FDN’S JEFF BARNES, ESQ. ADMITTED PRO HAC VICE IN MICHIGAN; CONGRESSIONAL OVERSIGHT REPORT HIGHLIGHTS ILLEGALITY OF ASSIGNMENTS OF MORTGAGE LOANS TO TRUSTS WITHOUT COMPLIANCE WITH POOLING & SERVICING AGREEMENTS FDN’s Jeff Barnes, Esq. has been admitted to the Washetnaw County, Michigan Circuit Court pro hac vice in connection with defense of a foreclosure involving a securitization. He is assisted by local Michigan counsel James Fraser, Esq. On the subject of securitization, we have obtained a copy of the November 16, 2010 Congressional Oversight Panel’s Report examining the consequences of mortgage irregularities.
The 127 page report discusses assignments, MERS, the problems with “robo-signers” and other document infirmities. We find very significant the matters on page 19 of the Report, which state as follows regarding assignment of mortgage loans to a securitized mortgage loan trust: “As described above, in order to convey good title into the trust and provide the trust with both good title to the collateral and the income from the mortgages, each transfer in this process required particular steps. Most PSAs [Pooling and Servicing Agreements] are governed by New York law and create trusts governed by New York law. New York trust law requires strict compliance with the trust documents; any transaction by the trust that is in contravention to the trust documents is void, meaning that the transfer cannot actually take place as a matter of law [citing relevant provision of NY Estate Powers and Trust Law section]. Therefore, if the transfer of the notes and mortgages did not comply with the PSA, the transfer would be void, and the assets would not have been transferred to the trust. PSAs generally require that the loans transferred to the trust not be in default, which would prevent the transfer of any non-performing loans to the trust now. Furthermore, PSAs frequently have timeliness requirements regarding the transfer in order to ensure that the trusts qualify for favored tax treatment.” This is what we have been arguing for years: that purported transfers of toxic, non-performing mortgage loans into a trust beyond the trust closing date and without strictly complying with the mortgage loan conveyance proviions of the PSA are void and of no force and effect, regardless of who attempts to make the transfer (e.g. MERS, who cannot make the transfer in any event for other reasons). The United States Congress has confirmed this. Perhaps more members of the Judiciary will ultimately come to the same conclusion.