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ProTitleUSA Foreclosure Defense and Offense Blog

Should Securitization become a part of the Title Exam? SEC vs Title Violations
by ProTitleUSA Title Search | 2013/03/21 |

There are a number of new court cases where securitization issues are pointed out and Plaintiff’s standing is under heavy scrutiny. I will not explain the securitization theory in this blog, instead, offer a simplified view of the issue through the title search example. Let’s say the loan originated by Washington Mutual in 12/2006 (non-MERS loan) and the foreclosing party is “Bank of America in the capacity of Trustee for XYZ Mortgage Backed Securities Trust 2007-1”. Per county records, there is an assignment of mortgage from Washington Mutual to “Bank of America in the capacity of Trustee for XYZ Mortgage Backed Securities Trust 2007-1” recorded in 2012. On the surface, you would not see any issues with this assignment document; however looking deeper at the securitization of the loan we may find a number of inconsistencies or violations of securities law that are not a part of any checks by recorder or title examiner or notary.

ProTitleUSA Foreclosure Defense and Offense Blog ::

Documents to be tied to the Title work. Let me touch only on the few items....Typically there are 2 main SEC (Securities and Exchange Commission) filed documents that would describe the roles and responsibility of each party involved in securitization of this loan for a given trust: Prospectus and Pooling and Servicing Agreement (PSA). PSA would define a time lines on when the assignments have to be executed after the trust cut-off (closing) date (when all loans / notes are transferred under the trust entity and the interest is being paid out to certificate holders). Typically, the document states that Trustee has 90 days from the cut-off date of the trust to record all necessary assignments of mortgage (in PSA referred as cure timeline). Clearly, you can see that this is a first violation of our example. PSA requires all assignments to be filed within 90 days (say Q1 of 2007), while the recorded assignment is filed 2 years later in 2009, most likely at the time of foreclosure kick-off or loan liquidation from the trust. How to you avoid this violation in the future?

My recommendation is to enforce Trustees to present to County Recorder a signed affidavit before assignment recording that the assignment of mortgage complies with securities law and in particular complies with Trust’s PSA and Prospectus documents. Going one step further, one may provide references to Prospectus and PSA documents were the loan is securitize in the affidavit. …(taking about transparency for loans, something Congress and Senate were debating for some time…). We can argue if this affidavit should be a recorded as an exhibit to an assignment.

 

Trustee Roles and Responsibility Title vs. PSA: I will only point out the most important issue in the Pooling and Servicing Agreement relating to Trustee. (If you have some free time, you can read the 700+ page PSA document yourself)

  • Per Pooling and Servicing Agreement: Trustee has no right, title or interest in assets of the Trust (notes)
  • Per Pooling and Servicing Agreement: Trustee cannot act outside the scope of the PSA
  • Per Pooling and Servicing Agreement: Trustee not liable for Certificates or mortgage loans and is accountable for the use of, or application of funds by servicer.
  • Per Prospectus: Trustee exchanges certificates of no pre-existing value for notes of intrinsic value

After the Foreclosure is final and there is no bidders for the property at the sheriff’s sale, Trustee assumes the title ownership per Sheriff’s Deed, however PSA does not allow for the Trustee to take Title or interest to the property. How do you reconcile the PSA securities law and Title documents in this case?

In my opinion, the additional process has to be put in place to transfer the note from Trustee to foreclosing institution, investor or otherwise the legal entity that does not follow securities law under PSA. Additional assignment has to be executed as well. Of course, the problem is much deeper then that, but for the sake of discussion and additional assignment would address the PSA violation. (I will purposely leave Servicer discussion for later time. )

Hopefully, this article will trigger reaction on how to fix some of securitization and title inconsistencies, rather then playing the blame game. There are TONS of issues in the title work today; I want to get to the point of purity, transparency and clarity to avoid any future claims and problems.




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1017 words | 2679 views | 3 comments | log in or register to post a comment


It's the banks and MERS not the Title's Responsibility

Ok, if we didn't have MERS (set up and owned BY the banking industry) to over ride the mortgage assignment process, this really wouldn't be a major issue.

So, it would be much easier for TITLE to figure out the true chain of title if the assignments were properly recorded in the first place.

Second, you can't even rely on the information when you follow the sketchy paper trail.  And not ALL mortgages are properly indexed into "the Mortgage backed Trusts". 

Perhaps if title just STOPPED insuring securitized mortgages in foreclosures or started excepting the validity of the mortgage and the Trust, the lending industry would start cleaning up their act.

IMHO, this borders on the practice of law, if we allow the Mortgage industry to drop more of their garbage practices fall into the laps of title and make it the title agent's responsibility to decipher the security LAWS of securitized mortgages.

Where does it stop?  ALL mortgages get sliced and diced.  Isn't THAT the problem to begin with?

I am trying to run down a mortgage now that was a HELOC originated by GMAC, sold, with no assignment of mortgage recorded and has been sold many times since all with no assignments.  The last time the client was contacted by the supposed Note holder, the borrower was told that the lien was an unsecured debt (credit line) and that the current lien holder didn't even know it originated as a HELOC.  GMAC basically washed its hands of the file stating that "we sold it and gave the buyer an assignment of mortgage, not our problem if they didn't file it"

In the mean time, the county records show that GMAC still owns it from over 5 years ago.

