Securitization is 'designed to fail'

[JonCris]

Isn't the above in contradiction to the title of this thread that they were designed to fail.

 

You know exactly what is meant yet you feel you have to resort to semantics to further your argument

 

Shame on you Sue I've always assumed you to be above such behaviour. Next you'll be correcting me grammar & Speeling:(

[Suetonius]

You know exactly what is meant yet you feel you have to resort to semantics to further your argument

 

Shame on you Sue I've always assumed you to be above such behaviour. Next you'll be correcting me grammar & Speeling:(

 

Not so JC... I just don't think you can have it both ways

[Suetonius]

Especially for you JC..

 

NY 'investigates' if banks misled ratings agencies - Yahoo! News UK

 

"New York Attorney General Andrew Cuomo is investigating whether eight banks misled ratings agencies to inflate the grades of certain mortgage securities, US media reported Thursday.

 

The investigation comes as federal authorities probe the business practices of a range of financial firms whose clients bought mortgage securities in the years leading to the collapse of the housing market in 2008 that helped trigger the global financial meltdown."

 

"Standard & Poor's, Fitch Ratings and Moody's Investors Service were the companies that rated the mortgage deals, it said. The agencies have taken flack for overstating the quality of mortgage securities that later lost value in the wake of the housing collapse."

[micko19]

Read below reminds me of the song "I'm forever blowing bubbles"

 

Beacon Homeloans says it's now the UK's 11th biggest lender | News | Mortgage Strategy

 

CDO's still going strong in uk.....HBVEurope big in Greece.....Still providing dirty tranches for hedge betters plotting European downfall...

 

Makes Osama Bin Ladin look like a boy scout.......

 

bla bla bla

[Killerschick]

Read below reminds me of the song "I'm forever blowing bubbles"

 

Beacon Homeloans says it's now the UK's 11th biggest lender | News | Mortgage Strategy

 

CDO's still going strong in uk.....HBVEurope big in Greece.....Still providing dirty tranches for hedge betters plotting European downfall...

 

Makes Osama Bin Ladin look like a boy scout.......

 

bla bla bla

 

Followed only 8 days later by:-

 

Beacon halts new lending | News | Mortgage Strategy

 

and I don't think they've ventured back into the marketplace since, despite assurances on their website that they were confident of launching new products early in 2010.

[micko19]

thanks for that

 

micko

[supersleuth]

One thing that still continues to trouble me with regard to the 5 year argument is what about the people that have had a mortgage with the same lender for more than 5 years. Also what about the people that have had a mortgage with the same lender for 10, 15 or 20 years etc.

 

 

Hi Suetonius,

 

It's puzzling that you are troubled with regard to the five year argument. You see, even the CML admit that RMBS (residential mortgage backed securities - i.e. securitised mortgaged) are designed to have less than a 6 year life. It was YOU who posted up evidence of the very short-term nature of a securitised mortgage.

 

Andrew Heywood who is Deputy Head of Policy at the Council of Mortgage Lenders, accepts (and knows) that 90% of securitised mortgages (RMBS) reach their call up date within 6 years. Just in case you didn't fully read the Andrew Heywood CML document that you posted up, it's attached here again. See slide 10.

 

Consequently, there is a breach of contract with the borrower. The borrower contracts to borrow the money for 25 years whereas, the lender KNOWS from the outset that it has NO INTENTION of honouring its obligation to lend for 25 years. Hence, remortgage or be repossessed within 5 years.

Council of Mortgage Lenders 1AndrewHeywood-1.pdf

Edited May 29, 2010 by supersleuth

[tifo]

what happens to securitised mortgages after maturity? for example, if my mortgage was securitised 10 years ago and matured 5 years ago, what's happened to it in the last 5 years?

[tifo]

Hence, remortgage or be repossessed within 5 years.

 

... not for people who keep up to date with payments. In this case, securitisation doesn't affect them at all?

[JonCris]

... not for people who keep up to date with payments. In this case, securitisation doesn't affect them at all?

 

 

Yes it does cos if they can't 'sell' the bundle onto new investors (which is what has happened due the credit crunch) they must liquidate the asset(s) to repay the current investor. Hence the reason for mysterious charges being added thereby causing the debtor, through no fault of theirs, to default Alternatively you increase the repayments to the extent the borrower cannot afford the payments

[tifo]

Hence the reason for mysterious charges being added thereby causing the debtor, through no fault of theirs, to default

 

They can't add charges if the borrower does not default with any payments even when the interest rate increases. And they can't increase payments if the borrower is keeping up repayments as per interest only or repayment arrangement.

