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Oops - Paid off and Liquidated Loans still in the Trust

Allegation: We have discovered 667 loans ($223,855,849) in 242 deals that we suspect are paid off or REO liquidations, yet the loan is still in the Trust and no loss has been passed through to certificate holders.

We can make this allegation because both Ocwen and Nationstar provide loan level servicing data. We would love to tell you that we used some sophisticated algorithm to do this analysis, but instead, we simply joined the servicing data to our CoreLogic LoanPerformance data and compared the status. The more difficult part was determining a correct property address and then locating the recorded documents to prove our allegation. Without the recorded documents, we wouldn’t know which data was correct.

Through tedious effort, we have matched up 130 of these loans to correct addresses and located the actual recorded documents or evidence showing the recording had been made. With this 20% sample, we are confident that we have discovered a real problem. Unfortunately, we only have loan level servicing data from Ocwen and Nationstar. We have no way to determine if this issue exists with other servicers.

We do not know if this error is caused by the servicer, trustee, securities administrator or some other party. From our viewpoint, it is simply an error that needs to be investigated and corrected.

3 situations

  1. Ocwen: REALPortal Status Code Level 1 = ‘REOS’ (REO Sold) BUT the loan is still in deal as a REO (65 loans)

  2. Nationstar: Current Status = ‘Paid’ BUT loan is still in deal as a REO (191 loans), 90+ or FC (333 loans) or other (16 loans). Some of these are full payoffs, as we located the recorded Release/Satisfaction of Mortgage document (see pages 8-14 for examples).

  3. Nationstar: Loans that we strongly believe are serviced by Nationstar AND are still in the deal as a REO, BUT are not on the Nationstar servicing database. Although we are less certain about these loans, we keep locating recorded documents that prove these are REO Liquidations.

Most of these sales have occurred over 3 months ago, with some sales going back to 2013. PSAs usually state that the Principal Distribution Amount shall include “the principal portion of all Net Liquidation Proceeds received during the related Prepayment Period with respect to Liquidated Mortgage Loans” and regarding the Allocation of Realized Losses state “On each Distribution Date, Realized Losses that occurred during the related Prepayment Period shall be allocated as follows.”

The loan level listing is attached to today’s email. These are alleged paid off or liquidated loans, some with solid proof and many still need to be proven. As we are not certificate holders, trustees will not talk to us.

Contact us at 203-276-0672 to become a client and access all reports and attachments.

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