Explaining the Chart

Negotiation of a Secured Instrument then Securitization (Left Side) In following this left process, rights to enforce the Promissory Note has been properly negotiated to subsequent Indorsees and enforcement rights contained within the Deed of Trust have been lawfully assigned in accordance to local laws of jurisdiction, Texas Local Government Code 192.007 if filed of record. A. Borrower to Originator a. Contract 1 signed (Promissory Note) b. Contract 2 signed (Temporary Attachment & Perfection) (Deed of Trust) with temporary attachment of the Deed of Trust to the Promissory Note. i. (Texas Local Government Code 192.001, May Record) ii. Promissory Note and Deed of Trust are enforceable by the Originator. B. Originator to Sponsor a. Negotiation of the Promissory Note i. Negotiation required to be a special endorsement (executed by Originating Lender - Indorser by Indorsement) to identify subsequent payee (Indorsee - Sponsor). Indorsement in blank would not allow identify of a subsequent secured party of record to referenced to the Promissory Note. ii. In accordance to Texas Local Government Code 192.007 one must record any subsequent instrument affecting instrument (Deed of Trust) filed under 192.001. 1. Originator as Indorser (Originating Lender) of the Promissory Note in tandem being the Assignee of the Deed of Trust assigns per 192.007 the Secured Rights to the Deed of Trust filed under 192.001 to an Assignor of Deed of Trust (Subsequent Lender 1 - Sponsor) where in public records the Indorser (Originating Lender Indorser) is identified as the Grantor and the subsequent payee (Indorsee Subsequent Lender 1) is identified as the Grantee. 2. As rights to the Promissory Note have been negotiated to a identified subsequent lender in tandem with assigning rights of record to the Deed of Trust are both enforceable by the Sponsor. C. Sponsor to Depositor a. Negotiation of the Promissory Note i. Negotiation required to be a special endorsement (executed by Sponsor Subsequent Lender 1 - Indorser by Indorsement) to identify subsequent payee (Indorsee - Sponsor). Indorsement in blank would not allow identify of a subsequent secured party of record to referenced to the Promissory Note.

ii. In accordance to Texas Local Government Code 192.007 one must record any subsequent instrument affecting instrument (Deed of Trust) filed under 192.001. 1. Sponsor as Indorser (Subsequent Lender 1) of the Promissory Note in tandem being the Assignee of the Deed of Trust assigns per 192.007 the Secured Rights to the Deed of Trust filed under 192.001 to an Assignor of Deed of Trust (Subsequent Lender 2 - Depositor) where in public records the Indorser (Subsequent Lender 1 Indorser) is identified as the Grantor and the subsequent payee (Indorsee Subsequent Lender 2) is identified as the Grantee. 2. Subsequent Lender 2 as being subsequent Grantee assumes right to both the Promissory Note and Deed of Trust. D. Depositor to Trustee (for the benefit of the Investors) a. Negotiation of the Promissory Note i. Negotiation required to be a special endorsement (executed by Depositor Subsequent Lender 2 - Indorser by Indorsement) to identify subsequent payee (Indorsee - Sponsor). Indorsement in blank would not allow identify of a subsequent secured party of record to referenced to the Promissory Note. ii. In accordance to Texas Local Government Code 192.007 one must record any subsequent instrument affecting instrument (Deed of Trust) filed under 192.001. 1. Depositor as Indorser (Subsequent Lender 2) of the Promissory Note in tandem being the Assignee of the Deed of Trust assigns per 192.007 the Secured Rights to the Deed of Trust filed under 192.001 to an Assignor of Deed of Trust (Subsequent Lender 3 - Trustee) where in public records the Indorser (Subsequent Lender 2 Indorser) is identified as the Grantor and the subsequent payee (Indorsee Subsequent Lender 3) is identified as the Grantee. 2. Subsequent Lender 3 as being subsequent Grantee assumes right to both the Promissory Note and Deed of Trust. E. As rights to the Promissory Note has been negotiated to a identified subsequent lender(s) in tandem with assigning rights of record to the Deed of Trust are both enforceable in subsequent order of Originating Lender to the Sponsor then to the Depositor and then to the Trustee (for the benefit of the Investors) F. Trustee (Subsequent Lender 3) as Account Debtor and identified as subsequent Indorsee in tandem being identified as a subsequent party of local laws of jurisdiction then can securitize the payment stream (Intangible Obligation) into various pools of