 

What i'm asking is what happens to mortgages whose borrowers NEVER default?

 

And what happens to mortgages after they have matured?

[supersleuth]

Just to clarify the agencies did not give them all triple A ratings.

 

http://www2.standardandpoors.com/spf/pdf/fixedincome/051006_eurosailSNAP.pdf

 

This report shows that different ratings were given (admittedly still a very rosey picture painted by the agency)

 

Another interesting post from you Sue. You argue that the credit ratings agencies didn't give the entire deal a triple A rating. And then you post up "evidence" to prove your point. As you rightly advise:

"PLEASE DO NOT ACCEPT ANY POSTS MADE BY ANYONE ON FACE VALUE.

PLEASE TAKE THE TIME TO VERIFY ANY OPINIONS YOURSELF."

 

Therefore, I have taken the time to verify this opinion. It appears that you have posted up a pre-sale draft which does not state the amounts of each tranche. However, if you look at a Prospectus that has been finalised and published, you will see that the vast bulk of the total amount securitised did get a triple A rating. See e.g.,

 

PROSPECTUS DATED 27 FEBRUARY 2007

Eurosail-UK 2007-1NC PLC

 

In that securitisation, the total amount of the securitised transaction in £'s and Euros were: £357,300,000 and Euro 552,150,000. Of these total amounts of the transaction:

 

£298,000,000 of the notes issued in £'s received a triple A rating i.e., 83.4% of the total notes issued in £'s ; and

 

Euros 449,900,000 of the notes issued in Euros received a triple A rating i.e., 81.4% of the total notes issued in Euros.

 

Therefore, when 84.4% of the Sterling issued notes are given triple A rating and 81.4% of the Euro issued notes are given triple A ratings, it is fair to say that on the whole the deal attracted triple A rating.

 

However, it is fair to say that a relatively tiny minority of the deal did attract double A, A, triple B, double B and B ratings.

 

The question is how did these deals attract a triple A rating to over 80% of the total amount of issued notes.

The answer is simple. The issuer pays the credit rating agency for the triple A ratings. Of course, the issuer, who is the credit rating agency's paymaster, wants the triple A rating and that's what they're paying for.

 

It is commonsence that when the issuer pays the credit rating agency a fee of at least $250,000 each and every year for the life of the note, the rating agency will want to keep that fee and keep its client happy. Hence, if you can pay the ratings agency a hefty fee for the rating you want, you can have a rating at any level you want.

 

Those who get a poor credit rating are obviously not paying the credit rating agencies any fees. How they'll sell their very souls (oh I forgot, they don't have one).

 

For those interested, check out the maths for yourself:

(Incorporated in England and Wales under Registered Number 5999159)

Notes Initial

Principal

Amount/

Number

Reference rate Margin Maturity Date Issue Price Ratings (S&P/Fitch/

Moody’s)

Class A1a €102,600,000 Note EURIBOR 0.07 per cent. March 2026 100 per cent. AAA/AAA/Aaa

Class A1c £148,000,000 Note Sterling LIBOR 0.07 per cent. March 2026 100 per cent. AAA/AAA/Aaa

Class A2a €152,500,000 Note EURIBOR 0.13 per cent. March 2045 100 per cent. AAA/AAA/Aaa

Class A2c £50,000,000 Note Sterling LIBOR 0.13 per cent. March 2045 100 per cent. AAA/AAA/Aaa

Class A3a €194,800,000 Note EURIBOR 0.16 per cent. March 2045 100 per cent. AAA/AAA/Aaa

Class A3c (with

Detachable A3c Coupons)

£100,000,000 Note Sterling LIBOR 0.16 per cent. March 2045 100 per cent. plus

premium

AAA/AAA/Aaa

Class B1a €36,900,000 Note EURIBOR 0.24 per cent. March 2045 100 per cent. AA/AA/Aa2

Class B1c £20,000,000 Note Sterling LIBOR 0.24 per cent. March 2045 100 per cent. AA/AA/Aa2

Class C1a €42,100,000 Note EURIBOR 0.44 per cent. March 2045 100 per cent. A/A/A1

Class D1a €23,250,000 Note EURIBOR 0.84 per cent. March 2045 100 per cent. BBB/BBB/Baa1

Class D1c £5,000,000 Note Sterling LIBOR 0.89 per cent. March 2045 100 per cent. BBB/BBB/Baa1

