Mortgage Securitisation Discussion Thread

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PLEASE NOTE

 

This discussion thread has been created form Off Topic posts that originally appeared in this thread

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?341304-who-owns-my-mortgage&p=3897735

 

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This may take a while to read and digest and I apologise for the length of the post in advance...........

 

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

The judge establishes here that the Lender is a 'trustee' for the SPV - and confirms that 'as will usually be the case that the full consideration has been paid'

 

So, what 'type' of 'trustee' does he mean? What 'type' of 'trustee' relationship exists - in the Pender case, for all intent and purpose on the evidence submitted the Administration Agreements 'appointed' Paragon as trustee were to ensure they retained the powers of an 'appointed trustee'.

Compare this type of 'appointed trustee' with a 'custodian trustee' or 'bare trustee' - what is the difference?

 

…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…..

 

The Judge establishes that it was Paragon that registered the charge, sold the debt, but retained legal rights to possession because their admin agreement, secured this important right for them by evidencing that they were 'appointed trustees' after the sale

 

The Trusts of Land and Appointment of Trustee Act 1996 establishes the rights of 'appointed trustees'

 

Section 6: General powers of trustees.

 

(1) For the purpose of exercising their functions as trustees, the trustees of land have in relation to the land subject to the trust all the powers of an absolute owner.

 

(2) Where in the case of any land subject to a trust of land each of the beneficiaries interested in the land is a person of full age and capacity who is absolutely entitled to the land, the powers conferred on the trustees by subsection (1) include the power to convey the land to the beneficiaries even though they have not required the trustees to do so; and where land is conveyed by virtue of this subsection—

 

(a) the beneficiaries shall do whatever is necessary to secure that it vests in them, and

 

(b) if they fail to do so, the court may make an order requiring them to do so.

 

(3) The trustees of land have power to [F1acquire land under the power conferred by section 8 of the Trustee Act 2000.]

 

F2(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

(5) In exercising the powers conferred by this section trustees shall have regard to the rights of the beneficiaries.

 

(6) The powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity.

 

(7) The reference in subsection (6) to an order includes an order of any court or of the Charity Commissioners.

 

(8) Where any enactment other than this section confers on trustees authority to act subject to any restriction, limitation or condition, trustees of land may not exercise the powers conferred by this section to do any act which they are prevented from doing under the other enactment by reason of the restriction, limitation or condition.

 

[F3(9) The duty of care under section 1 of the Trustee Act 2000 applies to trustees of land when exercising the powers conferred by this section.]

 

 

So, how do I come to the conclusion that there are situations where this Act does not work in favor of the Lender in a position who has sold the mortgage debt, retained it's name on the title and collects your monthly money via an administrator and then seeks possession when you default on the loan?

 

Well, Look at "(6) The powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity".[/b so...... what does this mean? If Pender essentially says that Paragon by virtue of the Admin Agreements were 'appointed trustees' - then, what about those lenders that cannot prove they remained 'appointed trustees' - Paragon is owned by Paragon PLC and bought and sold within the group- so, as a subsiduary of one and the same company - it spells sense that they 'kept it in the Company' so's to speak....

 

In my opinion, for a number of sub-prime lenders the position is quite different from Pender... why?... because Pender after the sale occurred were able to show evidence that they retained admin rights within which it must have clearly stated that they were 'appointed trustees' by Paragon PLC......

 

If the original lender does not remain as administrator for the SPV but instead outsources those duties, this does not mean that the original lender is not a 'trustee' - they are..... but they are not 'appointed' as in the meaning of TLAT Act 1996 s(1) there is a difference.....a trust is created... but not an appointed one....

 

As an un-appointed trustee, they become a trustee in equity or what is more commonly known as a 'bare' or 'custodian' trustee - these type of 'trustee' will find that it is s.6(6) of the TLAT Act 1996 that applies to them ..... their status is created by way of equity, not by way of appointment......unfortunately rights to possession are excluded to custodian or bare trustees....put simply, "..powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity - so, where an appointed trustee has the right to possession for example..... a bare trustee does not]

 

…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 Judge given the evidence before him, found in favor of Paragon, and quite rightly to... but look carefully at what he actually says.. he says 'as a matter of principle'..... 'legal charge remains exercisable'.... 'notwithstanding that paragon "may" have transferred the benenficial ownership of the Legal Charge to the SPV' ... This could mean that he was not provided with any evidence to substantiate that the mortgage debt had actually been sold. ....B

 

Any questions? thoughts? opinions?

 

Apple

Edited July 16, 2012 by ims21
needed to break it down to make more sense

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Above, I outlined the TLAT Act 1996 and how I believe it worked in favor of Paragon to assist Paragon secure it's possession Order against the Pender's - Bare in mind, that it is the Law I am quoting and not 'opinion' - All interpretation of course is mine.

 

My research has led me to interpret that the period of time after the sale and purchase of the mortgage debt and when the sale is updated on the register at HMLR is called the 'registration gap' - My interpretation is that it is during this period of time that the relationship between the Borrower and the Original lender changes.

 

I considered what impact the TLAT 1996 would have on the original Lender and the Borrower.

 

First, I wanted to understand if the original Lender retained any Legal right to possession of the property after having sold the debt - I concluded that if you have sold the mortgage debt which was the link to the property and all rights to possession of it, my gut feeling was that it must be nigh on impossible for the Lender to have a Legal right to possession................................. but then, against this gut feeling.....Pender is an Authority in which it is stated that the original Lender retains a Legal right to possession.... again.... in a matter brought before the Houses of Parliament on 16 October 2001 Barry Gardiner MP (Brent North)for Brent North raised the un-reported case of City Mortgage Corporation v Reid.... This case I interpret the circumstance to be similar for all intent and purpose to that of the Pender case but concluded differently.

[source: http://www.publications.parliament.uk/pa/cm200102/cmhansrd/vo011016/halltext/11016h05.htm ] .... It has to be understood that his un-reported case is NOT an Authority.

 

Against these cases..................My interpretaion of the TLAT 1996 s (6) leads me to wonder, just how important to the whole scheme of mortgage securitisation is an Administration Agreement - in the Pender case, it was the Admin Agreement that the learned Judge referred to....So, I interpret that if the original Lender has not entered into an admin agreement with the Buyer, then it is unlikely that he has retained any 'Legal' right to possession. In fact as stated previously, for a lender who has derived a equitable title by virtue of having sold the mortgage debt and retains his name on the title...., I interpret from the TLAT 1996, that in seeking possession of the proeprty he would be acting in contravention of this important piece of legislation.....in the Reid case I interpreted that they had 'done their homework'

 

But having said that....it is s.58 of the LRA 2002 - which deals with registered charges (it may in fact be the LPA 1925, but definately s.58 (1) ) which essentially says..... the name that appears on the register is to be taken in Law to have the Legal right to possession.... the Authority in Pender also made this quite clear....

