The Glaski decision was obviously a BIG victory for homeowners in California, and hopefully elsewhere. The gaffe on the part of the bank’s attorneys for allowing New York trust law rather than Delaware trust law to control the WaMu securitization failure arguments is mind blowing (See: http://foreclosuredefenseschool.com/glaski-v-bank-of-america/)
Most of the WaMu securitized trusts were all set up under Delaware trust law. The following argument is made by Richard Kessler, Esq. in relation to a loan within the “WaMu 2007-OA3 Trust.” The language is similar to all the WaMu trusts, but be sure to check out the specific PSA language for each.
No beneficiary has been identified.
The PSA defines a “Beneficial Holder” as: “A Person holding a beneficial interest in any Book-Entry Certificate as or through a DTC Participant or an Indirect DTC Participant or a Person holding a beneficial interest in any Definitive Certificate.” PSA at p. 28.
Except under a few specific exceptions, such as conditions where a servicer must redeem or replace a mortgage, the servicer may not have a legal or equitable interest in the mortgages being serviced. The Trustee does not hold beneficial title according to the PSA. “Section 2.20 – Legal Title. Legal title to all assets of the Trust shall be vested at all times in the Trust as a separate legal entity.”
This Trust was organized as a Delaware Statutory Trust. The enabling legislation states that a certificate holder has an interest in the property which is personal and no further interest in specific trust property. The beneficiary according to Delaware Trust law does not have an undivided interest in the mortgages which are an interest in real property.
(Delaware) “§ 3805. Rights of beneficial owners and trustees in trust property.
(c) A beneficial owner’s beneficial interest in the statutory trust is personal property notwithstanding the nature of the property of the trust. Except to the extent otherwise provided in the governing instrument of a statutory trust, a beneficial owner has no interest in specific statutory trust property.”
Here is where it gets very confusing. The Trust can hold the legal and beneficial title to the Mortgages under Delaware Law. However, in such a case, the Trust is not a REMIC trust and will not qualify for the pass through tax exemption. Alternatively, if the certificate holders hold the beneficial interest, it is limited to personal property and excludes an interest in real property. In such a case, there is no party holding a beneficial interest in a mortgage that stands in the shoes of the originating mortgagee.
A mortgage cannot be enforced for a beneficiary of a mortgage which does not have a legal existence. The Trust cannot foreclose on a mortgage in default for the benefit of the certificate holders without violating Delaware Trust law. If it forecloses on behalf of the Trust, it is in non-compliance with REMIC requirements.
SEC link to WaMu 2007-OA3 Trust’s PSA: http://www.secinfo.com/d16VAy.u86.d.htm#1stPage