Securitization – Page 14 – DTC Systems Inc

Bankruptcy Cram-Downs Being Used on Primary Residences

Bankruptcy Cram-Downs Being Used on Primary Residences

By Daniel Edstrom
DTC Systems, Inc.

A “cram-down” is where the principal balance is reduced, usually to fair market value. DSNews.com is reporting that the research firm and ratings agency DBRS has learned from various servicers that cram-downs are being done in some bankruptcy courts. We have seen the occasional cram-down but this shows that it is far more prevalent then most people realize. The effect of a cram-down is that the loan principal balance is reduced to fair market value and all amounts over that are “unsecured”, meaning they could be fully discharged. For example if a homeowner owes $750,000.00 on their primary residence, but the actual market value is $440,000.00, the bankruptcy court could cram-down the loan so that the actual principal balance is $440,000.00 and the rest ($310,000.00) is unsecured debt.

For more, read the DSNews.com article here: http://www.dsnews.com/articles/mortgage-cram-downs-by-bankruptcy-judges-are-taking-place-dbrs-2011-05-02

You can view more about DBRS here: http://dbrs.com/

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. Continue reading “The Internal Revenue Service is Investigating the Tax-Exempt Status of REMICs”

Bankruptcy Judge Margaret M. Mann Strikes Down Deutsche

Bankruptcy Judge Margaret M. Mann Strikes Down Deutsche

By Daniel Edstrom
DTC Systems, Inc.

The Honorable Judge Mann in Southern California brings the MERS issue up hard against Deutsche Bank National Trust Company.

Read the ruling – in re: Doble, Doble v. Deutsche Bank National Trust Company as Trustee: http://dtc-systems.net/wp-content/uploads/2011/04/Doble-v-Deutsche-Bank.pdf

Appeals Court Ruling Against MERS in Michigan Reverses District Court Non-Judicial Proceedings

Appeals Court Ruling Against MERS in Michigan Reverses District Court Non-Judicial Proceedings

By Daniel Edstrom
DTC Systems, Inc.

Selected excerpts:

These consolidated cases each involve a foreclosure instituted by Mortgage Electronic Registration System (MERS), the mortgagee in both cases. The sole question presented is whether MERS is an entity that qualifies under MCL 600.3204(1)(d) to foreclose by advertisement on the subject properties, or if it must instead seek to foreclose by judicial process. We hold that MERS does not meet the requirements of MCL 600.3204(1)(d) and, therefore, may not foreclose by advertisement.

MERS would purportedly track the mortgage sales internally so as to know for which entity it was holding the mortgage at any given time and, if foreclosure was necessary, after foreclosing on the property, would quit claim the property to whatever lender owned the loan at the time of foreclosure.

Continue reading “Appeals Court Ruling Against MERS in Michigan Reverses District Court Non-Judicial Proceedings”

Cease and Desist Consent Order Issued Against DocX and LPS Default Solutions

Cease and Desist Consent Order Issued Against DocX and LPS Default Solutions

By Daniel Edstrom
DTC Systems, Inc.

These consent orders are coming out of the woodwork. Here is an excerpt:

WHEREAS, in providing document execution services to Examined Servicers, including
services that facilitated completing foreclosures, LPS and its employees allegedly:

(a) Executed numerous affidavits and similar sworn statements (collectively,
“Affidavits”) making various assertions, such as the ownership of the mortgage note and
mortgage (or deed of trust), the amount of principal and interest due, and the fees and expenses
chargeable to the borrower, in which the affiant represented that the assertions in the Affidavit
were made based on personal knowledge or based on a review by the affiant of the relevant
books and records, when, in many cases, they were not based on such knowledge or review.
LPS executed these Affidavits on behalf of Examined Servicers knowing they would be filed in
state courts and in connection with bankruptcy proceedings in federal courts;

Continue reading “Cease and Desist Consent Order Issued Against DocX and LPS Default Solutions”

OTS Takes Action on Aurora Bank, EverBank, OneWest and Sovereign Bank

OTS Takes Action on Aurora Bank, EverBank, OneWest and Sovereign Bank

By Daniel Edstrom
DTC Systems, Inc.

The Office of Thrift Supervision is in on the action as well. Here is their press release from April 13, 2011:

Press Releases
April 13, 2011
OTS 11-008 – OTS Takes Action to Correct Foreclosure Deficiencies
FOR RELEASE:
Wednesday, April 13, 2010

CONTACT:
William Ruberry
(202) 906-6677
——————————————————————————–

Washington, D.C. — The Office of Thrift Supervision (OTS) has taken enforcement actions against four OTS-regulated mortgage loan servicers for critical weaknesses in processing home foreclosures, the OTS announced today.