 

So, if on the one hand you have a Law that states that titles derived from equity have no rights, (TLAT 1996) but then on the other hand ... a Law essentially states (s.58) ... you have every right to possession..... what is the overal interpretation meant to be.....?? Could this be why the Judge stated 'in principle'...they 'retain the right to possession'.... is this to be interpreted as a 'play' on common Law v Statutory Law??

 

I interpret that Statutory Law superceeds common Law as and when it's available. and that each case will be juduged on the evidence produced on a case by case basis.

 

I further interpret that in submitting evidence that substantiates s.6 TLAT.....will not as a stand alone peice of legislation overcome the 'conclusiveness' of s.58.

 

Apple

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Good Evening Apple, I might be able to add something to your post

 

 

 

 

The circumstances are similar. However, there are what some people might consider to be important and significant differences between the case of City Mortgage Corporation and that of Pender.

 

The link you provided states:

 

"The charge by CMC had never been registered because the Rileys' mortgaged property was not registered land."

 

Unlike Paragon, CMC was not the registered proprietor of the charge.

 

In Pender, Lord Justice Jonathan Parker confirmed that Paragon was

 

"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"

 

Whilst the Case of City Mortgage Corporation was an unreported case, details of the case can be found in subsequent cases.

 

As an example - GMAC RFC Ltd v Grant-Sinclair & Anor [2001] EWCA Civ 1793 (19 November 2001)

 

"22. During the course of the argument my attention has been drawn to an interesting case, namely City Mortgage Corporation Ltd v Reilly and Reilly, which was an unreported decision of Judge Rubery in the Stroke-on-Trent County Court, dated 28th November 1997. On analysis that decision does not, in my judgment, assist the applicant for this reason. There the claimant was City Mortgage Corporation Ltd, which was the original lender and mortgagee. The original mortgage was dated 15th March 1996. On I think the same day a transfer of what Judge Rubery held to be the legal and beneficial interest in the charge was transferred to another company called Greenwich International Ltd. The transfer was not dated and it was submitted on behalf of the claimant, which was City Mortgage Corporation Ltd, that it took effect only in equity and not in law. I should add that notice to the defendants of the transfer was given on the same day, 15th March 1996.

 

23. The judge rejected the claimant's submission and held that the transfer operated as a transfer of the legal interest and that notice of that transfer had been given to the defendant, so that the transferor or assignor, City Mortgage Corporation Ltd, no longer had any rights under the charge. Those rights were vested in the transferee or assignee, namely Greenwich International Ltd. Accordingly, the claim failed."

 

The judge held that a notice of assignment had been given to the Reilly's. As you will no doubt appreciate, a notice of assignment is one of the requirements for a legal assignment, as per s.136 of the Law of Property Act 1925.

 

The effect of the notice of assignment meant that upon receipt by the Reilly's, City Mortgage Corporation Ltd no longer had any rights under the charge.

 

Dave

 

Good Evening Dave.

 

Welcome to the forum, I'm pleased that you have taken time to outline your interpretations. Hopefully others will come along to assist us form a 'balanced' view.

 

It is not that I overlooked the s.136 LPA 1925 per se - it is timely that you should bring this important piece of legislation into the equation:

 

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

 

(a) the legal right to such debt or thing in action;

 

(b) all legal and other remedies for the same; and

 

© the power to give a good discharge for the same without the concurrence of the assignor:

 

Provided that, if the debtor, trustee or other person liable in respect of such debt or thing in action has notice—

 

(a) that the assignment is disputed by the assignor or any person claiming under him; or

 

(b) of any other opposing or conflicting claims to such debt or thing in action;he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other thing in action into court under the provisions of the M1Trustee Act, 1925.

 

(2) This section does not affect the provisions of the M2Policies of Assurance Act, 1867.

 

[F1(3) The county court has jurisdiction (including power to receive payment of money or securities into court) under the proviso to subsection (1) of this section where the amount or value of the debt or thing in action does not exceed [F2£30,000].]"

 

I interpret that the part in the text that I have 'emphasised' has a bearing on the substantiating rights of the Originating Lender once he has sold the mortgage debt.

 

I don't seek to complicate matters here but my interpretation is that when the originating lender sells the mortgage debt to the SPV, the relationship between the Borrower and the Originating Lender changes and the underlying mortgage agreement is affected - Here's how I have come to this conclusion.... prior to the sale the Borrower's right to Redemption was intact.....after the sale, the Borrowers right to redemption is lost.....but the borrowers equitable right to redemption remains. The Borrower relies heavily on this equitable right to redemption is very important to the Borrower. It is the right to pay off the mortgage debt and take ownership of the property. As I understand it, the case in Horsham (although not an Authority) did go someway to consider the impact on a borrowers equitable right to redeem the mortgage....

 

The text I highlighted above, states "(subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice"— [my emphasis

 

I interpret that it is the SPV that is the 'assignee'.... I go on to interpret that if the Borrower is unaware that the 'right to redeem' has been converted due to the sale of the mortgage debt to the SPV without notice that unwittingly, his 'right to redemption' converts to an 'equitable right to redeem' (which is essentially what the failure to notify the Borrower invokes).

 

The Borrowers 'equitable right to redeem' is an 'equity' and can be interpreted within this piece of legislation as 'equities'.

