t want to read the definitions, they have made the decision, and no one else, they have made the decision to not rescind.
    Do not blame a blogger, or someone in a post, or someone’s article, or anything. The finger points at us, and those committing the fraud will say ‘in some communication’ we are agreeing or participating in what they are doing to us, by not making certain things known, once we are aware of what ‘they’ are doing to us.

    Trespass Unwanted, Creator, Corporeal, Life, Free, People, Independent, State, In Jure Proprio (in One’s own right), Jure Divino (by divine right)

  12. @ djabelanger

    Please proceed with caution. Although also securitized, the term “nontraditional mortgage” loan does not appear to encompass all securitized mortgages; rather:

    “These mortgage products, herein referred to as nontraditional mortgage loans, include such products as “interest-only” mortgages where a borrower pays no loan principal for the first few years of the loan and “payment option” adjustable-rate mortgages (ARMs) where a borrower has flexible payment options with the potential for negative
    amortization. [Footnote1]”

    [Footnote1]
    Interest-only and payment option ARMs are variations of conventional ARMs, hybrid ARMs, and fixed rate products. Refer to the Appendix for additional information on interest-only and payment option ARM loans. This guidance does not apply to reverse mortgages; home equity lines of credit (“HELOCs”), other than as discussed in the Simultaneous Second-Lien Loans section; or fully amortizing residential mortgage loan products.
    ~~~~

    Interagency Guidance on Nontraditional Mortgage Product Risks

    Office of the Comptroller of the Currency
    Board of Governors of the Federal Reserve System
    Federal Deposit Insurance Corporation
    Office of Thrift Supervision
    National Credit Union Administration

  13. GOT ALL THIS FROM THIS.

    Prospectus [Rule 424(b)(5)]
    0001068238-07-001257

  14. Events of Default; Rights Upon Event of Default. BIG. READ ALL IN THAT SECTION. GO SLOW AND READ IT CAREFULLY.

    THE AGREEMENTS
    >
    As described in this prospectus under “Introduction” and “Description of the
    Securities—General,” each series of certificates will be issued under a pooling and servicing agreement
    or trust agreement, as applicable, and each series of notes will be issued under an indenture, each as
    described in that section. In the case of each series of notes, the provisions relating to the servicing
    of the loans will be contained in the related servicing agreements. The following summaries describe
    additional provisions common to each pooling and servicing agreement and trust agreement relating to a
    series of certificates, and each indenture and servicing agreement relating to a series of notes.

    Events of Default; Rights Upon Event of Default

    Pooling and Servicing Agreement; Servicing Agreement

    Events of default under the related pooling and servicing agreement or servicing agreement for
    a series of securities will include:

    o any failure by the servicer or master servicer to make a required deposit to the Custodial
    Account or the Payment Account or, if the master servicer or servicer is the
    paying agent, to distribute to the holders of any class of securities of that
    series any required

    86

              o   payment which continues unremedied for five days after the giving of written notice of the
                  failure to the master servicer or the servicer by the trustee or the depositor, or
                  to the master servicer or the servicer, the depositor and the trustee by the
                  holders of securities of such class evidencing not less than 25% of the aggregate
                  percentage interests constituting that class or the credit enhancer, if
                  applicable;
    
              o   any failure by the master servicer or servicer duly to observe or perform in any material
                  respect any other of its covenants or agreements in the related agreement for that
                  series of securities which continues unremedied for a period of not more than 45
                  days, or 15 days in the case of a failure to pay the premium for any insurance
                  policy which is required to be maintained under the related servicing agreement,
                  after the giving of written notice of the failure to the master servicer or the
                  servicer by the trustee or the depositor, or to the master servicer or servicer,
                  the depositor and the trustee by the holders of any class of securities of that
                  series evidencing not less than 25%, 33% in the case of a trust including private
                  securities or a majority in the case of a series of notes, of the aggregate
                  percentage interests constituting that class, or the credit enhancer, if
                  applicable; and
    
              o   some events of insolvency, bankruptcy or similar proceedings regarding the master servicer or
                  servicer and certain actions by the master servicer or servicer indicating its
                  insolvency or inability to pay its obligations.
    
             A default under the terms of any private securities included in any trust will not constitute
    an event of default under the related agreement.
    