After an interagency review of foreclosure policies and procedures at 14 nationwide mortgage servicers, the OTS issued enforcement orders against the four servicers supervised by the agency: Aurora Bank, EverBank, OneWest Bank and Sovereign Bank. The orders require swift and comprehensive action to remedy the widespread and significant deficiencies identified by the review.

Continue reading “OTS Takes Action on Aurora Bank, EverBank, OneWest and Sovereign Bank”

Cease & Desist Orders for: Citigroup, HSBC, JP Morgan Chase, MetLife, PNC, SunTrust, US Bancorp and Wells Fargo Bank

Cease & Desist Orders for: Citigroup, HSBC, JP Morgan Chase, MetLife, PNC, SunTrust, US Bancorp and Wells Fargo Bank

By Daniel Edstrom
DTC Systems, Inc.

The latest round of Cease and Desist orders issued by the Office of the Comptroller of the Currency (OCC) are against some of the largest “too big to fail” banks. Notably missing so far is Deutsche Bank National Trust Company along with Deutsche Bank Trust Company Americas and of course OneWest Bank.

The gist of these Cease and Desist orders is that certain “deficiencies” were found and the banks are operating with “unsafe or unsound” practices in residential mortgage servicing and in the Bank’s initiation and handling of foreclosure proceedings.

We hail the OCC for these efforts, but the problem is following up. How are the banks going to immediately comply with this order? They would have to stop processing nearly every single foreclosure they are working on today.

Continue reading “Cease & Desist Orders for: Citigroup, HSBC, JP Morgan Chase, MetLife, PNC, SunTrust, US Bancorp and Wells Fargo Bank”

Wells Fargo Does It Again – This Time Investors Take a Hit

Wells Fargo Does It Again – This Time Investors Take a Hit

By Daniel Edstrom
DTC Systems, Inc.

Since Wells Fargo Bank has been around since the Gold Rush days and are such a large lender and securitizer, you would think that they would have state of the art systems handling the servicing of loans. Especially in light of the huge rush to securitize anything and everything in the last 10 years. But apparently the meltdown has moved them beyond what their systems are capable of. This is probably especialy true given that banks are for the most part not lending much anymore (very limited number of new loans), but the number of loans in default, foreclosure, bankruptcy and REO status has skyrocketed. Pushing through so many foreclosures and processing so many advances and distributions is weighing down on their systems and infrastructure. In their latest March statements to certificateholders (investors who purchased certificates from securitized trusts), Wells Fargo (usually as a Master Servicer or Servicer) is giving investors this disclosure on the first page of the reports:

NOTE: Wells Fargo Bank, N.A. is processing an extraordinary expense charge related to the analysis, creation, and implementation of new and enhanced systems and processes necessitated by significant and unanticipated changes in industry and market conditions.

Continue reading “Wells Fargo Does It Again – This Time Investors Take a Hit”

BANK OF AMERICA CEASE AND DESIST ORDER FOR CERTAIN DEFICIENCIES AND UNSAFE OR UNSOUND PRACTICES

BANK OF AMERICA CEASE AND DESIST ORDER FOR CERTAIN DEFICIENCIES AND UNSAFE OR UNSOUND PRACTICES

By Daniel Edstrom
DTC Systems, Inc.

On April 13, 2011 the Office of the Comptroller of the Currency issued a Consent Cease and Desist Order. The order states that Bank of America has committed “deficiencies and unsafe or unsound practices identified by the OCC …” The OCC finds numerous problems to which the bank “neither admits nor denies”. Such as “failed to sufficiently oversee outside counsel and other third-party providers handling foreclosure-related services.”

Read the order here: http://dtc-systems.net/wp-content/uploads/2011/04/Consent_Order_for_Bank_of_America.pdf

MERS CEASE AND DESIST FOR CERTAIN DEFICIENCIES AND UNSAFE OR UNSOUND PRACTICES!!!

MERS CEASE AND DESIST FOR CERTAIN DEFICIENCIES AND UNSAFE OR UNSOUND PRACTICES!!!

By Daniel Edstrom and Jim Macklin
DTC Systems, Inc. and Secure Document Research

On April 13, 2011 the Department of the Treasury, Comptroller of the Currency, Board of Governers of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision and the Federal Housing Finance Agency have issued a consent order stating that these agencies have identified

“certain deficienies and unsafe or unsound practices by MERS and MERSCORP that present financial, operational, compliance, legal and reputational risks to MERS and MERSCORP that present financial, operational, complaince, legal and reputational risks to MERSCORP and MERS, and to the participating Members.”

OCC No. AA-EC-11-20

Board of Governers Docket Nos. 11-051-B-SC-1, 11-051-B-SC-2

FDIC-11-194b

OTS No. 11-040

FHFA No. EAP-11-01

Read the full 31 page Consent Order here: http://dtc-systems.net/wp-content/uploads/2011/04/MERS_Cease_and_Desist_2011_04_13.pdf