 

I interpret that this piece of Legislation protects the Borrowers equity (which will not only refer to the equitable right to redemption but also equity in the property earned during the term of the mortgage along with any deposit that may have been paid to the Originating Lender)

 

At this point, it would be unfair to lose sight of the link that the sale of the mortgage debt makes with s.6 TLAT 1996 as I endeavor to interpret s.136 LPA 1925 and the effect of failure to notify the Borroiwer of the Sale - which is the relationship has changed thus:

 

We have a borrower who has not been notified of the sale of the mortgage debt so that the equitable rights to redemption are protected(s.136 LPA 1925)

We have an Originating Lender who has sold the mortgage Debt to an SPV, who cannot pass any of the Legal right to possession to the SPV because of the equitable rights of the Borrower

We have an originating lender who for consideration has lost all right to possession because unless he secures some proof of being an appointed trustee, is a bare/custodian trustee who would have no substantiating rights to possession of the property (s.6 TLAT 1996)

 

Against this, and the interpretations kindly submitted by Dave, I conclude that consideration as to the 'conclusiveness' of s.58 (1) LPA 1925 remains to be done, because non of these pieces of Legislation, as yet, in their own right cause the conclusiveness of s.58 to be affected to deny the originating Lender possession of the property at this juncture...... and I think Dave is right to set out the Judges words thus:

 

"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

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"

 

Given this.... it is not that we have to 'agree' or 'disagree' .... what it means is that because the allegation is that it remains an over whelming view that the Lenders right to possession is not legal in some way.....(e.g the posts on the CAG, the building distrust of Lenders and a class action in the US recently undertaken) that the current balance of probability remains on equal footing with legislation being interpreted to provide arguments for and against.... I do not however conclude that a borrowers argument is as yet proven either way right now......

 

Apple

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Hello Apple

 

Thank you for your warm welcome.

 

I am sorry to say that it would appear "(subject to equities having priority over the right of the assignee)" is unrelated to either equity in the property or the right to redemption. However, from the use of the word 'equities', I can see that would be an easy interpretation for someone to make.

 

As confirmed by Lord Millett in the House of Lords case: Mulkerrins v. Pricewaterhouse Coopers [2003] UKHL 41 (31 July 2003) -

 

"The assignment is subject to equities, which means that any set-off which the debtor may have against the assignor can be asserted against the assignee."

 

Dave

 

Hi Dave

 

The point your make provides for the debate the opportunity to distinguish the way in which interpretation of the use of the statement in the text of s.136 LPA 1925 is distinguished from the application of the text that relates to 'equities' that relate/apply to Insolvency Law.

 

In the above case, I interpret that Mrs Mulkerrins, was the owner of a nursing home. She was made bankrupt and lost the Nursing home, she alleged that this would not have happened but for PwC's negligence. First, she had to fight off her trustee-in-bankruptcy, who somewhat implausibly claimed that her cause of action had vested in him for the benefit of the creditors. She further had to fight off PwC who claimed that they were not liable for any negligence.

 

The case was debated in the House of Lords, Lord Millett states:

 

"The district judge was not in any way concerned with accountability, or with the beneficial ownership of the cause of action. She was concerned only with the legal ownership: with the question - who can sue PwC? The district judge was not contemplating that the Trustee would be accountable for anything. She was contemplating that it would be Mrs. Mulkerrins who would sue, not the Trustee.

 

This is true so far as it goes, but it is not the whole truth. The district judge was certainly dealing with the legal title to the chose in action - the right to sue PwC. But she was not dealing with the bare legal title.

 

She ruled that the trustee had no interest in the claim, and her reasoning shows that she meant no interest at all whether at law or in equity. She considered that the claim had not vested in the trustee because it was not an asset which was available to the creditors, that is to say it was not part of the bankrupt estate. She did not overlook the basic rule that, with few exceptions, the property of a bankrupt vests in his trustee for the benefit of his creditors; or that at least so much of a chose in action as represents a claim to compensation for financial loss vests in him. To her credit she recognised that Ms Mulkerrins' claim was of an unusual kind, as neither the deputy judge nor the Court of Appeal seems to have done. It was a claim for damages for being made bankrupt. As she put it, "the bankruptcy itself is the cause of action". The district judge did not consider that a claim of this character could vest in the trustee for the benefit of the creditors; though she seems to have considered that this was a matter of timing which made the cause of action after acquired property.....

 

In the case, He went on to consider the assignment of a debt and concluded this:

 

......"The reason that the debtor's consent is not required to an assignment of a debt is that the assignment cannot prejudice him. The assignment is subject to equities, which means that any set-off which the debtor may have against the assignor can be asserted against the assignee."

 

So, essentially I interpret that whilst the case referred to above, differs in that...........Borrowers at the time that the sale of the mortgage debt occurs are not 'bankrupts'....... the 'similarities' to which Dave refers to provides information to support a finding that there is an additional equitable right, which I did not mention .... the interpretation of Lord Millett is an important as it confers that of Dave's observation to show that an additional equitable right exists to Borrowers which is to the right to apportion set-off claims against the SPV (assisgnee) ......

 

I have unfortunately not seen anything in the extensive text of the Lord's debate of the case that refers to the loss of the equitable right to redeem the mortgage, so, without more... I cannot truly conclude that s.136 LPA 1925 only refers to 'the right to set off' as a standalone equitible right or that prior to the sale...... the 'right to redemption' or after the sale ......... the 'equitable right to redemption' would be lost because of the Lenders failure to notify the borrower of the sale/assignment.

 

My conclusion is drawn on the basis that the word in the highlighted text: "(subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice"— [my emphasis] makes reference to there being more than 1 equitable right - it says "subject to equities".

 

Given the plural meaning of the word 'equities' [meaning 'more than 1"] as opposed to the legislator using the word 'equitable' (e.g the legislator could have stated "subject to the equitable right to set-off....") ..... this would have assisted Dave's distinction as a stand alone remedy to the Borrower.

 

I do not conclude that there is any play on words or interpretation of the English Language here and it is certainly not meant to be.... It is, I would like to believe, the way the Legislator meant the text to be stated and likewise interpretated.

 

In summary my interpretation so far provides that:

 

s.136 LPA 1925 in the circumstances failure to notify the Borrower of the sale/assignment protects not only the equitable right to redemption, but an additional equitable right to set-off

 

s.6 TLAT 1996 in the circumstances protects against the Originating Lender having any more than the limited rights of bare/custodian trustees who's original legal right to sue for possession is extinguished by this Act. (post sale of the mortgage debt - during the 'registration gap' period)

 

 

I think it is also prudent to factor into the equation, that s.136 LPA 1925 can also refer to the time when a Borrower sells the house without having had notice of the sale of the mortgage debt between the Originating lender and the SPV, where the Borrower sells the property to an 'innocent party' to provide additional equitable protections for all parties concerned.

 

Against this, I also factor in that 'Equity will not complete an Imperfect Gift' to mean that if the originating Lender and SPV have not formulated the assignment (registered the sale/transfer or notified the Borrower as required at common Law) equity will not assist the intended SPV.

