January 10th, 2011

A trillion dollars, illustrated in Google Sketchup.

PageTutor takes Google Sketchup for a spin to show us what a trillion dollars would look like, stacked up in hundred dollar bills.
One TRILLION dollars...

What does that look like? I mean, these various numbers are tossed around like so many doggie treats, so I thought I'd take Google Sketchup out for a test drive and try to get a sense of what exactly a trillion dollars looks like.

We'll start with a $100 dollar bill. Currently the largest U.S. denomination in general circulation. Most everyone has seen them, slighty fewer have owned them. Guaranteed to make friends wherever they go.
He does a nice progression from a single bill to stacked pallet-loads of them. (You probably want to look at it soon in case the Treasury gets upset at him using the image of the hundred dollar bill.)

Now I'd like to see someone do a graphic of a trillion euros in five hundred euro notes. It'd be nearly five times more compact (not quite, because the €500 note is physically larger than the $100). It'd be clear why the €500 note is more popular with people who need to transport large quantities of cash...

Once again the Massachusetts Supreme Judicial Court hands down a ruling with wide implications.

Or, as Prof. Adam Levitin of Georgetown Law posted, "Ibanez and Securitization Fail":
The Ibanez case itself is actually very simple. The issue before the court was whether the two securitization trusts could prove a chain of title for the mortgages they were attempting to foreclose on.

There's broad agreement that absent such a chain of title, they don't have the right to foreclose--they'd have as much standing as I do relative to the homeowners. The trusts claimed three alternative bases for chain of title:

(1) that the mortgages were transferred via the pooling and servicing agreement (PSA)--basically a contract of sale of the mortgages

(2) that the mortgages were transferred via assignments in blank.

(3) that the mortgages follow the note and transferred via the transfers of the notes.

The Supreme Judicial Court (SJC) held that arguments #2 and #3 simply don't work in Massachusetts.Collapse )The opinion is quite lucid and persuasive, particularly the point that if the wrong plaintiff is named is the foreclosure notice, the homeowner hasn't received proper notice of the foreclosure.

Regarding #1, the SJC held that a PSA might suffice as a valid assignment of the mortgages, if the PSA is executed and contains a schedule that sufficiently identifies the mortgage in question, and if there is proof that the assignor in the PSA itself held the mortgage. Collapse )

On the facts, both mortgages in Ibanez failed these requirements. In one case, the PSA couldn't even be located(!) and in the other, there was a non-executed copy and the purported loan schedule (not the actual schedule--see Marie McDonnell's amicus brief to the SJC) didn't sufficiently identify the loan. Moreover, there was no proof that the mortgage chain of title even got to the depositor (the assignor), without which the PSA is meaningless:
Even if there were an executed trust agreement with the required schedule, US Bank failed to furnish any evidence that the entity assigning the mortgage – Structured Asset Securities Corporation [the depositor] — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale.
So Ibanez means that to foreclosure in Massachusetts, a securitization trust needs to prove:

(1) a complete and unbroken chain of title from origination to securitization trust

(2) an executed PSA

(3) a PSA loan schedule that unambiguously indicates that association of the defaulted mortgage loan with the PSA. Just having the ZIP code or city for the loan won't suffice. (Lawyers: remember Raffles v. Wichelhaus, the Two Ships Peerless? This is also a Statute of Frauds issue--the banks lost on 1L contract issues!)
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The ruling drove down the stock prices of a number of big banks when it was handed down. As I posted back in October, that's revealing. Moreover, as mentioned in the following post, the direct effect on homeowners and their mortgages is dwarfed by the effect on the mortgage backed securities market.

Best advice I can repeat is that if you've bought a foreclosed property or are in foreclosure yourself, you should definitely find a sharp real estate lawyer. Particularly if the property is in Massachusetts.

The full text of the ruling is here. (Wikipedia on Raffles v. Wichelhaus, the Two Ships Peerless case.)