Perils of Pooling: OneWest

Neil_GarfieldPerils of Pooling: OneWest

By Daniel Edstrom
DTC Systems, Inc.

The following article was posted by Neil F. Garfield of livinglies.wordpress.com and comes from the following URL: http://livinglies.wordpress.com/2013/07/31/perils-of-pooling-onewest/

Apparently my article yesterday hit a nerve. NO I wasn’t saying that the only problems were with BofA and Chase. OneWest is another example. Keep in mind that the sole source of information to regulators and the courts are the ONLY people who understand mergers and acquisitions. So it is a little like one of those TV shows where the only way they can get an arrest and conviction is for the perpetrator or suspect to confess. In this case, they “confess” all kinds of things to gain credibility and then lead the agencies and judicial system down a rabbit hole which is now a well trodden path. So many people have gone down that hole that most people that is the way to get to the truth. It isn’t. It is part of a carefully constructed series of complex conflicting lies designed carefully by some very smart lawyers who understand not just the law but the way the law works. The latter is how they are getting away with it.

Continue reading “Perils of Pooling: OneWest”

Perils of Pooling

Neil_GarfieldPerils of Pooling

By Daniel Edstrom
DTC Systems, Inc.

The following article was posted by Neil F. Garfield of livinglies.wordpress.com and comes from the following URL: http://livinglies.wordpress.com/2013/07/30/perils-of-pooling/

Perils of Pooling

Posted on July 30, 2013 by Neil Garfield

We hold these truths to be self evident: that Chase never acquired any loans from Washington Mutual and that Bank of America never acquired any loans from Countrywide.  A review of the merger documents approved by the FDIC reveals that neither Chase nor Bank of America wanted to assume any liabilities in connection with the lending operations of Washington Mutual or Countrywide, respectively. The loans were expressly left out of the agreement which is available for everyone to see on the FDIC website in the reading room.

Continue reading “Perils of Pooling”

Texas Ropes One In: Motion to Dismiss Denied

Texas Ropes One In: Motion to Dismiss Denied

By Daniel Edstrom
DTC Systems, Inc.
http://www.dtc-systems.net

From April Charney:

…”If the holder of the deed of trust does not own or hold the note, the deed of trust serves no purpose, is impotent, and cannot be a vehicle for depriving the grantor of the deed of trust of ownership of the property described in the deed of trust….[finding that]…inherent in the procedural steps outlined in the Texas Property Code is the assumption that whatever entity qualifies as a “mortgagee” either owns the note or is serving as an agent for the owner or holder of the note; and, the statute assumes that when a foreclosure is conducted by someone other than the owner or holder of the note, the person conducting the foreclosure will be acting as agent or nominee for the owner or holder…Otherwise, the Texas statutory law would make no sense, and would be directly at odds with long-standing, basic principles governing the relationship between real estate borrowers, on the one hand, and their corresponding secured real estate lenders, on the other.” (edited from the below decision):
JANE McCARTHY, Plaintiff, vs. BANK OF AMERICA, NA, BAC HOME LOANS SERVICING, LP, and FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendants. NO. 4:11-CV-356-A December 22, 2011
 

Interagency Independent Foreclosure Review – File Your CLAIM

Interagency Independent Foreclosure Review – File Your CLAIM

By Daniel Edstrom
DTC Systems, Inc.

The following regarding the numerous Cease and Desist Consent Orders issued against servicers and others for unsafe or unsound foreclosure policies and practices is available here: http://www.independentforeclosurereview.com/

Independent Foreclosure Review

Looking for information about the Independent Foreclosure Review? Si usted habla español, tenemos representantes que pueden asistirle en su idioma.

Homeowners whose primary residence was part of a foreclosure action between January 1, 2009 and December 31, 2010, and whose home loan was serviced by a participating servicer, may be eligible for an Independent Foreclosure Review.

The Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (federal bank regulators) have required an Independent Foreclosure Review by an independent consultant to identify eligible customers who may have been financially injured due to errors, misrepresentations or other deficiencies in their foreclosure process. If the review finds that financial injury occurred, the customer may receive compensation or other remedy.

To qualify, your mortgage loan would need to meet the initial eligibility criteria: Continue reading “Interagency Independent Foreclosure Review – File Your CLAIM”

The Wrong Remedy at the Wrong Time, Part 2

The Wrong Remedy at the Wrong Time, Part 2

By Daniel Edstrom
DTC Systems, Inc.

New Note added on 1/22/2012 thanks to Simonee.  California Probate Code does not seem to apply based on this California Supreme Court decision: Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454 , 261 Cal.Rptr. 587; 777 P.2d 623 (download here: http://dtc-systems.net/wp-content/uploads/2012/01/Monterey_SP_Partnership_vs_WL_Bangham.pdf)

This is a continuation from The Wrong Remedy at the Wrong Time, Part 1 (http://dtc-systems.net/2011/01/wrong-remedy-wrong-time-part-1/).

It turns out that if you want to modify the Trust created by your Deed of Trust, or if you want to determine if the trust exists, you need to petition the court under California Probate Code 17200.  If you are not in California, but are in a Deed of Trust state, your state probably has similar probate laws.

In order to petition the court, California Probate Code 17200 has the following provision:

“(a) Except as provided in Section 15800, a trustee or beneficiary of a trust may petition the court under this chapter concerning the internal affairs of the trust or to determine the existence of the trust.”