             So long as an event of default remains unremedied, either the depositor or the trustee may,
    and, in the case of an event of default under a pooling and servicing agreement or servicing agreement,
    as applicable, at the direction of the holders of securities evidencing not less than 51% of the
    aggregate voting rights in the related trust, the trustee shall, by written notification to the master
    servicer or servicer and to the depositor or the trustee, terminate all of the rights and obligations of
    the master servicer or servicer under the related agreement, other than any rights of the master
    servicer or servicer as securityholder, and, in the case of termination under a servicing agreement, the
    right to receive servicing compensation, expenses for servicing the trust assets during any period prior
    to the date of that termination, and other reimbursement of amounts the master servicer or the servicer
    is entitled to withdraw from the Custodial Account. The trustee or, on notice to the depositor and with
    the depositor's consent, its designee will succeed to all responsibilities, duties and liabilities of
    the master servicer or the servicer under the related agreement, other than the obligation to purchase
    loans under some circumstances, and will be entitled to similar compensation arrangements. If a series
    of securities includes credit enhancement provided by a third party credit enhancer, certain of the
    foregoing rights may be provided to the credit enhancer rather than the securityholders, if so specified
    in the applicable prospectus supplement. If the trustee would be obligated to succeed the master
    servicer or the servicer but is unwilling to do so, it may appoint or if it is unable to act as master
    servicer or servicer, it shall appoint or petition a court of competent jurisdiction for the appointment
    of, a Fannie Mae- or Freddie Mac-approved mortgage servicing institution with a net worth of at least
    $10,000,000 to act as successor to the master servicer or the servicer under the related agreement,
    unless otherwise described in the agreement. Pending appointment, the trustee is obligated to act in
    that capacity. The
    
    
                                                        87
    
    trustee and any successor may agree on the servicing compensation to be paid, which in no event
    may be greater than the compensation to the initial master servicer or the servicer under the related
    agreement. The master servicer is required to reimburse the trustee for all reasonable expenses incurred
    or made by the trustee in accordance with any of the provisions of the pooling and servicing agreement,
    except any such expenses as may arise from the trustee's negligence or bad faith.
    
             No securityholder will have any right under a pooling and servicing agreement or servicing
    agreement, as applicable, to institute any proceeding with respect to the pooling and servicing
    agreement, unless the holder previously has given to the trustee written notice of default and the
    continuance thereof and unless the holders of securities of any class evidencing not less than 25% of
    the aggregate percentage interests constituting that class have made written request upon the trustee to
    institute the proceeding in its own name as trustee under the pooling and servicing agreement or
    servicing agreement, as applicable, and have offered to the trustee reasonable indemnity and the trustee
    for 60 days after receipt of the request and indemnity has neglected or refused to institute any
    proceeding. However, the trustee will be under no obligation to exercise any of the trusts or powers
    vested in it by the pooling and servicing agreement or servicing agreement, as applicable, or to
    institute, conduct or defend any litigation under the pooling and servicing agreement or in relation to
    the pooling and servicing agreement or servicing agreement, as applicable, at the request, order or
    direction of any of the securityholders covered by the pooling and servicing agreement or servicing
    agreement, as applicable, unless the securityholders have offered to the trustee reasonable security or
    indemnity against the costs, expenses and liabilities which may be incurred.
    
         Indenture
             An event of default under the indenture for each series of notes, in most cases, will include:
    
              o   default for five days or more in the distribution of any principal of or interest on any note
                  of the series;
    
              o   failure to perform any other covenant of the depositor or the trust in the indenture which
                  continues for a period of thirty days after notice of that failure is given in
                  accordance with the procedures described in the accompanying prospectus
                  supplement;
    
              o   any representation or warranty made by the depositor or the trust in the indenture or in any
                  certificate or other writing delivered under or in connection with the indenture
                  relating to or affecting the series, having been incorrect in a material respect
                  as of the time made, and the breach is not cured within thirty days after notice
                  of that error is given in accordance with the procedures described in the
                  accompanying prospectus supplement;
    
              o   certain bankruptcy, insolvency, or similar events relating to the depositor or the trust; and
    
              o   any other event of default provided for securities of that series.
    
    
                                                        88
    
             If an event of default as to the notes of any series at the time outstanding occurs and is
    continuing, either the trustee, the credit enhancer, if applicable, or the holders of a majority of the
    then aggregate outstanding amount of the notes of the series with the written consent of the credit
    enhancer may declare the principal amount, or, if the notes of that series are accrual notes, that
    portion of the principal amount as may be specified in the terms of that series, of all the notes of the
    series to be due and payable immediately. That declaration may, under some circumstances, be rescinded
    and annulled by the holders of a majority in aggregate outstanding amount of the related notes.
    
             If, following an event of default for any series of notes, the notes of the series have been
    declared to be due and payable, the trustee may, in its discretion, or, if directed in writing by the
    credit enhancer, will, regardless of that acceleration, elect to maintain possession of the collateral
    securing the notes of that series and to continue to apply payments on that collateral as if there had
    been no declaration of acceleration if that collateral continues to provide sufficient funds for the
    payment of principal of and interest on the notes of the series as they would have become due if there
    had not been a declaration. In addition, the trustee may not sell or otherwise liquidate the collateral
    securing the notes of a series following an event of default, unless:
    
              o   the holders of 100% of the then aggregate outstanding amount of the notes of the series consent
                  to that sale,
    
              o   the proceeds of the sale or liquidation are sufficient to pay in full the principal of and
                  accrued interest, due and unpaid, on the outstanding notes of the series, and to
                  reimburse the credit enhancer, if applicable, at the date of that sale, or
    
              o   the trustee determines that the collateral would not be sufficient on an ongoing basis to make
                  all payments on those notes as those payments would have become due if those notes
                  had not been declared due and payable, and the trustee obtains the consent of the
                  holders of 66 2/3% of the then aggregate outstanding amount of the notes of the
                  series and the credit enhancer, if applicable.
    
