Foreclosure-Gate: Securitization Trustees in the Crosshairs For Trust Fraud

11-09-2010 • Nakedcapitalism.com/

So if what we are increasingly led to believe it true turns out to be correct, that borrower notes never were conveyed to the trust, and were also not endorsed over to the trust (through the proper chain of conveyance specified in a PSA) in the stipulated time frame (a LONG time ago), the trustees were derelict in the performance of their duties. So with that in mind, let us reconsider the truly comical part at the beginning of the extract: Deutsche Bank AG….recently demanded that the servicers of its deals indemnify the German bank, and the investors it represents, against any “liability, loss, cost and expense of any kind” from “alleged foreclosure deficiencies or from any other alleged acts or omissions of the servicer.” Demand indemnification? What are they smoking? They have absolutely nada in the way of leverage. They can’t realistically fire the servicer (servicing is a loss making business right now, no one would be willing to act as a replacement unless they got more than the current servicer, and that would come out of the investors’ hide). In addition, if they tried to do so, the old servicer and the investors (who now would have to pay more) could say this move was clearly self serving, not in the investors’ interest. A mortgage securitization expert concurred with our reading: You are dead on. In fact, no one in the transaction has any negotiating leverage at this point. All negotiating leverage will likely come from one party pointing fingers at the other, trying to interpret the contracts. The trustee will seek to blame the servicer, the servicer will say they were directed by the trustee. Should be great sport…..