Class DTc £16,100,000 Note Sterling LIBOR 0.83 per cent. March 2045 100 per cent. BBB+/BBB/NR

Class E1c £5,600,000 Note Sterling LIBOR 2.95 per cent. March 2045 100 per cent. BB/BB/Baa3

Class ETc £9,100,000 Note Sterling LIBOR 2.95 per cent. March 2045 100 per cent. BB-/BB/NR

Class FTc Deferrable

Interest

£3,500,000 Note Sterling LIBOR 6.00 per cent. March 2045 100 per cent. B/B/NR

This document comprises a prospectus (the “Prospectus”) for the purpose of Directive 2003/71/EC (the

“Prospectus Directive”). Application has been made to the Irish Financial Services Regulatory Authority, as

competent authority under the Prospectus Directive, for the Prospectus to be approved. Application has been

made to the Irish Stock Exchange Limited (the “Irish Stock Exchange”) for the Notes to be admitted to the

Official List (the “Official List”) and trading on its regulated market.

Bookrunner, Arranger and Lead Manager

BANCO MILLENNIUM BCP INVESTIMENTO SA

Co-Manager

The date

Edited May 29, 2010 by supersleuth

[JebediahSpringfield]

Hi Suetonius,

 

It's puzzling that you are troubled with regard to the five year argument. You see, even the CML admit that RMBS (residential mortgage backed securities - i.e. securitised mortgaged) are designed to have less than a 6 year life. It was YOU who posted up evidence of the very short-term nature of a securitised mortgage.

 

Andrew Heywood who is Deputy Head of Policy at the Council of Mortgage Lenders, accepts (and knows) that 90% of securitised mortgages (RMBS) reach their call up date within 6 years. Just in case you didn't fully read the Andrew Heywood CML document that you posted up, it's attached here again. See slide 10.

 

Consequently, there is a breach of contract with the borrower. The borrower contracts to borrow the money for 25 years whereas, the lender KNOWS from the outset that it has NO INTENTION of honouring its obligation to lend for 25 years. Hence, remortgage or be repossessed within 5 years.

 

You are incorrect re: this 5 year sham mortgage you are suggesting. Securitisations have historically had a weighted average life of a few years largely due to prepayment rates. Non-conforming mortgages just a few years ago had exceptionally high prepayment rates 30% to 50% (peak). Prepayment rates now are around 5%. Anyone owning subprime paper now is prepared to hold for a significantly longer period because these types of mortgage products no longer exist and prepayment rates cannot justifiably be expected to reach levels of a few years ago.

 

You’re also failing to take into account that the reason these deals pay down in a relatively short time period is also due to the fact that the deals are called by the originator. An originator can call a transaction once the collateral balance is 10% of the original balance (known as a clean-up call option) and that means the originator owns the mortgages once again. Why do they do this? Because as the portfolio amortises to, it becomes more and more expensive to service the transaction and the economics tilt in favour of calling the deal versus paying out the high fixed costs of servicing the bonds. The mortgages that are called at the clean up call date are usually recycled and resecuritised.

 

You also fail to realise that repossessions are not in the interest of an investor. Loss severities on repossessions can easily be 40-50%. In the U.S., loss severities reached as high as 70%. Who takes that loss? It’s the investor, assuming the loss is not covered by excess margin on the collateral and credit enhancement. Also, an originator is not going to have a particularly easy time selling new securitised bonds to investors if they had a historically high repossession rate on previous deals as it’s evidence of either poor lending criteria, servicing, and significantly higher risk.

 

So your theory, frankly, does not hold water.

[JonCris]

They can't add charges if the borrower does not default with any payments even when the interest rate increases. And they can't increase payments if the borrower is keeping up repayments as per interest only or repayment arrangement.

 

What i'm asking is what happens to mortgages whose borrowers NEVER default?

 

And what happens to mortgages after they have matured?

 

Where you been? They DO add charges which the borrower only learns of when they receive the DN

[supersleuth]

You are incorrect re: this 5 year sham mortgage you are suggesting. Securitisations have historically had a weighted average life of a few years largely due to prepayment rates. Non-conforming mortgages just a few years ago had exceptionally high prepayment rates 30% to 50% (peak). Prepayment rates now are around 5%. Anyone owning subprime paper now is prepared to hold for a significantly longer period because these types of mortgage products no longer exist and prepayment rates cannot justifiably be expected to reach levels of a few years ago.

