Homeowners may first hear the term “securitization" when they miss mortgage payments or have a foreclosure of their home. The most common misconception of homeowners is that the "bank" that is receiving the monthly mortgage payment is the actual owner of the mortgage. BIG.FAT.LIE. Long gone are the days of going to your local bank and taking out a mortgage, with the bank holding the mortgage for the life of the loan.
Mortgage securitization has been around for decades, with the peak being reached between 2002 – 2007. Mortgage securitization is an extremely complex process involving multiple institutions. The majority of trusts that were created to hold these mortgages are governed by New York Trust Law. The critical governing documents for these trusts include the POOLING AND SERVICING AGREEMENT (PSA). The PSA document details certain procedures that must be followed to assign these mortgages into the trust within a certain time frame (cut off date and closing date). ONCE THE CUT OFF DATE AND CLOSING DATE HAS PASSED FOR THE PARTICULAR TRUST, THE MORTGAGES CAN NO LONGER BE ASSIGNED INTO THE TRUST.
Per the requirements of the PSA, the mortgage must be assigned through several entities, primarily from the originator (A) assigning the mortgage to the Sponsor (B). The sponsor was primarily responsible for filing the necessary documents with both the IRS and SEC to be able to claim a “tax exempt” REMIC status. In filing the required documentation, these trusts have evaded BILLIONS of dollars in taxes owed to the government. The IRS and SEC are currently doing their own independent investigations into these acts of tax evasion and fraud.
The sponsor then assigns the mortgage to the Depositor (C) and finally with the Depositor assigning the mortgage to the Trust (D).
There was no recourse for the mortgage originators disregarding their own rules to properly assign the mortgages into the trust. The mortgages were essentially pre-sold to these trusts before the homeowners signature was even dry on the paperwork.
By ignoring hundreds of years of property law in order to gain as much profit as quickly as possible for Wall Street, the required paperwork to properly document the mandatory transfers of the properties into these trusts did not happen. Realizing this problem, compounded with the demands to conform to foreclosure laws, the banks will draft ONE assignment of mortgage that is created and dated SEVERAL YEARS after the cut off date and closing date of the trust (a blatant violation of the PSA). This lone assignment will be from the Originator (A) DIRECTLY to the Trust (D), skipping all of the entities in between (not allowed per the PSA).
There are several problems with these “A to D” assignments: By the time that these documents are created, the Originator (A) does not have anything to transfer. The PSA states that such a sale and transfer had to occur prior to the cut off date and closing date of the trust. The next problem is that these assignments are non-compliant with the purpose of securitization to create both “bankruptcy remote” and “true sales” of the Trust, by assigning the mortgage to the Sponsor (the B party) and the Depositor (the C party). In a true securitization transaction, a direct assignment (A to D) from the originator to the trust is not allowed. Another problem is that these A to D transfers ignore the representations and warranties made to the Securities and Exchange Commission, the IRS, and to the certificate holders issued by the Trust, which is a form of SECURITIES FRAUD.
In most instances, the "A to D" assignments are executed by parties (Robo-Signers) who are not even a "Vice President" or "Assistant Secretary", yet are claiming a “signing authority” or some type of “agency authority” from the originator. The job of the "Robo-Signer" is to sign THOUSANDS of documents each day without reading or understanding what they are signing. Probably the most important problem with regards to these "A to D" assignments is regarding the fact that the originator is legally defunct (out of business) at the time the mortgage is assigned directly from the Originator to the Trust. In addition, these documents are often signed with a current date and an “effective date” from several years earlier, essentially "backdating" the document and creating the false impression that the mortgage has been into the trust all along.
When a homeowner takes out a loan to purchase a house, the two documents used are a NOTE and a MORTGAGE. Through the securitization process, the investors are issued "Certificates" as evidence of ownership of the mortgages in a particular trust, and the original mortgage and notes were destroyed.
For this reason, the banks cannot "produce the note" when the homeowner fights for their due process rights in court. The Bank will only be able to produce "copies" of the note and mortgage and not original documents.
The securitization scheme used “Credit Default Swaps”, also known as unregulated side bets against homeowners not making their mortgage payments.
Additionally, the servicer will also foreclose on the homeowner and re-sell the house for a very nice profit with NO LEGAL AUTHORITY TO FORECLOSE.
IT IS FOR THIS REASON THAT HOMEOWNERS DO NOT GET A MORTGAGE MODIFICATION. IT IS MUCH MORE PROFITABLE TO FORECLOSE.
A simple yet powerful question that a homeowner must ask: “Is the entity that I am making my monthly mortgage payments to, entitled to be receiving those payments”?