Deed of Sale Transferring Deed, and Disclaimer

Under the FDCPA [In Jerman v. Carlisle], the Court ruled that if a debt collector makes an incorrect statement of law during communications with a debtor, in violation of the Fair Debt Collection Practices Act (FDCPA), the debt collector cannot claim they merely misinterpreted the FDCPA in order to shield themselves from a lawsuit. The Court reasoned that ignorance of the law is no excuse when it comes to unfair debt collection tactics. A debt collector is not a fiduciary and by its own admission the debt collector has acknowledged it purposes is not that within the duties of a trustee or trustee’s agent acting in a fiduciary capacity. In allowing MERS to represent a succession of successors and assigns MERS none the less must disclose the parties of interest to who it is engaged and serves as nominee. Where MERS nominates an agent for purposes of appointing the debt sector to a fiduciary role the title company is under no obligation to release the custodial hold it has on the grant deed offered by the borrower in a nonjudicial power so sale understanding Title company the custodian is none the less compelled to reluctantly release its interest in MERS and does so upon conditioning the subsequent sale for the borrower title to realty by placing upon the deed of sale transferring deed a disclaimer to all parties which warns of the statutory non- compliance and potential for the in valid nature of the Debt collectors role as appointed by MERS or where MERS executes the assignment and grants the debt collector its authority.

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MORTGAGE ASSETS FAIR VALUE

Fair Value and Historical Cost: The BasicsAccounting standard-setters have defined fair value in divergence.  All of them are essentially variations on current market value or an estimate, where a market value is unavailable or regarded as unreliable, of what the market valued be if there were a market. For this reason, fair value is also referred to as markto-market.There are various alternatives to fair value as a basis of measurement in accounts. The principal one, and in the context of the current debate the only one seriously considered as an alternative, is “historical cost”,or in the context of financial instruments, “amortized cost”. The amortised cost of financial instrumentsinvolves adjusting the original cost for subsequent cash flows (eg loan repayments) and reducing the valuefor any impairment provision (eg bad debt).

The accounting rules set out how impairment provisions must be estimated. They may be best illustrated using the example of a portfolio of mortgages, as follows:

— When there is a problem with an individual mortgage, it is reduced in value or written off entirely as a bad debt. This is sometimes called a specific provision.

— The bank may also know that there will be other problem mortgages, based on past experience, without knowing which mortgages. For example, redundancy or divorce might create problem mortgages before the bank finds out about the problems. The bank may make a provision for bad debts for these. This is sometimes called a collective impairment provision.

A bank may also expect that some of its loans will run into problems in the future, particularly in the current economic conditions. The accounting rules do not allow the bank to make a provision for future problems. This restriction on provisioning was introduced to prevent company management from manipulatingtheir profits. In the past,management was suspected of manipulating results to give smooth profits by increasing provisions in good times and releasing them in downturns. While it may be prudent to save in good times and use the savings to cushion the bad times, it  was never clear why management expected more future losses in good times than they did when things turned bad.

The method for making impairment provisions is also relevant. They are made based upon the management estimate of the
cash flows they will receive on the problem loans (payments, recoveries fromcollateral, costs). The cash flows are discounted12 according to the time that they are expected to be received.The accounting rules require the interest rate from when the instrument was first acquired to be used as thediscount rate.

We have gone into these points in some detail because it is important to understand them for the purposesof the current debate.

Fair Value and Historical Cost:
The DifferencesThere are two major diVerences between fair value accounting and historical cost accounting:

— Fair value accounting recognises gains values above their historical cost. Another way of putting this is that fair valuerecognises unrealised gains, whereas historical cost only recognises realised gains—ie, gains that arise when assets are sold.

— When assets fall in value, this is recognised under both fair value and historical cost accounting.

But whereas fair value means the assets are written down to market value (or an estimate of whatthat might be in the absence of an active market), historical cost means that assets are subject toan impairment review where there is evidence that values have dropped. There are similarities in the process for making impairment valuations and estimating market values using models. Both would estimate future cash flows and discount the cash flows to reflect the timing of payments.

There are three basic reasons why fair value and the impairment model for historical cost will have divergent values at present.  12 Discounting reflects the fact that £1 today is worth more to someone than the promise of £1 in the \future. Discounting is a process to reduce the current value of future payments to reflect the time value of money (eg inflation) and the risk that the amount will not be paid.

