Dummies Guide to REMIC, Trusts and your Mortgage

First of all let me start by saying that REMIC Laws and Trusts, which are the bases of securitized investment property, is very complicated and convoluted. Experts in securitization and REMIC laws have difficulty sorting through the maze that the banks have created. However, I am going to attempt to reduce it to very basic concepts.

Let’s start with the dumbed down definition of Real Estate Mortgage Investment Conduit (REMIC). The simple legal definition is an entity (like a trust) that functions as a vehicle for investment mortgages. The benefits for the banks are favorable tax treatment. Mortgages are placed in Trusts and categorized as high risk and low risk for investors (Tranches). A lot of money has been made by the banks (Bank of America, Citibank, Chase, GMAC, and Wells Fargo) by selling and trading these trusts that are holding million of mortgages. Investors lost millions in these schemes because the banks/credit agencies did not correctly identify which categories of mortgage trust were truly high risks or low risk. (They were virtually all high risk). Homeowner lost out by losing their homes in unaffordable exotic mortgages and ARMS (adjusted rate mortgage) that was not identified clearly to them.

If your mortgage statement is coming from Select Loan Portfolio, Ocwen, American Home Servicing, AAmes Home Servicing, GMAC or Bank of America, your home may be in a Trust. This means that the above companies are servicers for your Trust and are not the owner of your mortgage and note. Your mortgage may be owned by for example “Deutche Bank as Trustee for Americas as Trustee for RALI 2007-8” or “The Bank of New York Mellon f/k/a Mellon Bank as trustee for CWABS Inc 2006-2007”.

Most laws state that for a bank for foreclose or take legal actions, that the banks must provide proof of Standing. Standing means that the bank has the right to go into court and ask to take your home. The Courts usually request proof such as the banks producing the original note and mortgage. If your home is in a Trust, the banks do not have the original note and mortgage. The original note and mortgage is with the Trustee in the Trust (with millions of other mortgages and notes). Additionally for the mortgage and note to be in the Trust a chain of events must be closely followed according to both Trust law (pooling and servicing agreement) and REMIC laws. Seems simple enough, but banks have been showing up to court with copies of documents that may or may not be in the Trust. Courts and the Attorney Generals of 42 states are catching up, but often too late for many of the homeowners who have lost their home or who are in the process of losing their home.

Ok take a breath….What to do (1) Request a Qualified Written Request (QWR) to identify who owns your mortgage and note and where your mortgage and note are (2) go to county court house to see what is filed in regards to your mortgage and note (3) always, always, seek help in answering a foreclosure complaint…yes it must be answered (be careful a lot of unqualified people calling themselves foreclosure defense attorneys) (4) Don’t give up hope!