an Investment Trust and pledge the rights of the Promissory Note along with the rights contained within the Deed of Trust as being tangible collateral to secure and intangible obligation. 1. Enforceable Rights to the tangible Promissory Note and Deed of Trust are enforceable by the Trustee for the benefit of the Investors (Trust) if the Account Debtor defaults under the intangible Promissory Note (intangible obligation) and the tangible obligor is in default under the tangible Promissory Note (tangible obligation). If only the Account Debtor is in default then the Trustee (Intangible Obligee) has only rights to enforce the tangible Promissory Note and tangible Deed of Trust as being personal property and lack rights to reach within. Where only the Account Debtor is in default, the value of the tangibles is would only have value as only recycled paper value. Conveyance of a Promissory Note and Deed of Trust as Personal Property under UCC Article 9 (Right Side), securitization with Trustee for the benefit of Investor to have enforceable rights to enforce the Promissory Note as a Secured Instrument is a legal impossibility. G. Borrower to Originator a. Contract 1 signed (Promissory Note) b. Contract 2 signed (Temporary Attachment & Perfection) (Deed of Trust) with temporary attachment of the Deed of Trust to the Promissory Note. i. (Texas Local Government Code 192.001, May Record) H. Originator/Underwriters create an Intangible Investment Vehicle. a. Originator/Underwriters register the Mortgage Loan (Promissory Note secured by a Deed of Trust) within the MERS electronic registry. b. Originator/Underwriters create an electronic digitized copy of the Promissory Note and Deed of Trust; the electronic copies become a part of the electronic mortgage file. c. Copy of the electronic mortgage file is transferred to the rating agencies for rating. i. Rating agencies only evaluate the quality of the mortgage loan and does not evaluate the legal aspect of scanning tangibles into an electronic intangible and assigning tangible rights if applicable to local laws of jurisdiction. ii. Originator/Underwriters as Account Debtor create the intangible obligation alleging the tangible are of legal status to be enforceable as security for the intangible obligation. iii. Originator/Underwriters d. Originator/Underwriters indorse the tangible Promissory Note in blank and prepare an assignment of the rights to the tangible Deed of Trust in blank to not be filed of record. e. Originator/Underwriters if at best could only convey as personal property the Promissory Note and a returned copy of a filed Deed of Trust to the

Sponsor or Sponsors agent without proper negotiation of the tangible Promissory Note and the filing of an assignment of rights to the Deed of Trust. I. Originator to Sponsor a. Selling and Purchase of the Intangible Obligation. b. Originator/Underwriters as assignor of the intangible obligation files of notice on the MERS registry a sale of the intangible obligation to the Sponsor. The registry update appears to be an attempt to allege that a negotiation of the tangible Promissory Note occurred along with alleging intangible laws of UCC Article allow for the assigning of rights to the security instrument where such rights to file are under guidance of the local laws of jurisdiction (Texas Local Government Code 192.007). The UCC Article 9 does allow for the assigning of intangible rights without filing in regards to personal property but state law preempts in regards when real property is involved and is excluded by UCC Article 9. c. Upon Sponsors acceptance of the purchase of the intangible obligation, the Originator/Underwriters conveys as personal property the tangible Promissory Note and tangible returned filed Deed of Trust to custody of the Sponsor or agent of Sponsor. d. Conveyance of personal property does not require a filing of public record but conveyance of secured rights contained within the Deed of Trust if such rights are being assigned of record require compliance with Texas Local Government Code 192.007. e. Whereas the Uniform Commercial Code Article 9 allows for contracting to assign for perfection of personal property rights to not have to be filed of record in local public records, it appears that there is a requirement that an original UCC finance statement is required of filing in the office of the Secretary of State. f. Where instrument that affect real estate are to be filed in the county where the property resides, filing of such instrument in the Secretary of States office would be a nullity and without force. g. For an instrument to be filed of record, such instrument in Accordance to the Texas Property Code has to be eligible for filing. J. Sponsor to Depositor a. Selling and Purchaser of the Intangible Obligation b. Sponsor as assignor of the intangible obligation files of notice on the MERS registry a sale of the intangible obligation to the Depositor. c. Upon Depositors acceptance of the purchase of the intangible obligation, the Sponsor conveys as personal property the tangible Promissory Note and tangible returned filed Deed of Trust to custody of the Depositor or the Depositors agent. d. Conveyance of personal property does not require a filing of public record but conveyance of secured rights contained within the Deed of Trust if such rights are being assigned of record require compliance with Texas Local Government Code 192.007.

