Mortgage Securitisation Discussion Thread

[wfspayback]

I think at this juncture it is prudent to provide a distinction between a 'assignment' of a debt and a 'sale' of a debt:

 

This link from the HMRC helps....... : http://www.hmrc.gov.uk/manuals/vatfinmanual/vatfin3215.htm

 

I've copied and pasted some of what it says below:

 

"Sale of a debt

 

The sale of a debt is a financial transaction, whereby the purchaser acquires ownership of debts from a creditor, at a nominal sum to the face value of the debts. The purchaser assumes all the rights and obligations of the original creditor and all legal and beneficial or equitable interest passes to the buyer to whom full title and risk is transferred.

 

The purchaser of a debt portfolio may either use an in-house operation to effect recovery or contract with one or more debt recovery agencies for use of their collections services as described in VATFIN3255. Depending on the contractual agreement with the original creditor, the purchaser may sell on all or part of the debts acquired.

 

The purchaser of a debt portfolio has no right of recourse to the seller for un recovered debts except where debts are deemed to be irrecoverable prior to the date of purchase e.g. deceased customers. In some cases the sale contract may allow the purchaser to return these accounts and gain a return of the relevant purchase amount.

 

Unless there is a chargeback agreement for unsupported balances, the purchaser does not return uncollected debts to the original creditor - the purchaser will write off the debts and take the loss.

 

Debt purchase companies may also offer contingency debt collection services as described in VATFIN3255.

 

In the sale of a debt, all legal and beneficial or equitable interest passes to the buyer to whom full title and risk is transferred.

 

We are currently waiting the judgment of the Court in a German ECJ reference concerning GFKL Financial Services AG (C-93/10) which questions whether the sale (purchase) of defaulted debts constitutes a service for consideration and an economic activity on the part of the purchaser of the debts even if the purchase price is not based on the face value of the debts. If it is an economic activity would it be exempt from VAT? If it is exempt from VAT, is the recovery of the debts exempt from VAT, as part of a single service or as an ancillary service, or taxable as a separate service? This guidance will be updated as necessary to reflect the outcome of this referral.

 

Assignment of a debt

 

For purposes of this guidance we distinguish the assignment of a debt from a sale of a debt, in that with an assignment only the equitable interest is passed to the assignee and the assignor retains the legal interest in the debt and any liability to obligations arising from the original contract. Often it will not be possible for the assignee to sell that which has been assigned.

 

The use of the term ‘assignment’ can cause misunderstanding and it is essential to be quite clear as to what is actually happening in any particular set of circumstances. If doubts arise, the VAT Deductions & Financial Services Team should be consulted."

 

It's best to read the full info from the link to draw ones own conclusions.

 

Apple

 

Apple it is even obvious to me that as it states above "for purposes of this guidance we distinguish the assignment of a debt from a sale of a debt" - keywords "for the purpose of this guidance" - with the guidance being in specific relation to V.A.T

 

If you read what you have posted again,

 

"In the sale of a debt, all legal and beneficial or equitable interest passes to the buyer to who full title and risk is transferred"

 

This is clearly a legal assignment of the debt. Least we forget that a debt is a chose in action. As such it is subject to s.136 of the LOP 1925. The full title (including the legal interest) can only be transferred by an absolute assignment (legal assignment) - being an assignment that transfers absolutely everything.

 

Back to your above post

 

"for the purposes of this guidance we distinguish the assignment of a debt from a sale of a debt, in that an assignment only the equitable interest is passed to the assignee and the assignor retains the legal interest in the debt and any liability to obligations arising from the original contract"

 

This is equally as clearly an equitable assignment.

 

The distinction you have tried to make between an assignment of a debt and the sale of a debt, only relates to the guidance you have posted. Your post even states "for the purpose of this guidance".

 

The sale in your post is a legal assignment.

The assignment in your post is an equitable assignment.

 

As I am sure you will agree, as it is afterall a legal fact that a legal assignment of a debt - being a chose in action, has to comply with s.136 of the LOP 1925. (notice to borrower etc) please s.136 (a & b) for confirmation of the legal interest of the debt. This is quite basic and obvious.

 

At this juncture, I would like to thank Pegasus Galaxy for their post, which I had the good fortune to read else where recently.

Edited August 14, 2012 by wfspayback

[wfspayback]

Apple your posts only serve to muddy, clear water.

 

*Disclaimer

 

Site Team, I am not trying to undermine a poster - in breach of CAG rules, I am simply stating an observation, which is supported by the evidence posted in this thread.

[applecart]

Thanks wfspayback

 

With respect, I don't consider that you undermine me, my posts or my valid contributions to this topic as party to this 'discussion thread' - so no need for you to apologise on the self imposed assumption that you do : )

 

Your comments are as much appreciated as those of any other poster - this is a discussion thread - you are free to air your point as much as anyone else....

 

Apple

[applecart]

From HMRC guidance, many will relate to the financial transactions that are to do with securitisation of the loan and the fact that an assignment is a transfer of the equitable interest and that a sale transfers both legal/equitable interests.

 

Without notice to a Borrower - this simply means that the buyer cannot sue for the debt and cannot sue for possession until such time as he complies with LPA 136 in relation to the debt element and s.27 LRA in relation to possession.

 

In relation to the original lender - On the surface - he has 'assigned' the debt (i.e - he fails to give notice to the borrower or to update HMLR).