Right off the bat we find that only a trustee or a beneficiary has the ability to petition the court under 17200.  If no trustee is specified, the default trustee is the trustor (the parties that executed the note – i.e. the homeowners).  The beneficiaries can easily substitute in a new trustee if that occurs.  But what if Mortgage Electronic Registration Systems (MERS) is named as the beneficiary?  Consider California Mortgage and Deed of Trust Practice § 1.39 (3d ed Cal CEB 2008) § 1.39 (1) the Beneficiary Must Be Obligee:  The beneficiary must be an obligee of the secured obligation (usually the payee of a note), because otherwise the deed of trust in its favor is meaningless. Watkins v Bryant (1891) 91 C 492, 27 P 775; Nagle v Macy (1858) 9 C 426. See §§ 1.8-1.19 on the need for an obligation. The deed of trust is merely an incident of the obligation and has no existence apart from it. Goodfellow v Goodfellow (1933) 219 C 548, 27 P2d 898; Adler v Sargent (1895) 109 C 42, 41 P 799; Turner v Gosden (1932) 121 CA 20, 8 P2d 505. The holder of the note, however, can enforce the deed of trust whether or not named as beneficiary or mortgagee. CC § 2936; see § 1.23.

Continue reading “The Wrong Remedy at the Wrong Time, Part 2”

Understanding the Governing Documents 1

Understanding the Governing Documents 1

by Daniel Edstrom

Wall Street financial engineering is a thing to behold.  Of course most of it is in complex legal terms difficult to comprehend.  Let’s take a look at a few definitions in a Prospectus Supplement and break them down.  This is from the RASC Series 2005-EMX4 Trust put out by GMAC.

Subordination. So long as the Class M Certificates remain outstanding, losses on the mortgage loans which are not covered by amounts payable under excess cash flow or overcollateralization will be allocated to the Class M Certificates that remain outstanding with the lowest payment priority, and the other classes of certificates will not bear any portion of such losses. If none of the Class M Certificates are outstanding, all such losses will be allocated to the Class A Certificates as described in this prospectus supplement.

What this means: Numerous classes of certificates are issued.  In this trust the Class A certificates are paid in priority first while any losses first come out of the Class M certificates.  Once the Class A certificates principal is paid in full, the principal is applied to the Class M certificates.  Once the Class M certificates absorb all losses and the principal is reduced to zero, the Class A certificates will suffer losses.  The diagram to the left shows what this looks like.  Is there a loss?  Only if the loss is not covered by “amounts payable under excess cash flow” or “overcollateralization.”

DEBT SERVICE REDUCTION–Modifications of the terms of a mortgage loan resulting from a bankruptcy proceeding, including a reduction in the amount of the monthly payment on the related mortgage loan, but not any permanent forgiveness of principal.

What this means: A reduction in the monthly payment based on a bankruptcy ruling but not including any permanent principal forgiveness.  This doesn’t mean much at the moment but we will revisit this shortly.

Realized Loss–As to any defaulted mortgage loan that is finally liquidated the portion of the Stated Principal Balance plus accrued and unpaid interest remaining after application of all amounts recovered, net of amounts reimbursable to the master servicer for related Advances, Servicing Advances and other expenses, towards interest and principal owing on the mortgage loan. For a mortgage loan the principal balance of which has been reduced in connection with bankruptcy proceedings, the amount of the reduction. As to any mortgage loan that has been the subject of a Debt Service Reduction, the amount of the reduction. For a mortgage loan that has been modified, following a default or if a default was reasonably foreseeable, the amount of principal that has been forgiven, the amount by which a monthly payment has been reduced due to a reduction of the interest rate, and any Servicing Advances that are forgiven and reimbursable to the master servicer or servicer. To the extent the master servicer receives Subsequent Recoveries with respect to any mortgage loan, the amount of the Realized Loss with respect to that mortgage loan will be reduced to the extent such recoveries are received.

What this means: This is part of the Wall Street engineering genius that is difficult to understand.  Basically what it is saying is that despite what you might believe,  despite what a judge rules in bankruptcy, and despite the fact that a loan modification has been applied to a loan, the investors receive the original payment of principal and interest.  Even after a ruling by a standing bankruptcy judge the investors receive the original principal and interest based upon the original note (or at least the copy of the note allegedly pooled into the trust).  One can only imagine the book-keeping nightmares that servicers face keeping multiple sets of books and trying to keep them all straight.  This is my best guess as to why the servicers have such a hard time keeping the accounting straight for those in bankruptcy.  Just ask O. Max Gardner III how often the servicers mess up bankruptcy rulings.

Read all of the above again.  Even if the principal and interest payment are reduced in bankruptcy, the servicer is required to advance the principal and interest of the original mortgage loan as amortized.  Once the loan is liquidated (paid off), the principal loss is calculated at that time and advances which have not been paid by other forms of credit enhancements are paid back to the advancing party.   THE INVESTORS GET THEIR MONEY during the course of the loan (whether or not paid by the homeowners), then it gets ripped out of their hands all at once when the loss is calculated.  But you never know for sure whether the investors will actually suffer a loss or if the credit enhancements will pay for it.  This is one of many reasons why the homeowner is entitled to a full accounting.

Bankruptcy judges be warned: Wall Street takes your rulings with a grain of salt and applies them in their own fashion.  This can only stem from multiple sets of books that are concealed, misrepresented and not disclosed to the courts.

Disclaimer Reminder:  This is a blog for educational and informational use only and does not constitute legal advice.  Take no action without first consulting an attorney in your jurisdiction.