             In the event that the trustee liquidates the collateral in connection with an event of default,
    the indenture provides that the trustee will have a prior lien on the proceeds of that liquidation for
    unpaid fees and expenses. As a result, on the occurrence of that event of default, the amount available
    for payments to the securityholders would be less than would otherwise be the case. However, the trustee
    may not institute a proceeding for the enforcement of its lien except in connection with a proceeding
    for the enforcement of the lien of the indenture for the benefit of the securityholders after the
    occurrence of an event of default.
    
             If stated in the accompanying prospectus supplement, in the event the principal of the notes of
    a series is declared due and payable, as described in the second preceding paragraph, the holders of any
    notes issued at a discount from par may be entitled to receive no more than an amount equal to the
    unpaid principal amount of those notes less the amount of the discount that is unamortized.
    
             In most cases, no securityholder will have any right under an indenture to institute any
    proceeding in connection with the agreement unless:
    
              o   the holder previously has given to the trustee written notice of default and the continuance of
                  that default,
    
    
                                                        89
    
              o   the holders of securities of any class evidencing not less than 25% of the aggregate percentage
                  interests constituting the class (1) have made written request upon the trustee to
                  institute that proceeding in its own name as trustee and (2) have offered to the
                  trustee reasonable indemnity,
    
              o   the trustee has neglected or refused to institute that proceeding for 60 days after receipt of
                  that request and indemnity, and
    
              o   no direction inconsistent with that written request has been given to the trustee during that
                  60 day period by the holders of a majority of the security balances of that class.
    
             If a series of securities includes credit enhancement provided by a third party credit
    enhancer, certain of the foregoing rights may be provided to the credit enhancer rather than the
    securityholders, if so specified in the applicable prospectus supplement.
    
             However, the trustee will be under no obligation to exercise any of the trusts or powers vested
    in it by the applicable agreement or to institute, conduct or defend any litigation under the pooling
    and servicing agreement or in relation to the pooling and servicing agreement at the request, order or
    direction of any of the securityholders covered by the agreement, unless the securityholders have
    offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities
    which may be incurred in or by exercise of that power. The master servicer is required to reimburse the
    trustee for all reasonable expenses incurred or made by the trustee in accordance with any of the
    provisions of the indenture, except any such expenses as may arise from the indenture trustee's
    negligence or bad faith.
    
    Amendment
             In most cases, each agreement may be amended by the parties to the agreement, without the
    consent of the related securityholders:
    
              o   to cure any ambiguity;
    
              o   to correct or supplement any provision therein which may be inconsistent with any other
                  provision therein or to correct any error;
    
              o   to change the timing and/or nature of deposits in the Custodial Account or the Payment Account
                  or to change the name in which the Custodial Account is maintained, except that
                  (a) deposits to the Payment Account may not occur later than the related distribution date,
             (b) the change may not adversely affect in any material respect the interests of any securityholder,
                  as evidenced by an opinion of counsel, and (c) the change may not adversely affect the then-current
                  rating of any rated classes of securities, as evidenced by a letter from each applicable rating agency;
    
    
                                                        90
    
              o   if an election to treat the related trust as a "real estate mortgage investment conduit," or
                  REMIC, has been made, to modify, eliminate or add to any of its provisions (a) to
                  the extent necessary to maintain the qualification of the trust as a REMIC or to
                  avoid or minimize the risk of imposition of any tax on the related trust, provided
                  that the trustee has received an opinion of counsel to the effect that (1) the
                  action is necessary or desirable to maintain qualification or to avoid or minimize
                  that risk, and (2) the action will not adversely affect in any material respect
                  the interests of any related securityholder, or (b) to modify the provisions
                  regarding the transferability of the REMIC Residual Securities, provided that the
                  depositor has determined that the change would not adversely affect the applicable
                  ratings of any classes of the certificates, as evidenced by a letter from each
                  applicable rating agency, and that any such amendment will not give rise to any
                  tax for the transfer of the REMIC Residual Securities to a non-permitted transferee;
    
              o   to make any other provisions for matters or questions arising under the related agreement which
                  are not materially inconsistent with its provisions, so long as the action will
                  not adversely affect in any material respect the interests of any securityholder; or
    
              o   to amend any provision that is not material to holders of any class of related securities.
    
