Mortgage Securitisation Discussion Thread

[applecart]

“Interesting...

 

The sale (disposition) of a legal charge is completed by registration. This has been established by common law and confirmed by legislation.

 

It is the Land Registry Charges Register that will evidence, if the sale (disposition) of the legal charge is complete and not any of the documents you have listed.”

 

Again, depending on your depth of knowledge – you will come to appreciate that the registration at Companies House is ‘evidence’ that the sale (disposition) is perfected and complete.

 

As the discussion ensues, I will of course relay the significance of other salient documents.

 

Apple.

[applecart]

"You say

 

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

 

88 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;

 

When the lender sells the mortgaged property (for want of a better description) following possession, that the mortgage is extinguished, not when the mortgage debt is sold/assigned in equity or at law."

 

On the contrary, it is LPA s.101 (1) that deals specifically with the sale of the mortgaged property…. It is LPA s.101 (6) that deals specifically with the sale or to use the terms of the legislators….. ‘realisation’ of the 'estate in fee simple' to do with the mortgage and rights to possession...

 

The mortgage is secured by the property

 

The mortgage is the loan

 

The property is the security

 

We are talking in terms of the mortgage being sold or 'the estate in fee simple' – not the physical property itself…

 

s.88 deals with realisation of either the 'estate in fee simle' – in fact in the ‘Swift 1st’ Case – you will note that the judge goes some way into explaining how s.104, 101(6) and s.88 are engaged.

 

The sale of the mortgage in securitization transactions comes first – possession of the Borrowers home tends to come later (this being without the Borrowers knowledge that the mortgage has already been sold (estate in fee simple) and is therefore subject to the full protection of the Law at s.88 and more…)

 

"When sold at law, the legal charge is transferred. It is not extinguished and replaced. "

 

Depending on your depth of knowledge, you will come to realise that the Original Lenders sale of the mortgage to the Issuer - is a ‘sale at Law’ and that the ‘Legal charge is transferred’ by way of registration at Companies House and that the mortgage between the Original Lender and the Borrower is extinguished. However…. I would caution that it is not replaced until such time as notice is given to the Borrower and s.27 LRA is complied with.

 

But, as we can see from the cases you posted – unless a collateral agreement ‘perfection event’ or ‘perfection act’ occurs this will not happen…. (registration gap)

 

Apple

[applecart]

"It is nonsense to interpret legislation that applies to one action, to also apply to another action.”

 

I don’t see that I did – s.88 is to do with ‘realisation of freehold mortgages’ and more specifically states: “(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”

 

For the benefit of doubt, it is the mortgage (estate in fee simple), and not the physical property itself that s.88 is dealing with here…. Because the estate is freehold and the mortgage term is a term of years….. It will be s.89 that relates to the realization of leasehold mortgages…

 

It is s.101 ‘Powers incident to estate or interest of mortgagee’ that deals with the sale of the property itself

 

“(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,…………….”

 

And s.101 (6) that deals with the lenders interest in the Legal Charge at HMLR - 'estate in fee simple'/mortgage :

 

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

 

Apple

[applecart]

"Interesting....

 

Why is this even being discussed let alone being disagreed with ?

 

This has been clearly legally established for near nine years

 

Paragon Finance Plc v Pender & Anor [2003] EWHC 2834 (Ch) (25 November 2003)

 

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

To claim anything else would not only be nonsense but complete nonsense"

 

This is a discussion thread - what it presents is in depth discussion on mortgage securitization – I suppose you could say – it looks to put the ‘sense’ into the oft bandied about word ‘nonsense’.

 

Who would have thought 9 years after Pender that well respected and trusted Banks would be at the forefront of a libor scandal??

 

The trust as and where it is due needs to be re-established or in the event that culpability is at play – then like the Banks, some one if not all the powers that be needs to do something about it – whatever the case – the position needs to be made clear….

 

Apple

[applecart]

"You say that case law can either be relied upon or ignored by a judge and the judge will apply his/her discretion

 

 

Interesting....

 

What about the principle of precedent and Stare decisis"

 

Lea_HTH provided an indepth explanation with regard to this – I’ve already extended my gratitude : )

 

Apple

[applecart]

Interesting....

 

You may want to consider that what you want to look to deal with is not the only thing you should look to deal with.

 

Assignment

 

I wonder if you understand and appreciate the significance of assignment. You have dismissed it, as if it is in some way irrelevant.

