Posted in Foreclosure Defense

Under the Hood of a REMIC

I am curious person.  I love research.  So it’s no surprise that I would attempt to research the trust that allegedly held the loan on my house.  I scoured the web for information regarding Home Equity Asset Trust 2005-6.  At first, there was no success.  I found a bit of information concerning a few of the tranches, but nothing really major.  It actually took me several years to piece all of this together.  Here is what I found:

Tranches

TRANCHE A1 – This is the tranche bought by JP Morgan and used as part of their employee 401(k) plan.  This is also one of the tranches in the Bill and Melinda Gates Foundation

TRANCHE B1 – Broken up into smaller tranches, these were arranged by Deutsche Bank AG London and issued by Ixion PLC, an Irish company.

  1. Matrix 2007-1 Series 20 Tranche A B1
  2. Matrix 2007-1 Series 20 Tranche B B1
  3. Matrix 2007-1 Series 20 Tranche C B1
  4. Matrix 2007-1 Series 20 Tranche D B1
  5. Matrix 2007-1 Series 20 Tranche E B1
  6. Matrix 2007-1 Series 20 Tranche F B1
  7. Matrix 2007-1 Series 20 Tranche G B1
  8. Matrix 2007-1 Series 29 B1
  9. Matrix 2007-1 Series 30 B1

TRANCHE B3 – Part of Octans I CDO Ltd.  On May 26, 2008, The Bank of New York Trust Company, as Trustee for Octans published a Notification of Public Disposition of Collateral.

TRANCHE B4 – Morgan Keegan Select Fund, Inc.  This Fund was part of a Joint Notice of Intent to Revoke Registration and Impose Administrative Penalty brought by the Alabama Securities Commission, Kentucky Department of Financial Institutions, Mississippi Secretary of State’s Office, and South Carolina Office of Attorney General against Morgan Keegan and others in September 2010.  There were several states that brought similar actions afterwards against Morgan Keegan for the same fund.  Morgan Keegan was charged with sales violations and overvaluing the funds.

TRANCHE M1 – This tranche was listed by Kent Funding II Ltd. on October 14, 2011 on a  Notice of Public Sale and Invitation to Bid.  Kent Funding II is a Cayman Islands company trading on the Irish Stock Exchange.  On June 8, 2012, Kent Funding II Ltd issued its Announcement of Delisting.

TRANCHE M2 – This is the Maiden Lane III tranche.  In late November 2012, the Federal Reserve Bank of New York posted a spreadsheet of the purchases indicating that the purchases were done in the Fall of 2008 with the final payments in June 2009.  The spreadsheet can be accessed by going to this website (http://www.newyorkfed.org/markets/maidenlane.html) – scroll down to almost the bottom of the page and click on “Transaction Data”.

TRANCHES M3 and M4 – Pioneer Valley Structured CDO I Ltd.  On November 24, 2009, Bank of America as trustee for Pioneer Valley published a Notice of Public Sale and Invitation to Bid.  Included in the collateral to be sold were Tranches M3 and M4.  This is a little confusing because Tranche M4 also part of Adirondack 2005-2.

TRANCHE M4 – Goldman Sach’s infamous CDO, ADIRONDACK 2005-2 LTD A1.  This was sold on the Irish Stock Exchange by Goldman Sachs with the Offering Circular dated January 23, 2006.

TRANCHE M5 – On May 28, 2013, Ambassador Structured Finance CDO, Ltd, through its Collateral Agent, USBNA, published a notification of the sale of the collateral.  The sale was scheduled for June 4, 2013.  Ambassador Structured Finance CDO, Ltd. is a Cayman Islands company trading on the Irish Stock Exchange.

TRANCHE M6 – Cloverlie Series No: 2007-32 is another Citigroup CDO. This one is in Ireland like Adirondack and, of course, is not registered with the SEC nor was it distributed in the U.S. The same tranche from HEAT 2005-6 used in this CDO was also used in Cloverlie Series No: 2007-33.  This one is also somewhat confusing because on July 1, 2009, Argon Capital Public Limited Company announced a credit event related to this tranche.

  1. Cloverlie 2007-32 M6
  2. Cloverlie 2007-33 M6

TRANCHES M7. – M7 was not registered with the SEC because it’s offshore. The first page of the Prospectus states that it is not to be distributed in the U.S.  Somewhere along the line, M7 was sold to Citigroup who then placed M7 with Cambridge Place Investments.  In July 2010 Cambridge Place Investments filed a lawsuit against Credit Suisse and various other depositors.  With regards to Credit Suisse, Cambridge alleged that Credit Suisse made various untrue statments of material facts and omissions resulting in the downgrading of all the securities sold or offered to Cambridge.  Additionally, Cambridge stated that over 42% of the mortgage loans underlying the securities were in default.  The M7 tranche was also sold (ie: double sold) to another investor – Baker Street. Baker is from the Channel Islands.

  1. Baker Street M7
  2. Camber 5 Ltd. M7

TRANCHE M8   – Another one where Deutsche Bank is the arranger. There are two issuers for Tranche M8 – Corolianus and Eirles, an Irish company. Both M7 and M8 are mentioned in the Cambridge Place Investments lawsuit.

  1. Eirles Two Series 258 M8
  2. Eirles Two Series 259 M8
  3. Eirles Two Series 264 M8
  4. Eirles Two Series 265 M8
  5. Eirles Two Series 266 M8

The biggest thing that strikes me about these transactions are that the majority are overseas, mainly Ireland.

Investor Reports

It was actually not until September 2013, that I hit pay dirt.

I came across U.S. Bank’s Trust Gateway and downloaded all the investor reports from 2005 to September 2013 and searched for our loan number.  The reports list delinquencies by their account numbers in their Loan Detail Reports for bankruptcies, foreclousres, REOs, and modificaitons.  I was surprised by what I discovered.  In the time that the Trust has been around, the loan was reported a whopping ten times – three of those reports are over a year after the property was sold at foreclosure.

The first report of the loan being in foreclosure is May 27, 2008.  Interesting since the assignment filed by USBNA was created on May 28, 2008 but was not signed until June 6, 2008.  We had mailed a letter of rescission to the originator, Homefield Financial, Inc., and Select Portfolio Servicing, Inc. (“SPS”) on March 24, 2008.  Homefield was defunct by this time.  It literally disappeard off the face of the earth.  I don’t know how a mortgage originator who was listed twice on Inc.’s top 500 fast growing companies can disappear.  But they did.  That, however, did not stop SPS from assigning the mortgage to U.S. Bank two months after the mortgage was rescinded.

Nothing is reported for June 2008, July 2008, or August 2008.  The loan once again is reported to be in foreclosure from September 2008 through January 2009.  SPS/U.S. Bank filed the foreclosure action in September 2008.  We filed a federal lawsuit to enforce our right of rescission in March 2009.

Then nothing else is reported for the next three years and 8 months until August 2012, approximately three months after the house was sold at foreclosure on May 17, 2012.

By the way, we won the federal lawsuit against the originator with the federal court opining that we had a valid right of rescission and we exercised the right of rescission in a timely manner.  The federal court ruled that the trigger for the rescission was March 24, 2008.  The federal court also awarded us statutory and actual damages.  A hollow victory to be sure but it’s vindication that we timely exercised a valid right of rescission.

However, we did not do so well in the state foreclosure action.  The state court entered a judgment of foreclosure over a year later.  On appeal, the attorney for SPS/U.S. Bank told the panel of appellate judges that “no court had ever ruled on the validity of the rescission claim”.  So that pretty much ended our case.  The appellate court entered a PCA (per curium affirmance without opinion).  That is a clear death bell for the case.  But I am digressing.

