Securitization May Create Securities Out of Loans and MBS

Both the notes and the bonds were highly speculative investments since neither were backed by an actual debt or a valid mortgage.

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There is an untested theory that could have significant impact if it was attempted by experienced securities counsel. The foundation lies in the way that mortgage loans were sold first to consumers as loan products and then traded in the secondary and tertiary markets as “investments.”
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The industry parlance has consumers “purchasing” a loan product, which is generally sold as part of an investment plan based upon representations regarding the rising value of real estate. Thus the loan product offers cash or access to property that will rise in value without any action performed by the homeowner. The signature of the consumer becomes a tradable commodity, which some have labeled identity theft. The consumer owns the right to get and keep money for the purpose of making a profit due to rising real estate prices. Hence the “loan product” may well be a “security” regulated by the SEC under the securities and exchange acts of 1933 and 1934.
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The debt of the consumer arises out of the receipt of money from a pool of funds that should not exist and is never revealed. The note and mortgage are payable to an unrelated third party which has the effect of preventing the debt and the note from merging into one single liability. Merger only occurs where the owner of the debt and the payee are one and the same entity. Hence both the debt and the note become speculative investments and the title to the property offered by the consumer to collateralize the loan becomes the homeowner’s investment. Title is clouded by the new loan contract, thus introducing the element of title risk where that risk did not previously exist.
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The MBS issued by Special Purpose Vehicles (SPVs) may have been issued by purported REMIC Trusts. But the special tax treatment and the exemption of MBS collapse upon close examination. Analysis of hundreds of Trusts points to an inconsistent treatment of the REMICs with nobody who can complain — except the U.S. government for tax purposes and the U.S. government for securities regulation.
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Virtually none of the putative REMIC Trusts ever received the proceeds of sale of MBS issued on behalf of the REMIC Trust. Such trusts are unfunded. Hence, without funds the trusts could not purchase or originate any transactions.
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The only transaction that the investors intended was the purchase of existing loans — where the originators assumed the risk of loss. This did not happen as the money from investors was diverted into originations, regardless of whether the loan was originated by a major bank or a tiny company with a lender’s license. All of such “originators” were providing merely fee based services in which they did not loan any money and they assumed no risk of loss if the loan became nonperforming.
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Quite the contrary, the evidence is clear that the pressure from the mega-banks who were in control of the “Securitization” process was for the maximum amount of dollars to be moved regardless of the requirements of fair lending. The process of due diligence was turned on its head with originators and intermediaries like Countrywide pushing for ways to approve loans that clearly, on their face, could never perform or would fail at a specified time in the future.
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The money that was taken by the mega banks was largely the result of false claims of securitization and false claims in filing foreclosures or otherwise attempting to collect on the note when the debt was equitably due to the investors whose money was applied, without consent, to the loan originations. In the process of making false claims regarding securitization the mega banks entered into a tacit co-venture agreement to create a market for bonds that were never mortgage backed and therefore were not mortgage backed securities exempt under the 1999 law. This enabled the mega banks to create sales and the illusion of further sales of the same loans over and over again masquerading as a different type of transaction when the net result was sale of the loans.
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Hence the conclusion reached by some is that both the MBS and the notes are securities under the SEC laws and rules and that neither one was exempt. The “mortgage bonds” were not backed by mortgages and thus did not qualify for either preferred REMIC treatment under the Internal Revenue Code nor for exemption from SEC regulation. If the definition of security is a transaction in which one party pays money in exchange for receiving a passive income or gain then both the bonds and the notes are securities. If the notes were not the product of merger with the debt, then the notes became a highly speculative instrument. If the bonds were not backed by mortgages then they too became highly speculative investments.

14 Responses

  1. […] via Securitization May Create Securities Out of Loans and MBS — Livinglies’s Weblog […]

  2. Reblogged this on Mario Kenny.

  3. We had complained to the SEC that the RMBS issued by CWABS Inc. may involve invalid securities as the assignment of mortgage on our property is defective. The SEC wrote us back stating that some trusts don’t mention all the properties in the trust for PRIVACY Reasons !

