Posted on October 22, 2009 by livinglies
NOTE: usedkarguy gets it pretty well. He submitted the following
comment which I have edited into this post, but I retain all his basic
observations. This one deserves a re-read.
Essentially he is proving a major point: You can’t pick up one end of the stick without picking up the other.
If the pretender lenders are claiming that the loan obligations are
in the “trust” (REMIC) then the securities must have been sold. But
then how can they say they stuck with unsold MBS for which they needed
TARP relief? That is why discovery on the TARP funds is so important.
Somewhere there is a document that says we are holding the following
TOXIC ASSETS. And in that list are thousands of mortgages in hundreds
of pools that never made it or which have vanished into thin air.
So the representation for example that U.S. Bank is the holder of
the note as Trustee for Asset backed Security Pool 1234 must be tested
by discovery and an evidentiary hearing if possible. That is where the
rubber meets the road.
The arrogance of the pretender lenders fades when they are required to move from spurious attorney representations in court to
production of actual evidence — documents that can be authenticated by
people with personal knowledge. And remember that would be people who
are COMPETENT WITNESSES.
The legal argument is that even if the loan DID make it through
the trust, it therefore was sold to the investors who purchased the
Mortgage Backed Securities which were hybrids, containing the language
of a bond and the conveyance of a percentage equity in the pool AS
OWNERS THEREOF. Thus without naming them as LENDERS and proving that
the LENDERS are foreclosing with the assistance of the pretender
lender, the pretender lender is simply stealing the property from a
LENDER who knows nothing about the existence of the foreclosure
The factual argument is that in many cases the loan never made it in
any form, on any document, to the Trustee, the Trust, the REMIC or the
THAT is why you win in discovery — unless they account for all
aspects of this transaction, they have no accounting at all. A
creditor’s burden of proof is simple: here are the records and our
witnesses that show that you took value from us and here is all the
money anyone ever paid on this obligation. So here is your balance.
This is done in small claims court every day.
Without an accounting they cannot positively state whether
the obligation is in default, and if so, to whom the obligation is
actually owed (i.e., who lost money on the allegedly defaulted loan).
Where’s the counterparty? Who wrote the default swap?
In my trust, it was Bear Stearns (Now JPMChase), and the Securities
administrator (seller) was Citigroup Global Markets. Trustee HSBC for
the Wells Fargo Trust. Wells Fargo wore all the other hats.
Now, the vintage deals WFHome Equity Asset Backed Securities
2005-1/2/3/4 were all “left on dealers shelves” like the same vintage
SASCO Deals. Anyway, if CitiGroup Global got stuck holding the
bag ($62Billion writedown, anyone remember?) and the securities
remained unsold, how did they (the mortgage pools) end up in the 1999
Wells Fargo/Norwest Assets 1999 Trust? It’s the
“extinguishment of the liability” (140-3) wherein the problem lies
(reverse-repo). It’s a modern-day version of “hot-potato”. It’s hot
because they used the loan to borrow more money after dispersing the
investor money. They don’t have the money to pay back the loan that
constituted the proceeds of YOUR loan (it was borrowed from the
investor). The AB1122 is where they defraud the investors by not
reporting the actual failure of the trust (receivership). And, the
REMIC trust is taking in more money in foreclosure and sheriff’s
sale/liquidation (not a true open market transaction as perpetrated
with fraudulent representation on the part of the foreclosing entity)
than in interest pass through (the key to tax-exempt flow through
(conduit) status) (more than 20%?), if the defaulted loans are
indicative of 20% of the total number of loans in the pool, the
mathematical consequences are supposed to trigger receivership
(liquidation). The WFHEABS05-2 are running at 40%
delinquent/foreclosed/bankrupt/REO. These default rates are common
throughout meltdown-era MBSs.
My question, Mr. E, is who is the counterparty? They are the one who
got stuck with loss on your note, but they have no note, and no claim
to the collateral. They got paid a premium to perform on a
contract, and lost. They don’t have any assigned interest in the house,
only a receipt for paying the claim. The
loan is extinguished on one set of books, but is continuously carried
as an asset (money still a receivable) on another set of books (ABS)
even though no such obligation exists.
Now, back to True Sale. This is the “surrender of control” issue that violates the true sale status. The
loan was to be assigned “without recourse” when the Depositor agreed to
deposit it with the Trust. I don’t think any of this was done other
than with a passing of dollar values over a wire. There was never any
“arms-length” transaction, the pretender lender stayed on immediately
to “service” the loan and make sure you defaulted, they
directed the appraisal of the collateral to cover the loan. Then they
end up recovering the collateral at sheriffs sale to sell at a later
date directing proceeds into their own pockets (the sponsor usually
holds the equity tranches and the Z tranche, which receives non-regular