 

You’re also failing to take into account that the reason these deals pay down in a relatively short time period is also due to the fact that the deals are called by the originator. An originator can call a transaction once the collateral balance is 10% of the original balance (known as a clean-up call option) and that means the originator owns the mortgages once again. Why do they do this? Because as the portfolio amortises to, it becomes more and more expensive to service the transaction and the economics tilt in favour of calling the deal versus paying out the high fixed costs of servicing the bonds. The mortgages that are called at the clean up call date are usually recycled and resecuritised.

 

You also fail to realise that repossessions are not in the interest of an investor. Loss severities on repossessions can easily be 40-50%. In the U.S., loss severities reached as high as 70%. Who takes that loss? It’s the investor, assuming the loss is not covered by excess margin on the collateral and credit enhancement. Also, an originator is not going to have a particularly easy time selling new securitised bonds to investors if they had a historically high repossession rate on previous deals as it’s evidence of either poor lending criteria, servicing, and significantly higher risk.

 

So your theory, frankly, does not hold water.

 

Theory? What theory? It is a fact that the borrowers will not have their loans for 25 years, and it is a fact that "lenders" intention that RMBS have a life "less than 6 years" as verified by non-other than Mr Heywood at the Council of Mortgage Lenders. Do you argue against Mr Heywood of the CML?

 

So you spout a load of drivel displaying that you're aware of certain securitisation soundbites, which, to most CAGGers is probably no more than pure gobbledegook. So perhaps you'd like to explain your soundbites gobbledegook in plain english so that other gaggers may understand and debate the point you have tried to make.

 

Also, perhaps you might also be mindful that you seem to be under the impression that it is the investors that are in the driving seat on all this. You are mistaken. The investors are passive just waiting for their payout (or not as the case may be). It is the Issuer/SPV that is in control of the events that befall the borrowers - not the investors.

 

Plus, be mindful that the "investors" and the "issuers" have very different ideas about what is commercially beneficial to them - they may have (and probably do have) conflicting interests. What the investor wants, may not be what the issuer wants. After all, it is the issuer/SPV that is in control of the assets - not the investor. So whilst you may spout off about the investors, remember that it is the Issuer/SPV that is the devil driving the borrowers to hell. So my dear, it seems that it is you who has failed to realise and understand what is going on.

[JebediahSpringfield]

Theory? What theory? It is a fact that the borrowers will not have their loans for 25 years, and it is a fact that "lenders" intention that RMBS have a life "less than 6 years" as verified by non-other than Mr Heywood at the Council of Mortgage Lenders. Do you argue against Mr Heywood of the CML?

 

So you spout a load of drivel displaying that you're aware of certain securitisation soundbites, which, to most CAGGers is probably no more than pure gobbledegook. So perhaps you'd like to explain your soundbites gobbledegook in plain english so that other gaggers may understand and debate the point you have tried to make.

 

Also, perhaps you might also be mindful that you seem to be under the impression that it is the investors that are in the driving seat on all this. You are mistaken. The investors are passive just waiting for their payout (or not as the case may be). It is the Issuer/SPV that is in control of the events that befall the borrowers - not the investors.

 

Plus, be mindful that the "investors" and the "issuers" have very different ideas about what is commercially beneficial to them - they may have (and probably do have) conflicting interests. What the investor wants, may not be what the issuer wants. After all, it is the issuer/SPV that is in control of the assets - not the investor. So whilst you may spout off about the investors, remember that it is the Issuer/SPV that is the devil driving the borrowers to hell. So my dear, it seems that it is you who has failed to realise and understand what is going on.

 

Let me simplify for your simple brain.

 

I’m fully aware that the average life of an RMBS WAS 5-6 years. The question is WHY that it is. You seem to suggest some baseless insidious plot that if a borrower has not refinanced in 5 years the lender will seek to repossess a borrower to ensure a five year paydown in the RMBS and thus, a sham mortgage contract exists. That is patently ridiculous and shows you have a very crude and ill-informed understanding of how securitisation works.

 

Notice I said WAS. Now the weighted average lives of RMBS will be significantly longer if lending doesn’t return to previous levels. The weighted average life was driven by largely by prepayment rates i.e., what proportion of borrowers voluntarily prepay. Up until the start of the financial crisis, default rates were almost insignificant. Given average prepayment rates that we saw during the housing boom of 30-50% a pool of mortgages amortised very quickly in size which meant that 4 or 5 years in, the pool of mortgages was small enough to trigger the originator’s ability to call the transaction. And they did call those transactions. So what about that 10% of the pool that was left after 4 or 5 years? What happened to them? Did they get repossessed? See how nonsensical your argument is The deals were CALLED, which means those borrowers that did not refinance still had their mortgage, and not only that, but the originator sold that mortgage into a new securitisation. By your warped logic, there is no one that has been with the same lender for 15 years whose loan has been previously been securitised.

