Yes it is true. I have seen it with my own eyes and IN WRITING. In our office we have on record a statement from Freddie Mac, which they submitted to the courts, that “Freddie Mac has made all relevant and required payments to the investors on behalf of the borrowers.” Did you catch that?!?!
Yes, Freddie Mac acting as the Master Servicer, has been making payments to the debt owners of a mortgage. How can the borrower be in default?
Thanks to Timothy McCandless for his article highlighting how this happens. In his example the servicer made payments.
This homeowner “might” owe the money to somebody, but not the creditor as the creditor has received the payment in full. Remember – this is from a public STATEMENT filed with the SEC to the investors describing what they were PAID. The party foreclosing is not entitled to power of sale as they are not the creditor. The creditor has received all payments and the homeowner has not defaulted.
- The Bank Slayer
No Default The Servicer is making the payments !!!
In the sercuritization game there are many co-obligors and you may not be in default after all. In the pooling agreement the servicer must agree to advance payment in the event of a missed payment by debtor.
Who is the obligor? Is there a default? Remember – this is financial engineering at its best. This is the American way to be creative and inventful. These guys are so good that homeowners can stop paying their loan and the creditors get paid anyway. They just forgot to tell the homeowners – and the courts. Some people call this forgetfulness fraud upon the court.
When they added the loans into the pool they attached numerous conditions to them. What might some of those conditions be? One of them is a condition for the servicer (making them an obligor). If the servicer doesn’t receive the homeowners payment, they MUST advance the payment (principal and interest) to keep the flow of revenue to the creditors (read this in the SEC filings). Don’t believe me? Think it can’t be proven? Read on …
The following is in regards to the IndyMac INDX 2xx5-xxx trust …
Let’s look at the April 2010 loan level files. Look at the these specific fields (for loan #xxxxxxxxx):
BEGINNING BALANCE SCHEDULED PRINCIPAL CURTAILMENTS PAYOFFS NEGATIVE AMORTIZATION ENDING BALANCE TOTAL PRINCIPAL SCHEDULED PAYMENT RELATED INDEX RATE NOTE RATE SCHEDULED INTEREST SERVICING FEE RATE SERVICING FEES NET RATE NET INTEREST TRUSTEE FEE RATE TRUSTEE FEES LPMI FEES OTHER FEES TOTAL FEES INVESTOR RATE TOTAL PTR INTEREST
523275.38 939.51 0 0 522335.87 939.51 2956.3 0.04625 2016.79 0.00375 163.52 0.0425 1853.27 0.000055 2.4 0 0 165.92 0.0424451 1850.87
Now look at the March 2010 loan level files. Look at these same specific fields (again for loan #xxxxxxxxx).
BEGINNING BALANCE SCHEDULED PRINCIPAL CURTAILMENTS PAYOFFS NEGATIVE AMORTIZATION ENDING BALANCE TOTAL PRINCIPAL SCHEDULED PAYMENT RELATED INDEX RATE NOTE RATE SCHEDULED INTEREST SERVICING FEE RATE SERVICING FEES NET RATE NET INTEREST TRUSTEE FEE RATE TRUSTEE FEES LPMI FEES OTHER FEES TOTAL FEES INVESTOR RATE TOTAL PTR INTEREST
524211.28 935.9 0 0 523275.38 935.9 2956.3 0.04625 2020.4 0.00375 163.82 0.0425 1856.58 0.000055 2.4 0 0 166.22 0.042445 1854.18
(Note the ending balance for March 2010 is 523275.38 – how come the balance is going DOWN?). On the March 2010 loan level files the servicer is also reporting the account is 90+ days delinquent. The homeowner is not and has not been making payments.
Beginning balance is 523,275.38 and ending balance is 522,335.87!!!
Scheduled Principal is 939.51 and the total principal is 939.51
523,275.38 – 939.51 = 522,335.87 (they show the principle has been reduced!)
Scheduled payment is 2956.30
Scheduled Interest is 2016.79 and net interest is 1853.27
939.51 + 2016.79 = 2956.30 (the scheduled payment)
Servicing fee = 163.52
2016.79 – 163.52 = 1853.27 (net interest)
Total PTR Interest is 1850.87 (Trustee fee is 2.40 so 1850.87 + 2.40 = 1853.27 which is the net interest)
The reason they have to ADVANCE the fees is because the fees are still paid and (apparently) come out of the interest portion of the payment.
This homeowner “might” owe the money to somebody, but not the creditor as the creditor has received the payment in full. Remember – this is a STATEMENT to the investors describing what they were PAID. The party foreclosing is not entitled to power of sale as they are not the creditor. The creditor has received all payments and the homeowner has not defaulted.
The method used seems to be inconsistent between deals. I checked for another homeowner in another IndyMac Trust (IndyMac xxxx 2xx7-xx) and the homeowner had interest only payments (so the principal didn’t go down) however, the interest looks like it is being paid. For other homeowners in this deal they are using the “curtailment” field and the ending principal balance is RISING.
This is just the statement to the certifiateholders. You can BET the sub-servicer and the master servicer are keeping full accounting records that they are NOT reporting to the homeowner, the investors or the courts.
Timothy McCandless Esq. @ http://timothymccandless.wordpress.com/about/