e. Whereas the Uniform Commercial Code Article 9 allows for contracting to assign for perfection of personal property rights to not have to be filed of record in local public records, it appears that there is a requirement that an original UCC finance statement is required of filing in the office of the Secretary of State. f. Where instrument that affect real estate are to be filed in the county where the property resides, filing of such instrument in the Secretary of States office would be a nullity and without force. g. For an instrument to be filed of record, such instrument in Accordance to the Texas Property Code has to be eligible for filing. K. Depositor to Trustee a. Selling and Purchase of the Intangible Obligation. b. Depositor as assignor of the intangible obligation files of notice on the MERS registry of sale of the intangible obligation to the Trustee. c. Upon Trustees for the benefit of Investors acceptance of the purchase of the intangible obligation, the Depositor conveys as personal property the tangible Promissory Note and tangible returned filed Deed of Trust to custody of the Trustee or agent of the Trustee. d. Conveyance of personal property does not require a filing of public record but conveyance of secured rights contained within the Deed of Trust if such rights are being assigned of record require compliance with Texas Local Government Code 192.007. e. Whereas the Uniform Commercial Code Article 9 allows for contracting to assign for perfection of personal property rights to not have to be filed of record in local public records, it appears that there is a requirement that an original UCC finance statement is required of filing in the office of the Secretary of State. f. Where instrument that affect real estate are to be filed in the county where the property resides, filing of such instrument in the Secretary of States office would be a nullity and without force. g. For an instrument to be filed of record, such instrument in Accordance to the Texas Property Code has to be eligible for filing. L. Trustee as Account Debtor and under this second scenario could not be identified as subsequent Indorsee in tandem being identified as a secured party of local laws of jurisdiction. At best to be in compliance with Texas state law, the Originator being the only party filed as secured party of record would potentially have rights to enforce the Deed of Trust contract. M. Under the lower presented actually followed scenario, the filing of an instrument in Texas local public records should be considered a fraudulent filing and such penalty for filing a document ineligible for recordation has a severe financial penalty. N. Where it is determined that an instrument is ineligible for recordation and in accordance to Texas law, such instrument could only be classified as being fraudulent and therefore criminal laws would come into play. But such criminal pursuit is not within the civilian capacity but in that of law enforcement.

O. Texas Government Code 51.903 provides the means and the method for any recording clerk to engage the services of law enforcement. What is commonly over looked is that there is really two of everything, one exists in the real property tangible world of laws and the other exists in the personal property intangible world of laws. Mortgage as it applies to a tangible Promissory Note secured by real property is not the same as a mortgage as it applies to an Intangible Promissory Note secured by personal property. Whereas the intangible security that secures the intangible obligation is secured by an underlying tangible security requires that both laws of the tangible and intangible world be applied to allow for the Intangible Obligee to have rights to enforce instruments contracted by the Tangible Obligor.

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RMBS LOAN SECURITIZATION DIAGRAM

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What Was Supposed To Happen:

BORROWER
Your Name Here
SIGNED AT CLOSING
DATE SIGNED SECURITY INSTRUMENT

What Actually Happened:

BORROWER
Your Name Here
SIGNED AT CLOSING DATESIGNED SECURITY

INSTRUMENT

\ RECORDED

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COUNTY

COUNTY
RECORDERS

RECORDERS OFFICE PROPERLY .

OFFICE

PERFECTED / /

LIEN k / /

ORIGINATOR

NOTE

ORIGINATOR

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SECURITY INSTRUMENT STAYS WITH ORIGINATOR

TRANSFERRED

INTANGIBLE PAYMENT

BY ENDORSEMENT
AND NEGOTIATION

OBLIGATION IS STRIPPED
AND TRANSFERRED PAPER NOTE POSSIBLY

ELECTRONICALLY

TRANSFERRED

I AND NEGOTIATED?
BUT NO RECORD

SPONSOR/SELLER

SPONSOR/SELLER

UNNAMED
PARTY
TRANSFERRED BY ENDORSEMENT INTANGIBLE PAYMENT OBLIGATION IS TRANSFERRED

COUNTY
RECORDERS

AND NEGOTIATION PROPERLY -

OFFICE

ELECTRONICALLY

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PAPER NOTE

DEPOSITOR

DEPOSITOR

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BUT NO RECORD

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ASSIGNMENT
RECORDED

UNNAMED

PARTY
COUNTY
RECORDERS

TRANSFERRED BY ENDORSEMENT AND NEGOTIATION PROPERLY

PERFECTED LIEN

INTANGIBLE PAYMENT
OBLIGATION IS

OFFICE

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TRUSTEE

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ASSIGNMENT RECORDED TRANSFERRED BY ENDORSEMENT
AND NEGOTIATION USUALLY DOES NOT ARRIVE

COUNTY RECORDERS OFFICE

PROPERLY

AT TRUST

DATE-

Data

UPON LOAN DEFAULT.

OFTEN YEARS LATER

PERFECTED
LIEN DATE

ASSIGNMENT OF

BY CLOSING DATE

OFTRUSTH J I
BY CLOSING DATE OF TRUST!!

INTANGIBLE PAYMENT OBLIGATION IS TRANSFERRED

ELECTRONICALLY AFTER CLOSING

SECURITY INSTRUMENT
TO IMPROPER PARTIES RECORDED

RMBS TRUST
Trust Name Here

Mortgage Compliance Investigators

Researched by Joseph Esquivel Illustrated by Bradley Walker 09/28/12

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IMPROPER. UNPERFECTED UEN

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RECORDERS
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