 

......On the ground he has 'sold' the debt (both the legal/equitable interest for valuable consideration)

 

- On the surface - the effect of the 'assignment' is that he can portray to be one that has retained the legal right to the monies and possession

 

.......yet, on the ground, the effect of the 'sale' is that has no right to the monies or possession.

 

Apple

 

 

 

Yes, that a bold statement given the finding in Pender - but, we are concerned here with A.N.OTHER....

[applecart]

I do not overlook the points made by David, Pegasus or wfspayback - all say the same thing - "Pender" - there posts all carry detail from the case law - it is best to remember that 'case law' is not above the applicable Law.

 

Regrettably, the posts that relate to Pender, provide little assistance where A.N.OTHER is concerned. Other than to confirm that - on the surface it is a 'assignment' and without notice the buyer cannot sue the borrower and that on the surface, the original lender continues to sue borrowers - when on the ground, they should have no right to.....

 

Apple

[wfspayback]

Paragon v Pender 2003

 

 

137. I am only concerned of course with the taking of possession, because there was no monetary judgment. I do not see that either section 114 LPA 1925 nor the provisions of the LRA 1925 have impact on the enforcement of the mortgage debt. For there to be a legal assignment of that it seems to me self evident that it must be completed by notice under section 136 LPA 1925 and until so done, even by virtue of section 114, it will remain an equitable assignment only.

 

138. Now this all makes sense. It means that the Defendants need only deal with the registered chargee and no one else. Anything else would be a nonsense.

 

139. That does not mean that the AA (or for that matter an unregistered transfer) is of no effect. Such transfers have an operation in equity. If the transfer documents are by deed, it would confer on the transferees the powers of equitable chargees under section 101 of the Law of Property Act 1925. This was referred to in Fisher & Lightwood again (paragraph 4.6).

 

142. Equally, as Fisher & Lightwood shows again in relation to the mortgage debt, an equitable assignee of the covenant to sue needs to give notice under section 136, otherwise he needs to sue in the name of the original mortgagee or join him; see paragraph 17.3.

 

The above in addition to the Paragon v Pender 2005 extract puts beyond any reasonal doubt proves Pegasus Galaxy's point about the mortgage debt and s.136 and Pegasus's point about the sale being in equity until it is completed by registration - when and only then will it operate at law to transfer the right of possession from the original lender.

 

146. Accordingly, even if the AA confers an equitable interest on CMS3, or constitutes it an equitable chargee it does not matter. They intended, and the LRA provisions confirm, that the Claimant remains the registered proprietor for all purposes.

 

You could change the above AA to MSA, rendering the repeated points made about the MSA totally and completely irrelevant. The MSA is a contract, a contract is not a transfer in the prescribed form.

 

The prescribed form is a TR4 form and only a TR4 form. Only a TR4 form registered with the land registry can divest the right of possession from the lender.

 

Remember in Paragon 2005

 

109. 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.

 

110. 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

 

We have reached the stage now where commen sense tells us that the counter argument has absolutely no factual basis in law.

 

The law is very very clear and it is undeniable that the registered owner of the legal charge by law has the right of possession. As confirmed above nothing within the Mortgage Sale Agreement can divest that right from the lender. The only thing that can, is registration of the TR4 form.

 

This is a legal fact. Nothing you say will change that one simple fact. You can continue to delude yourself but this one fact is unescapable.

 

Pegasus Galaxy cleared up all misunderstandings and explained the facts very clearly. Continued discussion now just appears to be about ego not about right or wrong.

 

*Disclamier

 

Site Team - I am not trying to undermine Applecart in breach of CAG rules. I am responding to the points posted in this thread and expressing my own personal opinion

Edited August 16, 2012 by wfspayback

[Lea_HTH]

... it is best to remember that 'case law' is not above the applicable Law.

 

What do you mean by the above?

[applecart]

Paragon v Pender 2003

 

Whilst I am loath to continually refer back to equitable v legal assignments in ‘pender’ when I am looking to deal specifically with the sale of a debt with regard to A.N.OTHER… perhaps it is best to bring the ‘pender’ issue to close thus..

 

Pender looked at ‘title to sue’ and argued that the ‘assignment’ of the debt denied the lender the right to possession.

 

In relation to ‘137’ – As I understand it, It was the defendants plea that the AA evidenced a legal assignment of the debt and on that basis believed that the original lender had no title to sue – the judge given the LPA 114 as against the LPA 136 dismissed the defendants plea.

 

Having dismissed the defendant plea – at ‘138’ the judge confirms that it ‘makes sense’ because if the borrower has not been given notice the ‘assignment’ has no effect in law, which simply means that the ‘assignment’ was equitable – equitable assignments of debt do not intend or engage a transfer of the legal interest – simply put… the lender retained a right to possession.

 

Interestingly, the judge confirmed at ‘139’ that if the transfer is by way of deed it confers on the SPV the powers of an equitable chargee under LPA s.101

 

Interestingly, at ‘142’ the judge confirms that the SPV cannot sue for the debt until he himself complies with s.136 otherwise he needs to sue in the name of the original mortgagee or join him – for this, the particulars of claim must state that this is the case.

 

“ The above in addition to the Paragon v Pender 2005 extract puts beyond any reasonal doubt proves Pegasus Galaxy's point about the mortgage debt and s.136 and Pegasus's point about the sale being in equity until it is completed by registration - when and only then will it operate at law to transfer the right of possession from the original lender.”

