“Morgicide” – The Illegal Destruction of Mortgages by Securitization

"If a bank modifies a loan, the modification may result in injury to certain classes of investors. Such financially injured investors may then sue the banks for improper administration of the investment resulting in billions of dollars of liability. Foreclosure, the measure generally accepted and prescribed in the investment documents to cure default of securitized loans, averts risk and liability for lenders.

The securitized mortgages are subject to rules created in the investment documents and rules issued by the Internal Revenue Service to secure favorable tax treatment for securitized loans. These rules constrain the ability of the banks to modify mortgages. Such rules may include the following:

(a) Imposing the restrictions on mortgage modification required to be made to qualify for pass through tax treatment under IRS regulations.

(b) Imposing restrictions upon the number of mortgages in the pool which may be modified.

(c) Providing a procedure and fees to be paid for foreclosure but no procedure to modifying the loan as an alternate dispute resolution.

(d) Creating securities with classes of ownership (“tranches”) with adverse and opposing financial interests resulting in so called “tranche warfare” so that a modification which favors one tranche may work a detriment upon another.

(e) Restricting the ability to lower interest payments on the note.

(f) Restricting the ability to increase the number of payments to be made.

(g) Restricting the ability to defer payments.

(h) Restricting the ability to extend the term of the mortgage.

(i) Restricting the ability to impose a temporary moratorium on payments.

(j) Restricting the ability to accept “short sales”.

(k) Creating potential liability to a specific class of certificate holders by entering into a modification agreement required for an alternate dispute resolution.
(l) Requiring the servicing agent to purchase any loan which has been modified.

These restrictions work a modification of the Transaction without the consent of the borrower. This constitutes either a breach of contract or a tortious interference with a contract, or both. Failure to have obtained the consent of the borrower to a securitization of the mortgage is a legally fatal flaw."

Full Post and Link to Source
http://4closurefraud.wordpress.com/2009/12/27/morgicide-the-illegal-destruction-of-mortgages-by-securitization/
Real Estate