Fisking the American Securitization Forum’s Congressional Testimony

From Credit Slips by Georgetown Law Professor, Adam Levitin.

Tom Deutsch, the Executive Director of the American Securitization Forum (ASF) testified before the Senate Banking Committee this past week about chain of title problems in securitization.  I was fascinated to see how much attention the ASF spent in attempting to rebut my testimony from a pair of previous hearings (here and, in a more polished form, here). My first thought was “gosh, ASF’s awfully defensive. They sure seem spooked.” And on looking at the details of the ASF’s rebuttal, my sense is they’re on very shaky ground if these are the best arguments they have. …

Below I review some of the ASF’s arguments and show why they’re just wrong. In particular, note the PSA language that I quote that demolishes the ASF’s claim that PSAs do not require an endorsement from every party in the securitization chain:

“the original Mortgage Note bearing all intervening endorsements showing a complete chain of endorsement from the originator to the last endorsee”

If there’s any doubt about what that language means (more discussion below), I’d love to hear it in the comments.  There’s a very specific method of transfer required in securitization by PSAs and if it wasn’t followed, then under New York law, the transfers are void.  And it is sure looking like many deals didn’t comply with the PSA terms. …

Please read the entire article for Professor Levitin’s explanation of the issues.  A must read for anyone following mortgage securitization and foreclosure issues.