 

You confuse ‘assignment’ with ‘sale’ here… LPA s.136 is to do with assignments having legal effect on notice being given to the borrower. It has nothing to do with ‘sales’.

 

Lenders plea the ‘assignment’ in a court of Law – never the ‘Sale’

 

A ‘sale’ is by virtue of a separate contract the Mortgage Sale Agreement – for securitization purposes, the contract is between the original lender and the SPV. It is also a statutory right of the lender under the provision of LPA 101 (6) NOT LPA 101 (1) . The Borrowers mortgage contract 9 times out of 10 will state that the borrower accepts that they will not be informed when a ‘sale’ occurs.

 

Again, the Judge at ‘146’ is referring to what he has been led to understand is an argument to do with an ‘assignment’ of a debt not a sale of a debt.

 

“You could change the above AA to MSA, rendering the repeated points made about the MSA totally and completely irrelevant. The MSA is a contract, a contract is not a transfer in the prescribed form.”

 

No, you cannot change the AA to MSA, they are completely different and their individual implications on the borrower are altogether different.

 

Sales are governed by the Sale of Goods Act 1979.

 

The MSA comes first – the loans are sold – evidence of a MSA brings into the equation the Sale of Goods Act 1979 - it is only after this time that any AA may become party to the equation.

 

“The prescribed form is a TR4 form and only a TR4 form. Only a TR4 form registered with the land registry can divest the right of possession from the lender.”

 

Again, an assignment has no legal effect until registration of the disposition. When done, the SPV can then step into the shoes of the original lender ‘officially’ and be seen by the world at large as the entity with ‘title to sue’. In an’ assignment’, until this happens – the ‘assignment’ is equitable. This is quite a separate instance from where a ‘sale’ of the debt has occurred.

 

Remember in Paragon 2005

 

109. 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.

 

Again, the court at ‘109’ is dealing with what it has been led to understand is an ‘assignment’ of the debt. NOT a ‘sale’ of the debt.

 

Quite rightly, for the ‘assignment’ to have legal effect, notice must be given to the borrower – it is common knowledge that until this happens the legal interests remain with the original lender.

 

Again, the court at ‘110’ is dealing with what it has been led to understand is an ‘assignment’ of the debt.

 

“ We have reached the stage now where commen sense tells us that the counter argument has absolutely no factual basis in law”.

 

Be mindful that your own common sense is not questioned here… after all we are dealing with a sale of the mortgage debt – not assignment – Pender is case law and bears little if any relation to the instance when a debt is sold.

 

“The law is very very clear and it is undeniable that the registered owner of the legal charge by law has the right of possession. As confirmed above nothing within the Mortgage Sale Agreement can divest that right from the lender. The only thing that can, is registration of the TR4 form.”

 

When a debt is assigned, the registered owner of that legal charge retains the right to possession. However, may I humbly direct you to the Sale of Goods Act 1979 for a better understanding of what effect the Mortgage Sale Agreement has or indeed any contract of sale for that matter.

 

“ This is a legal fact. Nothing you say will change that one simple fact. You can continue to delude yourself but this one fact is unescapable.”

 

It is a ‘legal fact’ in relation to ‘assignments’ only. It is not a ‘legal fact’ in relation to ‘sales’. I will ignore your last comment for others to judge for themselves : )

 

Pegasus Galaxy cleared up all misunderstandings and explained the facts very clearly. Continued discussion now just appears to be about ego not about right or wrong.

 

All points made by Pegasus, yourself and Dave are more than essential in relation to assignments of debt and the findings in Pender have established this for us. Thank you.

 

I welcome for anyone to bring forward their knowledge in relation to sales of debt to the forum on the understanding that the arguments in relation to ‘assignments’ is ended.

 

*Disclamier

 

Site Team - I am not trying to undermine Applecart in breach of CAG rules. I am responding to the points posted in this thread and expressing my own personal opinion

 

Most appreciated : )

[Lea_HTH]

"Re: Mortgage Securitisation Discussion Thread

 

Originally Posted by

applecart

... it is best to remember that 'case law' is not above the applicable Law.

"

 

 

 

 

 

 

 

 

I repeat my question from earlier...what do you mean by the above?

 

[applecart]

Apologies Lea_HTH

 

I did not see your post until now.

 

I take for granted that case law can be pleaded during proceedings and can either be relied upon or ignored by a judge. Essentially when you plead 'case law' - a judge will apply 'discretion in his application and reliance upon it and advise accordingly how and where he has applied it (normally)....

 

I take for granted that 'Statute' is the Applicable law - a judge cannot ignore that which is the Law. I can find no law that states a judge must rely on case law over that of the applicable law (as and when provided - especially when it is likely to devalue the case law plea)

 

 

 

Apple

[applecart]

I am conscious that not all lenders sell or intend to sell anymore than the beneficial interest of the debt, but to be fair to those borrowers where this is simply not the case, their civil rights must be taken into account. (i.e protection from A.N.OTHER)

 

ANY/ALL sales are governed by the provisions of the Sales of Goods Act 1979. So that if you have executed a contract to sell (MSA) it's implications are to be viewed in relation to the sale of a mortgage debt that will have been created by means of deed and it's likely effect upon the borrowers loan and the relationship between the original lender and the borrower is to be taken from there.....

