Explanation and Overview of the Loan Securitization Process Generic

Notice to Principal is Notice to Agent, Notice to Agent is Notice to Principal,

Applicable to all Successors, Assigns, and Agents: Silence, when there is a moral or legal Duty to respond, constitutes Agreement.

Page 1 of 8 Explanation and Overview of Loan Securitization Process

From: [Corporate name], First-Middle, in esse In care of: # Bankstas Road

Town (last two numbers from ZIP which is the original mailing post code for town), ABC State of the Union, u. s. of A. (without the UNITED STATES)

In ref: Notice of Rescission for Fraud ANNEXED document: Explanation and Overview of Loan

Securitization Process

Background and Introduction In 1933, the Glass-Steagal Act was enacted to regulate the FDIC and banking. Specifically, it governed the protection of depositors' monies so that banks were not allowed to gamble with the money in their safekeeping; this meant that banks could not trade their assets on Wall Street.

Sixty-six years later, in 1999, the Glass-Steagal Act was repealed and another bill was introduced, known as the GrammLeachBliley Act. This effectively allowed big banks to package and securitize their loans onto Wall Street.

Suddenly, the trillions of dollars from Wall Street could be used to fund loans. This meant that more loans were available to more people. Retirement funds, hedge funds, and all sorts of institutional investors from across the globe had what was assumed to be a safe place to park their money these safe places would come to be known as Mortgage-Backed Securities (MBS).

These institutions demanded that banks make these mortgage-backed securities packages available to them. These institutions relied on the following:

1) The banks banking license 2) The banks underwriting process 3) The banks collections infrastructure

The bankers realized that since they were not required to be left holding the bag at the end of the day, they could simply underwrite any old loan from any idiot who could affix their unique signature patent to paper. During the Bush-era, the bankers decided to change their underwriting guidelines around 2001-2002.

This enabled virtually anyone to go down to the bank and get a $1,000,000 alleged loan with no money down. These were commonly known as liar loans in the mortgage industries. This was great for low income earners, as long as the housing market was in a boom growth curve. This becomes really bad in a housing bubble, where the price of housing is way beyond the affordability index of most householders' median income. The Incentive and Motivation of Securitization When a bank allegedly lends money, they traditionally get 2.5 times the face value of the loan over the 30 year term of the loan. Considering that they did not use a single red cent of their own money, this is not a bad deal for the banks. Since funds are created from the Debtors (i.e. the person who is getting the loan) private Credit (private side of the Treasury Account), as is verifiable in the Net Money daily transaction report, which shows the source of funds that are funding an alleged bank loan come from the alleged Debtors own account not the banks, which are barred from lending their own money or their depositors money.

The money that funds the alleged loan is digitally created out of thin air, through the Federal Reserve




System (read Modern Money Mechanics published by the Federal Reserve).

If someone borrows $100,000 for a term of 30 years, that party will have to pay around $350,000 to the bank, as verified by the The Truth in Lending disclosure statement in the loan documents.

Because of the GrammLeachBliley Act, commercial banks are now able to sell mortgage-backed securities. Some greedy and devious people at Goldman-Sachs and others in the financial industry came to the conclusion that they could make even more money if they could sell loans on Wall Street, and that is exactly what they did.

These bankers were not lending their own money or assets or those of their depositors and still were making 2.5 times the face value of the original mortgage loan, over the 30 year term of the loan. But, that was not enough for them: they wanted more and they wanted it immediately, so they hit upon a way to make up to 1.5 times the face value of the original loan, at its inception, in addition to the 2.5 times over the course of the loan, for a staggering total of up to 4 times the face value of the original loan.

These greedy bankers began packaging these loans and selling them on Wall Street. As the market grew, they not only made money from the sale... but also from the appreciation of the stock (banks are allowed to hold up to 10% of the security and still qualify as a sale under Financial Accounting Standards).