 

I also factor into the equation that 'Equity will not allow a statute to be used as a Cloak for Fraud' to mean that if there is no trustee, whoever has title to the trust property will be considered to be the trustee. Otherwise, a court may appoint a trustee.

 

These latter equitable protections draw me to conclude in the circumstance where Borrowers are in the 'registration gap' period... that the Law already provides that given the circumstance the Originating Lender is a 'bare trustee' - this negates the need for the Courts to exercise any power to appoint a trustee.

 

The Law of property is complex - there is no quick fix to substantiate or deflect the allegations made against lenders - I do of course caution that these remain my interpretations and conclusions and in no way do they exhaust the protections for the lender or the borrower or do they look to either substantiate or deflect from allegations made of lenders and do not as stand alone statements seek to do any more than assist the debate this far.

 

Interpretation as well as opinion can change subject to the evidence of Law that may yet be presented in this thread.

 

Apple

[applecart]

Hello Apple

 

You are right we don't have to agree or disagree. The law on many matters is far from black and white, it will never be possible in part due to the way legislation is written and due to some of the unusual conclusions reached by the judiciary, for everyone to agree on some points of law.

 

The law and securitisation in the US is slightly different to here. In the US lenders have lost cases as they have been unable to prove that they have legal title.This is currently not an issue in the UK, due the Land Registry and the conclusiveness of title. Furthermore, in the US unlike here where they are usually sold once, they have sold numerous times, this means the paper records are somewhat easier for us in the UK to follow in terms of ownership.

 

Dave

 

Hello Dave

 

I agree with you, the Law of Property is complex here in the UK. The debate I can imagine will wrangle on for some while yet....

 

I also agree that our registration system by virtue of the LRA 2002 is possibly different from that of the US - MERS is an electronic means of registering title - which was not necessarily done correctly by Lenders - likewise, the MERS system also evoked claims - shocking.... having said that I read somewhere that here in the UK there is a plan to implement a electronic means of registering title interests - It's anybody guess if this will then cause similar problems and claims against Lenders similar to that of the US?

 

Our current legislation, like I said above is complex. The paper registration system on it's face does appear to provide protections for the Lender here in the UK - but, it does not appear to assist the Borrower when it comes to the position which we face with regard to the allegations made against Lenders.

 

Here in the UK, in light of the allegations asserted against the Lender and to provide fair balance for Borrowers it is becoming abundantly clear that in depth research, knowledge and interpretation of the Law is necessary to help Borrowers better interpret how and if what is being alleged predominantly in the US would have any impact here in the UK as based on the Law here.

 

Apple

[Lea_HTH]

Perhaps the site team could move these very long discussion posts to a thread of their own?

 

I don't think it's appropriate to leave them in this thread given that they are all speculation and have no secure basis in the law as it stands today - securitisation is not illegal and is unlikely to be found so, and even if it was, the end result would not be unenforceability of the original mortgage because there is such a thing as equity. Unenforceability appears to be the goal when these issues are concerned - whereas the easiest solution for most people is to pay their mortgages, improve their credit profile and move away from subprime lenders as soon as they are able.

[Lea_HTH]

Absolutely no need to apologise, I just think that the discussion would be better in a thread of its own as it doesn't relate to the OP's circumstances and anyone reading it in the future may think it does.

[applecart]

Hi Dave

 

Now that this thread is designated a discussion thread...

 

Your posts and other posters before you and I have sought to embed and establish that Pender is the Authority in all things to do with MBS (mortgage securitisation)

 

Despite this, the question keeps coming back - I think essentially - people want to understand HOW is it possible for a lender to sell the mortgage yet still retain title to sue...?

 

I looked into it and found:

 

The Bond Debenture Trust

 

This is where a single company solicits loans at fixed interest from the public, arranging for a trustee (usually a corporate body) to act as a nominal lender of the total amount subscribed, a conduit-pipe for interest and principle payments from the Company to the individual investor and a watchdog for the investors interests..

 

Common Law adopts the position that Ownership is INDIVISABLE

 

Equity allows a notional division of ownership - Legal Title being in one person and beneficial ownership in another.

 

At common law, the owner holds title to the property and enjoys all the other rights of property ownership.

 

A trust imposes a duty on the common law owner to hold the property for the benefit of someone else.

 

Thus, one of the key rights of ownership - the enjoyment of the property, no longer belongs to the titleholder.

 

Equity provided the person intended to benefit with a means to enforce the right of enjoyment. This is a personal right or right in peresonam against the trustee. It is not a proprietary right, or right in rem with respect to the trust property itself.

 

Apple

[applecart]

Then....

 

It is not strictly accurate to refer to the beneficiary of a trust as the beneficial owner of trust property since this suggests that the beneficiary has a right in rem with respect to the trust property.

 

If we have regard to the essence of the matter rather than the form of it.... a trustee is not an owner at all but a mere agent upon whom the Law has conferred the power and imposed the duty of administering the property of another person. In legal theory however, he is not a mere agent but an owner.

 

CONVERSELY......

 

He is the person to whom the property of someone else is ficticiously attributed by the Law to the extent that the rights thus vested in a nominal owner shall be used by him on behalf of the real owner.....

 

As between trustee and beneficiary, the Law recognises the truth of the matter as between these two... the property belongs to the latter NOT the former.

 

But in between the third persons, the fiction prevails... The TRUSTEE is CLOTHED in the rights of his BENEFICIARY and is so enabled to personate or represent him in dealings with the world at large....

[applecart]

I looked into 'nominees' further...

 

Bare Trust (sense 1)

 

He must convey the property as directed on request by the beneficiary on request by the beneficiary (or in some cases beneficiaries) but he has no duty to comply with any other directions. eg. Client money held by a solicitor in his client account.

 

Note: The existence of interests by way of succession or of a defeasible interest, or even a power of sale for example, is sufficient to prevent a trust from being a 'bare trust'

 

Bare Trust (1) Plus Agency Type Agreement

 

Where the trustee holds on trust for the beneficiary absolutely, but also agrees to do either whatever the Settlor (SPV) asks, or at least whatever is asked within a certain range of possibilities - e.g called a 'unit trust' in the UK.... This is commonly called a nomineeship except that unlike the Bare Trust (sense 1) .... this type of 'nominee' HAS THE LEGAL TITLE to the assets concerrned...