 

To quote 'Pegasus': "Secondly, it is a common misconception that a borrower applies for a mortgage and that a lender gives a mortgage to a borrower. In fact the lender gives the borrower a loan and in return, it is the borrower that gives the lender a mortgage. This is a very important point and goes to the root of your argument. For the avoidance of doubt the borrower is the mortgagor and the lender is the mortgagee."

 

I am more than aware that the borrower grants the lender a mortgage - I am also aware that the borrower has the right to do so being the 'absolute owner'.

 

It is a sad realisation that modern mortgages are not the same as back in the day - lenders are no longer 'loyal' to a borrowers interest - it would seem the allure of the money markets present much larger returns.......

 

The power of sale confers far more than the sale of the property or enforcement of the property by way of seeking possession via a court of law... we are in an age, where the powers of sale lead many lenders to effect a sale and enter possession as party to taking the 'self help' statutory right to the extreme....

 

The power by virtue of LPA 101 (6) is the norm

The power to enter into possession to effect the sale also appear to be the norm

 

These are rights that the lender has always had, Some whizz kid on wall street showed lenders how to use them to great advantage no doubt....

 

Notwithstanding having entered into possession and effected a sale (divesting both legal and equitable interests) the Lender then comes for what 'Pegasus' kindly advises..... "Remember, possession is enforcement of the ‘mortgage by way of legal charge’ given to the lender by the borrower and is not enforcement of the mortgage debt itself"......

 

Borrowers may view this as some kind of contradiction on the basis that once you have sold your 'legal charge' how is it that a lender still believes it can legally seek possession of a borrowers property on a 'legal charge' that no longer belongs to it? when LPA s.88 (staute-applicable law) advises borrowers that the right is supposed to have been extinguished....???

 

Apple

[Lea_HTH]

Apologies Lea_HTH

 

I did not see your post until now.

 

I take for granted that case law can be pleaded during proceedings and can either be relied upon or ignored by a judge. Essentially when you plead 'case law' - a judge will apply 'discretion in his application and reliance upon it and advise accordingly how and where he has applied it (normally)....

 

I take for granted that 'Statute' is the Applicable law - a judge cannot ignore that which is the Law. I can find no law that states a judge must rely on case law over that of the applicable law (as and when provided - especially when it is likely to devalue the case law plea)

 

No need for apologies.

 

You have misunderstood the nature of case law. It is the interpretation of statute by the judiciary.

 

Case law is binding on every court lower than that in which it was made. If, for example, a case was decided in the Appeal Courts, then EVERY court below that level MUST follow it. If a similar case reaches the same level of court, then the judges in that case are allowed to distinguish the new case from the old case on the basis of facts.

 

Case law made in the Supreme Court is binding on every court in the land.

 

So you see, one cannot separate case law from statute - the former is the interpretation of the latter, and therefore until the statute is changed, it is the case law that the judges use to decide similar cases.

 

For an excellent example of how a statute can be changed if the case law is deemed to be 'wrong' is with the Tenancy Deposit Scheme - Tiensa (case law) interpreted the statute (Housing Act 2004 - relevant sections in force 2007) in a way which appeared not to have been intended, so the statute was amended in the Localism Act 2011.

 

I hope that helps with your understanding.

[applecart]

That's truly very helpful - Thank you.

 

Apple

[Nick Nick]

Extract from A.N.OTHERS Mortgage Sale Agreement (2007)

 

"Terms of Sale and Purchase"

 

“It shall be a term of any sale referred to in Clause 3.1 (Sale and Purchase of Mortgage Loans) that the relevant Seller with full title guarantee (or in the case of Scottish Loans, with absolute warrandice, or, in the case of Northern Irish Loans, as beneficial owner) shall sell and the Issuer shall purchase, subject to the subsisting rights of redemption of the Borrowers:

 

(a) all right, title, interest and benefit of such Seller (both present and future) in and under the relevant Loans and their related Collateral Security (including their related Mortgages and (if any) Life Policies), including, for the avoidance of doubt:

 

(i) all sums of principal (including Principal Arrears), interest (other than Acquisition Interest) or any other sum payable under such Loans on or after the date of Completion and the right to demand, sue for, recover, receive and give receipts for all principal moneys payable or to become payable under such Loans and Mortgages or the unpaid part thereof and the interest (other than Pre-Acquisition Interest) due or to become due thereon and for any other sums due under such Loans;

 

(ii) the benefit of all securities for such principal moneys and interest and other sums payable, the benefit of all Occupier's Consents, the benefit of all MH/CP Documentation, the benefit of all Postponement Documents and the benefit of the right to sue on all covenants and undertakings in favour of such Seller or the relevant Originator in relation to each Loan and its related Collateral Security and the right to exercise all powers of such Seller or the relevant Originator in relation to each such Loan and its related Collateral Security;

 

(iii) (subject to the subsisting rights of redemption of Borrowers) all the estate and interest in the Properties the subject of the related Mortgages; [my emphasis]

 

(iv) (subject to the subsisting rights of redemption of Borrowers) all the estate and interest in the Life Policies (if any) the subject of the related charges;

 

(v) to the extent that they are assignable all clauses and rights of action in favour of such Seller or the relevant Originator against any person in connection with any report, valuation, opinion, certificate, consent or other statement of fact or opinion given in connection with any such Loans and Mortgages or affecting such Seller's or the relevant Originator's decision to make the relevant advance initially....”

