Wall Street Rules Applied to REMIC Classification


Wall Street Rules Applied to REMIC Classification

Wall Street Rules Applied to REMIC Classification

I would have a field day with these two on this topic!

Bradley T. Borden

Brooklyn Law School

David J. Reiss

Brooklyn Law School

August 31, 2012

Thomson Reuters News & Insight, September 2012
Brooklyn Law School, Legal Studies Paper No. 294


“They take aggressive positions, and they figure that if enough of them take an aggressive position, and there’s billions of dollars at stake, then the IRS is kind of estopped from arguing with them because so much would blow up. And that is called the Wall Street Rule. That is literally the nickname for it.”1

Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities.  This calamity is compounded by the fact that those professional advisers should have known that the REMICs they created were flawed from the start.  If these losses are realized, those professionals will face suits for damages so large that they could put them out of business.  That is, unless the Wall Street Rule is applied.

The issue of REMIC failure for tax purposes is important in at least three contexts:

(1) in any potential effort by the IRS to clean up this industry;

(2) in civil lawsuits brought by REMIC investors against promoters, underwriters, and other parties who pooled mortgages and sold mortgage-backed securities; and

(3) state and federal prosecutors and regulators who consider bringing criminal or civil claims against promoters, underwriters, and other parties who pooled mortgages and sold MBSs.

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3 Responses to “Wall Street Rules Applied to REMIC Classification”

  1. joe says:

    What about millions homeowners that WALL street and banks used the homeowners names at closing of their houses to make millions dollars on each home sold. O yea Fannie mae to was involved that means the united states government was involved to.

  2. Joni Brit says:

    That a homeowner has any right to investment profits from mortgage backed securities is negligible, but why wouldn’t a homeowner be entitled to securities specifically traced to the Title of her home? Especially if the efforts to seperate her from the Title were found to be fraudulent and misleading.


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