World Savings Bank, A Living Legacy of the Subprime Crisis
World Savings Bank loans were the worst of the worst loans that were packaged up and sold to homeowners from the 1990’s until 2008. These loans consisted of pick a pay loans with negative amortization. Typical predatory negative amortization loans allow for the original loan balance to increase to 110% maximum. Meaning if the loan was originally issued at $100,000.00, the loan balance can keep going negative until it reaches $110,000.00. World Savings Bank decided that this wasn’t enough and allowed their negative amortization loans to reach 125% of the original principal balance. This is the gift that keeps on giving. As home values have been decimated by the meltdown and continue to drop, properties with World Savings Bank loans have principal balances that keep going up and up and up. No underwriting was given on these loans, the value of the properties and the promise and belief they would ever rise was the only consideration given to support the loan. The other consideration used in “lending” the money had nothing to do with the homeowners. World Savings Bank wanted to entice investors into parting with their money. Lots of money. In fact BILLIONS and BILLIONS of dollars. It turns out that World Savings Bank had NO STAKE in the transaction, they were only the middleman. One big fat rich middleman. This was at the expense of both borrowers and investors who purchased certificates from the many REMICs setup by World Savings Bank. What REMICs? What securitizations? Didn’t Wells Fargo tell you that these loans were securitized? Why does the Office of the Comptroller of the Currency (the OCC) allow Wells Fargo Bank to foreclose in their own name on the tens of thousands of World Savings Bank foreclosures? The OCC knows much more than the American people what World Savings Bank, Wachovia and Wells Fargo Bank are doing to the American homeowners. Namely that Wells Fargo Bank is walking into court claiming to be the real party in interest, claiming that they own these loans and that they were never securitized. Of course this is nothing new for Wells Fargo Bank or Wachovia. Just look at the auto loans securitized by Wachovia Dealer Services. Wachovia Dealer Services did not loan the money as these were table funded automobile loans. The money used to fund the automobile loans came from various trusts that pooled the loans and sold them to investors. The trusts and/or the investors allegedly own the loans and not Wachovia Dealer Services or Wells Fargo Bank. But you would never know this by going to just about any state court in this country and looking at who the plaintiff is thats filing a judicial lawsuit on these automobile loans: Wachovia Dealer Services. Reading the Prospectus for these deals is a real eye opener: Title will remain in the name of Wachovia Dealer Services and even though the loans are sold, the abstract of title given to the DMV will not be updated to reflect the correct ownership. They go on to admit that title has not been perfected and that the certificateholders are at risk. It even goes on to say that the loan contracts will not be updated to reflect that ownership has changed (endorsement under state UCC laws). So you have no endorsement and no transfer (no perfection). The beneficial and equitable rights have been sold. The above all describes predatory banking, lending and servicing at its worst.
Let’s take a look now at the World Savings Bank REMICs:
This chart was put together using incomplete information. For instance, in 1991 and 1999 World Savings Bank issued REMICs, the original balance at issuance is unknown (at least to me). In 1999 or 2000 two other REMICs issued securities also of an unknown amount. You can clearly see the tremendous increase of investor money that flooded the country driving property values higher. Once this flood of money subsided, property values went back to their normal levels. This inflation and deflation is exactly what Thomas Jefferson was referring to. There are two ways to create money in the United States. One way is to print money, either physically or electronically. An example of physical money creation is our paper currency. Electronically created money would be similar to the current Quantitative Easing 2 (QE2) that has been in the news of late. The second way to create money is for banks to lender money. For more information on this read publications put out by the Federal Reserve Bank, such as Modern Money Mechanics published by the Federal Reserve Bank of Chicago. Apparently there is also a 3rd method of creating money, through the use of complex derivatives. Derivatives are listed on balance sheets as “money equivalents.” In 1983 the amount of these types of derivatives was 0.00. Today they amount to some $600 trillion (give or take a few trillion or more as nobody really knows the exact amount). This is quite a feat since the amount of paper currency in the entire world is $50 to $70 trillion.
Anyway, back to World Savings Bank. World Savings Bank is known to have created 1 REMIC in 1991, 1 REMIC in 1998, 2 REMICs in 1999, 2 REMIC deals in 2000, 2 other REMIC deals in 1999/2000, 3 REMIC deals in 2001, 4 REMIC deals in 2002, 1 REMIC deal in 2003, 3 REMIC deals in 2004, 5 REMIC deals in 2005, 5 REMIC deals in 2006, 5 REMIC deals in 2007 and 3 REMIC deals in 2008. This is at a minimum and includes on REMICs for RMBS securitizations. World Savings Bank also did Commercial MBS deals.
The World Savings Bank REMIC transactions have the following structure:
- Originator: World Savings Bank
- Master Servicer: World Savings Bank (or for newer World Savings Bank REMICs this would be Wachovia Mortgage Corporation)
- Seller: World Savings Bank (or for newer World Savings Bank REMICs this would be Wachovia Mortgage Corporation)
- Underwriter (Lead Manager) : World Savings Bank (or for newer World Savings Bank REMICs this would be Wachovia Capital Markets)
- REMIC: World Savings Bank REMIC ## (i.e. World Savings Bank REMIC 35)
- Trustee: Either Deutsche Bank National Trust Company or the Bank of New York
Why is this information seemingly impossible to locate? Because these are Rule 144/A securities meaning they are private transactions. Here is what these securities say: These securities will not be and have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Here is the kicker: many of these REMICs have been paid in full. Apparently somebody at Wells Fargo forgot to notify homeowners.
These loans and the resulting foreclosures will be strewn across the next two decades. The worst is yet to come.