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Notes on CitiBank v.xxxxxxxx
1. The style of the case has only one Plaintiff which is CitiBank, N.A. as Trustee for
Lehman XS Trust 2006-17.
1.1. CitiBank has a trust division that administers trusts which is incorporated
separately under the holding company CitiGroup Inc.
https://www.privatebank.citibank.com/our.../trust.htm
1.2. The reason why CitiBank N.A. is named as trustee is that they were trustee in
name only. Their name was “rented” to make it appear as though a funded
trust existed. In fact, there are no trust documents, there are no duties of the
trustee, there are no beneficiaries who could exercise any control or replace
the trustee, and none of the investors money went into a trust account, nor did
any indicia of ownership of notes and mortgages ever pass through a trust
account that was controlled by CitiBank. It wasn’t administered by their trust
division because there was no trust and there are no assets of the fictitious
investment pool that was sold to investors.
1.3. Thus the investors thought they were “buying” residential mortgage backed
securities (RMBS). But the investment pool was a fictitious entity or nominee
with no power, no assets and no interest in the loans claimed to be part of the
pool of assets in the “trust”. It was a ruse used to persuade investors --pension funds etc. --- to buy what was thought to be triple A rated securities,
that were insured and hedged.
1.4. What the investors did not know was that their money was diverted to a
“warehouse” lender controlled by the investment bank, to fund loans in which
the originator was usually a thinly capitalized entity completely dependent
upon the underwriting approval of the aggregator and the funding by the
alleged warehouse lender.
1.5. Most originators were a new kind of entity called “originators” because that is
all they did. Even when the originator was an actual depository institution the
loan was subject to a purchase and assumption agreement, which by
operation of law and contract made all such loans originated, underwritten and
funded in this manner, the loan was s aid to be owned not by the investors but
by the intermediaries.
1.6. Hence the funding of the loan violated the terms of the PSA and Prospectus
and violated the REMIC statute in the internal revenue code because the
REMIC entity was ignored, thus creating a massive double taxation problem.
When the market imploded and investors stopped buying the bogus mortgage
bonds, the scheme collapsed like every other Ponzi scheme.
1.7. A Ponzi scheme is generally defined as a series of fraudulent transactions in
which fictitious assets are thought to be traded, bought or sold for the benefit
of the investors; in fact, the scheme is funded not by the investments (there
were no investments at all in Madoff’s case) but rather by the purchase of
more mortgage bonds by investors who were unaware that thee ratings had
been rigged just like the LIBOR And EuroBOR rates were rigged.
1.7.1.
Any adjustable loan tied to LIBOR is therefore probably misstated as to
both principal and interest as a result of the LIBOR rigging, which
involved the largest and oldest banks in the world.
1.8. Lehman Brothers sought Bankruptcy protection in 2008. It is being rapped up
now with hundreds of unanswered questions. But one thing that is certain is
that Lehman was most probably the investment banker that created,
underwrote and sold the bogus mortgage bonds and/or may have been the
aggregator and/or warehouse lender for the subject transaction.
1.9. By claiming assets purchased with investor money Lehman et al were able to
name themselves as beneficiaries of the insurance and hedge products
promised to the investors. Thus the Banks declared fictitious losses in order to
collect on the insurance and the proceeds paid by counter-parties on credit
default swaps and other hedges.
1.10. In my opinion, the investment bank assumed the role of both fiduciary and
agent for the investors regardless of where the money and any assets were
deposited or held. Thus the payments received by the financial affiliate of the
Master Servicer (another entity controlled by the investment banker) from
insurance and hedge products were never paid to or credited to the investors.
1.10.1. Had they done so, the entire foreclosure crisis would have been averted.
1.10.2. Had they done so there would have been no need to fabricate, forge and
otherwise affix robo-signed, surrogate-signed or other unauthorized
signatures to documents to create the illusion of ownership by the
investment pool AFTER the insurance and hedges and federal bailouts
were paid to the banks.
1.10.3. Had they done so, the loan receivable account from the investment pool
would have been reduced proportionately and the balance due from the
borrowers would have been correspondingly reduced, subject to
potential claims for contributions from subservicers who continued to
make payments even after the loan was declared in default, insurance
and hedge products.
1.10.3.1. The loan balances would have been reduced not by forgiveness but
for payment, many times in full and sometimes overpaid because
the investment banks “leveraged” their bets against the loans up to
42 times (Bear Stearns is an example, where they essentially sold
the same loan 42 times. If Bear Stearns had modified, settled or
reinstated the loans, they could have owed as much as $8 million
on each $200,000 loan, which is why the pressure has been on for
foreclosures and the banks are two-stepping the requirement that
they modify mortgages.
1.10.4. They did not do so because the banks were hiding huge profits from two
principal channels --- the insurance and hedges on one hand, and the 2d
tier yield spread premium on the other. Accounting for all the money
would easily reveal by application of simple arithmetic that (a) the
investors advanced far more money than was ever used for funding
mortgages (Tier 2 yield spread premium) and that the banks had
received, as agents from the investors, far more money than the
investors had ever advanced.
1.11. The year 2006 is in the name of the alleged asset pool for which CIti is the
supposed Trustee. That means that the subject loan was to have been funded
by the REMIC that issued the bonds to the investors, and that the loans were
payable to the investment pool (REMIC) and secured by a mortgage or deed
of trust showing the pool to be the payee and showing the pool to be the
secured party. No such thing exists in the instant case. Both the PSA and
REMIC statute require closeout and no further business activity after 90 days
from the date of opening the pool for investments.
1.11.1. But the loan had been funded before the pool opened and was
supposedly transferred after the pool closed and during the Lehman
bankruptcy.
1.12. The funding of the loan came from the investors but NOT the REMIC as
claimed in the Plaintiff’s complaint. The industry practice has been and
continues to be the use of a single account dubbed “Custodial” by the
investment bank without any reference to the individual REMIC entities, which
did not exist anyway.
1.12.1. The loan was funded by the “custodial” account with strict instructions
that this money was not in any way to be touched or used by the named
loan originator. The originator was paid a service fee as a nominee for an
undisclosed lender (the investors using the investment bank as the
intermediary much as one uses a check drawn on one’s depository bank
to pay a vendor).
1.12.2. At no time did the originator post the transaction as a loan receivable
with a reserve for default because there was no risk of loss or use of the
capital of the originator.
1.12.3. The loan receivable belonged, by operation of law, to the investors who
advanced the money. Those investors included all of the “buyers” of the
bogus mortgage bonds of the fictitious REMIC plus the rest of the
investors who had been solicited for investment in other REmIC entities
that never received the money or the assets.
2. The banks are using the ruse of foreclosure to distract the investors, the government
and the borrowers from the fact that they were and are solely intermediaries that
never advanced one cent to fund the origination or purchase of these loans.
3. We are left with a chain of documents in which the wrong payee is named citing
terms of repayment wholly different from (1) the terms of the mortgage bond and (2)
the expectation of the investors.
4. The attorney obviously represents Wells Fargo, who is now saying it is the servicer,
but fails to produce any documentation showing how the ownership of the loan
passed through several transactions where money exchanged hands to the REMIC
entity and fails to produce any documentation from the Master Servicer appointing
Wells fargo as the subservicer.
4.1. As a result, Wells Fargo has no original documentation but only
documentation derived from other documents none of which are original
receipts for wire transfers, Check 21, ACH or cancelled check.