Balancing the Scales of Justice for Pro Se Homeowners

What the heck is securitization and what does it have to do with my foreclosure?

Posted by on Jan 23, 2012

After receiving a notice that my mortgage loan payment was increasing by almost $600 per month, I, like many Americans reached out to my servicer to discuss how I could modify my loan into a sustainable payment.  I did not ask for a principal reduction; I did not ask to have payments waived, I simply asked that my current rate of 7% be fixed, which is what I thought my loan was – a 30 year fixed, not an ARM.  And I, like many Americans, was put on a dual track by Wells Fargo (via its servicing unit America’s Servicing Company).  At Wells Fargo’s instruction I withheld three months payment to qualify for their “Borrower’s Counseling Program” to get my ARM modified to a fixed rate loan.  And of course at the 3 month mark they immediately filed a Notice of Default to initiate the foreclosure process, thereby putting me into a catch 22.  Pay off the arrears and no longer be eligible for the ever elusive “loan modification” (do you think loan modifications are an urban myth?) or work against the foreclosure clock to get the modification.  

Knowing that the escalated payments were not sustainable, I opted to race against the foreclosure clock and work on getting the modification.  Again, all I asked for was a fixed rate at 7%.  That is still a damn good rate for the bank; but of course what I didn’t know then and do now, foreclosure is much more profitable for the bank and their partners.  So profitable they lie and cheat by manufacturing documents and manipulating the law to get the foreclosure done.  (Yes, there will be a blog on robo and surrogate signing).

When I received the Notice of Default the amount of arrears had “escalated” beyond the three months of payments by about $3,000 dollars – they tacked on late fees and attorney fees.  But what was fascinating is that the Notice was filed by a firm called  Ndex West and included a cover letter stating the beneficiary of the Deed of Trust was a REMIC Trust – the Morgan Stanley Loan Trust through its (the Trust) Trustee, Deutsche Bank National Trust Company.  Huh?  My loan was originated by the infamous New Century Mortgage and the trustee of my Deed of Trust was Fidelity National, so who the heck were these companies?  And this is when I first heard the word, “securitization”.

Apparently sometime after my loan had been originated, New Century Mortgage had sold the Note to Morgan Stanley (through a couple of different companies) for pooling into a REMIC Trust and that REMIC Trust was supposedly the owner of my Note.  This selling and pooling of the Note into the REMIC is securitization.  

And, as a REMIC, the Trust cannot modify any of the Notes it holds.  So the whole, keep your three months worth of payments to qualify for a loan modification that Americas Servicing Company told me was a lie.  At that time it wasn’t possible to modify the Note because it would violated Internal Revenue Codes with severe tax consequences to the REMIC; and the pooling and servicing agreement (more info on PSA’s to follow) did not allow for any ARM’s to be modified.  I was duped by the servicer.  Had they been honest and upfront – hey, your note has been sold to a REMIC and it can’t be modified; so figure out how to make all your payments, I would have made arrangements to either increase my income to cover the escalating payments, or discussed a short sale with them.  Instead I had worked toward getting a modification and now was in the middle of a foreclosure; they had me between a rock and a hard spot, which is exactly what they had intended all along.  There are literally 1,000’s of web postings of other homeowners being duped in the exact same way by their servicer.

If your Note was suppose to be securitized, and the documents you are reviewing and seeing tell you that it has NOT been properly securitized then you have grounds to fight the foreclosure.  (There are other grounds to fight foreclosure as well but this is the most prevalent cause for fighting a foreclosure).

Wall Street and the banks, in their greedy quest for wealth, opted to not follow their own documents.  They got sloppy and never bothered to actually transfer the Notes into the REMICs.  This is why you are seeing lawsuits such as the FHFA’s[1] suing banks (Click here for listing and details)  and investors suing for the “empty REMIC” trusts (google “investors suing for empty trusts” and read) – here is one quick recap by Paula Rush[2] called “Investors Sue” and another over at Livinglies called “MBS Investors in Revolt: Ultimatums to US Bank and Wells Fargo”.

