Mortgage Securitisation - Paragon V Pender Title to Sue Judgements - For Debate & Discussion

[JonCris]

I'm reading up .......... again .........................but this evening I'll be watching the DCA's getting a kicking in C4 Dispatches 8pm ...........Tomorrow "I'll ve back"

[enoughisenough]

Sue just for clarification Im fighting a double repo a dca and frozen and disputed Barclaycard account, the local authority over a matter so sensitive I cant reveal and no it's not council tax, I've got very difficult family circumstances and I've just had a close family bereavement. I understand the basics but have no legal training and cerainly not the almost instant access to authorities statutes SIs and regulations that you seem to have access to. I'm happy to concede you are correct in your position but I'll only do so when I myself am satisfied. At the moment the level of Reading required and the interpretation of that makes it virtuallyimpossible. Hope I am still able to cast general doubt without any implication that I am simply an uninformed spoiler.

[Suetonius]

The point I am trying to make is that the majority are very quick to say securitisation is wrong etc..

 

However, I think that we need to break it down as much as possible.

 

We need to look at each aspect of securitisation. It may be something that can be of use. Then again it might not be. Until we break it down we are just jumping to conclusions and making assumptions, both of which could very easily fall apart in Court.

 

For me personally it is not enough to say something is wrong. You also need to know why (if it is) wrong. If you go to Court, you can't just say "because it is" as that always begs the question "why". If you can't answer, you risk losing creditability in front of the judge (rightly or wrongly) which could effect the outcome of your case.

[Crapstone]

EIE,

 

Can't you see the bigger picture? If you had posted on other forums you may well have been ripped apart and told to pay what you owe regardless of your circumstances.

 

It doesn't take too much time, or legal knowledge, to understand the basics that we must start with. If you can get your teeth into the later arguement then you are capable of rewinding and looking at the mechanics that got you there. And that's you in your case, and not being a sheep to follow what may seem an easy answer put across by someone else.

 

Question everything.

Edited July 22, 2009 by Crapstone

[Suetonius]

Bump

[IS IT ME?]

Sue and E is E.

Sue you are very knowledgeable on the paperwork of this and I do not mean that badly but if you look at the judgement again just for 5 minutes before you reply on the question of

If the lender HAS been PAID IN FULL for the mortgage book then I ask,

What are there losses?

What and why do they not transfer the mortgage to who ever?

Looking at the judgement I think the Judge was wrong and be leave me Judges do not know about securitisation at all and its that question of if the LENDER had been Paid in full for the Mortgage then they should have not been a party to any court case, as they do not own any thing but just act as agents for who ever.

Yes I know about who's on the LR and the LR act but if they have not changed these details becuase it would open a can of worms then its not the bower who should be taken to the cleaners.

[Suetonius]

Sue and E is E.

Sue you are very knowledgeable on the paperwork of this and I do not mean that badly but if you look at the judgement again just for 5 minutes before you reply on the question of

If the lender HAS been PAID IN FULL for the mortgage book then I ask,

What are there losses?

What and why do they not transfer the mortgage to who ever?

Looking at the judgement I think the Judge was wrong and be leave me Judges do not know about securitisation at all and its that question of if the LENDER had been Paid in full for the Mortgage then they should have not been a party to any court case, as they do not own any thing but just act as agents for who ever.

Yes I know about who's on the LR and the LR act but if they have not changed these details becuase it would open a can of worms then its not the bower who should be taken to the cleaners.

 

Wow at last, someone wants to discuss the judgements..

 

Thank you IS IT ME? (and I do mean that;))

 

To answer your question with regard to ownership and your statement that the lender should not be a party to any court case, take a look at equitable and legal assignment. I have created a thread to discuss equitable and legal assignment as this defines ownership and who can be a party to any court case

 

http://www.consumeractiongroup.co.uk/forum/mortgages-secured-loans/210243-mortgage-securitisation-equitable-legal.html

 

I would also recommend reading up about Law of trusts (involves the seperation of legal and equitable ownership)

Edited August 4, 2009 by Suetonius

[IS IT ME?]

Thank you Sue,

But the question still remains, if the lender has been paid in full ie the bonds then it is the bond holders who have losses.

Yes it say's bah bah bah in the rules BUT and this is the big BUT these laws where written years ago before securitisation was even thought of.

So I therefore ask what is there loss.

[Suetonius]

Yes it say's bah bah bah in the rules BUT and this is the big BUT these laws where written years ago before securitisation was even thought of.

So I therefore ask what is there loss.

 

Why is a big But IS IT ME?,

 

It may have been written before the introduction of securitisation, however that has no bearing on its relevancy or applicability. After all, the law is the law.

 

Anyway, back to your posts...