 

BUT there is an alternative view of what a bare trust is, which can be referred to as 'Bare Trust (sense 2)'

 

BARE TRUST (sense 2)

 

This concentrates not so much on the duties of the trustee but on the identity of the beneficiaries. This kind of Bare Trust is where the Trustee has no beneficial interest, whether or not he has active duties to perform. A Trustee's right to remuneration or an indemnity out of the Trust Fund (which is a kind of beneficial interest) has been held sufficient for this purpose.

 

DISTINCTION AND SPECIAL TRUST

 

The difference lies in the source of the duties....

 

IF the source is 'Contractual' the relationship is 'NOMINEESHIP'

 

IF the source is 'Property' (i.e in the terms of the trust and not just by agreement) it is SPECIAL TRUST...

 

A Special Trust may (NOT MUST) therefore fall foul of the rules against perpetuities - A Nomineeship CANNOT

 

On the other hand, where a nominee becomes bankrupt, his subsequent discharge from bankruptcy will destroy most contractual obligations but not obligations inherent in the property relationship....

 

A further question which arises in distinguishing a Nominee (with title) and a Special Trust is whether a 'Custodian Trustee' is a Nominee OR a Special Trustee - it is thought it is a Special Trustee...

 

Apple

[applecart]

We could start by looking at the detail found within Mortgage Sale Agreement documents - to confirm that it was only the beneficial interest sold

 

Extract from PARAGON MORTGAGES MSA (2006)

 

"Subject to the terms and conditions of this Agreement, the Warehouser, MTS and PML agree that the Warehouser shall:

 

(a) with the exception of any PML Mortgages which are Non-Verified Mortgages, in the case of the PML Mortgages, sell and PML shall purchase the PML Mortgages on the Closing Date;

 

(b) with the exception of any MTL Mortgages which are Non-Verified Mortgages, in the case of the MTL Mortgages, sell and MTS shall purchase

the MTL Mortgages on the Closing Date; and

 

© at any time and from time to time up to (including) the first Principal Determination Date, the Warehouser may by delivering a Non-Verified

Mortgage Request to PML and/or MTS and the Trustee, require PML and/or MTS to purchase, and if so required PML and/or MTS shall, subject to the

terms of this Agreement, purchase, Non-Verified Mortgages on the date specified in such request (being a Business Day falling on or prior to the first

Principal Determination Date).

 

2.2 In connection with each sale and purchase referred to in clause 2.1, subject to the terms and conditions of this Agreement, the Warehouser agrees to sell with full title guarantee (or in the case of the Scottish Mortgages with absolute warrandice or in the case of Northern Irish Mortgages, as beneficial owner) and PML (in respect of the PML Mortgages) and MTS (in respect of the MTL Mortgages) agree to purchase on the relevant Purchase Date and subject to the terms and conditions of this Agreement, the Warehouser hereby sells and PML (in respect of the PML Mortgages) and MTS (in respect of the MTL Mortgages) hereby purchases on the relevant Purchase Date:

 

(A) subject to the subsisting rights of redemption of Borrowers, those Mortgages which are or will be set out in the Annexures to the relevant English Sale Document pursuant to which such Mortgages are to be purchased on that Purchase Date and (in the case of the Scottish Mortgages) which are or will be set out in the Scottish Mortgages Schedule to be delivered on the Closing Date and, in each case, in which the Warehouser is indicated as being the warehouse company in relation to such English Mortgages, Northern Irish Mortgages and Scottish Mortgages including for the avoidance of doubt:

 

(i) all sums of principal, interest or any other sum payable under and the right to demand, sue for, recover, receive and give receipts for all principal moneys payable under such Mortgages or the unpaid part thereof and the interest due or to become due thereon and the other sums due under such Mortgages including the Accrued Arrears in respect of any such Mortgage and the amount of any interest (including capitalised interest (if any)) or other sums due to be paid or accrued in respect of any period up to such Purchase Date under or in respect of any Mortgage Sale Agreement Mortgage {provided that the principal moneys payable under any such Mortgage shall not be deemed to be due for the purpose of this paragraph merely because the legal date for redemption of the relevant Mortgage has passed); and

 

(ii) the benefit of all securities for such principal moneys and interest and the benefit of and the right to sue on all obligations, undertakings and covenants with, or vested in, the Mortgagee in each such Mortgage and the right to exercise all the Mortgagee's powers in relation to such Mortgages and, in the case of Individual Mortgages only, the benefit of all consents to mortgage signed by the occupiers of the Properties and the benefit of all MHA Documentation; and

 

(iii) all the estate and interest in the Properties vested in the Mortgagee subject to redemption or cesser; and

 

(iv) all causes and rights of action 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 Mortgage or affecting the decision to make the relevant advance; and

 

(v) the benefit of any guarantee or surety vested in the Mortgagee relating to any such Mortgage and any other collateral security relating to such Mortgage; and

 

(vi) the benefit of any rights to receive compensation in respect of criminal damage pursuant to the Criminal Damage (Compensation) (Northern Ireland) Order 1977 in respect of the Northern Irish Mortgages; and (B) all its right, title, interest and benefit (whether present or future) in relation to the Insurance Contracts including the right to receive the proceeds of any claim insofar only as they relate to such Mortgages."

 

 

Apple

[applecart]

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

[applecart]

In regard to mortgage securitisation, who is the settlor of the trust ? I would say it depends on the terms of the underlying agreements, to establish what was actually sold. Unless you do, you cannot be sure who the Settlor is

In regard to mortgage securitisation, who is the beneficiary of the trust ? I Would say that if the underlying agreements show that the Legal title remains with the Originator, then you can look to who the actual beneficiaries are and have been....

In regard to mortgage securitisation, who is the trustee of the trust? I would say if your findings show that the Originator sold rights in his Legal estate along with the mortgage then, the SPV will be the Trustee responsible to hold Legal Title for the benefit of himself and beneficiaries.

 

Apple

[applecart]

Thought I'd re-set it out better here as I do not have 'editing' facility : (

 

In regard to mortgage securitisation, who is the settlor of the trust ?

 

I would say it depends on the terms of the underlying agreements, to establish what was actually sold. Unless you do, you cannot be sure

 

who the Settlor is in regard to mortgage securitisation, who is the beneficiary of the trust ?

 

I Would say that if the underlying agreements show that the Legal title remains with the Originator, then you can look to who the actual beneficiaries are and have been....

 

In regard to mortgage securitisation, who is the trustee of the trust?

 

I would say if your findings show that the Originator sold rights in his Legal estate along with the mortgage then, the SPV will be the Trustee responsible to hold Legal Title for the benefit of himself and beneficiaries.