 

And what would happen if an originator did not call the transaction? Instead of being paid in 5 years, the bonds would probably not be paid for 10 years or longer, so it is by definition the fact that an originator called a deal that a deal paid off in 5 years, not because of some absurd conspiratorial repossession strategy for borrowers who did not refinance.

 

As far as the SPV, you clearly do not know what you are talking about here. The SPV is a braindead entity. It is purely a passive vehicle and it has to be structured that way because if it is an actively managed entity, it may jeopardise its status as a bankruptcy remote entity and it also may not qualify for the appropriate accounting treatment.

 

You should really do more homework before you start spouting misinformation.

[tifo]

Where you been? They DO add charges which the borrower only learns of when they receive the DN

 

I assume, there can be NO clause allowing a lender to impose a charge if there has been NO default by the borrower. What you're implying is that a lender will add charges for no apparent reason even with a borrower who has never defaulted.

[actionnotwords]

I assume, there can be NO clause allowing a lender to impose a charge if there has been NO default by the borrower. What you're implying is that a lender will add charges for no apparent reason even with a borrower who has never defaulted.quote tifo

 

 

 

In the case of spml/lmc/pml/sppl sub prime loans/mortgages the majority of which are 5 years or less the current situation is this of which there is supporting irrefutable evidence.

1)Borrowers with good payment records are being offered large discount inducements to change lender

.2)Borrowers in default are being hounded by an apparent repossession overdrive even though the arrears are sometimes quite trivial.

 

Tifo I strongly suggest you read the insurance [problem] carried out by these lenders and look at some of the repossession threads.Here is a link to start with.

 

 

 

This is a typical example of how arrears are manufactured and then compounded.

Further there are clauses in the securitization agreements prohibiting the mortgage from being converted for example from a repayment to interest only mortgage ensuring a non compliance with the pre action protocols laid down prior to repossession.

Such clauses are made between spv(issuer) and administrator,the original lender plays no part.See the spv prospectus for evidence of this.

Edited May 31, 2010 by MARTIN3030
link removed

[Mr J Strap]

Securitisation, securitisation, securitisation & Repossession.

 

 

A mortgage is a bundle of rights over someone’s land, granted as security for a loan. By granting these rights, the borrower encourages the lender to advance more than he otherwise would, or at a more favourable rate of interest, because the lender knows that the risk of default on the loan is much lower. However, the borrower needs to know that the rights he is granting to the lender are real, not notional, rights over his land, and the lender may well be able to enforce them. In everyday speech people tend to talk of a mortgage as if it were a loan (`I bought my house with a mortgage’), but a mortgage is merely the security for a loan. When banks use the term `mortgage’, `secured loan’, or `loan secured on property’, they are talking arrangements which are legally more-or-less equivalent. Although it is common to think of a lender `giving a mortgage’, legally it is the borrower who grants the mortgagor, and is thus called the Mortgagor. The lender is the Mortgagee.

 

The Mortgagee of a mortgaged property is entitled to take possession of it. This entitlement does not follow from a particular statutory right, but is a logical consequence of the way that mortgages work in English law. A mortgage is created by granting a lease to the mortgagee, or is deemed to be equivalent to so doing (s.87 Lpa1925). By definition, a lease creates a right of possession in favour of its owner. Although possession is a right, the mortgagee does not have a right to effect possession by force. Unless the property is standing empty, the mortgagee will need to apply to the court for a possession order. Such an order will only rarely be refused unless the property is a dwelling house. In this case, s.36 the Administration of Justice Act (1970) gives the court a power to postpone possession where there is a realistic possibility that the mortgagor will be able to meet the sums due under the loan.