 

Now be honest with me, when I said

 

I would also recommend reading up about Law of trusts (involves the seperation of legal and equitable ownership)

 

Did you ?

 

if you look at the judgement again just for 5 minutes

 

I would respectfully ask you to do the same.

 

3) The only question then is whether the SPV should have been joined in the proceedings as an additional claimant. In my judgment, the answer to that question is plainly: No. On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV (see Whiteley v. Delaney [1914] AC 132 at 141 per Viscount Haldane LC). But it does not follow that in that situation the SPV, as the owner of the Legal Charge in equity, is a necessary party to the claim; and on the facts of the instant case joinder of the SPV is wholly unnecessary. There is, after all, no issue between the SPV and Paragon as to the exercise of the mortgagee's rights under the Legal Charge: indeed the SPV has, by virtue of the administration agreements, expressly authorised Paragon to exercise such rights on its behalf.

 

4) In my judgment, therefore, there is no substance in the contention that the SPV should have been joined as an additional claimant in the proceedings. Nor, in my judgment, can the fact that Paragon has failed to describe itself as suing in its capacity as trustee affect the validity of the proceedings or of the orders made in the proceedings (in particular, the possession order). In any event, even if that failure could be said to amount to a formal defect in the proceedings (and I do not regard it as such) the court has ample powers under the CPR to correct such defects (e.g. under CPR Pt 17).

 

"On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV"

"Nor, in my judgement, can the fact that Paragon has failed to describe itself as suing in its capacity as trustee."

 

The key word is trustee.

 

This is why I previously suggested that you read up about the Law of Trusts. I was honestly not being disrespecful. I just find from personal experiance, it is easier to understand something if you find it out for yourself rather than just being provided with the answer.

 

However, I know from previous experiance that my telling you where to find the answer, will not satisfy you. So I would like to take a few moments to explain my own understanding (which by my own admission could be completely wrong).

 

What is a trust ?

 

A trust is the separating of the legal (legal title) and the beneficial (equitable title) ownership of property.

 

A trust consists of three parties:

 

 

• Settlor (the owner of both the legal and equitable title aka absolute owner)
  
• Trustee (Administor of the trust, which owns the legal title)
  
• Beneficiary (the owner of the equitable title)
  

 

In securtisation, the settlor and the trustee is usually the same party (i.e mortgage lender). Therefore, the trustee is granted the legal powers to enforce any rights in relation to the property.

 

The beneficiary is the SPV, which purchases the equitable title to the property. However, as beneficiary and the owner of the equitable title, it does not have any legal powers to enforce any rights in relation to the property.

 

Trusts have always been used as a method of limiting the exposure of assets to taxes and other legal claims as well as to specify the use of those assets in ways not otherwise recognised under the law.

In the scope of a trust, the trustee (mortgage lender) acts to protect the interests of the beneficary (SPV). Therefore, when a mortgage lender instigates repossession proceedings (and the mortgage has been securitised), it is doing so as the trustee of the trust. Therefore, any actual financial loss directly to the mortgage lender is immaterial.

 

I think that Her Majesty's Revenue & Customs (HMRC) explains far simplier than I can:

 

Introduction to settled property: What is a trust?

 

"The law of trusts is based upon the concept of English law that property rights can be split into:

• the legal ownership, and
  
• the beneficial interest
  

A person who is the absolute owner of property has both the legal and beneficial interest in it.

 

This means that the owner will show up as legal owner, e.g. on a land register or on a company register, and will also enjoy any benefit produced by the property.

 

The absolute owner may split the legal interest from the beneficial enjoyment. This can be done by giving the legal ownership to trustees and the beneficial interest to a named beneficiary (or beneficiaries). Alternatively the owner can retain the legal title and make himself a trustee."

 

Therefore, the matter of consideration being paid to the settlor (mortgage lender) by the beneficary (spv) has no bearing.

 

If you are seriously interesting in learning about the importance of ownership (both legal and equitable) and the law trusts, this contains some useful information:

 

http://www.oup.com/uk/orc/bin/qanda/books/10equity/equity_ch02.pdf

 

I hope the above answers your questions and explains why it must be the mortgage lender and not the spv that instigates and is a party to proceedings.

 

 

Please don't confuse the mortgage lender acting as a trustee with the spv's trustee, as that is another step of the securitisation process

Edited August 5, 2009 by Suetonius

[Suetonius]

I hope I answered your question ok, IS IT ME?

[Suetonius]

As pender has been raised again, I thought I would bump this thread too..

[bustthematrix]

...Still, after all these months, the debate wrangles on regarding the securitisation issue.

 

For me, there's still a lot wrong with the equitable and legal title issue when you take into view the principle of equal consideration in contracts.

 

I'm not an expert on these sorts of things but I do know this, the reason many people feel there's something wrong with securitisation is because there is!!!