 

Apple

 

The above 'A.N.OTHER Mortgage Sale Agreement 2007' would appear to be the MORTGAGE SALE AGREEMENT between PREFERRED MORTGAGES LIMITED, SOUTHERN PACIFIC MORTGAGE LIMITED, EUROSAIL-UK 2007-6NC PLC and BNY CORPORATE TRUSTEE SERVICES LIMITED of 28 November 2007 (or from another Eurosail 2007 MSA)

 

The above is from the bottom of page 2 and continues onto page 3

SPML MSA.pdf

[Nick Nick]

A.N.OTHERS Power of Attorney states is here, again I apologise for the length but it is again, copied and pasted as is excluding Seller, Issuer or Bank actual names:

 

 

FORM OF SELLER POWER OF ATTORNEY

 

THIS POWER OF ATTORNEY is made as a deed on xxxxx

 

BY

 

A.N.OTHER (seller)

 

IN FAVOUR OF:

 

ISSUER

 

And

 

A BANK

 

THIS DEED WITNESSETH that, for good and valuable consideration and as security for the respective interests of the ISSUER and the TRUSTEE under the Transaction Documents and the performance of the Seller’s obligations under the Transaction Documents, the SELLER IRREVOCABLY APPOINTS each of the ISSUER, the TRUSTEE and any RECEIVER and/or ADMINISTRATOR appointed from time to time in respect of the ISSUER or the ISSUER’s assets (each an “ATTORNEY) severally to be its true and lawful attorney (with power to sub delegate) and to be the SELLER’s agent and in the Seller’s name to do any act, matter or thing from time to time which any Attorney, in its absolute discretion, considers appropriate for the protection or preservation of that Attorney’s interest in the LOANS and their COLLATERAL SECURITY, the Insurance Contracts and other assets or which ought to be done by the SELLER under the covenants, undertakings and provisions contained in the Mortgage Sale Agreement including (without limitation) any or all of the following:

 

1 To exercise the SELLERS RIGHTS, POWERS and DISCRETIONS under the LOANS AND THEIR COLLATERAL SECURITY including the right to FIX THE RATE OF INTEREST PAYABLE under the LOANS in accordance with the terms theredf;

2 to exercise all the powers exercisable by the SELLER BY REASON OF ITS REMAINING FOR THE TIME BEING REGISTERED OWNER OR HERITABLE CREDITOR AT THE LAND REGISTRY, the Registers of Scotland or the Registers of Northern Ireland or, as the case may be, MORTGAGEE OF ANY OF THE MORTGAGES and in particular, but without prejudice to the generality of the foregoing, to make further advances to Borrowers;

3 to DEMAND SUE for and receive monies due or payable under the LOANS AND THEIR RELATED COLLATERAL SECURITY or RELATED RIGHTS;

4 upon payment of such moneys or any part thereof, to give good receipts and discharges for the same and to execute such receipts, releases, re-assignments, retrocessions, surrenders, instruments and deeds as may be requisite or advisable;

5 to execute and deliver LEGAL TRANSFERS, ASSIGNMENTS, ASSIGNATIONS AND DECLARATIONS of TRUST as contemplated under the Mortgage Sale Agreement in each case as the ISSUER or the TRUSTEE (as the case may be) consider necessary (with, in either case, such amendments as may reasonably be required to such transfers, assignments, assignations or declarations of trust and supplemental declarations of trust of ASSETS ORIGINATED BY THE SELLER and the subject of the Mortgage Sale Agreement as the ISSUER or the TRUSTEE may require and notices of all such transfers, assignments, assignations and declarations of trust in each case in such form as the ISSUER or the TRUSTEE may require;

6 to exercise any other rights, discretions and powers under The Mortgage Sale Agreement and for that purpose to execute, sign and do any deeds, documents, acts or things and;

7 to do every act or thing which the SELLER is OBLIGED TO DO under the Mortgage Sale Agreement or which any ATTORNEY may otherwise consider to be appropriate, proper or expedient for fully and effectually VESTING OR TRANSFERRING THE INTERESTS OF EACH OF THE ASSETS SOLD under the Mortgage Sale Agreement/or the SELLERS’s ESTATE RIGHT AND TITLE therein or thereto in the ISSUER and/or the TRUSTEE and their SUCCESSORS IN TITLE or other person or person ENTITLED TO THE BENEFIT THEREOF (as the case may be) in the same manner and as fully and effectually in ALL RESPECTS AS THE SELLER COULD HAVE DONE.

Every ATTORNEY shall have the power by writing under its hand (or, if the ATTORNEY is not an individual, under the hand of an officer of the ATTORNEY) from time to time to appoint a substitute who shall have power to act on behalf of the SELLER as if that substitute shall have been originally appointed as an attorney by this deed (including, without limitation, the power of further substitution) and/or to revoke any such appointment at any time without assigning any reason thereof.

 

The SELLER HEREBY AGREES AT ALL TIMES HEREAFTER TO RATIFY AND CONFIRM WHATSOEVER ANY ACT MATTER OR DEED ANY ATTORNEY OR SUBSTITUTE SHALL LAWFULLY DO OR CAUSE TO BE DONE UNDER OR CONCERNING THIS DEED.

 

The SELLER HEREBY DECLARES THAT THESE PRESENTS HAVING BEEN GIVEN FOR SECURITY PUPOSES AND TO SECURE A CONTINUING OBLIGATION, THE APPOINTMENTS MADE BY IT UNDER THIS DEED SHALL BE IRREVOCABLE …..