MBS ABS Foreclosures and Money Spent

According to the Mortgage Bankers Association, subprime
mortgages totaled almost 20 percent of all new home loans last year, a
Washington-based trade group. When U.S. growth slowed and home prices stopped
rising last year, delinquencies mounted. About 13 percent of subprime mortgages
made in 2006 were delinquent after 12 months, with 6.65 percent considered
“seriously delinquent,” or more than 90 days late, Standard & Poor’s
estimates.  Conservative lending is risk
avoidance and something held as a bank motto.

That appears to have all changed after nearly 7.2 million
“high-interest” or subprime loans made from 2005 through 2007, a
period that marks the peak and collapse of the subprime boom. The analysis
reveals the top 25 originators of high-interest loans, accounting for nearly $1
trillion, or about 72 percent of such loans made during that period.

Investment banks Lehman Brothers, Merrill Lynch, JPMorgan
& Co., and Citigroup Inc. both owned and financed subprime lenders. Others,
like RBS Greenwich Capital Investments Corp. (part of the Royal Bank of
Scotland), Swiss Bank, Credit Suisse, First Boston, and Goldman Sachs &
Co., were major financial backers of subprime lenders. The blame is in part due
to unceasing demand for high-yield, high-risk bonds backed by home mortgages.

Investigation upon investigation will show conclusive evidence
for U.S. and European investment banks having invested enormous sums in
subprime lending.  Those banks booked huge
profits prior to bottom falling out of the real estate market.  My analysis determined the amount of money
spent by homeowners on their mortgages as a percentage of their income spiked
sharply during the peak of the subprime boom. The analysis surveyed of more
than 350 million mortgage applications reported to the federal government over
a 10 year period through 2007.

Under the HMDA the Home Mortgage Disclosure Act, data from
lenders are collected and reviewed. The purpose is to determine whether the
banks are adequately serving their communities with added emphases on discrimination
against minority borrowers.

The government estimates their data accounts for about 80 percent of all home
mortgages.  
 
Starting in 2004, the Federal Reserve’s commenced to gather data
encompassing “substantially all of the subprime mortgage market while generally
 avoiding coverage of prime loans,”.

Business Trusts and How to Pierce the Corporate Veil

Piercing the corporate veil describes a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Courts must first decide the matter of allowing the plaintiff to allow the corporation to be treated as a separate legal person. In particular who is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed.

In this analysis we consider SOP for accounting and any thing available for mandatory reporting requirements. Clarity is important in an accredited investments and demands subject matter fact gathering. A big question is in determining if the corporation sold their interest in the asset, and transfered the subject loan? This is likley answered n advance by plaintiffs own admission found in public records and documents. The party, who originated the subject loan or claim interest in an unrecorded assignee, is the immediate successor who did transfer whole, the entire mortgage loan receivable. Now that same corporation is returning to claim the asset. The business trust’s affairs are by operation of the trustees and each appointed by a sponsor of the trust. The trustees are always a bigger Bank national Association as the “property trustee,” US Bank Trust NA is listed as a Delaware Trustee” and three or more individual trustees, or “administrative trustees,” who are employees or officers of or affiliated with US Bank.

The property trustee will act as sole trustee under the declaration of trust for purposes of compliance with the trust indenture act. This is to mean the trustee designated will also act as Trustee under the Guarantee and the Indenture. See “description of the Guarantee” in PPM and or Pooling & Servicing”. Unless an event of default under the indenture has occurred and is continuing at a time that the trust owns any “JSNH” the holders of the common securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee.
The property trustee and/or the Delaware trustee may be removed or replaced for cause by the holders of a majority in liquidation amount of the trust preferred securities.

In conclusion , holders of a majority interest in liquidation amount of the trust preferred securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee if an event of default under the indenture has occurred and is continuing.

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A “Deed for Bond” is Clearly Defined in Civil Code of Procedures

Requirements under mortgage Law
Validity of a Chattel Mortgage Contract
1. Stock certificates issued in formation of a trust and later sold would yield to the certificates “holder” the ownership in the assets the proceeds were used to acquire.
2. Herein the example given would be a “deed for bond” clearly defined in the states civil code of procedures governing a non judicial or the judicial, foreclosure rights.
3. The deed of trust or mortgage that is initially recorded is owned by the certificates holders. The validity of the recorded mortgage speaks unto itself as a perfected lien.
4. The certificates deemed to be “chattel” is in certain instances, made liquid under securities laws.
5. The deed for bond concept is further validated by the state enforced CCP over matter and appropriate jurisdiction.
6. Their value is marked to market, the total amount of the lien on real property and liquidity is Pro Tanto, or to that extent of the law what the bearer of the paper is entitled for like consideration.