 

Peeps, have a look this good news from across the pond - very interesting indeed!

LANDMARK DECISION PROMISES MASSIVE RELIEF FOR HOMEOWNERS AND TROUBLE FOR BANKS

OpEdNews - Article: LANDMARK DECISION PROMISES MASSIVE RELIEF FOR HOMEOWNERS AND TROUBLE FOR BANKS

The credit crunch is only just beginning…when rates start to rise, those who’re just managing to stay afloat due to low payments will tip into the default arena and that will start a flood of activity….

[Suetonius]

In addition to the Pender Court of Appeal Judgements (and legal precedent):

 

First a quick history lesson

 

5th January 1995, an order of possession was granted to Paragon Finance

 

21st January 2002, Mr & Mrs Pender applied unsuccessfully for a set aside

 

9th January 2003, oral application for appeal dismissed

 

17th February 2003, stay of execution granted

 

25th November 2003, application for permission to appeal

 

29th July 2004, limited permission to appeal granted

"On 29 July 2004 Jacob LJ granted permission to appeal to this court on the three issues raised in Mr Aaron's witness statement, viz: the title to sue issue, the implied obligation issue, and the extortionate credit bargain issue. He refused permission to appeal on the human rights issue."

 

27th June 2005, Appeal heard

 

31 January 2006, a petition to appeal was submitted to the House of Lords. The House of Lords refused to give leave to appeal.

 

2005 judgements, for discussion and debate:

 

The Title to sue

 

1) In my judgment Mr and Mrs Pender's case on this issue is misconceived. It is common ground that Paragon, as registered proprietor of the Legal Charge, retains legal ownership of it. One incident of its legal ownership – and an essential one at that – is the right to possession of the mortgaged property. I can see no basis upon which it can be contended that an uncompleted agreement to transfer the Legal Charge to the SPV (that is to say an agreement under which, pending completion, the SPV has no more than an equitable interest in the mortgage) can operate in law to divest Paragon of an essential incident of its legal ownership. In my judgment as a matter of principle the right to possession conferred by the Legal Charge remains exercisable by Paragon as the legal owner of the Legal Charge (i.e. as the registered proprietor of it), notwithstanding that Paragon may have transferred the beneficial ownership of the Legal Charge to the SPV.

 

2) It follows, in my judgment, that Paragon, so long as it remains the registered proprietor of the Legal Charge, is a necessary party to any claim to possession of the Property in right of the Legal Charge.

 

3) The only question then is whether the SPV should have been joined in the proceedings as an additional claimant. In my judgment, the answer to that question is plainly: No. On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV (see Whiteley v. Delaney [1914] AC 132 at 141 per Viscount Haldane LC). But it does not follow that in that situation the SPV, as the owner of the Legal Charge in equity, is a necessary party to the claim; and on the facts of the instant case joinder of the SPV is wholly unnecessary. There is, after all, no issue between the SPV and Paragon as to the exercise of the mortgagee's rights under the Legal Charge: indeed the SPV has, by virtue of the administration agreements, expressly authorised Paragon to exercise such rights on its behalf.

 

4) In my judgment, therefore, there is no substance in the contention that the SPV should have been joined as an additional claimant in the proceedings. Nor, in my judgment, can the fact that Paragon has failed to describe itself as suing in its capacity as trustee affect the validity of the proceedings or of the orders made in the proceedings (in particular, the possession order). In any event, even if that failure could be said to amount to a formal defect in the proceedings (and I do not regard it as such) the court has ample powers under the CPR to correct such defects (e.g. under CPR Pt 17).

 

5) In my judgment Mr Page's reliance on section 114 of the Law of the Property Act 1925 is wholly misplaced, for the reason which the judge gave: viz. that section 114 is concerned with transfers of mortgages of unregistered land (transfers of mortgages of registered land being dealt with by section 33 of the Land Registration Act 1925). To interpret section 114 as applying also to transfers of mortgages of registered land would produce a fundamental and wholly illogical conflict between the two regimes in relation to transfers of mortgages. Bearing in mind what Lord Oliver of Aylmerton said in Flegg (quoted in paragraph 85 above), I can see no conceivable basis for interpreting section 114 in a way which produces that result and every reason for not doing so. Accordingly I respectfully agree with the observations of this court in Marks with reference to the instant case (see paragraph 95 above).

 

6) Nor, in my judgment, can Mr Page find any support for his submission in the Land Registration Act 2002, or in the Law Commission Report which preceded it. In my judgment it is verging on the absurd to seek to interpret a provision in a statute by reference to a provision in a different statute enacted some eighty years later.

