[BROKERDIRT] must read expert witness declaration - orig promissory note isn't; indorsement is "photo-shopped"
April Charney
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John L Davidson
This paper is from:
http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=3114&context=faculty_scholarship
The money quote (as Dennis Kennedy would write):
We believe that the A-B-C-D argument has little or no legal merit with respect to the structure of mortgage securitizations. Under contract law, the question is whether delivery instructions providing that, “in connection with the sale,” the notes must be delivered to the SPV or its agent indorsed as specified by the securitization contract requires such delivery and indorsement in order for the sale to become effective. The delivery instructions are not described as conditions to closing the securitization transaction or to the sales thereunder, nor are escrows or hold-backs established pending proof of satisfaction of the instructions. Rather, those instructions appear to be intended to protect the SPV and its investors, not to invalidate their rights if the
instructions were not complied with.
John L. Davidson, Esq.
13975 Manchester, Suite 19
St. Louis, MO 63011
636.527.9395 (facsimile)
You just keep pushing. You just keep pushing. I made every mistake that could be made. But I just kept pushing.
April Charney
Delivery instructions? Is that a legal term that is defined anywhere?
Sent: Sunday, February 03, 2013 9:31 AM
To: BROKE...@LISTSERV.UMKC.EDU
Subject: [BROKERDIRT] Recent Scholarship on Mortgage Assignments and MBS Structuring
This paper is from:
http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=3114&context=faculty_scholarship
The money quote (as Dennis Kennedy would write):
We believe that the A-B-C-D argument has little or no legal merit with respect to the structure of mortgage securitizations. Under contract law, the question is whether delivery instructions providing that, “in connection with the sale,” the notes must be delivered to the SPV or its agent indorsed as specified by the securitization contract requires such delivery and indorsement in order for the sale to become effective. The delivery instructions are not described as conditions to closing the securitization transaction or to the sales thereunder, nor are escrows or hold-backs established pending proof of satisfaction of the instructions. Rather, those instructions appear to be intended to protect the SPV and its investors, not to invalidate their rights if the
instructions were not complied with.
John L. Davidson, Esq.
13975 Manchester, Suite 19
St. Louis, MO 63011
636.527.9395 (facsimile)
You just keep pushing. You just keep pushing. I made every mistake that could be made. But I just kept pushing.
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alex
years of the foreclosure mill bar and punch drunk securitization
bar having told fib after fib to more than enough appeals courts
and state supreme court justices...
the piece by the duke law school grad was designed to land
him at a tall building law firm, which it did in boston...consumer
defense is not where he was headed...
but there is no modern treatise on the issues and no recent
grad should be chastised for lacking in depth where none
exists...
The firm he has ended up with, along with other major
firms across the country are fully aware that a
securitization is controlled by the Trust Indenture Act of 1939
This is the governing part of the law...the pooling and servicing
agreement is part and parcel of that law...it is what keeps a
trustee from being liable for actions of the parties in interest
and any actions they take or refuse to take, so
where the Duke Grad student proposes,
that
" Under contract law..."
sorry...this is not about contract law...this is about the Trust
Indenture Act, and Article 8 issues...we dont get to article 9 or
3 until we escape the grip of the TIA...
but to answer the real question as to WHY are these TIA instruments
being left in blank as against being "accepted" by placing a name in
the "blank space" to create a "special indorsement", it is probably
worse than it appears...why not simply follow the PSA's ABCD dictums ?
a derivative needs an instrument to be pledged, much like someone
who has invested in a futures market, needs to place some assets
against the margin position...
there are only 10 trillion dollars in US home loan financial instruments
and about 8 trillion of US Treasuries available...add in about 2 trillion
in State and Local MBIA/AMBAC type issuances and that is 20 trillion
to be pledged against about 600 to 800 trillion in derivative positions
conforming to ISDA/Derivative requirements leads one to have to "borrow" and
rehypothicate positions to even begin to "cover" the margin requirements
of positions taken by "london whales" and other forms of gamblers...
The reason MF Global/Corzine and Lehman with its Repo 105's will
not lead to any prosecutions is because everyone does the same
thing...
if the "broken" trusts were properly conforming to the ABCD requirements
then the "custodians" of the trusts would not be able to trade out/lend out the
instruments to cover derivative positions...which in all actuality is another
REMIC violation...
but the tall building law firms take the position that until a tax court or
a treasury advisory or a private letter ruling or a treasury notice, or even
a proper publishing in the Federal Register occurs, then the REMIC
arguments have not been adjudicated and if push comes to shove they
will have baby scalia belt up, bring his six shooter to town, and be the
corporate carabinieri he was born to be...