             In most cases, each agreement may also be amended by the parties to the agreement with the
    consent of the holders of securities of each class affected thereby evidencing not less than 66%, in the
    case of a series of securities issued under a pooling and servicing agreement, or a majority, in the
    case of a series of securities issued under an indenture, of the aggregate percentage interests
    constituting the outstanding principal amount of securities of that class for the purpose of adding any
    provisions to or changing in any manner or eliminating any of the provisions of the related agreement or
    of modifying in any manner the rights of the related securityholders, except that no such amendment may
    (i) reduce in any manner the amount of, or delay the timing of, payments received on trust assets which
    are required to be distributed on a security of any class without the consent of the holder of the
    security, (ii) adversely affect in any material respect the interests of the holders of any class of
    securities in a manner other than as described in the preceding clause, without the consent of the
    holders of securities of that class evidencing not less than 66%, in the case of a series of securities
    issued under a pooling and servicing agreement, or a majority, in the case of a series of securities
    issued under an indenture, of the aggregate outstanding principal amount of the securities of each class
    of that series affected by that amendment or (iii) reduce the percentage of securities of any class the
    holders of which are required to consent to any such amendment unless the holders of all securities of
    that class have consented to the change in the percentage. Furthermore, the applicable prospectus
    supplement will describe any rights a third party credit enhancer may have with respect to amendments to
    the agreements.
    
             Regardless of the foregoing, if a REMIC election has been made with respect to the related
    trust, the trustee will not be entitled to consent to any amendment to a pooling and servicing agreement
    without having first received an opinion of counsel to the effect that the amendment or the exercise of
    any power granted to the master servicer, the servicer, the depositor or the trustee in accordance with
    the amendment will not result in the imposition of a tax on the related trust or cause the trust to fail
    to qualify as a REMIC.
    
    
                                                        91
    
    Termination; Retirement of Securities
    
             The primary obligations created by the trust agreement or pooling and servicing agreement for
    each series of securities, other than some limited payment and notice obligations of the applicable
    trustee and depositor, will terminate on the distribution to the related securityholders of all amounts
    held in the Payment Account or by the entity specified in the accompanying prospectus supplement and
    required to be paid to the securityholders following the earlier of:
    
              o   the final payment or other liquidation or disposition or any related Advance of the last trust
                  asset subject to that agreement and all property acquired on foreclosure or deed
                  in lieu of foreclosure of any loan, and
    
              o   the purchase by the entity specified in the accompanying prospectus supplement from the trust,
                  or from the special purpose entity, if applicable for that series, of all
                  remaining loans and all property acquired relating to the loans.
    
             Any option to purchase described in the second item above will be limited to cases in which the
    aggregate Stated Principal Balance of the remaining trust assets is less than or equal to ten percent
    (10%) of the initial aggregate Stated Principal Balance of the trust assets or such other time as may be
    specified in the accompanying prospectus supplement. If the holder of a class of securities may
    terminate the trust and cause the outstanding securities to be redeemed when 25% or more of the initial
    principal balance of the securities is still outstanding, the term "callable" will be included in the
    title of the related securities. In addition to the foregoing, the entity specified in the accompanying
    prospectus supplement may have the option to purchase, in whole but not in part, the securities
    specified in the accompanying prospectus supplement in the manner described in the accompanying
    prospectus supplement. Following the purchase of such securities, the entity specified in the
    accompanying prospectus supplement will effect a retirement of the securities and the termination of the
    trust. Written notice of termination of the related agreement will be given to each securityholder, and
    the final distribution will be made only at the time of the surrender and cancellation of the securities
    at an office or agency appointed by the trustee which will be specified in the notice of termination.
    
             Any purchase of loans and property acquired from the loans evidenced by a series of securities
    shall be made at the option of the entity specified in the related prospectus supplement at the price
    specified in the accompanying prospectus supplement. Such entity, if not Residential Funding Company,
    LLC or an affiliate, shall be deemed to represent that one of the following will be true and correct:
    (i) the exercise of such option shall not result in a non-exempt prohibited transaction under ERISA or
    Section 4975 of the Internal Revenue Code or (ii) such entity is (A) not a party in interest with
    respect to any ERISA plan (other than a plan sponsored or maintained by the entity, provided that no
    assets of such plan are invested or deemed to be invested in the certificates) and (B) not a "benefit
    plan investor" as defined in "ERISA Considerations - Plan Asset Regulations". The exercise of that right
    will effect early retirement of the securities of that series, but the right of any entity to purchase
    the loans and related property will be subject to the criteria, and will be at the price, set forth in
    the accompanying prospectus supplement. Early termination in this manner may adversely affect the yield
    to holders of some classes of the securities. If a REMIC election has been made, the termination of the
    related trust will be effected in a manner consistent with applicable federal income tax regulations and
    its status as a REMIC.
    