 

According to s.8 of the Administration of Justice Act (1973), the `sums due’ to not include any sums that arise by virtue of the mortgagor’s failure to meet repayments of an installment mortgage. For example, it is usual for a mortgage agreement to contain a term to the effect that the whole balance becomes due if even one repayment is missed. The effect of s.8 is that the courts can grant relief to the mortgagor without requiring him to raise the entire amount of the loan. Strictly speaking, a mortgagee does not have to seek possession — with a court order or without — to be able to exercise a power of sale. However, it is unlikely that a mortgagee will be able to sell the property while the mortgagor is still occupying it. Even if he does, he may be liable to the mortgagor for failing to realise a good price (CuckmereBrick V Mutual Finance 1971)

 

If a Mortgagor is in default of repayments, the Mortgagee may seek to sell the mortgaged property to realize his security. This power to sell is implied into every mortgage made by deed by s.101 of the Lpa1925, which goes on to say that the power of sale arises when the loan repayment becomes due. However, the power only becomes exercisable (s.103) by the mortgagee if

 

 

1. he has served notice on the defaulting mortgagor and not received payment three months after service; or
   
2. mortgage interest repayments are in arrears by more than two months; or
   
3. the mortgagor is in breach of some other covenant in the mortgage agreement.
   

The distinction between when a power of sale arises and when it becomes exercisable is important. This is because it is the responsibility of the purchaser from the mortgagor to ensure that the power of sale has arisen. If it has not, the sale is not valid. However, the purchaser does not have to satisfy himself that the power is exercisable. If the mortgagee sells the property before the power has become exercisable, he may be in breach of his obligations to the mortgagor, but it is still a good sale. The effect of sale is to vest the estate in land in the purchaser, free of the mortgage and any other mortgages of lower priority.

 

In practice, unless the mortgaged property is standing empty, the mortgagee will need to seek an order for possession before sale. He is not obliged by law to do so, but he cannot evict the mortgagor by force, and the property will probably not be saleable unless the mortgagee can give vacant possession. The power of sale must be exercised in good faith, that is, in order to obtain the best price reasonably achievable. The mortgagee may find himself liable to the mortgagor if he fails to so so. Consequently, many mortgage lenders prefer to appoint a receiver to handle the sale; the receiver is the agent of the mortgagor, not the mortgagee, so the mortgagee cannot be liable for the negligence of the receiver (unless, perhaps, he is negligent in appointing the receiver).

 

Particular problems arise for the mortgagee if his charge is over only over a share in the property. This may happen if, for example, the mortgage cannot be enforced against all the equitable co-owners of the property (as, for example, in williams and glynns bank v boland 1981; but note that if the mortgage advance is paid to two or more legal co-owners, the equitable co-owners will be overreached — city of london building society v flegg 1987). s.30 of the Lpa1925 allows a mortgagee to ask the court for an order of sale, and such an order would usually be granted unless to do so would cause exceptional hardship (Lloyds Bank V Byrne & Byrne 1993).

 

However, s.30 is effectively replaced by s.14 of Trusts of Land and Appointment of Trustees Act 1996 (abbreviated as 'tolata'). s.14 gives the court a much broader discretion in deciding whether to order sale. The interest of the mortgagee is only one of the factors that must be taken into account. Consequently, in Mortgage Corporation V Shaire 2000 it was held that pre-1997 caselaw on determining whether to order sale should be treated with caution. In that case, an application for an order of sale from a mortgagee was rejected, because — in essence — the rights of the occupier (whose signature had been forged on a mortgage application) — were more worthy of protection than those of the mortgagee.

 

In many legal arguments it can be quite important to determine when the Title to some property or other passess from one person to another. Title to interests in land Strictly speaking, a private citizen cannot have any title to land: all land belongs to the Crown. Instead, we say that there is an `interest in land’, and somebody owns that interest, or owns the title to that interest (same thing). In Unregistered conveyancing, legal title to an interest in land passes on execution of a Deed of Conveyance. In Registered conveyancing, if the interest is registerable, then title passes when the new ownership is entered on the Register. A deed (technically a Deed of transfer, not a conveyance) is still required to satisfy the Registrar, but the deed itself has no effect on title. Otherwise, if the interest is not registerable, the same rule applies as to unregistered conveyancing.

 

Typically the buyer and seller contract in advance to transfer the interest and, provided neither party attempts to rescind the Contract, the transfer itself is almost formality. If the remedy of Specific performance would be available to compel one or other party to effect the transfer, then the transfer will be `effective in equity’ from the moment of execution of the contract. Thus courts will recognize that equitable ownership has been transferred from that point; the seller retains the legal title, but on Constructive trust for the seller. For most practical purposes, the buyer owns the interest from contract.

