The sale of mortgages into the trusts that pool loans may be void if banks didn’t follow strict requirements for such transfers, said Biden
Ladies & Gentlemen…and what did MERS exactly do? It separated the mortgage from the note…skipped the deliverance and the acceptance process of the PSA.
Delivery & Acceptance Must Happen
Nearly all Pooling and Servicing Agreements require that On the Closing Date, the Purchaser will assign to the Trustee pursuant to the Pooling and Servicing Agreement all of its right, title and interest in and to the Mortgage Loans and its rights under this Agreement (to the extent set forth in Section 15), and the Trustee shall succeed to such right, title and interest in and to the Mortgage Loans and the Purchaser’s rights under this Agreement (to the extent set forth in Section 15). Also, an Assignment of Mortgage must accompany each note and this almost never happens.
Also, nearly every single loan transferred was transferred to the Trust in blank name. That is to say the actual loans were apparently not, as of either the cut-off or closing dates, assigned to the Trust as required by the PSA.
Bloomberg-
The New York and Delaware probes involve banks that assembled the securities and firms that act as trustees on behalf of investors in the debt, said one of the people and a third person familiar with the matter.
The top issuers of mortgage securities without government backing in 2005 included Bank of America’s Countrywide Financial unit, GMAC, Bear Stearns Cos. and Washington Mutual, according to trade publication Inside MBS & ABS. Total volume for the top 10 issuers was $672 billion. JPMorgan acquired Bear Stearns and Washington Mutual in 2008.
The sale of mortgages into the trusts that pool loans may be void if banks didn’t follow strict requirements for such transfers, Biden said in a lawsuit filed last year over a national mortgage database used by banks. The requirements for transferring documents were “frequently not complied with” and likely led to the failure to properly transfer loans “on a large scale,” Biden said in the complaint.
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Proper document transfers are critical to investors because if there are defects, the trusts, which act on behalf of investors, can’t foreclose on borrowers when they default, leading to losses, said Beth Kaswan, an attorney whose firm, Scott + Scott LLP, represents pension funds that have sued Bank of New York Mellon Corp. (BK) and US Bancorp as bond trustees. The banks are accused of failing in their job to review loan files for missing and incomplete documents and ensure any problems were corrected, according to court filings.
“You have very significant losses in the trusts and very high delinquencies and foreclosures, and when you attempt to foreclose you can’t collect,” Kaswan said.
