Securitised Mortgage

Angry_Cat

Angry_Cat wrote: »

In America possessions are being stopped dead as a result of securitisation, why is it not being tried here. There is nothing in the press about it

http://www.ritholtz.com/blog/2011/04/bad-securitization-no-standing-to-foreclose/

Fascinating March 30 legal decision out of Alabama, in the case of Phyllis Horace vs. LaSalle Bank National Association et. el.

“The ruling prevents defendant LaSalle Bank – as the trustee holding the plaintiff’s securitized mortgage – from proceeding with a foreclosure because the trust failed to follow its own pooling and servicing agreement, and did not follow applicable New York law when trying to “obtain assignment of Horace’s note and mortgage,” according to the court order.
Without proof the mortgage had been assigned to the trust, in this case a Bear Stearns-related mortgage trust, the trustee lacked standing to foreclose, the court found.”

http://www.nytimes.com/2010/10/04/business/04mortgage.html?pagewanted=2


In other cases, judges are finding that banks’ claims of standing in a foreclosure case can conflict with other evidence.
Last Thursday, Paul F. Isaacs, a judge in Bourbon County Circuit Court in Kentucky, reversed a ruling he had made in August giving Bank of New York Mellon the right to foreclose on a couple’s home. According to court filings, Mr. Isaacs had relied on the bank’s documentation that it said showed it held the note underlying the property in a trust. But after the borrowers supplied evidence indicating that the note may in fact reside in a different trust, the judge reversed himself. The court will revisit the matter soon.
Bank of New York said it was reviewing the ruling and could not comment.
Another problematic case involves a foreclosure action taken by Deutsche Bank against a borrower in the Bronx in New York. The bank says it has the right to foreclose because the mortgage was assigned to it on Oct. 15, 2009.
But according to court filings made by David B. Shaev, a lawyer at Shaev & Fleischman who represents the borrower, the assignment to Deutsche Bank is riddled with problems. First, the company that Deutsche said had assigned it the mortgage, the Sand Canyon Corporation, no longer had any rights to the underlying property when the transfer was supposed to have occurred.
Additional questions have arisen over the signature verifying an assignment of the mortgage. Court documents show that Tywanna Thomas, assistant vice president of American Home Mortgage Servicing, assigned the mortgage from Sand Canyon to Deutsche Bank in October 2009. On assignments of mortgages in other cases, Ms. Thomas’s signatures differ so wildly that it appears that three people signed the documents using Ms. Thomas’s name.

Angry_Cat

roonaldo wrote: »

the points you made were ridiculous. securitisation helped cause the credit crunch!!!

Before saying the points I made in regard to posessesions in american being stopped as a result of securitisation - being ridiculous, you might want to become familiar with the facts first. Please see my above post.;)

roonaldo

In America possessions are being stopped dead as a result of securitisation, why is it not being tried here. There is nothing in the press about it

your original point

and again, securitisation of bad debt to avoid repossessions isnt going to happen. you must be a wind up.

Angry_Cat

roonaldo wrote: »

your original point

and again, securitisation of bad debt to avoid repossessions isnt going to happen. you must be a wind up.

Thank you for your further comments

Not sure why you keep making references to bad debts.

Virtually all debts, mortgage, credit card, HP agreements etc etc etc are bundled together (good and bad) and sold through securitisation.

So sorry I am not on a wind up. Might be an idea for you to google securitisation and do a little research on the topic you have chosen to comment. I can assure you that any and every consumer debt you owe has more likely than not been sold to a special purpose vehicle through securitisation.

As I have shown above, securitisation happens all the time.

Angry_Cat

I have also shown that in America possessions are being stopped as a result of securitisation.

Pegasus_Galaxy

There is no real merit in the often repeated and misunderstood argument that in some way securitisation of a mortgage debt impacts upon the possession right of the original lender.

There are two elements to what you would appear to refer to as a mortgage:

Firstly, there is the loan, given to you the borrower by the lender. This loan creates a debt with the lender. In common law the lender is allowed to sell this debt to a third party, unless there is an express term within the agreement that prevents such a sale. This sale would take place as an equitable assignment, meaning that the legal title to the debt remains with the lender and the beneficial interest, which is the repayment of the debt is passed to the third party, in this case a Special Purpose Vehicle (SPV).