 

I don’t believe that you have given consideration too, or really understand the importance and significance of assignment of a thing in action. A thing in action is the right to enforce payment of a debt. In reference to this particular thread, the right to enforce the mortgage debt (right to possession is not the right to enforce the mortgage debt). It is complete nonsense to dismiss the relevance of assignment.

 

A chose in action – can be assigned in two ways, either by an equitable assignment or by a legal assignment. Equitable assignment of the mortgage debt is a right of lender permissible by common law. Whereas a Legal Assignment of the mortgage debt is defined by s.136 of the Law of Property Act 1925.

 

If we take a moment to read s.136 of the Law of Property Act 1925, we will find that it confirms that:

 

136 Legal assignments of things in action.

 

(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—

 

(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:

 

From the date the borrower receives notice of the legal assignment – the legal right to the mortgage debt and all legal/other remedies to that mortgage debt pass and transfer from the assignor (the lender) to the assignee (the SPV) and not before.

An assignment that does meet the statutory requirements of a legal assignment is an equitable assignment. The only significant difference between a legal assignment and an equitable assignment is that an equitable assignee cannot bring an action in its own name against the borrower, but must fall back on the rules governing equitable assignments and join the assignor as party to the action.

 

It is extremely foolish to not consider assignment, when discussing the sale of debt. The terms assignment and sale are almost interchangeable. The only significant difference is that a sale implies that a price has been paid whereas with assignment, this is not always the case.

 

If not for assignment, please ask yourself, how else the legal rights to the debt are transferred from the assignor (the seller) to the assignee (the buyer)["/COLOR]

 

I understand what the Law says with regard to choses in action – I may not articulate as well as you do – but, your point is not lost on me.

 

Remember, we are talking Mortgage Securitisation – depending on your knowledge the following may or may not make sense to you…..

 

The Borrowers mortgage agreement provides that the Borrower has appointed the Original Lender to be his Attorney (although at the time of executing the mortgage deed the Borrower will not be aware of this and 9 times out of 10 will not be made to sign the terms and conditions of the mortgage anyway – so it is most likely that they will not be aware of what they are involving themselves in – notwithstanding that terms and conditions that are not signed are not binding – but that’s a whole different thread)

 

The position is, the Buyer/the Trustees etc are not obligated to take any notice of what the Borrower does or does not know.

 

For securitisation purposes, so long as the terms and conditions state that the Seller has the right (by way of the Borrower’s purported Power of attorney) to sell, .....and… that somewhere in the terms and conditions it states that the Original lender will ‘step aside’ and make the Borrower obligated to the Buyer…. That’s all they need to know.

 

The effect is that the Buyer is ‘seen’ to be legally ‘entitled’ to the mortgage payments via its transaction agreements between itself and the seller and the Borrower (albeit without the Borrowers knowledge) for securitisation purposes. That’s a ‘sneaky’ means of Novation – don’t you think? (…but to be fair to Borrowers – it is not a true novation at all, not if the terms and conditions are not signed by all parties and the Borrower was not made aware that a novation was the purpose.)

 

Non the less, on the surface – you are correct – it’s an assignment – it’s equitable – The Original Lender will seek to enforce possession if you are in default on mortgage payments as the one with the chose in action.

 

But - on the ground – for securitization purposes – s. 136 LPA has nothing to do with it as far as the mortgage debt goes, the Buyer will not ever be in a position to take possession – because the mortgage Deed will not quote A.N.OTHER name – for that he must comply with s.27 LRA

 

Apple

[applecart]

Addressing any of the other points raised by others would simply be duplicating the information - so, I'll refrain from that - all it would do is extend the thread aimlessly...

 

Apple

[Lea_HTH]

Apple, apart from discussion, is there something you are hoping to achieve? I ask because it might be useful to know so that further directions, other than mere discussion, can take place.

 

Whilst marginally interesting the discussion doesn't appear to be going anywhere because of a lack of knowledge about the underlying reasons for it. Perhaps you are hoping to challenge a mortgagee in possession proceedings via securitisation? Or perhaps there are issues arising from such securitisation that you feel have affected you, or someone else?

 

I am not intending to disrupt your thread - there's no harm in discussion - just trying to see if there is actually something that I might be able to assist with?

[wfspayback]

Imagine if s.88 simply meant that when a mortgagee (the lender) exercises their power of sale (as per s.101 of the LPA 1925), of the house/land - The Freehold Estate - The purchaser of the house/land from the lender would take it free from the original mortgage.