 

Title to goods The Sale of goods act 1979 states that in a Contract of sale, title passes at the time the contract is made. In many cases this will be at the moment an Offer is accepted. Unless the contracting parties stipulate otherwise, and in contrast to most other jurisdictions, in English law there is no automatic passage of title on delivery of the goods. However, title by delivery does apply when the transfer of title is in the form of a gift, rather than a sale.

 

Title to things in action Things in action (e.g., copyrights, debts) have no tangible presence and therefore present particular problems in the passage of title. There is specific legislation to deal with the passage of many of these articles, e.g., debts (Law of property act 1925), shares in companies (Companies act 1985), patents, insurance policies, etc..

 

Both the loan (the debt) and the charge (lender rights) are things in action, also called choses in action rather than choses in possession. Both the debt and the lenders rights are choses in action as they are both intangiable. As such for the “legal title” to the debt and to the lenders rights to be “sold” the sale must comply with s.136 of the LPA 1925, in so much that a express notice of the sale must be given to the borrower. This does not need to be signed by the selling lender to be effective in law.

 

It is the case that within the UK, notices are not given to borrowers. Therefore, the sale does not comply with s.136 of the LPA 1925 and is classed as an equitable assignment. There are arguments I have seen on consumer forums that the use of s.136 of the LPA 1925 is fraudulent and that s.136 was never designed to be used in securitisation transactions. These arguments, demonstrate a clear misunderstanding of the law. S.136 was introduced and to define the specific requirements for a legal assignment (transfer of absolute ownership). Therefore, to say that the use is fraudulent is obviously absurd and has absolutely no basis in law.

 

Another argument, I often come across which is equally absurd and has no basis in law. It is theorised that following the implementation of the LRA 2002, under s.27 the disposition of the charge must be registered and the failure to do so is again speculated to be fraudulent. This is a clear example of putting the cart before the horse, so to speak. For there to be a requirement for a disposition to be registered as per s.27, it would stand to reason that there must have first been a disposition. If there has been no disposition, there is no disposition to be registered. As both the debt and the lenders rights are choses in action and can only be legally assigned AFTER an express notice has been given to the borrower disposition of the legal title is prevented by law. So rather than being an example of fraud as promoted by various consumer “help” forums and blogs, it is instead a clear example of compliance with the law.

 

It should be clearly noted that all of the documentation relating to the securitisation of mortgages in the UK confirm that the sale is equitable subject to notification to the borrower and that it is only certain individuals (posters on consumer “help” forums” that insist it is otherwise. However, when put to strict proof to substaniate their arguments they always appear to fall at the first hurdle. The various debates and at times childish arguments I have followed on various sites with regard to securitisation, were original ignited by a submission to the Treasury Select Committee by Carmel B Butler. However, in her submission, one would presume for the sake of convenience she made no reference to the somewhat significant court cases that had previously judged the issues she identified.

 

Naturally, there were the two paragon v pender cases in 2003 and 2005, being a high court case and a court of appeal case. Both resulting in important judgements that for the sake of completness should have been included within her submissions. Nevertheless, the debates with regard to securitisation continue and continue and continue. I must wonder if these debates would still continue if the success of Ms Butler’s arguments were as well documented on consumer “help” forums as the arguments themselves. In, Basinghall Finance PLC v Butler [2009] EWCA Civ 1262 (mortgages, assignment, securitisation, privity, Consumer Credit), the application to appeal was dismissed.

 

In summary, it is the rule of law that defines and restricts the sale by the lender and the subsequent ownership by the SPV as equitable only.

Edited May 29, 2010 by Mr J Strap

[actionnotwords]

Thankyou for that may I be so bold as to say "Jock" to which I would like to add my full support,if indeed any is required.!

[kegi]

I can only say to TIFO JEBIDIAH AND J STRAP beware of even suggesting when other posters on this thread state all securitised mortgages will be gone in five years and that is a fact and other such crap is wrong.you will be slagged off [sorry thats are being]already ]

You must except that all securitised mortgages will end in 5 years that was the intention in the lenders thinking when he signed up to an agreeement with you for a 25 year term [silly me for not seeing that].

Funny though they never stated when the five years started and as those in the real world know that millions of mortgages are already long past five years whats happened to the clock is it running fast or running slow.

But then again they could say thats only because you have had no problems with yours but it will happen at some point [remind myself never to forget to pay on time] or they will force me to remortgage if not invent an excuse to repo me .

I have said it before anyone who believes that is living in cloud cuckoo land and that was some 2 year ago and they still haven't got it .The fact that an apple Orchard is an Orchard and I invest in the apples in it , wether they turn out to be good apples or bad apples has no effect on the Orchard. It remains the same.

