Balancing the Scales of Justice for Pro Se Homeowners

Is a Securitization Audit a Scam?

Posted by on Feb 6, 2012

Is a Securitization Audit a Scam?

There has been a lot of talk lately about securitization audits and whether they are a “scam” or legitimate services.  A scam is a “devious scheme to defraud” or “swindle” someone.  It is trickery.  Unfortunately there are scams and the only way to protect yourself against a scam is by educating yourself on what is real and what is not real.  Scam artist prey on victim’s ignorance and manipulate the victim’s expectations by promising the impossible.

So let’s start first by understanding what a securitization audit is and what it isn’t.  Securitization is the process in which Wall Street financial companies, such as Morgan Stanley, GoldMan Sachs, Credit Suisse, JP Morgan and the banks like Wells Fargo, Bank of America, WaMu, etc.  pooled together a group of mortgage Notes and deposited the Notes into a REMIC Trust.  The Wall Street firms then broke the revenue stream from those Notes into securities or, certificates, that were /are sold on the stock market.  People who bought those certificates are the “certificate holders” of the REMIC trust.

As we now know, the Wall Street firms and banks never actually followed through with the proper conveyance of the Notes into the REMIC Trusts, and the common belief is that the majority of those REMIC Trusts are empty, they hold title to nothing.  It is these REMIC Trusts, through their Trustees – Wells Fargo, Deutsche Bank National Trust, Bank of America, etc. – who are conducting foreclosures.  The only problem is if the Note never made it to the Trust they are not the proper parties to be foreclosing.

So how does a homeowner determine if the REMIC Trust is the proper owner with rights to foreclose?  You can both pull the securitization documents yourself and read them, or you can have a Securitization Audit firm pull the documents and tell you, with documentation, whether your Note was actually conveyed to the Trust.  This is what a Securitization Audit is all about.

You can get onto EdgarOnline (which is a free online database containing all files filed with the SEC for the REMIC Trust) and pull the documents you need to review.  For every REMIC Trust, a homeowner will want to review:

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                  Pooling & Servicing Agreement – This is the document that created the REMIC Trust and provides details of who, what, when, where, and how.

  •                                 Who are the parties to the Trust?
  •                                 What the roles are of each party to the Trust
  •                                 When the Trust was created, when it closed, and when all Notes had to be conveyed (deposited) into the REMIC Trust as per the Internal Revenue Codes
  •                                 Where the Trust documents are
  •                                 How the Notes were purchased and conveyed, and how they are managed
  •                                 Which laws governed the REMIC Trust (most are governed by New York State laws)

                 Purchase Sales Agreement – This document details who sold what to who and when.  What entity sold the Notes to the depositor of the Notes for the REMIC Trust?

                Schedule of Loans – This document details the actual Notes that were intended to be deposited into the REMIC Trust.  Typically it is an excel spreadsheet that provides details such as property address, amount of the Note, etc.   Some of the SEC filings have this document; some do not.  If your REMIC Trust doesn’t have it then you will have to ask for it through discovery.

The Pooling & Servicing Agreement can be anywhere from 200 to 300 pages long; so if you know what you are looking for this can be a relative quick read (about an hour or so); if you don’t, then plan on some serious read time.  The Purchase Sales Agreement varies in length and again, if you know what you are looking for it can be a fairly quick read; if you don’t, plan on some serious read time.

This is where Securitization Audits come in; firms conducting the Securitization Audits know what to look for – they pull and read the documents and then provide an analysis of what they are seeing in the documents.  Key things that they will look at and report on are:

  •                 Who created the Trust?
  •                 Who purchased the Notes for the Trust?  Who were the Notes purchased from?  Does the Purchase Sale Agreement show a clear “chain of title” from the originator, to the seller to the purchaser to the depositor?  If not, the report should explain the failure and why it is a failure, and it should detail where in the document the failure is highlighted.
  •                 What were the conveyance requirements for the REMIC Trust according to both the PSA and the Sales agreement?  Were those requirements followed?  If not, the report should explain the failure and why it is a failure as well as the details of where in the document the failure is highlighted.
  •                 When the REMIC Trust was closed and was your Note conveyed in time to actually make it into the Trust?  (There are strict requirements that all Notes must be properly and validly conveyed within 90 days of the REMIC Trust’s closing)
  •                 What laws govern the PSA and Sales Agreement?
  •                 Is your Note on the Schedule?

 If you want to roll up your sleeves and read the documents to determine the above information, then you don’t need an audit; If you do not know how to do the above or what to look for, then an audit may be beneficial in your foreclosure fight.  You can teach yourself how to get this info and read it;  or you can pay someone to do it for you.  That is YOUR call.

I have heard people call these audits a scam because an individual can pull the documents and read them themselves; but that is not what a scam is.  A scam deceives someone into paying for something that they do not receive.

The next question is, what do you do with the information once you get it?  If you are a homeowner fighting a foreclosure, you may be able to use the audit as evidence that the REMIC Trust who is foreclosing on you is not the actual owner of the Note and Mortgage or Deed of Trust and therefore, has no standing to be conducting a foreclosure.

 And I suspect this is the real reason why individuals call the audit a scam.  If you do not know how to use the evidence that the Trust does NOT hold your Note and Mortgage and/or Deed of Trust, then the audit is useless to you.  You have wasted your money.  And that is key – you can use the audit to determine if you have grounds to fight the foreclosure for lack of standing and if the audit does indeed detail the failure of the REMIC Trust to hold your Note, you can use it as evidence in your pleadings and at trial.  But YOU or your attorney will have to know the statutes of your state and how to properly plead this information; the audit is NOT going to tell you how to use the evidence in your legal pleadings.

I think Securitization Audits have a definite place in the fight against these wrongful foreclosures; not everyone has the time, inclination or knowledge of how to find and determine this information and the audits are an effective tool.  I personally did my own research (Our Who is Edgar? ebook provides step by step instructions on how to find your documents) but that is because when I did the research it was before these audits were being offered.  It could have saved me many hours of reading especially when I did not knowing what I was looking for and it would have helped me educate my attorney more quickly.

If you decide an audit is what you want, there are plenty of firms on the internet.  Check out their references, get a sample of their work, and price shop.  There ARE legitimate firms (some are listed under our Experts Sections) providing a legitimate service. [/ismember]





Join the conversation and post a comment.

  1. Storm Bradford

    Knowledgeable attorneys and others who understand how things REALLY work, will tell you they are basically useless.


  2. National Help Center Law Group

    Amazing how simple it can be to communicate with people and have them understand a certain topic, you made my day.

  3. Conlisk Crandell

    I believe this is one of the so much important information for me. And i’m glad reading your article. But should remark on some general issues, The website taste is ideal, the articles is in point of fact great : D. Good task, cheers


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