 

Continue to imagine if when such a mortgagee is granted aforeclosure absolute, he obtains the estate in fee simple, free of the mortgage and any subsequent mortgages.

 

Now imagine that s.89 was exactly the same except that it applied to leasehold houses/land

 

Now imagine if you will, if the above was correct and that neither s.88 or s.89 related to the sale of the mortgage debt but to the sale of the actual freehold / leasehold property.

 

Wouldn't that be something ;-)

Edited August 20, 2012 by wfspayback

[wfspayback]

Apple, apart from discussion, is there something you are hoping to achieve? I ask because it might be useful to know so that further directions, other than mere discussion, can take place.

 

Whilst marginally interesting the discussion doesn't appear to be going anywhere because of a lack of knowledge about the underlying reasons for it. Perhaps you are hoping to challenge a mortgagee in possession proceedings via securitisation? Or perhaps there are issues arising from such securitisation that you feel have affected you, or someone else?

 

I am not intending to disrupt your thread - there's no harm in discussion - just trying to see if there is actually something that I might be able to assist with?

 

I recall in the early days of these debates (though not by apple) that if it could be shown the lender does not have title to sue, it would prevent the lender obtaining possession.

 

It was argued that the 'secreative' SPV's would never reveal themselves leaving no mortgagee to claim possession.

 

However, this has been proven not to be the case, after Southern Pacific Securities 05-2 Plc v Walker & Anor [2010] UKSC 32 (07 July 2010), which followed Southern Pacific Personal Loans Ltd v Walker & Anor [2009] EWCA Civ 1218 (12 November 2009).

 

With Southern Pacific Securities 05-02 plc being the Special Purpose Vehicle (SPV) for a number of Southern Pacific Personal Loans, secured loans.

 

Partially due to Southern Pacific Personal Loans not having any directors, as per the Mortgage Sale Agreement a perfection event occurred in that there was a perceived risk to the security, which resulted in perfection events - notices of assignments sent to borrowers (as required by s.136 of the Law of Property Act 1925) and the registration of completed TR4's* with the Land Registry (as required by s.27 of the Land Registration Act 2002). The Perfection Acts resulted in the SPV's taking the place of Southern Pacific Personal Loans as the legal owners of the mortgage debt and as the registered proprietor's of the legal charge.

 

http://www.investegate.co.uk/article.aspx?id=200912171131162946E

 

Taking the above into account, except that it could be argued that securitisation may impact upon the fairness of the agreement with the borrower, I regret I personally don't know what is trying to be achieved in this and other threads about securitisation.

 

 

*Rule 116 of the Land Registration Rules 2003, state that a transfer of a registered charge must be in Form TR3, TR4 or AS2, as appropriate.

Edited August 20, 2012 by wfspayback

[wfspayback]

In terms of unfairness to the borrower, it could be argued based upon the terms of the securitisation that the borrower is unable to convert their mortgage from repayment to interest only, the repayment period may not extended etc.

 

However, these are different arguments to those discussed in this thread regarding the lenders right to possession.

[wfspayback]

What are your thoughts on this entire topic Lea_HTH, your opinion is one that is respected on CAG and your input would be greatly appreciated and welcomed by all contributors to and readers of this thread.

[applecart]

Apple, apart from discussion, is there something you are hoping to achieve? I ask because it might be useful to know so that further directions, other than mere discussion, can take place.

 

Whilst marginally interesting the discussion doesn't appear to be going anywhere because of a lack of knowledge about the underlying reasons for it. Perhaps you are hoping to challenge a mortgagee in possession proceedings via securitisation? Or perhaps there are issues arising from such securitisation that you feel have affected you, or someone else?

 

I am not intending to disrupt your thread - there's no harm in discussion - just trying to see if there is actually something that I might be able to assist with?

 

That’s very kind of you. I’ve researched this topic quite well, so, I’m fine Thanks : )

 

There are of course thousands who are not well versed …and may benefit from any constructive direction you may be in a position to offer either way ; )

 

Apple

[Lea_HTH]

I was just wondering whether there was an ultimate aim to all this discussion, or whether it was for entertainment purposes.

 

As a lawyer, I'm interested in an end goal and ultimately a solution, and I am all for changing the law as and where possible, but I'm not convinced this is an area where the law will find differently than it already has. As such, there isn't really anything that I can add other than my previous comment on another thread, in which, if I recall correctly, I stated that securitisation was perfectly legal and therefore did not affect a possession claim.