  4. Yep.

  5. ANON- i think that you know rhe answer to the question you asked below-

  6. Let’s also ask this — since profit is always motivation, a higher interest rate will, of course, be more profitable — who were the top tranche investors in the private entity trusts? As the old saying goes — “if you can’t beat them – join them.” Also, what was required under the Community Reinvestment Act? How did this impact the banks, and how did they get around it?

  7. NMSA 1978 § 55-3-102: Subject matter. (a) This article applies to negotiable instruments. It does not apply to money, to payment orders governed by Article 4A, or to securities governed by Article 8. (b) If there is conflict between this article and Article 4 or 9, Articles 4 and 9 govern. (c) Regulations of the board of governors of the federal reserve system and operating circulars of the federal reserve banks supersede any inconsistent provision of this article to the extent of the inconsistency.” Cmt. 2 “The distinction between an instrument and a certificated security in bearer form may be somewhat more difficult and will generally lie in the economic functions of the two writings. Ordinarily, negotiable instruments under Article 3 will be separate and distinct instruments, while certificated securities under Article 8 will be either one of a class or series or by their terms divisible into a class or series (Section 8-102(a)(15)(ii)). Thus, a promissory note in bearer form could come under either Article 3 if it were simply an individual note, or under Article 8 if it were one of a series of notes or divisible into a series. An additional distinction is whether the instrument is of the type commonly dealt in on securities exchanges or markets or commonly recognized as a medium for investment (Section 8-102(a)(15)(iii)).

  8. Neil, shame on you… must be taking some serious heat from the banksters to qualify your information that anyone with half a brain and knowledgeable in the industry would confirm as not only true but standard MO. What do you mean MAY BE traded????? Come on… you have been outspoken through the tough years of getting people to realize the fraud, don’t back down now. Keep the thoughts and info flowing – you do a justice to those who are too timid to do it themselves.

  9. ANON, prior Fannie and Freddie pools?

  10. http://www.webofdebt.com

    All of the issues can be fixed if We The People can ONLY properly identify the PROBLEM:

    IT IS THE CRIMINAL BANKS AND THEIR CRIMINAL INFLUENCE ON CRIMINAL POLITICIANS.

    The vulnerability of those oppressing US lies in the FACT: they have counterfeit our currency. There are consequences, in the LAW for counterfeiting (Art.1, Sect. 8). Their counterfeiting is two-fold. They have counterfeit American Securities AND they have counterfeit “Federal Reserve notes, bills and bonds”. The intentionally-mislabeled, “Federal Reserve”, is an outlaw enterprise… It is not owned or operated by the American People, despite what We have been led to believe. The currency operating under the command of the intentionally-mislabeled, “Federal Reserve” is now, at this very moment, worthless, because the imposters to our money have counterfeit 20 X the combined GDP of every country, on the planet (1200 Trillions in phony, counterfeit, intentionally-mislabeled, “Federal Reserve, dollars, bills, notes and bonds”). http://www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18 The US is currently under attack. It is a “Palace Coup”, designed by the elites that have set up shop in the intentionally-mislabeled, “Federal Reserve”. The mechanism they have chosen to destroy us is COUNTERFEITING. It is the same mechanism European Central Bankers have used to destroy “Sovereignty” in every nation, across the globe, for centuries. I am begging you to wake up.

    ~ Michael Keane 4/14/17

    The Clintons deregulated “Derivatives”. Now, there are over 1200 Trillions (of intentionally-mislabeled, “Federal Reserve”, Bonds, Bills and Notes), owed to “Derivatives”.

    http://www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18

    The Clintons AND 3 REPUBLICAN SENATORS, GRAMM, LEACH AND BLILEY, suppressed the few remaining consumer protections that were left, in “Glass-Steagall”.

