Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Angelo
If the IRS can prove that the documents weren't transfered into the remic trusts properly, a great majority of the foreclosure occuring now will be declared invalid, IF you can prove the same.  Here is the artice from reuters:

http://www.reuters.com/article/2011/04/27/us-usa-mbs-taxes-idUSTRE73Q7UX20110427
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Bill

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But if the IRS concludes that the REMIC investments failed to comply with strict requirements in the federal tax code, the REMIC would have to pay a 100 percent tax on the income from those investments.

 

That means that the IRS could confiscate the full amount. Tax law experts said the REMICs also could be subjected to additional penalties for failing to file tax returns on the income.



Does anyone have an idea on what it means that the REMIC would have to pay the tax?

Is this the Sponsor, Trustee, or Investor?

I'm sure if the Investor gets 100% taxed because of the fradulent/improper/ ultra vires actions of the trustee there will be lots of law suits. 
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William A. Roper, Jr.
The central idea of a REMIC is that the income gets taxed to the trust certificate holders rather than the trust being taxed.  This is somewhat akin to a so-called "Subchapter "S" corporation, for which earnigns are taxed as if the corporation were a partnership.

In general, corporations pay a corporate income tax on earnings.  These earning can then also be distributed to shareholders through dividends, but the dividends are not deductible as an expense by the corporations and are taxable to the shareholders.  Therefore, regular corporate earnings are typically taxed twice, once by through the corporate income tax and again when the dividend income is taxed to the shareholder.

By contrast, a partnership is not typically taxed as an entity.  It prepares a tax return, but its earnings are then allocated to the partners.

With a Subchapter "S" corporation, the corporation is taxed like a partnership.

Most trusts are subject to regular federal income taxation.  REMIC trusts are an exception.  With the REMIC trust, the trust earnings are passed through to the trust certificate holders (the trust equivalent of shareholders).

Although I haven't carefully studied the tax code in respect of REMIC status, if the trust failed to properly qualify, then the tax status of the entity might be different.

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On balance, I believe that this is a tempest in a teapot.  The trust collateral will mostly be proven to have been properly transferred.  But the corrupt mortgage servicers and teh foreclosure mill law firms have been so recklessly engaged in forgery, perjury and other evidence fabrication that they have created a mountain of records that make it appear otherwise!
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William A. Roper, Jr.
It is important to bear in mind that the mortgage trust structure is set up in a way such that (a) the ONLY trust assets to speak of are the mortgage collateral and (b) ALL cash flows arising out of the trust are expressly dedicated to various purposes.  There is no extra reserve or general partner to absorb unexpected expenses or losses.

There is no SOURCE of cash to pay any taxes or penalties EXCEPT the cash flows already promised and dedicated to the certificateholders in respect of the trust indenture, PSA and registration statements.

So ANY unexpected taxes or penalties would have to come directly OUT of those trust certificate tranches or cash flows.  The certificate holders are mostly large and sophisticated investors.  These investors would seem to have a cause of action against the trustee, the mortgage servicer, the institutional custodian and/or the investment banking concern (depositor), depending upon which entities were culpable in the errors causing the unexpected liability.

But I really DO think this is completely ACADEMIC!

It is important primarily because in previously fabricating evidence, the servicers and foreclosure mill law firms were creating documents which were incompatible with the trust indenture and which seemed to implicate REMIC status.  But the problem is NOT that the REMIC tax status fails.  Rather, the problem is that these documents were simply bald forgeries.
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