WaMu’s securitized mortgages were “legally isolated” and out of the reach of the FDIC’s Receivership. Hence, “Nemo dat quod non habet” (One cannot give what one does not have).

If any doubt remains as to whether the FDIC Receiver ever obtained beneficial rights to any mortgage loan securitized by Washington Mutual Bank, you need to look no further than the FDIC’s own clarification on the subject within its “Rules & Regulations.” First as an example, let us review the language in the “Risk Factors” section of the Prospectus Supplement filed for the WaMu 2007-OA3 Trust. Link provided here:

https://www.secinfo.com/dScj2.u2Xa.htm?Find=FDIC&Line=46871#Line46871

 

Nevertheless, the FDIC has issued a regulation surrendering certain rights to reclaim, recover, or recharacterize a financial institution’s transfer of financial assets such as the mortgage loans if:
		•		the transfer involved a securitization of the financial assets and meets specified conditions for treatment as a sale under relevant accounting principles;
		•		the financial institution received adequate consideration for the transfer;
		•		the parties intended that the transfer constitute a sale for accounting purposes; and
		•		the financial assets were not transferred fraudulently, in contemplation of the financial institution’s insolvency, or with the intent to hinder, delay, or defraud the financial institution or its creditors.
		WMB’s transfer of the mortgage loans will be intended to satisfy all of these conditions.

 

The “regulation” referred to can be found on the FDIC’s website here: https://www.fdic.gov/news/news/financial/2000/fil0057a.html

Per the FDIC’s own Rules & Regs, as excerpted below, the FDIC determined that securitized mortgage loans constitutes a sale to which the transferor surrendered control over the assets, and as such, the mortgage assets were beyond the reach of creditors, bankruptcy, and even the FDIC’s receivership! Yes folks, the FDIC clarified and provided “sufficient assurance” that the mortgage assets were “legally isolated” and beyond its reach!

 

Federal Register: August 11, 2000 (Volume 65, Number 156)]

[Rules and Regulations]              

[Page 49189-49192]

—

Under generally accepted accounting principles, a transfer of financial assets is accounted for as a sale if the transferor surrenders control over the assets. One of the conditions for determining whether the transferor has surrendered control is that the assets have been isolated from the transferor, i.e., put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or receivership. This is known as the “legal isolation” condition.

—–

Where the transferor is an insured depository institution for which the FDIC may be appointed as conservator or receiver, the issue arises whether financial assets transferred by the institution in connection with a securitization or in the form of a participation would be put beyond the reach of the FDIC as conservator or receiver for the institution in light of (i) the statutory authority of the FDIC to repudiate contracts to which such institution is a party and (ii) the provisions of sections 11(d)(9), 11(n)(4)(I), and 13(e) of the Federal Deposit Insurance Act regarding the enforceability of agreements against the FDIC.

—-

The final rule resolves these issues by clarifying the powers of the FDIC as conservator or receiver with respect to financial assets transferred by an insured depository institution in connection with a securitization or in the form of a participation. The FDIC believes that this clarification should provide sufficient assurance to determine that the legal isolation condition is met.

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Not only does the FDIC deem securitized mortgages as being “legally isolated,” the FDIC also repudiated the securitization contracts, meaning the FDIC refused to accept or to be associated with the private contracts between the investors and the securitization entities.

re·pu·di·ate

/rəˈpyo͞odēˌāt/

verb

verb: repudiate; 3rd person present: repudiates; past tense: repudiated; past participle: repudiated; gerund or present participle: repudiating

1. refuse to accept or be associated with.

 

If the FDIC repudiated the securitization contracts, and deemed the mortgage assets as being “legally isolated” and beyond its reach, it would logically imply that the FDIC was incapable of not only assigning beneficial interests in the WaMu securitized loans “for Valuable Consideration, the receipt of which is hereby acknowledged,” but also the granting of any authority to JPMorgan Chase to meddle with the assets (i.e. forging WaMu endorsements, assigning beneficial interests it never possessed, and substituting trustees).

 

A basic principle of property law is encapsulated in the venerable Latin maxim: Nemo dat quod non habet (One cannot give what one does not have).

 

As early as 1872, the Supreme Court of the United States recognized and applied this fundamental principle of the common law:

persons, therefore, who buy goods from one not the owner and who does not lawfully represent the owner, however innocent they may be, obtain no property whatever in the goods, as no one can convey in such a case any better title than he owns.

Mitchell v. Hawley, 16 Wall. 544, 21 L.Ed. 322, 83 U.S. 544 (1872) December 1, 1872

The principle has been applied universally throughout the United States:

Although an assignee is said to “step into the shoes” of the assignor, this has generally been in accord with a principle of nemo dat quod non habet -one cannot transfer what one does not have-and thus it is said [*24] at common law that an assignee can acquire no greater right than the assignor held against the obligor. See, e.g., Adams, 294 S.W.3d at 105. Mitchell v. Residential Funding Corp. S.W.3d, 2010 WL 4720755, (Mo. Ct. App. Nov. 23, 2010).

Voidable title is distinct from “valid title,” which can be passed freely, and “void title,” which cannot be passed to any buyer (regardless of good faith status) because of the nemo dat quod non habet (“he who hath not cannot give”) rule. See Menachem Mautner, “The Eternal Triangles of the Law”: Toward a Theory of Priorities in Conflicts Involving Remote Parties, 90 MICH. L.REV. 95, 97-98 . . .

 

Bill Paatalo

Private Investigator – OR PSID#49411

Bill.bpia@gmail.com

One Responseto “WaMu’s securitized mortgages were “legally isolated” and out of the reach of the FDIC’s Receivership. Hence, “Nemo dat quod non habet” (One cannot give what one does not have).”

1. Izraul says:

   February 9, 2022 at 6:40 am

   Hence the real reason why JPMorgan got such a good deal from the FDIC. Because there was nothing in the way of mortgages to sell. It makes perfect sense when you think about it … 31 Billion for 1.9.

   Reply