As a title producer, I'm really tired of cleaning up other people's messes because we have ALLOWED the banking industry to become sloppy, lazy and unaccountable.

"NO" is a powerful word.  Maybe we title geeks should start using it more often when certain parts of the industry doesn't want to do their jobs properly and figure title is the caboose and therefore somehow mysteriously "becomes" our responsibility to take care of their messes.

How about instead of worrying about improper securitization, we just REQUIRE ALL INTERESTED PARTIES in the secured mortgage to SIGN OFF THEIR INTERESTS before we can insure the transaction?????

Oh yeah, that means potential lost revenues. . .  Catch 22    what you gonna do?

I vote NO for having to take SEC education for title insurance.  I vote YES for NO - let's push the mortgage industry to get back to being responsible for THEIR ACTIONS.

Cranky this am, need more coffee before I go off to chase more unicorn and rainbow phantom mortgages with no assignments.

Have a good day.

 
by Victoria Moate | 2013/04/01 | log in or register to post a reply

I agree that securitization must be a part of the title exam, but....

you said:

My recommendation is to enforce Trustees to present to County Recorder a signed affidavit before assignment recording that the assignment of mortgage complies with securities law and in particular complies with Trust’s PSA and Prospectus documents."

I think I understand you to mean that the risk should be put on the right party, here the securitization trustee, with which I somewhat agree.  But in reality, aren't you suborning a form of perjury or the recordation of a false affidavit, given that the assignment to the trust was not a) executed and b) recorded as required by the PSA?  And as  far as I know, all original trustees in the deeds of trust are title insurance companies with attorneys on staff who are well-versed in real property law, though likely not securitization laws. And also as far as I know, substitutions of dot trustees are being made as a matter of rote to companies and individuals for whom that is decidedly not the case.  Trustees have become no more than the collection agents of  beneficiary-status claimants and appear to accept that status as fact.  If anyone in this act should be executing affidavits as to the veracity of anything, the deed of trust trustee should not be free of that responsibility and risk.  

 Victoria's lack of interest in learning a very complex set of laws is certainly understandable.   Yet of the entities which formed and own  MERSCorp,  a company which has halted the recordations of assignments to true beneficiaries in land records if not the execution of those assignments, card-carrying charter members of MERSCorp are from the title industry, the very industry now expected to bear entirely unreasonable risks.    

 

 

 
by john gault | 2013/04/24 | log in or register to post a reply

If the banks played by their own rules. . .
Lack of interest isn't my disgust with the matter.  It's the fact that the lenders bend the laws all the time.  Taking the time to learn information that is basically garbage in garbage out when the banks do not strictly adhere to the letter of the law and make up their own rules.

That phantom mortgage I was chasing the other day?  Well, come to find out the primary lender discharged their mortgage of record and 4 days after the discharged was recorded, they illegally moved 1/4 of a $MIL out of an insurance trust account to use the funds as a "short payoff" that was never agreed to by the owner of the property and signer of the original mortgage.

Yes, let me repeat that, the LENDER's SERVICER, discharged the mortgage of record and once it was recorded and they NO LONGER HAD A MORTGAGE INTEREST IN THE PROPERTY, they illegally stole money from a HOI trust account to be used by the owner for the purpose of repairing, rebuilding or even purchasing another home - , using the money for a short payoff that was never agreed to by the property owner or even presented to the property owner as an option.

NOT a short sale agreement, no sale.  No Estoppel Letter, no letter of agreement from the lender or its legal rep, they simply took the money out of the insurance escrow trust account.  Oh yeah, the owner is still waiting for a full explanation and copies of documents from the servicer and Freddie Mac, all of which has "disappeared" from their records, even though NJ law says they must retain that info for 15 years.

So, you can stuff all the education you want into our brains for mandatory CE or initial title producer licensing, but if the banks continue to fraud their borrowers, the public and even Fannie and Freddie as Fannie and Freddie continue to fraud the public, WHAT IT THE POINT OF MORE EDUCATION IN areas that are LENDING PRACTICES vs operation of title when the banks don't even follow the laws and rules?

Maybe I am missing the benefit of SEC education?  Maybe I am just totally disgusted with the banking industry in general as it continues to perpetuate fraud on its customers.

Sure, I'll take another class, if needed.  Just explain the BENEFIT if the banks continue to act illegally?  Classes up the wazoo - as Rome burns. Fiddle dee dee
 
by Victoria Moate | 2013/04/29 | log in or register to post a reply
ProTitleUSA Foreclosure Defense and Offense Blog

I have started the BLOG to bring up a number of issues we see during Title Work Processing. Some of the issues are not as visible to searchers or recorders. There are many closed door settlements on those issues which are not allowing searching/recorder/title company communities to act on issues and bring them up during searching or closing.

 About author:

Alex Goldovsky, CEO of ProTitleUSA - a leader in online Nationwide Title Search Market, servicing FDIC, SBA and many others clients , has pioneered Robo Signer search and Loan Securitization Search work flows and products. Alex Goldovsky is a frequent speaker at the foreclosure defense seminars and Radio as well as a master mind behind new foreclosure defense products. If you would like to request Alex's appearance on the TV, Radio or Present latest and greatest on Foreclosure Defense Strategies, Robo-signer news and Market Dynamics, please, call ProTitleUSA's office at 888-878-8081 and request to speak with Alex.

 

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