".... securities that aren’t backed by anything."
[Kemp c. Countrywide] provided what appeared to be the first official confirmation of what we’ve long suspected and described on this blog: that as of a certain point in time post 2002, mortgage originators and sponsors simply quit conveying mortgage notes (the borrower IOUs) through a chain of intermediary owners to securitization trusts, as stipulted in the pooling and servicing agreements, the contracts that governed these deals. .... Bloomberg reporters saw that BankThink had purchased and posted the trial transcripts:
The judge asked DeMartini whether the notes ever move to follow the transfer of ownership, according to the transcript of the August 2009 hearing.
“I can’t say that they’re never moved because, I mean, with this many millions of loans as we have I wouldn’t presume to say that, but it is not customary for them to move,” DeMartini said.
This is in keeping with the judge’s recap, and also underscores the notion that it was Countrywide’s practice to not convey the notes. We have been told separately that a senior industry executive also said that no one in the industry transferred the notes. If true, this has very serious implications. As we’ve indicated, it means that residential mortgage backed securties are not secured by real estate, or as Adam Levitin put it, they are “non mortgage backed decurities. Bloomberg provides further comments along those lines:
“It may mean investors who think they bought mortgage- backed securities bought securities that aren’t backed by anything,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.
Heh. Good thing all those non-mortgage backed securities were only sold once. Oh, wait...