    
                                                        92
    
             In addition to the optional repurchase of the property in the related trust, if stated in the
    accompanying prospectus supplement, a holder of the Call Class will have the right, solely at its
    discretion, to terminate the related trust and thereby effect early retirement of the securities of the
    series, on any distribution date after the 12th distribution date following the date of initial issuance
    of the related series of securities and until the date when the optional termination rights of the
    entity specified in the accompanying prospectus supplement become exercisable. The Call Class will not
    be offered under the prospectus supplement. Any such call will be of the entire trust at one time;
    multiple calls for any series of securities will not be permitted. In the case of a call, the holders of
    the securities will be paid a price equal to the Call Price. To exercise the call, the holder of the
    Call Security must remit to the related trustee for distribution to the securityholders, funds equal to
    the Call Price. If those funds are not deposited with the related trustee, the securities of that series
    will remain outstanding. In addition, in the case of a trust for which a REMIC election or elections
    have been made, this termination will be effected in a manner consistent with applicable Federal income
    tax regulations and its status as a REMIC. In connection with a call by the holder of a Call Security,
    the final payment to the securityholders will be made at the time of surrender of the related securities
    to the trustee. Once the securities have been surrendered and paid in full, there will not be any
    further liability to securityholders.
    
             The indenture will be discharged as to a series of notes, except for some continuing rights
    specified in the indenture, at the time of the distribution to noteholders of all amounts required to be
    distributed under the indenture.
    
    The Trustee
             The trustee under each pooling and servicing agreement or trust agreement under which a series
    of securities is issued will be named in the accompanying prospectus supplement. The commercial bank or
    trust company serving as trustee may have normal banking relationships with the depositor and/or its
    affiliates, including Residential Funding Company, LLC and GMAC Mortgage, LLC.
  15. chase Obligations
    Some types of loans and classes of securities of any series, as specified in the accompanying
    prospectus supplement, may be subject to a purchase obligation. The terms and conditions of each
    purchase obligation, including the purchase price, timing and payment procedure, will be described in
    the accompanying prospectus supplement. A purchase obligation for loans may apply to the loans or to the
    related securities. Each purchase obligation may be a secured or unsecured obligation of its provider,
    which may include a bank or other financial institution or an insurance

    80

    company. Each purchase obligation will be evidenced by an instrument delivered to the trustee
    for the benefit of the applicable securityholders of the related series. The accompanying prospectus
    supplement will specify whether each purchase obligation for loans will be payable solely to the trustee
    for the benefit of the securityholders of the related series. Other purchase obligations may be payable
    to the trustee or directly to the holders of the securities to which the obligations relate.
    
                                              INSURANCE POLICIES ON LOANS
    
             The mortgaged property related to each loan (other than a Cooperative Loan) will be required to
    be covered by a hazard insurance policy (as described under "—Standard Hazard Insurance on Mortgaged
    Properties," below). In addition, some loans will be required to be covered by a primary insurance
    policy. If there are any FHA loans and VA loans in the mortgage pool, those loans will be covered by the
    government mortgage insurance programs described in the accompanying prospectus supplement. The
    descriptions of any insurance policies contained in this prospectus or any prospectus supplement and the
    coverage thereunder do not purport to be complete and are qualified in their entirety by reference to
    the forms of policies.
    
    Primary Insurance Policies
             If specified in the accompanying prospectus supplement and except as described below, (i) each
    mortgage loan having an LTV ratio at origination of over 80% will be covered by a primary mortgage
    guaranty insurance policy insuring against default on the mortgage loan up to an amount set forth in the
    accompanying prospectus supplement, unless and until the principal balance of the mortgage loan is
    reduced to a level that would produce an LTV ratio equal to or less than 80%, and (ii) the depositor or
    the related seller will represent and warrant that, to the best of its knowledge, the mortgage loans are
    so covered. However, the foregoing standard may vary significantly depending on the characteristics of
    the mortgage loans and the applicable underwriting standards. A mortgage loan will not be considered to
    be an exception to the foregoing standard if no primary insurance policy was obtained at origination but
    the mortgage loan has amortized to an 80% or less LTV ratio level as of the applicable cut-off date. In
    most cases, the depositor will have the ability to cancel any primary insurance policy if the LTV ratio
    of the mortgage loan is reduced to 80% or less (or a lesser specified percentage) based on an appraisal
    of the mortgaged property after the related closing date or as a result of principal payments that
    reduce the principal balance of the mortgage loan after the closing date. Trust assets secured by a
    junior lien on the related mortgaged property usually will not be required by the depositor to be
    covered by a primary mortgage guaranty insurance policy insuring against default on the mortgage loan.
    Mortgage loans secured by multifamily properties will not be covered by a primary insurance policy,
    regardless of the related LTV ratio.
  16. , the securityholders will bear
    the loss.

    class of certificates of a series may have the option to purchase from the trust any defaulted
    loan after a specified period of delinquency. If a defaulted loan or REO Loan is not removed from the
    trust prior to final liquidation, then, upon its final liquidation, if a loss is realized which is not
    covered by any applicable form of credit enhancement or other insurance, the securityholders will bear
    the loss. However, if a gain results from the final liquidation of an REO Loan which is not required by
    law to be remitted to the related mortgagor, the master servicer or servicer will be entitled to retain
    that gain as additional servicing compensation unless the accompanying prospectus supplement provides
    otherwise.