 

In any event, I agree with the judge that the administration agreements demonstrate a clear contrary intention, sufficient to disapply section 114 if (contrary to the conclusion which I have just expressed) the section would otherwise apply.

 

7) As to Mr Page's reliance on section 136 of the Law of Property Act 1925, that too is in my judgment misplaced. He fails to distinguish between the right to sue at law for the mortgage debt and the proprietary interest created as security for its repayment. Section 136 applies only to the former.

 

There is also:

 

 

Difference Between America & UK securitisation

 

"21. Two of the exceptions are the consequence of US requirements. The first, which the Appellant contends is reflected in substance and in form in the structure which has been achieved, is that the assignment must be a true sale; it may not be an assignment by way of security if US accounting standards are to be respected (necessary because COBE is a wholly-owned subsidiary of a US corporation which is subject to US standards). No such requirement is imposed by UK accounting standards, nor by the FSA"

 

It would appear that in the US, securitisation has to be via a true sale. However, that is not a requirement in the UK. Therefore, if the lender retains legal title in law in the UK, securitisation has no effect on the ability of the lender to instigate legal proceedings.

Her Majesty's Revenue & Customs (HRMC)

 

Securitisation is a method of raising finance on the capital markets at advantageous rates of interest. Types of businesses likely to use securitisation are financial institutions, insurance companies, trading companies and any other type of business with a regular source of income. If these bodies borrow money from a bank the rate of interest charged will depend on their credit worthiness. Securitisation involves the transfer of their income into a separate trust. This enables money to be borrowed against the security of the income stream in such a way that, if the company goes bankrupt, the investor will still be repaid.

 

In the case of credit card securitisations, the arrangement involves the establishment of a receivables trust, often in Jersey (receivables are the payments due to the credit card company from its customers, including repayment of the principal on a loan or credit arrangement. This can also apply to interchange commission paid by the retailer).

 

"The credit card company transfers the beneficial interest (not the legal interest) in the receivables on a block of accounts to the trust. This is done in return for payment of the principal amount of credit provided plus a proportion of the interest due (known as the excess spread). A separate company is then set up to issue debt securities on to the capital markets to third party investors. The issuer contributes the funds received from investors to trust assets and later receives funds from the trust as necessary when payments of interest and repayments of principal fall due to investors. In the meantime, the credit card company uses the funds received from the investors to fund its business."

 

Her Majesty's Revenue & Customs confirm that (in relation to credit cards) it is only the beneficial interest and not the legal interest that is transfered.

 

Capital One tribunial

 

As mentioned above. (please see point one)

 

MBNA Case

 

"57. The recitals to the RSD refer to the Transferor and Receivables Trustee (MBNA and CCSE respectively) having agreed that for the purposes of facilitating a possible securitisation, the Transferor may from time to time offer to assign all Receivables (existing and future) arising on such accounts of its credit card customers as are nominated to become Designated Accounts. It is acknowledged that upon acceptance of such an offer to assign by the Receivables Trustee, the Receivables will be assigned by way of equitable assignment only unless notice of assignment should later be given. It is also expressly contemplated by the recitals that the Receivables Trustee will appoint the Operating Party for the purpose of giving instructions in relation to any available discretion capable of being exercised by the Receivables Trustee upon the terms of a separate agreement described as the "RT Operating Agreement"."

 

This particular case in the High Court, also confirms equitable assignment.

s.136 Law of Property Act 1925

 

"136 Legal assignments of things in action

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—"

 

s.136 means that unless a notice has been given to the debtor / borrower, the assignment can only be equitable.

 

and:

 

The House of Lords take on securisitation

 

http://www.publications.parliament.uk/pa/cm200708/cmbills/121/en/2008121en.pdf

 

Lords Amendment 6 would make clear that the provisions of clause 3 relating to onward sale of the loans do not apply to the creation or transfers of equitable rights that occur in a securitisation. Rather, it clarifies that clause 3 relates only to the onward transfer of legal title to the loans. The amendment ensures that the transfers of equitable interests that occur as a normal part of a securitisation are separate from the onward transfer of legal title, and which do not require the same protections.

 

Not forgetting:

 

The Financial Collateral Arrangements (No.2) Regulations 2003

 

 

PART 2

 

Modification of law requiring formalities

 

Certain legislation requiring formalities not to apply to financial collateral arrangements

 

"(3) Section 136 of the Law of Property Act 1925 (legal assignments of things in action) shall not apply (if it would otherwise do so) in relation to a financial collateral arrangement, to the extent that the section requires an assignment to be signed by the assignor or a person authorised on its behalf, in order to be effectual in law."

