Last night I saw an incredible Facebook post by the Property Defense Network. It was a link to a Fannie Mae “Lender Letter” that I at first didn’t see the date on and therefore assumed it was new. The “Lender Letter” said this:
“Although Fannie Mae is not a creditor under the Truth in Lending Act, after consultation with its regulator, the Federal Housing Finance Agency, Fannie Mae has elected to provide the notice to borrowers when it purchases or securitizes a mortgage loan. Fannie Mae will begin sending the notices on or before June 19, 2009 for loans acquired on or after May 20, 2009.”
I find this admission absolutely astonishing, not because I didn’t already know this, but because Fannie Mae put the admission in writing. And it turns out that this “Lender Letter” was issued not in 2013, but on June 16, 2009!
Fannie “Mae” not be telling the truth
I would have definitely used this admission against Fannie Mae in my lawsuit against them if I had known about it. But I didn’t know about it until now, a year and a half after I lost my lawsuit. I doubt it would’ve made much difference to the judge that ruled against me, but who knows?
At any rate, to lessen the possibility that people will go into court or negotiations ignorant (as I was, at least about this admission) of what Fannie Mae openly admits about itself in publicly available documents, I intend to make Fannie Mae and its fake securitizations and empty pools a special research project of this blog. Did that make any PRISM ears perk up? Well, stay perky assholes, I’m just getting started.
Wait, what was that part about Fannie Mae not being a creditor?
Yes, so back to Fannie Mae saying it isn’t a creditor. Notice that the letter specifies that Fannie is not a creditor “under the Truth in Lending Act.” Very interesting distinction, that–naturally one wonders what the Truth in Lending Act (TILA)considers a “creditor,” doesn’t one? Here is the relevant part of the TILA definition of “creditor”:
“(l) Creditor means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit. The term creditor includes a creditor’s assignee, transferee, or subrogee who so participates.“
Now, that definition begs another question, namely, what is the standard, vanilla, legal definition of “creditor?” Let us turn to Black’s Law Dictionary (2nd Ed.), which defines “creditor” as the following:
“A person to whom a debt is owing by another person, called the ‘debtor.'”
Hmmm…I think that second definition is most people’s understanding of what a “creditor” is.
So what does that all mean?
In short, then, we can see that Fannie Mae admits that it is NOT a creditor pursuant to TILA, leaving unspoken the idea that Fannie Mae IS a creditor in some other sense, presumably under the more standard definition of the word “creditor” cited above. However, given several other publicly available statements by Fannie Mae, we can see that Fannie Mae is not a creditor in ANY sense of that word.
How can that be, one might understandably ask? Here’s how, as I previously wrote in the post “Fannie Mae, By Its Own Admission, Owns Nothing”:
A PDF from Fannie Mae’s own website entitled “Basics of Fannie Mae MBS” explains Fannie Mae’s lack of ownership very simply and succinctly:
“In general, mortgage-backed securities are commonly called “MBS” or “Pools” but they can also be called “mortgage pass-through certificates.” An investor in a mortgage-backed security — the certificateholder — owns an undivided interest in a pool of mortgages that serves as the underlying asset for the security. Interest payments and principal repayments from the individual mortgage loans are grouped and paid out to investors.
The mortgages that back a Fannie Mae MBS are held in a trust on behalf of Fannie Mae MBS investors and are not Fannie Mae assets. As a Fannie Mae MBS investor, the certificateholder receives a pro rata share of the scheduled principal and interest from mortgagors on the loans backing the security. Interest is paid at a specific interest rate. The certificateholder also receives any unscheduled payments of principal.”
So from the above, we see that Fannie itself says that certificateholders–not Fannie–own the beneficial interest in the mortgage pool (Fannie says in other documentation that it can also purchase these types of certificates, although I haven’t seen any indication that Fannie smokes its own dope). Even more importantly, we see that Fannie itself says that the mortgages (i.e., the promissory notes) that are supposedly in the pools/trusts are NOT Fannie assets.
The very definition of the term “asset” of course involves “ownership,” as spelled out at Investopedia’s definition of “asset,” which it defines as:
“A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.”
Therefore, Fannie admits it neither owns nor controls the promissory notes. So if Fannie Mae itself admits that it does not own the notes and mortgages in the pools, why are Fannie’s goons swearing to Schack that Fannie does own them?
Some people may not be satisfied with such an admission in the text of a website meant to simplify matters. OK, well how about these jewels from the ”Fannie Mae Amended and Restated 2007 Single-Family Master Trust Agreement for Guaranteed Mortgage Pass-Through Certificates evidencing undivided beneficial interests in Pools of Residential Mortgage Loans” dated January 1, 2009:
“By delivering at least one Certificate of a Trust in the manner described in Section 3.1, the Issuer [i.e. Fannie Mae] unconditionally, absolutely and irrevocably sets aside, transfers, assigns, sets over and otherwise conveys to the Trustee [i.e., Fannie Mae], on behalf of related Holders, all of the Issuer’s [Fannie Mae] right, title and interest in and to the Mortgage Loans in the related Pool, together with any Pool Proceeds.”
“Concurrently with the Issuer’s [Fannie Mae] setting aside, transferring, assigning, setting over and otherwise conveying Mortgage Loans to the Trustee for a Trust: (a) the Trustee [Fannie Mae]… acknowledges that it holds all of the related Trust Fund in trust for the exclusive benefit of the related Holders [of certificates issued by the Trust]…”
Note that Fannie Mae as Issuer irrevocably transfers all of its interest to Fannie as Trustee, and that Fannie Mae as Trustee says that it holds all the money in the trust for the exclusive benefit of the certificateholders. So again, Fannie Mae admits it doesn’t own notes.
Fannie “Mae” be stealing your house!
So there you go–notes are not Fannie Mae assets because Fannie Mae irrevocably transferred the notes to the pools (or at least they say they did–more on that as it develops). So Fannie Mae is not only not a creditor under TILA, Fannie Mae is not a creditor AT ALL, because they DON’T OWN THE NOTES.
Oh, they’ll swear up and down in court that they own the notes, while simultaneously telling the investors in the supposed “pools” of loans that the investors own the notes, not Fannie Mae. See how that works? It’s the classic con tactic–know your audience, and then tell them what they want to hear, whether it’s true or not. And don’t be afraid to tell your audience completely conflicting stories, just make sure you tell them with the utmost conviction and a few sworn affidavits from people with no personal knowledge.