Under the fractional reserve banking system, a bank can lend up to 9 times the face value of the amount of their depositors' money. In other words, a deposit of $1 into the banks cash reserves allowed it to lend up to $9 out. But, clever and greedy bankers suddenly realized that there was even more money to be made if they sold the loan and received the cash immediately.

So, from a $100,000 loan, banks immediately receive $150,000 cash from the sale of that loan. This money on account is then treated as a deposit, which means the bank can now lend out $1.35 million (9 times $150,000). And they could do this again and again, and again. This was really, really good for the banks! This was really good for borrowers (especially marginally-qualified borrowers), as there is a sudden glut of unlimited money to borrow from. This was really bad for the economy in the long run, as we all have seen.

Economics 101 tells us if you have too much money, chasing limited goods, it leads to an increase in prices, which is exactly what happened.

The banks threw their previous underwriting guidelines out the window. They had what's called a fiduciary responsibility to ensure that the loans which were made were properly underwritten. This means that they were supposed to make sure that the loans they underwrote were backed by people who could actually afford to pay that loan back. Instead, the bankers just ignored prudent and responsible underwriting guidelines, in the name of greed.

The bankers knew from the beginning that they were not going to keep these often-times dubious loans on their books. They had already decided that all those loans were destined for Wall Street and so it suddenly became a game of hot potato, as it became someone elses problem.

The bankers basically stuck it to Wall Street and Wall Street knowingly stuck it to the rest of the world by passing on trillions of dollars in worthless paper. This wiped out many retirement funds, stock portfolios and life insurance portfolios. It was the perfect set-up for the biggest financial meltdown in the history of Mankind, the Perfect Storm.

Lets consider the Securitization process and how it relates to my alleged loan and bank fraud.




Stage 1: The Pooling and Servicing Agreement Process Once a loan is closed, it quickly gets put into a Pooling and Servicing Agreement. This Pooling and Servicing Agreement is then registered with the SEC (Securities Exchange Commission) as a REMIC Trust. REMIC is an acronym for: Real Estate Mortgage Investment Conduit. It is also known as a Special Purpose Vehicle (SPV) for the purpose of tax exemption purposes.

A master servicer of the REMIC is appointed and a Trustee to manage the Trust. Normally, the Trustee of a Trust has the power and responsibility to administer the assets of that Trust.

For example, back in the days of feudal lords, these lords would create trusts in which to put their assets (such as their land, their castle, and so on) into. In the event that something happened to the lord, the trustee had the power to manage the estate / trust. However, in the case of a REMIC, the trustee does not have the power to manage the assets of the Trust. Once a REMIC is formed, it then gets converted into a security that is publicly-traded on Wall Street. Stage 2: The Changing of the State of the Negotiable Instrument Imagine, if you will, that my loan is a carrot. It allegedly got thrown in with thousands of other carrots into a giant juicing machine called a REMIC. At the end of the process, many gallons of carrot juice were created from all the thousands of individual carrots. From this point forward, it is impossible to ever identify what juice came from what carrot. The juice was then sold to hundreds of people. This is what happens to a loan when it gets securitized. The loan is now owned by thousands of shareholders all over the world.

Furthermore, the state of the loan is changed. When the alleged loan was securitized, it was converted into a publicly-traded security. The loan was no more, it is now and forever a publicly-traded security. In other words, you cannot reconstitute a carrot from carrot juice. In this instance, whats done can never be undone. Once a loan has been securitized, it forever loses its security instrument (i.e., the Deed of Trust and the right of the original alleged lender or any successor or assignee of the promissory note or Deed of Trust to foreclose on the loan no longer lawfully exists).

This is why it is a fact that at least 90% of foreclosure proceedings (judicial and non-judicial) in America




are fraudulent on their face and legally void, since the lawfully-required instruments have been destroyed through the securitization process. The original instruments are required to initiate a foreclosure and according to Michael Barrett, Esq. (the co-founder of a Texas-based law firm that specializes in foreclosure), those documents, in 90% of cases, do not exist.