    Like “The (intentionally-rigged) Great Depression”, both political parties are to blame and both parties recently desired and obtained suppression of “Glass-Steagall”.

    “Glass-Steagall” was designed, in the aftermath of the deliberate, banker-created, “Boom-and-Bust Cycle”, aka, “The Great Depression”, to isolate SPECULATIVE BANKS (aka, “WALL STREET”), from interfering in the financial day-to-day comings-and-goings of everyday Americans (you know, people without a gambling problem).

    Since the signing of the “Gramm, Leach, Bliley Act”, there are now, so many criminal banking behaviors documented, across-the-board, there aren’t enough pages, on FB to list them all…

    AND BOTH PARTIES ARE RESPONSIBLE.

    The 1200 Trillion are owed to “SECURITIES FRAUD”. Article One, Section Eight, explains, in UNAMBIGUOUS LANGUAGE, as follows:

    “The Congress shall have power… To provide for the punishment of counterfeiting the securities and current coin of the United States…”.

    Read the sixth paragraph, below:
    http://www.usconstitution.net/xconst_A1Sec8.html

    The 1200 Trillions owed to “Securities Fraud” hinge upon counterfeit pools of “Mortgage Loans” that are, in fact, EMPTY!

    There are NO MORTGAGE “LOANS” within the “Pools of Loans”!

    The “MBS”, “Mortgage-Backed Securities”, DON’T HAVE ANY MORTGAGES IN THEM!
    https://livinglies.wordpress.com/tag/empty-trust/

    THE CRIMINAL BANKS AND CORRUPT POLITICIANS AND CORRUPT LAW ENFORCEMENT, FROM BOTH SIDES, CREATED TWO “SHELL COMPANIES”, ERIC HOLDER’S, “THE MERS (MORTGAGE ELECTRONIC REGISTRATION SYSTEM)” AND OBAMA’S “RESCAP (RESIDENTIAL CAPITAL)”.

    Both “shell companies” act as hedge funds and in each instance, the criminal banks counterfeit titles to American homes and then place phony insurance policies on those homes (aka, “DERIVATIVES”).

    The seminal paper, exposing this criminal SCAM was written by Professor Christopher L. Peterson, while he was a Law Professor at SJ Quinney Law School, in Utah. He is now the Chief Counsel, for Enforcement, of the CFPB.

    Read page 116, from his paper, below. He describes “The MERS (created by Eric Holder’s Law Firm, “Covington-Burling”)”, as a “shell company”, used to “PRETEND” to own American homes.

    “PRETEND” TO OWN AMERICAN HOMES…

    http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=3399&context=wmlr

    Another word for “Pretending” to own American homes is “COUNTERFEITING”.

    The second “shell company”, Obama’s “RESCAP”, was created to “COUNTERFEIT” “Mortgage Loans”, said to be in the possession of F&F (Fannie and Freddie), but, that isn’t true either…

    Instead, the criminals: “Law Enforcement”, Politicians and Bankers, are claiming the Banks may claim “loans” that never belonged to them, in the first place, through the Obama Restructuring of GMAC.

    https://livinglies.wordpress.com/tag/gmac-mortgage/

    The banks are claiming “loans” that were never listed with GMAC, as “Assets (the fancy legal term for the “Assets” is “RES”- “Asset Capital =“RES CAP”… get it?)” they transferred into their possession, despite the fact GMAC never listed those “loans” as belonging to GMAC, prior to GMAC’s liquidation…

    They are claiming to “own” something that was never in the possession of the entity they claim they got it from.

    Federal Judge Margaret Sweeny is beginning to expose the truth and Matt Taibbi has written about it…

    http://www.rollingstone.com/politics/news/why-is-the-obama-administration-trying-to-keep-11-000-documents-sealed-20160418

    … although, most of the dots have yet to be connected.

    https://livinglies.wordpress.com/2017/02/21/fannie-freddie-plunge-after-court-rules-hedge-funds-cant-sue/

    Federal Judge Gleeson exposed a plea bargain with HSBC- a Chinese-English hybrid, that is presently being concealed (although the case is being heard, on appeal, this week).

