Securitization in A Nutshell

According to the terms of any note I ever read, any payment from you or any third party that is intended to be a payment against interest, principal or both must be applied as such. You have hit the nail on the head with your question. When they pooled your note, the deal you signed was ended and a new one began — one to which you were NOT a party. You were mentioned but they never got your signature in the pooling and servicing stage, the securitization stage or the terms of the bond (mortgage backed indenture stage).

Question: I was served with a complaint to foreclose and of course they lost the note as well as saying I hadn’t paid since November 08. I in fact have paid up until March 31, 09, but it seems they have alloted my mortgage payment (at least 3/4) of them to suspense and fees.

I’ve asked for months to no avail and all the other questions, like who holds my mortgage. I

Are Mortgage servicers allowed to take my payments and apply them to wherever they want, even though I have never seen a notice regarding suspense???

ANSWER: Mary: According to the terms of any note I ever read, any payment from you or any third party that is intended to be a payment against interest, principal or both must be applied as such. You have hit the nail on the head with your question. When they pooled your note, the deal you signed was ended and a new one began — one to which you were NOT a party. You were mentioned but they never got your signature in the pooling and servicing stage, the securitization stage or the terms of the bond (mortgage backed indenture stage).

The “pooling” resulted in giving themselves authority to pledge your payments and third party payments (AIG insurance, credit default swaps, Federal bailouts etc.) to cover the obligation of OTHER BORROWERS. This is a direct breach of the express terms of the note which describes how the payments will be applied.

Follow me here. The “lender” who appeared on the papers at your closing was already prepaid on your obligation by third party investors. So one of two things are true: either the note is paid in full and there is no obligation nor is there anything for the mortgage to secure, or the note you signed was properly assigned to a third party who put up the money. But the note cannot be properly assigned and enforced against you if the terms are changed without your knowledge or consent. So it wasn’t properly assigned. That means it is paid.

Where does that leave the investor who put up the money that was used to fund your mortgage? The investor has received a bond (which is the same as a note) which includes all kinds of terms that you knew nothing about where the money was owed and guaranteed from several entities that you knew nothing about. The bond indenture says the bond holder gets a pro rata title to the mortgages and notes in the pool.

So the “trust” is holding nothing — but so is the investor because the note you signed was not properly assigned — conditions were added to payment and risk, making it a different deal.

So the investor has claims and may have been paid from the government, an insurer, cross collateralization, over collateralization or some other source including you. The investors claims against you are NOT on the note and mortgage because the note was paid never assigned in the legal sense.
The investor’s claims are at common law or in equity since you did get a loan and some of the money the investor injected into the pool was used to fund your loan. But as soon as the investor sues you for unjust enrichment, constructive or resulting trust or whatever, you have counterclaims for all the TILA violation, predatory lending, appraisal fraud, slander of title, usury, etc. that could lead to a counterclaim for treble damages against the investor for things the investor never did — at least not directly.

One thing seems certain — that any claim by the investor is unsecured and the ONLY party with legal standing to assert any claim against you is the one who lost money. The net value of the investor’s claim is unknown but dubious at best. And so far the investors are suing only the servicers and investment banks for sticking them with deals made up of pure vapor.