Getting back to the trust. Another surprise, and it may make more sense to those who are securities literate (I am a securities illiterate), the Liquidation Proceeds were reported as being $51,418.58 on August 27, 2012.  However, the house was sold at foreclosure for $115,900.00 on May 17, 2012.  What happened to the remaining $64,481.42?  In the same report, SPS reported the loss as $121,273.62.   Shouldn’t the loss have been reported as being $56,792.20 which is the difference between the foreclosure sale amount and the outstanding principal amount?

Another little discrepancy that I noticed is the amount of the outstanding principal.   On May 27, 2008, SPS reported the principal owed was $175,130.86.  On August 27, 2012 (4 years and 2 months later), the reported principal owed was $172,692.20.  SPS/USBNA claimed we owed $175,721.65 as principal on the Final Judgment of Foreclosure.  Someone is lying somewhere big time.  Does this maybe sound like fraud on the court?  I mean, that is a difference of over $3,000.00.

So how did the outstanding principal go down from $175,130.86 to $172,692.20 if we were delinquent?  The investor reports clearly show that payments were being made.

Then almost a year later, in June 2013, a loss in the amount of $378 is reported with another loss in the amount of $945.00 reported in August 2013 followed by another loss in the amount of $336.00 reported on October 25, 2013  (see chart below).  How can losses occur more than a year after the foreclosure?

Date of Report

Outstanding Principal Amt

Interest Rate

Comments

2008.05.27

175,130.86

10.25%

2008.09.25

174,660.66

9.25%

2008.10.27

174,535.56

9.25%

2008.11.25

174,409.50

9.25%

2008.12.26

174,282.47

9.25%

2009.01.26

174,139.34

8.63%

2012.08.27

172,692.20

Liquidation Proceeds – $51,418.58;

Loss – $121,273.62

2013.06.25

Loss – $378.00

2013.08.26

Loss – $945.00

2013.10.25

Liquidation Proceeds – $336.00

INVESTOR LAWSUITS

This leads me to the next section involving investor lawsuits.  I have been able to locate several investor lawsuits against Credit Suisse, DLJ Capital, and SPS (both DLJ Capital and SPS were purchased by Credit Suisse) involving one or more of the tranches mentioned above.  Some of the lawsuits are Cambridge Place Investments v. Morgan Stanley, et al., Phoenix Light SF Limited, et al v. Credit Suisse, et al., Prudential v. Credit Suisse.  There are probably many more investor lawsuits out there that have not been published.

In each of the lawsuits, the allegations were similar – the information provided to the investors was faulty.  Based on the information provided in the investor reports related to the loan number 403253218, I would say that the investors are 100% correct.  Investors are thought to be “sophisticated” parties and that is always one of the affirmative defenses used by Credit Suisse, DLJ Capital, and SPS.  However, no matter how “sophisticated” a person is, if the information presented is faulty, then whatever decision is made based on that faulty information will be faulty.

In the Prudential v. Credit Suisse, Case No.2:33-av-00001 (USDC, NYSD) case, Prudential conducted a loan level analysis of the Offerings.  The results for Home Equity Asset Trust 2005-6 revealed that 33.88% of the loans had material defects.  A whopping 87.61% of the loans in Tranche M2 had missing intervening assignments.  M2 is the same tranche that the New York Federal Reserve Bank used in Maiden Lane III.

Now back to the assignment related to our loan – first, the collateral file produced by U.S. Bank in the foreclosure case did not contain any assignments whatsoever.  U.S. Bank, in its response to our discovery stated that there was only one assignment (from Mortgage Electronic Registration Systems, as nominee of Homefield Financial, to U.S. Bank, as Trustee) which was recorded in Orange County, Florida on June 6, 2008.  That’s it, no other assignment occurred before our rescission.  Why would U.S. Bank accept a loan that was allegedly in default and had been rescinded?  Doesn’t U.S. Bank have a duty to the investors?

