Adam Levitin on Ibanez | Loan Schedules and Trustee Liability

Two interesting posts from Adam Levitin…

Ibanez: About that Loan Schedule….

posted by Adam Levitin

Did Ibanez a particularly screwed up set of securitization documentation?  Or was this just snafu?  Looking around at other PSAs, I’m starting to think the latter.  In Ibanez, the Massachusetts Supreme Judicial Court noted that PSA was insufficient to serve as an assignment of the loan because what was presented as the affiliated loan schedule:

“did not include property addresses, names of mortgagors, or any number that corresponds to the loan number or servicing number on the LaRace mortgage. Wells Fargo contends that a loan with the LaRace property’s zip code and city is the LaRace mortgage loan because the payment history and loan amount matches the LaRace loan.”

So how do other PSAs fare under the Ibanez metric?  I’ve been looking at them, and it seems that there are lots of RMBS deals where the schedules in the PSAs are possibly insufficient to meet the Ibanez standard.  And that means that there are lots of RMBS trusts that might not be able to successfully foreclose in Massachusetts or maybe in any other title theory state.  (Read on…I name names!)

Continue reading here…

Ibanez: Trustee Liability

posted by Adam Levitin

I’ve gotten a bunch of questions in recent days about whether the RMBS trustees in the Ibanez case are on the hook for the screw up. The trustees (US Bank and Wells Fargo) insist that they have no possible liability.  I’m not so sure.  I think it’s actually a more complex issue.

So, to recall, the dispositive factor in Ibanez was that neither securitization trust could prove that the mortgage had ever been assigned to the trust.  The reason for this was that (1) assignment in blank doesn’t work in Massachusetts, (2) the mortgage doesn’t follow the note in Massachusetts, and (3) the PSA couldn’t be found in one case and in the other case was insufficient to act as an assignment because it wasn’t executed and because the loan schedule did not sufficiently show that the mortgage was actually covered by the PSA.

The extent of the trustee’s liability is determined by the PSA, which is the document creating the trust and the trusteeship contract.  But without a PSA, what is there that limit’s the trustee’s liability?  Isn’t the trustee just serving as a common law trustee for a common law trust?  Would it be negligent for a common law trustee not to retain a copy of the trust agreement, especially if that agreement was necessary for preservation of the trust’s assets?

Continue reading here…

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