Recent Favorites to Review (via FORECLOSURE TESTIMONY /)

Wells Fargo NAS v Farmer Motion to vacate in Supreme Court, Kings County, NY 2009 In Re: Joshua & Stephanie Mitchell – US Federal Bankruptcy Court, NV 2009 In Re: Wilhelm et al., Case No. 08-20577-TLM (opinion of Hon. Terry L. Myers, Chief U.S. Bankruptcy Judge, July 9, 2009) – Chief US Bankruptcy Judge, ID – MERS, by its construction, separates the Deed from the Mortgage MERS v Johnston – Vermont Superior Court Decision Wells Fargo v Jordon … Read More

via FORECLOSURE TESTIMONY /

Recent Favorites to Review

Wells Fargo NAS v Farmer Motion to vacate in Supreme Court, Kings County, NY 2009
In Re: Joshua & Stephanie Mitchell – US Federal Bankruptcy Court, NV 2009
In Re: Wilhelm et al., Case No. 08-20577-TLM (opinion of Hon. Terry L. Myers, Chief U.S. Bankruptcy Judge, July 9, 2009) – Chief US Bankruptcy Judge, ID – MERS, by its construction, separates the Deed from the Mortgage
MERS v Johnston – Vermont Superior Court Decision
Wells Fargo v Jordon – OH Appellate Court
Weingartner et al v Chase Home Finance et al – US District Court (Nev): Two pro se plaintiffs sue for relief re: MERS assignments. Very technical decision but two things are apparent. First, the court has little patience for pro se plaintiffs who throw everything out there wasting the court’s time and second, even though the court threw out most of what the plaintiffs were arguing for, they did side with the plaintiff. Provides a good insight to the court’s reasoning vis a vis MERS assignments.Also makes clear you shouldn’t try this from home. Please seek legal counsel.
Schneider et al v Deutsche Bank et al (FL): Class action suit (the filing) seeking to recover actual and statutory damages for violations of the foreclosure process. Provides an excellent description of the securitization process and the problems with assignments. Any person named as a defendant in a suit by Deutsche Bank should contact the firms involved for inclusion in this suit.
JP Morgan Chase v New Millenial et. al. – FL Appellate which clearly demonstrates the chaos which can ensue when there is a failure to register changes of ownership at the county recorder’s office. Everyone operates in good faith, then out of nowhere, someone shows up waving a piece of paper. The MERS system, while not explicitly named, is clearly the culprit of the chaos. 2009
In Re: Walker, Case No. 10-21656-E-11 – Eastern District of CA Bankruptcy court rules MERS has NO actionable interest in title. “Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.” Scroll to page 4 to find the ruling.
MERS v Saunders – Docket: Cum-09-640 – Supreme Judicial Court of Maine. Argued: June 15, 2010. Decided: August 12, 2010. Confirms MERS has no actionable interest in title.
In Re: Adams – North Carolina Joins the Ranks.
US Bank v Ibenez – Supreme Court of Massachusetts in affirming a lower courts decision to overturn a foreclosure sale pretty much repudiates the entire securitization business model. January 7, 2011. As of posting, slip opinion only.

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The Clearing House Letter to the FDIC

1 The members ofThe Clearing House are: ABN AMRO Bank N.V.; Bank of America, NationalAssociation; The Bank of New York Mellon; Citibank, N.A.; Deutsche Bank Trust

Company Americas; HSBC Bank USA, National Association; JPMorgan Chase Bank,

National Association; UBS AG; U.S. Bank National Association; Wachovia Bank,

National Association; and Wells Fargo Bank, National Association.

 Norman R.

Nelson

General Counsel

450 West 33rd Street

New York, NY 10001

tele 212.612.9205

norm.nelson@theclearinghouse.org

December 17, 2008

Mr. Robert E. Feldman

Executive Secretary

Federal Deposit Insurance Corporation

550 17th Street, NW

Washington, D.C. 20429

Attn: Comments

Re: RIN 3064-AD35:

Notice of Proposed Rule Making–Assessments

Dear Mr. Feldman:

The Clearing House Association L.L.C. (“The Clearing House”), an association of

major commercial banks,1 appreciates the opportunity to comment on the Federal Deposit

Insurance Corporation (the “FDIC”) notice of proposed rulemaking on risk-based

deposit insurance assessments and the FDIC’s proposed restoration plan (the

“Proposal”). 73 Fed. Reg. 61560 (Oct. 16, 2006). The Clearing House understands

the FDIC’s need to increase its deposit-insurance assessments in light of the

extraordinarily high deposit-insurance losses in the current year. As we

discuss below, however, we are concerned that certain aspects of the Proposal

are excessive and would produce unintended negative effects on our members and

their customers.

