OP-ED (NOT LEGAL ADVICE) —
The author of this post is the author of several books, all of which can be found on the Clouded Titles website. The author is not an attorney but rather a disenfranchised political enemy of the United States Government and consults attorneys on actions involving real property law and consumer issues.
I was rummaging through some recent cases when I found a case involving HSBC Bank USA, NA who was acting as a Trustee for a REMIC, which got me thinking (which for me, can be dangerous at times) about the idea that every new missed payment constitutes a new default date and thus a new cause of action. This is the downside of Florida’s infamous Bartram case.
See the referenced case here: HSBC Bank USA NA v Sanchez et al_4D17-1085 (Feb 28, 2018)
While perusing the above-referenced case, it suddenly dawned on me that this was a case involving a REMIC (Real Estate Mortgage Investment Conduit). Being the researcher that I am, I decided to take a look at the Prospectus for this REMIC … and what do you think I found? Not the Prospectus? You’re right about that. (Why does this NOT surprise me?) What I was looking for was a 424(b)(5) Prospectus because it would have probably contained information regarding the cut-off date, the closing date … and especially the distribution date (to the investors, of money paid by the servicer, which in the above case was probably Wells Fargo Bank, NA). Why is this important?
If the investors are getting paid every month, then how are they harmed? What right does HSBC have to go into court and collect on behalf of the certificate holders of the Luminent Mortgage Trust 2007-2 if distribution payments to the investors were being paid every month? Wouldn’t that defeat a default date? How would we know if we didn’t know what to ask? It is highly likely none of this was considered in the defense of the Sanchez borrowers.
The Trustee “allegedly” came into court claiming that the Borrowers missed multiple payments before, during and after the pendency of the proceedings. Being the dutiful Senior Judge that the Hon. Barry Stone allegedly is, he misapplied Bartram, found for the Bank, and subsequently got reversed by the 4th DCA. Notice also from the last paragraph that the 4th DCA couldn’t find where Judge Stone made a determination that the Trustee Bank was damaged and remanded the case back to his court. This was a per curiam decision (which means all judges on the appellate panel agreed one the same sticking points). This would mean (to me) that the servicer’s attorneys “didn’t get it right” in their contrived pleadings.
My whole point here is this: If a REMIC is involved, wouldn’t it be nice to find out about the ADVANCES section? This is the section of the REMIC’s own governing regulations (NOT THE PSA), contained in the Prospectus, wherein the servicer (or in the alternative, the Master Servicer), is mandated to make the Borrower’s monthly payments to the investors if it reasonably believes it can collect the payments from the Borrower. The Distribution Date of almost every REMIC occurs between the 20th and 25th of every month and the payment is made to them as the Borrowers within the tranches of the REMIC pay the servicer (who distributes the payments). When the Borrower misses a payment, the servicer makes the payment anyway. So how are the investors harmed? How was HSBC harmed? How was there a “default” when the servicer was continually required to make and thus would keep making the payments?
Wait a minute!
WHO is actually paying the law firm for the Trustee to foreclose? The REMIC? Nope. U.S Bank has admitted in its own brochures that, as a Trustee for a REMIC Trust, does NOT know when borrowers are in default (probably because they get reports showing the servicer has been making the payments for the borrowers when they can’t make them). We have come to find that the servicers are the entities paying the law firms to come into court and misrepresent the payment schedules. I am only aware of a handful of cases where attorneys have seen payments actually made by the servicer show up on a loan payment schedule where the servicer complied with the terms of the Prospectus, signed under penalty of perjury under Sarbanes-Oxley. So then … why are we nitpicking at “when’s the last time the borrower made a payment” when we should be nitpicking at “when’s the last time the servicer made a payment on behalf of the borrower to prevent the distribution date from being interrupted”. This IS a big deal!
The allegations made by all servicers is that the Borrower is in “default”, all the while the servicer is hiding the fact that the servicer made the payments to the investors, who have been getting paid religiously. You see, the servicers have a Servicing Agreement with the REMIC. They get to go into court and attempt to recoup the payments they’ve made on behalf of the borrowers to the investors. Do you have a contract with the servicer? Nope. Didn’t think so.
Your mortgage was signed by you, representing a unilateral adhesion contract with the originating lender (who is probably using Mortgage Electronic Registration Systems, Inc. to securitize the mortgage loan), NOT the servicer. The REMIC sets up credit default swaps, default insurance, PMI, LPMI and requires the seller to pay for a title policy to insure the chain of title, when in fact, the falsely manufactured assignments we see in most cases is a clear attempt by the servicer to commit perjury upon the land records (F.C.C. § 817.535). When the lawyers for “the Bank” come into court and regurgitate all of these allegations, they are part of the conspiracy to commit felony perjury on the court because they are employed by the servicer, who is trying to recoup payments they made on behalf of the Borrower, NOT the Trustee.
IMHO, this case bears a lot deeper “digging” through discovery in a new cause of action against the servicer and the law firm bringing the case on behalf of the wrong party. The REMIC has probably been paid off several times over when the Borrower actually did miss a payment. The REMIC then went in and “cashed in” on the aforementioned policies and collected on those policies so it could continue to make payments to the certificate holders. There is no mention of this in the foreclosure Complaint, is there?
The servicer then files an Affidavit through its representative, claiming that the REMIC Trust, the certificate holders and the Trustee have been harmed because the borrower missed making the mortgage payments, all the while it has been meeting the Distribution Date deadlines set forth in the Prospectus.
By the way, this REMIC filed a 15d6 notice with the United States Securities and Exchange Commission on January 25, 2008 (BEFORE the financial crash), claiming that it had less than 3oo investors and was no longer required to file reports to the SEC: SEC Info – Luminent Mortgage Trust 2007-2 – ‘15-15D_ on 1:25:08 This would indicate that distribution payments are probably still being paid on ALL of the loans that allegedly were put into the tranches of the REMIC Trust, which can be found HERE: SEC Info – Luminent Mortgage Trust 2007-2 – ‘FWP_ on 4:24:07 re: Lares Asset Securitization, Inc.
Notice that Lares Asset Securitization, Inc. is listed as the Depositor? I guarantee you that nowhere is this Depositor mentioned on any assignment, endorsement or allonge anywhere in the Sanchez’s paperwork. THIS would be in violation of the Pooling and Servicing Agreement (PSA), which is part of the Prospectus. What generally happens is that the servicer is doing the foreclosing (by written Power of Attorney with the Trustee) in order to collect all of those “missed payments” it had to make up by paying the investors when the borrower didn’t make them. It would appear that despite the REMIC’s collecting on all of those insurance policies, it profited from the collection of those policies to the point where it could continue to reinvest those profits as capital, avoid paying taxes because of its pass-through tax-exempt status and continue to make the payments to the certificate holders (investors) every month. There is no proof that Lares put that Note and Mortgage into the Trust pool, is there?
So, to be honest … yes … the borrower indeed may have missed their mortgage payments, but are they really in default if the servicer made the payments for them? The results of this case obviously beg for more “behind the scenes” attention (discovery) to WHO is coming to collect and why, followed by the appropriate civil and criminal action against those responsible. In Florida, Florida Criminal Code § 817.535 has a civil remedy as well as a criminal one.
And here … we’re arguing about default?
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