  17. Realization Upon Defaulted Loans

    If a loan, including a contract secured by a lien on a mortgaged property, is in default, the
    master servicer or servicer may take a variety of actions, including foreclosing on the mortgaged
    property, writing off the principal balance of the loan as a bad debt, taking a deed in lieu of
    foreclosure, accepting a short sale, permitting a short refinancing, arranging for a repayment plan,
    capitalization of arrearages or modification as described above, or taking an unsecured note.

  18. if an event of default as to the notes of any series at the time outstanding occurs and is
    continuing, either the trustee, the credit enhancer, if applicable, or the holders of a majority of the
    then aggregate outstanding amount of the notes of the series with the written consent of the credit
    enhancer may declare the principal amount, or, if the notes of that series are accrual notes, that
    portion of the principal amount as may be specified in the terms of that series, of all the notes of the
    series to be due and payable immediately. That declaration may, under some circumstances, be rescinded
    and annulled by the holders of a majority in aggregate outstanding amount of the related notes.

    If, following an event of default for any series of notes, the notes of the series have been
    declared to be due and payable, the trustee may, in its discretion, or, if directed in writing by the
    credit enhancer, will, regardless of that acceleration, elect to maintain possession of the collateral
    securing the notes of that series and to continue to apply payments on that collateral as if there had
    been no declaration of acceleration if that collateral continues to provide sufficient funds for the
    payment of principal of and interest on the notes of the series as they would have become due if there
    had not been a declaration. In addition, the trustee may not sell or otherwise liquidate the collateral
    securing the notes of a series following an event of default, unless:

    o the holders of 100% of the then aggregate outstanding amount of the notes of the series consent
    to that sale,

    o the proceeds of the sale or liquidation are sufficient to pay in full the principal of and
    accrued interest, due and unpaid, on the outstanding notes of the series, and to
    reimburse the credit enhancer, if applicable, at the date of that sale, or

    o the trustee determines that the collateral would not be sufficient on an ongoing basis to make
    all payments on those notes as those payments would have become due if those notes
    had not been declared due and payable, and the trustee obtains the consent of the
    holders of 66 2/3% of the then aggregate outstanding amount of the notes of the
    series and the credit enhancer, if applicable

  19. https://www.sec.gov/rules/final/33-8518.htm

    best to read all in this.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  20. The trust will hold separate pools of assets with separate classes of securities for each pool.

    Securities backed by one pool do not have rights to the other pools.

    hum

  21. — TONIGHT —
    Sorry for the Late gentle reminder – please make an appointment for yourself to join us for Episode [13] of “The Gallant Goose & Friends” on TalkShoe #139335 with your host, greg; TONIGHT, Wednesday evening at 6:45 PM Eastern.

    Since Neil posted that he is skipping his weekly Thursday Night LIVING LIES – FORECLOSURE DEFENSE & ATTACK call until Jan 7, 2016, we’ll just discuss the Paatalo Articles and talk about current events and news and your own Foreclosure Defense experience…

    IMPORTANT NOTE: Because Dec 24th and Dec 31st fall on Thursday, we will be “bumping” our call over to Wednesday for the next two weeks (Dec 23 & Dec 30)

    Details follow:

    1) Neil’s Living Lies Call at 6:00PM Eastern (347) 850-1260… on Blogtalk Radio (resumes 1/7/2016)

    2) Our interactive self-help Q&A call, “The Gallant Goose & Friends” on TalkShoe – begins TONIGHT – WEDNESDAY night at 6:45PM Eastern

    Call in at (724) 444-7444 (then use Call ID: 139335) then “1#” for guest and/or use your computer to blog/type at http://www.talkshoe.com/tc/139335
    6:45 PM Eastern (for 60+ min)

    [Our Calls and Chat Board are recorded for review and sharing…]

    Please use the phone line TO SPEAK; ASK QUESTIONS AND CONTRIBUTE…
    Note that computer access will ONLY allow you to hear and type into the blog (Not Speak)…

    all are welcome!

    if you; or one of your friends; would like to be added and receive email reminders of the call…please email the host at: [lawman@gmx.us] with the subject line: “please add me to the goose!”