I. Recapitalization of the Deposit Insurance Fund (“DIF”)

Our member banks are prepared to do their part to

maintain a strong and well-capitalized deposit-insurance system. We strongly

agree that a financially sound DIF is essential to support the country’s

financial system, and our member banks recognize that bank premiums have funded

all this support since the FDIC’s creation. Nonetheless, the FDIC must balance

its efforts to rebuild the DIF quickly against the consequences that would

occur from unnecessarily diverting resources from financial institutions that

could use them to meet customer credit needs.

Our nation is faced with the most severe economic

crisis it has experienced in many decades. Central to the current economic

crisis is a severe disruption in the credit markets that has included the

collapse of banks, thrifts, investment banks, insurance companies and other

financial-services companies. We appreciate that the FDIC considered these

circumstances and the current strength of the financial-services industry when

incorporating in its restoration plan the full five-year range for rebuilding

the DIF authorized by Congress.

We respectfully submit, however, that, given the

circumstances, the five-year period should be extended as contemplated by

Congress. In the Federal Deposit Insurance Act, Congress expressly provided the

FDIC with flexibility to extend the period in which the DIF must be restored to

1.15 percent beyond five years on account of “extraordinary circumstances.”2 The current

economic crisis is presumably what Congress considered as it is without

question extraordinary. In fact, the FDIC has invoked its systemic-risk

authority, which prior to September had never previously been used, to provide

guaranties on transaction deposits and senior unsecured debt.3 In addition,

the Secretary of the Treasury (after consultation with the President) and the

Board of Governors of the Federal Reserve System (the “Federal Reserve”) each

made comparable systemic-risk determinations for these guaranties.

Accordingly, The Clearing House agrees with

several other observers and strongly urges the FDIC to extend the period for

restoration of the DIF to at least seven years(which may need to be further extended in the

event of a protracted economic crisis) and, as discussed below, to delay any

increase in assessments beyond the first quarter of 2009 until the effect on

the DIF of recent government intervention programs can be analyzed. If the FDIC

decides to go forward with immediate increases in the assessment rate, The

Clearing House strongly recommends that the FDIC adopt more modest increases

commensurate with a longer restoration period.

The Clearing House appreciates that a strong DIF

is essential to maintaining depositor confidence and supports changes to the

premium calculation that truly reflect the risk of loss to the FDIC. Our member

banks are, however, deeply concerned that the aggressive recapitalization

proposed by the FDIC, although well intentioned, would unnecessarily restrict

their ability to lend in the context of the current extraordinary disruption of

the financial markets. In addition, we believe that the assessment rates

contemplated by the Proposal fail to consider, and thereby potentially

undermine, efforts by Congress and the Department of the Treasury (the “Treasury”)

to support bank liquidity and stimulate lending in the economy.

Congress instructed the FDIC, when setting

assessment rates, to take “into account economic conditions generally affecting

insured depository institutions so as to allow the designated reserve ratio to

increase during more favorable economic conditions and to decrease during less

favorable economic conditions, notwithstanding the increased risks of loss that

may exist during such less favorable conditions.”4 The deeply

troubled economic conditions prevalent today clearly are in line with this

Congressional intent.

Despite this, just yesterday the FDIC approved

raising the existing assessment schedule uniformly by 7 basis points for the

first quarter of 2009. As a result, Category I banks (considered to be the

healthiest) that are well-capitalized and have CAMELS ratings of 1 or 2 will

pay between 12 and 14 basis points for this period. Even at the minimum base

assessment rate, such a large increase will have a significant effect on earnings

and capital, and therefore lending capacity, at the most financially sound

institutions. By way of example, if a large bank,

“Bank  X”, has $750 billion in assessable deposits, applying the FDIC’s proposed

minimum assessment rate (12 basis points), it is paying at least $900 million a

year in assessments. Each basis point increase in the deposit assessment would

cost Bank X $75 million. When the FDIC applies the proposed risk-based

assessments, in the best case scenario Bank X is paying at least 8 basis

points, which would total $600 million per year. The Proposal allows the FDIC

to charge up to 21 basis points, which would cost Bank X over $1.5 billion per

year.