 

By the way any investor who justs sits there waiting for his ill gotten gains tofall into his lap is no investor in my eyes

 

Even talking subprime I have no hesitation in stating that most of those some 2 million are already past their sell by date

 

To try and equate the problems that some have on these forums

with certain lenders and impose that with with the view its all to do with securitisation is wrong

 

Quote from previous post

A SPV is no more than a money box come cash machine end of

 

lets have more drival I say

kegi

[tifo]

there is supporting irrefutable evidence.

1)Borrowers with good payment records are being offered large discount inducements to change lender

.2)Borrowers in default are being hounded by an apparent repossession overdrive even though the arrears are sometimes quite trivial.

 

What i'm asking is what they can do to a borrower who NEVER defaults and NEVER gets into arrears and always has suitable insurance and pays the mortgage even when they change from one type to another.

 

Being offered money to move is not the same as adding charges nor is taking possession action over arrears.

 

I'm asking the question for info only and the answer is that no-one knows.

[supersleuth]

Securitisation, securitisation, securitisation & Repossession.

 

 

It should be clearly noted that all of the documentation relating to the securitisation of mortgages in the UK confirm that the sale is equitable subject to notification to the borrower and that it is only certain individuals (posters on consumer “help” forums” that insist it is otherwise. However, when put to strict proof to substaniate their arguments they always appear to fall at the first hurdle. The various debates and at times childish arguments I have followed on various sites with regard to securitisation, were original ignited by a submission to the Treasury Select Committee by Carmel B Butler. However, in her submission, one would presume for the sake of convenience she made no reference to the somewhat significant court cases that had previously judged the issues she identified.

 

Naturally, there were the two paragon v pender cases in 2003 and 2005, being a high court case and a court of appeal case. Both resulting in important judgements that for the sake of completness should have been included within her submissions. Nevertheless, the debates with regard to securitisation continue and continue and continue. I must wonder if these debates would still continue if the success of Ms Butler’s arguments were as well documented on consumer “help” forums as the arguments themselves. In, Basinghall Finance PLC v Butler [2009] EWCA Civ 1262 (mortgages, assignment, securitisation, privity, Consumer Credit), the application to appeal was dismissed.

 

 

Hi Mr J Strap,

 

Could you kindly clarify a couple of points with respect to your extensive post.

 

Firstly, you say that "it should be clearly noted that all documentation relating to the securitisation of mortgages in the UK confirm that the sale is equitable". Are you aware that despite many borrowers requesting these documents, that the lenders vigorously resist the disclosure? Therefore, these documents, which you say confirm an equitable sale, have never been disclosed and consequently, it has been impossible for anyone to "clearly note" the confirmation that these sales are equitable. Nonetheless, it is evident from your assertion that you have a copy of a mortgage sale agreement and have been able to "clearly note" and confirm for yourself that the sale was equitable. So why don't you post it up so that we caggers can confirm for ourselves that the sale is equitable and you can thereby prove your point. No doubt you'd agree with Suetonius who cautions us, that we should seek to verify every poster's opinions.

 

Secondly, you have identified a case that may be of significance to the debate, namely the Basinghall Finance plc case. However, it is not available on the bailii.org site. Do you have a copy of the judgment that you could post up? It may be helpful to many caggers to understand what arguments were heard and why the permission was refused. If you don't have a copy, could you let us know more about the case and why you say it proves your point?

 

Many thanks

[tifo]

S.136 was introduced and to define the specific requirements for a legal assignment (transfer of absolute ownership). Therefore, to say that the use is fraudulent is obviously absurd and has absolutely no basis in law.

 

s.136 defines how a legal assignment is effected and is meant to be used only in the case of a legal (absolute) assignment. Until notice is given to the borrower it is an equitable assignment and with no specific time period permitted for this notice it can remain indefinate (this seems a loophole). Thus even though the lenders do not break any law they do misuse the intention of s.136 which is for a legal assignment only.

 

When debts are assigned under s.136 (i.e. credit card debt) the whole debt is sold and is not split into benefits, rights, obligations or liablities. As such, does s.136 allow for the different parts of a contract to be split and kept/sold?

[JonCris]

kegi in your sarcasm you ignore (again) the fact that these 'investments' ar meant to be, unbeknown to the borrower, sold over & over again & had that been the case then they wouldn't have been any the wiser. It's only because of the credit crunch & the banks refusal to lend to 'investors' that it's all gone balls up