The only problem for the TBLF's is that there were rulings during the
depression that led to the TIA of 39 and subsequent rulings
and adjudications, when much like today, wall street decided
it would do what it wanted with pension fund money and other funds
they were holding in a purported fiduciary position...
remember, social security and FDIC insurance were the original
corporate welfare bail out, as companies refused to make pension
payments as had been promised and the tax payer was left
holding the bag for wall street gambling/profiteering...and bad
assets were revalued at 100 cents on the dollar by FDIC/taxpayer
deposit coverage...
even bernie madoff was not the total scoundrel he is made out to be...
(ok he was, but not in the way most people think...)
he was a derivatives counter party, and derivatives are basically
unregulated insurance practicing...without the required capital positions...
He got into his real problems when he danced with Banco Santander in
their move against ABN/AMRO...the little financial civil war that broke out
over that fight and the Prime Brokerage lending by Bank of America and
BNP Paribas in that battle is only now coming to light in
the Italian investigations on derivatives and the corruption
investigations now being done in Spain...
sorry TBLF's...getting future partners/current state attorneys to sign
off on MERS and LPS will not bring all this to a close...
during the depression, less than one percent of the population had
a college degree and only two percent had ever gotten beyond
high school...the current population has over a quarter with
degrees and over half having advanced beyond HS...
The piece by our Duke Grad describes early,
with the now worn out mantra and meme that...
"But this model failed when, in 2007 and 2008, home prices fell significantly"
Derivative positions of John Paulson and attacks on AMBAC by Ackman
had nothing to do with killing the financing for home loans in america...???
I am sure that would be news to Janet Tavakoli
inventing the internet is probably one of the few things al gore got right...
be well,
G. Alex Morfesis
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April Charney
Alex, I so wish you were a lawyer. I am not pursuaded and nothing you state changes my mind that these NY trusts are NOT covered by statutory NY trust law, but are common law trusts per the PSA. As such, it is the common law of NY that covers the subject, not the statute. This may not matter much as to outcome, but it does matter to show from where the structure the court is required to apply is derived in the law.
This NY statutory trust law vs. common law issue is a matter of great debate, so please chime in. But that is why I wish you were a lawyer so you could tell me why I am wrong legally.
Sent: Sunday, February 03, 2013 3:15 PM
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Subject: Re: [BROKERDIRT] Recent Scholarship on Mortgage Assignments and MBS Structuring
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April Charney
I forgot to ask how an entity that is NOT the trust or acting on behalf of a trust that "owns/holds" the mortgage loan can hypothocate anything on its own behalf as "cover" or otherwise?
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alex
NY Common law trusts were what thacher proffit were working around and why they
dissolved and ran for cover when they could not get the Uniform NonJudicial Foreclosure act pushed thru
I am just laying out that there is more in the arsenal than just the problems with the NY common law trust
workarounds...
dont confuse my additions as a subtraction to your points
be well,
alex
alex
in a loan pool, due to the TIA of 39 we actually have two trustees...this is not for you april...its for everyone else who may not have a full picture...the indenture trustee(ie the cashier at the restaurant) is forwarded the funds and makes a monthly distribution report to the 25 to 40 cusip registered tranches and the 300 to 800 stake holders(pensions, hedge funds, money market accounts, etc)...the "corpus holder" is usually one of two trustees...northern trust or wilmington trust...there are three servicers...the master servicer, the subservicer(the one which most consumers interact with) and the default servicer(I argue it is almost always really LPS who does not publicly take that position but runs 50% of all foreclosures...ISGN/Lenstar running most of the rest)...
in short selling on wall street...in theory, the party needs to have the instrument in hand before making the naked sale...in reality, the dance around is that parties pick up the phone(or bounce bloomberg messages) to a party with the shares and confirm they can end up with "X" amount of shares that are available, but since 20 or 30 parties end up calling the same source, they never usually require(wink wink) that any one of them tie down the shares first...
in that same manner, the custodian holding the "blank" indorsed instrument, despite of probable Tefra(1982) violations, are in fact trafficking in bearer instruments and "lend out" collateral for use in counterparty derivative transactions and charge a "rental" fee for use of the collateral, creating revenue for the custodian, like BONY/Mellon and DB.
The fact is the TIA did not contemplate the machinations designed today to absorb the excess interest rate the average american "overpays" for home mortgages compared to most of the rest of the OECD countries. And wall street was not going to pass on the lowered interest rate to homeowners...There is really no business need to have all these entities "handing off" responsibilities to each other when they are all quite capable of handling the whole matter themselves. If Jimmy Hoffa had done this in the 50's and 60's, he would have
been perp walked in 30 seconds for skimming...
how this is not a walking talking sherman act violation is beyond me...
be well,
alex