Other metrics further demonstrate the effect of this increase. For example, if Bank X were able to earn 1.20% pre tax on this deposit base, the Proposal would reduce Bank X’s earnings, at the 12 basis point rate, by 10%. For many banks that arestruggling to produce earnings in the current environment, the percentage loss
of earnings would considerably higher. In addition, Bank X’s lending capacity

would be reduced by approximately $6 billion annually assuming a 10x multiplier

and a 33 1/3% effective tax rate. the effect is comparably significant even at smaller institutions. For instance, at a bank, “Bank Y”, with $50 billion in assessable deposits, applying the minimum
assessment rate for Category I institutions, Bank Y will pay $15 million in
deposit assessments for the first quarter of 2009. Each basis point increase in
assessments would cost Bank Y $5 million a year. Under the Proposal, beginning
in April 2009, Bank Y could pay between $40 million to $105 million per year in
assessments.

Sucha large increase in deposit-insurance assessments more than doubles current

premiums and is anticipated to rebuild the reserve ratio to 1.15 percent in

four years, not five. Indeed, the FDIC expects the assessment income to be so

large that the reserve ratio will reach 1.21 percent in five years. This dramatic

increase in assessment rates would run counter to current government policy

objectives, including programs involving the DIF itself.

TheEmergency Economic Stabilization Act (“EESA”) signed into law on October 3,

2008 raised deposit insurance levels to $250,000. Congress, while authorizing

this coverage, specifically excluded the increase in coverage from the

calculation of the DIF ratio. Furthermore, on October 14, the FDIC created the

Temporary Liquidity Guarantee Program (the “Guarantee

Program”), which extended deposit insurance coverage to all non-interest

bearing transaction deposit accounts while also leaving this increased coverage

out of the DIF ratio. These actions strongly support a policy objective to

avoid an unduly onerous insurance premium increase.

Moreover,

under the Guarantee Program, the FDIC established a 10 basis-point surcharge

that applies to non-interest bearing transaction deposit accounts not otherwise

covered by the $250,000 deposit insurance limit. The amount collected by this

surcharge is added to each participant’s deposit-insurance premium.

Inlight of these new programs and the worsening economic climate, The Clearing

House respectfully submits that the analysis on which the FDIC based the

assessments in the Proposal is out of date and that the Proposal has

effectively been overtaken by these developments. Both the transaction deposit

guaranty and $250,000 coverage limit are set to expire on December 31, 2009,

suggesting that a comprehensive review of the nation’s deposit-insurance system

will occur next year in the context of the then-current economy. Accordingly,

The Clearing House strongly urges the FDIC to remove any increase in

assessments from the final rule and to make any significant change to the

assessment system only after a full review of these issues within the context

of this comprehensive review.

Ifthe FDIC decides to move forward with increases in the assessment rates, we

urge the FDIC to take full advantage of the discretion afforded to it by

Congress to design and administer the deposit-insurance system to avoid

pro-cyclical deposit-insurance assessment increases. A gradual increase in the

assessment schedule over the next few years would be more appropriate,

considering the present economic recession and financial turmoil will likely

ebb over time. By contrast, the significant increase contemplated by the

Proposal is inconsistent with government efforts to shore up bank capital and

bank liquidity under the Guarantee Program and the Capital Purchase Program

(“CPP”) under the Troubled Asset Relief Program, established pursuant to the

EESA. Our member banks strongly support their obligation to strengthen FDIC

resources, but propose doing so in a way that is less pro-cyclical and that

keeps more resources available for credit extensions.

Mr. Robert E. Feldman -6- December 17, 2008

II. Calculation of AssessmentsOurmember banks support the FDIC’s

objective to charge riskier banks a higher

assessment for deposit insurance, fostering market discipline through the

deposit insurance cost that a bank pays. However, we believe that the Proposal

falls short of achieving this objective because the measures of risk

contemplated by the Proposal are misdirected and do not adequately evaluate

risk in the event of a failure. The FDIC’s risk of loss in the event of the

failure of a depository institution is a function of two principal factors. The

first is the amount of recoveries on the unencumbered assets, i.e., assets that

are not pledged and are therefore available to the FDIC to pay deposit

liabilities. The second is the aggregate amount of equity and liabilities that

are subordinate to the claims of depositors.