In a Deposition before the Texas Task Force Meeting on Judicial Foreclosure Rules of Michael Barrett, Esq. (of Barrett, Daffin, Frappier, Treder & Weiss, LLP) regarding the validity of mortgage documents, (see page 27, line 6-22, of the deposition taken of attorney Barrett referenced below) attorney Barrett testified that:

The deposition can be found at: Texas T k Force Meeting on Judicial Foreclo ure

This deposition can be found at: Texas Task Force Meeting on Judicial Foreclosure Rules on November 7, A. D. 2007 (note page 27, 28 and 33), as found on the Supreme Court of Texas Website: http://www.supreme.courts.state.tx.us/jfrtf/pdf/110707transcript.pdf

This confirms that the servicers, sub-servicers and/or alleged lenders cannot be a legitimate holder-in-due-course of the original, wet-ink, debt obligation (promissory note), nor do they have any lawful authority to act for the same nor any authority to appoint any agent(s) to initiate any type of foreclosure proceeding. Therefore, such parties and their agent(s) are committing multiple kinds of fraud by initiating either a judicial or non-judicial foreclosure proceeding. In almost every case, all agents (i.e., substitute or successor trustees) who initiate foreclosure proceedings against the homes of the American people are aiding and abetting fraud, theft and criminal conversion, as well as, an act of commercial piracy. The alleged Beneficiary of the Deed of Trust / mortgage has absolutely no lawful authority to appoint another entity /agent to initiate a foreclosure proceeding, for the reasons stated herein.

A promissory note (hereinafter Note) is what is called a negotiable instrument. There are specific laws, called the Uniform Commercial Code, that were enacted to govern negotiable instruments. Specifically, the right for a bank (or any claimant) to enforce and foreclose on a property is dependent upon whether the claimant is a real party of interest.

If the loan / Note has been sold, then the bank can no longer legally or truthfully claim that they are a real party of interest.

Not only that, once a loan has been converted into a publicly-traded security, it is no longer a loan. If both the loan and the publicly-traded security exist at the same time, which is known as double dipping. Double dipping is a highly illegal form of securities fraud.

A Note can only be in one of two states when it undergoes securitization, not both states at the same time. It can either be a negotiable instrument (and treated and governed as such) or it can be a publicly-traded security (and treated and governed as such). Once the Note is traded as a publicly-traded security, it forever has that legal characteristic. The Note can never again be treated or governed as a negotiable instrument. It is, and can only legally be, treated as a publicly-traded security and regulated by the SEC as a stock.

On almost all Deeds of Trust or Mortgages, there is language that says something like This Deed of Trust secures a Promissory Note. Please take note, when the Note is converted into a publicly-traded security, legally and lawfully that Note no longer exists. If a Deed of Trust was created to secure a Note, and that Note no longer has a valid existence, then that Deed of Trust is invalid, void and unenforceable. That Deed of Trust secures nothing.




The Deed of Trust is the security instrument that the alleged lender or servicer claim gives them the right to foreclose on the Promissors home. If the Deed of Trust is invalid, then the alleged lender or servicer has no right to foreclose on the Promissors home. Stage 3: Real Parties of Interest Let's talk about accounting rules, specifically the rule governing a sale. To prevent accounting fraud, various governing bodies created Financial Accounting Standards (FAS). As you know, accounting is a very important area that needs to be regulated tightly to prevent companies from cooking the books.

Specifically, FAS 140 was created to govern the sale and securitization of a negotiable instrument. Look it up: Google: FAS 140.

One of the things about FAS 140 is the rule governing a sale. A transaction can only be recognized as a lawful (legitimate) sale if it is sold to a party at arm's length. In other words, you cannot sell an asset to yourself (this is what Enron did to hide their losses). Also, it says, (and I am paraphrasing) that once an asset is sold, the seller forever loses the ability to control the asset.