 REGULATORY ACTIONS

In addition to the regulatory actions by the OCC against USBNA and the FTC against SPS, on November 16, 2012, the SEC issued a cease and desist order against Credit Suisse for making misleading statements regarding the key investor protection known as “First Payment Default” (“FPD”).  FPD requires the originators to repurchase certain delinquent loans or otherwise cure the breaches and if the originators fail to repurchase the loans or cure the breaches, then Credit Suisse was required to do so.  However, the SEC states that Credit Suisse failed to ensure that the delinquent loans were removed and did not disclose that fact.  Furthermore, Credit Suisse engaged in a bulk settlement practice of accepting payment for the delinquent loans from the originators, pocketing the money and then leaving the loans underlying the bulk settlements in the trust instead of repurchasing the loans as they were required to do under the Pooling and Servicing Agreements.  In other words, Credit Suisse was double-dipping. On the one had, Credit Suisse was receiving payment from originators for delinquent loans while on the other hand leaving the delinquent loans in the trusts in order for the loans to be foreclosed and receive payment from the foreclosures.  Paragraph 26 of the cease and desist order states:

 The bulk settlement practice involved a number of acts that operated as a fraud or deceit on RMBS investors. These acts included, but were not limited to: (1) The settling of repurchase claims against originators, and keeping the consideration received, when Credit Suisse had sold the underlying loans to RMBS trusts; (2) The collection of settlement proceeds for securitizations where Credit Suisse had passed through its MLPA rights to an RMBS trust or had itself promised to repurchase certain EPD loans; (3) The application of different quality review procedures for loans that Credit Suisse sought to put back to originators and the practice of not repurchasing such loans from trusts unless the originators had agreed to repurchase them; (4) The failure to disclose the bulk settlement practice when answering investor questions about EPDs; and (5) The failure to notify trustees or investors about the benefits Credit Suisse retained related to securitized loans, despite knowing that investors were unaware of the bulk settlement practice.

As I said, I am not an expert on securities or even investment portfolios.  However, even with my limited knowledge, something seems not right.

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13 thoughts on “Under the Hood of a REMIC

  1. Reblogged this on Deadly Clear and commented:
    Great investigative work – and we haven’t even begun the to understand and research rehypothecation! If we dig deep enough and compel discovery – we may find that our social security numbers are required as a part of the securitization package – and wouldn’t that, therefore, make us an unwitting participant to the scheme?

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    1. It most definitely would make us unwitting participants. Add to that the sale of our private information without our consent. The loan tape for this trust was never filed. My understanding is that the social security numbers and credit scores were on the loan tapes. The missing loan tape, IMHO, points the possibility that this was an empty trust.

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  2. Did your discovery include copies of the wire transfers/checks from the parties who allegedly purchased your loan? I would agree with your empty trust conclusion, as 99% most likely are. That is the reason for all the robo-signed docs and robo-witnesses at trial. If the forecloser had the proper documents, they would not need the fake ones.

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  3. I believe this research also reveals that many different illegal scenarios were used to enhance profits as well as the sale of the note multiple times. It is still my opinion that the Notes were shredded and copies were used.

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    1. Louise, there is a lot of evidence from the bankers themselves that the loan documents including the notes were scanned and then shredded. This is a violation of the UETA.

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      1. In my previous case, opposing counsel actually said that to me during the settlement proceedings and then I busted him for it and put another motion on the calendar. They had a forged Note created by using an autopen and put it before the Court.

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  4. Alina, great stuff and thanks for sharing it. I too found the USB Gateway…very interesting information there. One thing I was not able to find that you seem to have, is the purchasers for each tranche. In my case (pending in CA Appeals Ct), the sponsor/seller and depositor were/are Lehman and SASCO, which are in BK…I’m trying to find out if they were required to repurchase anything from the Trust. Also, WHO was the purchaser of the tranche my mtg was purportedly in.
    Any help on how to identify the purchaser of the tranche would be much appreciated.

    Thanks!

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    1. So Cal 7 – have you intervened in the BK? The loans were not assigned to tranches until after the default. I was never able to find the exact tranche where my loan was placed. It took literally years to piece together the tranches. Most sales occurred overseas. It was only when investors filed suit or when the tranche was publicly offered for sale that I discovered the information. Luckily for me, this trust has been part of a lot of litigation.

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