November 26, 2012
Fleisher: “Why a Tax Crackdown Is Not Needed on Mortgage-Backed Securities”
In Why a Tax Crackdown Is Not Needed on Mortgage-Backed Securities, Professor Vic Fleisher argues that IRS enforcement of tax laws governing REMICs will merely complicate efforts to properly fix blame and allocate the costs of the financial crisis. Professor Fleisher relies upon poorly-defined policy reasons for his position. Nonetheless, the severity of disregard for the rules, a need to ensure that the mortgage-securitization industry honestly reform, and the potential additional revenue warrant IRS action with respect to REMICs. For additional discussion regarding the need for IRS and other enforcement in this industry see Bradley T. Borden & David J. Reiss, Wall Street Rules Applied to REMIC Classification; Bradley T. Borden, Did the IRS Cause the Financial Crisis; Bradley T. Borden & David J. Reiss, An Uneasy Justification for Prosecutorial Abdication in the Subprime Industry; Naked Capitalist, Yes, Virginia, The IRS does not Treat the Connected Like the Rest of Us (REMIC Edition).
November 26, 2012 | Permalink | No Comments
Borden: “Did the IRS Cause the Financial Crisis?”
In Did the IRS Cuase the Financial Crisis, Professor Brad Borden explains that competent IRS audits of REMICs would have uncovered many of the problems that led to the financial crisis. Competent audits and tax enforcement of REMICs would therefore have helped prevent the crisis.
November 26, 2012 | Permalink | No Comments
Borden & Reiss: “Wall Street Rules Applied to REMIC Classification”
In Wall Street Rules Applied to REMIC Classification, Professors Brad Borden and David Reiss explain how arrangements that fail to satisfy the REMIC requirements may benefit from the so-called Wall Street Rule. They argue, however, the IRS’s failure to audit REMICs may have contributed to the financial crisis and that audits and tax enforcement now will generate tax revenue, help clean up the mortgage securitization industry, and place the cost of the financial crisis on the parties who caused it.
November 26, 2012 | Permalink | No Comments
November 20, 2012
Federal District Court in Texas Rules That Third-Party Lacks Standing in Recording-Fee Case
It appears that although courts may be receptive to claims about lost recording fees because of MERS, they won’t hear cases brought by third parties (at least, not in federal court). The citizens of a Texas county brought the claim seeking lost recording fees from MERS as a defense while they were in foreclosure. In Huml v. Mortgage Electronic Registration System, Judge David Guaderrama of the U.S. District Court in El Paso, Texas, rejected the plaintiffs’ theory of MERS gaining unjust enrichment. The plaintiffs alleged that the county lost recording fees that would have been acquired had MERS not taken “undue advantage of real property recording systems.”
The Judge found that the plaintiffs lacked standing to bring the claim. Since the plaintiffs alleged that counties were harmed by MERS, Judge Guaderrama found the argument of standing “piggy-backs on the direct injury, if any, to the counties.” Since the plaintiffs couldn’t assert direct injury from lost recording fees, and because plaintiffs cannot sue to enforce a third party’s rights in federal court (unless the suit falls under a particular exception, which didn’t happen in this case), the Judge dismissed the claim.
November 20, 2012 | Permalink | No Comments
Nevada Supreme Court Unanimously Rejects Irreparable Split Theory and Grants Bank Standing
In Edelstein v. Bank of New York, the Nevada Supreme Court unanimously rejected the irreparable split theory. The theory was brought up to challenge the Bank’s standing to foreclose on the plaintiff’s property. The irreparable split theory provides that a promissory note and a deed of trust that is separated prevents a nonjudicial foreclosure from occurring. This is because a note is a promise to repay the loan, while the deed of trust establishes the property as security for the loan.
The Court rejected the “traditional rule” that prevents the transfer of notes or deeds of trust separately, particularly because it would conflict with a previous holding recognizing the ability to transfer notes and deeds of trust separately. Instead, the Court adopted the Restatement approach, which permits separate transfers if the parties agree to it.
The Court held that identifying MERS as the nominee for the original lender and its assignees in the note is sufficient to hold “an agency relationship with [the original Lender] and its successors and assigns with regard to the note.” The Court found that the recorded beneficiary is considered “the actual beneficiary and not just a shell for the ‘true’ beneficiary.” As a result, naming MERS as the beneficiary of the deed of trust effectively split the note and deed of trust, but they were unified prior to foreclosure proceedings.
However, the Court found that no law requires them to be unified at inception, only in order to foreclose. The Nevada Supreme Court ultimately held that if the “split is cured when the promissory note and deed of trust are reunified.” As a result, the Court found that the bank, which held both the mortgage and the note at the time of foreclosure, had standing to continue the foreclosure mediation process.
November 20, 2012 | Permalink | No Comments
Borden & Reiss: “An Uneasy Justification for Prosecutorial Abdication in the Subprime Industry
By Brad Borden
In an Uneasy Justification for Prosecutorial Abdication in the Subprime Industry, Professors Brad Borden and David Reiss argue that individuals must be accountable for actions they took that led to the financial crisis. Failure to prosecute individuals will not deter similar behavior in the future and we can expect other crises, if prosecutors do not take actions against individual wrongdoers.
Share this:
Like this:
November 26, 2012 | Permalink | No Comments