 

Apple

[applecart]

This is the front copy of the Pagagon Mortgage Sale Agreement:

 

PARAGON MORTGAGES LIMITED

as an Originator and a Seller

 

PARAGON SECOND FUNDING LIMITED

as the Warehouser

 

MORTGAGE TRUST LIMITED

as an Originator

 

MORTGAGE TRUST SERVICES PLC

as an Administrator and as a Seller

 

PARAGON FINANCE PLC

as an Administrator

 

PARAGON MORTGAGES (NO.13) PLC

as the Issuer

 

and

 

CITICORP TRUSTEE COMPANY LIMITED

as the Trustee

 

MORTGAGE SALE AGREEMENT

26 October 2006

 

Compare this to the Parties in the Mortgage Sale Agreement of A.N.OTHER:

 

A.N.OTHER

as Seller

 

SPV

as Issuer

 

A.BANK

as Trustee

 

Apple

[applecart]

To understand who the 'appointed' Trustee is, I think for that you need to look at the Power of Attorney Agreement. Apologies for the length of this docucment, but I've copied and pasted it as was:

 

This detail is all relating to Paragon's Power of Attorney Agreement:

 

The Mortgage Sale Agreement explains:

 

' "Power of Attorney" means a power of attorney to be granted by each Originator and MTS in favour of the Issuer, the Trustee and the Administrator in the form set out in Parts A, B and C of Schedule 5;'

 

"Part C - Mortgage Trust Services pic Power of Attorney

THIS POWER OF ATTORNEY

is made by way of Deed on October 2006

BY:

(1) MORTGAGE TRUST SERVICES PLC whose registered office is at St. Catherine's

Court, Herbert Road, Solihull, West Midlands B91 3QE (the "Donor"),

IN FAVOUR OF:

(2) PARAGON MORTGAGES (NO.13) PLC whose registered office is at St.

Catherine's Court, Herbert Road, Solihull, West Midlands B91 3QE (the "Issuer",

which term where the context permits shall include its successors and permitted assigns);

 

(3) CITICORP TRUSTEE COMPANY LIMITED whose registered office is at

Citigroup Centre, 14th Floor, Canada Square, Canary Wharf, London E14 5LB (the

"Trustee", which term where the context permits shall include such company and all

other persons or companies for the time being acting as the trustee or trustees under the

Trust Deed (as defined in the Deed of Charge referred to below));

(4) PARAGON FINANCE PLC whose registered office is at St. Catherine's Court,

Herbert Road, Solihull, West Midlands B91 3QE (in its capacity as an

"Administrator");

and

(5) MORTGAGE TRUST SERVICES PLC whose registered office is at St. Catherine's

Court, Herbert Road, Solihull, West Midlands B91 3QE (in its capacity as an

" Administrator").

 

WHEREAS:

(A) The Issuer has agreed to purchase several mortgages, Standard Securities, charges and securities from time to time as provided in the Mortgage Sale Agreement.

(B) The Donor is or may become (or is entitled to be or may become entitled to be) the

legal owner of the said several mortgages, Standard Securities, charges and securities

(each such mortgage, Standard Security, charge or security being hereinafter called a

"Charge"). © By a deed of sub-charge and assignment dated October 2006 and made between, among others, the Issuer, the Trustee, each Administrator and the Donor (the "Deed of Charge") the Issuer transferred or assigned in security or agreed to transfer or assign in security to the Trustee, among other things, its rights in each Charge subject to the proviso for re-transfer therein contained. (D) At the request of the Issuer, the Trustee and each Administrator, the Donor has agreed to enter into these presents for the purposes hereinafter appearing.

 

NOW THIS DEED WITNESSETH that the Donor HEREBY APPOINTS the Issuer, the

Trustee and each Administrator severally to be its true and lawful attorney (with power to

sub-delegate) for it and in its name to do the following acts and things or any of them for so long only as the Donor remains the legal owner of the Charges:

(i) to exercise the rights, powers and discretion under such Charge (including the right to

fix the rate or rates of interest payable under such Charge and to calculate the Monthly

Payments or Net Monthly Payments as the case may be (being of combined interest and

principal) payable by the Borrower in the case of a Repayment Mortgage) and any

collateral security therefor and any related rights;

(ii) to exercise all the powers exercisable by the Donor by reason of its remaining for the

time being the legal owner of such Charge and in particular, but without prejudice to

the generality of the foregoing, to make further advances to the Borrower;

(iii) to demand, sue for and receive all moneys due or payable under such Charge or any such collateral security or related rights;

(iv) upon payment of such moneys or of 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;

(v) from time to time to substitute and appoint severally one or more attorney or attorneys for all or any of the purposes aforesaid;

(vi) to do and complete all such acts and things and to execute any deeds and documents as may be necessary to perfect the title of the Issuer to any Charge including the execution of transfers and assignations of the Charges and, where relevant, procuring the registration of the Issuer as registered proprietor of any Charge at the Land Registry or registered owner of any Charge at the Land Registry of Northern Ireland or the

Registry of Deeds, Belfast or the registration or recording of the Issuer as heritable

creditor of any Charge at Registers of Scotland;

(vii) to deal with the funds standing to the credit of the Collection Accounts in accordance with the provisions of the Relevant Documents but subject to the terms of the Collection Account Declarations of Trust; and

(viii) (in relation to the Trustee and the Administrator acting as Attorney under this

sub-clause (viii) only) to execute under hand or seal any instrument necessary or

expedient to discharge, vacate or release:

(a) any and every mortgage or Standard Security assigned or transferred to the

Issuer by the Donor under a mortgage sale agreement dated the same date as

this Power of Attorney between, among others, the Donor, the Warehouser,

the Issuer and the Trustee (the "Mortgage Sale Agreement"); and

(b) any and every Charge over real or heritable or personal or moveable property

now or in the future assigned or transferred to the Issuer by the Donor,

in such form as the Trustee or the Administrator acting as Attorney in relation to this

sub-clause (viii) shall consider appropriate,"

 

Apple

[applecart]

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

[applecart]

Don't mis understand me - what I should have said is based on the MSA and the Power of Attorney for Pender, we can can see how it is the Judge found in favor of Pender in that case. So, Thank you, I'm hopeful that interested members/guests perhaps draw the same conclusion.

 

On the other hand, we still have A.N.OTHER's documents to consider - would the outcome be the same for them as per Pender - or, indeed, should it be?