[My Emphasis as and where shown as ‘capital letters’ or ‘underline’]

 

Apple

 

This would be from pages 53-55 of the MORTGAGE SALE AGREEMENT between PREFERRED MORTGAGES LIMITED, SOUTHERN PACIFIC MORTGAGE LIMITED, EUROSAIL-UK 2007-6NC PLC and BNY CORPORATE TRUSTEE SERVICES LIMITED of 28 November 2007 (or from another Eurosail 2007 MSA)

SPML MSA.pdf

[Nick Nick]

I am bemused that anyone would care what is fair or unfair to the likes of REFERRED MORTGAGES LIMITED, SOUTHERN PACIFIC MORTGAGE LIMITED, EUROSAIL-UK 2007-6NC PLC and the other Eurosail's, given their track record and dire reputation on CAG and how they reportedly treat their borrowers.

 

I am sure SPML, SPPL and Eurosail are grateful for your concerns about what is fair to them.

 

To refuse to post the Mortgage Sale Agreement because it would be unfair to them and only post certain edited extracts would appear to show the strength of your argument in a very bad light and made me wonder what could be in this Mortgage Sale Agreement that you might not want people to read themselves.

 

Your real reasons not to post the Mortgage Sale Agreement became very clear, once I read it.

[Nick Nick]

Looking at what Lord Justice Jonathan Parker actually says in more detail below......

 

Lord Justice Jonathan Parker :

 

“…..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)….[my emphasis

 

From the above post

 

'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'

 

In addition to the above extract we also have to consider the judgement's of the Court of Appeal case of Paragon Finance Plc v Pender & Anor [2005] EWCA Civ 760 (27 June 2005).

 

We have to consider that as a Court of Appeal Judgement

 

Case law is binding on every court lower than that in which it was made. If, for example, a case was decided in the Appeal Courts, then EVERY court below that level MUST follow it. If a similar case reaches the same level of court, then the judges in that case are allowed to distinguish the new case from the old case on the basis of facts.

 

109.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.

 

The above judgement which is binding on every lower court confirms

 

1. As registered proprietor of the legal charge, the lender retains legal ownership
   
2. An incident of legal ownership is the right to possession
   
3. An uncompleted transfer does not operate at law to divest the lender of the right to possession.
   

 

Now we have to consider on what basis does an uncompleted transfer (one that has not been completed by registration) not operate at law, resulting in the lender retaining legal ownership including the right of possession.

 

The above Judgement is supported by legislation - being the Land Registration Act 2002

 

27 Dispositions required to be registered

 

(1)If a disposition of a registered estate or registered charge is required to be completed by registration, it does not operate at law until the relevant registration requirements are met.

 

(3)In the case of a registered charge, the following are the dispositions which are required to be completed by registration—

 

(a)a transfer, and

(b)the grant of a sub-charge.

 

Both legislation and case law (being the judiciary interpretation of legislation) confirms that a transfer of a legal charge does not operate at law until it is completed by registration.

 

It is logical to conclude that a transfer that has not been completed by registration is by definition uncompleted.The judgement from Pender confirms that an uncompleted transfer does not operate at law to divest the lender of the right to possession.

[Nick Nick]

Now that we have established that an uncompleted transfer of the legal charge does not operate at law and does not serve to divest the right of possession from the lender, we can refer to the MORTGAGE SALE AGREEMENT between PREFERRED MORTGAGES LIMITED, SOUTHERN PACIFIC MORTGAGE LIMITED, EUROSAIL-UK 2007-6NC PLC and BNY CORPORATE TRUSTEE SERVICES LIMITED of 28 November 2007 (previously referred to in this thread as the 'A.N.OTHER Mortgage Sale Agreement 2007'.

 

The question that now needs to be asked, is if this document proves that the transfer of the legal charge has been completed by registration, so that the transfer operates at law and does divest the lender of its right to possession.

 

To ask this question we first must wrongly disregard the judgement of Paragon Finance Plc v Pender & Anor [2003] EWHC 2834 (Ch) (25 November 2003).

 

132.The prescribed form is TR3. The operative part of the transfer (paragraph 8) is commendably succinct "the transferor transfers the charge mentioned to the transferee". The AA is clearly not a transfer in the prescribed form.

 

Note: Since the above judgement the TR3 form - being the prescribed form to effect a transfer of a Legal Charge, has been replaced by the Land Registry with the TR4 form (effective from 1 October 2009).

 

Page 13

 

(i) SPML shall exercise its rights under the Asset Sale Agreement so that the legal title to any Mortgages relating to the Matlock Loans are transferred to SPML and that SPML is or becomes registered at the Land Registry as proprietor or owner of each Mortgage relating to a Matlock Loan having a registered title; and

 

Page 13

 

(j) SPML shall exercise its rights under the A&L Mortgage Origination and Sale Agreement so that the legal title to any of the Mortgages relating to the A&L Loans are transferred to SPML and that SPML is or becomes registered or recorded at the Land Registry as proprietor or owner of each Mortgage relating to an A&L Loan having a registered or recorded title.