For

the reasons discussed more fully below, The Clearing House has several concerns

with the Proposal’s approach for calculating assessments, including reducing

the assessment rate based on amounts of unsecured debt and increasing the rate

based on amounts of secured debt. A fundamental flaw to this approach is that

it ignores the value of a wide-range of unencumbered assets in the

determination of loss, while disproportionately penalizing institutions for

holding what is arguably one of the few viable sources of funding and liquidity

in today’s difficult markets. Accordingly, The Clearing House recommends that

the FDIC abandon the adjustments for assessment rates for unsecured and secured

liabilities. Instead, we urge the FDIC to adopt a simpler approach that bases

assessments on (1) the amount of insured deposits (as opposed to assessable

deposits) and (2) the unencumbered assets available to pay insured deposits in

the event of a liquidation (as opposed to the adjustments based on

secured/unsecured liabilities). The Proposal uses substitutes for unencumbered

assets—secured liabilities and unsecured liabilities—that we believe are

significantly flawed for several reasons that we outline below. If the FDIC

decides to move forward with the Proposal’s changes to the assessment system

based on secured and unsecured assets, we strongly urge the FDIC to consider

the following recommendations in the final rule.

Unsecured

Liabilities. The Clearing House recognizes the FDIC’s preference that a

bank be funded with unsecured liabilities that would be subordinated to claims

of  depositors in receivership, thereby providing a cushion that can reduce the FDIC’s loss in the event of a failure. In addition, our member banks agree in principle that

the presence of unsecured debt obligations reduces risks to the DIF and

therefore justifies a reduced assessment rate. However, we believe that the

Proposal is too limited and undervalues the risk mitigation of other unsecured

obligations.

As an initial matter, the FDIC’s multiplier (20 basis points) that it proposes to

apply to the ratio of long-term unsecured debt to total deposits at a large

institution discounts the risk mitigation effect of the unsecured debt by 80

percent. We believe that this multiplier is excessively low. The benefit of

unsecured debt is further underestimated in the Proposal because the FDIC

measures it against total deposits, and not only insured deposits, which are the

true proxy for the FDIC’s risk. Therefore, The Clearing House recommends that

the FDIC adjust upward the multiplier for unsecured debt and measure that

amount against only an institution’s insured deposits, not full deposit base.

In

addition, we suggest raising the proposed cap on assessment-rate reductions for

unsecured liabilities. The FDIC sets in the Proposal an arbitrary limit of 2

basis points with no stated legal or economic rationale. Meanwhile, the FDIC

itself recognizes that the greater the amount of unsecured liabilities, the

lower its risk of loss. Indeed, it is not inconceivable that a bank could

present essentially zero risk to the FDIC. The FDIC exacerbates this issue by

applying a significantly disproportionate cap on rate increases for secured

obligations. Consequently, the Proposal can lead to the result of increased

rates based on secured debt, even though there may in fact be unsecured debt to

offset the secured debt attracting no benefit. This could result in

institutions paying significantly higher assessment rates, regardless of their

relative risk.

Finally,

as we mentioned above, The Clearing House suggests that the FDIC use all

unencumbered assets of an institution as a measure of risk in calculating

premiums and not, as the Proposal currently contemplates, merely provide for a

downward adjustment for only for long-term unsecured debt instruments. Indeed,

at many institutions, including our member banks, there are substantial

unencumbered assets that afford the FDIC protection in the event of a

Mr. Robert E. Feldman -8- December 17, 2008

receivership.

The same factors that the FDIC cites as support for reducing deposit-insurance

premiums for unsecured liabilities operate for a wider range of unencumbered

assets as well. Consequently, we recommend that the FDIC abandon the

adjustments for secured and unsecured debt and instead adopt an approach that

bases assessments on an evaluation of an institution’s unencumbered assets. Our

member banks would welcome the opportunity to discuss with staff at the FDIC

alternatives for how such calculations and reporting could be performed.

Nonetheless,

if the FDIC retains the downward adjustment, we believe that all unsecured debt

should be included in determining the adjustment. In fact, short-term debt

absorbs loss upon failure just as well as long-term debt. In addition, we

strongly urge the FDIC to factor into account additional unsecured obligations

that serve as a cushion to FDIC losses in the event of default. We believe

there is no reason for excluding additional types of junior unsecured

obligations (regardless of term or structure) when they will in fact reduce a

deposit holder’s loss in the event of default. Applying a small credit only to

a narrow set of unsecured liabilities while significantly penalizing a wide

range of secured liabilities often used as prudent funding sources creates a

serious disparity in the assessments paid by financial institutions.