 

And:

 

"As Dr Eilis Ferran MA (presently Reader in Corporate Law and Financial Regulation at Cambridge University) points out in a book entitled 'Mortgage Securitisation – Legal Aspects' (Butterworths, 1992) to which we were helpfully referred by Mr Ali Malek QC (for Paragon) in the course of argument, if the transfer of the mortgages is not completed by registration, the SPV acquires an equitable title to the mortgage but the transferor retains the legal title, albeit as trustee for the SPV (assuming, as will usually be the case, that the full consideration has been paid). Dr Ferran goes on to point out that, for reasons essentially of administrative convenience and cost, transfers by way of securitisation are usually left uncompleted, but with provision being made for completion in certain specified circumstances, e.g. if the transferor persistently defaults on its obligations under the securitisation arrangements. Typically, such obligations will be contained in an 'administration agreement' between the transferor and the SPV. These general observations about securitisation (for which I am indebted principally to Dr Ferran's book) are not the subject of dispute in the instant case."

 

To place the above extract into context, Dr Eilis Ferran is a Professor of Company and Securities Law at the University of Cambridge:

As you would anticipate with someone with her credentials, she is published:

'The Place for Creditor Protection on the Agenda for Modernisaiton of Company law in the European Union' (2006) 3 European Company and Financial Law Review 178

'Transatlantic Financial Services Regulatory Dialogue' (with K Alexander, HE Jackson and N Moloney) (forthcoming European Business Organization Law Review Building an EU Securities Market (CUP, 2004)

'Financial Assistance: Changing Policy Perceptions but Static Law' [2004] Cambridge Law Journal 225 - 243

'The Role of the Shareholder in Internal Corporate Governance: Enabling Shareholders to Make Better-informed Decisions' [2003] European Business Organization Law Review 491 - 516

'Examining the UK Experience in Adopting the Single Financial Regulator Model' (2003) 28 Brooklyn Journal of International Law 257-307

'Dispute Resolution Mechanisms in the UK Financial Sector' [2002] Civil Justice Quarterly 135-155 (also published in a report to the Korean Stock Exchange, Self-Regulation in the Korean Securities Market Korean Securities Law Association, 2002)

'Corporate Law Codes and Social Norms - Finding the Right Regulatory Combination and Institutional Structure' [2001] Journal of Corporate Law Studies 381-409

Ferran and Goodhart (eds) The Challenges Facing Financial Regulation (Hart Publishing, 2001)

'Company Law Reform in the UK' (2001) 5 Singapore Journal of International and Comparative Law 516-568

Boyle and Birds Company Law (Jordans, 2000) (with Boyle, Birds and Villiers)

Company Law and Corporate Finance (OUP, 1999)

 

Employment History:

Reader in Corporate Law and Financial Regulation (2000 – 2005)

University Lecturer, (1991 – 2000)

University Assistant Lecturer, (1988–1991)

Director of the Centre for Corporate and Commercial Law, (April 1999 – September 2003)

Assistant Director, Centre for Corporate and Commercial Law, (1997–1999)

College Lecturer, St Catharine’s College, Cambridge (1986–1988 )

Trainee Solicitor, Clifford Chance, solicitors (1984–1986)

 

Qualifications

PhD, University of Cambridge, 1992, (by special regulations)

BA, University of Cambridge 1983 (Law Tripos First Class with Distinction)

 

Also very important

Halsbury (as in Halsbury's Laws of England)

 

586. Securitisation of mortgages.

 

Securitisation is the sale of a package of mortgage debts to a corporate vehicle (the 'issuer') established for the purpose of issuing securities usually in bearer form such as bonds1. One or more mortgagees (the 'originator') may agree to sell debts and related security to the issuer. This effects an equitable assignment of the mortgages which is not perfected by notice to the mortgagors or by registration. The issuer is entitled to call for a legal transfer of legal title to the mortgages in certain circumstances such as the persistent default or insolvency of the originator. The issuer is given an irrevocable power of attorney to effect the transfer and for certain other purposes2. The originator retains the powers of the mortgagee, including the right to possession3 but agrees to act in accordance with the instructions of the issuer in relation to matters such as interest rates and enforcement. The undertaking and assets of the issuer, including the mortgages, are in turn charged in favour of a security trustee for the benefit of the holders of notes or bonds issued by the issuer4. The security trustee is given custody of the charge certificates or, in the case of unregistered land, mortgages and title deeds, and is given an irrevocable power of attorney to effect a legal transfer of the mortgages.

