(OP-ED) — The author of this post is a consultant to attorneys on quiet title and cancellation and expungement actions and thus, not an attorney who can give legal advice. This overview, with its suggestive commentary, is for your educational entertainment only.
Scenario … “The Set-Up”
You want to buy a home. You don’t have much money, but credit is plentiful, as long as you can “fog up a mirror”. You’re the “party of the first part” because you’re willing to take a gamble that if you can get a loan, you’ll be able to pay it back, with interest.
However, you’re not “Party A” (the party of the second part). Party A” is a corresponding lender. That means it’s highly likely your loan is going to be securitized, which means it’s going to be put into the MERS® System, which is now owned by the same company that owns the New York Stock Exchange.
But of course, you’re ignorant of all of the shenanigans going on behind the scenes because you just want the keys to the house.
Meet “Party B” … not Cardi B; Cardi B has lots of money and she can probably pay cash for a house).
Party B is more than likely the sponsor-seller (the interim funding lender in the deal). Party B figured out how to make a puttload of money doing securitization, so Party B hooked up with some attorneys who all engaged in “pure intellectual masturbation” together to create a “sales pitch”, known to investors as a 424(b)(5) Prospectus. This document was drafted and signed under penalty of perjury under the Sarbanes-Oxley Act. But that wouldn’t really matter to you, because you just wanted the keys to the house, right?
Meet “Party C” … the Depositor. This entity is never a “member”, “user” or “subscriber” of the MERS® System; however, the Depositor plays an important role in securitization because it has to accumulate all of the documents (mortgages and notes funded by the REMIC) together by the specified “Cut-Off Date”, which is shown in the Prospectus (the sales pitch), which has to be done by a date certain (not 5 or 7 years down the road) or else the transfer of the loan into the REMIC would be void. Party C is one of those parties that is a necessary party to securitization, so without it being named in the chain of transfers from Party A to Party B to Party C to “Party D” (the Trustee for the REMIC trust), as specified in the Prospectus, by the specified date, then it creates all sorts of legal challenges down the road, for both borrowers and investors alike.
To make even more money on the deal, Party B goes out and makes applications all over town for default insurance, while placing side bets (credit default swaps) on the performance of the certificates issued to the investors who have no idea what’s coming.
Now that all the side bets are in place and the loans have all been funded, the loan you got through Party A (the corresponding lender who only put up 5% of the deal) just closed and Party A got reimbursed by Party B, who actually funded the loan!
Later you find out the truth … but wait … if Party B was actually footing the bill with investor money it got through securitization, shouldn’t Party B be named the lender on the mortgage or deed of trust? You’d think so. But nope! That puts Party B too close to the action on the assignment that’s supposed to be recorded in the land records where your house is … but somehow … Party B and its corresponding lenders are having too much fun giving loans to people they knew couldn’t repay them … so they forget about recording the required assignments altogether.
Ha! Ha! Ha! Not!
The sponsor-seller knows what’s coming, because it’s holding all the Aces and it knows that over time … the house of cards will fall because all the loans in the pool are set to “reset” themselves within a certain period of time, causing the entire REMICs value to collapse. I call it “Day 91”. That’s the day the sponsor-seller gets to cash in on all of the insurance policies and credit default swaps. The sponsor-seller can take a $500,000 loan and make $7.5-million off of the deal!
And here you are, swimming in debt, trying to figure out how to pay that mortgage that just reset itself through that adjustable rate BS you obligated yourself for. But there’s more month at the end of the money. You stop paying. Party B is counting on it! Party B set the whole thing up (using the MERS® System) to obfuscate the chain of title so it can create assignments of mortgage and deeds of trust to record in the land records vis a vis the mortgage loan servicer, who is tasked with taking your payment every month.
At least that’s what the mortgage loan servicer wants you to think when it sends you the default notice! But alas … another lie.
The mortgage loan servicer is required to pay your principal and interest payments on your mortgage loan to the investors whether you pay them or not! It’s called an “Advance”. That too, is in the Prospectus … (not in the PSA)! Simply put … are you really in default when the alleged REMIC moves to foreclose on you? If someone is paying the investors every month, then how can they claim you’re in default. Because they have a contract with you? The originating lender (Party A) was paid off at closing by Party B (who used investor money to fund the loan) … this is what we call “table-funded lending”.
I’m trying to tell a story here, because this is the part where the rubber meets the road!
Until you default (when the servicer declares you aren’t making your payments anymore) … you’ll never see an assignment recorded in the land records (99% of the time). You have no contract with the servicer (Party E, for Empty Pockets). Servicers have been known to “rob Peter’s account to pay Paul’s account” all the time, like Ocwen, which is why servicers are sloppy with handling money and shitty record-keeping. But the servicer has another angle … it uses its employees to create assignments of mortgage and deeds of trust using MERS to cover up the missing links in the chain of title and conveys the title from Party A to Party D, without any recollection or mention of Parties B or C! So who is it really coming into court to foreclose?
If you said Party E, you’re right! These days, servicers are being even more brash, claiming they have a power of attorney from Party D (the Trustee for the REMIC) to foreclose on behalf of Certificateholders of some REMIC “series number”, claiming the certificate holders have been “harmed”, when in fact, the servicer is just trying to reimburse itself for all the defaulted payments it kept making on your behalf. Now it’s using phony documentation to claim the note and mortgage were transferred to Party D, many years later. The REMICs only stay open a year, so none of that makes any sense. So the mortgage loan servicer retains the law firm to foreclose on your house … let the lying, cheating and stealing begin! All on behalf of Party F (the investors). I use Party “F” because in this scenario, the investors get “F**ked” in the end because the money made by stealing your house using phony assignments created by the mortgage loan servicer and its employees goes into their pockets and not those of the investors.
The attorneys continue the lie by claiming you’re not a third-party beneficiary to the assignment!
And the judges buy into that crap hook, line and sinker! It shows their ignorance!
There are a lot of problems with these foreclosure mill lawyers using that falsehood. In fact, the very pleadings or responses they file in lawsuits brought by the homeowner in deed of trust states to stop the foreclosure, or in the pleadings they put into the court record in mortgage states, contain misstatements in of themselves … and even more so when they have to rely on the recorded documents that the mortgage loan servicers put into the land records, in violation of statutes and penal codes, that contain false and misrepresentative information.
And the borrower and the attorney for the borrower run into court and wave the assignment around, telling the judge it’s a fraudulent document. The judge of course (after hearing the attorney say you can’t challenge the assignment because you’re not a third-party beneficiary to the assignment) goes along with the bank’s argument … just because it seems to make sense. However, there is a problem with that scenario.
Check back for PART 2 … where we discuss the bank’s flawed argument … and what homeowners are countering that flawed argument with!
HINT: Are the investors really third-party beneficiaries? (think about it seriously, really).
Why should that affect you?
Look at your assignment!