After the financial crisis in 2007-2008, most of the loans were securitized through Fannie Mae (Fannie) and Freddie MAC (Freddie). Fannie and Freddie, although operate as a government backed enterprise, maintain the course and methods of a private and publicly traded company, focused on bottom line. Fannie and Freddie are one of the last resorts for securitization market, continuing to securitize loans in REMIC trusts through today. We see many foreclosure actions were Freddie or Fannie become an owner after the foreclosure sale. In the few states, we see assignments executed into Freddie and Fannie. Well, this does not make complete sense to me, or at least this requires massive curative work, here is why!

Fannie and Freddie securitized the (conforming) loans in the similar fashion as the public securitization, forming REMIC trusts for investors to buy certificates with Fannie and Freddie guarantee. Every trust they formed maintained REMIC Trust documents (which you can find on the Fannie/Freddie respective sites) that would define a scope of each REMIC trust formed; typically these documents are REMIC Prospectus and Prospectus Supplement and Servicing Agreement (called Offering Circular). Freddie and Fannie would be named as Issuer and Guarantor and Trustee to this Trust in the documents, while servicer would selected from the list of approved servicers by Fannie and Freddie for each trust. The problem I see is a poor disclosure of securitization in the title work, as in my opinion, the title should really say, “Fannie Mae as Trustee for Guaranteed REMIC Pass-Through Certificates Fannie Mae REMIC Trust 20XX-XX. If you study Prospectus document, investors are paid consideration in the form of offering proceeds. The investors are the beneficiaries of this Fannie Mae REMIC. According to the IRS a REMIC is a passive conduit and the beneficiaries cannot take active participation in the management of the assets. As the beneficiaries of a Trust, they may be able to enforce their rights only in equity.

Quite recently Fannie Mae stated to report on when the loan was purchased into the trust; typically it’s within 30 days after origination of the loan. This would constitute the note transfer into the trust and in my opinion requires an assignment execution into REMIC Trust.

We currently only see an assignment into the servicer during the foreclosure process kick off or assignment into Fannie/Freddie directly through Foreclosure Deed. Also, there is a popular instrument call “Assignment of Bid” in the foreclosure to Fannie or Freddie to “patch” the chain of title and avoid securitization disclosure.

Write me at alex@protitleusa.com if you have any questions or comments or just post the comment here.