 

1 See companies; financial services and institutions.

2 See the Powers of Attorney Act 1971 s 4; and agency vol 1 (2008 ) para 175.

3 See Paragon Finance plc v Pender [2005] EWCA Civ 760, [2005] All ER (D) 307 (Jun).

4 The charge takes effect as an equitable sub-charge.

 

 

So we have:

 

• House of Lords
  
• Legislative Law (Law of Property Act 1925 & The Financial Collateral Arrangements (No.2) Regulations 2003)
  
• Dr Ellis Ferran (Professor of Company and Securities Law at the University of Cambridge)
  
• Halsbury
  
• High Court of Justice (MBNA v HMRC)
  
• Her Majesty's Revenue & Customers (HMRC)
  
• Manchester Tribunal Centre (Capital One v HMRC)
  
• Court of Appeal (Paragon v Pender 2005)
  
• High Court of Justice (Parapgon v Pender 2003)
  
• Trust Law
  

All saying that it is the equitable title and not the legal title.....

[BiGaD09]

Whilst I appreciate the debate currently surrounds the distinction between legal and equitable assignment, I feel I have found another issue worthy of mentioning with regards to the securitisation process involving contracts;

 

 

When a mortgage is securitised T&C's are applied to the sale between initial lender and SPV, for example how interest rates are calculated etc.

*

*

Would this not repudiate the entire contract as the original T&C's are essentially substituted with a new set without borrower knowledge/agreement?

*

*

This, in my opinion, seems to be verified by Halsbury with;

*

The originator retains the powers of the mortgagee, including the right to possession but agrees to act in accordance with the instructions of the issuer in relation to matters such as interest rates and enforcement.

*

*

Thus once the mortgage is securitised the contract no longer adheres to the original T&C's agreed between borrower and initial lender and as a result the borrower is no longer under obligation to comply with the T&C's under their contract.

 

 

I apologise in advance if it appears that I am hijacking the thread I am just trying to raise another point. Further to this I can't remember off the top of my head where I got the basis for this point, so to whoever raised it, thanks and credit to you.*

[JonCris]

Whilst I appreciate the debate currently surrounds the distinction between legal and equitable assignment, I feel I have found another issue worthy of mentioning with regards to the securitisation process involving contracts;

 

 

When a mortgage is securitised T&C's are applied to the sale between initial lender and SPV, for example how interest rates are calculated etc.

*

*

Would this not repudiate the entire contract as the original T&C's are essentially substituted with a new set without borrower knowledge/agreement?

*

*

This, in my opinion, seems to be verified by Halsbury with;

*

The originator retains the powers of the mortgagee, including the right to possession but agrees to act in accordance with the instructions of the issuer in relation to matters such as interest rates and enforcement.

*

*

Thus once the mortgage is securitised the contract no longer adheres to the original T&C's agreed between borrower and initial lender and as a result the borrower is no longer under obligation to comply with the T&C's under their contract.

 

 

I apologise in advance if it appears that I am hijacking the thread I am just trying to raise another point. Further to this I can't remember off the top of my head where I got the basis for this point, so to whoever raised it, thanks and credit to you.*

 

 

Don't apologize I (& others here) have been banging on about this for ages yet very few seem to be arguing this in their litigation. My own view is that this has real legs & has a much better chance of success of who owns what.

 

I suggest that 1 or the other could be argued in the alternative thereby giving a greater chance of success

[supersleuth]

Whilst I appreciate the debate currently surrounds the distinction between legal and equitable assignment, I feel I have found another issue worthy of mentioning with regards to the securitisation process involving contracts;

 

 

When a mortgage is securitised T&C's are applied to the sale between initial lender and SPV, for example how interest rates are calculated etc.

*

*

Would this not repudiate the entire contract as the original T&C's are essentially substituted with a new set without borrower knowledge/agreement?

*

*

This, in my opinion, seems to be verified by Halsbury with;

*

The originator retains the powers of the mortgagee, including the right to possession but agrees to act in accordance with the instructions of the issuer in relation to matters such as interest rates and enforcement.

*

*

Thus once the mortgage is securitised the contract no longer adheres to the original T&C's agreed between borrower and initial lender and as a result the borrower is no longer under obligation to comply with the T&C's under their contract.

 

 

I apologise in advance if it appears that I am hijacking the thread I am just trying to raise another point. Further to this I can't remember off the top of my head where I got the basis for this point, so to whoever raised it, thanks and credit to you.*

 

You are absolutely correct. Plus, the SPV is NOT regulated by the FSA, so they do what the hell they want to....and the borrower is forced to support not only the administration costs that the originator would have charged, but in addition, the borrower is forced to support and pay for the extreme and extensive administration costs of the SPV and the securitisation structure too. And more, all these extra SPV administrators want a profit too. Then there's all te ongoing annual legal fees, auditors fees, credit agency fees, investment banking management fees, etc., etc., the costs are passed to the borrowers and then they all want profits tooooooo and, and and, it goes on and on....and who do you think pays for the infamous bonsuses that the investment bankers get at Christmas...well somebody's got to pay for that too.

 

BigaD09 very much welcomed and thank you for an excellent contribution.