 

Dave is unwilling to comment fruther (understandably) anyone else care to comment on the detail presented for A.N.OTHER?

 

Apple

[applecart]

I agree, it is not the Account Trustee that is in question.

 

Within the MSA of A.N.OTHER - under the heading of POWER OF ATTORNEY it states:

 

A.N.OTHER, hereby irrevocably and by way of security for the performance of its obligations under this Agreement appoints the ISSUER, the TRUSTEE and ANY PERSON NOMINATED for the purpose by the ISSUER or the TRUSTEE, and each of them individually, TO BE IT’S ATTORNEY as set out in Clause x (A.N.OTHER/TRUSTEE Power of Attorney) of the Closing Arrangements Deed, to execute or do any deed, assurance, agreement, instrument or act which A.N.OTHER has undertaken to execute or do under the covenants, undertakings and provisions contained in this Agreement and A.N.OTHER

 

I interpret this to mean that A.N.OTHER has for a consideration - transferred all it's legal and equitable rights to the Borrower's home by way of a 'sale' with a Power of Attorney in favor of the ISSUER.

 

On it's face........... provides a distinct difference between A.N.OTHER and Paragon equity sale by Paragon and any 'purported sale of equity' by A.N.OTHER.

 

Granted, I do not draw this conclusion as the be all and end all to this matter, but it does appear that without more.....Borrowers may be justly showing signs of concern.

 

Apple

[applecart]

I think our posts crossed - I am looking at what you've said and will comment further in a while either way...

 

Apple

[applecart]

Before I get back to Dave, thought I would post that which I have posted previously here:

 

"Bare Trust (sense 1)

 

He must convey the property as directed on request by the beneficiary on request by the beneficiary (or in some cases beneficiaries) but he has no duty to comply with any other directions. eg. Client money held by a solicitor in his client account.

 

Note: The existence of interests by way of succession or of a defeasible interest, or even a power of sale for example, is sufficient to prevent a trust from being a 'bare trust'

 

Bare Trust (1) Plus Agency Type Agreement

 

Where the trustee holds on trust for the beneficiary absolutely, but also agrees to do either whatever the Settlor (SPV) asks, or at least whatever is asked within a certain range of possibilities - e.g called a 'unit trust' in the UK.... This is commonly called a nomineeship except that unlike the Bare Trust (sense 1) .... this type of 'nominee' HAS THE LEGAL TITLE to the assets concerrned...

 

BUT there is an alternative view of what a bare trust is, which can be referred to as 'Bare Trust (sense 2)'

 

BARE TRUST (sense 2)

 

This concentrates not so much on the duties of the trustee but on the identity of the beneficiaries. This kind of Bare Trust is where the Trustee has no beneficial interest, whether or not he has active duties to perform. A Trustee's right to remuneration or an indemnity out of the Trust Fund (which is a kind of beneficial interest) has been held sufficient for this purpose.

 

DISTINCTION AND SPECIAL TRUST

 

The difference lies in the source of the duties....

 

IF the source is 'Contractual' the relationship is 'NOMINEESHIP'

 

IF the source is 'Property' (i.e in the terms of the trust and not just by agreement) it is SPECIAL TRUST...

 

A Special Trust may (NOT MUST) therefore fall foul of the rules against perpetuities - A Nomineeship CANNOT

 

On the other hand, where a nominee becomes bankrupt, his subsequent discharge from bankruptcy will destroy most contractual obligations but not obligations inherent in the property relationship....

 

A further question which arises in distinguishing a Nominee (with title) and a Special Trust is whether a 'Custodian Trustee' is a Nominee OR a Special Trustee - it is thought it is a Special Trustee... "

 

Apple

[applecart]

Hello Apple

 

It would be unwise for anyone to comment about extracts from a document they have not read. Extracts without the context of the rest of the document are open to interpretation.

 

Whilst I am unable to comment on the documents you feel to post, would be unfair on the lender (If truth be told I do not understand how it would be unfair to the lender and if it was why is that of importance), the answer to your question would appear to be clearly Yes, it would be exactly the same.

 

In direct relation to the power of possession, the content of both the administration agreement and the mortgage sale agreement has absolutely no effect upon the possession right of the registered proprietor of the legal charge. The content of the administration agreement and for that matter the mortgage sale agreement for any mortgage securitisation will at best mean the transfer operates in equity, which will not at law divest the right of possession from the registered proprietor of the legal charge.

 

In response to A.N.Other, providing it is the registered proprietor of the legal charge

 

It is common ground that A.N.Other, 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 A.N.Other 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 A.N.Other as the legal owner

 

In my judgment as a matter of principle the right to possession conferred by the Legal Charge remains exercisable by A.N. Other as the legal owner of the Legal Charge (i.e. as the registered proprietor of it), notwithstanding that A.N.Other may have transferred the beneficial ownership of the Legal Charge to the SPV

 

As per the above extract from Pender, you can substitute the lenders name for any other registered proprietor of the legal charge.

 

Trust the above is of assistance

 

Dave

 

Ok, back to you now Dave....and as always apologies for the length of this post.....

 

I have posted the 'types of trust' again - lest we lose sight of them as we look to conclude this discussion (hopefully)

 

One of the Types of Trust - you will notice creates a Trust where the Legal title is intended to remain registered with the Originator.... as you know, a number of Originators purport to retain legal title but admit to selling the beneficial interest.....

 

It is only when you look at the underlying agreements (albeit extracts in the case of A.N.OTHER), that you begin to draw conclusions as to the Type of Trust you are dealing with....

 

To be fair to both Lenders and Borrowers - in open discussion - It is important to identify the 'Type of Trust' relationship - long before one draws on Pender as the Authority in all securitisation matters.

 

It would be unfair to 'assume' that the relevant documents for A.N.OTHER are the 'same' as Pender, when I have provided more than enough relevant detail to cause some form of interpretation - which imo is better than assumption.

 

It would be unfair to 'assume' that because the Legal Title is registered at HMLR in the originators name after the sale - that the position for a lender who appoints an Attorney to take over all his powers, rights in the 'estate' and 'mortgages' is in the same position as one such as Paragon, who's rights whilst transferred were retained by and within the Paragon Group (Paragon Mortgages/Paragon Finance PLC...)

 

The A.N.OTHER POA (Power of Attorney) transfers 'all the powers of A.N.OTHER by reason of its remaining for the time being the registered owner or heritable creditor at the Land Registry' along with powers in 'interest rate changes', 'collateral security',' estates', 'loans' etc, etc

 

Quite different from Paragone POA....