 

The above two extracts confirm that SPML and not Eurosail is or will become registered or recorded at the Land Registry as proprietor or owner of each Mortgage

 

Pages 13/14

 

 

8 PERFECTION OF TITLE AND FURTHER ASSURANCE

 

8.1 No Perfection Acts prior to a Perfection Event Each of the Issuer and the Trustee undertakes that unless a Perfection Event has occurred and is continuing it will not:

 

(a) give or require the giving of any notice of the assignment or assignation of, or of its interest in, any Loan or its related Collateral Security, whether to the relevant Borrower, to an insurance or assurance company which is an insurer under a Life Policy or to any other person;

 

(b) take any steps:

 

(i) to register itself at the Land Registry or, as the case may be, the Land Registry of Northern Ireland as proprietor or owner of any Mortgage of any Property having a registered title or effect any other registration at the Land Registry or, as the case may be, the Land Registry of Northern Ireland in respect thereof;

(ii) to register or record itself as heritable creditor under any Scottish Mortgage or effect any other registration or recording in the Registers of Scotland in respect thereof; or

(iii) to register itself at the Central Land Charges Registry or, as the case may be, the Registry of Deeds, Belfast or effect any other registration at the Central Land Charges Registry or, as the case may be, the Registry of Deeds, Belfast,in respect of any Mortgage;

 

© send or require to be sent to any solicitor or licensed or qualified conveyancer who has acted on behalf of a Seller or Originator in respect of any Loan who has custody of Title Deeds, a letter or other communication requiring such solicitor or licensed or qualified conveyancer to hold such documents to the order of the Issuer or the Trustee; or

 

(d) perform, or request a Seller or Originator to perform, any of the other Perfection Acts.

 

Page 14

 

8.2 Perfection Acts

 

(a) If a Perfection Event has occurred and is continuing, a Seller shall, if requested in writing by the Issuer or the Trustee, do such of the Perfection Acts as may be requested by the Issuer or the Trustee to perfect the title of the Issuer in the Loans and

their related Collateral Security.

 

(b) If a Seller fails to comply with the undertaking in Clause 8.2(a), the Issuer or the Trustee may, pursuant to the relevant Seller

 

The Mortgage Sale Agreement confirms that registration will not take place until a perfection event has occured.

 

As the transfer will not be registered until such a time that a perfection event occurs the transfer is uncompleted - in otherwords it has not been completed by registration.

 

Pender tells us that

 

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.

 

One incident of its legal ownership – and an essential one at that – is the right to possession of the mortgaged property.

 

The Land Registration Act 2002 tells that

 

27 Dispositions required to be registered

 

(1)If a disposition of a registered estate or registered charge is required to be completed by registration, it does not operate at law until the relevant registration requirements are met.

 

(3)In the case of a registered charge, the following are the dispositions which are required to be completed by registration—

 

(a)a transfer, and

(b)the grant of a sub-charge.

 

Confirming that the uncompleted transfer detailed in the Mortgage Sale Agreement does not operate in law.

 

To conclude

 

The A.N.OTHER Mortgage Sale Agreement 2007 - confirms that the transfer has not and will not, until a perfection event occurs be completed by registration.

 

Case Law (Pender and others) and Legislation (Land Registration Act 2002) - both confirm that an uncompleted transfer does not operate at law and does not serve to divest the lender of its right to possession.

 

The A.N.OTHER Mortgage Sale Agreement therefore confirms that the legal ownership of the legal charge is retained by the lender and as such the lender has the right to possession.

TR4.pdf

SPML MSA.pdf

[applecart]

We may yet find, that the A.N.OTHER is not only that of SPML's, but as you have kindly provided a lender for the discussion to ensue, I will proceed from there if you will.....

 

Firstly, It bothers me not which lender is culpable- to me, any lender who's head fits the cap will do : )

 

I didn't mention any particular lender, because I did not wish to be so bold as you have been - but many holders of mortgages with SPML will now be able to consider their civil rights with regard to that particular lender - Thanks will no doubt go out to you for that : )

 

Apple

[applecart]

I had thought that we had managed to distinguish the core difference between A.N.OTHER (now substituted by SPML) and the findings in Pender (as a case that essentially meets the lenders objective with regard to ‘assignments’ and is the lenders ‘surface’ plea in court) on to the issue of the ‘sale’ of the mortgage (being the ‘on the ground’ truth in the case of A.N.OTHER/SPML).

 

I came across this case law: ‘Swift 1st Ltd v Colin & Ors [2011] EWHC 2410 (Ch) (27 July 2011)....’ It is not an appeal case, but makes reference to a court of appeal case…

 

This was a case Before His Honour Judge Purle QC at the Royal Courts of Justice in London... I have added highlighted interpretation in ‘layman terms’

 

It is quite extensive – so, I have taken from it that which I think are the salient sections and broken it down over a few posts to assist discussion…

 

'9 As the Rileys were the registered proprietors of the freehold estate, they had power to confer upon the mortgagee full power to sell that freehold. The effect of the exercise of the power of sale is set out in section 104 of the same Act. In subsection (1) it is provided as follows:

 

"A mortgagee exercising the power of sale conferred by this Act shall have the power, by deed, to convey the property sold, for such estate and interest therein as he is by this Act authorised to sell or convey or may be the subject of the mortgage, freed from all estates, interests, and rights to which the mortgage has priority, but subject to all estates, interests, and rights which have priority to the mortgage"

 

I interpret that the Judge confirms what Pegasus advised previously; it is the Borrower who gives the lender the power of sale and that it is s.104 LPA 1925 that refers to the ‘effect’ of what happens when a lender exercises that power.

