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Ibanez: About that Loan Schedule....

posted by Adam Levitin

Did Ibanez a particularly screwed up set of securitization documentation?  Or was this just snafu?  Looking around at other PSAs, I'm starting to think the latter.  In Ibanez, the Massachusetts Supreme Judicial Court noted that PSA was insufficient to serve as an assignment of the loan because what was presented as the affiliated loan schedule:

"did not include property addresses, names of mortgagors, or any number that corresponds to the loan number or servicing number on the LaRace mortgage. Wells Fargo contends that a loan with the LaRace property's zip code and city is the LaRace mortgage loan because the payment history and loan amount matches the LaRace loan."

So how do other PSAs fare under the Ibanez metric?  I've been looking at them, and it seems that there are lots of RMBS deals where the schedules in the PSAs are possibly insufficient to meet the Ibanez standard.  And that means that there are lots of RMBS trusts that might not be able to successfully foreclose in Massachusetts or maybe in any other title theory state.  (Read on...I name names!)

Let's start by taking a look at another ABFC PSA (not the ABFC 2005-OPT1 series involved in Ibanez), this time from ABFC Asset Backed Securities Series 2005-WMC1 (a Weyerhauser Mortgage Corporation deal--Weyerhauser was GE's subprime origination arm).  This PSA is (1) executed and (2) has a detailed loan schedule included.  So that means that the execution issue in Ibanez goes away.  But is the loan schedule up to snuff?   I'm not so sure. 

The ABFC 2005-WMC1 PSA has a schedule that includes two different loan IDs, the original balance and interest rate, the original term and first payment date, the LTV, maturity date, loan product type (and other info on the loan terms), and the city, state, ZIP.  It does not have a property address beyond a city and a ZIP, and it does not have the names of the mortgagors. 

The only thing that might distinguish it, then, from the schedule in Ibanez is if the loan ID numbers on the schedules match with that on the mortgage.  I've seen plenty of cases where the loan IDs don't match up; it certainly isn't a rare event.  Even if they do match up, I'm not sure that's enough. Maybe the loan number links to the note, which links to the mortgage, which should contain a description of the property.  If so, then the loan ID might suffice. Ibanez isn't clear on what is actually required, but the court was clear in stating that in a title theory state, a mortgage of a property is technically a sale of the property.  I'd be surprised if any state holds that there's an enforceable sale of real property when there's no street or lot address given.  (If there are any dirt lawyers reading this, please feel free to suprise me in the comments; I'm happy to learn.) 

So what's the take-away here?  I think there are lots of securitization deals where the mortgages might not be enforceable in title theory states like Massachusetts, even if the trustee can produce an executed PSA with all the schedules.  You don't have to even look at the schedules themselves to know whether there could be a problem.  PSA definitions of "Mortgage Loan Schedule" will typically (but not always) contain a list of all the items to be scheduled.  Some, like this ACE Securities Home Equity Loan Trust 2005-HE4 or this GSAMP Trust 2005-WMC1 or this Carrington Mortgage Loan Series Trust 2006-FRE1 require the mortgagor's name and a street address on the schedule (whether that info is correct is another story).  But there are plenty that do not require such information (see here (BoA deal), here (Argent deal with schedules), here (Countrywide deal), here (Chase deal), and here (Bear Stearns deal with schedules) for some examples), and if it's not required, well, it's not there.  And that could well be fatal to enforcement of these trusts' mortgages in Massachusetts at the very least, at possibly in every title theory state. 

So bottom line:  Ibanez might be a much broader reaching opinion than anyone's yet recognized. 


Can I buy a "have" in the first sentence?

And for those who don't live and breath the Ibanez issues - PSA = a mortgage securitization Pooling and Servicing Agreement.

As opposed to a public service announcement, or a prostate-specific antigen, or professional services automation.

RMBS = Residential Mortgage Backed Security

I'm afraid "ABFC" will have to remain insider code for the scholastic technocrats, as I have no idea what it stands for.

ABFC = Asset Backed Funding Corporation, name of the deal Depositor, AMC ;)

Adam, you raise fascinating points. I suspect they will be the subject of litigation in trial courts for the foreseeable future.

You don't address or speculate on why such elementary information would have been redacted in the first place. Why redact names and addresses for privacy from an SEC filing when all that information and more--images of people's legal signatures, for heaven's sake--is available at the local registry of deeds? Here in Mass I can browse all sorts of private data over the internet in a matter of seconds (you can too of course). Anyway, simply using ID numbers would have preserved privacy in any event. And while various commenters have alluded to (a) haste and supposed overhead costs associated with taking a few extra days to perfect documents and (b) recordation fees, I have a hard time attributing such monumental carelessness to these seemingly minor secondary driving forces. I have yet to hear what I regard as a rational explanation for behavior extremely widespread (thus avoiding the "handful of strange actors" explanation) and that at first blush appears so utterly bizarre. Banks unable to locate proper records of an account (i.e. Ibanez)? Where that "account" consists of 1220 residential mortgages?

What possibilities suggest themselves here?
• Might the failure to properly or fully document the transfer of an asset create situations in which two parties could potentially claim possession of that asset for separate purposes in dealing with different sets of entities, such as (a) investors asking about their collateral (MBS pool) and (b) bank examiners asking about a bank's level of reserve capital?

• In the '06 - '08 period rumors were swirling around about the interaction of toxic mortgages and refinancing. Many people with shaky finances in the early '00s, who had bought into the first wave of toxic mtges, had stabilized themselves by mid-decade, having also realized sufficient appreciation on their properties that they had begun refinancing into conventional mtges at significantly lower rates by '05 or '06, and the trend was said to be accelerating. Rumors focused particularly on Countrywide, as to whether they were properly accounting for the loss of these customers. In my own RegOfDeeds research (several 1000 Mass mtges) I seldom found a refi from one CW or Indy product (a first wave toxic) to some other CW product. Almost always refi customers opted to shift from toxics to conventionals.

I'm no bank analysist but it was being said that CW's SEC filings didn't seem to match up with the rate at which they were losing their juciest customers as gauged by registry filings--my own personal observation was that their bleed rate was considerable. Remember that CW was *keeping in house--not reselling* an increasingly large proportion of its origination portfolio as time went on. IndyMac and the others were said to be in the same boat.

Notice the Ibanez case happened in MA not another state. Probably because the judges have let them enter fraud for so long they can be implicated as well in the whole theft of homes!

Anyone who thinks its any different let me show the proof to educated people who listen! I once loved my profession til I got caught up in their circle of corruption!

Even if you have a way to have all your bills paid it makes no difference to them. They'll steal and get judges to endorse their theft instead of STOP IT!


One of the reasons why they create the ficticious assignments is so they can get a "synthetic" status of Holder In Due Course. This allows them to foreclose on the consumer without the threat of a consumer raising claims and real defenses against the foreclosing party.

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