[BiGaD09]

In addition to my last post, I've just been flicking through the T&C's of my mortgage (with GE) and section 20 headed TRANSFERS states;

 

 

We may transfer some or all of our rights under the mortgage deed to another person at any time. We will only transfer our rights if the other person agrees to exercise the transferred rights in accordance with a policy which we reasonably think is no less favourable to you than the policy we were following before the transfer.

 

This raises some interesting points;

(1) It states they may transfer some*or all of their rights to another entity. Surely in this instance this would make it an equitable and legal transfer thus rendering them unable to make a claim on the mortgaged property.

(2) They will transfer said rights if they*reasonably think it is no less favourable. This is admission in essence that they intend to substitute the original T&C's with new ones as long as they are reasonably favourable in their opinion.

(3) Would this have any bearing on any potential court action. For instance would GE state that they had stipulated in the mortgage conditions that they may do the above and the borrower still agreed to the mortgage?

 

 

I would be very interested to get the opinions of others as I'm maybe reading too much into it or perhaps on the other hand I'm onto something. Thanks.

Edited December 7, 2009 by BiGaD09
spelling error

[JonCris]

BIGaD9 I agree unless the buyer abides by the original T's & C's & the implied protection for the consumer then that's unfair as per the act ...... unfortunately this has yet to be argued in court one of the reasons being that it's been difficult to either obtain a copy of their contract or educate the judiciary as to whats going on under their noses ............... Having said that there IS one Count Court Judge that I know of who IS aware & has in the past demanded the claimant produce their agreement failing which they struck out their claim ........... Unfortunately there is a 'confidentiality agreement' in place so I can't say anymore other than it's alleged that the LiP was a member of this site

[ryde]

Great to see this debate reignited albeit with a different slant ,the beauty of it is that all the information required is stated in the spv prospectus which is easily accessible ,it just needs really digging through to find the conflicts which I think enoughisenough and others may have done on the spml/london mortgage thread some time ago.As stated it really is the central issue,there must be some considerable mileage in the fact that a regulated agreement is signed only to be sold on without your knowledge or agreement to an unregulated party.What is the point of having regulated agreements if this is the norm in securitizations,it renders the whole point and purpose of them and the fsa licencing and regulatory powers completely subverted and redundant.This is so fundamental it should be raised in parliament.

Edited December 8, 2009 by ryde

[ryde]

4.16 The proposed definition of managing a regulated mortgage contract is not intended to bring into the scope of regulation firms that own or hold a regulated mortgage contract but do not carry out any activity that is material to the borrower. Special purpose vehicles (SPVs) and

other vehicles used in securitisation, for example, may own or hold regulated mortgage contracts but have no role in any decision-making process which affects borrowers. Decisionmaking powers are delegated by these bodies to a mortgage third party, for example the originating mortgage lender. The Government considers that arrangements of this type should be allowed to continue, and in such arrangements, authorisation will be required by the firm that has the ability to make decisions that will materially affect the borrower, and not by the firm that owns or holds the mortgage. In cases where the firm that owns or holds the mortgage instructs or directs the firm with the ability to make decisions to act in a certain way, this firm will require authorisation.

Originally posted by itbg

 

THIS TOPIC IS CURRENTLY BEING DISCUSSED ON THE SPML/LONDON MORTGAGE THREAD AS CAN BE SEEN BY THE ABOVE VERY RELEVANT POST ANY CONTRIBUTIONS OR INPUT ON THIS THREAD WOULD BE VERY MUCH APPRECIATED.

Edited December 8, 2009 by ryde

[andrew1]

4.16 The proposed definition of managing a regulated mortgage contract is not intended to bring into the scope of regulation firms that own or hold a regulated mortgage contract but do not carry out any activity that is material to the borrower. Special purpose vehicles (SPVs) and

other vehicles used in securitisation, for example, may own or hold regulated mortgage contracts but have no role in any decision-making process which affects borrowers. Decisionmaking powers are delegated by these bodies to a mortgage third party, for example the originating mortgage lender. The Government considers that arrangements of this type should be allowed to continue, and in such arrangements, authorisation will be required by the firm that has the ability to make decisions that will materially affect the borrower, and not by the firm that owns or holds the mortgage. In cases where the firm that owns or holds the mortgage instructs or directs the firm with the ability to make decisions to act in a certain way, this firm will require authorisation.

Originally posted by itbg

 

THIS TOPIC IS CURRENTLY BEING DISCUSSED ON THE SPML/LONDON MORTGAGE THREAD AS CAN BE SEEN BY THE ABOVE VERY RELEVANT POST ANY CONTRIBUTIONS OR INPUT ON THIS THREAD WOULD BE VERY MUCH APPRECIATED.

