What Is Area 51 in Mortgage Securitization?

The Original Area 51

Area 51. The name conjures images of classified military bases, armed guards, and secrets kept behind chain-link fences. You were not allowed in. The government did not have to explain what happened inside. The public accepted that some things were off limits.

I have spent 12 years as a licensed private investigator uncovering a different kind of secret. The securitization of your mortgage loan is, in my experience, the new Area 51. Few dare to venture in. Fewer still come out with answers. But the information is there, buried in public records, SEC filings, and trust documents that the parties who hold your loan hope you never read.

The New Area 51: Securitization

When I take on a securitization case, I start with the governing documents. The Pooling and Servicing Agreement, the Deposit Account Agreement, the Trust Agreement. These are the rulebooks. They dictate what was supposed to happen to your Tangible Promissory Note and your Security Instrument after the ink dried at closing.

The complexity of these documents overwhelms most homeowners. It overwhelms many attorneys. But when you apply the statutory requirements of law to what you find, the picture becomes clear. The results can be both devastating for the other side and remarkably simple in their logic.

Breaking Down the Core Elements

Let me walk you through what happened to your loan. A Tangible Promissory Note was created and signed. That note is a promise to repay. A second document, the Security Instrument, was signed as a backup collection mechanism in case of default. You know it as your Mortgage or Deed of Trust. You signed it. The lender created it. The Security Instrument was then recorded in public record, creating a perfected lien on your property.

The United States Supreme Court addressed the relationship between the note and the security instrument in Carpenter v. Longan, 83 U.S. 271 (1872). The Court held that the note and the mortgage are inseparable. Where the note goes, the mortgage follows. This principle, established over 150 years ago, is the foundation of chain of title analysis. When I find that the note and the Security Instrument have been separated, that tells me something went wrong in the transfer process.

The Perception of Deficiency

Years pass. The borrower falls behind. The bank calls it a default. But when I dig into the records, I often find that the lender defaulted first. The lender failed to follow the covenants of the Security Instrument. The lender failed to properly transfer the note. The lender failed to record assignments on time. The question becomes: who defaulted first?

I have seen this pattern in case after case. Certain transactions were supposed to take place under the trust agreement. They did not. Other transactions took place that were never authorized. What is a borrower to do? You start by finding out what actually happened.

Starting With a Securitization Analysis

A professional securitization audit is where this starts. I examine the trust documents, pooling agreements, and SEC filings. I search public records, court documents and exhibits, Securities and Exchange Commission filings, private databases, and any other source that holds relevant records.

The borrower learns through this analysis three things: what was supposed to happen, what did happen, and what did not happen. Once I have that information, I apply the statutory requirements of law to the transactions. I determine whether the party coming forward with a foreclosure action has clean hands. I determine whether a proper party exists who can lawfully bring a foreclosure action at all.

Analysis as an Educational Tool

A good forensic analysis is an educational tool. I hand you the knowledge of what took place behind closed doors. The securitization process was supposed to be transparent. In my experience, it has been anything but. The trust documents, the pooling and servicing agreements, the deposit agreements, and the layers of transactions create a labyrinth that most homeowners cannot navigate alone.

I have walked through that labyrinth thousands of times. I know the dead ends. I know where the documents contradict each other. I know where the dates do not line up. That is what a securitization audit does. It is not enough to accept the documents presented at face value. You dig into the records, cross-reference the filings, and apply the law to what you find.

Taking Action With the Information

Information is useless if you do not use it. What you do next depends on your state and where you are in the foreclosure process. What have you done so far? What has the other party done?

In Judicial States

If I were in a judicial state and the party bringing the foreclosure could not demonstrate standing, I would file a Motion to Dismiss for Lack of Standing. The court can only rule on what is presented to it. If the foreclosing party cannot show they hold the Tangible Promissory Note and have the right to enforce it, they have no standing to bring the action. The note and the Security Instrument must be together. Carpenter v. Longan established this. UCC Article 3, which governs negotiable instruments, confirms it.

In Non-Judicial States

If I were in a non-judicial state, I would look at an injunction. I would do something to stop the train and level the playing field. In non-judicial states, the trustee sale can proceed without court oversight. That means the homeowner must initiate legal action to stop it. An injunction forces the other party to justify their actions before the court before they can take your property.

Holding the Parties Accountable

Use the laws the way they were written. Hold the parties bringing the foreclosure accountable for their actions. A bar grievance may be filed against an attorney who violates his oath of office. Attorneys are officers of the court. When they present false information or make claims unsupported by evidence, they should be held to account.

Once you start, you keep going. The fat lady has not sung, and I do not intend to let her. The banks count on homeowners giving up, running out of money, or not understanding the process well enough to continue. That is why education and forensic analysis are your best weapons.

The Bottom Line

The securitization of mortgage loans created a system where the original agreements were broken apart, sold in pieces, and reassembled in ways never disclosed to the borrower. The Tangible Promissory Note and the Security Instrument were separated. The Intangible Payment Obligation was stripped and sold to investors. The chain of title was obscured through the MERS system and assignments that may not reflect actual transactions.

A securitization audit uncovers what actually happened. It is the key to understanding whether the party trying to foreclose on your home has the legal right to do so. Without this knowledge, you are fighting blind. With it, you have the tools to challenge improper foreclosures and protect your property.

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Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted, all rights reserved.