 

So, here and whilst I do not judge or confer that this is the gospel - but it would appear their is a distinction as to the Type of Trust that A.N.OTHER has created..... which would more than fit the description of Bare Trust (1) Plus Agency Type Agreement.

 

This take me back to the finding of the TLATA 1996 s.6 - and consider if this section now more clearly fits A.N.OTHER?

 

At Common Law, the owner holds title to the property and enjoys all the other rights of property ownership...

 

A trust imposes a duty on the Common Law Owner to hold the property for the benefit of someone else..........

 

Therefore one of the key rights of ownership - the enjoyment of the property - no longer belongs to the Title-holder,.... Equity provided the person intended to benefit with a means to enforce the right of enjoyment.

 

This was a personal right, or right in personam against the trustee. It was not a proprietary right, or right in rem with respect to the trust property itself.

 

If we consider the essence of the matter rather than the form of it, a trustee (the originator) is not an owner at all, but a mere agent (Bare Trust with Agency) whom the Law has conferred the power and imposed the duty of administering the properrty on behal of another person.

 

He is a person to whom the property of someone else is fidicuary attributed by the Law to the extent tha the rights and powers thus vested in a nominal owner shall be used by him on behalf of the real owner

 

As between Trustee and Beneficiary. the Law recognises the truth of the matter as between these two.

 

the property belongs to the Beneficiary and not the Trustee.

 

As between the Trustee and Third persons, the fiction prevails.

 

The Trustee is clothed with the rights of his Beneficiaries and is so enabled to personate or represent him in dealings with the World at large....

 

This is no different to the allegations made by Carmen Butler in the Houses of parliament some time ago - right now, with further knowledge and more detail (unless there is anyone who can offer an alternative narrative) what she was saying makes a whole lot of sense too.....

 

Again, this is only a discussion, there are no final conclusions to support either Lender or Borrower.... Having said this, I can see why Borrowers despite the finding and Authorities in Pender remain confused...

 

Apple-

[applecart]

Hi Dave

 

Given that it is only you and I that have contributed to the discussion, it is fair to say that if I do not respond to you, then you have every right to rely on your points raised as the conclusive result.

 

I do not disagree with anything that you have posted and this discussion would not be as it is without your input – between us, we are hopefully drawing attention to the concerns and allegations being made by Borrowers and the rights as relied upon by lenders on the authority of Pender and the lenders right to possession by virtue of s.58 LPA 1925.

 

We are - between us, looking to quash this issue once and for all – so that there should be no doubt in any Borrowers mind that the Lender is legally going about his business in relation to their properties.

 

In accepting that the trust for all securitization financial arrangements are ‘Bond or Debenture Trusts’ (you did not disagree with this)

 

We can say of Pender, that all was in-house, its creation does not appear to speak of anything other than the transfer of mortgages and makes no mention of transfer of any collateral security. The authorities in more than one appeal conclude that their agreement did not fall foul to s.58 LPA 1925 on the finding that the there was no mention of transfer of the collateral security and as we know Paragon retained the ‘title to sue’ and many other Lenders have relied and achieved the benefit of this Authority.

 

If we take for granted that the extracts from the A.N.OTHER MSA is hypothetical…

 

The mention of a transfer of collateral security is where the ‘title to sue’ issue continues to arise. Why?.................. Because if the rights to the collateral security have been transferred by virtue of the MSA and other supporting documentation – then I can see why it is that Borrowers are continuing to allege that A.N.OTHER has no ‘title to sue’

 

As I understand it, if you have created a Bond or Debenture Trust, the Originator is not the Legal owner of the title or ‘title to sue’ for possession.

 

 

Apple

[applecart]

We failed to consider and factor in the Explanatory notes of : s.58 (2) LPA 1925

 

 

s.58 EXPLANTORY NOTES – Conclusiveness

 

The Legal estate will not vest in the transferee until all of the appropriate requirements for registration set out in schedule 2 have been met.

 

Subsection (2) is designed to prevent subsection (1) overriding the rule in relation to registrable dispositions that a disposition only operates at Law when all the relevant registration requirements have been met (I,e entry of the disponee in the register as proprietor may not always be the only requirement). The Legal Estate will not vest in the transferee until all of the appropriate requirements for registration set out in Schedule 2 have been met.

 

We failed to consider and factor in as to whether Schedule 2 Part 2 applies to s.58 LPA 1925 after the sale:

 

Dispositions: Registration Requirements

 

“Part 2: Registered Charges

 

Introductory; Transfer; and Creation of a sub-charge

 

224. This Part of the Schedule sets out the registration requirements for those dispositions of registered charges required to be completed by registration under section 27 (3). The requirements reflect the way in which transfers of charges and the creation of sub-charges are currently recorded. Under paragraph 10, if the benefit of a registered charge is transferred then the transferee, or any person who acquired the benefit from him, must be entered in the register as proprietor of the charge. In practice this means that the entries relating to the charge are altered by the insertion of the new owner’s details. Under paragraph 11, if a sub-charge is created, then the person who acquired the benefit of the sub-charge (or any person who has acquired the benefit of the sub-charge from him) must be entered in the register as proprietor of the sub-charge. This in practice results in an additional entry. The details of the original chargee remain in the register.”

 

 

Apple

[applecart]

in relation to the creation of the mortgage between the Borrower and the Originator - we failed to consider and factor in what the position would be after the sale with regard to the Borrower rights under the provision of s.88 LPA 1925:

 

Realisation of freehold mortgages.

 

(1) Where an estate in fee simple has been mortgaged by the creation of a term of years absolute limited thereout or by a charge by way of legal mortgage and the mortgagee sells under his statutory 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.

 

An express power of sale is the Originators Legal right alongside the right to take power to enter into possession as ‘soon as the ink is dry’ [fourmaids v Dudley]

(s.101 (1) LPA 1925) & (s.95 (4) LPA 1925)

 

s.101 (1) LPA 1925: Powers incident to estate or interest of mortgagee.

 

"(1) A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely):

 

(i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title, or other matter, as the mortgagee thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to re-sell, without being answerable for any loss occasioned thereby; and..."

 

s. 95 (4) LPA 1925:

 

"Nothing in this Act affects prejudicially the right of a mortgagee of land whether or not his charge is secured by a legal term of years absolute to take possession of the land, but the taking of possession by the mortgagee does not convert any legal estate of the mortgagor into an equitable interest.

 

Apple