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IPFS News Link • Housing

Foreclosure-Gate: Countrywide Never Transferred Notes to the NY Trusts

I've been on this specific point for more than a year. Why? Because I have had multiple people assert to me who were in a position to factually know that this took place. It also was the only way for certain "problems" (like writing crap paper) to remain undisclosed to auditors and investors. Now we have it on the record, in a lawsuit. Linda DeMartini, a supervisor and operational team leader in B of A's litigation management department, testified that "the original note never left the possession of Countrywide"... DeMartini "testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents"... There's no cure for this at this point in time. The following problems are insurmountable: Most if not all of the MBS trusts are organized under NY Trust Law. NY Trust Law requires that delivery be made "in as perfect a form as possible." Intentionally not delivering anything is so far removed from this requirement that it is a near-certainty that the Trusts are in fact legally void. IRS REMIC rules require that the trusts contain a static pool of loans, and that they all be in the trust as of the certification date. This is typically 90 days post-closing of the trust (the 90 days is to allow a few late deliveries.) If REMIC rules are not followed the entire trust loses its tax passthrough preference and back taxes are due on the operations of the trust back to the point of violation - in this case, back to the founding. The holders of the certificates could become held financially responsible for these taxes - at the corporate rate. The Pooling and Servicing Agreements all contain certifications that the formalities of transfer were complied with, including all intervening assignments and delivery to the Trust. These are not certifications of something to be done prospectively, they are certifications of fact that have allegedly occurred. If in fact no transfers took place then the entire MBS chain is arguably void as there are no mortgages in the securities. This would constitute the largest fraud ever perpetrated upon investors in the history of the world. And now, to top it off, we have in formal testimony an admission by Bank of America's litigation management department, that they have concealed this fact from the public markets. Where is the notification required of a "material adverse event" in the firm's 8Ks, 10K or 10Qs on this matter? This sort of knowledge certainly has the potential to be "material" (in that the liability would exceed the Bank's capitalization several times over) and yet we first learn of this in a conclusive fashion in a lawsuit? Mr. President and Sheila Bair: TAKE THESE BANKS, PARTICULARLY BANK OF AMERICA, INTO RECEIVERSHIP NOW. This outcome cannot be avoided. We must do this in a form and fashion that is controlled, which means you must do it now, before the vultures get their teeth into these issues. There is no way to retroactively fix this - we're talking about trillions of dollars here, more than you can print and play with, and there are international concerns that own these MBS as well. The rule of law must be upheld.