Thursday, November 25, 2010

STDs ask "To be or not to be: MBS?" Go ask MBS (and related derivatives)Sponsors, Trustees, Servicers and MERS

STDs… Who’s servicing whom? MBS - To be or not to be? Ask MERS.

STDs setting the stage for unprecedented, widespread legal show down over competing claims to property titles; global shock waves. Risks to homeowners, renters and investors in any Real Property, MBS or derivative security.

The American legal hallmark is Due Process under the Law. Writ LARGE, will homeowners’, renters’, and real property owners’ prevail over banks’, servicers’, MBS CMBS investors’, Fannie, Freddie Mac and Ginnie Mae’s interests. Will or which States', counties' and cities' judicial, law enforcement and fiscal officers fully defend property owner’s and renters' due process rights or cave into investors’ and ultimately their own agendas as public officials with their own jobs to protect? In recent times hedge funds and certain Wall St. investment banks added leverage, traded for proprietary profit and inevitably the latter, in particular were caught holding trillions of MBS and related derivatives. During the 2008 so – called financial crisis the Federal Reserve acquired over $1 Trillion of MBS! Seems Taxpayers’ paid full face value, 100 cents on the dollar from banks largely from a certain Federal Reserve district east of the Hudson (technically via reserve credits – which same banks could substitute out by exchanging previous reserves – but that’s a discussion for another day.) Absent the Fed’s MBS purchases it’s believed certain banks were insolvent; if insolvent generally proscribes them from certain critical functions. Globally, creditors starting with China may be concerned and take adverse action. In epic irony, the homeless may indeed have the last and loudest laugh.

What’s all the fuss about? Indications regarding legal chain (and) claim to title from court decisions, attempted but defective foreclosure filings, allegations of robo-signing and witness testimony before Congress – point to a potential breakdown in the legal formation of MBS such that MBS may in many instances NOT be MBS; STDs result. In sum, this looks not just to be an isolated Florida foreclosure problem, nor a US problem but a global banking to YOUR Street and YOUR house problem!

STDs (Securitization Transmitted Damages) result from faulty MBS’ securitizations which was purposely designed to protect MBS investors by specific steps to ensure that the securities issued by the trust creating the MBS were bankruptcy-remote from sponsors (i.e. not legally reachable).

Mistake #1 - The most basic step was physical possession of the Note by the MBS Trustee (often delegated to a servicer) subject to pooling and servicing agreement (PSA). In addition, both the “mortgage” and “NOTE (“promise to repay”) were always to be kept physically together; this appears to have NOT been done. Stated plainly, mortgages were not properly transferred to the trust designed to hold them. This seems to imply that the original mortgage holders may still be the legal holders, NOT the MBS trust on behalf of MBS investors. Result – servicers may be misapplying borrowers’ monthly mortgage payments to incorrect parties. Original holders may have claims against servicers ultimately borrowers. MBS investors including the Federal Reserve, appear to have claims against banks, MBS sponsors, MBS trustees and/or Servicers.

Mistake #2 – in addition to mistake #1, many sponsors of MBS and appears servicers relied upon a company called MERS (Mortgage Electronic Registration System) however, MERS now and then 1) NEVER handled (by hand) the physical documents nor 2) ever had physical custody of the mortgage and note documents; in sum MERS was a very large database – not a vault. This appears to present a separate and distinct source of clouding of claims of title.

Result – salt in the wound of mistake #1 – further confusing and misapplying borrowers’ monthly mortgage payment to incorrect parties.

Renters – yes, renters as a class, may have claims against servicers et al which causes a reverse chain reaction if landlords’ payments have been misapplied to the incorrect FULL legal owners of the property’s rental units. This can be particularly complex on Condominium and Cooperative properties with multiple original developers, entities and mortgage holders.

STD’s setting the stage for massive claims for breach of fiduciary duty…

Presently, individual trustees, responsible for overseeing all assets in trust, in addition to the issues raised above, seem to be blindly assuming that their mortgage servicers are 1) physically holding their a) mortgage and b) promissory notes & c) and that both documents have been properly kept together, endorsed, assigned and recorded.

Failure to investigate is probable cause later for BFD – breach of fiduciary duty – against any and all who serve as a trustee, with individual personal exposure.

MBS investors - Expert Evaluation of claims for Breach of Fiduciary Duty or Suitability.

There are two levels of suitability analysis that may affect claims evaluation, in addition to the fiduciary duty owed to investors. Investors with claims related to MBS, RMBS, CMBS, CDOs, Synthetic CDOs, and CDS and fiduciary duty can contact Chris McConnell & Associates.

The “whole market went down” excuse is baloney – Resources, Action steps you can take:

Assistance is available to help you better understand the responsibilities, duties and securities industry compliance and supervisory requirements of a bank, trust company, brokerage firm, stock broker, branch manager, financial adviser, investment adviser, hedge fund, mutual fund or derivative security. An expert with over 27 years of actual Wall St and securities litigation and FINRA arbitration experience, AIFA® advanced fiduciary training. An expert who wrote the book on Wall St compensation, incentives, accounting, margin, compliance and managed accounts, modeled one of the first structured products and can help assist you in learning all the ways a securities broker dealer, broker or supervisor may have caused losses or profited from assets in your account; with or without your knowledge or consent.

About Chris McConnell, AIFA® a/k/a McFid*, BFD Expert since 2003

He has over 27 years of combined experience as a recognized expert, including his considerable securities industry experience. Since 2004, Mr McConnell issued annual, 1 page FiduciaryALERTS™ like July 2008's “Denial of Twin-flation™ is not a prudent investment strategy” McFid the combination of his Irish family shield “not for himself” and fiduciary. BFD stands for breach of fiduciary duty. For more information, visit

Copyright © Chris McConnell & Associates 2003 to 2010. All rights reserved.

No comments: