Lowell Deeds

The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell

February 24, 2009

Buried by a wave of assignments

by @ 12:43 pm. Filed under Real Estate

Our electronic recording terminal has been buzzing with activity during the past few days, mostly due to hundreds of assignments that read as follows:

Citi Residential Lending Inc, as Attorney-in-Fact for Ameriquest Mortgage Company does hereby assign the described mortgage together with the note described therein to Deutsche Bank National Trust Company, as Trustee for Ameriquest Mortgage Securities Inc Asset-Backed Pass-Through Certificates, Series 2005-R6, under the pooling and servicing agreement dated July 1, 2005. Said mortgage was executed on July 1, 2005 by Joe Homeowner and is recorded in the Middlesex North District Registry of Deeds in Book 30125, Page 15.

Asset-Backed Pass-Through Certificate? The way I understand it, a mortgage banker pools together say $10 million in home mortgages and generates “pass-through certificates” in $10,000 denominations that represent the entire value of that mortgage pool. Investors then by these certificates and the mortgage banker (or a servicing company) receives the monthly mortgage payments from homeowners and passes the money through to the investors, keeping a percentage (44/100 of 1% seems a standard amount) for the effort.

As most of us who were recording all of these mortgages knew full well, the chances of them being paid by the borrowers was – remote, shall we say. It seems that the investors who bought these “pass-through certificates” didn’t have the benefit of our opinions. Many investors are now claiming to have been misled. A class action suit now pending in the US District Court for the Eastern District of New York makes the following allegations:

Investors purchased the Certificates based upon three primary factors: return (in the form of interest payments), timing of principal and interest payments, and safety (risk of default of the underlying mortgage loan assets). The Registration Statement included false statements and/or omissions about: (i) the underwriting standards purportedly used in connection with the origination of the underlying mortgage loans; (ii) the maximum loan-to-value ratios used to qualify borrowers; (iii) the appraisals of properties underlying the mortgage loans; and (iv) the debt-to-income ratios permitted on the loans.

As a result, the Certificates sold to plaintiff and the Class were secured by assets that had a much greater risk profile than represented in the Registration Statement. In this way, defendants were able to obtain superior ratings on the tranches or classes of Certificates, when in fact these tranches or classes were not equivalent to other investments with the same credit ratings.

My sense is that all of the assignments we’ve recently received are somehow related to all of this, particularly with all the talk of bank bailouts or takeovers.

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