    If you would like to be REMOVED from the group…please email the host at: [lawman@gmx.us] with the subject line: “please pluck my goose”

    thank you.
    greg

  22. The Rules continue existing industry practice by specifying that the depositor (often the sponsor or an affiliated intermediary that receives the pool assets and transfers them to the issuing entity) is the statutory “issuer” for purposes of signing the registration statement. As such, each of the depositor’s principal executive officer, principal financial officer, controller, or principal accounting officer and a majority of its directors is required to sign the registration statement for the ABS offering. The same depositor will be considered a different statutory “issuer” in respect of each issuing entity and also in respect of its own securities.

  23. so my agreement ,the mortgage and note, per se- that once the lender is payed as to the amount in the note, then my obligations to that agreement is done . so once the originator sells that note / mortgage to depositor for the the full amount of the note. my obligations to that lender is dead. gone. i owe them nothing. as they have been payed in full.

  24. A creditor may terminate a loan or open-end credit agreement and accelerate the balance when the consumer fails to meet the repayment terms resulting in a default in payment under the agreement; a creditor may do so, however, only if the consumer actually fails to make payments resulting in a default in the agreement.

    so if the consumer is note a party to the psa , as stated by the banks. the psa is the agreements with the partys. in that agreement.

    so as all psa say. if the borrower does not pay any or all of the payments, then the servicer and trustee must pay the payments. as per agreement.

  25. @ djabelanger

    The issue(s) are:

    Who are the holder(s) of a PAYMENT INTANGIBLE?

    Who are the holder(s) of the NOTE?

    Who are the purported TRUE CREDITOR(s)?

    Whether the holder(s) of a PAYMENT INTANGIBLE also holds a perfected security interest in the LIEN?

    Whether the holder(s) of a PAYMENT INTANGIBLE have the authority to enforce the LIEN?

    Does securitization of the PAYMENT INTANGIBLE further BIFURCATE the security instrument such that it is a nullity?

  26. Securitized Mortgage
    Securitized Mortgage
    A mortgage that is packaged into a mortgage-backed security (MBS). One mortgage may be securitized over several MBSs, and each MBS contains many securitized mortgages. A securitized mortgage gives the holder of the security, rather than the bank originating the loan, the right a claim on the principal and interest payments on that mortgage. Mortgages are securitized to remove them from a bank’s balance sheet (which reduces risk) and to improve its cash flow.

