It’s hard to believe we’re coming up on the one year anniversary of the whole robo signer controversy which exposed the banks and brought foreclosures to a halt. Now sure it took the mainstream press until October to get it, but the soldiers on the ground were talking about it far, far in advance. The world is still struggling to grasp the significance of all of this, but this morning over at CreditSlips, the good professor Adam Levitin starts to sum it up when he writes:
Since last October, shortly after the robosigning scandal broke, I’ve been talking until I turned blue in the face about robosigning being the tip of the iceberg with mortgage problems and that the real issue was chain of title. Robosigning appeared to be an almost unexpected deposition by-product; the real goal in the depositions that uncovered the robosigning was exposing the backdating of mortgage endorsement. And that they did–the notaries’ whose seals were on the documents didn’t have their commissions when the assignments supposedly took place.
Read the full article and you’ll find just how critical the problems with securitization really are. The bottom line is we are talking about epic failures up and down the entire financial services food chain and throughout our entire government system that was supposed to be regulating all of this. We will all be paying the consequences for these failures for decades to come, so it is key to understand the complex world of mortgage securitization. And for that you need to go see Max Gardner, an absolute legend in the defense of consumers. But you don’t have to hop on a plane, you can sit right there on your computer and get the best and most useful education for the defense of consumers delivered right to your laptop. (Click here to download the seminar) Following are just a few of the notes that I took:
- One of the primary purposes for the securitization of loans (aside from providing liquidity to the lender) is to keep them bankruptcy remote or FDIC remote, that is, a primary reason for the business model was to keep assets away from the claims of creditors and the FDIC if the lender/bank failed.
- We all understand now that few of these mortgage trusts were done properly but why is that? Just think of all the money that would have been involved to endorse, assign, notarize, sign, staple, copy, bundle and pool each of these loans. Why was this not done correctly? How did the Masters of the Universe blow this all so badly across so many different trusts? Complying with each of those steps costs money…each step and each loan may not be a whole lot of money, it would cost a few hundred bucks a piece at most, but multiply that by the 12,000 loans in a typical mortgage trust and you’re talking real money.
- The Pooling and Servicing Agreements all contemplate that there actually was a “true sale”. A key component of the “true sale” was that all the documents made it into the trust, pursuant to the Pooling and Servicing Agreement, especially the note. The PSA is the key document in the entire securitization process. It is the blueprint and map for the entire transaction. Reading the PSA shows where all the skeletons are buried.
- The PSA creates relationships between all parties, including who receives payments after loans are deposited and the scope of servicer duties…including what discretion they have over modification.
The program really is exceptional…..REQUIRED READING!
