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דין
ICKOVICS, NEUSTADTER, CLARK, SABAG & CO. - LAW OFFICES
Laurent Ickovics (2003-1963) (1963-2003) לוראן איצקוביץ ז"ל
Jay Neustadter,* Adv. 33 Yaavetz St. 33 רח' יעבץ "עו (יהושע )ג'יי
ד *,ניוסטדטר
Eli. D. Clark, ** Adv. Tel Aviv, Israel 65258 אביב-תל "עו , קלארק. ד.אלי
ד
Yigal Sabag, Adv. 5100898- :פקס :5100499-03 :טל "עו ,יגאל סבג
:Fax 03 Tel ד
Chaim Schiff, Adv. eli.d.clark@incs-law.com "עו ,חיים שיף
ד
*also admitted in New York ,*חבר גם בלשכת עוה"ד בניו יורק
** also admitted in New York, Maryland June 22, 2006 ,** חבר גם בלשכת עוה"ד בניו יורק
and Washington DC. מרילנד
ובוושינגטון
1.1 In paragraph 1.1.3 Mr. Biafore writes that: “The Trust’s decision to
allocate the UBS Settlement Payment to one loan or another for
internal accounting purposes had the same effect as the decision of a
bank that writes off a bad loan on its books.” However, the Lee Hall
Loan was not written off, but classified by Wells Fargo as liquidated
with no loss.
2.3 In fact, the best evidence for the purpose and intent of the
Settlement Payment is how the Trust characterized the payment in the
notice to Certificateholders, namely as “Liquidation Proceeds, ” in
Hebrew תקבולים מסילוק. In other words, the Lee Hall Loan was
liquidated by the Settlement Payment.
6.4 We agree with Mr. Biafore that the characterization by the Trust of
a certain payment – such as the purchase price of a loan – as
“Liquidation Proceeds” is not necessarily binding on third parties. But
Mr. Biafore would have us believe that such a characterization is not
even binding on the Trust itself!
6.6 This point becomes still clearer when we consider the following
scenario: If Mr. Cimerring were to pay the Trust the amount claimed,
how would Mr. Cimerring’s payment be classified under the Pooling
and Servicing Agreement? The answer should be obvious: Mr.
Cimerring is a Mortgagor, which makes his payment a “payment from
Mortgagors.” As discussed above, Section 3.02(b) of the Pooling and
Servicing Agreement requires that “payments from Mortgagors” be
treated “first, as a recovery of accrued and unpaid interest on such
Mortgage Loan” and “second, as a recovery of principal of such
Mortgage Loan.” But in the case of the Lee Hall Loan, all of the
interest and principal has already been recovered. How then should
the Trust characterize Mr. Cimerring’s payment? As recovery of a
different loan? Would this not represent a breach of the Pooling and
Servicing Agreement?
7 Effects of the Characterization as a Payment
8.2 We are happy to oblige Mr. Biafore and freely acknowledge that if
the Trust were to lose its status as a REMIC or incur a liability for tax
on prohibited transactions, this would not in any way absolve any
borrower of its obligations to the Trust. Nor have we suggested
otherwise.
8.3 On the other hand, we think it is clear – and we hope that Mr.
Biafore would acknowledge – that the REMIC rules summarized by
Mr. Biafore show that the Trust’s characterization of payments for
purposes of the Pooling and Servicing Agreement are not merely
“internal accounting” matters, but substantive decisions with profound
legal consequences.
9.1 In paragraph 6.5.2, Mr. Biafore asserts that: “the Trust may, under
the Pooling and Servicing Agreement, reallocate the Settlement
Payment to a loan other than the Lee Hall Loan should the Trust
receive a “payment” on the Lee Hall Loan.”
9.2 Mr. Biafore does not cite a specific provision of the Pooling and
Servicing Agreement in support of his assertion, because none exists.
The Pooling and Servicing Agreement does not explicitly permit such
recharacterization nor does it explicitly prohibit such an action. It
seems likely that the idea of recharacterizing a payment was never
considered by the drafters of the Pooling and Servicing Agreement.
9.3 Yet, the following language of Section 3.02(b) of the Pooling and
Servicing Agreement suggests that such recharacterization of
payments is prohibited:
9.5 Thus, according to Mr. Biafore, the Trust can, as often as it wishes,
change the terms applicable to a payment by repeatedly reallocating
the payment to a different Mortgage Loan. If Mr. Biafore is correct,
the requirements of Section 3.02(b) are open to unlimited, retroactive
manipulation by the Trust.
CONCLUSION
Mr. Biafore’s report discusses at length scenarios involving the partial refund of the
purchase price of an asset and the deduction of bad debts. But these scenarios do not
describe the facts of the case at hand.
Mr. Biafore’s main theme is that Mr. Cimerring’s obligations are not affected by various
agreements and actions of the Trust, including the Settlement Agreement, the Pooling and
Servicing Agreement, the characterization of the Settlement Payment, the Trust’s tax
status, etc. But what Mr. Biafore is really trying to claim is that the Trust itself is not
bound by its own actions or obligations: (1) not by its allocation of the Settlement
Payment to the Lee Hall Loan; (2) not by its classification of the Lee Hall Loan as
“liquidated;” (3) not by its reports to Certificateholders; (4) not by Section 3.02(b) of the
Pooling and Servicing Agreement; (5) not even by basic accounting principles that
prohibit the retroactive reallocation of items of income in preceding tax years.
Yours sincerely,