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Foreclosure-Gate: Mortgage-Backed Securities Without Mortgages?

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We may be about to find out. The number of deals the RMBS Investor Clearing House now has a big enough interest in to request action by bond trustees has climbed about 30 percent since a July statement by Franklin. The clearing house allows bondholders to coordinate without divulging to each other which securities they own. The group added three new portfolios Nov. 12 that weren¡¯t included in the most recent total, Franklin said in an e-mail from Dallas that day. A quarter of bond investors in any single deal marks the minimum threshold to force mortgage-bond trustees to grant access to loan files that may help investors prove mortgage sellers should buy back bad debt or take other action. Remember, the allegations made by various legal folks in the practice (and apparently validated by the case law thus far) is that not one note has been able to be produced that contains all of the required conveyances and endorsements. What's going to happen when (or if) these folks gain access to the files and find that they're missing - that is, that the custodian doesn't have them? Well now that would be interesting, no? "Mortgage-backed securities" that in fact have no mortgages in them? Why that would be a wee problem, no? Everything we know up to this point strongly suggests that this is exactly what is going to be discovered, and as a consequence, the RMBS Investor Clearing House is definitely an entity to watch. The wheels of justice turn slowly, but they do turn, and if in fact basically none of these notes have been properly conveyed into the trusts, and as such the trusts are a legal nullity, then investors have spent billions of dollars as unknowing participants in a massive fraudulent scheme.

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