Secured

Liabilities.The Clearing House strongly opposes the upward adjustment in

the assessment rate based on the ratio of secured liabilities to domestic

deposits contemplated by the Proposal. This adjustment, unlike the one for

unsecured debt, is not discounted. In addition, it is capped at 50% of the

adjusted base assessment rate. For healthy Category I institutions with the

highest assessment rate, this would result in a penalty of seven basis points

on account of holding secured liabilities. This amount is unreasonably

disproportionate to the risk reduction afforded for unsecured debt. If the FDIC

decides to push forward with these adjustments, as opposed to adopting a

simpler approach like we recommend above, we strongly recommend that the FDIC

equally and fully include the effect of both forms of debt in the calculation.

The

Proposal also ignores the fact that a bank that uses assets to obtain stable,

secured funding may increase its loss given default but it also diminishes its

probability of default. Punishing a financially healthy bank that has little

probability of default with as much as

Mr. Robert E. Feldman -9- December 17, 2008

a  seven basis-point upward adjustment to its assessment is entirely contrary to

the notion of risk-based assessment.

In  addition, including secured lending as a risk factor is contrary to many well-established

programs that have implied government support. Banks routinely borrow secured

funds from the Federal Home Loan Banks (“FHLBs”), and this funding is an

important part of their liability structure. More recently, banks have become

regular borrowers from the Federal Reserve Banks through programs like the Term

Auction Facility. The Proposal specifically mentions both of these types of

secured borrowing as raising the risk to the DIF. It also lists repurchase

agreements that are routinely used by our member banks to obtain low-cost

funding by using excess securities.

The  Proposal thereby threatens to contract substantially this crucial source of

liquidity at a time when it is most needed. The FHLBs and the Federal Reserve

Banks have been important sources of funding for banks since the freeze in the

capital markets. Penalizing banks for accessing these important funding sources

seems imprudent and inconsistent with market realities. Higher assessments for

holding secured liabilities will encourage financial institutions either to

decrease their lending activities or to seek out less reliable, more expensive

sources of alternative funding. In either scenario, the cost of funding for

borrowers will increase. Such unintended consequences are in direct tension

with mandates by Congress, and indeed the FDIC itself, for banks to make more

credit available at a reasonable cost in order to mitigate the current

recessionary trends.

In

fact, on November 10, 2008, the FDIC, Treasury and the Federal Reserve issued

an Interagency Statement on Meeting Needs of Creditworthy Borrowers stating

that, “[a]t this critical time, it is imperative that all banking organizations

and their regulators work together to ensure that the needs of creditworthy

borrowers are met.” Surely banks could continue to use these funding sources,

but they would be more expensive because of the increased assessment costs. As

a result, the cost of credit would increase at this critical time when credit

needs to be more reasonable.

Mr. Robert E. Feldman -10- December 17, 2008

The

treatment of secured debt in the Proposal also would render covered bonds less

attractive at a time when the FDIC itself has been fostering covered bonds as

an alternative funding vehicle. Given the virtual closing of the securitized

asset finance market, it is highly undesirable to adopt an assessment scheme

that will penalize the use of the covered bond alternative.

Finally,

our member banks are seriously concerned that the treatment of secured debt in

the Proposal will result in sharp increases in assessments when amendments take

effect to Statement of Financial Accounting Standards No. 140, Accounting for

Transfers and Servicing of Financial Assets and Extinguishments of Liabilities

(FAS 140). Beginning in 2010, FAS 140 will require banks to report on their

balance sheets assets in their off-balance sheet special-purpose vehicles and

variable-interest entities, which often include securitized assets. As a

result, the associated secured liabilities will come onto banks’ balance

sheets. Under the Proposal, including these secured liabilities when

determining the adjustment to assessment rates, in addition to the secured

funding discussed above, will cause several of our member banks to cross the

10% threshold for secured liabilities that triggers an upward adjustment to

assessments.

Brokered

Deposits.The FDIC requested comments on whether deposits resulting

from balances swept into an insured depository institution from customer

brokerage accounts at an affiliated broker-dealer should be excluded from the

definition of “brokered deposits” for purposes of the assessment calculation.

73 Fed. Reg. at 61,566. Our member banks strongly encourage the FDIC to exclude

these deposits from its brokered deposit assessment calculation because they do

not involve the risk that the FDIC perceives accompanies brokered deposits in

general. Under these sweep programs, a broker-dealer affiliated with one or

more insured depository institutions offers its clients a brokerage account

where the client can elect to have excess funds in the account automatically

invested, or swept, into deposit accounts at the affiliated depository

institution. These deposits are generally reported as “brokered deposits” on

the depository institution’s Call Report or Thrift Financial Report.