 

Apple

[applecart]

"10 The TR2 which was executed in this case transferring the property to Mr and Mrs Colin was executed by the claimant in exercise of its power of sale. It is evident that, as the mortgage was by deed, section 104 is engaged, the claimant's authority to sell deriving from section 101. It seems to me, therefore, that the claimant had full power to sell and that the effect of that sale was to override all subsequent interests and the claimants own interest[/B]This follows also from section 88 of the Law of Property Act, which is effectively incorporated by reference by section 101(6), which provides as follows:

 

"The power of sale conferred by this section includes such power of selling the estate in fee simple or any leasehold reversion as is conferred by the provisions of this Act relating to the realisation of mortgages"

 

I interpret that when a Borrower enters into a sub-prime mortgage he will sign a TR2 form to convey property to a valid purchaser, clearly there is no ‘purchaser’ of which the Borrower knows of or intends to sell to. It could be, that the Lender takes advantage of this and uses it for his own purposes….additionally; a Borrower will also sign a mortgage deed to convey the power of sale to the lender. When a Borrower does so, section 104 is ‘engaged’ if he exercises the power of sale by virtue of s.101. From there, s.88 and s.101 (6) comes into play…

 

Apple

[applecart]

"11 Section 88 relates to the realisation of freehold mortgages and provides in subsection (1):

 

"(1) Where an estate in fee simple has been mortgaged by....a charge by way of legal mortgage and the mortgagee sells under his staturtory or express power of sale -

 

(a) the conveyance by him shall operate to vest in the purchaser the fee simple in the land conveyed subject to any legal mortgage having priority to the mortgage in right of which the sale is made and to any money thereby secured, and thereupon:

 

(b) the mortgage term or the charge by way of legal mortgage and any subsequent mortgage term or charges shall merge or be extinguished as respects the land conveyed;

 

and such conveyance may, as respects the fee simple, be made in the name of the estate owner in whom it is vested."

 

I need not read any other part of the section, but plainly section 101(6) brings that into play"

I interpret that at the instant that s.101 (6) and s.88 are engaged, that there is no ambiguity in what the learned Judge states: ‘the effect of that sale was to override all subsequent interests and the claimants own interest’(the ‘claimant’ being the lender)

 

Apple

[applecart]

HJ Purle QC went on to say:

 

13. ‘ Accordingly it seems to me that the claimant had full power of sale over the freehold, notwithstanding that its charge was not substantively registered and that it did not become the registered proprietor of any charge. The power of sale derives not from the niceties of the Land Registration legislation, but from the Law of Property Act 1925, and all that is required is a mortgage by deed. For section 88 to be engaged, all that is required, so far as relevant to the present case, is a charge by way of legal mortgage. The fact that this charge by way of legal mortgage was in the event unregistered, is, in my judgment, neither here nor there. It is still such a charge within the meaning of the Law of Property Act 1925 and section 88 in particular. In those circumstances it seems to me that the claimant is entitled to succeed on that ground alone.

There will be those of you who are familiar that the Purchaser in securitization does not register its interest at Land Registry, the learned Judge at s.13 advises that it is not what is on the register that is the limb upon which a lender can rely, it is what is in the statute of the LPA 1925 that takes precedent on reliance on the mortgage deed. The Judge doesn’t stop there… he looks at the fact that the purchaser has not registered his charge at HMLR and says it is ‘neither here nor there it is still a charge within the meaning of LPA 1925 and section 88 in particular’ – section 88, is to do with extinguishing of the interest of the seller…..

 

Apple

[applecart]

"14. The Land registry have taken the point in correspondence that, as the charge was unregistered, it took effect in equity only and that, as an equitable mortgage, albeit made by deed, the power of sale did not arise. This, it seems to me, is erroneous. The power of sale, as I have said, arises under section 101 of the 1925 Act, and that merely requires that a mortgage be made by deed, which this one was."

 

I interpret that it is Land Registry’s stance that where a charge is not registered, it is to be considered no more than an ‘equitable’ interest – (no doubt by virtue of the conclusiveness of title that is s.58 (1) LPA)… but, in assuming that the learned Judge will have taken this into account, he calls the Land Registry’s take on the matter ‘erroneous’ and re-affirms that it is s.101 and the deed that is to be taken note of…

 

Apple

[applecart]

At 15; H J Purle QC goes on to consider a decision in the Court of Appeal case Re: White Rose Cottage [1964] Ch 483 in which Wilberforce J held – ‘in the case of a mortgage by deposit under seal, a true equitable mortgage – that the expression “the mortgage property” in section 101 meant the property over which the mortgage deed purported to extend and was not limited to an equitable interest in that property.”

 

HJ Purle QC stated: ‘That seems to me to be correct. As counsel pointed out in the course of argument, a power, including the power of sale, is by its nature an authority to exercise certain rights over property in which the donee of the power does not necessarily have any proprietary interest, and which therefore enables the donee of the power to dispose of property which that donee does not own. Given that that is so, there is not good reason why the extent of the power of sale should be limited by reference to the limited extent of the interest to which it may be annexed, such as, on this analysis, an equitable mortgage.’

 

I interpret that the learned Judge confirms that a mortgage deed does not only extend to the equitable interest alone it in fact extends to legal interest as well, so that a power of sale includes both legal and equitable interests.

 

Apple