A Brief Summary of RMBS Securitization As We Now Know It

Posted on November 3, 2010 by Neil Garfield

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

1. In nearly all cases there is a reference to a trust that “owns” the loans. The
first transaction is with this fictitious trust on whose behalf money is
collected from investors who think they are purchasing bonds, the payor
being the trust, but they are in effect non-recourse bonds because the
trust only exists as a conduit for the flow of money from receivables that
include but are not limited to borrower payments, co-obligor (servicer)
payments, loss mitigation payments with waiver of subrogation, etc. The
loan product sold to the homeowner occurs long after the money is
collected from the investors. At no time are any of the participants in the
securitization chain at risk from a default on the loan. That risk is solely
borne by the investor. The risk undertaken by the securitization
participants is in the bets they placed on the failure of the pools, an
occurrence which is declared by the Master Servicer, which is a participant
in the securitization chain.

2. In nearly all cases there is no trust document creating the trust.

3. In nearly all cases there were no documents of transfer as required by the

securitization documents and as required by the IRC for REMICs. So the
assignment, endorsement etc are all fabricated, forged, or backdated,
notarized by a notary who neither knows nor ever saw the signor.

4. In nearly all cases the signor of any proffered document by the would-be
forecloser is not authorized and there are no documents that can be
authenticated proving up a chain of authority or ownership.

5. Thus in nearly all cases, the only party of record is the loan originator who
did not loan any money. They acted as a broker and the loan was physically
funded by a third party into the escrow account of the closing agent.

6. Thus in nearly all cases, the only party of record with any colorable
encumbrance is not owed any money — either because they were PAID IN
FULL or they never advanced the money.

7. Thus in nearly all cases, the encumbrance (mortgage or deed of trust) is

 void ab initio because it secures an obligation that was not owed to the
mortgagee or beneficiary. Even the note is void because it describes a
party to whom the obligation is owed who never contributed one penny to
the funding. The obligation, as your opposition will tell you themselves, is
to someone else, not the originating lender.

8. Attempts to show transfers now “fixing the problem” have two fatal
defects: (1) both the IRC REMIC law and the securitization documents
whose wording is identical to to the statute, require that all assets be
transferred in within 90 days of the establishment of the “trust.” This never
happened with any securitized loan. (2) in nearly all cases the attempted
transfer is of a loan which has already been declared in default. This
violates the terms of the securitization documents and any such transfer
would be a fraud on the investors giving them non-performing loans when
the documents clearly state that the loans must be performing and meet
industry standard underwriting guidelines. Hence the parties causing those
new transfer documents to be created and signed are prohibited from
using them, inasmuch as they are on their face unacceptable as assets of
the pool.

9. All documents prepared or proffered by the pretender lenders are self-

serving artifice designed to deceive the court. None of them ever advanced
any money which we know because the money all came from investors
buying bogus mortgage bonds, which are now in litigation because they
were bogus. The point though is that the money came from the investors.

10. No securitization participant in the chain has the power to satisfy a

mortgage, foreclose on a mortgage, or to submit a credit bid at the time of
foreclosure auction because they are not creditors and there is no money
owed to them.