Statute – s.136 of the Law of Property Act confirms that an assignment can be legal (absolute). However, to be a legal assignment, the borrower must receive notice of that assignment and the legal assignment is only effective at law from the date upon which the borrower received such a notice.

The effect of an equitable assignment is that any legal enforcement of that debt must be done so in the name of the original lender. If the SPV wanted to enforce the debt, if could only do so by joining the original lender in proceedings. However, once a borrower receives notice of the assignment – the assignment is a legal assignment and as the assignee the SPV can start proceedings in its name.

To be clear, the above only relates to the actual debt. You should also bear in mind that possession proceedings is not classed as the enforcement of the mortgage debt, rather it is in regard to the possession right of the lender as a result of a ‘mortgage by way of legal charge’.

Secondly, it is a common misconception that a borrower applies for a mortgage and that a lender gives a mortgage to a borrower. In fact the lender gives the borrower a loan and in return, it is the borrower that gives the lender a mortgage. This is a very important point and goes to the root of your argument. For the avoidance of doubt the borrower is the mortgagor and the lender is the mortgagee.

Remember, possession is enforcement of the ‘mortgage by way of legal charge’ given to the lender by the borrower and is not enforcement of the mortgage debt itself. This significant point was confirmed in Paragon Finance Plc v Pender & Anor [2005] EWCA Civ 760 (27 June 2005). Lord Justice Jonathan Parker at 116 said-

“As to Mr Page's reliance on section 136 of the Law of Property Act 1925, that too is in my judgment misplaced. He fails to distinguish between the right to sue at law for the mortgage debt and the proprietary interest created as security for its repayment. Section 136 applies only to the former.”

Returning to the right of possession of the lender – When you applied for the loan to buy your home, as security you gave a legal charge to your Lender. This legal charge encompasses a number of rights granted to the lender by you the borrower, in exchange for money. These rights can be found and are detailed in part III of the Law of Property Act 1925.

Once granted by the borrower to the lender, the charge itself becomes an item of property that is owned by the lender. The lender is free to sell (dispose) of the legal charge as it sees fit. In the case of securitisation the charge is sold in equity to a Special Purpose Vehicle (SPV). As the sale takes place in equity and not at law, the legal title to the charge is retained by the lender and any possession proceedings would have to take place in the name of your lender. For the sale to be effectual at law rather than in equity, the disposition of the charge must be completed by registration. This is confirmed by s.27 of the Land Registration Act 2002.

In this Country we have the Land Registry. In addition to keeping records of the owners of property (land/buildings), it also maintains records of the charges registered against each property and who owns each charge. The register itself is conclusive evidence of the legal title of both property and of the legal title of the legal charges.

The registered owner of the legal charge – being the named owner of the charges register has the right to possession of your property. This is a right you granted to the lender when you applied for a loan and gave a ‘mortgage by way of legal charge’ to your lender.

In the case of securitisation, until the sale to the SPV is completed by registration, so that it take effect at law rather than in equity, the Lender will correctly be recorded as the legal owner of the legal charge. Therefore, any and all possession proceedings must by law be in the name of the lender. If the Special Purpose Vehicle wanted to exercise the right of possession, it must do so in either the name of the lender or jointly with the lender. It has no legal right to exercise the right of possession in its own name.

Once the sale (disposition of the charge) has been completed by registration, it takes effect at law and the Special Purpose Vehicle will become the registered owner of the legal charge and it is then and only then able to exercise the right of possession in its own name.

I understand and appreciate that the arguments in regard to the effect of securitisation can be attractive to anyone in financial difficulties. However, they are based upon a complete lack of understanding of the legalities involved. By way of an example, any reliance of events in the USA is misplaced. In the states the borrower signs a ‘note’, this note is then passed between companies each time the mortgage is sold. It is only the financial institution that holds that note and can demonstrate ownership that can seek possession. In the UK, we have the Land Registry and the Charges Register which acts as conclusive proof of ownership of the legal charge.

There have been a number of cases at virtually all levels within our judiciary in regard to the arguments of mortgage securitisation and its effect upon the possession rights of lenders. On each and every occasion it is confirmed that the lender as the registered owner of the legal charge, retains the right of possession, granted by the borrower to the lender.

To enforce the mortgage debt and seek a monetary judgement, until a notice of assignment has been given to the borrower – any proceedings must be in the name of the lender.

To enforce the legal charge and seek a possession order, until the sale has been completed by registration – any proceedings must be in the name of the lender.