  27. Consumer Protection Issues
    While nontraditional mortgage loans provide flexibility for consumers, the Agencies are concerned that consumers may enter into these transactions without fully understanding the product terms. Nontraditional mortgage products have been advertised and promoted based on their affordability in the near term; that is, their lower initial monthly payments compared with traditional types of mortgages. In addition to apprising consumers of the benefits of nontraditional mortgage products, institutions should take appropriate steps to alert consumers to the risk of these products, including the likelihood of increased future payment obligations. This information should be provided in a timely manner–before disclosures may be required under the Truth in Lending Act or other laws–to assist the consumer in the product selection process.
    Concerns and Objectives–More than traditional ARMs, mortgage products such as payment option ARMs and interest-only mortgages can carry a significant risk of payment shock and negative amortization that may not be fully understood by consumers. For example, consumer payment obligations may increase substantially at the end of an interest-only period or upon the “recast” of a payment option ARM. The magnitude of these payment increases may be affected by factors such as the expiration of promotional interest rates, increases in the interest rate index, and negative amortization. Negative amortization also results in lower levels of home equity as compared to a traditional amortizing mortgage product. When borrowers go to sell or refinance the property, they may find that negative amortization has substantially reduced or eliminated their equity in it even when the property has appreciated. The concern that consumers may not fully understand these products would be exacerbated by marketing and promotional practices that emphasize potential benefits without also providing clear and balanced information about material risks.
    In light of these considerations, communications with consumers, including advertisements, oral statements, promotional materials, and monthly statements, should provide clear and balanced information about the relative benefits and risks of these products, including the risk of payment shock and the risk of negative amortization. Clear, balanced, and timely communication to consumers of the risks of these products will provide consumers with useful information at crucial decision-making points, such as when they are shopping for loans or deciding which monthly payment amount to make. Such communication should help minimize potential consumer confusion and complaints, foster good customer relations, and reduce legal and other risks to the institution.
    Legal Risks–Institutions that offer nontraditional mortgage products must ensure that they do so in a manner that complies with all applicable laws and regulations. With respect to the disclosures and other information provided to consumers, applicable laws and regulations include the following:
    • Truth in Lending Act (TILA) and its implementing regulation, Regulation Z.
    • Section 5 of the Federal Trade Commission Act (FTC Act). TILA and Regulation Z contain rules governing disclosures that institutions must provide for closed-end mortgages in advertisements, with an application,15 before loan consummation, and when interest rates change. Section 5 of the FTC Act prohibits unfair or deceptive acts or practices.16
    Other Federal laws, including the fair lending laws and the Real Estate Settlement Procedures Act (RESPA), also apply to these transactions. Moreover, the Agencies note that the sale or securitization of a loan may not affect an institution’s potential liability for violations of TILA, RESPA, the FTC Act, or other laws in connection with its origination of the loan. State laws, including laws regarding unfair or deceptive acts or practices, also may apply.
    Recommended Practices
    Recommended practices for addressing the risks raised by nontraditional mortgage products include the following:17
    Communications with Consumers–When promoting or describing nontraditional mortgage products, institutions should provide consumers with information that is designed to help them make informed decisions when selecting and using these products. Meeting this objective requires appropriate attention to the timing, content, and clarity of information presented to consumers. Thus, institutions should provide consumers with information at a time that will help consumers select products and choose among payment options. For example, institutions should offer clear and balanced product descriptions when a consumer is shopping for a mortgage–such as when the consumer makes an inquiry to the institution about a mortgage product and receives information about nontraditional mortgage products, or when marketing relating to nontraditional mortgage products is provided by the institution to the consumer–not just upon the submission of an application or at consummation.18 The provisions of such information would serve as an important supplement to the disclosures currently required under TILA and Regulation Z or other laws.19
    Promotional Materials and Product Descriptions. Promotional materials and other product descriptions should provide information about the costs, terms, features, and risks of nontraditional mortgages that can assist consumers in their product selection decisions, including information about the matters discussed below.
    • Payment Shock. Institutions should apprise consumers of potential increases in payment obligations for these products, including circumstances in which interest rates or negative amortization reach a contractual limit. For example, product descriptions could state the maximum monthly payment a consumer would be required to pay under a hypothetical loan example once amortizing payments are required and the interest rate and negative amortization caps have been reached.20 Such information also could describe when structural payment changes will occur (e.g., when introductory rates expire, or when amortizing payments are required), and what the new payment amount would be or how it would be calculated. As applicable, these descriptions could indicate that a higher payment may be required at other points in time due to factors such as negative amortization or increases in the interest rate index.
    • Negative Amortization. When negative amortization is possible under the terms of a nontraditional mortgage product, consumers should be apprised of the potential for increasing principal balances and decreasing home equity, as well as other potential adverse consequences of negative amortization. For example, product descriptions should disclose the effect of negative amortization on loan balances and home equity, and could describe the potential consequences to the consumer of making minimum payments that cause the loan to negatively amortize. (One possible consequence is that it could be more difficult to refinance the loan or to obtain cash upon a sale of the home).
    • Prepayment Penalties. If the institution may impose a penalty in the event that the consumer prepays the mortgage, consumers should be alerted to this fact and to the need to ask the lender about the amount of any such penalty.21
    • Cost of Reduced Documentation Loans. If an institution offers both reduced and full documentation loan programs and there is a pricing premium attached to the reduced documentation program, consumers should be alerted to this fact.
    Monthly Statements on Payment Option ARMs. Monthly statements that are provided to consumers on payment option ARMs should provide information that enables consumers to make informed payment choices, including an explanation of each payment option available and the impact of that choice on loan balances. For example, the monthly payment statement should contain an explanation, as applicable, next to the minimum payment amount that making this payment would result in an increase to the consumer’s outstanding loan balance. Payment statements also could provide the consumer’s current loan balance, what portion of the consumer’s previous payment was allocated to principal and to interest, and, if applicable, the amount by which the principal balance increased. Institutions should avoid leading payment option ARM borrowers to select a non-amortizing or negatively-amortizing payment (for example, through the format or content of monthly statements).
    Practices to Avoid. Institutions also should avoid practices that obscure significant risks to the consumer. For example, if an institution advertises or promotes a nontraditional mortgage by emphasizing the comparatively lower initial payments permitted for these loans, the institution also should provide clear and comparably prominent information alerting the consumer to the risks. Such information should explain, as relevant, that these payment amounts will increase, that a balloon payment may be due, and that the loan balance will not decrease and may even increase due to the deferral of interest and/or principal payments. Similarly, institutions should avoid promoting payment patterns that are structurally unlikely to occur.22 Such practices could raise legal and other risks for institutions, as described more fully above.

  28. hile third-party loan sales can transfer a portion of the credit risk, an institution remains exposed to reputation risk when credit losses on sold mortgage loans or securitization transactions exceed expectations. As a result, an institution may determine that it is necessary to repurchase defaulted mortgages to protect its reputation and maintain access to the markets. In the agencies’ view, the repurchase of mortgage loans beyond the selling institution’s contractual obligation is implicit recourse. Under the agencies’ risk-based capital rules, a repurchasing institution would be required to maintain risk-based capital against the entire pool or securitization.13 Institutions should familiarize themselves with these guidelines before deciding to support mortgage loan pools or buying back loans in default.

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