 

This raises some interesting points which mirror in some ways mortgages and 2nd charge loans being provided by another sub-prime lender.

 

In this case, within the accounts of the company providing the loans it sates that they have 'sold' ALL mortgages and loans (1st Mtgs from a sister company, and their own 2nd charge loans) to another company within the group. Same Directors across the the whole group of companies. Now if the laons have been 'sold' for a consideration which appears to have happened, it's either equitable assignment via securitisation or a straight sale which would mean the title should be transfered one imagines. CEO states that the loans are kept on balance sheet and no loans are securitised, so taking him at his word what can the sale reflect as far as title is concerned or rights to repossess? In laymans terms, a sale with a consideration would effectively repay the loan to the OC therefore they would show no loss and couldn't repo in their name, but they are.

 

In their own borrowings which finances our loans, their bankers have a negative pledge in the Debenture which would restrict sale of rights or title, but it clearly states in their Directors reports that ALL loans were 'sold' and in the purchasing vehicle (Ltd Co.) it shows clearly that loans have been 'aquired'. Now the receiving company has no regulation, FSA, DPA, nothing, so why on earth sell these loans to another company within the same group, which doesn't trade in providing loans (or anything else as far as we can see) unless there is some benefit....not a straight forward situation to follow like the SPML case as at least you have an admission of securitisation...mmm?? any thoughts anyone?

[BiGaD09]

4.16 The proposed definition of managing a regulated mortgage contract is not intended to bring into the scope of regulation firms that own or hold a regulated mortgage contract but do not carry out any activity that is material to the borrower. Special purpose vehicles (SPVs) and

other vehicles used in securitisation, for example, may own or hold regulated mortgage contracts but have no role in any decision-making process which affects borrowers. Decisionmaking powers are delegated by these bodies to a mortgage third party, for example the originating mortgage lender. The Government considers that arrangements of this type should be allowed to continue, and in such arrangements, authorisation will be required by the firm that has the ability to make decisions that will materially affect the borrower, and not by the firm that owns or holds the mortgage. In cases where the firm that owns or holds the mortgage instructs or directs the firm with the ability to make decisions to act in a certain way, this firm will require authorisation.

Originally posted by itbg

 

It appears to be quite clear reading the above that the government and HM treasury have very little insight into the sub prime lending market and furthermore that the lenders know this and couldn't care less.

 

For example the above states that decision making powers should remain with the regulated company, the original lender for example, however in reality this just does not happen. My mortgage T&C's clearly state this in the fact that they reserve the right to alter my agreement as long as, in their opinion, it is not 'unreasonably' unfair in it's terms. That to me at least is pretty much proof of who is making the decisions, the unregulated and well hidden SPV. In light of this the treasury need to do something as it is direct contradiction to their own recomendations, will they though? Unfortunately I have my doubts!

 

Apologies if I've gone off topic slightly, just thought it was a worthwhile point. Also, does anyone know if anything will come of the consultation or was it just a treasury paper exercise?

[tertiary alcohol]

It appears to be quite clear reading the above that the government and HM treasury have very little insight into the sub prime lending market and furthermore that the lenders know this and couldn't care less.

 

For example the above states that decision making powers should remain with the regulated company, the original lender for example, however in reality this just does not happen. My mortgage T&C's clearly state this in the fact that they reserve the right to alter my agreement as long as, in their opinion, it is not 'unreasonably' unfair in it's terms. That to me at least is pretty much proof of who is making the decisions, the unregulated and well hidden SPV. In light of this the treasury need to do something as it is direct contradiction to their own recomendations, will they though? Unfortunately I have my doubts!

 

Apologies if I've gone off topic slightly, just thought it was a worthwhile point. Also, does anyone know if anything will come of the consultation or was it just a treasury paper exercise?

 

anybody found any "well hidden SPV"

111 The only question then is whether the SPV should have been joined in the proceedings as an additional claimant. In my judgment, the answer to that question is plainly: No. On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV (see Whiteley v. Delaney [1914] AC 132 at 141 per Viscount Haldane LC). But it does not follow that in that situation the SPV, as the owner of the Legal Charge in equity, is a necessary party to the claim; and on the facts of the instant case joinder of the SPV is wholly unnecessary. There is, after all, no issue between the SPV and Paragon as to the exercise of the mortgagee's rights under the Legal Charge: indeed the SPV has, by virtue of the administration agreements, expressly authorised Paragon to exercise such rights on its behalf.

Edited July 18, 2012 by tertiary alcohol
Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV

[IS IT ME?]

You should down load the latest sale from ACCORD MORTGAGES sale of mortgages asap,

BUT read it all, all 207 pages of it then you will understand why they have got away with it and the courts do not help the borowers in any way.

[andrew1]

..and where might one obtain such a document IIM?