Mr. Robert E. Feldman -11- December 17, 2008

The

broker-dealer establishes the deposit account on the books of the affiliated

depository institution in its name, as agent and custodian for the customer,

with “pass-through” deposit insurance. The broker-dealer maintains records of

the deposit accounts held by each of its customers consistent with FDIC

requirements and sends the customer periodic account statements, including with

respect to the deposit accounts and year-end tax-reporting statements. Although

the customer of the broker-dealer is legally not a customer of the affiliated

depository institution, the customer has a long-term relationship with the

financial group of which the broker-dealer and the depository institutions are

part.

The

excess cash in a customer’s brokerage account is automatically swept daily into

the affiliated depository institution, resulting in a continual flow of funds.

Even though withdrawals are made by customers on a daily basis, the flow of

deposits into the depository institution tends to keep the level of total

deposits fairly constant. As a result, this deposit base tends to be stable,

behaving like core deposits. Deposits obtained under these programs generally

pay interest at rates that are at or below prevailing money-market mutual fund

rates. Thus, the deposits are not high rate or rate sensitive. These attributes

make them less like brokered deposits and more like core deposits. These funds

are not “hot money,” which the FDIC considers exceptionally risky. They represent

a product choice of an established customer relationship. Accordingly, The

Clearing House strongly urges the FDIC to exclude these deposits from the

definition of “brokered deposits” for purposes of the brokered deposit

adjustment in the Proposal.

In

addition, our member banks urge the FDIC to consider excluding from the

“brokered deposits” definition balances swept into an insured depository

institution from customer brokerage accounts at unaffiliated broker-dealers.

Financial institutions, including some of our member banks, operate sweep

programs under which cash balances are swept from an account at an unaffiliated

broker-dealer into deposit accounts at one or more third-party depository

institutions, with “pass through” deposit insurance. There is no price

competition among participating banks. Thus, as in the sweep program described

above, deposits that are placed in these programs generally pay interest at

rates that are at or below prevailing rates so

Mr. Robert E. Feldman -12- December 17, 2008

these

deposits also are not high rate or rate sensitive. In addition, these programs

provide a stable source of deposits for well-capitalized banks and do not

present the moral hazards typically associated with brokered deposits.

Consequently, The Clearing House recommends the FDIC exclude these deposits as

well when determining the brokered deposit adjustment.

Inequitable

Treatment of Large Institutions.The Proposal indicates

that, as of June 30, 2008, 45 percent of large banks would have been charged

the minimum assessment rate under the current system of risk calculation

methodology, versus 28 percent of small banks. The Proposal also states that

the anticipated impact of the new risk measurements will be that only 25

percent of large banks may qualify for the minimum rate, consistent with the

same percentage for smaller banks. As a result, the Proposal clearly makes it

more difficult for a large bank to be eligible for the lowest assessment rates.

We urge the FDIC to recognize that the largest institutions should not be

penalized solely on the basis of size with no relation to risk.

* * *

Thank

you for considering the views expressed in this letter. If you would like

additional information regarding this letter, or if it would be helpful to meet

with representatives of our member banks, please contact me at (212) 612-9205.

Sincerely,

How does this work?

INDYMAC MBS, INC.
Depositor

INDYMAC BANK, F.S.B.
Seller and Servicer

DEUTSCHE BANK NATIONAL TRUST COMPANY
Trustee and Supplemental Interest Trustee
——————————
POOLING AND SERVICING AGREEMENT
Dated as of November 1, 2007

INDYMAC INDA MORTGAGE LOAN TRUST
2007-AR8

MORTGAGE PASS-THROUGH CERTIFICATES
Series 2007-AR8

General Business Trusts Reporting ” understand the policy”

Requirments

Each director, principal officer and member of a committee with governing board delegated powers shall annually sign a statement which affirms such person:
a. Has received a copy of the conflicts of interest policy,
b. Has read and understands the policy,
c. Has agreed to comply with the policy, and
d. Understands the Organization is charitable and in order to maintain its federal tax exemption it must engage primarily in activities which accomplish one or more of its tax-exempt purposes.

Periodic Reviews

To ensure the Organization operates in a manner consistent with charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, periodic reviews shall be conducted. The periodic reviews shall, at a minimum, include the following subjects: a. Whether compensation arrangements and benefits are reasonable, based on competent survey information, and the result of arm’s length bargaining.
b. Whether partnerships, joint ventures, and arrangements with management organizations conform to the Organization’s written policies, are properly recorded, reflect reasonable investment or payments for goods and services, further charitable purposes and do not result in inurement, impermissible private benefit or in an excess benefit transaction.

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