    The “Deferred Prosecution Agreement” was written by the Obama DOJ and Holder, Lynch and Breuer, all signed it.

    You may read the court document here:
    Case 1:12-cr-00763-JG Document 23 Filed 07/01/13

    The bank is laundering terror and drug money for people presently murdering American and British Soldiers…

    Holder Knows it… Loretta Lynch knows it and Lanny Breuer knows it.

    Moreover, these 3 appear to have committed Treason, because the former English Finance Minister, George Osborne asked them to.

    3 months after the Treason was signed, in Brooklyn, where Loretta Lynch was then prosecutor, James Comey was placed, as an executive on the board of HSBC-Hong Kong Shanghai Banking Corporation… He is now the Director of the FBI.

    Comey’s brother made millions as the Clinton’s accountant, for their phony Foundation and Eric Holder’s wife is Loretta Lynch’s sorority sister…

    Just one big happy Family.

    These criminal Frauds also know Holder’s suggestion the banks must be protected, is also complete falsehood:

    https://livinglies.wordpress.com/2016/07/15/david-dayen-eric-holders-longtime-excuse-for-not-prosecuting-banks-just-crashed-and-burned/

    “Treason”?

    Indeed, Since Comey first fashioned betrayal of Coalition Forces, in Afghanistan and Iraq, in 2005, for KPMG…

    http://thepoliticsforums.com/threads/70200-James-Comey-money-launderer

    http://21stcenturywire.com/2016/07/13/fbi-director-comey-board-member-of-clinton-foundation-connected-bank-hsbc/

    some 1384 Coalition Forces have been murdered, in Afghanistan, alone.

    Filter Deaths By Year
    View Fatality Details

    http://icasualties.org/oef/

    There is no doubt the IRAQ LIE is a criminal disgrace, based on falsehood.

    It is likely the IRAQ LIE was created to derail the EURO as it was trading evenly with the phony, intentionally-mislabeled, “Federal Reserve, notes, bills and bonds”, at a time when Iran was threatening to sell their oil to countries that used Euros.

    http://www.countercurrents.org/iran-heard260106.htm

    In closing, if you are still broadcasting your ignorance one political party is less corrupt than another, please be still; nobody with any sense, at all, is interested in your nonsense.

    The ANSWER is to “weaponize” the 1200 Trillions in counterfeit, criminal Banking Debt by “monetizing” the counterfeit criminal Banking Debt….

    In other words, let’s take the banks at their word and employ a type of financial jiu jitzu…

    Force them to open their books (M3 has not been publicly scrutinized since 2006) and then begin seizing the Bankers’ “Assets”, because they are, at this very moment: “INSOLVENT”. 1200 TRILLIONS IS 20 X THE COMBINED GDP OF EVERY COUNTRY, ON THE PLANET… NO BANK OR GROUP OF BANKS COULD EVER CLAIM THAT AMOUNT REALISTICALLY.

    It is COUNTERFEITING, plain-and-simple.

    Once the CRIMINAL BANKS are exposed, new currency issues of Lincoln’s Greenbacks can be printed and released, while pro-rated against seizure of the phony, “Federal Reserve, notes, bills and bonds”, using the same infrastructure, although now: “UNDER NEW OWNERSHIP”.

    It is past time We The People Nationalize the banks, investigate , prosecute and punish these absolute, criminal Filth.

    ~ Michael Keane copyright, 3/12/17, all rights reserved

    “Slappingtons.com”, coming soon

    You may post on FB if you like and Thank You.

  11. Getting close here, Neil. Still — ask where did the “loans” originally come from? These were primarily refinances — not new purchases. Where did they come from?? I think you know.

  12. which explains why the prices of real estate have been driven up too quick again. Same crap, different year and Im sure the same results to follow. Lets hope Trump dont bail them out this time, not with my money. that dodd-frank needs to be repealed!

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