The Internal Revenue Service is Investigating the Tax-Exempt Status of REMICs

The Internal Revenue Service is investigating the Tax-Exempt Status of REMICs

By Daniel Edstrom
DTC Systems, Inc.

Reuters has announced that “The Internal Revenue Service has launched a review of the tax-exempt status of a widely-held form of mortgage-backed securities called REMICs.”  This comes after many years of homeowners, lawyers and securitization experts having discussed the shenanigans of Wall Street.  The standard industry practice is that loans were never perfected into these REMICs, which required the loans as “qualified mortgages” to be in the REMIC within 90 days of the “startup day”, which corresponds with the trust “closing date”.  However, in nearly every case we have seen, the REMIC servicers are doing an assignment of the security instrument into the trust after the loan is in foreclosure in order that whoever is foreclosing has the right to foreclose.  Unfortunately once a loan is in default it is no longer a “qualified mortgage” under REMIC laws, not to mention that it is years past the REMIC “startup day”.  Nor as Judge Arthur Schack puts it in New York, why is the trustee accepting the conveyance of a non-performing loan into the trust?

Specifically the article says “These banks’ transgressions, confirmed in court decisions and through recent action by federal bank regulators, include the failure to formally transfer ownership of mortgages to the trusts that invested in them and the subsequent creation of fraudulent mortgage assignments and other false documents.”  Cease and Desist Consent Orders were just issued against Bank of America, Citibank, HSBC, JP Morgan Chase, US Bank, Wells Fargo, Aurora Bank, EverBank, EverBank Financial Corporation, IMB HoldCo LLC, OneWest, Sovereign Bank, DocX, LPS Default and MERS.  Just wait until the Securities and Exchange Commission decides to investigate Sarbanes-Oxley legislation against the statements these entities have made under oath with what the bank regulators found actually happened with them.

Does Sarbanes-Oxley have teethe?  Who knows, but here is what section 906 states:

“(c) CRIMINAL PENALTIES. —WHOEVER—
     (1) certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than $1,000,000 or imprisoned not more than 10 years, or both; or
     (2) willfully certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than $5,000,000, or imprisoned not more than 20 years, or both.”

 That speaks for itself.

Read the Reuters article: http://www.reuters.com/article/2011/04/27/us-usa-mbs-taxes-idUSTRE73Q7UX20110427

Author: dmedstrom

Reverse Engineering and Failure Analysis - Reverse Engineering Wall Street

5 thoughts on “The Internal Revenue Service is Investigating the Tax-Exempt Status of REMICs”

  1. I have an assignment filed 4 years after the closing date – sign by ROBO Stephen C. Porter claiming to be Assist Sec of Mers while he is the Chief Litigation Attorney for Barrett Law Firm in Texas – Org with Countrywide in 06 – anyone seeing this name on their documents?

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