To illustrate this point, imagine if I were to sell you a brand new laptop. You took the laptop, and smashed it to a million bits with a sledgehammer. Because I sold the laptop to you, I have no say whatsoever about what you do with the laptop. It is yours.

This is a very important material fact to understand. Once an asset has been sold, the seller forever loses control of the asset.

What that means is, if your lender sold your loan to a REMIC, then they forever lose their ability to enforce, control or otherwise foreclose on your property. Put simply, they are no longer the real party of interest. They are just a servicer. Who Are the Real and Beneficial Parties of Interest? Before we can properly answer this question, we have to discuss IRS tax codes. You see, the real party of interest has to pay taxes on their earnings.

In other words, if your bank owns your Note, they have to pay tax on the interest earned from that Note. If a REMIC owns your Note, then the REMIC has a tax liability. The Case of Double Taxation Corporations have known for years about double taxation. This means, at a corporate level, at the end of the year they take all the revenue and subtract the expenses; what's left are the profits. These profits are then taxed.

The corporation also has shareholders. The corporation typically distributes dividends to their shareholders. Once the shareholders receive their dividends, this is considered to be income to the shareholders. This is also taxed. In other words, profits are taxed twice.

To avoid the problem of double taxation, banks put these loans into SPVs (special purpose vehicles) so they don't get taxed on them. This is covered under Internal Revenue Code 860. This way, only the shareholders are taxed.

This means, only the shareholders are the real parties of interest.

In the previous section, I discussed the powers of the Trustee. Because of this special IRS rule, the Trustee is not the real and beneficial party of interest because the REMIC does not own the notes, the shareholders do; therefore the Trustee cannot enforce the promissory note.

In other words, they cant have their cake and eat it too. They can either accept double taxation and let the REMIC hold the centralized power, or they can distribute the tax liabilities to the shareholders, in which




case they have also distributed the parties of interest.

The bank can chose to have a distributed party of interest scheme to avoid paying taxes twice (There is nothing wrong with this.).

But now they have a real pickle. If no one entity is a real and beneficial party of interest, then each and every shareholder of the REMIC is.

So then the question iswho has the right to foreclose? The correct answer is: no one.

If the thousands of shareholders each own a tiny part of a Promissors Note, can any one of them legally or lawfully foreclose on the Promissors house, which was originally security for the Note? The correct answer is: No.

A Note is only enforceable in its whole entirety. That is the nature of the massive fraud that is being perpetrated by the bankers on homeowners and investors worldwide. REMIC, Investors and Shareholders explained:

There is a lot of confusion around the concept of securities conversion, specifically around the various parties involved, such as the investor and the shareholder.

The following explains in greater detail how each of these entities are tied together.

To illustrate the point, lets use another analogy. Let's say I am Steve Jobs in the 1970's. I come to you asking for $1000 to invest in my little company called Apple. Part of Apple's assets is the intellectual property and design of the Apple computer.

10 years later, we go public. Because you were my initial investor, your initial shares are now worth a lot of money. Your percentage of ownership as an investor is converted into publicly-tradable stock.

Imagine if, immediately after I go public, I create another company and assign the intellectual property and design of the Apple computer to this new company. Is that legal?

The answer is: No. Thats commonly known as bait and switch. You cannot register one thing with the




SEC and market the stock and then, after the investors pay for the stock, switch out the asset.

This is how bait and switch relates to a REMIC: there are two pseudo-government entities, called Fannie Mae and Freddie Mac, (these are actually privately-owned companies). These two giants fund or invest in most of the REMICs which are created for the purpose of securitization. Fannie Mae and Freddie Mac are the investors.

Once a REMIC is converted into stock, Freddie and Fannie get very rich, because they are the majority shareholders of these publicly-traded stocks.