 

That obviously doesn't stop you from enjoying your discussion!

[applecart]

Thanks Lea_HTH

 

Your profession is noted.

 

Your interest in an end goal and solution is also noted.

 

There is no suggestion in this discussion that securitisation isn't legal.

 

It would be useful to know the ground/s you to conclude that securitisation would not affect a possession claim?

 

 

Apple

[Lea_HTH]

The law as it stands.

[mxpaulg]

new to all this but are we saying that maybe all that MX has sold on is not enforcable by MX, I have £5M of mortgages & am always looking for ways to exit, any help?

Edited August 21, 2012 by mxpaulg

[applecart]

The law as it stands.

 

Shrewd, very shrewed - I like it : )

 

We are to understand that everything we need to know is shown on the title register...... but, I need only say...... 'What about overriding interests'?....

 

Apple

[mxpaulg]

I too am looking for an end game & some help, if we can construct an argument then give them a run for their money! I am all for it

[applecart]

new to all this but are we saying that maybe all that MX has sold on is not enforcable by MX, I have £5M of mortgages & am always looking for ways to exit, any help?

 

Hi Ya,

 

This is a discussion thread - viewed by some as a 'flight of fancy' ......

 

It does not look to advise or direct any consumer to 'exit' legally binding mortgage obligations.

 

It's content is general at this stage - and will make sense to some and nothing to others - Essentially, it was never intended to provide direction for individual issues.

 

Perhaps best to start a thread of your own - outlining your personal issues and seek help from there.

 

Whilst this may not be the response you hoped for, this is in no way meant to deter you from starting a thread of your own : )

 

Apple

[Lea_HTH]

Apple: Any overriding interest, if addressed in any defence, would be considered by a judge in a possession hearing.

 

mxpaulg: If you wish to 'exit' your mortgages, you will need to sell or remortgage. What is discussed in this thread will not, as the law stands, fly in a court of law.

[wfspayback]

mxpaulg: If you wish to 'exit' your mortgages, you will need to sell or remortgage. What is discussed in this thread will not, as the law stands, fly in a court of law.

 

Further to Lea_HTH's comment -

 

Mxpaul, you do have to consider relevant case law. When I say relevant, I mean similar cases with arguments based on mortgage securitisation, rather than cases only linked by six degrees of seperation.

 

I say this because of Legal Precedence. Decisions made by Courts are binding upon lower Courts. As an example a Court of Appeal Judgement is binding upon a High Court and a County Court, whereas. High Court Decision is binding upon a High Court. Least we forget that a Supreme Court Decision binds all lower Courts.

 

With all this in mind, it may be beneficial at this point to look at and consider relevant case law.

Edited August 22, 2012 by wfspayback

[wfspayback]

High Court Cases

 

Paratus AMC Ltd & Anor v Countrywide Surveyors Ltd [2011] EWHC 3307 (Ch) (14 December 2011)*

 

H.H. Judge Keyser Q.C. :

 

12.*By a Mortgage Sale Agreement dated 2nd March 2005, GMAC sold to RMAC the beneficial ownership of a package of mortgage loans and their related security; these included the loan to the Borrower and the mortgage over the Property. Some of the details of the transaction will be relevant in considering issues of loss and damage. For present purposes it suffices to say that the transaction was part of GMAC's repackaging of its portfolio and that at law GMAC remained the mortgagee of the Property and entitled to receive from the Borrower the payments in respect of the loan.

[wfspayback]

Whilst an Irish case, this demonstrates how different Courts view the securitisation arguments in exactly the same way

 

High Court of Ireland

 

Wellstead -v- Judge White & Anor [2011] IEHC 438 (25 November 2011)*

 

Judgment of Mr Justice Michael Peart delivered on the 25th day of November 2011:

 

His grounding affidavit characterises the action by Ulster Bank in seeking repossession in circumstances where it no longer owns the mortgage and has been repaid the money lent to the applicant is fraudulent, misleading and premeditated.

 

In relation to the last argument, Counsel for the bank has referred to clause 17 of the mortgage deed executed by the applicant and his former partner, which contains a consent by the mortgagors to such a disposal of the benefit of the mortgage to another party by way of a securitisation scheme or otherwise, and it is submitted that this is a point which it is simply not open to the applicant to argue, even if he was in time to do so, since he has consented to that occurring. I agree.

