This article contains the Summary of Findings which is part of the report on the securitization audit that was conducted on November 18, 2017. This article was written on February 8, 2020.
The findings in this examination are factual although they are here provided for informational purposes only and are not to be construed as legal advice. The borrower or the reader, as the case may be, was or is advised to consult a competent legal professional in connection with the contents of this report and its proper use.
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SUMMARY OF FINDINGS
The Premises
The subject loan was granted on August 29, 2007. The Fixed Rate Note names Countrywide Bank, FSB as the originating lender. This note has been endorsed twice; first, by the originating lender in favor of Countrywide Home Loans, Inc., and second, in blank by Countrywide Home Loans, Inc.
The Mortgage names Mortgage Electronic Registration Systems, Inc. as nominee for the lender and mortgagee. It was assigned by MERS twice to The Bank of New York Mellon, formerly known as The Bank of New York as Trustee for CHL Mortgage Pass-Through Trust 2007-18. The assignments purport that the loan has been securitized into the mentioned trust. This trust is a common law trust that is governed in accordance with the laws of the state of New York. It was established under a Pooling and Servicing Agreement (PSA) dated as of September 1, 2007 in order for its assets to qualify for inclusion into a Real Estate Mortgage Investment Conduit (REMIC).
The mortgaged property is now in foreclosure. The plaintiff named in the Complaint is The Bank of New York Mellon, formerly known as The Bank of New York as Trustee for CHL Mortgage Pass-Through Trust 2007-18.
The Main Issues
1. By naming itself as plaintiff in the complaint, the trust, through its trustee declares that (a) it
was established as a New York common law trust and that its PSA shall be construed and
governed in accordance with the laws of the state of New York; (b) its purpose was to securitize
mortgage loans which would be acquired in order to qualify them for inclusion into a REMIC; and
(c) it is operating according to the provisions of its PSA which means, in particular, that the
loans were certified as having been in the possession of the trustee as of December 28, 2007 or
three months after the trust’s Closing Date on September 28, 2007.
2. The certification by the trustee and the independent accountant’s attestation that are on file
with the Securities and Exchange Commission in the name of the trust are proof that the trustee
has complied with the transfer and maintenance requirements of the mortgage loan documents
as prescribed in the PSA. It is thus to be expected that the proofs of this compliance are borne
by the documents pertinent to the mortgage loans that are purported to have been acquired by
the trust.
3. A loan in which the related documents do not bear evidence of the trustee’s compliance of the
requirements prescribed in the PSA cannot be said to be owned by this trust. The trustee could
not be in a position to admit having committed certain violations of or having failed to comply
with certain provisions of the PSA in order to be free to assert that the loan is owned by this
trust knowing fully well that those who are not parties in the PSA do not have the right to raise
questions on such violations or non-compliance.
4. There is no direct correlation between the note endorsed in blank and the plaintiff named in
the Complaint. Mere possession of the note by The Bank New York Mellon as trustee is not
conclusive evidence that the loan is owned by this trust given the fact that The Bank of New
York Mellon is also acting as trustee for numerous other trusts that were established for
purposes similar to that of CHL Mortgage Pass-Through Trust 2007-18 and the possibility that The
Bank of New York Mellon itself may even own the loan.
The blank endorsement, which maybe allowed or prescribed by the PSA, cannot identify the
plaintiff as the owner of the note. Nevertheless, the trustee would be estopped from claiming
that the trust it is representing is in wrongful possession of the note on the ground that the
trustee, together with the other entities that established the trust, are deemed responsible for
the shortcomings of even the strictest compliance of the rules which they themselves
prescribed.
the Complaint. Mere possession of the note by The Bank New York Mellon as trustee is not
conclusive evidence that the loan is owned by this trust given the fact that The Bank of New
York Mellon is also acting as trustee for numerous other trusts that were established for
purposes similar to that of CHL Mortgage Pass-Through Trust 2007-18 and the possibility that The
Bank of New York Mellon itself may even own the loan.
The blank endorsement, which maybe allowed or prescribed by the PSA, cannot identify the
plaintiff as the owner of the note. Nevertheless, the trustee would be estopped from claiming
that the trust it is representing is in wrongful possession of the note on the ground that the
trustee, together with the other entities that established the trust, are deemed responsible for
the shortcomings of even the strictest compliance of the rules which they themselves
prescribed.
5. Proof of possession of the note at the time the action was initiated, in ordinary circumstances,
would have been enough for the plaintiff to prove the right to foreclose. In the instant case,
however, the trust, having elected to qualify itself as a REMIC, chose to be bound by a more
stringent set of rules. As such, the trust must acquire its mortgage loans within three months of
its closing date and this acquisition must be manifest in the endorsement. Any loan acquisition
by the trust beyond this period would not qualify the loan for inclusion into a REMIC and thus,
would be void under the New York Estates, Powers and Trusts Law.
6. Any reference to the endorsements is conspicuously absent from the Complaint. This is an
indication that the endorsements were not yet affixed on the note at the time of the filing of
the Complaint or that plaintiff is relying mainly on the two assignments as a means by which to
assert ownership of the loan and the right to enforce the terms of the note. As has been stated,
the assignments were made to purport to include the note.
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