When a REMIC is formed, its assets (your loan plus thousands of other peoples loans) are declared a permanent fixture to the REMIC (This is like that intellectual property of Apple computer.). This is registered with the SEC, it is public information. In other words, once an asset is registered and traded as part of the security, you cant just switch it out (move it to another company/owner/investor) because it has become a permanent fixture of that specific traded asset.

The conclusion we want you to take away here is: an asset that is declared in an SEC filing is permanently attached to that specific filing. This is a permanent conversion. This means there is no doubt that your loan/promissory note is no more, once it has been declared part in an SEC filing.

Let's take a case of double existence to illustrate the point. Let's say we have the stock traded on Wall Street (that supposedly contains the note). Next, we take the promissory note and we assign it to another bank, who takes it and securitizes it again.

If this situation were to happen, the same loan would be traded twice on Wall Street. In other words, the second set of investors got duped. They bought a lemon. They basically bought a forgery. This is securities fraud. It cannot happen, legally or morally. Summary So, let's summarize the main points. Since over 85% of loans have been securitized, we now know that:

Banks are not the real parties of interest in any foreclosure transactions and neither are the investors of the REMIC.

No one (not banks, REMIC or investors) can lawfully foreclose.

When a Note (i.e. and asset) goes into default, it gets written-off by the REMIC.

Once the asset, i.e. Note, is written-off, the REMIC gets tax credits for the full amount on the face of the Note from the IRS.

This means the debt is settled in full. Any contractual obligation the Promissor may have had to pay the Note is gone.

The only legitimate (lawful/legal) way a bank or financial company can attempt to foreclose on someones home is if that bank buys the Note back from the open market as an unsecured debt, just like any other debt collector would.

Remember, the debt obligation, i.e. Note, has been written off, a full tax credit has been given to the shareholders and the REMIC. The contractual obligation of the Promissor to pay the Note no longer legally or lawfully exists. Essentially, banks and financial companies, such as Select Portfolio Servicing, Inc., are picking up the discharged Notes for pennies on the dollar; then through legal sophistry and outright deceit, under color of law, they try to re-attach the converted Note (which is legally no longer a Note, but a security) to the dead Deed of Trust / Mortgage. Then, they take these documents and fraudulently use them to represent themselves to the world as if they are the legitimate (lawful? genuine?) real parties of interest. They bring documents into court, committing fraud upon the court and fraud upon their own attorneys (who, for the most part, are ignorant of this scheme).




In light of the foregoing material facts, there are a few questions that the officers and employees of Select Portfolio Servicing, Inc. and its alleged Successor Trustee Quality Loan Service Corp. of Washington, which claims to have the legal right and authority to conduct a non-judicial foreclosure sale, must answer before the foreclosure goes forward:

1. Have you read, and are you familiar with, the Master Servicing and Pooling Agreement relating to this mortgage loan that was filed with the SEC?

The master servicer, sub-servicer, or some other party (counter-party) likely made a payment to the party who allegedly owns the purported debt obligation. This payment, if made, was intended to cover sums that are alleged to be in default. Therefore, the party who allegedly owns the purported debt obligation (i.e. Note) has, by virtue of that payment, not been damaged in any way.

2. If any sums have thusly been paid, how can it truthfully be stated by Select Portfolio Servicings employees or agents that a Default has occurred?

If the investment trust that ostensibly owns the mortgage obligation is a REMIC, the trustee, the QSPE, and the other parties servicing the trust, have no legal or equitable interest in the securitized mortgages. Therefore, any servicer who alleges that they have the right, or that they have been assigned the right, to claim that they are the agent for the holder of the Note for purposes of standing to bring an action of foreclosure, are stating a legal impossibility and prima facie committing fraud.

3. In light of the foregoing, by what authority can Quality Loan Service Corp., as alleged agent for Select Portfolio Servicing, show that its employees or agents can initiate or conduct a lawful non-judicial foreclosure proceeding?

In ref: Notice of Rescission for Fraud

Explanation and Overview of the Loan Securitization Process Generic

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