 

But there is another obstacle which faces the applicant, and which he has not addressed, and it is that there is nothing unusual or mysterious about a securitisation scheme. It happens all the time so that a bank can give itself added liquidity. It is typical of such securitisation schemes that the original lender will retain under the scheme, by agreement with the transferee, the obligation to enforce the security and account to the transferee in due course upon recovery from the mortgagors.

 

In my view, discovery would not be ordered on a leave application in any event. But the applicant would have to overcome the arguability threshold for the point that he is making in relation to securitisation, and in my view and for the reasons outlined above he cannot do so.

[wfspayback]

The now infamous Pender case

 

Court of Appeal

 

Paragon Finance Plc v Pender & Anor [2005] EWCA Civ 760 (27 June 2005)

 

Lord Justice Jonathan Parker :

 

CONCLUSIONS

 

The title to sue issue

 

In my judgment Mr and Mrs Pender's case on this issue is misconceived. It is common ground that Paragon, as registered proprietor of the Legal Charge, retains legal ownership of it. One incident of its legal ownership – and an essential one at that – is the right to possession of the mortgaged property. I can see no basis upon which it can be contended that an uncompleted agreement to transfer the Legal Charge to the SPV (that is to say an agreement under which, pending completion, the SPV has no more than an equitable interest in the mortgage) can operate in law to divest Paragon of an essential incident of its legal ownership.*

 

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

 

It follows, in my judgment, that Paragon, so long as it remains the registered proprietor of the Legal Charge, is a necessary party to any claim to possession of the Property in right of the Legal Charge.

 

The only question then is whether the SPV should have been joined in the proceedings as an additional claimant. In my judgment, the answer to that question is plainly: No. On the assumption that the consideration for the transfer of the Legal Charge has been paid in full, Paragon has since retained its legal ownership of the Legal Charge as trustee for the SPV (see Whiteley v. Delaney [1914] AC 132 at 141 per Viscount Haldane LC). But it does not follow that in that situation the SPV, as the owner of the Legal Charge in equity, is a necessary party to the claim; and on the facts of the instant case joinder of the SPV is wholly unnecessary. There is, after all, no issue between the SPV and Paragon as to the exercise of the mortgagee's rights under the Legal Charge: indeed the SPV has, by virtue of the administration agreements, expressly authorised Paragon to exercise such rights on its behalf.

 

In my judgment, therefore, there is no substance in the contention that the SPV should have been joined as an additional claimant in the proceedings. Nor, in my judgment, can the fact that Paragon has failed to describe itself as suing in its capacity as trustee affect the validity of the proceedings or of the orders made in the proceedings (in particular, the possession order). In any event, even if that failure could be said to amount to a formal defect in the proceedings (and I do not regard it as such) the court has ample powers under the CPR to correct such defects (e.g. under CPR Pt 17).

 

In my judgment Mr Page's reliance on section 114 of the Law of the Property Act 1925 is wholly misplaced, for the reason which the judge gave: viz. that section 114 is concerned with transfers of mortgages of unregistered land (transfers of mortgages of registered land being dealt with by section 33 of the Land Registration Act 1925). To interpret section 114 as applying also to transfers of mortgages of registered land would produce a fundamental and wholly illogical conflict between the two regimes in relation to transfers of mortgages. Bearing in mind what Lord Oliver of Aylmerton said in Flegg (quoted in paragraph 85 above), I can see no conceivable basis for interpreting section 114 in a way which produces that result and every reason for not doing so. Accordingly I respectfully agree with the observations of this court in Marks with reference to the instant case (see paragraph 95 above).

 

Nor, in my judgment, can Mr Page find any support for his submission in the Land Registration Act 2002, or in the Law Commission Report which preceded it. In my judgment it is verging on the absurd to seek to interpret a provision in a statute by reference to a provision in a different statute enacted some eighty years later.

 

In any event, I agree with the judge that the administration agreements demonstrate a clear contrary intention, sufficient to disapply section 114 if (contrary to the conclusion which I have just expressed) the section would otherwise apply.

 

As to Mr Page's reliance on section 136 of the Law of Property Act 1925, that too is in my judgment misplaced. He fails to distinguish between the right to sue at law for the mortgage debt and the proprietary interest created as security for its repayment. Section 136 applies only to the former.

 

Accordingly in respectful agreement with the judge I reject Mr Page's submissions on the title to sue issue