What this means to YOU as a homeowner is that your Note most likely remains with the originator – who most likely committed fraud in the origination of the loan by misstating your income, telling you that the loan terms were different than what they actually were and/or used a fraudulent appraisal overvaluing the property (New Century admitted to congress the use of fraudulent appraisals was prevalent in their loan origination, see Patricia Lindsay for the Financial Crisis Inquiry Commission  for a fascinating, though disgusting, read).   The goal here is if you can prove the originator still holds the Note then you can sue the originator and hold them accountable for their fraud and/or deceptive business practices in an effort to get a reasonable, affordable loan so you can repay the money you borrowed and keep your property.

Is your Note one of millions that was supposed to be securitized? 

1)      Has it been sold to a Wall Street firm that pooled it into a REMIC trust? If so, the loan (Note) has been securitized (or was supposed to be).  You can find this out by writing a QWR (Qualified Written Request) for the name, address and contact information of the owner of your Note.  By law your servicer must tell you.  If you have received a Notice of Default, see if there is a cover letter that tells you who the “beneficiary” is; or check your county land records for an “assignment of Deed of Trust” and see who the Deed of Trust was assigned to.

2)      If the loan was securitized go to Edgar (www.secinfo.com) and enter the name of the REMIC and look for two documents – the Pooling and Servicing Agreement and Prospectus.  Both of these documents will tell you the path your loan supposedly took after it was originated, whether the REMIC allows modifications of Notes, and when the REMIC Trust was closed.  (If you find the site a little confusing, we have  “Who is Edgar” over in our store for $3.99 which gives you step by step instructions on how to find the documents.) 

3)      Is the assignment of Deed of Trust after the closing of the REMIC Trust?  If so, then most likely your Note never made it to the REMIC Trust and the bank will be manufacturing fraudulent documents to hide that little fact.

4)      Has the Note followed the path detailed in the Pooling and Servicing Agreement?  Most PSA’s have a 2.01 Conveyance Section that covers the endorsement requirements on your Note.  Most call for each owner of the Note to endorse the Note over to the next party in the chain of title.  Most assignments of Deed of Trust reflect a direct transfer from the originator to the REMIC Trust, which is a legal impossibility.  (See Internal Revenue Codes)  The IRS mandates that the Notes be legally conveyed within three months of closing the REMIC.  Also check your PSA to see what is the governing law (almost all are governed by New York law) – if it is governed by New York Trust laws, the transfer of a Note after the closing date is void.  (See  Professor Adam Levitin Written Testimony to House Finanical Services Committee where he explains all of the violations and failure of the banks to actually transfer the Notes)

 

 



[1] FHFA:  Federal Housing Finance Administration – oversees vital components of the secondary housing market – Fannie Mae, Freddie Mac and Federal Home Loan Banks.

[2] Paula Rush: Consumer Attorney with blog at www.paularush.com – excellent articles and advice!

3 Comments

Join the conversation and post a comment.

  1. hiit tabata

    I like your fantastic web site. Just what I was searching for!
    Best regards,
    Ron

    • Rishi

      I moved into my home about 5 yrs. ago and everything was fine until my hnbuasd was in a bad car accident which left everything on me. I had to file wage earner and that too was going aline okay. At least my bills were getting paid and then my company closed leaving me jobless. After 6mos.my wage earner was dissmissed. I refiled 3 mos. later after finding work with a temp service but the assignment was up and so was the wager earner.I’ve been trying to work with my j p morgan chase on a payment plan,but they want between 7,000.00-8,000.00 down with 3 monthly mortagage payments of 1,500.00, before my loan will be modified.I’m back at work now andI could afford a 800.00-900.00 monthly payment comfortably, but I don’t have that type of down payment .I am in pre forecloser now and I don’t want to lose my home.The idea of that is already affecting my son.Do I have a chance of getting help with the new stimulus plan?I know for a fact that a couple of other banks have already brgin working with their mortagage holder without a large down payment and have already told them about a plan that’s going to help them without the stress of worrying of losing their homes.Of course chase is not telling me anything except try to get they down payment so that they can modify and that they don’t want to see me lose my home.Will if that’s so, work with me . I don’t have that kind od money. Can you let me know if this plan will help and give me any other helpful information?. Thank You

  2. mortgage net branch california

    Please let me know if you’re looking for a article author for your site. You have some really great articles and I feel I would be a good asset. If you ever want to take some of the load off, I’d love to write some articles for your blog in exchange for a link back to mine. Please shoot me an e-mail if interested. Kudos!

X

Forgot Password?

Join Us

Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.